Ramesh Lal vs Municipal Corporation Of Delhi
2011 Latest Caselaw 2379 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Date of Judgment: 04.05.2011

+                   R.S.A.No. 142/2007

RAMESH LAL                                            ...........Appellant

                    Through:         Mr. B.P. Singh, Advocate.

                           Versus

MUNICIPAL CORPORATION OF DELHI                        .........Respondent

                    Through:         Ms. Biji Rajesh along with
                                     Mr. Gaurang Kanth, Advocates.

                               AND

                    R.S.A.No. 144/2007

RAMESH LAL                                            ...........Appellant

                    Through:         Mr. B.P. Singh, Advocate.

                           Versus

MUNICIPAL CORPORATION OF DELHI                        .........Respondent

                    Through:         Ms. Biji Rajesh along with
                                     Mr. Gaurang Kanth, Advocates.

CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR

    1. Whether the Reporters of local papers may be allowed to
       see the judgment?

    2. To be referred to the Reporter or not?                     Yes

    3. Whether the judgment should be reported in the Digest?
                                                         Yes

RSA Nos. 142/2007 & 144/2007                                     Page 1 of 10
 INDERMEET KAUR, J. (Oral)

1. This appeal has impugned the judgment and decree dated

07.02.2007 which had reversed the finding of the trial judge dated

27.04.2004. Vide judgment and decree dated 27.04.2004, the suit

filed by the plaintiff Sh. Ramesh Lal seeking recovery of amounts

against the defendant/Municipal Corporation of Delhi (MCD) had

been decreed in his favour. The impugned judgment had reversed

the finding of the trial judge. The suit filed by the plaintiff stood

dismissed.

2. Vide the impugned judgment dated 07.02.2007; both the

suits i.e. suit no. 37/2004 and suit no. 39/2004, filed by the

plaintiff had been decided. Both the suits had, in fact, been

consolidated in the trial court itself and had been disposed of by

the impugned judgment.

3. Plaintiff was registered as a contractor with the defendant;

he was engaged in the business of government contract work and

supply of building material. He had conducted works for the MCD

which were found to be satisfactory. The final bill was prepared

by the department and had been passed for payment. The

plaintiff had signified his acceptance and signed the measurement

book as well. These facts are undisputed.

4. The gross value of the work done by the plaintiff in suit no.

37/2004 was to the tune of `2,05,044/-; final bill amounted to

`1,24,750/- of which the amount of `43,133/- was paid to the

plaintiff; security amount had also been released. Balance

recoverable was `81,617/-.

5. In suit no. 39/2004, the gross value of the work done by the

plaintiff amounted to be `3,75,997/-; final bill which had been

passed was of `2,38,102/-. `32,886/- was the security amount.

Amount recoverable was `2,70,988/-.

6. Legal notice dated 11.07.2002 had been issued to the

defendant whereafter the present suits were filed.

7. Suit was accordingly filed for a sum of ` 81,617/- along with

interest at 18% per annum (i.e. a sum of `14,201 w.e.f. 12.06.2001

till 16.09.2002) for the total amount of ` 95,818/-. This was in suit

no. 37/2004.

8. Plaintiff had filed the second suit for recovery of `2,70,988/-

along with the interest at the rate of 18% per annum (w.e.f.

12.06.2001 till 16.09.2002 i.e. the interest amount of `20,001/-)

i.e. the total amount of `2,92,633/-.

9. It is not in dispute that during the pendency of the two suits,

the principal sums of `81,617(in suit no. 37/2004) and `2,70,988/-

(in suit no. 39/2004) have since been paid. The interest amount

i.e. `14,201/- in first suit and `20,001/- in the second suit were the

subject matter of dispute before the courts below.

10. The suit had initially been filed under Order 37 of the Code

of Civil Procedure (hereinafter referred to as ‟Code‟). The trial

judge had noted that the summons in the prescribed format had

been issued. Pursuant to the summons for judgment, the

defendant, however, did not file his application for leave to defend

but instead chose to file an application under Section 8 of the

Arbitration and Conciliation Act, 1996 read with Order 7 Rule 11

of the Code. The contention was that the parties were governed

by an Arbitration Agreement which did not stipulate any interest.

Court was, however, of the view that interest is to be awarded to

the plaintiff and the suit of the plaintiff was accordingly decreed.

11. In appeal, this finding was set aside. The impugned

judgment was of the view that interest is not payable to the

plaintiff. Court was of the view that the parties were governed by

the Arbitration Agreement and Clause 25 of the same was

adverted to. The judgment was accordingly set aside.

12. This is a second appeal. It has been admitted and on

2305.2007, the following substantial question of law had been

formulated:-

" Whether the demand raised by the appellant regarding the

payment of interest is a disputed matter, if so to what its effect

and whether he is entitled to interest or not?"

13. On behalf of the appellant it has been urged that the

judgment suffers from a perversity as there were no disputes or

difference left between the parties; admittedly, the final bill had

been passed for payment; in fact, payment of the principal amount

in terms of the final bill had been released. Part payment had

been released before the filing of the suit and the balance amount

had been paid during the pendency of the suit. This by itself

shows that there was no dispute or difference left between the

parties. The question of invoking the arbitration clause did not

arise.

14. Arguments have been rebutted. It is pointed out that the

impugned judgment suffers from no perversity; the Arbitration

Agreement did not contain any interest clause; interest could not

have been awarded.

15. Record has been perused. The suit had initially been filed

as a suit under Order 37 of the Code. The suit amount was

inclusive of the figures i.e. the amount of Rs. 14,201/-in the first

suit and the sum of Rs. 20,001/- in the second suit. Order 37 is a

complete Code in itself. The procedure contained therein has to

be strictly followed. Once the summons for judgment is served

upon the defendant, the procedural requirement is that the

defendant has to enter his appearance and thereafter file an

application for leave to defend. In the application for leave to

defend all defenses which are permissible under law are

permitted. That is the procedure under Order 37 of the Code.

The plaintiff could not have straightaway filed an application

under Order 7 Rule 11 of the Code or invoked Section 8 of the

Arbitration and Conciliation Act, 1996. The averments made in the

application under Order 7 Rule 11 could well have been made by

him in his application for leave to defend.

16. That apart, the contention of the learned counsel for the

appellant has force. Once the final bill had been passed by the

department; there was no dispute or difference left between the

parties. The question of invoking the arbitration clause did not

arise.

17. The quotient of interest which is now disputed by the

department was not a dispute arising out of the Arbitration

Agreement which is a necessary pre-condition to invoke the

arbitration clause. Even otherwise, the arbitration agreement by

which parties were government clearly in clause 9 stipulated that

the payment of the final bill once it is passed shall as far as

possible be made within the period specified therein i.e. if the

tendered value of the work is up to Rs. 5 lacs, a period of three

months is prescribed and if the tendered work exceeds Rs 5 lacs,

a six months period was prescribed. Admittedly, in this case even

after his stipulated period, complete payment was not released.

Legal notice dated 11.07.2002 which was also after the stipulated

three months period was also not heeded to. The plaintiff was

compelled to resort to litigation. Clause 10 (B) of the Arbitration

Agreement deals with interest and recovery; in this clause, the

mobilization advance paid to the contractor, would carry interest

at the rate of Rs. 18% per annum to be calculated from the date of

payment upto the date of recovery. This clause is admittedly in

favour of the department; nevertheless it does throw light on the

intent of the parties to the agreement; plaintiff had relied upon

this clause to claim interest at 18 % per annum for the intervening

period as in spite of the fact that even after stipulated period of

three months was over, his complete payment had not been made

to him. This clause had been relied upon by the trial judge. The

impugned judgment not granting interest to the plaintiff which

was part of the suit amount which was a suit under Order 37 of

the Code is an illegality. Plaintiff had not invoked the Arbitration

Agreement; he had simplicitor filed a suit for recovery. Question

of the invocation of the Arbitration Agreement did not arise when

admittedly there was no dispute or difference left between the

parties. Payment of final bill was admittedly paid after a delay;

interest was the entitlement of the plaintiff. The award of interest

at the rate of 18 % per annum as aforenoted has been deciphered

from the clause of the agreement itself i.e. Clause 10 (b) read with

Clause 9. Impugned judgment not granting interest to the

plaintiff is a perversity. Plaintiff was rightfully entitled to it.

18. Reliance by the learned counsel for the respondent upon the

judgment reported in (2007) 3 SCC 686 Agri Gold Exims Ltd. Vs.

Sri Lakshmi Knits & Wovens and Ors. as also upon the judgment

reported in (2003) 6 SCC 503 Hindustan Petroleum Corpn. Ltd.

Vs. Pinkcity Midway Petroleums is misplaced. These judgments

are inapplicable. In Agri Gold Exims Ltd. (supra), it was held that

the term „dispute‟ must be given its general meaning. In this

case, the respondents had made payment without prejudice to

their rights and contentions; thus there was a dispute between the

parties. In this case, the final bill had been passed; there was no

dispute left. This ratio is inapplicable. The second judgment of

Hindustan Petroleum Corpn. Ltd. (supra) states the undisputed

proposition that where an arbitration clause exists, the court had

the mandatory duty to refer the disputes arising between the

contracting parties to the Arbitrator. In this case, there was no

dispute which was referable for arbitration. After passing of the

final bill which was an admitted document, there remained no

dispute between the parties.

19. Judgment of 18 (1980) DLT 122 Haryana Breweries Ltd. Vs.

Aluminium Manufacturing Co. Ltd. & Anr. is also distinct. This

judgment has detailed the procedure which has to be followed in a

summary suit under Order 37 of the Code. After the summons for

judgment had been served upon the defendant, an application for

leave to defend has to be filed by him. This was a case where the

leave to defend has been refused only on the ground that it had

been filed before summons for judgment had been served upon

the defendant; this was held to be a curable defect and not a

ground for the dismissal of the application for leave to defend.

20. Substantial question of law is answered in favour of the

appellant and against the respondent. Appeal is allowed. Both

the appeals are disposed of.

INDERMEET KAUR, J.

4th May, 2011 ss