Kerala High Court
P.T.Thomas vs State on 21 May, 2024
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE C.PRATHEEP KUMAR
TUESDAY, THE 21ST DAY OF MAY 2024 / 31ST VAISAKHA, 1946
RSA NO. 514 OF 2005
AS NO.144/2001 OF ADDITIONAL DISTRICT COURT,KOTTAYAM
OS NO.741/1998 OF PRINCIPAL MUNSIFF COURT, KOTTAYAM
APPELLANT/RESPONDENT/PLAINTIFF
P.T.THOMAS, S/O THOMAS,
AGED 59 YEARS, PURAYIDATHIL HOUSE,,
PADINJATTUMBHAGOM KARA, ATHIRAMPUZHA VILLAGE,
KOTTAYAM DISTRICT.
BY ADVS.
SRI.RAJEEV.P.NAIR
SRI.P.V.GEORGEONAKKOOR
SRI.JOE JOSEPH KOCHIKUNNEL
SRI.PAULCY KURIAN
SRI.REJI GEORGE
RESPONDENTS/APPELLANTS/DEFENDANTS
1 STATE OF KERALA, REP. BY
CHIEF SECRETARY TO THE GOVERNMENT,,
THIRUVANANTHAPURAM.
2 THE SECRETARY TO THE P.W.D.
P.W.D. OIFFICE, THIRUVANANTHAPURAM.
3 THE CHIEF ENGINEER,
ROADS AND BRIDGES DIVISION, P.W.D. OFFICE,
THIRUVANANTHAPURAM.
4 THE SUPERINTENDING ENGINEER,
ROADS AND BRIDGES DIVISION, SOUTH CIRCLE,
THIRUVANANTHAPURAM.
5 THE EXECUTIVE ENGINEER,
ROADS DIVISION P.W.D., OFFICE, KOTTAYAM.
6 ASSISTANT EXECUTIVE ENGINEER
ROADS SUB DIVISION, P.W.D. OFFICE, KOTTAYAM.
RSA 514/2005
2
BY GOVERNMENT PLEADER SRI.E.G.GORDEN
THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD
ON 9.4.2024, THE COURT ON 21.05.2024 DELIVERED THE
FOLLOWING:
RSA 514/2005
3
C.R.
C.PRATHEEP KUMAR, J.
------------------------------------
R.S.A.514 of 2005
------------------------
Dated : . 21st May, 2024
JUDGMENT
1. This second appeal is filed under Section 100 r/w Order XLII Rule 1 of CPC
by the respondent/plaintiff in A.S.144/2001 on the file of the Additional
District Court, Kottayam, who is the plaintiff in O.S.741/1998 on the file of the
Principal Munciff Court, Kottayam, against the judgment and decree dated
22.9.2003 reversing the judgment of the trial court.
2. The brief facts necessary for the disposal of this Appeal are as follows :-
The appellant is a PWD contractor. He had undertaken a work of the 1 st
respondent through the 5th respondent and an agreement was entered into in
that respect on 14.3.1997. The work was completed on 5.7.1997 and bill for an
amount of Rs.4,81,078/- was presented before the respondents. Since the bill
amount was not disbursed, he had issued a notice to the respondents on
24.11.1997. Thereafter on 31.3.1998, the respondents disbursed a sum of
Rs.4,81,078/-. According to the appellant, for the delayed period he is entitled
to get interest at the rate of 24% per annum. Accordingly, he filed the Suit
before the Munsiff Court, Kottayam demanding a sum of Rs.84,895/- being
interest at the rate of 24% per annum for the bill amount of Rs.4,81,078/-. The
learned Munsiff allowed the Suit in part and decreed an amount of Rs.56,932/-
which was granted calculating interest at the rate of 18% for the bill amount.
However, the 1st Appellate Court reversed the above finding of the trial Court
and dismissed the Suit. Aggrieved by the above judgment and decree of the 1 st
Appellate Court, this appeal has been preferred.
3. At the time of admission, the following substantial questions of law were
formulated by this Court :
(i) Whether a suit for interest alone is maintainable ?
(ii) Whether the defendant can plead accord and satisfaction for the
first time before the first appellate court and if so, whether the
acknowledgment issued for receipt of the final bill amount operates as
an estoppel against the appellant/plaintiff against claiming interest ?
4. Both sides were heard in detail on the above substantial questions of law.
5. The 1st question that arise for consideration is whether a Suit for interest
alone is maintainable. Relying upon Section 3(1) of the Interest Act, 1978 ( in
short 'the Act'), the learned counsel for the appellant would argue that a suit for
interest alone is maintainable. Sub-section (1) of Section 3 of the Act states as
follows :-
"3. Power of court to allow interest - (1) in any proceedings for
the recovery of any debt or damages or in any proceedings in
which a claim for interest in respect of any debt or damages
already paid is made, the court may, if it thinks fit, allow interest to
the person entitled to the debt or damages or to the person making
such claim, as the case may be, at the rate not exceeding the
current rate of interest, for the whole or part of the following
period, that is to say -
(a) if the proceedings relate to a debt payable by virtue of a written
instrument at a certain time, then, from the date when the debt is
payable to the date of institution of the proceedings;
(b) if the proceedings do not relate to any such debt, then, from the
date mentioned in this regard in a written notice given by the
person entitled or the person making the claim to the person liable
that interest will be claimed, to the date of institution of the
proceedings:
Provided that where the amount of the debt or damages has been
repaid before the institution of the proceedings, interest shall not
be allowed under this section for the period after such repayment.
6. On a perusal of the above provision, it is clear that a Court is empowered to
award interest in any proceeding for recovery of any debt or damages or in any
proceeding in which the claim for interest in respect of any debt or damages
already paid is made.
7. The learned counsel for the appellant also relied upon the decision of a
Division Bench of this Court in Anirudhan v. Government of Kerala, 1999
KHC 527, in support of his argument that Suit for interest alone is
maintainable. In the above decision, the Division Bench, after evaluating
various aspects including Kerala Financial Code and Kerala PWD Manual,
held thus in paragraph 18 and 19 :
"18. A reading of Art.180 of the Kerala Financial Code clearly
provides that no Government may enter into a contract for the
execution of a work unless funds have been duly provided for it or
an assurance has been received from the authority competent to
provide the necessary funds that they will be allotted before the
liability matures. The fact remains that the above mandatory
provision in Art.180 of the Kerala Financial Code has been given a
go bye. Likewise Art.15.2.2, 10.2.4.1 and 10.2.4.2 of the Kerala
P.W.D. Manual provides various procedures to be followed before
tenders are invited for a work.
19. It is held by decisions of Court that an executive agency must
be vigorously held to the standards by which it professes its action
to be judged. This principle has been accepted by the Apex Court in
many cases. Having regard to the explicit terms of Art.180 of
Kerala Financial Code and 15 of the Kerala P.W.D. Manual it is
clear that Government are duty bound to make payments to the
work completed. The aforesaid provision, in our opinion would
unambiguously command that no work shall be tendered except
with the availability of complete funds, has given rise to a promise
or representation and it is on that basis alone the contractors come
forward to undertake the work, plan their work programme and
arrange for the employment of staff and engagement of machinery
and incur large investments. Thus upon the strength of the promise
and representation the contractors act or change their position by
undertaking various steps as aforesaid and also claim 5% security
deposit which, according to the contractors, is also made either by
borrowings at high rate of interest or from diversion or from their
own funds. Non-payment of the amounts due to the contractors will
cause grave injustice to them. It is held that the contractors are
engaged by the State on their expectation and therefore cannot be
denied their legal dues. A citizen is entitled in law to insist that the
State will go by the procedure which it has laid down. In all these
cases the State has entered into a contract undertaking payment
upon satisfactory completion of the work. The Government has also
undertaken to pay the other amounts for the work done as per the
agreement. Therefore, the Government, in our opinion cannot be
permitted to violate the solemn contracts. "
8. Thereafter the Division Bench had given a specific direction to the
Government to award interest at the rate of 18% per annum to all the
contractors, whose payments were delayed for a period of more than one
month from the date of completion of the work in the following words :
"We therefore, direct the State of Kerala to effect payments either
in one lump or in two installments. The entire amounts due to the
contractors who have not been paid off the amounts due to them
shall be paid within the above period. There shall not be any delay
in effecting the said payment. The Government shall scrupulously
follow this direction and pay the amounts to the contractors within
four months from today, failing which the State shall pay interest
at the rate of 18% per annum to all the contractors who are before
us and that the interest is payable on the matured liability after the
completion of one month's time from the date of completion of the
work with reference to each contractor."
9. In the decision in State of Kerala and Another v. P.Edward John, 2015
(3) KHC 867, the dispute involved was whether the trial court was right in
holding that the respondent was entitled to interest on delayed payment for the
work done as a contractor of PWD. Relying upon the decision of the Division
Bench in Anirudhan (supra) as well as various other decisions, the Division
Bench upheld the decision of the court below granting interest for the delayed
payment. In paragraph 22, the Division Bench held that :
"According to the respondent / plaintiff, consequent to non -
payment of amounts due on completion of the work, he sustained
severe financial loss and lack of funds for reinvestment made him
handicapped to continue his business properly. Hence, vide Ext. A3
letter dated 12/08/2005, the respondent / plaintiff informed the
second appellant / second defendant that he has received the
payment under protest and later caused Ext. A4 notice dated
12/04/2006 under S.80 of the Code of Civil Procedure, 1908 to be
issued, demanding payment of interest at the rate of 12% per
annum on delayed payment of the amount due on completion of the
contract work. As we have already noticed, the appellants /
defendants have admitted that though they are bound by the terms
of the contract, payment could not be effected in time due to
paucity of Government funds. Though the final bill was drawn up
and passed for payment as early as on 29/09/2003, payment was
made only on 12/08/2005. Since the appellants / defendants have
wrongfully deprived the respondent / plaintiff the beneficial use of
the money payable for the work undertaken by him till 12/08/2005,
he is legitimately entitled for interest during the aforesaid period.
The rate of interest awarded by the Court below is also just and
reasonable. In such circumstances, we find absolutely no grounds
to interfere with the judgment and decree passed by the Court
below."
10. In the decision in State of Kerala and Another v. M.K.Jose (RFA
No.246/2003 decided on 16.12.2019) also, the question that arose for
consideration before the learned Single Judge was whether the plaintiff is
entitled to realize interest for the delayed payment after referring to various
decisions including the decision in Anirudhan (supra). The learned Single
Judge held in paragraph 9 that :
"The principle laid down in all the above three decisions, would
show that when there is delay in payment of the actual amount due to
the contract on completion of the work entrusted to him, he is
entitled to claim interest for the delayed payments. On a perusal of
the records available, it could be seen that the court below has
rightly considered the case of the plaintiff and awarded interest for
the delayed payment."
11. It was argued by the learned Government Pleader that in Ext.B1 contract
entered into between the parties there is no provision for payment of interest
for the delayed period and as such, the Government is not liable to pay interest
for the delayed period. However, as held in the decision in Anirudhan (supra),
when a work is entrusted to a contractor, he is supposed to complete it within
the stipulated time and as such, when the work is completed, the department is
also bound to effect payment. More over, no work shall be tendered except
with the availability of complete funds and as such there is no justification for
the delay of more than one month after the completion of the work in releasing
the payment. Therefore , in the light of the above decisions and Section 3(1) of
the Act, it is to be held that the Suit filed by the appellant for interest alone is
maintainable.
12. Another question to be considered is whether the plea of accord and
satisfaction raised by the respondents for the first time before the 1 st Appellate
Court is maintainable and whether the acknowledgment issued for receipt of
final bill amount (Ext.B2 receipt) operates as estoppel against the claim for
interest. It was argued by the learned counsel for the appellant that accord and
satisfaction are to be specifically pleaded by the party claiming the same and
that unless and until it is pleaded, such a contention cannot be raised during the
appellate stage. He would argue that in the written statement the respondents
have not raised any such pleading regarding accord and satisfaction and as
such, Ext.B2 receipt cannot be relied upon against the appellant as accord and
satisfaction or as an estoppel against the claim for interest. On the other hand,
the learned Government Pleader would argue that since the appellant had
received the entire bill amount without any objection as early as on 31.3.1998,
thereafter he is estopped from making any demand for interest for the delayed
payment. In order to claim accord and satisfaction by a substituted agreement
the party who claims such a contention has to plead and prove that the parties
to the dispute had agreed to a settlement of all their existing disputes by a new
agreement.
13. In the decision in Payana Reena Layana Saminathan Chetty and another
v. Pana Lana Pana Lana Palaniappa Chetty, 1913 SCC OnLine PC 40, the
appellants and respondents had several serious disputes with regard to the
business carried out by them. Due to the intervention of third parties they have
arrived at a settlement and a document styled as "a receipt" was entered into
between the parties. While recognizing the receipt as accord and satisfaction
by a substituted agreement, the privy council held that :
".............The "receipt" given by the Appellants, and accepted
by the Respondents, and acted on by both parties proves
conclusively that all the parties agreed to a settlement of all
their existing disputes by the arrangement formulated in the
"receipt". It is a clear example of what used to be well known
in Common Law Pleading as "Accord and Satisfaction by the
Substituted Agreement." No matter what were the respective
rights of the parties inter se they are abandoned in
consideration of the acceptance by all of a new agreement. The
consequence is that when such an accord and satisfaction takes
place the prior rights of the parties are extinguished. They have
in fact been exchanged for the new departure, and the rights of
all the parties are fully represented by it."
14. The law is well settled that evidence adduced without the support of
pleadings cannot be relied upon. As I have already noted above, in the written
statement filed by the respondents, there is no contention that by accepting the
payment as per Ext.B2 receipt all the existing liabilities were discharged
between the parties. In the instant case, Ext.B2 receipt was not produced along
with the written statement also. Therefore, Ext.B2 is part of the pleadings
before the trial court. On the other hand, Ext.B2 is a printed form and
admittedly only if the appellant affixes his signature in the said printed form,
the bill amount will be disbursed.
15. In support of his argument, the learned counsel for the appellant relied upon
the decision of the Hon'ble Supreme Court in Chairman, N.T.P.C. Ltd v.
Reshmi Constructions, Builders and Contractors, 2004 (2) SCC 663. In the
above decision, the parties entered into an agreement for a project at
Kayamkulam. Upon completion of the work, the respondent submitted final
bill, which was not accepted by the appellant. Thereafter, the appellant
prepared the final bill and forwarded the same along with a printed format
being a No Demand Certificate. The said No Demand Certificate was held by
the respondent which states that the respondent issued all payment in full and
final settlement of the work performed by them and also that they have no
other claims whatsoever from the appellant. On the very same day, the
respondent issued a letter to the appellant stating that they were forced to sign
in the printed form under coercion and also that the above certificate and
undertakings were executed without prejudice to their rights and claims
whatsoever on account of the alleged final bill. Thereafter the respondent
invoked the arbitration clause raising claims on several heads projecting the
contention of the appellant that acceptance of the final bill in full and final
satisfaction after issuing a No Demand Certificate by the contractor no further
claim will lie under the contract. In paragraph 26, the Apex Court held that :
"Even when rights and obligations of the parties are worked out
the contract does not come to an end inter alia for the purpose of
determination of the disputes arising thereunder, and, thus, the
arbitration agreement can be invoked. Although it may not be
strictly in place but we cannot shut our eyes to the ground reality
that in the cases where a contractor has made huge investment, he
cannot afford not to take from the employer the amount under the
bills, for various reasons which may include discharge of his
liability towards the banks, financial institutions and other
persons. In such a situation, the public sector undertakings would
have an upper hand. They would not ordinarily release the money
unless a No Demand Certificate is signed. Each case, therefore, is
required to be considered on its own facts."
16. The reasons given by the Hon'ble Supreme Court for concluding that the
arbitration agreement subsists in the above case include :
"(i) Disputes as regard final bill arose prior to its acceptance
thereof in view of the fact that the same was prepared by the
respondent but was not agreed upon in its entirety by the
appellant herein;
(ii) The appellant has not pleaded that upon submission of the
final bill by the respondent herein any negotiation or settlement
took place as a result whereof the final bill, as prepared by the
appellant, was accepted by the respondent unequivocally and
without any reservation therefor;
(vi) The appellant never made out a case that any novation of
the contract agreement took place or the contract agreement
was substituted by a new agreement. Only in the event, a case
of creation of new agreement is made out the question of
challenging the same by the respondent would have arisen."
17. The above grounds relied upon by the Hon'ble Supreme Court for concluding
that the arbitration agreement subsists were relied upon by the learned counsel
for the appellant to substantiate his contention that in the instant case also the
signature of the appellant was obtained by the respondent in a printed form
while disbursing the final bill amount and also that such a case was not made
out in the pleadings.
18. In the decision in Raghul Construction Engineers and Constructions v.
NTPC, Kayamkulam, 2005 KHC 1195, a Division Bench of this Court in a
similar instance relied upon the decision in Reshmi Constructions (supra) and
held that there is no accord and satisfaction as the payment against the final
bill was accepted under protest.
19. On the other hand, the learned Government Pleader would argue that Ext.B2
receipt was marked without objection and as such, it is binding on the
appellant. He has relied upon the decision of the Hon'ble Supreme Court in
Lachhmi Narain Singh (d) through LRs and Others v. Sarjug Singh
(dead) through LRs and Others, 2021 KHC 6407, to substantiate the above
argument. In the above decision, the proceeding for probate of a bill, the
application was opposed on the ground that the bill in question was revoked
and cancelled by the registered deed (Ext.C). Ext.C cancellation deed was
marked without objection. The fact that the probate applicant never opposed
the acceptance and marking of Ext.C cancellation deed was considered as a
ground for accepting its genuineness. The Court has also relied upon Ext.B
report of handwriting expert which proved that the thumb impression in the
cancellation deed is that of the testator. In this context it is also to be noted that
the document involved in the above decision is the certified copy of a
registered document.
20. In the instant case, there was no pleading regarding accord and satisfaction
and also that in the light of Ext.B2 receipt, the conduct of the appellant in
receiving the final bill amount amounts to estoppel. Ext.B2 is a printed form in
which the signature of the appellant was obtained as a condition for disbursing
the final amount. Since accord and satisfaction and consequent estoppel were
not pleaded in the written statement filed by the respondents, there was no
opportunity for the appellant to deny the same and to adduce any evidence in
that respect. In the above circumstances, it is to be held that the plea of accord
and satisfaction and the consequent estoppel raised before the 1 st Appellate
Court without affording an opportunity to the appellant to contest the same
cannot be used against the appellant to deny the interest claimed for the
delayed payment. Therefore, the second substantial question of law raised is
liable to be found against the respondents.
21. In the decision in Anirudhan (supra), the Division Bench categorically held
that in case there is delay of more than one month from the date of completion
of the work in disbursing the bill amount, the contractor is entitled to get
interest at the rate of 18% per annum on the bill amount for the delayed period.
I do not find any ground for not following the above decision in the present
case also and absolutely no valid explanation is offered by the respondents for
the delay in paying the bill amount. In the above circumstances, I do not find
any irregularity or illegality in the judgment and decree of the trial Court
granting a decree allowing interest at the rate of 18% per annum, in the bill
amount for the delayed period and as such, the 1 st Appellate Court was not
justified in setting aside the decree and judgment of the trial court. In the above
circumstances, this Second Appeal is liable to be allowed by setting aside the
impugned judgment of the 1st Appellate Court and restoring the judgment and
decree of the trial court.
In the result, this Second Appeal is allowed. The impugned judgment and
decree of the 1st Appellate Court is set aside by restoring the judgment and
decree of the trial court.
Sd/-
C.Pratheep Kumar, Judge
Mrcs/4.4.2024
