Magma Leasing Ltd. vs Hcl Infosystems Ltd. (No. 1)
2006 Latest Caselaw 1124 Del

JUDGMENT

Sanjiv Khanna, J.

1. I have heard learned Counsel for the parties. My attention has been drawn to the agreement dated November 11/12, 1998. Clause 4 of the said agreement is relevant and is reproduced below:

HCL hereby ensures payment of lease rentals as due and payable by BHEL to be paid to MLL directly which rental is due and payable every quarter and is due to commence from the date of installation of the equipments at BHEL's site payable within 30 days of the end of the particular quarter during which the equipment is installed at BHEL and MLL will be treated as 'lessor' for the purpose of the same.

It is further clarified that HCL will pay interest for the delay in obtaining receipt of lease rentals from BHEL pursuant to the performance under the lease agreement at 2 per cent, per month after 30 days from the respective due dates until payment thereof and further HCL will also make good to MLL the short-fall, if any, in the respective lease rental due and payable together with interest at 2 per cent, per month till the date of payment.

2. It is stated by learned Counsel for the parties that the other agreements with an identical clause were executed between the petitioner and the respondent-company.

3. Parties have also drawn my attention to the agreement dated September 28, 1999, irrevocable power of attorney dated September 25, 1999, and memorandum of agreement dated June 22, 1999 and the supplementary agreement dated June 23, 1999, between the petitioner, the respondent and BHEL.

4. The basic dispute in the present petition pertains to payment of interest by the respondent-company to the petitioner on the delayed payment of lease instalment by BHEL as per clause 4 of the agreement dated November Will, 1998. The said clause, as quoted above, states that the respondent shall pay interest at 2 per cent, per month to the petitioner for any default/delay in payment of instalment by BHEL beyond 30 days of the due date. The respondent-company had agreed to pay interest at 2 per cent, per month from the date the instalment had become due plus 30 days till the date of payment. There is no dispute between the parties in this regard.

5. Learned Counsel for the parties have also drawn my attention to the calculation of interest which has been given in the form of a chart with the affidavit dated July 15, 2005, of Mr. M.V. Chandran (page 12 onwards). The said chart gives the date when each lease instalment became due and also the date when the cheques for the said instalments were deposited with the bank of the petitioner. For each default, interest at 2 per cent, per month, payable in terms of clause 4, has been separately calculated.

6. On behalf of the respondent-company it is submitted that the claim for interest for several defaults in payment of instalments is barred by limitation. For example, the instalment due on June 17, 1999, was paid to the petitioner on August 13, 1999, but the present petition for winding up was filed on March 17, 2005, i.e., after a gap of more than five years from the date the cause of action arose and the petitioner became entitled to interest in terms of clause 4. However, there are other cases in which the claim of interest is within limitation.

7. Learned Counsel for the petitioner has drawn my attention to letter dated April 17, 2001, written by the respondent-company to the petitioner. The relevant portion of the said letter is reproduced below:

We are enclosing our cheque No. 075194 dated April 12, 2001, for Rs. 80,595 (rupees eighty thousand five hundred and ninety five only) drawn on ICICI Bank payable at part at Chennai towards the amount deducted from BHEL, Trichy, rental agreement. We regret for the delay. The details of the payment are as follows:

1. Your letter No. MLL/MAS/O81/2000 dated February 9, 2001, Rs. 30,312 ;

2. Ad hoc payment against other pending claims (details are awaited from our head office for this amount) Rs. 10,430'.

It is submitted that ad hoc payment of Rs. 10,430 by the respondent-company was towards part payment of the interest payable under clause 4 of the agreement dated November 11/12, 1998. It is further submitted that the petitioner-company had been, as a matter of practice, setting off and adjusting from the interest due and payable under clause 4, interest at 2 per cent, per month when any instalment was paid prior to the due date. It is submitted that only after the expiry of the lease agreement, the net amount due and payable by the respondent-company could be ascertained and therefore the cause of action arose only after the entire lease instalments had been paid/cleared and the term of the lease had expired.

8. I have considered the submissions made by learned Counsel for the par- : ties with regard to the date on which the cause of action arose. Clause 4, as quoted above, specifically gives the starting point and the ending point for charging of interest, whenever there was delay in paying instalments under the agreement. For each default, interest in terms of clause 4 has to be separately calculated. The petitioner has also separately calculated the interest on each default. The agreement nowhere provides for setting off of interest or for payment of interest by the petitioner in case the lease instalment is paid in advance or before the due date. This stand of the petitioner is also contrary to the averments made in the affidavit and the chart enclosed along with the affidavit dated July 15, 2005 of Mr. M.V. Chandran.

9. Reference in this regard may be made to the two judgments of this Court in the cases of Globe Motors Ltd. (in liquidation) v. Mehta Teja Singh and Co. (Agencies) [1983] 24 DLT 214 : [1984] 55 Comp Cas 445 and National Small Industrial Corporation Ltd. v. Takdir Singh [2005] 120 DLT 397. In both the cases the agreements had provided for payment in instalments. It was held that limitation period of three years under Article 137 of the Limitation Act, 1963, would start on the date the instalment was due. It was held that the cause of action separately accrued with regard to each and every instalment and the period of limitation for filing of the claim would be three years commencing from the date on which the particular instalment became due.

10. The aforesaid principle would equally apply in the present case. Each default in payment of instalment would constitute a separate cause of action, as in case of payment of monthly rent. Interest for each default has to be separately calculated and interest is payable for the period of default and not after instalment was paid. The quantum of interest payable under clause 4 could be computed when BHEL made belated payment of the lease instalment. The cause of action therefore accrued in favour of the petitioner on the date instalment was paid by BHEL and accordingly the petitioner should have filed a petition for winding up or a suit for recovery of interest within three years thereafter, in respect of each default. Thus, some of the claims for payment of interest made by the petitioner would be barred by limitation and some other claims would be within limitation.

11. With regard to the case of the petitioner that there was part payment of interest by the respondent in view of letter dated April 17, 2001, the relevant portion of the letter quoted above does not help the petitioner. It has not been stated in the letter by the respondent-company that payment towards interest under clause 4 was being made. The letter merely states that some ad hoc payment was being made against some other pending claims, the details of which were awaited. There is no other letter or acknowledgment by the respondent-company, which has been placed on record. Moreover, this letter relied upon by the petitioner is dated April 17, 2001 and the petition for winding up was filed on March 17, 2005, which is again beyond the period of three years even from the date when the letter dated April 17, 2001, was written.

12. In view of the above, it is directed that the petitioner and the respondent-company should carry out fresh calculations and file a chart calculating interest payable under clause 4 of the agreement dated November 11/12, 1998, with reference to the date on which the winding up petition was filed, i.e., March 17, 2005. The parties will go back three years from March 17, 2005, with reference to the date when the instalment was belatedly paid by BHEL. The interest will be calculated on the basis of simple interest. Let the chart be filed by both the parties within a period of four weeks from today.

13. List on September 5, 2006.