IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY THE NINETEENTH DAY OF APRIL TWO THOUSAND AND ELEVEN HON’BLE SRI JUSTICE B. PRAKASH RAO AND HON’BLE SRI JUSTICE G. BHAVANI PRASAD A.S.Nos.1753 of 2001 & 1864 of 2001 A.S.Nos.1753 of 2001 Between: M/s. Jai Kishan Agro Chemical Industries, reptd. by its Managing Partner .. Appellant AND Girijan Cooperation Corporation Limited, represented by its Vice Chairman-cum-Managing Director and another .. Respondents A.S.Nos.1864 of 2001 Between: Girijan Cooperation Corporation Limited, represented by its Vice Chairman-cum-Managing Director and another .. Appellant AND M/s. Jai Kishan Agro Chemical Industries, reptd. by its Managing Partner .. Respondents COMMON JUDGMENT: (per G. Bhavani Prasad, J) These two appeals are directed against the judgment and decree in O.S.No.10 of 1998 dated 04-09-2000 on the file of the Court of Senior Civil Judge, Kothagudem. The disputes between Girijan Cooperative Corporation Limited (hereinafter referred to as the Corporation) and M/s. Jai Kisan Agro Chemical Industries (hereinafter referred to as the Industries) resulted in O.S.No.60 of 1995 and O.S.No.10 of 1998 on the file of the Court of Senior Civil Judge, Kothagudem. O.S.No.60 of 1995 was filed by the Corporation against the industries for recovery of Rs.7,64,800/- with interest at 12% p.a. on Rs.5,75,000/- and costs. The Corporation claimed that the industries agreed to supply Zinc Sulphate manufactured by it to the Corporation at Rs.995/- per quintal, on which an order was placed through a letter dated 7-5-1992 paying an advance of Rs.5,75,000/-. The zinc sulphate supplied by the industries was complained by the farmers to have no effect. Samples of zinc sulphate from the stocks supplied by the industries were seized by the Anti Corruption Bureau officials on 19-10-1992 and on analysis, the zinc sulphate content was found to be 1.60% as against 21% as per the contract. Then the Corporation issued a notice dated 3-12-1992 for refund of advance, for which the industries gave a reply on 11-12-1992 and the industries sending a sample to the Central Laboratory, Faridabad, was behind the back of the Corporation. The Industries approached the High Court through a writ petition, which is pending and hence the suit. The Industries contested the suit claiming that zinc sulphate worth Rs.11,34,300/- was supplied to the Corporation and Rs.5,59,300/- were due to the industries after adjusting the advance of Rs.5,75,000/-. When the Quality Inspector issued show cause notice dated 10-12-1992, the Industries came to know that the Inspector sent a sample of zinc sulphate to Ananthapur Laboratory for analysis and then the industries requested the Quality Control Inspector to send a sample to the Central Laboratory, Faridabad. The Central Laboratory opined the sample to be standard. The prosecution was, hence, dropped and when the Corporation did not pay the balance, the industries filed W.P.No.13454 of 1994 in which the High Court directed the Corporation to consider the case of the industries taking into consideration the Central Laboratory’s report. The Corporation did not take any action and hence, the industries filed Contempt Case No.546 of 1994. The Industries filed O.S.No.105 of 1995 on the file of the Senior Civil Judge’s Court, Miryalaguda (O.S.No.10 of 1998 on transfer to the trial Court herein) for recovery of Rs.5,59,300/-. Hence, the industries desired O.S.No.60 of 1995 to be dismissed. On such pleadings, the trial Court framed the following issues for trial in O.S.No.60 of 1995. 1) Whether the plaintiff is entitled to the interest as prayed for? 2) Whether the Court has no jurisdiction to try the suit? 3) Whether the plaintiff is entitled to the suit amount? 4) To what relief? Issues 1 and 2 were later deleted. O.S.No.10 of 1998 (O.S.No.105 of 1995) was filed by the industries against the Corporation represented by its three officials for recovery of Rs.11,40,912/- with future interest at 24% p.a. and costs claiming that the balance of Rs.5,59,300/- due has to be paid with interest at 24% p.a. The Corporation resisted the claim contending that the contempt case was dismissed by the High Court on 6-12-1995 and the suit is a counter blast to O.S.No.60 of 1995. The suit is also barred by limitation and hence, be dismissed with costs. On such pleadings, the trial Court framed the following issues for trial. 1) Whether the plaintiff is entitled for recovery of money as prayed for? 2) Whether the suit is filed within the limitation? 3) Whether the Court has no jurisdiction to entertain the suit? 4) To what relief? Additional Issue framed on 13-06-2000. Whether the additional interest claimed by the plaintiff is within time? The issue No.1 was later deleted. Both the suits were clubbed together and during joint trial, PWs.1 to 4 for the Corporation and DWs.1 and 2 for the industries were examined and Exs.A.1 to A.5, B.1 to B.10 and X.1 were marked. The trial Court rendered the impugned common judgment, firstly concluding that the industries supplied zinc sulphate in a phased manner after the order under Ex.A.5 dated 7-5-1992, for which payment had to be made within one month after completion of supply of the goods. The last delivery of consignment was on 9-10-1992 as shown by Ex.B.4 and the Corporation had to make payment by 9-11-1992. Article 15 of the Limitation Act, 1963 makes the period of limitation run from the expiry of the period of credit and the suit O.S.No.10 of 1998 filed on 8-11-1995 was, hence, within time. The trial Court opined that Article 14 of the Limitation Act has no application and the decision reported in Md. Sultan & Company v. Manickam (AIR 1961 Madras 388) was hence, inapplicable. The Trial Court also noted that W.P.No.13454 of 1994 was disposed of on 25-07-1994 as per Ex.B.8 and the contempt case was disposed of on 7-12-1995. Excluding the period from July, 1994 to 7-12-1995 under Section 14 of the Limitation Act, as per Pirani Company v. State (1966 (2) ALT 171), the Trial Court opined the suit to be within time even in that view. The Trial Court noted that PW.1, the Divisional Manager of the Corporation admitted the report of the Central Laboratory, Faridabad, and opined that the report of the Government Analyst stood superseded by the certificate of the Central Laboratory as held in Calcutta Municipal Corporation v. Pawan K. Sarar (1999 (2) SCC 400). The trial Court, hence, concluded that Rs.5,59,300/- admitted by PW.1 to be due to the industries has to be paid. The Trial Court noted that the industries is a small scale industry as seen from Ex.B.2 and as per sections 3 to 5 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, the industries claimed compound interest with monthly rests. Under the said Act, the supplier is entitled to interest at 5% above the floor rate and in view of the evidence of DW.2, the Chief Manager of State Bank of Hyderabad, Kothagudem and Ex.X.1-circular, the highest of the minimum lending rate being 21.75% in 1992, the industries is entitled to interest at 5% above the floor rate of 21.75% with monthly rests. The industries was noted to have claimed compound interest only at 24% p.a. with monthly rests and as the Act had come into force on 23-09-1992, the trial Court felt the industries to be entitled to compound interest at 24% per annum with monthly rests. A reference was also made to Pragati Chemical Industries (P) Ltd., v. APSCIDC Ltd (1997 (5) ALD 426). Dealing with the claim of the industries for additional interest, the trial Court held the industries to be entitled to additional interest also in view of the statutory right. Accordingly, the trial Court dismissed the suit O.S.No.60 of 1995 without costs and decreed the suit O.S.No.10 of 1998 with costs for Rs.11,40,912/- with future interest at 6% p.a. from the date of plaint till the date of realization. The industries filed A.S.No.1753 of 2001 claiming that it is entitled to 24% monthly compound interest in terms of statute from the date of plaint till the date of decree and hence, desired that interest be awarded at 24% p.a. monthly compound from the date of suit 7-11-1995 till realization. However, the appeal was valued and court fee was paid thereon only on the difference of interest between 7-11-1995, the date of suit and 4-9-2000, the date of decree. The Corporation filed A.S.No.1864 of 2001 contending that zinc sulphate supplied by the industries was misbranded with a content of 1.60% only as against the agreed content of 21%. The industries was claimed to be guilty of fraud and the suit ought to have been instituted from the dates of delivery within three years, while the deliveries commenced from 7-5-1992. The suit is barred by time even from the disposal of W.P.No.13454 of 1994 and the pendency or result of the contempt case have no bearing and the period cannot be excluded. The report of the Central Laboratory was not before the Court and the report of the Central Laboratory, even if true, is conclusive only in respect of initiation of any proceedings and it has no evidentiary value in a suit. Ex.X.1- circular is general in nature and compounding interest and grant of additional interest by allowing an amendment were erroneous. The request for additional interest was barred by limitation and hence, the Corporation desired the judgment and decree to be reversed. The dismissal of O.S.No.60 of 1995 filed by the Corporation against the industries by the impugned judgment is not the subject matter of these appeals. The points that arise for consideration, therefore, are, -- 1) Whether the suit is within time? 2) Whether the industries is entitled to the suit amount in O.S.No.10 of 1998 and interest and additional interest as awarded? 3) To what relief? Point No.1: O.S.No.10 of 1998 by the industries against the Corporation was for recovery of the price of goods sold by the industries to the Corporation. Article 14 of the Limitation Act applies when the suit is for the price of goods sold and delivered where no fixed period of credit is agreed upon, while Article 15 applies when the price has to be paid after the expiry of a fixed period of credit. In the first case, the limitation starts to run from the date of delivery of goods, while in the second case, the limitation starts to run from the date when the period of credit expires. Where the parties to a sale of goods intend that the goods delivered are not to be paid until the period of credit ends, the limitation runs not from the date of purchase or delivery but from the expiry of the period of credit. In the present case, the order was placed for the first time by the Corporation with the industries on 7-5-1992, while the plaint in O.S.No.10 of 1998 was presented on 7-11-1995. The averments of the parties show that 1103 quintals 97kgs of zinc sulphate was supplied by the industries to the Corporation between 17-06-1992 and 19-06-1992, while 300 quintals was supplied on 8-10-1992 and 9-10-1992. Ex.A.5-order dated 7-5-1992 provided in condition No.4 that payment would be made within one month after supply of goods and if so, the price of 300 quintals supplied on 8-10-1992 and 9-10-1992 could have been paid by 8-11-1992 and 9-11-1992 and the suit is within time insofar as the said supply is concerned being within three years from the date of expiry of period of credit to a tune of Rs.2,98,500/- out of Rs.5,59,300/- towards balance of price for the goods delivered. The Trial Court had taken 9-11-1992 as the date from which the period of limitation starts to run in respect of the entire balance due as the transaction was a case of supply of zinc sulphate from time to time from 17-6-1992 to 9-10-1992 and the payment of Rs.5,75,000/- through demand drafts by the Corporation on 8-9- 1992 and 3-10-1992. It appears to have been taken as a mutual, open and current account between the parties and though Article 1 of the Limitation Act, 1963 in terms has no application, the payment of Rs.5,75,000/- through demand draft on 8-9-1992 and 3- 10-1992 towards price for the goods supplied earlier would also extend the period of limitation from the dates of payments under demand drafts under Sections 18 and 19 of the Limitation Act, 1963. In any view, admittedly, the industries filed W.P.No.13454 of 1994 before the High Court for a direction to the Corporation to pay the value of the goods delivered and the writ petition was disposed of on 25-07-1994. The trial Court had taken the period between 25-07-1994 and 7-12-1995, the date of disposal of the contempt case as a period excludable under Section 14 of the Limitation Act, 1963, relying on a binding precedent of this Court. Even otherwise, the industries was compelled to file the writ petition as the Corporation was unwilling to pay the balance of price for the goods based on an analyst’s report and Section 14 of the Limitation Act clearly applies where the writ petition is being pursued in good faith before the High Court in respect of the same relief, for which the industries could have filed a suit, in the light of the decision reported in Pirani Company v. State (1966 (2) ALT 171). No contrary precedent has been brought to notice and if so, even in respect of delivery of goods between 17-06-1992 to 19-06- 1992 in respect of which part payments under demand drafts were made on 8-9-1992 and 3-10-1992, the suit has to be considered to be within the period of limitation either under Article 14 or Article 15 by the time of the suit on 7-11-1995 on exclusion of the period of pendency of W.P.No.13454 of 1994 under Section 14 of the Limitation Act, even if the period of pendency of the contempt case were to be not considered. Hence, the suit claim in O.S.No.10 of 1998 has to be considered to be within limitation. Insofar as the claim for additional interest is concerned, it was introduced in the plaint by way of subsequent amendment, but it was in respect of a statutory right claimed by the industries. The trial Court relied on two binding precedents from the Apex Court in this regard to conclude that such an amendment, which is ancillary to the main relief under a statute, can be permitted at any stage of the suit. When the order permitting the amendment of the plaint to include the claim for additional interest was allowed to become final, any plea of bar of limitation with reference to the date of making an application for amendment or the date of order allowing amendment may not be available. Point No.2: The supply of zinc sulphate to the extent claimed by the industries between 17-06-1992 and 19-06-1992 and on 8-10-1992 and 9-10-1992 is admitted and the price agreed is not in dispute. The industries did not take back any goods, which were supplied to the Corporation even after the report of the Government Analyst. The Central Laboratory, Faridabad, opining the samples to be of prescribed standard on a sample being sent by the Quality Control Inspector at the request of the industries is and could not have been factually in dispute. If the sub-standard nature of zinc sulphate supplied according to the Government Analyst was improbablised by the certificate issued by the Central Laboratory, Faridabad, later, which certificate is entitled to statutory precedence over the Government Analyst’s report, there remained no justification for the Corporation not paying the balance of price for the goods supplied to it admittedly to a tune of Rs.5,59,300/-. Coming to the interest payable on the same, the same is no matter of discretion but is the subject of Interest on Delayed Payments to Small Scale Industries and Ancillary Industrial Undertakings Act, 1993 (for short “the Act”) and according to Section 4 of the said Act, any failure to make payment by the buyer to the supplier as per Section 3 will make the buyer liable to pay interest from the appointed day or the date immediately following the date agreed upon, at one and half times the Prime Lending Rate charged by the State Bank of India. Under Section 5 of the said Act, the interest so payable is compound interest with monthly rests on the amount due to the supplier and the present Section 4 substituted by Central Act 23 of 1998 provides for higher rate of interest than the earlier Section 4, which provided for the rate of interest at 5% above the floor rate of interest charged by scheduled banks subject to the directions of the Reserve Bank of India. That was the interest allowed by the trial Court as per Sections 4 and 5 of the statute from which there could have been no escape for the Corporation. Learned counsel for the industries Sri S. Laxma Reddy, also relied on Sovintorg (India) Ltd., v. State Bank of India, New Delhi[1], wherein Section 34 of the Code of Civil Procedure was held to be based upon justice, equity and good conscience. The Apex Court held that interest may be awarded in lieu of compensation or damages or even on equitable grounds in appropriate cases. Even where there is no specific provision for grant of interest, the Apex Court with reference to its earlier decisions justified the grant of interest. Section 34 of the Code of Civil Procedure, 1908 governs interest since the suit to the date of decree and thereafter till the date of payment. Interest between the date of suit till the date of decree shall be at a reasonable rate, while the interest from the date of decree till the date of payment will be ordinarily not exceeding 6% p.a. except, of course, in the cases of commercial transactions in respect of which the interest can go up to contractual rate of interest or where there is no contractual rate, the rate at which monies are lent or advanced by nationalized banks in relation to commercial transactions. Under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, the recovery of the amount due from a buyer together with interest calculated under Sections 4 and 5 shall be by way of suit or other proceedings under any law for the time being in force under Section-6 sub-section (1) of the Act. No arbitration or conciliation proceedings were resorted to herein by the parties under sub-section (2) of Section 6 and therefore, the amount due and interest in accordance with Sections 4 and 5 can be claimed in a suit, but interest since the suit still appears to be governed by Section 34 of the Code of Civil Procedure, 1908. While the Corporation made the purchases of fertilizers for supply to Girijan farmers, the same may not be capable of being construed as connected with industry, trade or business of the Corporation within the meaning of Explanation-II to Section 34 of the Code of Civil Procedure, 1908, and therefore, further interest from the date of decree till the date of payment cannot be exceed 6% p.a., while at any rate such rate of interest from the date of decree till the date of payment was not the subject matter of the appeal for which it was valued and the court fee paid. The question remains as to what would be the reasonable interest on the principal sum for the period from the date of suit till the date of decree. As the same is within the judicial discretion of the court, a reasonable balance has to be struck between the statutory rates under Sections 4 and 5 of the Act, 1993 and the financial burden to be imposed on the public corporation run for the benefit of the downtrodden girijans. While the future interest from the date of suit till the date of realization under Section 34 is ordinarily simple, interests of justice will be best served by making such interest payable at 24% p.a. being less than the rate at which interest could have been payable at the relevant time under Section 4 as it then stood but not to make it monthly compound as provided by Section 5 to safe guard the interests of the public corporation and the persons whom it intended to serve and the public funds it handles. Therefore, from the date of suit till the date of decree, interest has to be awarded accordingly modifying the original decree. In the result, A.S.No.1864 of 2001 is dismissed without costs and A.S.No.1753 of 2001 is allowed in part without costs, modifying the judgment and decree in O.S.No.10 of 1998 on the file of the Court of Senior Civil Judge, Kothagudem, dated 04-09- 2000 only to the extent of awarding interest from the date of suit till the date of decree on the principal sum of Rs.5,59,300/- at 24% p.a. simple, while retaining the further interest granted by the judgment and decree at 6% p.a. on the principal sum of Rs.5,59,300/- from the date of decree till realization. _________________ B. PRAKASHRAO, J ____________________ G. BHAVANI PRASAD, J Date: 19-04-2011 Ksn [1] AIR 1999 Supreme Court 2963