M/S. K. Kerkarshaka Shankarana ... vs M/S. Agro Agencies,
2023 Latest Caselaw 5932 AP

Andhra Pradesh High Court - Amravati

M/S. K. Kerkarshaka Shankarana ... vs M/S. Agro Agencies, on 8 December, 2023

     THE HON'BLE SRI JUSTICE V.GOPALA KRISHNA RAO

                     APPEAL SUIT No.122 OF 2006

JUDGMENT:

-

This Appeal, under Section 96 of the Code of Civil Procedure

[for short 'the C.P.C.'], is filed by the Appellant/defendant

challenging the Decree and Judgment, dated 30.12.2005, in O.S.

No.47 of 1998 passed by the learned Principal Senior Civil Judge,

Tenali [for short 'the trial Court']. The Respondent herein is the

plaintiff in the said Suit.

2. The Plaintiff filed the above said suit for relief of declaration

that the plaintiff is entitled to the amount deposited by the defendant

federation, rendition of accounts and ascertainment of amount

payable, for costs and subsequent interest with bank rate.

3. Both the parties in the Appeal will be referred to as they are

arrayed before the trial Court.

4. The brief averments of the plaint, in O.S. No.47 of 1998, are as under:

i) The plaintiff is a proprietary concern doing business in selling

coconut oil etc., at Tenali. The plaintiff, earlier, had agreement with 2 VGKRJ AS 122 of 2006

the defendant federation for promotion and sale of coconut oil in

Andhra Pradesh and latest agreement is dated 15.04.1996. As per

terms of agreement the defendant has to supply coconut oil in

various packages of different capacities, for which the plaintiff has to

furnish bank guarantee for Rs.10,00,000/-. Commission will be given

to the plaintiff also. That the plaintiff should pay in cash for the

consignment within 15 days else the plaintiff is liable to pay interest.

On the request of plaintiff, Indian Bank, Tenali Branch extended

bank guarantee for Rs.10,00,000/- i.e., on 28.05.1997 for

Rs.7,50,000/- and for Rs.2,50,000/-, in total Rs.10,00,000/- bank

guarantee will be expired by 17.1.1998. The defendant by its letter

dated 15.12.1997 addressed to the bank, Invoked the bank

guarantee to a tune of Rs.8,36,816/- and requested the bank to pay

the same by 22.12.1997. The defendant wrote another letter dated

27.01.1998 to the bank referring to the letter dated 15.12.1997

requesting the bank to pay the invoked amount by 10.02.1998. The

plaintiff went to Trivendram and met the officials of the defendant

company, discussed the matter with them by staying there itself

from 19.02.1998 to 23.02.1998. As a result the defendant company

on 23.02.1998 telephoned to the Indian bank, Tenali Branch and 3 VGKRJ AS 122 of 2006

said that the plaintiff had paid the amount by way of delivering post

dated cheques and the bank need not sent the money Invoked, as

nothing is due from plaintiff as on 23.02.1998 in view of the post

dated cheques for Rs.8,00,000/-. The defendant also informed the

bank people through phone that the invocation of bank guarantee on

23.12.1997 and follow up letter dated 27.01.1998 are to be ignored

by the bank. Under the circumstances, plaintiff gave a letter date

23.02.1998 to the defendant and the details of post dated cheques

given by the plaintiff to the defendant federation on 23.02.1998 are

as follows:-

1. Cheque No.447651, dt.10.03.1998 for Rs.1,00,000/-

2. Cheque No.447652, dt.21.03.1998 for Rs.1,00,000/-

3. Cheque No.447653, dt.31.03.1998 for Rs.1,00,000/-

4. Cheque No.447654, dt.13.04.1998 for Rs.1,00,000/-

5. Cheque No.447655, dt.23.04.1998 for Rs.1,00,000/-

6. Cheque No.447656, dt.30.04.1998 for Rs.1,00,000/-

7. Cheque No.447657, dt.07.05.1998 for Rs.1,00,000/-

8. Cheque No.447658, dt.15.05.1998 for Rs.1,00,000/-

4 VGKRJ AS 122 of 2006

Both the plaintiff and defendant came to an understanding for the

following terms:

1. That the defendant refrains from presenting the cheques dated

07.05.1998 and 15.05.1998 till the compromise is fully worked

out. By writing suitable letters, defendant withdraws

immediately the invocation of the bank guarantee made by its

letter dated 15.12.1997 and another letter dated 27.01.1998.

2. The question of interest, sales tax and other contentions of the

plaintiff will be placed before the Board of the defendant

federation and the amount will be paid to the plaintiff by way of

reimbursement.

ii) The defendant committed breach of contract by its letter dated

23.03.1998 addressed to the Indian Bank Branch, Tenali, Invoked

the bank guarantee to a tune of Rs.8,36,816/- as referred to in its

letter dated 15.12.1997 and 27.01.1998 to the bank and requested

the bank to pay the amount by 31.03.1998 to the defendant. The

defendant company with an ulterior motive gave go-bye to the

compromise, wanted to be a double gainer at the cost of plaintiff by

Invoking the bank guarantee for Rs.8,36,816/- though it is already 5 VGKRJ AS 122 of 2006

had post dated cheques on hand which they can present for

encashment and to take action against the plaintiff if cash is not

available or paid.

iii) The plaintiff returned the damaged stock to the defendant.

Credit note also given by the defendant to the plaintiff for the value

of the said stock, but it changed the Interest on the said amount.

The defendant agreed to refund the charged interest on

Rs.1,05,336/- upto December, 1995 together with interest till

payment is made. The defendant told the plaintiff that the matter will

be placed before the Board for its ascent, and the refund will be

made. The defendant agreed to reimburse the sales tax vide

defendant's letter MGK 29(3)192/4913 and additional sales tax as

per A.P.Act. The agreement dated 15.04.1996 between the plaintiff

and defendant was expired by 15.04.1997. There is no subsisting

agreement. The defendant committed breach of agreement by not

sending stocks to the plaintiff after 12.4.1996, inspite of repeated

requests and orders placed by the plaintiff, the defendant failed to

supply stocks. Because of which the plaintiff suffered loss of 6 VGKRJ AS 122 of 2006

business and profit and also suffered loss by unnecessarily paying

the bank commission for the bank guarantee.

iv) The plaintiff need not pay any Interest to the defendant

subsequent to the expiry of agreement. The defendant has to pay

Interest over the cost of damaged goods returned to it by the plaintiff

on par with the interest claimed by the defendant and the balance of

Interest to be paid to the plaintiff. As per the understanding arrived

at, the sales tax and extra tax paid by the plaintiff should be

refunded by the defendant. As the defendant failed to supply stocks,

the plaintiff suffered loss of business and profits. Therefore the

defendant has to compensate the loss. As the defendant failed to

supply stock, the bank guarantee provided by the plaintiff stood idle.

Plaintiff is forced to pay the bank commission during the entire

period.

v) The plaintiff wrote a letter dated 04.03.1998 and sent the

same to the defendant through registered post bringing forth the

settlement of claim for over due amount and Invoking of bank

guarantee. The plaintiff is entitled for refund of Rs.2,00,000/-

notionally from defendant towards the above claims. The plaintiff 7 VGKRJ AS 122 of 2006

also sought for the relief of settlement of accounts, to determine how

much amount the plaintiff has to pay to the defendant and to restrain

the defendant from invoking the bank guarantee as the defendant

had already received payment for the said amount by way of post

dated cheques and to restrain the defendant from presenting the

post dated cheques until amount is actually due to it, is detrimented

and the defendant has to pay back the surplus amount already

received by it by way of cheques or return the cheques.

vi) This court granted interim injunction in I.A.No.513/1998. But

the defendant violated the interim injunction orders passed by this

court and invoked the bank guarantee and taken away a sum of

Rs.8,36,816/- from Indian Bank, Tenali. In I.A.No.780/1998 in

I.A.No.513/1998 in this suit the court passed orders directing the

defendant to redeposit the amount received by him from Indian

Bank, Tenali by way of D.D. on 15.05.1998, within one month from

the date of this order, failing which the respondent/defendant has to

suffer civil Imprisonment for a period of one month. The defendant

preferred appeal to the District Court and High Court. Before the

appellate court and High Court also the defendant lost its case and 8 VGKRJ AS 122 of 2006

finally deposited a sum of Rs.8,36,816/- on 20.08.2004 to the credit

of the suit instead of re-depositing in Indian Bank, Tenali branch.

The Indian Bank, Tenali Branch filed a suit against the plaintiff and

recovered huge amounts which includes Rs.8,36,816/- and interest

from the plaintiff. As such the amount of Rs.8,36,816/- deposited to

the credit of the suit by the defendant together with interest at bank

rate from 15.05.1998 till the date of realization, became the property

of the plaintiff. Hence the plaintiff also seeking declaration that the

plaintiff is entitled for the amount of Rs.8,36,816/- along with interest

from 15.05.1998 till realization.

5. The defendant filed a written statement by denying the

averments mentioned in the plaint and further contended as under: -

i) The defendant while admitting the agreement between the

plaintiff and defendant for promotion and sale of coconut oil in

Andhra Pradesh in 1993, pleaded that the transaction between the

plaintiff and the defendant was governed by the latest agreement

dated 15.04.1996 executed at Thiruvananthapuram, Kerala. The

defendant further contend that in clause 22 of the agreement clearly

specifies that all disputes and differences that may arise out of or in 9 VGKRJ AS 122 of 2006

the course of this agreement shall be decided under the provisions

of the Kerala Co-operative Societies Act, 1969 and Section 100 of

the Act clearly bars jurisdiction of the Courts and revenue Courts,

hence the suit is not maintainable and this Court has no jurisdiction

to entertain the suit and the injunction application is also not

maintainable. The only remedy open to the plaintiff is to go by

clause 22 of the agreement between plaintiff and defendant and the

plaintiff ought to have file an arbitration suit before the Registrar of

Co-operative Societies, Tiruvananthapuram and redress his

remedies, if any he has.

ii) A grace period of 6 months is provided from the date of expiry

of the bank guarantee for its invocation. Therefore, bank guarantee

is valid upto 17.07.1998. Inspite of repeated demands, the plaintiff

committed default in making payment due to the defendant,

therefore, the defendant is constrained to invoke the bank guarantee.

iii) The defendant had not accepted any letter dated 23.02.1998

or the cheques bearing Nos.447651 to 447658 as alleged. The

defendant is a State Government undertaking and therefore there is

no provision to accept post dated cheques. The defendant is not 10 VGKRJ AS 122 of 2006

liable to reimburse the sales tax as per the A.P.Act as alleged by the

plaintiff.

iv) The plaintiff himself admitted his liability for Rs.8,36,000/- due

to the defendant and the plaintiff also liable to pay interest at 22.5%

p.a. The defendant is in receipt of the letter but ignored it as it was

against facts and figures and against the terms of the agreement.

The defendant being a government undertaking cannot accept post

dated cheques for future presentation.

6. Based on the above pleadings, the trial Court framed the

following issues:

(i) Whether the defendant has not accepted any letter dated 23.02.1998 or the cheques bearing Nos.447651 to 447658, as alleged?

(ii) Whether the defendant is not liable to reimburse the sales tax as per the A.P.Tax?

(iii) Whether the plaintiff is liable to pay interest at the rate of 22.5% from date of delivery till the date of payment?

(iv) Whether the defendant is not liable for damages for damaged stock?

(v) Whether this Court has no jurisdiction to entertain the suit?

(vi) Is the plaintiff entitled to any relief as prayed?

11 VGKRJ AS 122 of 2006

(vii) To what relief?

7. During the course of trial in the trial Court, on behalf of the

Plaintiff, PW1 and PW2 were examined and Ex.A1 to Ex.A23 were

marked. On behalf of the Defendant DW1 was examined and Ex.B1

to Ex.B4 were marked.

8. After completion of the trial and hearing the arguments of both

sides, the trial Court partly decreed the Suit with costs vide its

judgment, dated 30.12.2005, against which the present appeal is

preferred by the appellant/defendant in the Suit questioning the

Decree and Judgment passed by the trial Court.

9. Heard Sri M.Bala Subrahmanyam, learned counsel for

appellant/defendant through virtual hearing and heard Sri Y.V.Anil

Kumar, learned counsel, representing Sri Y.V.Ravi Prasad, learned

counsel for respondent/plaintiff.

10. Sri M.Bala Subrahmanyam, learned counsel for appellant

would submit that the Civil Court at Tenali has no jurisdiction to

decide the suit and the suit has to be filed at Tiruvananthapuram 12 VGKRJ AS 122 of 2006

and he would further contend that the decree and judgment passed

by the trial Court is contrary to law and the appeal may be allowed.

11. Per contra, the learned counsel for the respondent would

contend that on appreciation of entire evidence on record, the trial

Court partly decreed the suit and there is no need to interfere with

the finding given by the Trial Court.

12. Having regard to the pleadings in the Suit and the findings

recorded by the trial Court and in the light of rival contentions and

submissions made on either side before this court, the following

points would arise for determination:

I. Whether the Principal Senior Civil Judge's Court, Tenali is having jurisdiction to try the suit? II. Whether the decree and judgment passed by the trial court needs any interference?

13. Point No.1:

Whether the Principal Senior Civil Judge's Court, Tenali is having jurisdiction to try the suit?

The learned counsel for appellant would submit that in view of

clause 22 of Ex.A1 agreement, the Civil Court at Tenali has no 13 VGKRJ AS 122 of 2006

jurisdiction to try the suit and it has to be decided under Kerala

Cooperative Societies Act, 1969. The learned counsel for appellant

represented that in view of the Ex.A1 agreement clause 22, the Civil

Court at Tenali has no jurisdiction. The clause 22 in Ex.A1 goes to

show that all the disputes and differences that may arise out of or in

the course of agreement shall be decided under Kerala Cooperative

Societies Act.

14. Per contra, the learned counsel for respondent would contend

that since the appellant played fraud on the plaintiff by executing an

agreement under Ex.A1 through an incompetent person, therefore,

there is no need to rely on Ex.A1 agreement. The Deputy Manager,

(finance) of the defendant federation is examined as DW1. As per

his evidence, the Managing Director of the defendant is only the

competent person to sign in the agreement. Per contra, Ex.A1 was

entered by the Marketing Manager. Admittedly, there is no

endorsement on Ex.A1 or any subsequent letter or any proceeding

from the defendant federation authorizing the Marketing manager to

sign on Ex.A1 on behalf of Managing Director. Therefore, Ex.A1

itself is nullity.

14 VGKRJ AS 122 of 2006

15. The Apex Court in a case of Shriram City Union Finance

Corporation Limited. Vs. Rama Mishra1 held as follows:

A party is bound either by the provisions of the Constitution, statutory provisions or any rule or under terms of any contract which is not against the public policy. It is open for a party for his convenience to fix the jurisdiction of any competent Court to have their dispute adjudicated by that Court alone.

In a case of Dwarka Prasad Agarwal (Died) By L.Rs. vs.

Ramesh Chandra Agarwala2, the Apex Court held as follows:

Section 9 of the Code of Civil Procedure confers jurisdiction upon the civil courts to determine all dispute of civil nature unless the same is barred under a statute either expressly or by necessary implication. Bar of jurisdiction of a civil court is not to be readily inferred. A provision seeking to bar jurisdiction of civil court requires strict interpretation. The court, it is well-settled, would normally lean in favour of construction, which would uphold retention of jurisdiction of the civil court. The burden of proof in this behalf shall be on the party who asserts that the civil court's jurisdiction is ousted.

Here in the case on hand, the plaintiff is a proprietary concern

running business at Tenali in Guntur District, Andhra Pradesh.

Therefore, the Senior Civil Judge's Court, Tenali is having

2002 AIR(SC) 2402

2003 AIR(SC) 2696 15 VGKRJ AS 122 of 2006

jurisdiction to decide the suit. The Trial Court by assigning cogent

reasons held in its judgment that the said Court can try the suit. I do

not find any illegality in the said finding given by the trial Court.

16. Point No.2:

Whether the decree and judgment passed by the trial court needs any interference?

It is not in dispute by the appellant that the plaintiff is

proprietary concern doing business as in selling coconut oil at Tenali

and the plaintiff is also carrying business at Tenali. As per the case

of the plaintiff, the defendant has to supply Coconut oil in various

packages of different capacities, for which the plaintiff has to furnish

a bank guarantee for Rs.10,00,000/-. It is not in dispute that the

plaintiff submitted bank guarantee for Rs.10,00,000/-, out of the said

amount an amount of Rs.8,36,816/- is invoked by defendant. In

order to secure proper payment of the cost of the goods supplied to

the plaintiff by the defendant, the plaintiff offered a bank guarantee

of Rs.8,36,816/-. As per the own admissions of DW1, the defendant

received 8 post dated cheques worth of Rs.8,00,000/-. It was

admitted by the learned counsel for appellant/defendant that the

16 VGKRJ AS 122 of 2006

said cheques are encashed by the defendant. It is not in dispute by

both sides that bank guarantee furnished by the plaintiff for

Rs.8,36,816/- was also invoked by the defendant. The contention of

the plaintiff is that the defendant federation collected the amount

due from the plaintiff. As seen from the material on record a specific

request is made by the plaintiff not to invoke the bank guarantee

made by the plaintiff to the defendant that the plaintiff is depositing 8

postdated cheques instead of invoking the bank guarantee of

Rs.8,36,816/-. Per contrary to the same, the defendant encashed

the said cheques and the defendant also raised bank guarantee of

Rs.8,36,816/- and the defendant collected the money doubles the

amount due from the plaintiff. In order to prove the case of the

plaintiff, the plaintiff examined one R.Venkateswara Rao as PW1

and the official of the bank is examined as PW2. The evidence of

PW1 and PW2 supports the case of the plaintiff. The material on

record reveals that having accepted the post dated cheques and

encashing the postdated cheques, the defendant federation invoked

the bank guarantee and collected the money double the amount due

from the plaintiff. It is also fact that the bank guarantee was invoked

by the defendant federation inspite of injunction order granted by the 17 VGKRJ AS 122 of 2006

trial Court. The same is not disputed by the other side. The material

on record reveals that contempt of Court proceedings were also

initiated against the defendant and the said orders were upheld by

this Court and the defendant deposited the bank guarantee amount

of Rs.8,36,816/- before the trial Court. On appreciation of the entire

evidence on record, the trial Court rightly decreed the suit in-part by

granting relief of declaration that the plaintiff is entitled to receive the

amount of Rs.8,36,816/- which was deposited by the defendant

before the Court. It is an admitted fact by both the parties that

inspite of specific instructions by the plaintiff, the defendant

encashed the post dated cheques for Rs.8,00,000/- and also

invoked the bank guarantee for Rs.8,36,816/-, due to that the

plaintiff suffered a lot and the bank filed a suit against the plaintiff

and collected money from the plaintiff with interest. In fact, the

defendant collected the money double the amount due from the

plaintiff, even though the defendant encashed the cheaques for

Rs.8,00,000/- again the defendant also invoked the bank guarantee

for Rs.8,36,816/- which is a contrary to law and which is not

permissible. Therefore, the decree and judgment passed by the trial 18 VGKRJ AS 122 of 2006

Court is perfectly sustainable under law and it requires no

interference.

17. In the result, the Appeal Suit is dismissed confirming the

decree and Judgment dated 30.12.2005, in O.S.No.47 of 1998

passed by the learned Principal Senior Civil Judge, Tenali. No order

as to costs.

As a sequel, miscellaneous petitions, if any, pending in the

Appeal shall stand closed.

_________________________ V.GOPALA KRISHNA RAO, J Date: 08.12.2023 sj 19 VGKRJ AS 122 of 2006

THE HON'BLE SRI JUSTICE V.GOPALA KRISHNA RAO

APPEAL SUIT No. 122 OF 2006

Date: 08.12.2023

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