IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA RFA No. 10 of 2002. Judgement reserved on: 7.3.2008. Date of decision: 17.3.2008. M/s Food Corporation of India & anr. ….. Appellants. Vs. M/s Shree Durga wheat Products …. Respondent. Coram The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting?1 For the Appellants : Mr. H.K.Bhardwaj, Advocate. For the Respondent : Mr. Ajay Kumar, Advocate with Ms. Shilpa Sood, Advocate. Kuldip Singh, Judge. This appeal has been directed against the judgement, decree dated 18.9.2001 passed by learned District Judge, Sirmour District at Nahan in Civil Suit No. 9-CS/1 of 2000/1999 decreeing the suit of the plaintiff- respondent for Rs.2,42,000/- with proportionate costs and interest at the rate of 12% per annum from 31.12.1998 till payment. 2. The facts in brief are that respondent- plaintiff filed a suit for recovery of Rs.2,80,000/- against the appellants- defendants by pleading that appellants had floated open market sale scheme for Whether the reporters of the local papers may be allowed to see the Judgment? …2… selling wheat. As per that scheme, for the months of February and March, 1997, the prospective buyers of the wheat were to be sponsored to the appellants by the Director Food & Supplies Himachal Pradesh / District Food & Supplies Controller, Nahan. The respondent was sponsored to the appellants for purchase of wheat against payment. The respondent handed over two demand drafts of Rs.1,00,000/- each, both dated 8.3.1997 to the appellants through Depot Incharge of appellant No.1 at Nahan on 10.3.1997 alongwith an application. This amount was the advance for the price of wheat which was to be purchased. Later on, District Food and Supplies Controller, Nahan desired that wheat for the month of March, 1997 be not lifted as wheat for the month of February, 1997 was to be lifted in March, 1997 as the allotment of February was released by the defendants in March, 1997. This was conveyed to the appellants by the respondent as well as District Food & Supplies Controller. The amount of Rs.2,00,000/- paid by the respondent to the appellants remained with the appellants. The respondent approached the appellants to return the said amount as the wheat could not be purchased due to the instructions of government agency at Nahan. The District Food & Supplies Controller vide letter dated 30.7.1997 had requested appellant No. 2 to return the amount of Rs.2,00,000/-, but to no avail. The respondent got issued notice dated 31.8.1998 to the appellants but appellants did not return Rs.2,00,000/- to the respondent. Thereafter the respondent filed the suit. In the suit, the respondent has claimed Rs.2,00,000/- principal amount and …3… Rs.80,000/- on account of interest at the rate of 24% per annum from 10.3.1997. 3. The suit was contested by the appellants by filing written statement. It has been pleaded that the prospective buyers were to apply to the Food Corporation of India for the required quantity of wheat alongwith ten per cent earnest money in the shape of demand draft. The respondent asked for 400 tons wheat, which was allotted to the respondent. The amount of Rs.2,00,000/- which was deposited by the respondent was earnest money at the rate of 10% costs of 400 tons of wheat demanded by the respondent. The respondent was required to deposit balance 90% amount with Food Corporation of India, but respondent failed to deposit the amount. The respondent was not serious for purchasing the wheat for the month of March, 1997 and therefore, made itself liable for the forfeiture of earnest money and accordingly 10% earnest money deposited by the respondent for purchasing wheat was forfeited due to the failure on the part of the respondent to lift the allotted quantity of wheat during the month of allotment, as per standing instructions. The appellants prayed for dismissal of the suit. 4. The respondent filed replication, in which the stand taken in the plaint was reiterated. It has been pleaded that there was no condition that the appellants could forfeit the advance money, no letter was ever written to the respondent that advance money of 10% can be forfeited. The plea of forfeiture raised by the appellants is malafide. The learned trial court on the pleadings of the parties has framed following issues. …4… 1. Whether the plaintiff is entitled to the recovery of Rs.2 lacs, as alleged? OPP. 2. Whether the amount of Rs.2 lacs stands forfeited, as alleged? OPD. 3. Whether this court has jurisdiction to try the suit? OPD. 4. Relief. The learned District Judge has decreed the suit for Rs.2,42,000/- with proportionate costs and interest at the rate of 12% per annum from 31.12.1998 till payment. 5. I have heard Mr. H.K. Bhardwaj, learned counsel for the appellants and Mr. Ajay Kumar, Advocate alongwith Ms. Shilpa Sood, Advocate for the respondent and gone through the record. It has been submitted on behalf of the appellants that learned District Judge has not properly appreciated the case of the parties. The amount of Rs.2,00,000/- which was deposited by the respondent was 10% of the sale price of 400 tons of wheat and was earnest money. The balance 90% amount was required to be deposited by the respondent for lifting allotted wheat during March, 1997. The respondent has failed to deposit balance 90% of the sale price wheat, therefore, the appellants were well within their right to forfeit the earnest money as per standing instructions for selling the wheat. On the other hand, learned counsel for the respondent has submitted that amount of Rs.2,00,000/- was advanced by respondent for purchasing the wheat from appellants, the wheat was to be lifted as per instructions of the Director, Food and Supplies, Himachal Pradesh or District Food & …5… Supplies Controller, Nahan. The respondent was directed by District Food & Supplies Controller, Nahan not to lift the wheat in the month of March, 1997 from the appellants and in these circumstances wheat was not lifted by the respondent from appellants. The District Food & Supplies Controller, vide letter dated 30.7.1997 also requested appellant No. 1 to return Rs.2,00,000/- to respondent. The appellants despite repeated demands did not return Rs.2,00,000/- to the respondent. 6. PW 1 Rajan Sood, Managing Director of the respondent has supported the case of the respondent in his statement. He has stated that in February, 1997, appellants had sanctioned wheat quota to the respondent and they deposited whole of the amount of wheat. In March, 1997, some wheat was allotted to the respondent and an amount of Rs.2,00,000/- vide two drafts of Rs.1,00,000/- each was paid to the appellants. These drafts were handed over on 10.3.1997 to the appellants alongwith letter Ex. P 1. The wheat of February, 1997 was given to the respondent in the end of March, 1997. In these circumstances, the respondent was left with no requirement of wheat for the month of March, 1997. The wheat offered by the appellants to respondent against the allotment of March was sub- standard beyond D-Category and was not fit for human consumption. Therefore, respondent did not lift the wheat and demanded Rs.2,00,000/- from the appellants. Letter Ex. P-2 was also given to the appellants for refund of amount. A notice Ex. P 3 was also got issued to the appellants. The respondent claimed interest at the rate of 24 %. In cross examination, PW 1 has denied that 10% amount …6… was deposited as earnest money. PW 2 Bhushan Lal, Junior Assistant, District Food and Supplies Controller, Nahan has placed on record letter dated 18.2.1997 Ex. P 7 and letter dated 14.3.1997 Ex. P 8 of the office of District Food and Supplies, showing allotment of wheat in favour of respondent in February 1997 300 MT and in March 1997 400 MT. He has also placed on record letters Ex. P 9 and Ex. P 10, vide which District Food and Supplies Controller, Nahan has informed the Director, Food and Supplies that he has no objection if amount of Rs.2,00,000/- is refunded to the respondent. 7. DW 1 Moti Lal, Assistant Manager, Food Corporation of India, Shimla has stated that the Corporation in February, 1997 had launched O.M.S.S.D. Scheme. As per that scheme, the party was required to pay 10% E.M.D. for purchasing wheat in a particular month and the wheat was to be lifted by the party in the same month. In case the party failed to lift the wheat, then 10% earnest money was to be forfeited. In March 1997, the respondent did not lift the allotted wheat nor paid the balance sale price and therefore, 10% E.M.D. of the respondent was forfeited. In cross-examination, he has admitted that February 1997 quota of wheat in whole of Himachal Pradesh was lifted in March, 1997. There is no advertisement/ letter or agreement in the record of Corporation before February or March, 1997 that in case wheat was not lifted then 10% amount would be forfeited. He has also admitted that before filing of the suit, the respondent was not informed in writing that Rs.2,00,000/- have been forfeited. …7… 8. The appellants in order to succeed in their defence for forfeiture of the amount of Rs.2,00,000/- will have to prove that there was an agreement between respondent and the appellants that amount of Rs.2,00,000/- paid by the respondent to appellants for lifting 400 tons of wheat in the month of March 1997 would be forfeited in case the balance amount is not paid in March 1997 and the allotted wheat for the month of March 1997 is not lifted in March, 1997. DW 1 has categorically admitted that there is no such agreement etc. in their record. In the written statement, it has been pleaded that 10% earnest money was liable to be forfeited as per instructions, but no such instructions have been proved on record. 9. The appellants have failed to prove that they had a right to forfeit the amount of Rs.2,00,000/- deposited by the respondent with them for purchasing 400 tons of wheat in March 1997. The case of the respondent appears to be well founded for the reasons that in the month of February 1997, certain quantity of wheat was allotted to the respondent and the entire amount for lifting the wheat of February 1997 was paid to the appellants. However, appellants delivered the wheat to the respondent in the end of March 1997, therefore, the respondent left with no requirement to lift the wheat for the month of March, 1997. In addition to this, the appellants were offering sub- standard wheat to the respondent for the quota of March 1997, which was not fit for human consumption and therefore, the respondent refused to lift that wheat. The fact that quota for the month of February 1997 of wheat was lifted in whole of Himachal Pradesh in the month of March 1997, has been admitted by DW 1 Moti Lal. The …8… learned court below has rightly appreciated the evidence on record and has drawn proper inference therefrom. 10. Learned counsel for the appellants has submitted that interest at the rate of 12% allowed by the court below is on the higher side. The amount of Rs.2,00,000/- was deposited by the respondent with the appellants was for purchasing the wheat from the appellants, therefore, it was a part of commercial transaction. In these circumstances, it cannot be said that interest at the rate of 12% allowed by the learned District Judge is on the higher side. No case for interference has been made out by the appellants. Resultantly, the appeal fails and is accordingly dismissed. However, the parties are left to bear their own costs. March 17, 2008. ( Kuldip Singh ) (Hem) Judge.