Government Of Andhra Pradesh, ... vs M/S. Shadab Metal Industries, ...
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     THE HON'BLE SMT. JUSTICE P.SREE SUDHA

            SECOND APPEAL No.737 of 2005

JUDGMENT:

This Second Appeal is filed against the Judgment of

the first appellate Court in A.S.No.12 of 2003 dated

14.06.2004 on the file of II Additional District Judge (FTC),

Adilabad, which was allowed in part and the suit of the

plaintiff being O.S.No.94 of 1996 was decreed for a sum of

Rs.49,120/- with proportionate costs both in the trial

Court and in the Appellate Court. No interest was awarded

on the decretal amount.

2. The brief facts of the case are:

The Defendant/Superintendent of Police, Adilabad

District placed an order of Rs.8,73,250/- on 03.02.1996

for supply of steel furniture with the plaintiff i.e.

M/s.Shadab Metal Industries, Adilabad, represented by its

Proprietor, R.A.Javeed and an agreement was reduced into

writing. Accordingly, plaintiff supplied entire material as

per the order placed by the defendant under Ex.A1, and

even after receiving the entire material the defendant

failed to make the entire payment within the time SA.No.737of 2005

stipulated, as such he gave legal notice demanding the

defendant to pay interest from the date of supply till the

date of payment of the amount. Defendant admitted the

agreement dated 3.2.1996, but denied to have given

assurance to pay the said sum to the plaintiff on or before

20.03.1996. He stated that there was no delay on the part

of defendant in pursuing the matter, as such plaintiff has

no right to claim interest at the rate of 24% over the

amount payable by the defendant without any agreement

to that effect. He further stated that plaintiff has not

issued notice under Section 80 of Code of Civil Procedure,

and the bills were presented for payment supplied in the

month of March, 1996, but they were not passed for want

of sanction of budget and due to freeze orders of the

Government. However, in the subsequent year of budget,

the amount was released to the plaintiff and thus

requested the Court to dismiss the suit.

3. There is no dispute regarding supply of material by

the plaintiff to the defendant, as per agreement under

Ex.A2, on 20.03.1996 for payment of Rs.8,73,250/-. The

plaintiff mainly contended that defendant has to pay the SA.No.737of 2005

amount on or before 20.03.1996, but there was delay of 7

½ months and as such, he is entitled for interest @ 24%

per annum for the delay, whereas the defendant stated he

gave bank cheque on 04.11.1996 for Rs.8,73,250/-.

Admittedly there was gap of more than 7 months from the

date of supply to the date of payment.

4. Defendant stated that during the month of March,

Government cannot effect for payment due to the lapse of

the budget and only takes time for sanction of the budget

from the authorities. Plaintiff contended that whenever a

person is entitled to seek recovery of any amount, when

there is delay in the payment, he is entitled for interest,

whereas the defendant contended that there is no clause

to pay interest in case of delayed payment, as such they

need not pay interest on it.

5. The trial Court held that plaintiff failed to prove that

he is entitled to seek interest for the delayed payment for

the material supplied to the defendant and there is no

condition stipulated that he is entitled for interest, as

such, dismissed the suit. It was also observed that though

the legal notice got issued by the plaintiff under Ex.A3, SA.No.737of 2005

section 80 Code of Civil Procedure was not mentioned in

it. Aggrieved by the said order, plaintiff preferred an

appeal, even in the appeal, plaintiff was awarded interest

at 9% per annum on Rs.8,73,250/- from 20.03.1996 to

04.11.1996.

6. The Appellate Court also held that as per section

61(2) of Sale of Goods Act to award interest even in the

absence of contract for payment of interest is proper. The

Appellate Court also considered the provisions of the

Interest Act, 1978 and held that even in the absence of

contract for payment of interest in case of delay, the

plaintiff is entitled for interest.

7. Against the said order this Second Appeal is

preferred by the Government of Andhra Pradesh and they

mainly raised the following Substantial Questions of Law:

1) Whether a notice i.e., Ex.A3 which is not issued in accordance with Section 80 C.P.C. can be treated as notice in terms of Section 80 C.P.C.?

2) Whether interest is payable even in the absence of contract for payment of interest since there is no negative Covenant in Ex.A2 to the effect that interest was not payable?

SA.No.737of 2005

3) Whether Section 61(2) of Sale of Goods Act be made applicable to the case on hand?

4) Whether the First Appellate Court is justified in awarding interest basing on Clause 8 of agreement i.e. Ex.A2 to the effect that immediately after delivery of the goods the amount is to be paid?

8. The appellant counsel relied upon a decision of the

Hon'ble Supreme Court in Garg Builders v. Bharat

Heavy Electricals Limited 1 in which it was held in para

No.22 as:

Thus, when there is an express statutory permission for the parties to contract out of receiving interest and they have done so without any vitiation of free consent, it is not open for the Arbitrator to grant pendent lite interest. We are of the considered opinion that Clause 17 of the contract is not ultra vires in terms of Section 28 of the Indian Contract At, 1872.

9. The learned counsel for the appellant also relied

upon a decision of the High Court of Andhra Pradesh in

State of Andhra Pradesh; Engineer in Chief Roads

and Buildings Department, Government of Andhra

Pradesh; Superintending Engineer, Roads and

Buildings Department; Executive Engineer, Roads and

Buildings Department, Bhimavaram v. M/s.Vyshno

AIR 2021 Supreme Court 4751 CA No.6216 of 2021 SA.No.737of 2005

Constructions; District Collector, West Godavari;

State of Andhra Pradesh; Chief Secretary, General

Administration Department 2 in which it was held as:

"The said order is under challenge in this appeal. On a plain reading of the impugned order it is manifest that the High Court while considering the writ petition filed by the owner of the vehicle for quashing of the notice of auction-sale and for other consequential reliefs has passed order drawing up a fresh contract between the parties and has issued certain further directions in the matter; the Corporation has been directed to advance a fresh loan to the writ petitioner to enable him to purchase a new truck; to enter into agreement for realization of the balance loan amount in accordance with law; to write off the remaining amount of Rs.16,500 and to order waiving of the interest till date etc. The order, to say the least, was beyond the scope of the writ petition which was being considered by the High Court and beyond the jurisdiction of the Court in a contractual matter. No doubt, while exercising its extraordinary jurisdiction under Article 226 of the Constitution the High Court has wide power to pass appropriate order and issue proper direction as necessary in the facts and circumstances of the case and in the interest of justice. But that is not to say that the High Court can ignore the scope of the writ petition and nature of the dispute and enter the field pertaining to contractual obligations between the parties and issue such direction annulling the existing contract and introducing a fresh contract in its place."

In Garg Builders (supra), the Hon'ble Supreme Court held that if the contract

2022 Lawsuit (AP) 1415 SA.No.737of 2005

prohibits pr-reference and pendent lite interest, arbitrator cannot award interest for the said period. In the said case, clause barring interest is very clear and categorical. It uses the expression "any moneys due to the contractor" by the employer which includes the amount awarded by the arbitrator. It further held that when there is an express statutory permission for the parties to contract out of receiving interest and they have done so without any vitiation of free consent, it is not open for the arbitrator to grant pendente lite interest nor such clause of the contract is ultra vires in terms of Section 28 of the Indian Contract Act, 1872.

10. Perused Ex.A2 Agreement Deed dated 03.02.1996,

entered into between the plaintiff and the defendant. In

the said Agreement, it was specifically mentioned that

respondent herein has to supply same quality of material

to that of the sample which was already supplied to them

and the supplier was also instructed to supply the same

quality material on or before 20.03.1996, otherwise the

supplier is liable for penalty imposed by the purchaser. So

also, the purchaser agreed to pay the total amount

immediately. As per the Agreement, respondent herein

supplied the entire material and there is no dispute

regarding the quality of the material, but the amount was

not paid by the appellant herein immediately after SA.No.737of 2005

receiving the material. They paid the amount after 7 ½

months. Therefore respondent herein filed the suit being

O.S.No.94 of 1996 for recovery of Rs.1,30,987/- towards

interest on Rs.8,73,250/- @ 24% per annum from

20.03.1996 to 04.11.1996. This Court finds that it is just

and reasonable to grant an amount towards interest as

there is serious lapse on the part of the appellant herein in

not making the payment within the time agreed between

both the parties. However, the appellant is directed to pay

interest on Rs.8,73,250/- @ 12% per annum from the date

of filing the suit till the date of decree and @ 6% of interest

from the date of decree till the date of realization.

Therefore, the interest granted by the First Appellate

Court @ 9% per annum is modified as above.

11. In the result, the Second Appeal is partly allowed

modifying the Judgment dated 14.06.2004, passed by the

first appellate Court in A.S.No.12 of 2003 and the

Judgment dated 24.06.2003 passed by the trial Court in

O.S.No.94 of 1996 is set aside. The appellant herein is

directed to pay interest on Rs.8,73,250/- @ 12% per

annum from the date of filing the suit till the date of SA.No.737of 2005

decree and @ 6% of interest from the date of decree till the

date of realization and is specifically directed to pay the

interest amount within a period of one month from the

date of this Judgment, failing which, it has to pay the

interest @12% per annum from the date of filing the suit

till the date of realization.

Pending miscellaneous applications, if any, shall

stand closed. No order as to costs.

___________________________ JUSTICE P.SREE SUDHA Date: 11.09.2023 BV