HONOURABLE Dr. JUSTICE
B.SIVA SANKARA RAO
APPEAL SUIT No.1686 OF
1996
JUDGMENT:
The
appellant-Central warehousing Corporation, Adilabad, represented by its
Warehouse Manager, is the defendant in O.S.No.10 of 1994 filed by the
respondent in the appeal as plaintiff.
The suit was filed in the Court of Additional District Judge, Adilabad
for recovery of Rs.4,07,712/-(Rupees four lakh seven thousand seven hundred and
twelve only) with interest at 21% p.a. from the date of suit (06.06.1994) till
realization. In fact, the original suit
claim was for Rs.3,62,999/-(Rupees three lakh sixty two thousand nine hundred
and ninety nine only) which was later amended to said amount vide order dated
21.07.1995 in I.A.No.1276 of 1995. The suit, on contest, was decreed by the
Additional District Judge, Adilabad, for Rs.1,76,011/-(Rupees one lakh seventy
six thousand and eleven only) which is
part of the suit claim together with interest at 12% p.a. from the date of suit
till date of payment with proportionate costs as per para-19 of the trial Court
judgment.
2.
Before coming to the grounds of appeal attacking legality and correctness of
said decree and judgment allowing by the trial Court and what are the points
that required for determination on being formulated, from rival contentions
within the scope involved in the first appeal lis; for better appreciation, the
factual matrix of the case before trial Court is the following:-
2a. The case of the
plaintiff (a businessman and a commission agent under the name and style of
‘Anil Traders’ Adilabad) against the defendant-Corporation in the suit claim is
that, for storage and safe custody with the defendant-Corporation (by non-gratuitous
bailment), he deposited 300 full pressed cotton bales of H4 variety to return
on demand covered by receipts (Exs.B.1 to B.3), that on 08.06.1991 there was a
fire accident in the godown and the bales deposited by the plaintiff, among
stored stock of others, were gutted in fire and to compensate the same i.e.(value
of the bales of Rs.11,17,825/- as on the date of fire accident, and for Rs.44,713/-
at 4% p.a. sale tax incurred thereon by the plaintiff as last purchaser for
total of Rs.11,62,538/-) a claim was made by the plaintiff to pay within 15
days, failing which, with liability of 21% p.a. interest also from that date
till payment to recover; that after
several demands, the defendant paid Rs.6,00,000/- on 26.01.1992, Rs.4,62,000/-
on 19.11.1992 to the plaintiff and later
for the balance and for the sales tax amount incurred by plaintiff to pay with
interest at 21% p.a., the plaintiff issued notice (Ex.A.7) dated 28.11.1992 covered
by acknowledgments (Ex.A.8 and A.9) dated 30.11.1992 and 02.12.1992; that the defendant failed to pay but for the last
part payment of Rs.55,828/- on 14.05.1993 and thereby the suit claim.
2b. The defendant mainly
contended that the 300 cotton bales deposited by the plaintiff with the
defendant were covered by receipt Nos.465785 dated 09.05.1991, 465816 dated
01.06.1991 and 465817 dated 01.06.1991 which indicate the value of the goods as
on the date of deposit, that on knowing the fire accident, the Manager of
defendant-corporation informed to police and to the parties whose stock/goods
deposited were gutted in fire including to the plaintiff herein by letter dated
25.06.1991, that the plaintiff when lodged a claim for Rs.11,17,825/- with 4%
GST, it was replied by the defendant of there is no negligence on their part to
make any liability for sales tax amounts and that any way the goods were
insured and they are pursuing the insurance company vigorously to make payment
to the plaintiff and others whose stocks were destroyed. The other contention
in opposing the suit claim was that, they have taken all precautions in
constructing the godown with bricks, stones, asbestos roofing with all safety
devises to protect from fire and rain etc., that the cause for said fire
accident on 09.06.1991 as per the State Fire Officer was of sparks emanated
from friction of the bales only, that as per the terms mentioned on the reverse
of the receipts issued for stocks deposited with the defendant-corporation,
they insured the goods and the insurer is liable to pay only the value of goods
as on the date of deposit and nothing more much less to pay interest on said
value or any liability for any payment of sales tax thereon, that plaintiff also
got knowledge of said terms on the receipts to bind bilaterally and thereby the
plaintiff will be entitled to receive the insurance amount which the insurance
company has to indemnify the defendant and thereby the insurance company is a
necessary and proper party, that the suit is not maintainable without joining
the insurer of the goods, that defendant collected amounts and paid to
plaintiff as explicit as part of the terms and the insurer-officials also
visited the godown and enquired the matter to pay the amount, that besides not
liable for any interest, rate of interest claimed is exorbitant and the claim
of sales tax amount is also not tenable. It is also the contention that the defendant,
having collected from the insurer the amount of the stock of the plaintiff,
paid in entirety for its value i.e. Rs.6,00,000/- on 26.01.1992, Rs.4,62,000/-
on 19.11.1992/- and Rs.55,825/- on 13.05.1993 and the defendant also informed
orally and in writing repudiating any liability for interest or for any sales tax
amount and thus nothing is liable to pay and thereby the suit claim for
Rs.3,62,999/-, as if due, is not correct to enforce and to dismiss the suit
claim with costs.
2c. From the pleadings, the trial Court
framed the following issues:-
• Whether
the plaintiff is entitled to recover Rs.3,66,999/- from the defendant?
• Whether
the plaintiff is entitled for the interest? If so, to what rate?
• Whether
the plaintiff is entitled to recover sales tax amount of Rs.44,713/- from the
defendant?
• Whether
the Insurance Company is a necessary and proper party to the suit?
• To
what relief?
Additional
issues:
• Whether
the plaintiff is entitled to recover Rs.4,07,712/- including sales tax amount
of Rs.44,712/- from the defendant?
• Whether
the amount of APGST of Rs.44,713/- including in suit claim after amendment is
barred by limitation?
2d. On above pleadings in
deciding the issues referred above, on behalf of plaintiff, he was examined
orally and relied upon ten documents viz., Exs.A.1 and A.2 letters of
defendant, dated 25.06.1991, Exs.A.3 to A.6 letters of plaintiff dated 10.07.1991,
16.09.1991, 24.10.1991 and 09.11.1991 respectively, Ex.A.7 office copy of
notice, dated 28.11.1992, Exs.A.8 and A.9 are acknowledgment receipts dated
30.11.1992 and 02.12.1992 respectively and Ex.A.10 certificate issued by Bank
of Maharashtra Branch, Adilabad, dated 31.01.1995. Similarly after plaintiff’s
evidence, on behalf of defendant, its Manager Sri Ramulu, was examined as D.W.1
and relied upon 14 documents viz., Exs.B.1 to B.3 receipts of Warehousing
Corporation dated 09.05.1991, 09.06.1991 and 01.06.1991 respectively, Ex.B.4
office copy of letter dated 25.06.1991, Ex.B.5 office copy of reply notice, dated
24.12.1992, Exs.B.6 to B.8 office copies of Warehousing Corporation receipt
Nos.445785,dated 09.05.1991,465816,dated 01.06.1991 and 465817,dated 01.06.1991
respectively, Exs.B.9 to B.13 office copies of letters, dated 20.01.1992, 12.01.1992,01.04.1992,11.06.1992,and
18.11.1992 respectively and Ex.B.14
office copy of notice, dated 18.10.1993.
2e. From said pleadings and
evidence placed on record by both sides and after hearing in deciding suit
claim, the trial Court held that despite there is no condition in the receipts(Exs.B.1
to B.3) for the goods stored to pay interest and also to pay the APGST amount,
from the admitted facts of the six lakh worth of stocks deposited covered by said
receipts were gutted in fire completely; the same is even covered by insurance
for the value mentioned in the receipts, as the claim was not settled and paid
despite notices and demands to pay with
interest for non-payment within a reasonable time, the defendant is liable for
interest. It was also held that or the liability to pay the value of gutted stock
is not contingent upon settlement and payment of insurance claim and that as
per Section 3 of the Interest Act, 1978, for such liability to pay interest by
defendant no contract is necessary. It was also held that the liability to pay
interest arises from the notice dated 10.07.1991 (Ex.A.7) and it was also held
in AIR 1977 Madras page 56 that the
plaintiff is entitled to claim interest from the date of demand, even in the
absence of contract and in M/s Thakral
v. Indian Petro Chemicals Corporation Limited, it was held that for no attempt made to refund the amount during the
pendency of the suit, the defendant is liable to pay interest and fixed 18% per
annum as reasonable within the meaning of Section 2(b) of the Interest Act
which reads of liability to pay current rate of interest and even from Ex.A.10
certificate issued by the bank of Maharashtra, Adilabad branch, dated
31.01.1995; during July to October,1991 rate of interest on FDRs was 13% per
annum maximum with quarterly rests and for term loans lent the bank charges on
sum of Rs.2,00,000/- and above at 20%
p.a. with quarterly rests. It was held that besides the interest till date of
suit under Section 34 of CPC granted interest at 12% per annum on the balance
of the value of stock from date of suit
till realisation. It was also held that
there is no liability for sales tax
amount said to have been incurred by referring to AIR 1943 Calcutta page 591, wherein it was held that it is only for
entire value of goods lost and not for any consequential damages. It was further held that as the goods were
directly deposited by plaintiff with the defendant covered by receipts, from
that contract the defendant is liable irrespective of the defendant’s
entitlement to recovery from the insurance company for the goods insured, and
insurance company is thus not a necessary and proper party and the suit is not
bad for its non-joinder. The trial Court
with above observations arrived at Rs.1,76,011/- as amount due as on the date
of suit together with interest therein at 12% p.a., from the date of suit till
realization with proportionate costs.
3(a). It is said findings
of the trial Court impugned in the appeal by as many as 25 grounds raised in
the appeal with sum and substance that : a) the trial Court having been categorically
held that terms of contract between the parties covered by the receipts
(Exs.B.1 to B.3) do not provide for payment of interest, however, grossly erred
in fastening liability for interest in answering issue No.2 in ignorance of the
fact that the defendant made all due efforts to settle the claim with the insurer of the goods and its payment
immediately on receiving from the insurer to the plaintiff and the reasons given
to arrive said conclusion by the trial Court also are erroneous, contrary to
law, evidence on record, misreading of Section 3 of the Interest Act and
misunderstanding and improper exercise of the discretion under Section 34 of
CPC. and thereby the trial Court’s findings in paras-12 and 13 in arriving the
amount and fixing the liability for interest are erroneous, irrelevant and
liable to be set aside.
3(b). It is also contended
as part of the attack on correctness of the trial Court’s decree and judgment
that besides the insurer is a necessary party, the defendant was also wrongly
arrayed in stead of impleading Central Warehousing Corporation to represent by
the Chief Executive, simply showing the Adilabad branch represented by the
warehouse manager, that is suffice to dismiss the suit claim apart from other
merits referred above.
3(c). It is also the
contention that the trial Court also misread the principle laid down in
judgment of A.K.Ray v. Governor General
of India in case of luggage deposited by the passenger lost, liability is
held only for value of goods and not for any consequential damages resulted
from the loss, to negate the interest claim and thereby sought for setting
aside the trial Court’s decree and judgment by allowing the appeal with costs
against the plaintiff/respondent to the appeal.
3(d).In the course of
hearing the counsel for the appellant/ defendant by reiterating the above
contentions with reference to the evidence on record in attacking the findings
of the trial Court also drawn attention of the Court to Section 34 of CPC,
Section 3 of the Interest Act and also placed reliance on the judgment of this
Court dated 26.10.2010 in a similar claim of said fire accident covered by
A.S.No.1483 of 1994 against O.S.No.28 of 1992 on the file of the Principal
District Judge, Adilabad.
4. Whereas it is the
contention of the counsel for respondent/plaintiff that; a) Even under the
Interest Act irrespective of the fact that there was no contract or
stipulation, the liability to pay interest arises on any amount due from the
date of demand till date of suit so far as pre-lite
interest concerned and regarding pendent-lite
and post-lite interest it is governed
by Section 34 of C.P.C. within the discretion of Court to exercise that in this
case when the trial Court granted interest at 12% p.a. from the date of suit
till realization on the amount arrived, this Court cannot reduce much less
interfere and thereby sought for dismissal of the appeal.
5) From the above rival
contentions, the points that arise for determination are formulated as follows:-
(i) Whether either under Sections 3 to 5
of the Interest Act or under Section 34 of CPC from the contention by the
defendant/appellant that already principal amount due for the value of the
goods deposited covered by the terms of contract under Exs. B.1 to B.3=B.6 to B.8
receipts has been paid before the date
of suit, the question of payment of interest does not arise, much less at bank
lending rate for the pre-lite pendente-liti and post-lite and if so, the decree and judgment of the trial Court
adjudging the decree amount as due with interest at 12% per annum thereon from
the date of suit till realization is liable to be set aside and if so to what
extent?
(ii). Whether there is any wrong array of
the defendant, and if so with what finding, so also regarding so called
non-joinder of the insurer of the stock of the plaintiff deposited with the
defendant that was insured by the defendant to which the plaintiff was not
direct party admittedly?
(iii)To what result?
Point No.2:
6(a). As the deciding of
point-2 is needful and convenient at first instance before deciding the point-1
formulated above, the point-2 is taken up for determination. In fact, on
perusal of the array of the defendant in the plaint, it shows that the
defendant arrayed was the Central warehousing corporation itself that was at
industrial area, Adilabad represented by its warehouse manager. Further, in the written statement and additional
written statement of the defendant before trial Court, it was contended that
the defendant is a corporation constituted under the WHC Act with its main office at Delhi,
regional office at Hyderabad and branch office at Adilabad with its godown and
office looked after by its manager and the suit should have been filed against
the defendant as represented by its regional manager. There was no amendment even sought by the
defendant to that effect in the array. Said contention which even crystallizes
the array of defendant was the corporation which is a legal entity admittedly,
but for mistaken mention if at all in saying as represented by warehouse
manager of Adilabad in stead Chief Manager of the central office. Once there
was competency to the regional manager within the region, there is competency
equally to the branch manager within the branch area and thereby it is not
tenable to give rise said contention as if it is a defect to go to the root of
the matter, that too, even in the appeal grounds cause title not with any
rectified array by pointing out alleged mistaken mention in the trial Court array
of defendant.
6(b). Coming to the so
called non-joinder of the (NIC) insurer of the goods concerned, as the
insurance contract was between defendant-corporation on one side and the
insurer (NIC) on the other side to make good for any contingency within the
terms of the policy if occurred loss to the goods; when admittedly, plaintiff-owner
of the goods deposited with the defendant and not party to the insurance
contract, there is no need to implead said insurer as co-defendant. It is at best
for the defendant to give notice to the insurer to indemnify for loss of the
goods insured and for failure, to invoke Order VIII-A of C.P.C. of A.P.
Amendment (same as in Madras Amendment) under the caption third party procedure
which reads:-
1. Third party notice-
Where a defendant claims to be entitled to contribution from or indemnity
against any person not already a party to the suit (hereinafter after called a
third party) he may, by leave of the Court, issue notice (hereinafter called
third party notice) to that effect, sealed with the seal of the Court. The
notice shall state the nature and grounds of the claim. Such notice shall be filed into Court with a
copy of the plaint and shall be served on the third party according to the
Rules regarding the service of summons.
2. Effect of notice- The third party shall, as from the time of the
service upon him of the notice, be deemed to be a party to the action with the
same rights in respect of his defence against any claim made against him and
otherwise as if he had been duly sued in the ordinary way by the defendant.
3. Default by third
party- if the third party desires to dispute the plaintiff’s claim in the
suit as against the defendant on whose behalf the notice has been given, on his
own liability to the defendant, the third party may enter appearance in the
suit on or before the date fixed for his appearance in the notice. If he does
not enter appearance he shall be deemed to admit the validity of the decree
that may be obtained against such defendant, whether by consent or otherwise,
and his own liability to contribute or indemnify, as case may be, to the extent
claimed in the third party notice:
Provided
always that a person so served and failing to appear may apply to the Court for
leave to appeal, and such leave may be given upon such terms, if any, as the
Court shall think fit.
4. Procedure default- where the third party does not enter
appearance in the suit and the suit is decreed by consent or otherwise in
favour of the plaintiff, the Court may pass such decree as the nature of the
case may require against the third party and in favour of the defendant on
whose behalf notice was issued:
Provided
that execution thereof shall not be issued without leave of the Court until after satisfaction by such
defendant of the decree against him.
5.Third party directions-If
the third party enters appearance the defendant on whose behalf notice was
issued may apply to the Court for directions, and the Court may, if satisfied
that there is a question to be tried as to the liability of the third party to
make the contribution or pay the indemnity claimed, in whole or in part, order
he question of such liability, as between the third party and the defendant
giving the notice, to be tried in such manner, at or after the trial of the suit,
as the Court may direct, and if not so satisfied may pass such decree or order
as the case may require.
6.Leave to defend- The Court may, upon the hearing of the
application mentioned in Rule 5, give the third party liberty to defend the
suit upon such terms as may be just, or to appear at the trial and taken such
part therein as may be just, and generally may order such proceedings to be
taken, documents to be delivered or amendments to be made and give such
directions as appear proper for the most convenient determination of the
question or questions in issue, and as to the mode and extent in or to which
the third party shall be bound or made liable
by the decree in the suit.
7. Costs- The Court may decide all questions of
costs, as between the third party and the other parties to the suit, and may
order any one or more to pay the costs of any other or others or give such
direction as to costs as the justice of the case may, require.
8.Questions between
co-defendants- Where
a defendant claims to be entitled to contribution from or indemnity against any
other defendant to the suit, a notice may be issued and the same procedure
shall be adopted for the determination of such questions between the defendants
as would be issued and taken, if such last-mentioned defendant were third
party, but nothing herein contained shall prejudice the rights of the plaintiff
against any defendant in the suit.
9. Further parties- Where any
person served with a third party notice by a defendant under these rules
claims to be entitled to contribution from or indemnity against any person not
already a party to the suit, he may, by leave of the Court, issue a third-
party notice to that effect, and the preceding rules as to the third-party
procedure shall apply mutatis mutandis
to every notice so issued and the expressions “third-party notice” and
“third-party” in these rules shall apply to and include every notice so issued
and every person served with such notice respectively.”
6(c).Thus having not
invoking the remedy by defendant if at all, the (NIC) insurer of the goods to
make good to the plaintiff for the goods gutted in the fire accident belongs to
the plaintiff that was kept in the safe custody of the defendant to take back
on demand, that too, non-gratuitous bailment, it is not open to the defendant–Corporation
to contend that the insurer of the goods must be a necessary party. The
defendant thus has no right to compel the plaintiff to implead said insurer of
goods. The defendant cannot also contend that the suit is not maintainable
without impleading the insurer. Thus, the suit claim between the plaintiff and
defendant it is no way fatal on its maintainability. Accordingly, point-2
formulated above is answered against the appellant-defendant and in favour of
the respondent-plaintiff.
Point
No.1
7(a).
Ex.B.1 is the receipt passed by the defendant for the cotton bales deposited by
the plaintiff with the defendant on 09.05.1991 worth of Rs.3,83,825/- to be
kept in safe custody under the contract of non-gratuitous bailment till
31.07.1991 by collection of charges and no doubt it shows on the colomn whether
insured; as insured with M/s United India Insurance Company. In fact, as per
the written statement of the defendant referred above, the stock was insured
with (NIC) insurer. The terms and
conditions of the storage contained on the reverse side of Exs.B.1 to B.3 speak
that the storage charges will be made on a monthly basis and number of days in excess of a month will be
charged on weekly basis and the liability as per clause 5 is warehouseman
undertakes to exercise reasonable care and diligence by law for keeping goods
and liability is limited to the value of the goods on the date of deposit and
not responsible for the usual and customary shrinkage in weight and affect on
quality during storage due to natural causes. Ex.B2 receipt is similarly for
the cotton bales deposited on 01.06.1991 of worth Rs.3,65,225/- to store till
31.08.1991 and Ex.B.3 receipt is similarly for the cotton bales deposited worth
of Rs.3,68,775/- on 01.06.1991 to store till 31.08.1991. Ex.B.4 = Ex.A.1 and
A.2 refers that under the three receipts covered by Exs.B.1 to B.3 total 300
pressed bales of cotton i.e. at each time 100 bales deposited that were gutted
in fire and it was the intimation by the defendant-corporation to the plaintiff
on 25.06.1991 by referring the warehouse receipt numbers and dates of deposit.
Ex.B.5 is the reply notice. Ex.A.2 is the acknowledgment dated 26.01.1992 of
the defendant-corporation manager passed to the plaintiff for the Exs.B.1 to
B.3 covered under Ex.B.4 referred 300 cottons bales on respective dates worth
in all as on date of deposit Rs.11,17,825/- worth receipts surrendered were
received and the adhoc payment of Rs.6,00,000/-was made towards compensation
for the stock destroyed in the fire
accident, dated 08.06.1991. It is the first payment (dated 26.01.1992) out of total
value of the stocks deposited during May,1991 to June,1991. As on the dates of Exs.B1
to B.3, there was no contract for payment of interest. However, the fact
remains that the fire accident dated 08.06.1991 was intimated to the plaintiff
by the defendant under Ex.B.4=A.1 dated 25.06.1991, and the plaintiff issued
Ex.A.3 notice to the defendant acknowledging A.1=B4 intimation of the stock
damaged by demanding to pay the said value of the stock of Rs.11,17,825/- as
well as sales tax paid thereon of Rs.44,713/-.
By referring to it, Ex.A.4 dated 16.09.1991 is another letter of the
plaintiff to the defendant to pay immediately, else to take legal recourse for
payment with interest on the delayed payments at 21% p.a. from the date of fire
accident. In fact, there is nothing to
show service of said notice. Ex.A.5 is the plaintiff’s another legal notice,
dated 24.10.1991 referring to Exs.A.1,A.3 and A.4 and that the plaintiff is
suffering loss from non-settlement of the claim by non-payment of value of the
cotton bales even three month’s lapse from the fire accident and with no reply
to Exs.A.3 and A.4 even, hence to pay out of the funds of the defendant said amount, else to approach the Court of
law by saying the plaintiff is no way connected when the insurance company with
whom the defendant insured the goods. Ex.A.6 dated 09.11.1991 is another letter
of plaintiff to the defendant saying it is in response to the defendant’s
letter dated 06.11.1991. The plaintiff submitted the declaration confirming
that there is no other insurance policy, no bank pledge on the deposit receipts
and enclosed the copies of purchase invoices of the stock and photo copy of day
book entries of the stock and weighment note as well as invoices and gate
passes for the bales lifted from pressing factories to the defendant godown, hence,
to settle the claim by payment of the amount within 15 days, else to take legal
recourse. No doubt in Ex.A.6 dated
09.11.1991 there is no demand for interest but for in Ex.A.3 specifically and
A.4 generally. Ex.A.7 is the legal
notice of plaintiff to the defendant and the higher authorities for recovery of
the amount of the value of stock of Rs.11,17,875/- and the sales tax paid
amount of Rs.44,713/- and by acknowledging receipt of Rs.6,00,000/- covered by
Ex.A.2 receipt, dated 26.01.1992 and another amount of Rs.4,62,000/- received on
19.11.1992 and to pay the balance with interest. Either in Ex.A.7 notice or in
any of the notices referred above given by the plaintiff covered by Ex.A.3 to
Ex.A.6, there is no mention about the exercising right of doctrine of
appropriation of creditor. When the
creditor without saying he got and exercises the right to appropriate, he
cannot adjust the amount received firstly
towards interest claimed. Further, when there is no contract to pay
interest at a particular rate, question of appropriation does not arise.
7(b). In this regard,
Sections 59 to 61 of the Indian Contract Act,1872 reads as :-
(i) Section 59: Application of
payment where debt to be discharged is indicated- Where a debtor, owing
several distinct debts to one person, makes 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.
(ii) Section 60: Application of payment
where debt to be discharged is not indicted-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
limitation of suits.
(iii) Section
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 time being
as to the limitation of suits. If the debts are of equal standing, the payment
shall be applied in discharge of each proportionately.
7(c).Here, as the entire
debt under the three consigned stocks covered by Exs.B.1 to B.3 receipts is
within time and there is no specific mention by debtor in making payment to
apply to the first consignment and remaining to the second consignment as such
it can be appropriated out of the total amount of liability to any of it. As discussed already, when there is no
contract regarding payment of interest stipulated between the parties and there
is no statutory provision to pay interest at a particular rate from a
particular date or period of time the payments made are to be appropriated
towards principal sums due. In this regard, the Privy Council in Raj Bahadur
Seth Nemichand v. Seth Radhakishen[1], held that a
creditor to whom principal and interest
are owed is entitled to appropriate any indefinite payment which he gets from a
debtor towards payment of interest, however, a debtor might not making the payment stipulates that it was to
be applied only towards the principal. If such stipulation was made, the
creditor was at liberty to refuse the payment of such terms; but then he would
have to give back the money, or the cheque by which the money was offered. If
the amount was accepted, then the creditor would be bound by the appropriation
as proposed by the debtor. As such, the plaintiff has no right of appropriation
towards any interest not stipulated by law.
7(d). The liability to pay
any interest under the Interest Act(even there is no contract to pay interest) from
the date of receipt of notice demanding interest for non-payment before filing
of suit or for fixing any interest on principal sum under Section 34 of CPC for
the pendenti-liti and post-lite interest is different from the
doctrine of appropriation under the Contract Act as referred above. The
doctrine of appropriation applies if there is a contract to pay interest and
otherwise, if there is a statutory provision for interest or at least demand
for payment of interest at a particular rate to claim therefrom and in the
absence of which, the question of appropriation towards interest out of any payment
(made even without specification) does not arise. As such from the acknowledgment of two
payments as on the date of Ex.A.7 notice out of the amount of Rs.11,17,825/-
value of the goods gutted in fire what remains payable by the defendant to the
plaintiff was out of total Rs.11,17,825/- on deducting first payment of
Rs.6,00,000/- it comes to Rs.5,17,825/- and on deducting the second payment of
Rs.4,62,000/-, the balance is Rs.55,825/- by the Ex.A.7 notice of plaintiff
dated 28.11.1992 received under Ex.A.8 and A.9 acknowledgments by the
defendant. The defendant issued Ex.B.5 reply dated 24.12.1992 saying for the
value of the stock gutted in fire covered by Ex.B.1 to B.3 warehouse receipts
for Rs.11,17,825/- the same was insured under All India floater policy as has
been the practice. In Ex.B.5 reply notice dated 24.12.1992 it was further
mentioned by the defendant intimating to the plaintiff that the claim for sales
tax paid amount of 4% of the value of stock and any liability for interest does
not arise for no such contract as can be seen from terms of the warehouse
receipts (Exs.B.1 to B.3) and thus not liable to pay by defendant other than value
of the stock of goods worth Rs.11,17,825/- of which already paid Rs.6,00,000/-
on 26.01.1992 and Rs.4,62,000/- on 19.11.1992 by Demand Drafts (D.Ds) that were
encashed by plaintiff and thereby the claim for Rs.3,20,119/- as if due by
charging interest is unsustainable and what all liable is only the balance of
Rs.55,827/- which they are pursuing to make payment and not to take any legal
recourse. It was pursuant to it, the last payment of Rs.55,825/- was made and acknowledged
by the plaintiff vide receipt dated 13.05.1993. Exs.B.9 to B.14 are the letters of the
defendant to the plaintiff to produce original letters and receipts
respectively for making the payment which are not much of relevance but for to
say from the said documents marked by both sides the claim of interest made by
the plaintiff was denied by the defendant and as such when the entire amount
was paid by the defendant to the plaintiff, the liability to pay interest even
as per the Interest Act from the date of receipt of the notice a demanding to
pay interest does not arise. In fact,
the plaintiff did not file any acknowledgments for serving of the letters but
for acknowledgment to Ex.A.7 legal notice dated 28.11.1992 covered by Exs.A.8
and A.9 which shows from the signature on Ex.A.8 that it was served on Regional
Manager on 30.11.1992 and the defendant on 02.12.1992 to say only from the
beginning of December, 1992 the defendant if at all liable to pay interest for
any balance of amount due. In this regard as referred above, the plaintiff
himself in Ex.A.7 acknowledged receipt of two payments of Rs.6,00,000/- and
Rs.4,62,000/- respectively and what was the balance due as on date of Ex.A.7
notice was only Rs.55,825/- as replied by the defendant in Ex.B.5 dated
24.12.1992. The last payment of
Rs.55,825/- that was received by the plaintiff as per the plaint was on
14.05.1993. It is to say only from 02.12.1992 till 14.09.1993 for 5 1/3(five and one third) months
the defendant is liable to pay interest, that too, only on Rs.55,825/- by
invoking the Sections 3 to 5 of the Interest Act. In fact, from the very
plaint, the amounts were paid before the date of suit.
8. Now coming to the scope and application of
Section 34 of CPC and Sections 3 to 5 of the Interest Act which read thus:
8(a). Section 34 CPC.
•
Interest- Where and insofar 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 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
nationalized banks in relation to commercial transactions.
Explanation
I: In this sub-section, ”nationalized bank” means a corresponding new bank as
defined in the Banking Companies(Acquisition and Transfer of Undertakings) Act,
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.
•
Where
such a decree is silent with respect to the payment of further interest on such
principal sum 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 there for shall not lie.
8(b). Coming to the Interest
Act, (14 of 1978)1977, which came into force after receipt of the assent of the
President on 31.03.1978, Sections 3 to 5 read thus:-
Section
3: Power
of Court to allow interest:
•
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
a 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 to a certain time, then, from the
date when the debt is payable to the date of institution of the proceeding:
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.
•
Where,
in any such proceedings as are mentioned in sub-section (i):-
•
Judgment,
order or award is given for a sum which, apart from interest on damages,
exceeds four thousand rupees, and
•
The
sum represents or includes damages in respect of personal injuries to the
plaintiff or any other person or in respect of a person’s death, then, the
power conferred by that sub-section shall be exercised so as to include in that
sum interest on those damages or such part of them as the Court considers
appropriate for the whole or part of the period from the date mentioned in the
notice to the date of institution of the proceedings, unless the court is
satisfied that there are special reasons why no interest should be given in
respect of those damages.
3) Nothing in this Section –
a) shall apply in relation to-
i) any debt or damages upon which interest
is payable as of right, by virtue of an express agreement; or
ii) any debt or damages upon which payment of interest is
barred, by virtue of an express agreement;
b) Shall affect-
i) the compensation recoverable for the dishonour of a bill of
exchange, promissory note or cheque, as defined in the Negotiable Instruments
Act, 1881,(26 of 1881); or
ii) the provisions of Rule 2 of Order II of the First
Schedule to the Code of Civil Procedure,
1908;(5 of 1908).
c)
Shall empower the Court to award interest
Section 4: Interest payable under certain enactments:-
•
Notwithstanding
anything contained in Section 3, interest shall be payable in all cases in
which it is payable by virtue of any enactment or other rule of law or
usage having the force of law.
•
Notwithstanding
as aforesaid and without prejudice to the generality of the provisions of
sub-section(1), the Court shall in each of the following cases, allow interest
from the date of specified below to the date of institution of the proceedings
at such rate as the Court may consider reasonable, unless the Court is satisfied that there are special reasons
why interest should not be allowed namely:-
•
Where
money or other property has been deposited as security for the performance of
an obligation imposed by law or contract, from the date of the deposit;
•
Where
the obligation to pay money or restore any property arises by virtue of a
fiduciary relationship from the date of the cause of action;
•
Where
money or other property is obtained or retained by fraud from the date of the
cause of action;
•
Where
the claim is for dower or maintenance, from the date of the cause of action.
Section 5; Section 34 of the Code
of Civil Procedure, 1908 to apply:-
Nothing
in this Act shall affect the provisions of Section 34 of the Code of Civil
Procedure, 1908,(5 of 1908).
8(c). From the
above, out of the three divisions of interest according to the period for which
interest is allowed by the Court, viz., pre-lite, Pendente-lite and post–lite; (i)) Pre-lite-interest accrued due prior to
the institution of the suit on the principal sum adjudged. Interest for the
period anterior to institution of suit is not a matter of Procedure as it is
referable to substantive law and can be sub-divided into two sub-heads; (i)
where there is a stipulation for the payment of interest at a fixed rate
(contract rate) and (ii) where there is no such stipulation (as per statutory
provisions providing certain rate of interest and in its absence as per the
interest Act from date of serving written demand and at prevailing market rate
and bank lending rate as guidance). Though, the pre-lite interest was awarding
on grounds of equity also(from common law principle of justice, equity and good
conscience) by the courts as per certain precedents including from, Bengal Nagpur Railway Company Limited Vs
Ruttamji Ramji[2]
of Privy Council and following it of the Apex Court in Satinder Singh Vs Amrao Singh[3] and Hirachand Kothari Vs State of Rajasthan[4], mainly from the wording of old
Interest Act,1839 proviso to Section -1-which reads that “interest shall be
payable in all cases in which it is now payable by law” and the same since
repealed by the Interest Act,1978 with no such and similar provision, no
interest can be awarded on equitable grounds so far as pre-lite substantive interest the Apex Court by its latest
expression in paras-13 to 15 in LIC of
India Vs S Sindhu[5].
8(d). From the above
provisions for no contract between the plaintiff and defendant to pay interest
as is evidenced from Exs.B.1 to B.3=B.6 to B.8 and also from Exs.A.3 and A.4
apart from no proof of service of said notices, the liability to pay for the
balance due as on the date of service under Ex.A.9 acknowledgment on the
defendant of the Ex.A.7 notice dated
02.12.1992 till the payment of the said amount on 14.05.1993 as even
admitted by both sides only for the said
period based on sub Section (1)(b) of Section 3 and its proviso of the Interest
Act and nothing more.
8(e). Further, the
Apex Court in DDA Vs Joginder S Monga[6] held categorically
that under Section 34 CPC, so far as pendente-lite and post-lite interest
concerned is no doubt at the discretion of the Court, however it is to exercise
judiciously to fix, having regard to the principle of restitution and even the
Appellate court can reduce rate of interest from taking note of drastic fall in
bank rate of interest, and with that observation of facts and with that it
reduced from 18% to 9% p.a.
8(f). The Apex
Court in Mahesh Chandra Bansal Vs
Krishna Swaroop Singh[7] held categorically
that under Section 34 CPC, so far as pendent-lite
and post-lite interest concerned is
no doubt at the judicial discretion of the Court and granted at 12% p.a. for
the amount due by the partnership firm.
8(g). Thus, as on the date
of plaintiff maintaining suit claim, there is only the interest if at all to
pay under Section 3(1)(b) and its proviso of the Interest Act read with Section
34 of CPC is for the 5 1/3 months from 03.12.1992 to 14.09.1993, even taken the
same with rate of interest at 12% p.a. i.e. at 1% p.m. for the said amount of
Rs.55,825/- it comes to Rs.558/- x 5 1/3
= Rs.2,976/- that what is due if at all to grant towards Interest and nothing more for the suit
transactions as interest amount as on
the date of suit from defendant to the plaintiff on said sum of
Rs.55,825/-. As said sum was discharged
before suit date admittedly, by date of suit no more principal sum is due, but
for the said interest sum due of Rs.2,976/- to adjudge the same as principal
sum due as on date of suit and to award interest pendent-lite and post-lite
thereon at same rate of 12%p.a. From the above, the liability to pay interest
at 12% per annum by defendant to the plaintiff arises along with that amount of
Rs.2976/- from the date of suit on 19.12.1995 till date of realization. Having
regard to the above, the point No.1 is answered.
Point-3:
9. In the result, the
appeal is partly allowed by setting aside the decree and judgment of the trial
Court awarding a sum of Rs.1,76,011/- with interest at 12% per annum from date of suit till
realization with proportionate costs is modified by decreeing the suit claim only
for Rs.2,976/- with interest at 12% per annum thereon only from the date of
suit till realization. In the peculiar
facts and circumstances of the case, both the parties are directed to bear their
own costs throughout and it is needless to say any amount deposited or paid by
the defendant before the trial Court pursuant to the decree of the trial Court
is entitled to restitution by the appellant/defendant subject to payment of
this appeal decreed portion of the extent due to the plaintiff therefrom.
Consequently, miscellaneous petitions, if any, pending in this appeal shall
stand closed. No costs.
_________________________
Dr.
B. SIVA SANKARA RĀO, J
Date:06-12-2013
VVR
Note:
L.R. copy to be marked. Yes/No
