Food Corporation Of India vs Roshan Kumar Ranjit Kumar
2009 Latest Caselaw 1248 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                   Date of Decision: 08th April, 2009

+     (1)                FAO(OS) 330/2007

      FOOD CORPORATION OF INDIA                ..... Appellant
                    Through:  Mr. Sukumar Pattjoshi, Advocate

                  versus

      ROSHAN KUMAR RANJIT KUMAR                ..... Respondent
                    Through:  Mr. M.L. Lahoty & Mr. Paban K.
                              Sharma, Advocates

                                   AND

      (2)                FAO(OS) 433/2007

      ROSHAN KUMAR RAJNIT KUMAR                 ..... Appellant
                    Through:  Mr. M.L. Lahoty & Mr. Paban K.
                              Sharma, Advocates

                  versus

      FOOD CORPORATION OF INDIA                ..... Respondent
                    Through:  Mr. Sukumar Pattjoshi, Advocate

      CORAM:
      HON'BLE MR. JUSTICE MUKUL MUDGAL
      HON'BLE MR. JUSTICE VIPIN SANGHI

      1. Whether the Reporters of local papers may
         be allowed to see the judgment?
      2. To be referred to Reporter or not?
      3. Whether the judgment should be reported
         in the Digest?

%                          JUDGMENT (Oral)


MUKUL MUDGAL, J.

1. These two appeals i.e. FAO(OS) 330/2007 & FAO(OS)

433/2007 are directed against the judgment of the learned Single

Judge dated 30.04.2007, by which the objections to the majority award

dated 24.01.2003 were dealt with and disposed off. The learned Single

Judge by the impugned judgment directed the FCI to refund the

earnest money converted into security deposit, and granted interest

w.e.f. 05.03.1999 @ 9%. The FCI's appeal is largely confined to the

issue of grant of interest on security deposit w.e.f. 05.03.1999. In so

far as the appeal of the respondent Roshan Kumar Ranjit Kumar is

concerned i.e. FAO(OS) 433/2007, the same challenges the judgment

of the learned Single Judge upholding the award on its counter claim

for Rs.5,28,790.90, which was rejected by the arbitrators. The learned

Single Judge concurred with the finding that this claim was barred by

limitation.

2. Insofar as the plea of the FCI is concerned, Clause D(ii) of the

contract is relevant and reads as follows:

"ii) The successful tenders shall remit 5% of the value of the total quantity offered for purchase towards security deposit together with the cost of stocks within 7 days of issue of confirmation of acceptance of tender in the form of Demand Draft issued by any of the scheduled Bank in favour of SRM, FCI, Region Chandigarh payable at Chandigarh. The security deposit furnished by the tenderer/ buyer would be subject to the terms and conditions laid down for the sale of sub/ std. rice and FCI shall not be liable for payment of any interest on security deposit for or for any depreciation thereof. If the tenderer/buyer fails or neglects to observe or perform any of his obligations under the contract, it shall be lawful for the FCI to forfeit either in whole or in part in its absolute discretion, the security deposit by the tenderers/buyers towards the satisfaction any sum due to be claimed from the tenderer/buyer, for any damages, losses, charges, expenses or costs that may be suffered or incurred by the FCI. The decision of the SRM, FCI, Punjab Region, Chandigarh in this

respect shall be final and binding on the tenderers/buyers. In the event of security deposit being in sufficient or if the security deposit has been (sic) fully the case may be, shall be deducted from any sum of due or which any time there after may become due to the tenderer/buyer under this or any other contract with the FCI. Should that sum also not be sufficient to recover the full amount recoverable, the tenderer/buyer shall pay to the FCI, on demand the balance due. The Earnest Money furnished by the tenderer should be adjusted against or converted into the security deposit and could be released only after the satisfactory completion of contract. The FCI shall not be liable to pay any interest thereon." (emphasis supplied)

3. The submission of the counsel for the appellant FCI Sh.

Pattjoshi is confined to the plea that the FCI was not liable to pay any

interest on the earnest money which stood converted into security

deposit, in view of the express prohibition contained in the clause

extracted above. He has relied upon Oil & Natural Gas Corporation

Ltd. v. Saw Pipes Ltd. 2003(5) SCC 705 to submit that the award is

liable to be interfered with, if it is contrary to the contract. He has

submitted that the decision of the learned Single Judge, insofar as he

granted interest on the refund of security deposit to the respondent

w.e.f. 05.03.1999, cannot be sustained, as interest was contractually

not payable on this amount. He accordingly prays that interest should

not be granted on this amount of security deposit at all.

4. Mr. Lahoty, appearing for the respondent contractor in

FAO(OS) 330/2007, has attempted to counter this plea by arguing that

while interest was not payable on the earnest money, but upon its

conversion to security deposit, interest was payable.

5. Having considered the rival pleas and examined the

contractual terms, we are of the view that the intention of the parties

emerging from the contract is clear, that no interest was payable on

the refund of earnest money, which stood converted to the security

deposit. Earnest money, insofar as clause D(ii) is concerned, is

synonymous with security deposit. The learned arbitrators in their

majority award held in favour of the appellant FCI, holding that the

respondent contractor was not entitled to seek refund of the earnest

money/security deposit. Consequently, the stand of the appellant that

they were not liable to refund the amount of Rs.11,16,000/- was

accepted by the Arbitral Tribunal in their majority award. As a result,

the occasion to refund the said amount did not arise till after the

decision of the learned Single Judge reversing the aforesaid finding of

the Arbitral Tribunal, and holding that the appellant was indeed liable

to refund the EMD/security deposit of Rs.11,16,000/- to the respondent

contractor, as no loss or damage had been suffered by the appellant

on account of the breach of the contract by the respondent contractor.

Accordingly, we are of the view that interest on the said sum of

Rs.11,16,000/- was not payable till the time the stand of the appellant

FCI was rejected by the learned Single Judge and was payable only

after the refund of this amount was ordered by the learned Single

Judge on April 30, 2007. The judgment of the learned Single Judge is,

accordingly, set aside to the extent it grants interest w.e.f. 05.03.1999

@ 9% on Rs.11,16,000/- and it is clarified that the interest on the

aforesaid sum of Rs.11,16,000/- shall be payable only w.e.f.

30.04.2007, till payment to the respondent.

6. Insofar as the plea of the contractor firm Roshan Kumar Ranjit

Kumar i.e. the appellant in FAO(OS) 330/2007 is concerned, Mr. Lahoty,

learned counsel for the appellant has assailed the judgment of the

learned Single Judge on the aspect of limitation in relation to the

contractor's claim of Rs.5,28,790.90. Insofar as this plea is concerned,

the facts are briefly stated as under.

7. This claim was for refund of excess amount paid by the

contractor, as material delivered on 30.10.1996 was of lesser quantity.

Though on merits this claim was found to be justified, the arbitrators

found this claim to be time barred. The limitation period for this claim

was reckoned from 30.10.1996. The award, which was upheld by the

learned Single Judge on the issue of limitation held that the release

order was given on 04.10.1996 as per which order the stocks were to

be lifted by 18.10.1996. The contractor sought extension of time by

their letter dated 16.10.1996 and at the contractor's request, FCI

extended the time upto 31.10.1996 by the letter dated 24.10.1996. In

spite of this communication stocks were not lifted. The

Appellant/ontractor's claim was, thus, founded on the ground that it

had deposited a sum of Rs.65 Lacs with the FCI, against which as on

30.10.1996 the material supplied was worth Rs.58,92,112.80ps. and

accordingly, the refund of this excess amount was payable to the

contractor.

8. The learned counsel for the appellant-contractor in FAO(OS)

433/2007, has contended that the cause of action arose when the

advertisement for sale of stocks of the respondent was given by the

FCI in the year 1999 and it further arose upon preparation of balance

sheet acknowledging the aforesaid amount of Rs.5,28,790.90.

9. Insofar as the plea of Mr. Lahoty founded upon the issuance of

advertisement is concerned, the mere fact that an advertisement was

given in 1999 for disposing off the goods at the risk and cost of the

appellant-contractor, in our view furnished no ground for extending

limitation in the appellant's favour. The claim of the appellant-

contractor was founded on the cause of action which arose on

30.10.1996 upon its failure to lift the stocks for the amount already

deposited for whatever reason. It had no correlation to the issuance of

an advertisement by the FCI for disposing off the stocks at the risk and

cost of the contractor. The majority award and the learned Single

Judge, in our view, rightly held that the period of limitation began from

31.10.1996. The second plea of Mr. Lahoty that the balance sheet

acknowledged this amount in 1999 cannot be accepted for the reason

that the date of preparation of the balance sheet has not been

disclosed. It is not clear whether the same was prepared before or

after the expiry of the initial period of limitation on 30.10.1999. If the

Contractor desired to rely upon the balance sheet to claim extension of

limitation by resort to Section 18 of Limitation Act, it was for the

Contractor to have established the date of the so-called

acknowledgement. This apart, even if this plea is to be looked into on

merits, the entire balance sheet is to be considered and no entry can

be culled out and seen in isolation.

10. For the aforesaid reasons we find no merit in the appeal i.e.

FAO(OS) 433/2007 preferred by the firm Roshan Kumar Ranjit Kumar.

The same is, accordingly, dismissed. The appeal preferred by the FCI

bearing FAO(OS) 330/2007 is allowed to the limited extent, i.e. the

interest liability changing shall arise from 03.04.2007 and not from

09.03.1999 on the amount of Rs.11,16,000/- @ 9% per annum.

11. Both the appeals stand disposed off in the above terms.

MUKUL MUDGAL, J.

VIPIN SANGHI, J.

APRIL 08, 2009 Rsk n