Telangana High Court
Andhra Pradesh Industrial ... vs M/S. Nccivrclsmc Jv on 1 October, 2024
Author: Nagesh Bheemapaka
Bench: Nagesh Bheemapaka
HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
AND
HON'BLE JUSTICE NAGESH BHEEMAPAKA
COMCA.No.1 of 2022
Counsel for the appellant: Sri Kishore Rai Sohni, learned Senior Counsel.
Counsel for the respondent: Sri Avinash Desai, learned Senior Counsel.
JUDGMENT:
(Per Justice Moushumi Bhattacharya)
The Commercial Court Appeal arises out of a judgment dated 10.06.2021
passed by the Commercial Court, at Hyderabad in a Suit filed by the respondent
(C.O.S.No.38 of 2016) for recovery of Rs.38,90,99,890/- with interest pendente lite
and future interest.
2. The Commercial Court decreed the Suit in favour of the respondent
holding that the respondent is entitled to recover an amount of
Rs.38,90,99,890/- and is also entitled for interest @ 15% p.a. during the
pendency of the Suit and interest @ 6% p.a. till realization of the suit debt
on the principal sum. The appellant/defendant was also directed to pay
costs.
3. The appellant has challenged the impugned judgment on three
grounds.
4. Learned Senior Counsel appearing for the appellant/defendant
submits that the respondent/plaintiff was appointed to execute a drinking
water project at Kadapa, which is presently in Andhra Pradesh and hence
the Suit would be hit by section 105 of The Andhra Pradesh Reorganisation
Act, 2014 (The Reorganisation Act, 2014). Counsel submits that the Suit
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should have been transferred to the appropriate Court in Andhra Pradesh as
per the Central Government Notification dated 02.06.2014 which was done
in similar Suits pending on the appointed date under The Reorganisation
Act, 2014. Counsel relies on a Full Bench decision of this Court in Andhra
Pradesh High Courts Advocate Association Vs. Union of India 1 in support of
his contention.
5. The third point taken on behalf of the appellant is that the
Commercial Court could not have awarded pendente lite interest @ 15% p.a.
on the R.A. Bills amounting to Rs.19,06,73,561/-. Counsel relies on section
34 of The Code of Civil Procedure, 1908 (CPC) to urge that the interest
awarded is unreasonable since it was awarded outside the purview of
section 34 of the CPC.
6. Learned Senior Counsel appearing for the respondent/plaintiff objects
to the grounds taken by the appellant for assailing the impugned judgment.
Counsel relies on section 20 of the CPC to argue that the registered office of
the appellant/defendant was at Fateh Maidan, Hyderabad at the time of
institution of the Suit in 2016 and that the registered office of the appellant
continues to be in Hyderabad as on date. Counsel places reliance on the
Cause Title in the present Appeal, filed in 2021, where the appellant has
shown its registered office as located in Hyderabad. Counsel also submits
that the allotment of work, contract and communications were sent and
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received by the appellant from the appellant's office at Hyderabad. Counsel
further submits that The Reorganisation Act, 2014 will not apply to the
present case since the respondent/plaintiff filed the Suit in 2016 after the
appointed date (02.06.2014). On the point of interest, counsel submits that
the respondent/plaintiff is entitled to claim interest since the contract is
commercial in nature even if it did not stipulate payment of interest.
7. We have heard learned Senior Counsel appearing for the parties and
considered the documents placed before us including the import of The
Reorganisation Act, 2014.
8. The facts relevant to the adjudication are as follows.
8.1 The appellant (defendant) and the respondent (plaintiff) entered into
an Agreement on 24.09.2008 for execution of a drinking water project
at Kadapa, Andhra Pradesh - Somasila Drinking Water Supply
Scheme. The project was for a total consideration of
Rs.99,99,67,736/-. The respondents furnished a security deposit of
Rs.1,74,99,440/- and performance Bank Guarantee of Rs.74,99,760/-
for the defect liability period. The respondent also obtained an
Execution All-risk Policy of Rs.12,52,381/-.
8.2 The respondent commenced work and raised the first RA bill on
31.12.2008 for Rs.14,31,32,488/-. Clause 68 of the Agreement
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provides for payment to be made by the appellant within 14 days from
the date of each certification.
8.3 The appellant delayed certification of the RA bill and also failed to
make payment according to the stipulated contractual time. The
respondent however continued to execute the project and raised the
second RA bill on 28.02.2009 for Rs.15,13,63,174/-. The appellant
did not pay any amounts to the respondent and the respondent
continued to work in excess of Rs.30,00,00,000/- without receiving
any payment from the appellant. The appellant eventually made
payments for the first RA bill in two instalments with the final
payment received on 18.05.2009. The respondent continued to
execute the project and raised the third RA bill on 13.07.2009 for
Rs.2,02,11,186/-.
8.4 In December, 2009, the appellant directed the respondent to
provisionally stop the work. The respondent vide letter dated
21.01.2010 requested the appellant for resumption of work. The
appellant did not reply to this letter.
8.5 The respondent raised the fourth RA bill on 05.02.2010 for
Rs.1,86,33,520/- for the work done till December, 2009. The
appellant had in the meantime certified RA bill Nos.3 and 4 after
December, 2009 by which time the respondent had completed work
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amounting to Rs.17,13,85,853/-. The appellant failed to make
payments for the work done.
8.6 The appellant started communicating with the Government of Andhra
Pradesh in the meantime with respect to making payments to the
respondent which would be evident from the letters written by the
appellant on 27.09.2010, 27.11.2010, 02.04.2012 and 15.01.2013.
The Government admitted the liability towards the respondent. The
respondent was also shown as a creditor for the unpaid amount of
Rs.20,83,08,286/- in the audited books of the appellant for the
Financial Year 2013-14 and 2014-15. The appellant finally informed
the respondent by letter dated 12.02.2013 that the project would be
closed as the work was held up due to absence of funds from the
Government of Andhra Pradesh. The respondent issued a notice
dated 19.05.2014 and filed CP.No.217 of 2014 in the High Court
which is pending as on date. The respondent filed the Suit on
08.02.2016 for recovery of amounts with interest pendente lite and
future interest.
9. We propose to first deal with the issue of whether the
respondent/plaintiff was entitled to the amounts claimed along with
interest.
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The Plaintiff's Entitlement to Recovery of Amounts
10. The admitted facts have been stated above. The letters written by the
appellant to the Government of Andhra Pradesh show that there was no
fault on the part of the respondent in executing its part of the bargain. The
respondent continued to perform its work in accordance with the terms of
the Agreement executed between the parties despite not receiving the
amounts raised in the four RA bills. The appellant continued to violate
Clause 68 of the Agreement in terms of payment within the agreed timelines.
11. It is nobody's case that the respondent abandoned the work or that
the appellant expressed any dissatisfaction with the respondent's work.
Moreover, the respondent commenced execution of the work from 2008, i.e.,
since the parties entered into an Agreement and raised its first RA bill on
31.12.2008, the second RA bill on 28.02.2009, the third RA bill on
13.07.2009 and the fourth RA bill on 05.02.2010. Therefore, the
respondent continued to execute the contract for two years without receiving
any payment for the substantial amounts contained in the RA bills, save
and except payments for the first RA bill in two instalments and that too on
18.05.2009 after a delay of 5.5 months from the date of submission of the
first RA bill. The respondent filed the Suit in 2016 i.e., eight years after it
commenced executing the contract. The impugned judgment was
pronounced five years later on 10.06.2021.
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12. There is also no dispute that the amounts raised in the RA bills were
admitted amounts which would be evident from the appellant's numerous
letters to the Government of Andhra Pradesh on 27.09.2010, 27.11.2010,
24.02.2012 and 05.01.2013 categorically admitting its liability to the
respondent. The appellant's letter to the respondent on 12.02.2013 asking
the respondent to take back the pipes which were supplied to the site
stating that the project would be closed due to absence of funds from the
Government of Andhra Pradesh is also testimony to the respondent being
fully in the clear with regard to its performance obligations.
13. Therefore, there is no doubt that the respondent/plaintiff was entitled
to claim interest on the admitted amount for non-payment of the three RA
bills since the RA bills were raised during 2008-2010 and the Suit was filed
eight years after the first RA bill. In any event, the respondent is entitled to
claim interest even in the absence of any interest clause in the Agreement.
The Court agrees with the contention of the respondent that interest @ 15%
p.a. during the pendency of the Suit is reasonable in respect of commercial
transactions as contemplated by the Agreement dated 24.09.2007.
14. The object of awarding interest is to put a party back to the same
position as the party was before the breach occurred and to mitigate the
financial damage suffered by the party. It is undisputed that the respondent
was not only made to wait for payment for eight long years i.e., till the claim
made in the Suit, but also that the respondent was forced to negotiate with
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the appellant for payment and write innumerable letters to the appellant for
clearing the four RA bills.
15. We accordingly hold that the respondent/plaintiff was not only
entitled to recover the money as paid for in the Suit but was also entitled to
interest awarded by the Commercial Court in the impugned judgment.
The Point with regard to the Limitation
16. The Suit is within limitation as the plaint was presented on
08.02.2016 within the period of limitation from the letter dated 12.02.2013
(written by the appellant to the respondent with regard to closure of the
project). The appellant/defendant also acknowledged its liability through
the letters to the Government of Andhra Pradesh which would attract
section 18 of The Limitation Act, 1963 which pertains to the effect of
acknowledgment in writing and contemplates a fresh period of limitation
from the time of acknowledgement of liability in writing. This was also
recorded by the Court in the order dated 24.09.2024. The respondent would
also have the benefit of exclusion of time for the purpose of computing
limitation during the prosecution of other proceedings against the appellant.
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The Argument on Jurisdiction.
17. The stand of the appellant is that the Trial Court should have
transferred the matter to the High Court of Andhra Pradesh. The argument
is based on the place of performance of contract being at Kadapa, Andhra
Pradesh. The appellant also relies on section 105 of The Reorganisation Act,
2014 for transfer of proceedings to the appropriate Court.
18. We have heard the respondent/plaintiff on these grounds and our
answer is as follows.
19. Section 105 of The Andhra Pradesh Reorganisation Act, 2014
provides for transfer of pending proceedings and clarifies as under:
"Section 105:
(1) Every proceeding pending immediately before the appointed
day before a court (other than High Court), tribunal, authority or
officer in any area which on that day falls within the State of
Andhra Pradesh shall, if it is a proceeding relating exclusively to
the territory, which as from that day are the territories of the State
of Telangana, stand transferred to the corresponding court,
tribunal, authority or officer of that State.
(2) If any question arises as to whether any proceeding should
stand transferred under sub-section (1) it shall be referred to the
High Court at Hyderabad and the decision of that High Court shall
be final.
(3) In this section--
(a) "proceeding" includes any suit, case or appeal; and
(b) "corresponding court, tribunal authority or officer" in the
State of Telangana means--
(i) the court, tribunal, authority or officer in which, or
before whom, the proceeding would have laid if it had
been instituted after the appointed day; or
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(ii) in case of doubt, such court, tribunal, authority, or
officer in that State, as may be determined after the
appointed day by the Government of that State or the
Central Government, as the case may be, or before the
appointed day by the Government of the existing State
of Andhra Pradesh to be the corresponding court,
tribunal, authority or officer."
20. "Appointed day", is defined under section 2(a) of The Reorganisation
Act, 2014 as the day on which the Central Government notifies the same in
the Official Gazette. The Central Government issued the Notification on
02.06.2014. Hence, the appointed day is 02.06.2014. The
respondent/plaintiff filed the COS in 2016 which is hence after the
"appointed day".
21. Therefore, since COS.No.38 of 2016 was not pending on the
"appointed day" there was no question of transfer of COS under section 105
of The Reorganisation Act, 2014.
22. Second, the transfer of proceedings contemplated under section 105 of
The Reorganisation Act, 2014, pertains to proceedings from the erstwhile
State of Andhra Pradesh to the State of Telangana provided the subject
matter exclusively falls within the State of Telangana. This would be clear
also from section 105(1) of the 2014 Act. Therefore, the transfer is only in
one direction, i.e., from the State of Andhra Pradesh to the State of
Telangana, if falling under section 105(1) and not the other way around.
Thus, the appellant's contention that the Suit should have been transferred
from the State of Telangana to the State of Andhra Pradesh (in the reverse
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direction) is not within the contemplation of section 105(1) of the 2014 Act
and is therefore without basis.
23. Section 105 of the 2014 Act would not apply to the Suit filed by the
respondent for the above reasons.
24. As opposed to the contention of the appellant, section 20 of The Code
of Civil Procedure, 1908 would fully apply to the facts of the present case.
25. Section 20 of the CPC provides for the territorial jurisdiction for
institution of a suit under sub-section (a), where the defendant/s actually
and voluntarily resides or carries on business or personally works for gain at
the time of commencement of the suit.
26. In the present case, the appellant/defendant had its registered office
at Fateh Maidan, Hyderabad and also carried on business and resided in
that place. The registered office of the defendant was at Hyderabad not only
at the time of institution of the Suit in 2016 but continued to be in
Hyderabad at the time of filing of the Appeal, as indicated in the Cause Title.
The respondent/plaintiff hence fulfilled the requirement of section 20(a) of
the CPC for the reasons stated above.
27. Moreover, the allotment of work, communications between the
appellant and the respondent as well as the request for foreclosure of
contract on 12.02.2013 undisputedly forms part of the cause of action. All
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these letters were issued from the appellant/defendant's office at
Hyderabad. The Agreement dated 24.09.2008 was executed in Hyderabad
further giving rise to the cause of action in Hyderabad. Section 20(c) of the
CPC provides that every suit shall be instituted in the Court within whose
jurisdiction the cause of action, wholly or in part, arises. There is hence, no
dispute that the Commercial Court at Hyderabad had territorial jurisdiction
over the Suit.
28. The Full Bench decision of this Court in Andhra Pradesh High Court
Advocates Association (supra), relied on by counsel appearing for the
appellant is not relevant for the objection to jurisdiction as the said decision
was pronounced in respect of matters pending in the High Court for the
State of Telangana. The Full Bench interpreted section 40(3) of the 2014
Act, which relates to transfer of proceedings of the High Court at Hyderabad
to the High Court of Andhra Pradesh and the right to appear/act in the
proceedings transferred to the High Court of Andhra Pradesh. Section 40(3)
carves out an exception from the application of section 40(1) and (2), taking
away the jurisdiction of the High Court at Hyderabad in respect of certain
matters in the State of Andhra Pradesh. The proviso to section 40(3) confers
the Chief Justice of the High Court at Hyderabad with the power to transfer
certain matters to the High Court of Andhra Pradesh.
29. The Full Bench held that the Chief Justice of High Court at
Hyderabad would have the power to transfer all the cases under section
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40(3) of the 2014 Act to the High Court of Andhra Pradesh. Therefore, the
Full Bench decision pertaining to section 40(3) of the 2014 Act would not
have any application to the present Appeal since the prerogative of transfer
has been given only to the Chief Justice of the High Court at Hyderabad and
in any event pertained only to the orders passed by the High Court at
Hyderabad which was a common High Court at that point of time before the
date referred to in section 30(1) of the 2014 Act i.e., till 31.12.2018.
30. It is relevant to mention that the President vide order dated
26.12.2018 constituted a separate High Court for the State of Andhra
Pradesh form 01.01.2019 in accordance with section 30(1) of the 2014 Act.
31. It is also relevant to state that the appellant did not take any objection
with regard to lack of jurisdiction of the Commercial Court on the ground of
The Reorganisation Act, 2014 before the Commercial Court itself. The third
issue framed is whether the Civil Court would have the jurisdiction to
entertain the claim of the plaintiff as with regard to the Arbitration Clause in
the Agreement between the parties. The appellant/ defendant's contention
before the Trial Court was that the Suit was not maintainable in view of the
Arbitration Clause. Therefore, the plea of lack of jurisdiction under the
2014 Act is a new plea taken by the appellant only in the Appeal.
32. Therefore, the objections raised on behalf of the appellant/defendant
are rejected for the reasons as stated above.
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33. We have in any event carefully considered the impugned judgment
dated 10.06.2021 and do not find any error therein. The Commercial Court
has given clear findings for decreeing the Suit with costs and directing the
appellant/defendant to pay Rs.38,90,99,890/- and also holding that the
respondent is entitled to interest @ 15% p.a. during the pendency of the Suit
and interest @ 6% p.a. till realization of the suit debt. We do not find any
reason to interfere with these findings including the quantum of interest
awarded on the principal amount.
34. COMCA.No.1 of 2022, along with other connected applications, is
accordingly dismissed. Interim orders, if any, shall stand vacated. There
shall be no order as to costs.
__________________________________________
MOUSHUMI BHATTACHARYA, J
__________________________________
NAGESH BHEEMAPAKA, J
October 01, 2024
Note: LR copy to be marked.
B/o. BMS
