Telangana High Court
M/S Bemco Sleepers Ltd And 3 Others vs M/S Shanti Wires Pvt Ltd And Another on 31 January, 2025
Author: Abhinand Kumar Shavili
Bench: Abhinand Kumar Shavili
THE HON'BLE SRI JUSTICE ABHINAND KUMAR SHAVILI
AND
THE HON'BLE SMT. JUSTICE TIRUMALA DEVI EADA
CITY CIVIL COURT APPEAL No.167 OF 2007
JUDGMENT:
(Per Hon'ble Smt. Justice Tirumala Devi Eada)
This is an appeal filed by the appellants being aggrieved
by the judgment and decree, dated 15.02.2007, passed in
O.S.No.391 of 1996 by the learned III Senior Civil Judge, City
Civil Court, Secunderabad (for short "the trial Court").
2. Heard Smt.Manjari S.Ganu, learned counsel representing
Sri M.Papa Reddy, learned counsel for the appellants and
Sri P.Venugopal, learned counsel for respondent No.2.
3. The appellants herein are the defendants and the
respondents herein are the plaintiffs before the trial Court and
the parties are addressed herein as they were arrayed in the
suit before the trial Court for the sake of convenience.
4. The case of the plaintiffs before the trial Court was that
they were carrying on business of Steel products and that the
defendants were purchasing their products and were having a
running account. During the course of business, the
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defendants have committed default in paying the outstanding
dues and that on 06.10.1995 they entered into a
Memorandum of Understanding that the defendant shall pay
Rs.31,00,000/- towards full and final settlement of the claim
and that they have paid only Rs.6,00,000/- out of the said
amount and failed to pay the balance amount. Thus, the
plaintiffs claimed Rs.63,17,383/- as on 31.08.1996 including
the interest @ 24% per annum.
5. The defendants through their written statement admitted
their transactions with the plaintiffs and also about the
Memorandum of Understanding and their subsequent
payment of Rs.6,00,000/-. They have denied the claim of the
plaintiffs in the suit which is to a tune of Rs.63,17,383/-.
6. The trial Court framed the following issues for trial:
"1. Whether the plaintiff No.1 is entitled for recovery of a
sum of Rs.21,99,309/- from defendant No.1 as prayed for?
2. Whether the plaintiff No.1 is entitled for recovery of a
sum of Rs.2,15,526/- from D2 as prayed for?
3. Whether the plaintiff No.1 is entitled to recover a
sum of Rs.11,22,588/- from D2 and D3 as prayed for?
4. Whether plaintiff No.2 is entitled to recover a sum of
Rs.27,79,960/- from defendant No.1 as prayed for?
5. Whether the defendants are liable to pay future
interest @24% p.a as prayed by the plaintiffs?
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6. Whether no credit is given for the payment of Rs.6 lakhs
in the total claim of Rs.63,17,382/- as contended by the
defendants?
7. Whether this court has no jurisdiction to try the suit?
8. To what relief?"
7. The trial Court after considering the evidence on record
has decreed the suit for a sum of Rs.26,75,000/- against
defendant Nos.1 to 3 jointly and severally in favour of both the
plaintiffs. The suit claim against defendant No.4 in his
personal capacity is dismissed.
8. The defendants have thus filed this appeal. During the
course of arguments learned counsel for the appellants has
submitted that the interest must not have been awarded
against the total amount of Rs.25,00,000/- and that it ought
to have been awarded only on the principal amount.
9. Learned counsel for respondent No.2 has submitted that
the trial Court has considered the entire evidence on record
including the Memorandum of Understanding while passing
the judgment and hence, has prayed to confirm the judgment
and decree.
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10. The Court of first appeal is a last Court of record. Hence,
after considering the averments of both sides, this Court
frames the following Points for determination.
1. Whether the plaintiffs are entitled for recovery
of the amount as claimed from the defendants
and whether the defendants are liable to pay
the same?
2. Whether the trial Court's judgment and decree
is sustainable in law and under facts?
3. To what relief?
11. POINT NO.1:
a) A perusal of the trial Court record reveals that the
defendants have admitted the transactions with the plaintiffs
and also the execution of memorandum of understanding
under Ex.A193. Though one of the grounds in filing the
appeal happens to be denying the liability of defendant in
paying the entire amount in the suit, during the course of
arguments learned counsel for the appellants has fairly
admitted the liability to pay the balance amount of
Rs.8,55,784/- as mentioned in Ex.A193. Hence, there is no
controversy about the payment of Principal amount but the
only dispute is with regard to the payment of interest.
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b) A perusal of Ex.A193 reveals that at paragraph No.2 that
a balance of Rs.8,55,784/- is remaining payable to the
plaintiffs by the defendant group of companies and this
balance has been accepted by both the parties i.e. plaintiffs
and defendants companies as true and correct.
c) As disclosed from Ex.A193 since the principal amount is
only Rs.8,55,784/-, it is not proper to award interest on the
entire suit claim.
d) It is pertinent to refer to Section 34 of the Code of Civil
Procedure, 1908 and the same is extracted hereunder:
"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.
Explanation.-In this sub-section, "nationalised bank" means a
corresponding new bank as defined in the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1970 (5 of 1970).
Explanation II.-For the purposes of this section, a transaction is a
commercial transaction, if it is connected with the industry, trade or
business of the party incurring the liability.] [Inserted by the Code of Civil
Procedure (Amendment) Act, 1976, Section 13 (w.e.f. 1.2.1977). ]
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(2)Where such a decree is silent with respect to the payment of further
interest [on such principal sum] [Substituted by Act 66 of 1956, Section 2,
for certain words. ] from the date of the decree to the date of payment or
other earlier date, the Court shall be deemed to have refused such interest,
and a separate suit therefor shall not lie...."
e) From a plain reading of the above section it is
understood that the interest be imposed only on the principal
sum. This Court is conscious of the fact that the suit is of the
year 1996. To put an end to the litigation and in the facts and
circumstances of the case a future interest @12% on the
principal amount of Rs.8,55,784/- is opined to be just and
reasonable. The memorandum of understanding reveals that
the interest shall not be imposed till March, 1996 and if any
default is committed, the interest shall be imposed from 31st
March, 1996. Therefore, from 31st March, 1996 to the date of
realization the interest is awarded on the principal sum of
Rs.8,55,784/- @ 12% per annum.
f) The Constitutional Bench of the Apex Court in case of
Central Bank of India v. Ravindra 1 after discussing many
cases including the decisions in case of Corpn.Bank v.
D.S.Gowda 2, Bank of Baroda v. Jagannath Pigment &
(2002) 1 Supreme Court Cases 367
(1994) 5 SCC 213
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Chemicals 3 has held that the principal sum actually advanced
coupled with the interest is capable of being adjudged as
principal sum on the date of the suit and the principal sum so
adjudged is "such principal sum" within the meaning of
Section 34 of the Code of Civil Procedure, 1908 on which the
interest pendente lite and future interest, at such rate and for
such period which the court may deem fit, may be awarded by
the Court.
g) In a recent decision of the Apex Court in case of
D.Khosla and Company v. Union of India 4 while deciding a
matter under the Arbitration Act, has held that Section 34 CPC
provides that where the decree is for payment of money, the
court may order interest at such rate as the court deems
reasonable to be paid on the principal sum adjudged. Again,
the reading of the aforesaid sub-section (1) of Section 34 CPC
would reveal that the interest is payable on the principal sum
adjudged and not on interest part of the award.
(1996) 5 SCC
(2024) 9 Supreme Court Cases 476
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h) In the light of the decisions referred above and after
taking into consideration the grounds of appeal and the
arguments of the learned counsel, this Court is of the opinion
that the interest has to be awarded only on the principal
amount.
i) The other contention raised by learned counsel for the
appellants is that defendant No.4 is not liable. The same
finding is given by the trial Court and hence, no indulgence is
required on this aspect. Learned counsel for the appellants
has further argued on the aspect that the Memorandum of
Understanding is only between plaintiff No.1 and defendant
No.1 and therefore, the other defendants are not liable to pay
any amount and that plaintiff No.2 is not entitled to any
amount. But Ex.A193 at paragraph Nos.1 and 3 disclose that
the Memorandum of Understanding includes the other group
of companies also.
j) The said lines are extracted hereunder:
"M/s.Shanti Wires Pvt.Ltd. (SWPL) and other Group
Companies of their vis. Southers Prestress etc. have supplied
material to M/s.BEMCO Sleepers Ltd., (BSL) and other Group
Companies viz. Vaman Poles Pvt.Ltd., Bharat Electric Pole
Mfg.Co. etc. M/s.SWPL raised bills various times for the
supplies to BSL and BSL paid those amounts substantially
according to their financial position. The amounts were
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normally paid till the end of March 1991. However due to
certain difficulties faced by BSL and other group companies
during last four years the payment to SWPL for the bills raised
by them for the H.T.Wire supplied to BSL were not effected
regularly. However SWPL and BSL were enjoying very cordial
relations with each other and tried to accommodate each other
inspite of problems faced by both of these groups.
In order to compensate the loss due to interest which SWPL
suffered as substantial amount was blocked with BSL and
group companies. It was decided to compensate this loss to
some extent by payment of interest to SWPL by BSL which was
agreed and accepted by both of them that a sum of
Rs.22,44,216/- was accepted as interest payable to SWPL by
BSL and thus including this interest amount a sum of
Rs.31.00 lacs (Rs.Thirty one lacs only) is accepted was net
payable amount to SWPL by BSL."
k) The Memorandum of Understanding is to be taken as a
whole to understand the intention of the parties but cannot be
read in bits and pieces. Thus, it is clear that though only
plaintiff No.1 and defendant No.1 have signed the document, it
covers the interest of plaintiff No.2 also and that defendant
Nos.2 and 3 are also liable along with defendant No.1.
Therefore, it is held that the plaintiffs are entitled to claim
Rs.8,55,784/- with interest @ 12% per annum on the said sum
from 31st March, 1996 to the date of realization from the
defendants and that defendant Nos.1 to 3 are jointly and
severally liable to pay the same. Point No.1 is answered
accordingly.
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12. POINT NO.2:
In the light of the finding arrived under Point No.1, it is
held that the trial Court's judgment and decree needs
interference only to the extent of the interest that is awarded.
13. POINT NO.3:
In the result, the appeal is partly allowed modifying the
trial Court award to the extent of interest to be payable to the
respondents herein. The appellant Nos.1 to 3 are directed to
pay respondent Nos.1 and 2 an amount of Rs.8,55,784/- with
interest @12% per annum on the said amount from 31st
March, 1996 to the date of realization. There shall be no order
as to costs.
Miscellaneous Applications, if any, pending in this appeal
shall stand closed.
________________________________
ABHINAND KUMAR SHAVILI, J
___________________________
TIRUMALA DEVI EADA, J
Date: 31.01.2025
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