FIRST APPEAL No.6 of 1996 Against the Judgment and Decree dated 31st August, 1995 passed by Sri Kashinath Tiwary, learned Sub Judge-IV, Gaya in Money Suit No.34 of 1992 / 21 of 1992. M/S KALYANPUR CEMENT LTD.& ORS -----------------Defendants-Appellants Versus MAGADH UNIVERSITY --------------------Plaintiff-Respondent *********** For the appellant : Mr. Chitranjan Pd. Sinha, Sr. Advocate Mr. Subodh Kumar, Advocate For the respondent : Mr. Jayshanker Baranwal, Advocate Dated: The 21st day of September, 2010 P R E S E N T HON'BLE MR. JUSTICE MUNGESHWAR SAHOO -------------- J U D G M E N T Mungeshwar Sahoo, J. This First Appeal is directed against the Judgment and Decree dated 31.08.1995 passed by Sri Kashinath Tiwary, learned Sub Judge-IV, Gaya in Money Suit No.34 of 1992 / 21 of 1992 decreeing the plaintiff-respondent money suit. (2) The plaintiff-respondent, Magadh University, filed the aforesaid money suit for recovery of Rs.2,24,159/- as detailed in Scheduled I of the plaint. (3) According to the plaintiff, the case in short is that the plaintiff invited tender for supply of 500 metric tone of cement equal to 2 10,000 bags of cement for construction of buildings. The quotation of the defendant-appellant being the lowest at Rs.1290/- per metric tone was accepted. The defendant was also supplying cement to the plaintiff earlier. A negotiations took place between the plaintiff and defendant on 15.12.1989 and the price was settled at Rs.1275/- per metric tone. The defendant had to supply 500 metric tone cement at Rs.1275/- in 50 metric tones per lot. Rs.1,22,823/- was lying with the defendant since earlier so it was treated as advance regarding this negotiation which was to be adjusted from the last quantity of cement to be supplied by the defendant. (4) The plaintiff’s further case is that the defendants supplied 3 lots of cement each lot contained 50 metric tones in the month of January, February and March, 1990 making a total supply of 150 metric tones. The defendant failed to supply the remaining 350 metric tones cement in spite of repeated requests. Lastly, in September 1990, the defendant gave a letter to the plaintiff to enhance the rate of cement from agreed rate of Rs.1275/- per metric tone to 1370 per metric tone. Because of the above facts, the plaintiff was compelled to purchase 250 metric tones of cement from Uttar Pradesh State Cement Corporation at higher rate of Rs.1520/- per metric tone and 100 metric tones of cement from Cement Corporation of India, Patna at the rate of Rs.1720/- per metric tone resulting monetary loss of Rs.61,250/- and Rs.44,500/- respectively. The price of cement supplied by the defendant was adjusted from the advance amount and the balance amount of Rs.59,073/- is still outstanding dues against the defendant. Legal notice were sent by the plaintiff to 3 the defendant but the defendant did not settled the matter. (5) The defendant-appellant appeared and filed contesting written statement. However, the defendant admitted the case of the plaintiff regarding agreement to supply of 500 metric tones cement at the rate of Rs.1275/- per metric tone. The defendant also admitted the negotiation on 15.12.1989 and also admitted receipt of advance of Rs.1,22,823/-. The main defence of the defendant is that the defendant is not responsible for non-supply of balance quantity of cement as such they are not liable to pay the damage. Because of election and break down in the factory, the balance cement could not be supplied and moreover in September, the defendants were ready to supply the cement at the rate of Rs.1320/- per metric tone but the plaintiff purchased from outside and, therefore, the plaintiffs are not entitled for the damages. The defendants admitted that a sum of Rs.59,073/- is still with the defendant. (6) On the basis of the above pleadings of the parties, the learned Court below framed 6 issues. The material issues are Issue No.4 and 5 which are quoted below : Issue No.4 : - Was there any breach of contract made by the defendants? Issue No.5 : - Is the plaintiff entitled to realise the amount claimed along with interest ? If so, to what extent ? (7) After trial, the learned Court below considering the oral as well as documentary evidences found that the defendant had failed to supply the cement as agreed upon and had thus made a breach of contract and because of the aforesaid breach of contract, the plaintiff had sustained loss by making purchase of cement from other 4 companies on higher rate as such the plaintiff is entitled for damages with interest on the amount of loss sustained and granted 12 per cent interest on the damage sustained and also on the outstanding dues of Rs.59,073/-. (8) Mr. Sinha, the learned senior counsel, appearing on behalf of the appellant submitted that the learned Court below has not considered the effect of break down in the factory. According to the learned counsel because of unavoidable circumstances, the cement could not be supplied to the plaintiff, therefore, the defendant- appellants are not liable to pay damages. Mr. Sinha further contended that in spite of offer made by the defendant to supply cement at Rs.1320/- per metric tones, the plaintiff purchased on higher rate from other companies, therefore, the plaintiff is not entitled to receive damages and it cannot be said that the defendant violated the terms and conditions of the contract. Mr. Sinha further contended that at any rate the interest awarded by the learned Court below at the rate of 12 per cent per annum is much higher because there was no agreement between the parties and there is no evidence available on record that the prevailing market rate of interest is 12 per cent. (9) Mr. Sinha further submitted that there is no reliable evidence produced by the plaintiff to show that in fact plaintiff had purchased the cement from the companies concerned and in fact the amount was paid to those companies and in absence of reliable evidence, the damages could not have awarded in favour of the plaintiff. The learned counsel submitted that Exhibit 6 and 6 (a) are not sufficient to show that in fact payment was made to the company 5 concerned. On these grounds, the learned counsel submitted that the impugned Judgment and Decree are liable to be set aside. (10) On the other hand, the learned counsel appearing for the University submitted that there is no illegality in the impugned Judgment and Decree. In spite of repeated letters Exhibit 2 series, the defendant did not supply the required quantity of cement, which was agreed by the defendant. The learned counsel further submitted that no reliable evidence was produced by the defendant to show that in fact there was break down in the factory and, therefore, the intention of the defendant was bad because later on, the defendant offered to supply the cement on higher rate. The learned counsel further submitted that so far election is concerned, it was held in March, 1990 but even thereafter up to August, 1990, no cement supply was made by the defendant in spite of repeated requests and because the buildings were constructed on the sanction of the University Grants Commission, the schemes was to be completed within the specified period. Therefore, plaintiff had to purchase the cement from other companies and purchased the same for making the scheme completed within the stipulated time. On these grounds, the learned counsels submitted that there is no illegality in the impugned Judgment and Decree passed by the learned Court below. (11) In view of the above contentions of the parties, the question arises for consideration is whether the defendant violated the terms and conditions of the agreement and, therefore, are liable to pay damages to the plaintiff with interest and if so to what extent and whether the impugned Judgment and Decree is sustainable in the eye 6 of law? (12) As has been stated the plaintiff’s case is to the effect that there was negotiation on 15.12.1989 between the plaintiff and defendant No.2 and it was settled that the defendant was to supply 500 metric tones cement at the rate of Rs.1275/- per metric tones which is admitted by the defendant. Exhibit 3 has been filed by the plaintiff which shows the said negotiation. Moreover, in this case, it is admitted fact by the defendant. The defendant also admitted that Rs.1,22,823/- was with the defendant. The defendant also admitted to have supplied only 150 metric tones of cement till April, 1990. The only dispute is regarding non-supply of remaining 350 metric tones by the defendant to the plaintiff. (13) Exhibit 2 series are important letters which requires consideration in this matter. Exhibit 2 is letter dated 16th May, 1990 written by the appellant informing the plaintiff that there was serious breakdown and power crisis. As soon as production is established the supply of cement will be resumed in first week of June, 1990. Exhibit 2/b is letter dated 15.12.1989 issued by Magadh University to the appellant requesting the appellant to arrange for supply of 500 metric tone cement. Exhibit 2/c is letter dated 21st March, 1990 issued by Magadh University to the appellant which shows that till then only hundred metric tone cement was supplied and it was requested in that letter to supply the balance quantity of cement immediately which shows the urgent necessity of the cement. Exhibit 2/d is another letter issued by University to the defendant-appellant. In that letter also, requests was made to supply remaining 350 metric tone of 7 cement as till then 150 metric tone cement was received by the plaintiff. This letter is dated 12.04.1990. In that letter, it was informed by the plaintiff to the defendant that a large number of building projects was sanctioned by the University Grants Commission and for the want of cement, the work was held up and further if the project is not completed within the stipulated time, the Commission will not release the sanction grant. Ext. 2/e is written by the Engineer, Magadh University informing the appellant that because of non-supply of cement, the University had to suffer a lot and, therefore, requested to supply the balance 350 metric tone cement. This letter is dated 05.05.1990. From perusal of Ext. 2/j, which is letter dated 17.09.1990 issued by the appellant to the University, it appears that the appellant agreed to supply the balance quantity of cement at the rte of Rs.1370/- per metric tone. From the above documentary evidences, it is clear that in spite of the repeated requested made by the plaintiff, according to the contract, the defendant did not supply the cement. The defendant on the ground of breakdown assured the plaintiff to resume the supply in the first week of June, 1990 but then no supply was made and thereafter he issued letter to supply the balance cement at the rate of Rs.1370/- per metric tone which was contrary to the terms and conditions agreed between the parties. The agreement between the parties was that the appellant was to supply cement at the rate of Rs.1275/- per metric tone. From the above stand of the appellant, the intention of the appellant, clearly shows that he was not to perform his part of the contract and he did not perform his part of the contract causing monetary loss to the plaintiff. 8 (14) The learned counsel appearing on behalf of the appellant submitted that there is no evidence that the plaintiff purchased the cement from outside. So far this submission is concerned, it appears that the plaintiff has field Ext.6 series to show that cements have been purchased from U.P. State Cement Corporation and from Cement Corporation of India, Patna. The learned counsel questioned the genuineness of these documents and submitted that in fact there is no proof that the amount was deposited in the account of the concerned cement company. So far this submission is concerned, it is the question of reliability of the evidence. It is specific case of the plaintiff that the plaintiff purchased the cement at Rs.1720/- per metric tone and in support of his case, the receipt was produced. It is only mentioned that cement will be handed over only after the amount is deposited in the account of the company. Only because that is mentioned, it cannot be said that the amount was not deposited and cement was not delivered to the plaintiff. It is not the case of the appellant that the construction of the buildings was not completed. If constructions of the buildings was completed then wherefrom University got the cement. Therefore, it appears to me that the objection regarding the reliability of Ext.6 series is concerned is only for the sake of objection and has got no force. (15) In view of the above facts, it appears that the appellant committed breach of the terms of the contract and did not supply the balance 350 metric tones cement and, thereby the plaintiff was compelled to purchase the cement from outside in higher rate to 9 complete the work. In my opinion, therefore, the appellant is liable to pay the damage sustained by the plaintiff because of the breach of contract committed by the appellant. It appears from perusal of Ext.6 series that the plaintiff purchased 250 metric tones of cement from U.P. State Cement Corporation Ltd. at the rate of Rs.1520/- per metric tone. The Ext. 6/A is dated 01.06.1990 for Rs.1,90,000/- and Ext. 6/B is dated 12.07.1990 for Rs.1,90,000/-. Therefore, the differences of the amount which was paid by the plaintiff in access of the agreed rate is recoverable from the defendant as damaged with interest and likewise the plaintiff has also purchased 100 metric tones of cement on 19.09.1990 from Cement Corporation of India Ltd, Patna at the rte of Rs.1720/- per metric tone. Ext.6 is the money receipt for Rs.2,12,498.89/- On calculation, it appears that the price of cement will be Rs.1700/- per metric tone. The difference of the amount paid by the plaintiff in excess of the agreed rate comes to Rs.42,500/-. It is admitted fact that from the advance amount, the balance amount left with the appellant is Rs.59,073 which was neither paid to the plaintiff by the defendant nor cement was supplied against the said amount and, therefore, the appellant is also liable to pay interest on it. (16) The learned counsel for the appellant submitted that there was no contract for payment of interest and moreover in the present case, the learned Court below has granted 12 per cent interest which is very high. The learned counsel further submitted that according to Section 34 C.P.C., the learned Court below could not have granted more than 6 per cent interest per annum on the damage so calculated. According to the learned counsel, 9 per cent is considered 10 to be the proper rate of interest as has been held by the Hon’ble Supreme Court. (17) On the contrary, the learned counsel for the University- respondent submitted that the learned Court below has granted the rate of interest after considering the nature of dealing and moreover it is discretionary. (18) So far this question is concerned, the Hon’ble Supreme Court recently in a decision reported in 2009 (12) Supreme Court Cases 324 (Rampur Fertilizers Ltd. Vs. Vigyan Chemicals Industries) has held that in the absence of any agreement or statutory provision or mercantile uses interest payable can be only at the market rate and such interest is payable upon establishment of totality of circumstances justifying exercise of such equitable jurisdiction. In ascertaining the rate of interest, the courts of law can take judicial notice of both inflation as also fall in bank rate of interest and further held that 9 per cent interest per annum to be reasonable. (19) In the present case, the plaintiff claim 18 per cent interest. From perusal of the impugned Judgment, it appears that the learned Court below held that 18 per cent is excessive and granted 12 per cent interest per annum. The learned Court below has not assigned any reason that it was the market rate or it was the rate of bank. (20) In view of the decisions of the Hon’ble Supreme Court in the case of Rampur Ferlitiliser Ltd. (Supra), in my opinion in the present case also simple interest of 9 per cent per annum will be proper interest. I, therefore, find that the plaintiff is entitled t the 11 damages as calculated by the learned Court below with simple interest at the rate of 9 per cent per annum. (21) In view of my above discussion, the findings of the learned Court below to the effect that the defendant committed breach of terms of contract causing monetary loss to the plaintiff is hereby confirmed. The amount of damage calculated by the learned Court below is also hereby confirmed. So far interest part is concerned, I have already held that the plaintiff is entitled to recover damages and the balance advance amount with simple interest at the rate of 9 per cent per annum. The other findings of the learned Court below are hereby confirmed. The impugned Judgment and Decree are accordingly modified. (22) In the result, this Appeal is allowed in part. The impugned Judgment and Decree are modified to the extent indicated above regarding interest only. In the facts and circumstances of the case, the parties shall bear their own costs. Patna High Court, Patna Dated 21st September, 2010 N.A.F.R/ Sanjeev (Mungeshwar Sahoo,J.)