CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (1) In the High Court of Judicature for Rajasthan At Jaipur Bench, Jaipur J U D G M E N T In S.B. Civil First Appeal No.82/1992 Jaipur Metals & Electricals Limited Vs. M/s. R.S. Metals Pvt. Ltd. Date Of Judgment :: 5th Jan,2010 P R E S E N T Hon'ble Mr. Justice Jitendra Ray Goyal Ms. Sukriti Kasliwal with Mr. R.N. Vijay, for appellant. Mr. N.K. Maloo with Mr. V.K. Tamoliya, for respondent. ...... By the Court :- This first appeal under section 96 of the Code of Civil Procedure has been filed by the defendant-appellant against the decree and judgment dated 29/2/1992 passed by Additional District Judge No.1, Jaipur City, Jaipur in Civil Suit No.(214/88)73/89 whereby suit filed by plaintiff-respondent has been decreed. CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (2) 2. Brief facts giving rise to this appeal are that plaintiff had supplied material vide three separate bills in all amounting to Rs.2,72,574.56 to the defendant-company and at the time of these supplies there was a credit balance of the defendant company with the plaintiff company amounting to Rs.1886.51. The defendant company could not make payment despite of several reminders and after sometime on 17/12/1977 the appellant company was declared relief undertaking under the Rajasthan Undertaking (Special Provision) Act, 1961. By virtue of the notification issued in this regard, the defendant company was protected from institution of suit or any legal proceeding. The protection continued for a period of ten years upto 16/12/1987 and thereafter plaintiff company filed a suit for recovery of goods price of CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (3) Rs.1,69,868.08 and interest thereupon i.e. Rs.4,35,968/-, after adjustment of Rs.5097.4 through debit note dated 30/11/1977 and Rs.95722.93 which was received by the plaintiff Shanti Lal and brothers on 31/3/1982. 3. The defendant company in its written statement admitted that due to dwindling financial position and booked debts amounting to several crores of rupees, the defendant company was declared relief undertaking vide State Government Order dated 17/12/1977 and this notification continued uptil 16/12/1987. According to the defendant company when its financial position improved, offer was floated to its creditors that principal sum may be paid in ten yearly equal installments or 50% of principal amount at the time of full and final settlement. The defendant company wrote letters to all CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (4) the creditors including the plaintiff company. The Chairman cum Managing Director Shri Heera Bhai of plaintiff company agreed to settle on full and final satisfaction of payment of principal amount at one time in a meeting held with Chairman and Managing Director of the defendant company and accepted the cheque of Rs.1,69,868.04, therefore, nothing remained outstanding against the defendant company. 4. On the basis of the pleadings, following issues were framed :- 1.क्या वादी वाद-पऽ के चरण बम 1 के अनुसार ूितवादी से 4,35,968/- रुपये कुल ब्याज ूाप्त करने का अिधकारी है ? 2.क्या वादी की ओर से डायरेक्टर ौी महेंि चौधरी को वाद ूःतुत करने का अिधकार है ? 3.क्या वादी के चेयरमेंन ौी हीराभाई चौधरी द्वारा ूितवादी कंपनी के चेयरमेंन ौी आई. एस. काविड़या से 1,69,868 रुपये 04 पैसे की रािश लेकर फुल एंड फाईनल सेटलमेंट करके CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (5) रसीद भेज देने का वायदा िकया था | वाद पर उसका क्या ूभाव है ? 4.क्या वादी असल शेष रकम से अिधक ब्याज ूाप्त करने की अिधकािरणी नहीं है ? 5.क्या दावा िमयाद बाहर है ? 6.अनुतोष ? 5. The trial court after recording the evidence and hearing the parties decreed the suit in favour of the plaintiff company to the tune of Rs.3,30,250/- along with interest thereon at the rate of 5% per annum from the date of filing of the suit till payment. Hence, this appeal by the defendant. 6. Heard learned counsel for the parties and perused the impugned judgment and material available on the record. 7. The first point raised on behalf of the appellant-defendant-company is that on improving its financial CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (6) position, the appellant-company floated an offer in the month of January, 1986 vide Ex.A-1 to all of its creditors to pay outstanding principal balance amount in full and final settlement as per offer made vide Ex.A-1, thereafter in a meeting held in the first week of April, 1988 with the Chairman and Managing Director of the appellant company, the respondent- plaintiff company's Director Shri Heera Bhai agreed to settle the claim on payment of principal amount and thus the appellant company made the entire payment of the balance principal amount of Rs.1,69,868 vide cheque dated 10/4/1988 along with covering letter Ex.A-5 of 11/4/1988 and this cheque was got encashed by the respondent company without any protest and thus it was well proved that the respondent company received this amount against the full and final settlement of CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (7) the claim. Learned counsel for the appellant has placed reliance upon the judgment delivered in the case of M/s. Bhagwati Prasad Pawan Kumar Vs. Union of India, reported in AIR 2006 Supreme Court 2331. 8. Per contra, learned counsel for the respondent has contended that there was no such agreement between the parties and mere acceptance of the cheque does not amount to any waiver on the part of the respondent. It was further contended that a suit for recovery of the balance part of the goods and interest thereon was already pending in the court and there is no reason to interfere with the finding of the trial court. 9. I have considered the rival submissions in the light of the evidence on record. Learned trial court having considered the oral evidence of DW1 CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (8) Sh. Koshal Kishore, DW2 D.N. Agrawal and PW1 Mahendra Choudhary has rightly held that the appellant-defendant company has failed to prove that in the meeting with Managing Director of the appellant company, Mr. Heera Bhai, Director of the respondent company agreed to settle entire claim in full and final settlement on payment of only the balance price of the goods i.e. Rs.1,69,868. It has rightly been observed by the trial court that no document or minutes of the meeting/settlement have been placed on record and merely the general offer made by the appellant company to settle the disputes of all the creditors vide Ex.A-1 and the covering letter Ex.A-5 do not prove any such settlement between the parties. It is also significant to say here that soon after the receipt of the letter Ex.A-5 dated 11/4/1988, the CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (9) respondent company vide letter Ex.13 dated 22/4/1988 made a clear denial of any such settlement. The decision of the Hon'ble Apex Court in M/s. Bhagwati Prasad Pawan Kumar's case (supra) is clearly distinguishable as in that referred case the railways having admitted part of the claim had sent two cheques in favour of appellant with specific conditions that if the offer made by the railways was not acceptable, the cheque should be returned to railways failing which it would be deemed that the appellant has accepted the offer in full and final satisfaction of the claim. Therefore, there is no valid ground to interfere with the findings of the trial court on this issue. 10. The second point raised by the learned counsel for the appellant is that there was no agreement to pay interest; that section 61(2) of the Sales of Goods CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (10) Act, 1961 is not applicable as the suit was not for the price of the goods and it was only for the interest; that as per section 3 of the Interest Act, 1978, the interest is permissible from the date of the notice given in this regard and such notice was given by the respondent only on 7/12/1986 which is Ex.10. Thus, no interest was permissible prior to that and reliance has been placed upon the judgment delivered in the case of Oil & Natural Gas Corporation Ltd., Bombay Vs. Essar Steel Ltd., Bombay, reported in 2002 (1) MhLj 699; (MANU/MH/0558/2001). 11. Per contra, learned counsel for the respondent placed reliance upon the judgment delivered in the case of South Eastern Coalfields Ltd. Vs. State of M.P. and others, reported in (2003) 8 Supreme Court Cases 648 and contended that interest has rightly been allowed by the CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (11) trial court. 12. I have considered the rival submissions. Admittedly, there was no agreement between the parties to pay interest. The plaintiff-respondent has pleaded that since the price of the goods was not paid, hence, the plaintiff company is entitled to interest at market rate in such commercial transactions. The plaintiff has claimed a total sum of interest of Rs.4,35,968/- from 1/4/976 till 15/2/1981, the date of filing of the suit at different rates for different periods i.e. at the rate of 16% per annum from 1/4/1976 to 31/3/1982 and at the rate of 18% from 1/4/1982 till 15/2/1988. Learned trial court having taken into consideration various letters of the plaintiff has come to this conclusion that the plaintiff never claimed interest and the last letter is Ex.9 dated 22/8/1977 CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (12) and till then no interest was claimed, hence no interest can be allowed from 1/4/1976 to 30/11/1977. It has further been held that Rajasthan Government vide its order dated 17/12/1977 declared the appellant as a sick company and this order continues in force upto 16/12/1987 and thereafter the present suit was filed and thus interest at the rate of 12% per annum was allowed from 1/1/1978 to 29/2/1988 the date of filing of the suit. Thus, the total amount of interest allowed by the trial court is Rs.3,30,250/-. 13. The submissions made by the counsel for the appellant are not acceptable. It is not correct to say that the present suit was filed for the interest and not for the price of the goods. As stated here-in-above, the plaintiff company filed the suit for the balance price of the goods as well as CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (13) interest thereon. After institution of the present suit, the amount of the price of the goods was paid and thus it cannot be said that suit was not for price of the goods. Further the provisions of section 3 of the Interest Act of 1978 are not applicable in the instant case as the same are applicable only in proceedings for the recovery of any debt or damages while the present suit was not for recovery of any debt or damage and therefore, the judgment delivered in Oil & Natural Gas Corporation Ltd.'s case (supra) is not applicable in this case. In the above referred judgment, it has been held that interest as per section 3(1)(b) of the Interest Act, 1978 can be awarded only if prescribed notice is given, but as observed here-in-above it was not a suit for debt or damages but for the price of the goods with interest thereon. Therefore, section 3 of the CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (14) Interest Act is not attracted in this case. 14. As held by Hon'ble Supreme Court in South Eastern Coalfield Ltd's case (supra), interest may be allowed in view of the provisions of sub-section (2) of section 61 of the Sales of Goods Act,1930. Section 61 of the Sales of Goods Act runs as under :- “ 61. Interest by way of damages and special damages.-(1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed. (2) In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (15) the price- (a) to the seller in a suit by him for the for the amount of the price-from the date of the tender of the goods or from the date on which the price was payable; (b) to the buyer in a suit by him for the refund of the price in a case of breach of the contract on the part of the seller-from the date on which the payment was made.” 15. Upon bare perusal of these provisions, it is clear that in the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price of the goods. Thus, in view of the above judgment, I find no good ground to interfere with the findings of the trial court awarding interest on the price of the goods. CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (16) 16. One more point has been raised on behalf of the appellant that the trial court has wrongly awarded interest at the rate of 5% per annum upon the decreetal amount of interest. Reliance has been placed upon the judgment delivered in the case of Central Bank of India Vs. Ravindra and others, reported in AIR 2001 Supreme Court 3095. 17. On the other hand, learned counsel for the respondent contended that interest amount upto the filing of the suit becomes principal amount and thus further interest from the date of filing of the suit till payment is legally justified. Reliance has been placed upon the judgment delivered in the case of Oil & Natural Gas Commission Vs. M.C. Clelland Engineers S.A., reported in (1999) 4 Supreme Court Cases 327. 18. In Oil & Natural Gas CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (17) Commission's case (supra), though it has been held that arbitrator has power to allow interest upon interest but taking into consideration the facts in the light of the judgment delivered by the Constitutional Bench of Hon'ble the Apex Court in Central Bank of India's case (supra) that in the instant case neither there was any voluntary contract between the parties that interest shall be charged on periodical rest and also capitalized on remaining unpaid nor it has been pleaded and proved that there was an established practice or usage in this regard and also keeping in view that as per section 61 of the Sales of Goods Act, the court may allow interest only on the price of the goods, the interest upon interest should not have been allowed by the trial court. 19. Since in the case on hand the amount of Rs.1,69,868/- which was paid by CFA 82/92 Jaipur Metals & Electricals Ltd. Vs. R.S. Metals Pvt. Ltd. (18) the appellant company to the plaintiff company as price of the goods has been found adjustable by the trial court against the payable amount of Rs.5,00,118/- which includes principal amount of Rs.1,69,868/- and interest of Rs.3,30,250/-, therefore, plaintiff- respondent is entitled to get the interest only on the principal amount of Rs.1,69,868/- at the rate of 5% per annum from the date of decree. 20. Accordingly, this appeal is partly allowed to the extent that interest at the rate of 5% per annum shall only be payable on the principal amount of Rs.1,69,868/- from the date of filing of the suit till payment and to this extent impugned decree and judgment is modified. Rest of appeal is dismissed. Cost is made easy. (J.R. Goyal),J. VS Shekhawat/-Jr. P.A.