M/S. Vijay Industries vs M/S. Natl Technologies Ltd

Appellant is a small scale unit registered with the District Industries Centre. Admittedly, it supplied Castor Oil to the respondent valued at Rs. 89,13,589/-. A sum of Rs. 49,99,000/- had been paid by the respondent. The invoices of the credit bills attached with each of the supply contained a clause relating to payment of interest in the following terms:

4. It is not in dispute that at the foot of each credit bill an officer of the respondent - company had put its signatures as a token of acceptance.

5. Appellant is said to have adjusted the amount first towards interest at the stipulated rate and balance against the principal amount. As despite demand the amount due and owed to it was not paid by the respondent, a legal notice was served upon it claiming interest on the said sum. It was stated that the appellant had appropriated account of payments made by it against the interest and balance, if any, against the principal amount. On the 3 basis thereof, a demand for a sum of Rs. 64,58,457/- together with future interest at the rate of 2% per month was raised. The said legal notice was replied by the respondents, stating:

6. Without disputing its liability, however, in view of the correspondence that exchanged between the parties, the respondent offered to pay a sum of Rs. 2,00,000/- per week to the appellant beginning from April, 2003. It is on that assurance the appellant is said to have agreed to restore supply of Castor Oil provided it deposited 50% of the outstanding dues and remaining 50% at the rate of Rs. 2,00,000/- per week.

7. In its letter dated 8.09.2003, the respondent stated:

8. A sum of Rs. 8 lakhs was paid in between the period 19.04.2003 to 11.07.2003. As evidently, the appellant refused to make further supplies, a meeting took place, the minutes whereof reads, thus:

9. As the said agreement between the parties arrived at in the said meeting was not adhered to, on 23.12.2003 a legal notice under Section 434 of the Companies Act, 1956 was served on the respondent, stating:

10. In its reply to the said legal notice, the respondent did not deny or dispute demand of interest. According to it, the total sum due was Rs. 16,80,468/ (sic for Rs. 15, 80,460/-), stating:

However, on the facts of that case, there was nothing to show that prior to the issuance of the statutory notice by the appellant, any claim was made in respect of the payment of interest and furthermore the respondent had filed a counter affidavit to the said petition denying and disputing the said assertion of the appellant that an order of winding up of the company was not passed only for payment of the interest which had been disputed bonefide.

39. The findings of the High Court, with respect, are not correct for more than one reason; firstly, because the Division Bench did not hold that the invoices were not proved by cogent evidence; secondly, question of leading evidence would arise only after the company petition is admitted and, 32 thirdly, issuance of invoices and signature of the respondent thereon is not disputed.

41. This brings us to the question as to why an interest is payable. An interest is inter alia payable by way of restitution.

43. For the reasons aforementioned, we have no other option but to set aside the judgment of the High Court. The question, however, which arises for consideration is whether at this stage we shall remit the matter back to the learned Single Judge to admit the company petition or dispose of the matter ourselves. We choose to adopt the latter course. We are of the opinion that interest of justice would be subserved if we in exercise of our jurisdiction under Article 142 of the Constitution of India direct that the respondent to pay simple interest on the admitted sum at the rate of 12% 37 per annum on the balance amount instead of 24% per annum within eight weeks from the date of amount became due till it is paid failing which the consequences provided in law shall ensue.

44. We have passed this order with a view to avoid multiplicity of proceedings and for the purpose of avoiding unnecessary delay in the interest of parties.

45. The appeal is allowed. No costs.

December 17, 2008