Karnataka Co Op Milk Producers ... vs M/S Sri Dhanalakshmi Cotton And Rice ...
2025 Latest Caselaw 8545 Kant

Karnataka High Court

Karnataka Co Op Milk Producers ... vs M/S Sri Dhanalakshmi Cotton And Rice ... on 18 September, 2025

   IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 18TH DAY OF SEPTEMBER, 2025

                         PRESENT

        THE HON'BLE MRS. JUSTICE ANU SIVARAMAN

                           AND

        THE HON'BLE DR. JUSTICE K.MANMADHA RAO

       REGULAR FIRST APPEAL NO.319 of 2021 (MON)
                         C/W.
       REGULAR FIRST APPEAL NO.318 of 2021 (MON);
       REGULAR FIRST APPEAL NO.396 of 2021 (MON);
       REGULAR FIRST APPEAL NO.397 of 2021 (MON);
       REGULAR FIRST APPEAL NO.398 of 2021 (MON);
       REGULAR FIRST APPEAL NO.400 of 2021 (MON);
       REGULAR FIRST APPEAL NO.402 of 2021 (MON);
       REGULAR FIRST APPEAL NO.403 of 2021 (MON);
       REGULAR FIRST APPEAL NO.404 of 2021 (MON)

IN RFA NO.319 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                              ...APPELLANT
(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)

AND:

M/S. SRI. DHANALAKSHMI COTTON AND
RICE MILLS PVT. LTD.
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT:
GANAPAVARAM-522 619
 -

                            2




(VIA) CHILAKALURIPET
GUNTUR DISTRICT (AP)
REPRESENTED BY ITS DIRECTOR
P. VEERANARAYANA
                                           ...RESPONDENT
(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)

     THIS RFA IS FILED UNDER SECTION 96 OF CPC, 1908,
AGAINST THE JUDGMENT AND DECREE DATED 29.09.2020
PASSED IN OS.No.968/2015 ON THE FILE OF THE XVI
ADDITIONAL CITY CIVIL JUDGE (CCH No.28), BENGALURU,
PARTLY DECREEING THE SUIT FOR RECOVERY OF MONEY AND
ETC.

IN RFA NO.318 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                               ...APPELLANT
(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)

AND:

SRI. BOBBA VENKATESHWARA RAO
S/O RANGA RAO
AGED ABOUT 60 YEARS
PROPRIETOR OF
M/S. KALPATARU FEEDS
AT R.S. No.168/1, ENIKEPADU
VIJAYAWADA-521 108
KRISHNA DISTRICT
ANDHRA PRADESH
                                              ...RESPONDENT

(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)
 -

                            3




     THIS RFA IS FILED UNDER SEC.96 R/W. ORDER 41 RULE 1
OF CPC 1908, AGAINST THE JUDGMENT AND DECREE DATED
29.09.2020 PASSED IN O.S. No.969/2015 ON THE FILE OF THE
XIV ADDL. CITY CIVIL JUDGE AT BENGALURU (CCH No.28)
PARTLY DECREEING THE SUIT FOR RECOVERY OF MONEY AND
ETC.

IN RFA NO.396 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N.RAMESH
                                               ...APPELLANT
(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)

AND:

M/S. BRAHMMAS AGRO PVT. LTD.
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
PLOT No.324, BLOCK B
MLA AND MP'S COLONY
ROAD No.10C JUBILEE HILLS
HYDERABAD-500 033
FACTORY AT LOHIYAPURAM
DESAIPET, VETAPALEM MANDAL
PRAKASAM DISTRICT
ANDRA PRADESH
REP. BY ITS DIRECTOR
A SIVA RAMI REDDY
AGE 52 YEARS
                                              ...RESPONDENT

(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)
 -

                            4




     THIS RFA IS FILED UNDER SECTION 96 R/W ORDER 41
RULE 1 OF CPC 1908, AGAINST THE JUDGMENT AND DECREE
DATED 29.09.2020 PASSED IN OS.No.979/2015 ON THE FILE OF
THE XIV ADDITIONAL CITY CIVIL JUDGE, BENGALURU (CCH
No.28) PARTLY DECREEING THE SUIT FOR RECOVERY OF MONEY
AND ETC.

IN RFA NO.397 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                               ...APPELLANT
(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)

AND:

M/S. TIRUMALA COTTON AND AGRO PVT. LTD.
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT:
THIMMAPURAM-522 233
EDLAPADU MANDAL
GUNTUR DISTRICT
ANDRA PRADESH
REPRESENTED BY ITS DIRECTOR
N. LAKSHMINARAYANA
AGED ABOUT 66 YEARS
                                              ...RESPONDENT

(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)

     THIS RFA IS FILED UNDER SEC.96 R/W.ORDER 41 RULE 1
OF CPC, AGAINST THE JUDGMENT AND DECREE DATED
29.09.2020 PASSED IN OS No.978/2015 ON THE FILE OF THE
XIV ADDL. CITY CIVIL JUDGE AT BENGALURU (CCH No.28)
PARTLY DECREEING THE SUIT FOR RECOVERY MONEY AND ETC.
 -

                            5




IN RFA NO.398 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                               ...APPELLANT
(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)

AND:

M/S. SWATHI COTTONS PVT. LTD.
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
DOOR No.6-179, GANAPAVARAM-522 619
NADENDLA MANDAL
GUNTUR DISTRICT
ANDHRA PRADESH
REPRESENTED BY ITS DIRECTOR
P. BOGGAVARAPU ANKAMMA RAO
                                              ...RESPONDENT

(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)

     THIS RFA IS FILED UNDER SECTION 96 R/W ORDER 41
RULE 1 OF CPC 1908, AGAINST THE JUDGMENT AND DECREE
DATED 29.09.2020 PASSED IN OS No.972/2015 ON THE FILE OF
THE XIV ADDITIONAL CITY CIVIL JUDGE, BENGALURU, PARTLY
DECREEING THE SUIT FOR RECOVERY OF MONEY AND ETC.

IN RFA NO.400 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK
PRODUCERS FEDERATION LTD.
KMF COMPLEX, DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
 -

                           6




BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                              ...APPELLANT

(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)

AND:

M/S. SRI. MAHALAXMI COTTON SEED
OIL INDUSTRIES, PARTNERSHIP FIRM
HAVING ITS REGISTERED OFFICE AT:
No.6-72, NEAR NAKKALAPALLY VILLAGE
HANAMKONDA MANDAL
WARANGAL DISTRICT-506 002
TELANGANA
REPRESENTED BY ITS MANAGING PARTNER
SRI. YADA KRISHNA MURTHY
AGED ABOUT 60 YEARS
                                           ...RESPONDENT
(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)

     THIS RFA IS FILED UNDER SECTION 96 R/W ORDER 41
RULE 1 OF CPC 1908, AGAINST THE JUDGMENT AND DECREE
DATED 29.09.2020 PASSED IN OS.No.973/2015 ON THE FILE OF
THE XIV ADDITIONAL CITY CIVIL JUDGE, BENGALURU PARTLY
DECREEING THE SUIT FOR RECOVERY OF MONEY AND ETC.

IN RFA NO 402 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGWODA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                              ...APPELLANT

(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)
 -

                           7




AND:

M/S. COROMANDEL AGRO PRODUCTS AND OILS LTD.
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956,
HAVING ITS REGISTERED OFFICE AT:
No.12-B, SKYLARK APRTMENTS
BASHEERBAGH
HYDERBAD-500 029
AND ITS ADMINISTRATIVE OFFICE AT:
JANDRAPET-523 165, CHIRALA
PRAKASAM DISTRICT
ANDRA PRADESH
REPRESENTED BY ITS COMPANY SECRETARY
AND GENERAL MANAGER
K. SATYANARAYANA
                                           ...RESPONDENT
(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)

     THIS RFA IS FILED UNDER SECTION 96 OF THE CPC,
AGAINST THE JUDGMENT AND DECREE DATED 29.09.2020
PASSED IN O.S.No.980/2015 ON THE FILE OF THE XIV
ADDITIONAL   CITY   CIVIL JUDGE,   BENGALURU,   PARTLY
DECREEING THE SUIT FOR RECOVERY OF MONEY AND ETC.

IN RFA NO 403 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                              ...APPELLANT

(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)
 -

                            8




AND:

M/S. SRINIVASA COTTON AND OIL MILLS PVT. LTD.
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMAPNIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT:
No.490, VARAGINI-522 235
PEDANANDIPADU
GUNTUR DISTRICT
ANDRA PRADESH
REP. BY ITS MANAGING DIRECTOR
SRI. DASARI LAKSHMI SIVARAMA PRASAD
                                            ...RESPONDENT

(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)

     THIS RFA IS FILED UNDER SECTION 96 R/W ORDER 41
RULE 1 OF CPC 1908, AGAINST THE JUDGMENT AND DECREE
DATED 29.09.2020 PASSED IN OS.No.977/2015 ON THE FILE OF
THE XIV ADDITIONAL CITY CIVIL JUDGE, BENGALURU PARTLY
DECREEING THE SUIT FOR RECOVERY OF MONEY AND ETC.

IN RFA NO 404 OF 2021:
BETWEEN:

KARNATAKA CO-OP MILK PRODUCERS
FEDERATION LTD.
KMF COMPLEX
DR. M.H. MARIGOWDA ROAD
BENGALURU-560 029
BY ITS ADDITIONAL DIRECTOR (ADMINISTRATION)
MR. C.N. RAMESH
                                              ...APPELLANT
(BY SRI. S.S. NAGANAND, SENIOR COUNSEL A/W.
    SRI. CHANDRANATH ARIGA K., ADVOCATE)

AND:

M/S. KALLAM AGRO PRODUCTS AND
OILS PVT. LTD.
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
 -

                            9




SY. No.278, DOKIPARRU-522 438
MEDIKONDUR MANDAL
GUNTUR DISTRICT
ANDHRA PRADESH
REP. BY ITS MANAGING DIRECTOR
K. MOHAN REDDY
                                            ...RESPONDENT

(BY SRI. SRINIVASA MURTHY S., ADVOCATE FOR C/R)

     THIS RFA IS FILED UNDER SEC.96 OF CPC, 1908, AGAINST
THE JUDGMENT AND DECREE DATED 29.09.2020 PASSED IN
OS.No.971/2015 ON THE FILE OF THE XIV ADDITIONAL CITY
CIVIL JUDGE, AT BENGALURU, PARTLY DECREEING THE SUIT
FOR RECOVERY OF MONEY AND ETC.

      THESE APPEALS HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT     ON   15.07.2025  AND   COMING    ON   FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN
J., PRONOUNCED THE FOLLOWING:

CORAM:   HON'BLE MRS. JUSTICE ANU SIVARAMAN
         and
         HON'BLE DR. JUSTICE K.MANMADHA RAO


                    CAV JUDGMENT

(PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN)

These Regular First Appeals No.319/2021, 318/2021,

396/2021, 397/2021, 398/2021, 400/2021, 402/2021,

403/2021 and 404/2021 are filed challenging the judgment

and decree dated 29.09.2020 passed by the XIV Additional

City Civil Judge, Bengaluru (CCH.No.28) ('trial Court' for

short) in OS No.968/2015, 969/2015, 979/2015, 978/2015,

-

972/2015, 973/2015, 980/2015, 977/2015 and 971/2015,

respectively.

2. We have heard Shri. S.S. Naganand, learned

senior counsel as instructed by Shri. Chandranath Ariga. K,

learned counsel appearing for the appellants and Shri.

Srinivasa Murthy S, learned counsel appearing for the

respondents.

3. The plaintiffs were private limited companies, who

supplied raw materials to the defendant - Society registered

under the Karnataka Co-operative Societies Act, 1959,

pursuant to an e-tender in which the plaintiffs' bids were

accepted. Purchase orders stipulated that 80% of the invoice

value is to be paid within 15 days from the date of receipt

and acceptance of goods and the remaining 20% within 30

days. The plaintiffs contended that they were entitled to

claim interest since the defendant delayed in making the

payments. Legal notices demanding payment were issued by

the plaintiffs, and the amounts due were paid by the

defendant which was adjusted towards interest. Alleging

that the defendant remained liable for the outstanding

-

principal amount with current and future interest at the rate

of 18% per annum, the plaintiffs instituted recovery suits

before the trial Court.

4. The defendant appeared through the counsel and

filed a written statement denying the averments in the

plaint. It was specifically contended that the plaintiffs had

paid the entire amounts towards supply of raw materials and

that the defendant is not due to the plaintiffs in any sum. It

was further contended that there was no contract for

payment of interest between the parties and that the

contention of the plaintiffs that the amounts paid have been

adjusted towards interest is therefore completely without

any basis. It was further contended that there was a

complaint with regard to large scale misappropriation in the

tender process of the defendant and that serious

irregularities were pointed out by the auditor in his

preliminary report. By order dated 04.09.2012, the

Additional Registrar of Co-operative Societies had ordered

an enquiry under Section 64 of the Karnataka Co-operative

Societies Act, 1959. It is submitted that this was the reason

-

for the delay in making the payment and that the full

amount had admittedly been paid to the plaintiffs. It is

stated that the claim of the plaintiffs which is based on the

clear admission that the amounts paid have been adjusted

towards interest and future interest at the rate of 18% per

annum claimed is completely untenable and cannot be

accepted under any circumstances.

5. Based on the pleadings of the parties and the

materials on record, the trial Court framed the following

issues:-

"1. Whether the plaintiff proves the defendant to be due to pay the suit claim amount?

2. Whether the plaintiff proves to be entitled for the interest on the amount as sought for?

3. What is the rate of interest to which the plaintiff is entitled?

4. Does the defendant prove that the amount as per the contract to be fully paid?

5. Whether the suit is in time?"

6. The representative of the plaintiff company was

examined as PW.1 and documents were marked. The

-

Additional Director, Finance of the defendant Society has

been examined as DW.1 and the documents were marked.

7. The trial Court, after considering the pleadings

and the evidence on record, answered issues No.1 to 3 are

partly in the affirmative, issue No.5 in the affirmative and

issue No.4 in the negative. It was held that the plaintiffs

failed to prove the entitlement to the claim amount with

interest at 18% per annum. However, it was found that the

amounts due had been paid after a delay beyond the agreed

period. Relying on Section 61(2) of the Sale of Goods Act,

1930, the Court observed that while the plaintiffs were

entitled to claim interest for delayed payment, the rate must

be determined considering the facts, prevailing practice and

trade usage. Since there was no agreement between the

parties stipulating payment of interest and in view of

general trade usage the plaintiffs were held entitled to

interest at 6% per annum from the date of suit till

realization. Aggrieved by the decision of the trial Court, the

defendant has preferred these appeals.

-

8. The learned senior counsel appearing for the

appellant contends that the plaintiffs unilaterally

appropriated payments towards interest at 18% per annum

without any agreement to that effect. The trial Court

observed that no contract or documents existed between the

parties providing for interest on delayed payments. In such

circumstances, the plaintiffs claim for interest was

unsustainable and the Court ought to have rejected the

claim in entirety. The trial Court refused to consider that the

plaintiffs could not first appropriate the payments towards

interest and the award of interest was perverse and contrary

to judicial interpretation of Section 61(2) of the Sale of

Goods Act, 1930. While this provision vests discretion to the

Court to award interest, the trial Court failed to exercise

such discretion, providing no reason for fixing the interest

rate. The plaintiffs were unable to succeed in establishing

their claim for interest at 18% per annum.

9. It is further contended that the claim for interest

was inconsistent, unsupported by evidence and based on

self-serving statements rather than pleadings or proof. In

-

the absence of an agreement for payment of interest, the

appropriation made by the plaintiffs was unreasonable. The

suit insofar as it sought recovery of interest was not

maintainable. The order awarding interest and costs suffered

from infirmities was arbitrary and passed without application

of mind.

10. In support of his contentions, he has relied on the

following citations:-

        •   Garimella     Suryanarayana                v.     Gada
            Venkataramana    Rao       reported   in    AIR   1953
            Madras 458;

• Delhi Development Authority and Another v. Joint Action Committee Allottee of SFS Flats and Others reported in (2008) 2 SCC 672; and

• Gurpreet Singh v. Union of India reported in (2006) 8 SCC 457.

11. The learned counsel appearing for the

respondents on the other hand contends that even though

the purchase orders did not expressly stipulate interest for

delayed payments, they are still entitled to claim it. The

purchase orders required 80% of the amount to be paid

within 15 days of receipt and acceptance of material and the

-

balance 20% within 30 days. DW.1 admitted that the

payments were not made within the stipulated time and that

part-payments were made due to an existence of debt.

12. It is further contended that all invoices and legal

notices issued by the petitioners clearly stipulated interest at

varied rates, with legal notices specifying 18% interest per

annum. Since the defendant accepted the invoices and

notices without demur or protest, it cannot now deny

liability for interest or take advantage on its own inaction.

The trial Court granted interest at 6% per annum from the

date of suit till realization. The respondents contend that

this rate is meager, especially since under Section 34 of

CPC, at least 12% per annum should have been granted in a

commercial transaction.

13. It is contended that the plaintiffs had issued

repeated notices seeking payment of the amounts due. It is

submitted that the delayed part payments made by the

Society were appropriated towards interest first by the

plaintiffs and then towards the principal amount, which is

permissible since, in the absence of debtor's instructions,

-

the creditor can appropriate the payments at its discretion.

Therefore, even if all the payments had been adjusted solely

towards the principal, the defendant would still be liable to

pay the interest due on delayed payments.

14. In support of his contentions, he has relied on the

following citations:-

• Leela Hotels Ltd. v. Housing and Urban Development Corporation Ltd. reported in AIR 2012 SC 903;

• M/s Marwar Tent Factory v. Union of India and Others reported in (1990) 1 SCC 71;

• Rajpati Prasad v. Kaushalya Kuer and Ors. reported in MANU/BH/0046/1981;

• A.K Srinivasa Naidu v. S. Jayarama Reddiar Firm reported in MANU/TN/0214/1977;

• Sri Lakshmi Ganesh Cotton Ginning Mill v. Andhra Cotton Mills Ltd. reported in 1995 SCC OnLine AP 358;

• Jatin Koticha v. VFC Industries Pvt. Ltd. reported in 2007 SCC OnLine Bom 1092;

• M/s KLG Systel Ltd. v. M/s Fujitsu ICIM Ltd. reported in ILR (2001) 1 DELHI 436;

-

• Govind Rubber Limited v. Louis Dreyfus Commodities Asia Private Limited reported in (2015) 13 SCC 477;

• Times Global Broadcasting Company Limited and Another v. Parshuram Babaram Sawant reported in (2014) 1 SCC 703;

• Meka Venkatadri Appa Row Bahadur Zemindar Garu and Others v. Raja Parthasarathy Appa Row Bahadur Zemindar Garu reported in 1921 SCC OnLine PC 24;

• Maha Laxmi Handloom Production Co-op Ind. Society Ltd., Panipat v. State of Haryana reported in 1995 SCC OnLine P&H 640;

• The Purasawakkam Permanent Benefit Fund Ltd. v. P. Shanmugam reported in 2013 (5) CTC 856;

• Madras Ennore Foundry Limited, by Managing Director, Ennore, Madras-57 v. Sri Ayyanar Aluminium Steel Rolling Mills, represented by Guruswamy Nadar, Tiruchirapalli reported in 1994 SCC OnLine Mad 194; and

• Bengaluru Water Supply and Sewerage Board, Cauvery Project Division, by its Executive Engineer v. Sugesan and Co. (P) Ltd. 38, Rajaji Road, Madras-1 reported in 1998 SCC OnLine Mad 386.

-

15. We have considered the contentions advanced. It

is an admitted fact that the contract between the parties

provided for payment of 80% of the value of the raw

materials supplied within 15 days from the receipt of goods

and the balance 20% was to be paid within 30 days from

the receipt of the goods. This aspect is clear from the

purchase orders produced by the defendant as well. Clause

5.0 of the purchase order reads as follows:-

"5.0 PAYMENT: The payment shall be made in two stages, 80% within 15 days after receipt & acceptance of material and balance 20% within 30 days after the receipt of the material. For payment either the GRN quantity or the invoice quantity whichever is lowest will be considered."

16. PW.1 in his cross-examination also stated that he

is aware of the inquiry initiated against the officials of the

defendant company and that the rate of interest has been

calculated at 18% per annum in the table shown at

paragraph No.7 of the plaint, it is stated that payment has

been abnormally delayed and adjustment has been made

towards amount due. It is further contended that since

payment was not received within time prescribed in the

-

Purchase Order, claim for interest has been made at 18%

per annum. It is also admitted that there was no specific

contract between the plaintiffs and the defendant about rate

of interest at 18% per annum.

17. The trial Court considered the decisions relied on

by either side and came to the conclusion that there is no

contract between the parties with regard to payment of

interest for the price of goods. It was also found that the

payment had been delayed. The trial Court therefore took

the view that the plaintiffs are entitled to claim interest for

delayed payment towards price of goods supplied by them.

Taking note of the facts and circumstances of the case, it

was found that the amounts due and remaining unpaid

amount should carry simple interest at the rate of 6% per

annum from the date of suit till date of realization. The trial

Court also found that there were audit objections raised with

regard to the tender and that a complaint was filed before

the Lokayukta, on enquiring under the provisions of

Karnataka Co-operative Societies Act, 1959 was launched,

criminal cases were filed and the Bank account of the

-

Society were frozen and these facts were known to the

plaintiffs. It was therefore held that the defendant reasoning

for the delayed payment cannot be overlooked. The trial

Court also did not accept the contention that the invoices

contained a clause regarding interest and therefore the

interest was fixed by contract.

18. Sections 59 to 61 of the Indian Contract Act,

1872, relates to apportionment of payments. The provisions

read as follows:-

"59. Application of payment where debt to be discharged is indicated.- Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.

60. Application of payment where debt to be discharged is not indicated.- Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits.

61. Application of payment where neither party appropriates.- Where neither party makes any

-

appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionably."

19. Section 61(2) of the Sale of Goods Act, 1930

provides for awarding of interest in the absence of a

contract to the contrary. Section 61 of the Sale of Goods

Act, 1930 reads as follows:-

"61. Interest by way of damages and special damages.- (1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed.

(2) In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price-

(a) to the seller in a suit by him for the amount of the price-from the date of the tender of the goods or from the date on which the price was payable;

(b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller-from the date on which the payment was made."

-

20. Section 34 of the Code of Civil Procedure, 1908 is

with regard to payment of interest in a suit for payment of

money, which reads as follows:-

"34. Interest.-(1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, [with further interest at such rate not exceeding six per cent. per annum as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:

[Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent. per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions."

21. The decisions relied on by the learned counsel for

the respondents are specifically in the realm of Banking Law

or in cases where there are specific provisions in the

contract between the parties for payment of interest or the

payment of interest is statutorily mandated (For example

under the provisions of MSMED Act). There are also

decisions relied on with regard to apportionment of the

-

amounts paid where there is a decree for payment of money

which also are covered by the statutory provisions.

22. A reading of the judgments which have been

relied on by both sides and a consideration of the statutory

provisions would bring us to the inescapable conclusion that

when there is no contract between the parties regarding

payment of interest when the payments due under the

contract are delayed, there was no justification for the

plaintiffs to have appropriated the amounts paid belatedly

towards interest in the first instance. Since there was no

contract with regard to payment of interest, the payment

made by the appellant could have been appropriated only

against the principal due at the relevant time.

23. Further, though issues have been raised as to

whether the plaintiffs prove that they are entitled to interest

on the amount as sought for, a specific issue as to the

apportionment has not been raised by the trial Court. The

pleadings and the calculations placed on record in these

cases show that the purchase order in these cases was

-

issued on various dates from 12.07.2012 to 06.08.2012.

The materials were supplied on various dates between

16.07.2012 and 04.09.2012. Payments had admittedly

made by the appellant, though belatedly. It is admitted that

as on 12.06.2013, substantial payments had been made by

the appellant which were admitted in the plaint. The

appellant had specifically contended that amounts in excess

of the principal amount due had been paid in respect of each

of the purchase orders.

24. In the facts and circumstances of the instant

cases, there has admittedly been delay in making the

payments which is against the express provisions of the

contract between the parties, we are of the opinion that the

finding of the trial Court that the interest at the rate of 6%

per annum ought to have been paid is legal and valid. The

interest would be payable on the amount remaining unpaid

from the agreed date till the date of payment. However, the

amounts so paid cannot be appropriated first against

interest and the payable amount artificially inflated in the

absence of any provision for such a course or even for

-

payment of interest on delayed payments in the contract

between the parties.

25. In the result, we are of the opinion that the

judgment and decree of the trial Court requires interference.

Accordingly:-

(i) The Regular First Appeals are partly allowed.

(ii) The judgment and decree dated 29.09.2020 passed by the XIV Additional City Civil Judge, Bengaluru in Original Suits No.968/2015, 969/2015, 979/2015, 978/2015, 972/2015, 973/2015, 980/2015, 977/2015 and 971/2015, are hereby set aside.

(iii) The plaintiffs are entitled for interest at the rate of 6% per annum on the delayed payment from the dates on which the amounts were due and payable to the dates on which they have been paid.

(iv) The plaintiffs are not entitled to appropriate the payment made by the defendant first towards interest and can claim payment only if amounts are due by applying

-

interest at the rate of 6% per annum on the delayed payment from the dates on which the amounts were due to the dates on which they have been paid.

(v) In case, any such amounts remain unpaid, this decree can be executed insofar as such amounts are concerned.

The parties shall bear their own costs.

All pending interlocutory applications shall stand

disposed of in all the appeals.

Sd/-

(ANU SIVARAMAN) JUDGE

Sd/-

(DR. K.MANMADHA RAO) JUDGE

cp*