THE HONOURABLE SRI JUSTICE B.PRAKASH RAO AND THE HONOURABLE SRI JUSTICE G.BHAVANI PRASAD A.S.No.1644 of 1994 JUDGMENT: (Per the Ho’nble Sri Justice B.Prakash Rao) The appellant is the first defendant, who by way of this appeal under Section 96 of the Code of Civil Procedure, assails the correctness of the Judgment and Decree in O.S.No.2 of 1994, dated 6- 6-1994, on the file of the District Judge, Ranga Reddy District at Hyderabad decreeing partly the suit filed by the respondent No.1 herein as against the appellant and dismissing the same as against the 2nd defendant who is not added in this appeal as not being necessary. In a suit the claim set forth by the respondent No.1/plaintiff (hereinafter called as the plaintiff) is for a total sum of Rs.18,55,329.64 ps with interest. Initially, the said suit was filed on 10-6-1985 as O.S.No.140 of 1985, on the file of the Principal Subordinate Judge, Ranga Reddy District. However, as per the orders of withdrawal passed in O.P.No.828 of 1993, dated 11-3-1994, on the file of the District Judge, Ranga Reddy District, the same was transferred to the Court below i.e., the District Judge and it was renumbered as O.S.No.2 of 1994. The case of the plaintiff in brief, is that it is carrying on the business in production of Conductors, Electrical Wires, Cables and Strips at Hirakud, Orissa and has been placing the orders with the defendants, the appellant and other defendant No.2 Mr. D.C.Galada for converting E.C.Grade Aluminum ingots into Aluminum rods in the factory of the defendants. The stock in the year 1981-82 lying with the defendants’ factory was 298 Metric Tonnes of Aluminum ingots. The plaintiff placed orders on 20-4-1981 for supply of the Aluminum rods with a specific condition to stick to the time as mentioned. However, there has been a breach on the part of the defendants in supplying the quantity as sought for and there was a short supply, which has led to the meetings between the representatives of the plaintiff and defendant No.1 on 24-4-1982 and on 19-5-1982. In spite of promise extended by the defendant No.1 for supplying the goods in monthly installments, and in spite of possessing substantial quantity of the Aluminum ingots there was clear a breach of trust on the part of the defendant No.1 and an act of misappropriation which has led to filing of a Criminal prosecution by the plaintiff followed by a notice on 31-5-1993 demanding the supply of the rods and damages for breach of contract. Though the notice was received, no reply was given. Hence, the suit for recovery of Rs.9,07,964.98 ps towards the value of 46.845 Metric Tonnes of Aluminum ingots, Rs.16,864.30 ps towards freight charges from Hirakud to Hyderabad, Rs.6,74,855.27 ps towards interest at 18.5% from 1-7-1981 to 10-6- 1985, Rs.1,62,182.07 ps towards price escalation from 31-1-1981, Rs. 92,481.12 ps towards loss of profit at 10% on the value of 46.845 Metric Tonnes of Aluminum ingots, which could have been the earning of the plaintiff. Hence the claim. Repelling the allegations and denying their liability, the case of the appellant in its written statement was that there is no dispute regarding the transaction between the parties about the supply of Aluminum rods since 1977. However, a detailed account has been given commencing from the year 1982 onwards as to how the supplies were made, but the breach is only on the part of the plaintiff, in effect stating that in spite of the receipt of the goods the plaintiff did not stick to the term of payment as contemplated, which has to be made within 7 days from the date of receipt of the Bill. Therefore, consistently there have been dues at different point of time withheld for no valid reason. In fact, to avoid any practical problems arising in regard to the mutual liabilities, the defendant did furnish a bank guarantee Bond No.12 of 1980, dated 11-11-1980 from the Canara Bank, Uppal. Yet there has been consistent default on the part of the plaintiff thus committing breach, and therefore, the first defendant had to file a suit in O.S.602 of 1983, on the file of 1st Additional Judge, City Civil Court, Hyderabad seeking permanent injunction against the plaintiffs from setting forth their claim. Thus, there is an inordinate delay on the apart of the plaintiff in payment of the converting charges. Therefore, neither the Criminal prosecution nor the present proceedings are maintainable and the plaintiff is not entitled to recover any amount from the defendants. The 1st defendant expressed readiness and willingness to supply 45.810 Meters of wire Aluminum rods subject to the plaintiff making the repayment of the amount which are appropriated by it together with interest and withdraws the demand for encashing the aforesaid bond, hence, there is no cause of action and the suit is liable to be dismissed. With these and other detailed allegations spelt out from both sides in their respective pleadings, the Court below framed the following issues: 1. Whether the defendants retained 46.845 meters of material supplied by the plaintiff illegally and misused the same? 2. Whether the plaintiff is entitled to recover Rs.9,07,946.98 ps towards value of 46.845 meters of material? 3. Whether the plaintiff is entitled to recover Rs.16,864.30 ps towards freight charges, as claimed? 4. Whether the plaintiff is entitled to recover Rs.6,74,855.20 ps towards the interest as claimed? 5. Whether the plaintiff is entitled to recover Rs.1,62,182.70 ps towards price escalation? 6. Whether the second defendant is not a necessary and proper party to the suit? 7. To what relief? Thereafter, the parties went into trial. On behalf of the plaintiff PW.1 was examined and Exs.A.1 to A.14 were marked, whereas on behalf of the appellant/defendant DW.1 was examined and Exs.B.1 and B.2 were marked. On appreciation of the aforesaid evidence and the material on record, the Court below partly decreed the suit to the extent of the amount mentioned above holding, firstly that the appellant retained 46.85 Metric Tonnes of material and use it for other purpose other than supplying the Aluminum rods to the plaintiff; secondly, the plaintiff is entitled to recover a value of 46.802 Metric Tonnes coming to a tune of Rs.9,07,946.98; thirdly, the plaintiff is held to be not entitled to the freight charges as claimed for a sum of Rs.16,864,30 ps. Further, that the 2nd defendant is not is not a necessary party to the suit and the plaintiff is entitled to the interest at 12% per annum from 1-4-1983 till the date of the judgment. Thus, there is a decree for the aforesaid amount of Rs.9,07,946.92 ps along with interest at 12% per annum from 1-4-1983 till the date of the judgment and for subsequent period the interest at 6% per annum till the date of repayment. Hence this appeal. Though, it has been contended out on behalf of the appellant on merits and as per the grounds raising the contention that the Court below erred in holding that withholding of 46.71 Metric Tonnes of Aluminum rods by the appellant and the plaintiff is not entitled to cost of the said material, that apart, the interest at 12% per annum from 1-4- 1983 is contrary to the pleadings and there is no basis for the same, and that the plaintiff is not entitled for the damages in the form of interest. It was further contended that even though the appellant had made an offer to pay the amount, but the same was not accepted and therefore no claim is sustainable including towards any interest either pendente lite or subsequent. These submissions were sought to be repelled on behalf of the respondent/plaintiff pointing out that the case of the plaintiff is squarely based upon the non-supply of the goods as agreed to within the time and the grant of interest is perfectly in order and as contemplated under the law. Since there is a demand prior to filing of the suit plaintiff is rightly held to be entitled to the interest and thus the findings as arrived at by the Court below on all the issues on proper appreciation of the evidence and material in support do not warrant any interference. Even though, such contentious aspects were sought to be focused, however, ultimately the appellant has restricted his attack in this appeal only to the extent awarding interest to the plaintiff, both, pendente lite and also subsequent, and therefore, the ultimate question that boils down is as to whether the Court below was right in granting the interest either way as stated above. It is not in dispute from the above stated facts and circumstances and vis-à-vis the checkered events which led to the present suit as laid by the plaintiff for recovery of the amount for non- supply or short supply of the goods as per orders and as agreed to. It has been categorically found by the Court below that the appellant has withheld to the extent 46.845 Metric Tonnes of Aluminum ingots and made use thereof, which the plaintiff has been denied to and to which he should have been entitled in the normal parleys of a business transaction. Therefore, there being no dispute in regard to the short supply up to the aforesaid extent nor an attack seriously being made on all the aforesaid findings on the issues 1, 2, 3, 5 and 6, it necessarily follows that there is a short supply and there is a withholding and there is a demand at all points of time as could be evidenced from the very correspondence which has been produced in the process of trial. The letters Exs.A.4 to A.8 and A.12 speaks much on the demand and the delays. That apart, prior to filing of the suit, the plaintiff had issued a notice on 31-5-1993 demanding not only the goods, but also the amounts thereon along with interest. In those circumstances, it is a clear case on facts to show that there is a demand at all points of time even prior to the suit. In Union of India Vs. Watkins Mayor and Co.,[1] considering the scope of the provisions of Interest Act, 1839 it is held: “It is well established that interest may be awarded for the period prior to the date of institution of the suit when there is an agreement for the payment of interest at fixed rate or when interest in payable by the usage of trade having the force of law, or under the provisions of any substantive law as for instance, under S.80 of the Negotiable Instruments Act, 1881, when no rate of interest is specified in the promissory note or bill of exchange, the Court may award interest at the rate of 6 per cent per annum. Under the Interest Act, 1830, the Court may allow interest to the plaintiff if the amount claimed is a sum certain which is payable at a certain time by virtue of a written instrument. But where the amount claimed is compensation for unliquidated amount and not a sum certain, the Act has no application and no interest can be granted on the amount claimed. The provision that “interest shall be payable in all cases in which it is now payable by law” only applies to cases in which the Court of Equity exercises jurisdiction to allow interest. To invoke a rule of equity, the existence of a state of circumstances which attracts the equitable jurisdiction, as for example, the non-performance of a contract of which equity can give specific performance, has first to be established. I n Union of India Vs. The steel stockholders Syndicate, Poona[2] considering the principles for awarding damages under Section 73 of the Contract Act it has been held that the interest can be used as a measure to determine the compensation, which the plaintiff would seek against the defendants for his negligence in causing inordinate delay in delivering the goods. In Union of India Vs. Visveswaraya Iron and Steel Ltd., and others[3] a Division Bench of the Karnataka High Court reiterated the principles as mentioned in the above two decisions. In Venkatrama Oil Industries Company Limited Vs. Union of India rep by GM, South Central Railway[4] a learned Single Judge of this Court while enunciating the principles for grant of interest has held as follows: “In the absence of any usage or contract express or implied, or of any provision of law to justify the award of interest, interest by way of damages cannot be awarded. But when damages pure and simple are claimed and in order assess the same the yardstick of charging interest at a particular rate, on the locked up capital due to the negligence of the defendants, be applied for and interest is calculated as a yardstick or measure to assess the damages which the claimant is entitled to. And in such cases also where equity compels the payment of interest, interest be awarded.” In APSRTC, Hyd and Another Vs.B.Vijaya and others[5] a Larger Bench of this Court presided over by the then Hon’ble Chief Justice considering the question in regard to the determination of compensation under the provisions of the Motor Vehicles Act, 1988 vis- à-vis the Workmens’ Compensation Act, held as follows: “Interest of compensation-Simple interest can be granted with effect from the date of the claim-But fixation of rate of interest lies within the discretion of the Tribunal or the Court-No uniform rate of general application can be fixed while awarding compensation-It varies from case to case depending upon the factors like inflation, change of economy, policy of Reserve Bank of India, period of litigation-Permanent injuries sustained by the victim, enormity of suffering, loss of further income, loss of enjoyment of life, etc – But, in a case where compensation is claimed under Workmens’ Compensation Act, the minimum rate is fixed at 12% per annum simple interest and also penalty. In Union of India Vs. Konduru Venkata Reddy[6] a Division Bench of this Court of which both of us are parties had only to reiterate an age old well settled principle to the effect that the provisions of Interest Act 1978 cannot be invoked unless there is a demand prior to laying of claim. In view of the aforesaid principles and applying a well established principles all along repeatedly upheld by the various Courts, it follows that grant of interest is governed by the principles under contract, demand, custom and usage. As far as the case on hand is concerned, there being no dispute about the transaction inter se between the parties and the demand made prior to the suit, we do not find any illegality much less any error in awarding the interest at 12% pendente lite and prior thereto and 6% from the date of the Judgment. Except to the extent as mentioned above, no other plea has been raised to go into by this Court either on merits or otherwise. In the above stated circumstances, we do not find any merits in the above appeal and it is accordingly dismissed with costs. ____________________ B.PRAKASH RAO,J _______________________ G.BHAVANI PRASAD,J Dt:26-07-2010 Grk [1] AIR 1966 SC 275 [2] AIR 1976 SC 879 [3] AIR 1987 Karnataka 161 [4] 1996 (2) ALD 26 [5] 2002 (4) ALD 862 (LB) [6] 2008 (5) ALD 272 (DB)