(6) After the company petition was filed, as per the letter of P.1 dated September 27, 1995, he attended the annual general body meeting of the company held on September 27, 1995, and when he sought clarification on certain items listed in the general business as well as special business on the annual report of the company for 1994-95, as he happened to be one of the petitioners in the company petition the followers of respondent No. 2 created disturbance and created fear in him as well as the other shareholders who are also of his view and when he requested that the proceedings to be noted reflecting the true state of affairs, respondent No. 2 refused to do so. Having come out of the meeting he addressed registered letter to respondent No. 2 on the happenings at the general body meeting on the same day. No reply was given by the respondents to this letter. On the same day the late Karedla Suryanarayana, petitioner No. 1 in the company petition, addressed a letter to all the board of directors to furnish the true reasons for closing parcel offices and the reasons for selling away the lorries for low prices causing loss to the company. The directors of the company observed silence.

(7) For the letter of P. 4 dated September 19, 1996, respondent No. 2 in his letter dated September 24, 1996, gave reply on similar lines.


Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001

It is to be seen to what extent the action of the respondents in not furnishing information sought for by the shareholder, more so when they filed an application under Section 397 of the Act and when the Company Law Board failed to call for the documents can be justified. Under Section 163 of the Act, the registers that are required to be maintained by the company shall be kept at the registered office of the company and they shall be open during the business hours for inspection of the members at least for two hours subject to reasonable restrictions. Under Sub-section (3), a member, debenture holder or other person is at liberty to make extracts of the registers that are maintained under Section 163 of the Act without paying any fee and under Sub-section (3)(b) he may require the company to furnish certified copies of them on payment of the prescribed fee required for copying. On requisition given by the member, the company is bound to furnish them within ten days and under Sub-section (5) refusal to permit the member to inspect the records or furnishing of the copies, the company is liable to be punished with a fine, which may extend up to Rs. 50 for every day. Under Sub-section (5)(b) the Company Law Board may also, by order, compel an immediate inspection of the document, or direct that the extract required shall forthwith be allowed to be taken by the person requiring it and did not move its little finger in the matter.
323. Under Section 209 of the Act every company shall keep at its registered office proper books of account with respect to the aspects enumerated therein and under Section 209(a) of the Act, the books of account, other books and papers of every company shall be open for inspection during business hours.


324. Under Section 219 the members of the company are entitled to have a copy of the balance-sheet including profit and loss account, auditors' report and every other document required by law to be annexed or attached as the case may be to the balance-sheet, which is to be laid before the company in the general meeting at least 21 days before the date of the meeting. Under Sub-section (2) any member of the company on demand is entitled to have a copy of the last balance-sheet of the company free of cost with other documents annexed or attached to the balance-sheet. Again if the company refuses to furnish copy of the documents, the Board by order directs the company to furnish a copy of the document demanded by person concerned.


325. In Life Insurance Corporation of India's case , the rights of shareholders are summarised in para. 84 of the judgment as hereunder (page 617) :
 "On an overall view of the several statutory provisions and judicial precedents to which we have referred, we find that a shareholder has an undoubted interest in a company, an interest which is represented by his shareholding. Share is movable property, with all the attributes of such property. The rights of a shareholder are (i) to elect directors and thus to participate in the management through them; (ii) to vote on resolutions at meetings of the company ; (iii) to enjoy the profits of the company in the shape of dividends; (iv) to apply to the court for relief in the case of oppression ; (v) to apply to the court for relief in the case of mismanagement; (vi) to apply to the court for winding up of the company; (vii) to share in the surplus on winding up."


326. From the provisions of Sections 163, 209 and 219 of the Act coupled with the law enunciated by the Supreme Court, the shareholders in a company are having every right to seek information in order to safeguard their rights and interests in the company and to know whether the management of the affairs of the company are in the larger interest of the shareholders or not. As the annual reports deal with the assets and liabilities of the company broadly and as they do not contain the details, generally the shareholders cannot raise the issue in the annual general body meeting. Be that as it may, in this case when the majority shareholders supporting respondent No. 2 are not allowing the minority shareholders to raise any issue by creating a hostile atmosphere and the minority shareholders are afraid to attend the meeting of the office, the only way left for them is to get details, for the information furnished in the report by applying for certified copies of the extracts. They cannot make a grievance without getting required information. In a case of this nature where a right is conferred on the minority shareholders to approach the Company Law Board seeking relief against acts of oppression and mismanagement they are entitled to have copies of the documents sought for, to prove their case. Otherwise, the right to seek relief against acts of oppression and mismanagement given to the minority shareholders under the statute will be a futile exercise, if the required information sought for is neither provided by the company nor called for by the Board.


327. The whole misfortune in this case is that the Board has not chosen to summon the original record and provide an opportunity to the petitioners to go through the records of the company. The Board did not choose to pass any orders to that effect in spite of their specific prayer in the main petition as well as in C. A. No. 69 of 1994. When they approached the company, it was refusing to furnish information required to prove their allegations by questioning them under what provision a shareholder is entitled to that information having removed respondent No. 2 as director of the company.

328. To my mind while the action of the Board is wholly unsustainable in law, the action of the respondent-company is intended not only to oppress the minority shareholders, but also intended to withhold the information to prove their case and the Board ought to have drawn an adverse inference against the respondents for withholding the information available with them. But unfortunately the Board did not advert to this aspect and did not record a finding whether these acts on the part of the respondents amount to acts of oppression or not.


329. Withdrawal of some of the petitioners from company petition :
 Coming to the company petition, originally nine shareholders have filed this application including the third petitioner-S. Jayaram Reddy, a resident of Visakhapatnam. He executed general power of attorney along with his subsidiary shareholders on April 4, 1994, in favour of petitioner No. 9. He also filed an affidavit on September 10, 1994, confirming the contents of the rejoinder filed by the petitioners in the case. But on November 29, 1995, he informed petitioner No. 9 that he executed a revocation deed on November 8, 1995, duly enclosing a copy of the revocation deed. This letter was sent by registered post from Rajahmundry, though he is a resident of Visakhapatnam. After the death of the first petitioner-Suryanarayana, his legal representatives did not choose to come on record. Petitioner No. 2 Dwarapudi Seetharam did not file appeal along with others. The case of the petitioner is that respondents Nos. 2 and 3 pressurised them either from not continuing the proceedings or for withdrawing from the proceedings only to see that petitioner No. 9 is singled out in his fight against the misdeeds of respondents Nos. 2 and 3. The respondents did not rebut these allegations by any evidence oral or documentary. From the conduct of respondents Nos. 2 and 3 on various acts of oppression discussed in this judgment a presumption has to be drawn in favour of the contention of the petitioners.
330. Non-recording of minutes of the general body truly and correctly :


330. Non-recording of minutes of the general body truly and correctly :
 Likewise petitioner No. 9 in his letter dated September 27, 1993, alleged that the minutes of the previous general body meeting are not recorded properly and truly and the issue referred therein were raised by him in the general body meeting held on September 27, 1993, were wantonly omitted. For this no reply was given by any of the respondents.
331. The will of the majority shall prevail :
 The judgment would not be complete without the answering the sheet anchor of the arguments of learned counsel for the respondents that majority directors on the board as well as the shareholders and at times the petitioners also approved the actions of mismanagement as well as the acts of oppression, the question of granting any relief to the petitioners in this case does not arise. This issue was answered by the Supreme Court in B. R. Kapur v. State of Tamil Nadu, AIR 2001 SCW 3720 ; [2001] 3 MLJ 165, their Lordships while repelling the arguments of counsel for the respondents that the members of the political party commanding majority in the Legislative Assembly are having an unfettered right to elect a person who does not possess the qualifications enumerated under Article 173 or who incurs the disqualifications enumerated in Article 191 held as follows (pages 183 and 186) :


"... a person convicted for a criminal offence and sentenced to imprisonment for a period of not less than two years cannot be appointed as a Chief Minister under Article 164(1) read with (4) and continue to function as such. Their Lordships further observed 'that such an action on the part of the legislative members would be subversive of the Constitution and would be repugnant to the theory of good governance and would be contrary to the Constitution itself, which Constitution has been adopted, enacted and given to the people of India by the people of India."
332. Their Lordships further held thus (page 191) :


332. Their Lordships further held thus (page 191) :
 "Given the present political parties and the electoral system, it is accepted that following a general election, the party with a majority of seats in the State Legislature or Parliament will form the Government. This is what the Constitution postulates and permits. But in the matter of formation of Government if the said majority political party elects a person as their leader, whom the Constitution and the laws of the country disqualifies for being chosen as a member of the Legislative Assembly, then such an action of the majority elected member would be a betrayal of the electorate and of the Constitution to which they owe their existence. In such a case, the so-called will of the people must be held to be unconstitutional and, as such, could not be and would not be tolerated .... In other words, the people of the country, the organs of the Government, Legislature, Executive and Judiciary are all bound by the Constitution ... to be suprema lex or the paramount law of the land and nobody is above or beyond the Constitution .... This being the position, the action of the majority of the elected members of a political party in choosing their leader to head the Government, if found to be contrary to the Constitution and the laws of the land then the Constitution and the laws must prevail over such unconstitutional decision, and the argument of Mr. Rao, that the will of the people would prevail must give way ... it would be a blatant violation of constitutional laws to allow her to continue as the Chief Minister of a State, howsoever short the period may be, on the theory that the majority of the elected members of the Legislative Assembly have elected her as the leader and that is the expression of the will of the people."


333. At some other place their Lordships held that "the Constitution prevails over the will of the people as expressed through the majority party. The will of the people as expressed through the majority party prevails only if it is in accord with the Constitution".


334. From this it is seen that if the decisions taken by the board or general body is in contravention of the laws of the country and prejudicial to public interest, it cannot be said that the will of the majority will prevail, but not the law of the land.

335. Further, for various reasons, the majority of the shareholders in the company might have not dared to open their mouth against the illegal actions of respondent No. 2 having burnt their fingers once in 1978 and having seen the plight of the petitioner, who is none other than the son-in-law of the second respondent and brother-in-law of the third respondent, on that ground the respondents cannot contend that if their actions are clearly in violation of the laws of the land like the Companies Act, Income-tax Act, so on and so forth, their decisions will prevail over the law of the land.

336. Further under Chapter VI of the Act, a right is conferred on the minority shareholders seeking relief against not only acts of oppression but also on the actions of majority shareholders that are prejudicial to public interest apart from acts of mismanagement of the affairs of the company. Hence, the respondents cannot take shelter, if the actions of the company are not in accordance with law, by contending that such an action is having the approval of majority shareholders.

337. In the light of the foregoing discussion on various issues in controversy I have no manner of doubt in holding that the petitioners were able to prove the acts of mismanagement as well as the acts of oppression and they are being continued unendingly, even after company petition if filed, even though the procedure followed by the Board is unknown to law and the findings recorded by the Board are not supported by any evidence and they are per verse. As stated supra the scales of justice before the Board heavily swung in favour of the respondents.


338. Hence, I have no hesitation in setting aside the findings recorded by the Board on the issues in controversy and in holding that the allegations levelled by the petitioners are proved, at any rate, a prima facie case was made out by the petitioners for grant of relief under Chapter VI of the Act.


339. As stated supra, the petitioners are satisfied with the directions given by the Board and from that point of view only, I examined the case of the petitioners to see whether any reasons can be given by this court in support of the directions given by the Board, as counsel for the respondents vehemently argued that the Board having dismissed the case of the petitioners as devoid of merit, gravely erred in giving such a direction. Now as I have taken the view that the series of acts of mismanagement as well as acts of oppression are proved by the petitioners, the question would be what should be the relief that can be granted in the circumstances of the case. The facts of the case speak for themselves that the differences between the groups have reached an irrevocable point of no return and any direction or directions for keeping the company with present holding intact will not serve the purpose as it is impossible for the parties to continue together in the company and at the same time or ordering winding up of a company, which is otherwise solvent is not proper. Hence the only equitable and just relief that can be granted is to direct either of the parties to purchase the shareholding of other group. But in this case, as the majority shareholders are on the side of the second respondent, it would not be proper for this court to direct the majority shareholders to sell their shares to the minority shareholders. Hence the only order that can be passed in this case is to direct the respondent-company itself or any one of the shareholders of the company including respondents Nos. 2 and 3 to purchase the shares of the minority shareholders. In fact, the petitioners expressed their willingness for the said course both before the Board as well as this court, but respondents Nos. 2 and 3 contended that the financial position of the company does not permit the purchase of the shares held by the minority shareholders. As far as the financial position of the company is concerned, I have clearly taken a view


shareholders. As far as the financial position of the company is concerned, I have clearly taken a view that the financial position of the company is very sound and it is in a position to purchase the shares of the minority shareholders. At that stage, I brought to the notice of counsel for the respondents Article 6 of the Articles of association whereunder any member of the company can transfer his shares to an outside person, only with prior approval of the board of directors and suggested that in the light of bad blood flowing between the parties as no one will come forward to purchase the shareholding of the minority shareholders who incurred the wrath of the second respondent, that the company itself may select the purchaser of their choice for transfer of shares of the minority shareholders. Even for this suggestion also the respondents are not willing.


340. I am fortified in my view by the following decisions :
341. In Shanti Prasad Jain's case , their Lordships of the Supreme Court held that the provisions of Section 397 of the Companies Act are more or less akin to Section 210 of the English Companies Act of 1948. It was held that the purpose of introducing Section 210 in the English Companies Act was to give an alternative remedy to winding up in the case of mismanagement or oppression. The law always provided for winding up, in case it was just and equitable to wind up a company. However, it was being felt for some time that though it might be just and equitable in view of the manner in which the affairs of a company were conducted to wind it up, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent. That is why Section 210 was introduced in the English Act to provide an alternative remedy where it was felt that though a case had been made out on the ground of just and equitable cause to wind up a company, it was not in the interest of the shareholders that the company should be wound up and that it would be better if the company was allowed to continue under such directions as the court may consider proper to give. This is the genesis of the introduction of Section 153C in the 1913 Act, and at present Section 397 of the Indian Companies Act, Their Lordships further held that "the circumstances must be such as to warrant the interference that 'there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy'."


342. In Daulat Makanmai Luthria's case [1992] 3 Comp LJ 119, the Principal Bench of the Board held that in case of deadlock or loss of mutual trust necessary for working together in managing the affairs of the company and if it becomes impossible for the petitioner and the respondent to work together even if an independent chairman was appointed, the only course open to the Board is to direct either of the parties to purchase the shares of the other party, so that the company comes under the exclusive control and management of either of the warring groups.

343. From the beginning both before the Board as well as this court, the respondents consistently exhibited a defiant attitude perhaps they are under an impression that they can resort to acts of oppression of minority shareholders and crush them ruthlessly by dragging the proceedings to the apex court level by availing of the services of corporate lawyers with the riches at their command ; so that no one can dare to raise his voice, in future on administration of the affairs of the company by respondents Nos. 2 and 3, as they have already tasted success once in 1978. Of course, at that time the ninth petitioner was with his father-in-law.


344. Even assuming that the findings recorded by this court are not sound in law on the facts of the case will, as I have taken the view that the Board is empowered to exercise the inherent powers under regulation 9 of the Board's regulations to give directions in equity for doing substantial justice between the parties and pull down the curtain on the acts complained of by the minority shareholders. I hold that the directions given by the Board are proper and just in the circumstances of the case. Hence, though I did not agree with the findings of the Board on the merits of the case, I am in full agreement with the end result in the case, vide Yashovardhan Saboo's case [1993] 1 Comp LJ 20 ; [1995] 83 Comp Cas 371 (CLB).

345. Accordingly, C. A. No. 4 of 1999 is dismissed as devoid of merits and C A. No. 5 of 1999 is allowed to the extent indicated above.

346. Naturally the petitioners in C. A. No. 5 of 1999 should not only have the costs but exemplary costs, according to me, against the respondents. Accordingly, the respondents are directed to pay Rs. 25,000 to the petitioners towards costs.

347. Having pronounced the judgment on the merits, I am adjourning the matter to October 29, 2001, to have the views of the parties on the appointment of valuers to value the shares held by the minority shareholders. Provisionally, I am thinking that both the parties will nominate one chartered accountant each and the court will be nominating one chartered accountant and the fee for the chartered accountant nominated by the court has to be paid by the company subject to modification after hearing the parties.


348. After pronouncing judgment on the merits on October 18, 2001, I adjourned the matter to October 29, 2001, so as to enable both the parties to nominate one chartered accountant from their respective side to be associated with the chartered accountant to be nominated by this court for valuation of the shares held by the minority shareholders. The matter underwent some adjournments due to the untimely death of the managing director. Today both the parties nominated the chartered accountants. Accordingly, the following order is passed constituting the committee of chartered accountants.

349. Mr. Ch. G. Krishna Murthy, M.A., LL.B., F.C.A., former Member of Law Commission of India, Ministry of Law and Justice, Government of India (now residing at H. No. 512/A/2, Road No. 31, Jubilee Hills, Hyderabad, Phones : 3543622 and 4745165 (Res.)) is nominated, on behalf of this court and he will be the Chairman of the Committee. M/s. V. Sankarayya and Co., Chartered Accountant (202-301, Satyam Cinema Complex, Ranjit Nagar Community Complex, New Delhi-8) is nominated as chartered accountant by the minority shareholders and M/s. S. Daga and Co., Chartered Accountants, (403, Paigah Plaza, Basheer Bagh, Hyderbad-500063) is nominated as chartered accountant by the respondent company M/s. Sri Ramadas Motor Transport Limited and its board of directors. Their postal addresses are given below the order.


350. The remuneration payable to the chartered accountant nominated by this court is fixed at Rs. 1,50,000 in lump sum. He is entitled to claim actual expenses to be incurred by him towards travelling apart from the above remuneration if he has to leave Hyderabad. He is given liberty to move this court if the above remuneration is not adequate for the work done by him. As far as the chartered accountants nominated by the parties are concerned, both the parties shall bear the remuneration and travelling expenses payable to their respective chartered accountants.

351. Both the parties are given liberty to make their representation before the committee of chartered accountants ; and the committee of chartered accountants shall submit its report to this court within three months from the date of receipt of this communication.


352. Before parting with the case, I feel that it is my bounden duty to bring to the notice of the authorities concerned, that grave miscarriage of justice has taken place in this case as the Company Law Board failed to observe fundamental principles of procedural laws. But counsel appearing for the respondents submitted that the Company Law Board is following the same procedure from its inception. I am afraid, that if the Company Law Board is allowed to function in this manner, grave injustice will be done to the litigant public. Since the Company Law Board is vested with discharge of judicial functions and being an institution of public trust, it is expected to act fairly, objectively and dispassionately, but not whimsically, fancifully or arbitrarily. If the individual members/Benches of the Board are allowed to follow their own procedure giving a go-by to the laws of procedure, the very faith and belief of the litigant public will be eroded. Hence, it is high time that either the Board should frame regulations on the procedure to be followed without amibiguity or the Government in exercise of its rule making power shall frame rules with regard to the procedure to be followed by the Board instead of leaving the issue to the individuals occupying position in the Company Law Board which will go a long way in gaining credibility by the institution.


Chilamkuri Gouri Sankar Rao And ... vs Bhurugumalla Venkatappayya Sons ... on 23 April, 1982

JUDGMENT Ramanujulu Naidu, J.

 1. Against the preliminary decree dt. 22-11-1978 passed in O.S. No. 20 of 1975 on the file of the Court of the subordinate Judge Guntur, instituted by the 1st respondent against defendants 1 to 7 thereto for recovery of a sum of Rupees 84,736 on the foot of a deed of mortgage, dt. 15-10-1970 executed by late chilamkuri venkata Kotirathnam. Both on behalf of himself and as guardian of his son impleaded as the 1st defendant in the suit who was then a minor. For a sum of Rs. 49,000 by enforcing the mortgage against the hypothecated property a terraced building situate at Guntur town as also against the other properties of the 1st defendant and of late venkata kotirthnam in the hands of all the defendants defendants 1 and 4 pereferred the above appeal.

2. Defendants 2 and 3 are the divided sons while defendants 5 to 7 are the daughters of late chilamkuri venkata Kotirathnam the 4th defendant is his widow.


3. The case of the plaintiff is that defendants 1 to 3 and their father. Late venkata kotirathnam originally constituted a Hindu joint family that defendants 2 and 3 became divided from the Joint family that late venkata Kotirathnam and the 1st defendant. However continued as members of a Joint family with venkata kotirathnam as manager of the joint family that venkata Kotirathnam borrowed a sum of Rs. 49,000 from him for discharge of the antecedent debts cntracted by the family and for meeting other expenses of the family that late venkata kotirathnam executed a registered deed of mortgage on 15-10-1970 both on his behalf and as father and guardian of the 1st defendant who was then a minor mortgaging the teraced building that compound interest at 12% per annum with monthly rests was stipulated under the deed of mortgage. That venkata Kotirathnam died on 10-8-1974 survived by the defendants. That his share of the property devolved on all the defendants that as the mortgage debt was not discharged he got registered notices issued to all the defendants calling upon them to discharge the mortgage that the 1st defendant caused a reply to be sent to him denying the truth and validity of the mortgage and disowing and liability under Ex. A-1 that defendants 4 to 7 refused to receive the notices and that the 3rd defendant did not choose to send any reply to the notice received by him.


4. The suit was resisted by all the defendnats . In the written statement filled by the 1st defendant it was averred that defendants 2 and 3 went out of hte joint family in the years 1964 and 1967 respectively relinquishing theri interests in the property of the joint family, that in the year 1967 he too got himself divided from the 1st defendant that late venkata Kotirathnam had no right to Act as manger of the alleged joint family that Ex. A-1 executed by him on his behalf without obtaining prior permission of the District Court Guntur as required under the provisions of the Hindu Minority and Guardianship Act was unenforceable and not binding on him that the alleged borrowing under Ex. A-1 was not true and that in any event. The consideration received under Ex. A-1 was not applied in discharge of any binding antecedent debts. Incurred and not spent to meet the necessary expenses of the family.

5. In the written statement filed by defendants 2 and 3. It was averred that they were divided from the joint family int eh years 1964 and 1967 relinquishing their rights in the properties of the joint family that they had nothing to do with the 1st defendant that they were not aware of execution of Ex. A-1 and that in any event the rate of interest stipulated under Ex. A-1 was highly excessive penal and usurious.


6. After framing appropriate issues the learned subordinate Judge found that no evidence whatsoever was let in on behalf fo the 1st defendant in support of his plea of division in status with his father in the year 1967 that the 1st defendant did not even choose to examine himself in support of his plea that Ex. A-1 was true valid and binding on the 1st defendant and that the rate of interest stipulated under Ex. A-1 was neither penal nor usurious In the result a preliminary decree in a sum of Rs. 49,000 was passed on 22-11-1978 directing the defendants to pay the mortgage money together with compound interest thereon at 12 per cent per annum with monthly rests from the date of the mortgage till the date of redemption three months time was granted or redemption of hte mortgage and subsequent interest at the rate of 6 per cent per annum on the principal sum of Rs. 49,000 from the date of realisation was also awarded In case of default in payment of the decretal amount. The mortgaged property was directed to be brought to sale and in case the sale proceeds were not sufficient to satisfy the decree. The plaintiff was declared entitled of the 1st defendant and those of late venkata Kotirathnam in the hands of defendants 1 to 7 In the decree actually drawn up. Interest from the date of hte suit till the date of redemption was calculated at the rate of 6% per annum. Interest upon the date of the suit was calculated at the stipulated rate. The plaintiff filed I.A. No. 655 of 1979 before the learned subordinate Judge for amendment of the decree contending that on account of a mistake interest from the date of suit till date of redemption was calculated at a lesser rate and that the same should be calculated at the rate stipulated in Ex. A-1. The application was allowed by the learned subordinate Judge on


rate stipulated in Ex. A-1. The application was allowed by the learned subordinate Judge on 19-4-1979 without notice to the defendants. The amended decree was for a sum of Rs. 1,39.064-06 representing the principal sum of Rupees 49,000 interest in a sum of Rupees 83,842-06 accrued thereon at the stipulated rate from the date of the mortgage up to the date of redemption and costs in a sum of Rs. 6.222. Clause 2 of the amended decree runs as follows:


"2. And it is hereby declared and decreed as follows That the defendants do pay into the Court on or before the day of 22nd February 1979 or any other date up to which time for payment may be extended by the Court the said sum of Rs. 1.39, 064.06 ps. Wtih further interest at 6% from the date of redemption i.e. 22-2-1979 till the date of realisation'.
The defendants thereupon filed I.A. No. 1892 of 1979 before the learned subordinate Judge for setting aside the order dated 19-4-1979 on the ground that they had no notice of the application. The learned subordinate Judge dismissed the application holding that no notice was necessary to be given to the defendants as correction of a clearical error was sought by the plaintiff and ordered in exercise of the powers conferred upon the Court under S. 152 of the civil P.c. "


7. Assailing the judgment and the amended decree passed by the learned subordinate Judge defendants 1 and 4 preferred the above appeal as already stated.

8. Aggrieved by the order dated 19-4-1979 passed by the learned subordinate Judge directing amendmetn of the preliminary decree defendants 1 and 4 preferred C.R.P. No. 199 of 1980. The revision petition came up before Jeevan Reddy J and the learned Judge by his order dated 9-3-1980 upheld the plea of the plaintiff. That only a clerical error that crept in the preliminary decree. Was corrected by the learned subordinate judge. The learned Judge however modified the amended decree by awarding subsequent interest at the rate of 6 per cent per annum from the date of redemption till the date of realisation only on the principal sum of Rs. 49,000. In pursuance of the amended preliminary decree as modified by Jeevan Reddy J., the appellants were permitted to amend the memorandum of grounds of appeal relating to valuation of the subject matter of the appeal suit the deficit court-fee as a consequence there of was also paid by the appellants.

9. It was urged by sri T. Veerabhadraiah learned counsel for the appellants that there was division in status between the 1st defendant and his father in the year 1967 itself and that his father had no right to mortgage his share of the hypothecated property.


10. As already stated. The learned subordinate Judge found that noevidence, oral or documentary was let in on behalf of the 1st defendant and that even the 1st defendant did not choose to examine himself in support of the plea. Realising the difficulty. The 1st defendant filed C.M.P. No. 536 of 1982 under O. XLI R. 27 of the civil P.c. on 20-1-1982 for reception of three documents tendered therein as additional evidence and for marking the same as Exs. B-1 to B-3 one of the three documents is a letter dated 16-10-1967 purporting to have been addressed by Ch v. Kotirathnam to the 1st defendant represented by his maternal uncle as his guardian he then being a minor It is recited in the said document that defendats 1 to 3. Defendants 5 to 7 and another son by name chandrasekhara Rao were born to venkata Kotirthnam that chandrasekhara Rao was taken in adoption by chilamkuri seetharathnamma. Widow of the elder brother of venkata Kotirathnam that defendants 1 to 3 and venkata Kotirathnam constituted members of a Hindu undivided family. That defendants 1, 6 and 7 were to be married by them that the 2nd defendant became divided from the joint family after receiving some properties of the joint family and executing a registered deed dated 27-3-1964 relinquishing his rights in the properties of the joint family that likewise the 3rd defendant relinquished his rights inteh properties of the joint family by executing a registered deed dated 29-8-1967 that venkata Kotirathnam and the 1st defendant however continued to be members of the joint family that venkata kotirathnam


defendant however continued to be members of the joint family that venkata kotirathnam was carrying on business in a manner detrimental to the interest of the 1st defendant that the mother and the maternal uncle of the 1st defendant as also some well-wisehers of Venkata kotirathnam and the 1st defendant demanded venkata Kotirathnam to partition the properties of the joint family by metes and bounds that as it was not convenient to do so, severance in status between venkata kotirathnam and the 1st defendant was effected that Venkata kotirathnam undertook not to alienate the 1st defendant's half share inthe properties of the Joint family that the 1st defendant would not be concerned with any profit and would not be liable for any losses incurred or debts contracted by venkata kotirathnam in the business he was carrying on and theat the 1st defendant was relieved of all obligations of maintenance and marriages of the two unmarried sisters. The document purports to have been attested by the mother of the 1st defendant and two others.


11. In para 4 of the affidavit filed in support of the application for reception of the additional evidence it is claimed by the 1st defendant that the document was in the custody of the maternal uncle of the ist defendant that he had no Knowledge of the document until the disposal of the suit that it was only after the disposal of the suit he was apprised of the contents of the document by his maternal uncle and that it was only after the disposal of the suit he was apprised of the contents of the document by his maternal uncle and that at his request the document was given to him by his maternal uncle.

12. It may be noted that the suit was instituted in tehyear 1975 that the ist defendant was the real contestant in the suit that trial of the suit was taken up on 24-11-1976 and that significantly neither the maternal ujcle of the Ist defendant nor his mother apprised him of and supplied him with the most valuable defence available to him to defeat the suit no explanation was offered by the ist defendant for not tendering the document for reception of the additional evidence till 20-1-1982 In the circumstances we have absolutely no hesitation in holding that the document dt. 16-10-1967 was brought into existence by the ist defendant with a view to defeat the rights of the plaintiff.


13. That Ex. A-1 the deed of mortgage was truly executed and also supported by consideration as detailed therein is amply established by evidence of unimpeachable character let in by the plaintiff P.W. 2 the sole proprietory of the plaintiff's concern deposed to the execution of Ex. A-1 by late chilamkuri venkata kotirathnam signing in Ex. A-2 to A-24 were market on his behalf in proof of the various items making up the total consideration of Rs. 49.000 recited in Ex. A-1 P.W. 1 the scribe of Ex. A-1 substantially corroborated the testimony of P.W. 2 and added that some amounts were paid by P.W. 2 towards discharge of the mortgage amount that the plaintiff paid some cash to venkata Kothiratnam for purchase of stamps for execution of Ex. A-1 and that the balance of consideration was paid by the plaintiff to venkata kotirathnam at the time of registration of the document No evidence whatsoever was le tin on behalf of the defendants in rebuttal. The testimony of P.Ws. 1 and 2 thus remains uncontradicted and unchallenged.


14. The consideration of Rs. 49,000 recited in Ex. A-1 consists of (I) Rupees 6,110 towards discharge of the debt due under Ex. A-2 a registered deed of mortgage dt. 31-1-1964 executed by Venkata kotirathnam both on his behalf and on behalf of the 1st defendant he then being a minor as also defendants 2 and 3 in favour of Garee venkata subbarao for Rs. 5.000 borrowed for the purpose of meeting the expenses of erstwhile joint family of venkata kotirathnam and defendants 1 to 3; (ii) Rs. 8, 325 towards discharge of the Khata debt contracted by the ist defendant from Garee venkata subbarao and co.. for the purpose of the business carried on by the joint family consisting of venkata kotirathnam and defendants 1 to 3 and acknowledged by the 3rd defendant on 31-12-1966 in the accounts of Garee venkata subbarao & co., (iii) Rs. 13,000 towards discharge of the debt due to the concern of the plaintiff on a promissory note executed by defendants 2 and 3 the amount covered by the promissory note having been borrowed by them for the purpose of the business carried on jointly by venkata kotirathnam and defendants 1 to 3 in the name of sri Balaji Dal mill after defendants 2 and 3 divided from venkata Kotirathnam and the 1st defendant : (iv) Rupees 3,100 towards discharge of the Khata debt contracted by the 2nd defendant from the concern of the plaintiff for the purpose of the business carried on by the 2nd defendant: (v) Rupees 1,200 received in cash by


by the 2nd defendant: (v) Rupees 1,200 received in cash by venkata kotirathnam on 14-10-1970 from the plaintiff towards expenses for purchase of stamps for execution of Ex. A-1; and (vi) Rs. 17,265 received in cash by the 1st defendant before the joint sub Register Guntur at the time of registration of Ex. A-1 as already stated the truth of the details of consideration recited in Ex. A-1 is amply established not only by the unchallenged testimony of P.Ws. 1 and 2 but also by Exs. A-2 to A-24.


15. The question for consideration is to what extent the various items making up the total amount of consideration of Rs. 49,000 recited in Ex. A-1 are binding on the 1st defendant who was a minor at the time of execution of Ex. A-1 and on whose behalf also Ex. A-1 was executed by venkata Kotirathnam.

16. It is unnecessary to advert to the various decided cases as the legal position is neatly summed up in the latest decision of the Supreme Court in prasad v. V. Govindaswamy Mudaliar . Their lordships of the Supreme Court held (at pp. 96 to 97);-
 "A natural guardian of Hindu minor has power in the management of his estate to mortgage or sell any part thereof in case of necessity or for the benefit of the estate. If the alienee does not prove any legal necessity or that he does not make reasonable enquiries the sale is invalid.
But the father in a joint Hindu family may sell or mortgage the joint family property including the son's interest therein teo discharge a debt contracted by him for his own personal benefit and such alienation binds the sons provided (a) the debt was antecedent to the alienation and (b) it was not incurred for an immoral purpose. The validdity of an alienation made to discharge an antecedent debt rests upon the pious duty of the son to discharge his father debt not tainted with immorality.


"Antecedent Debt' means antecedent in fact as well as in time that is to say, that the debt must be truly independent of and not part of the transaction impeached. The debt may be a debt incurred in connection with a trade started by the father the father alone can alienate the son's share in the case of a joint family. The privilege of alienating the whole of the joint family property for payment of an antecedent debt is the privilege only of the father, grandfather and great-grandfather qua the son or grandson only. No other person has any such privilege.


There is however another condition which must be satisfied before the son could be held liable i.e. that the father or the manager acted like a prudent man and did not sacrifice the property for an inadequate consideration'.
Their Lordships of the Supreme Court quoted with approval the following propositions laid down in Briji Narain v. Mangla prasad. AIR 1924 PC 50:-
 "(1) The managing coparcener of a joint undivided estate cannot alienate or burden the estate qua manager except for purposes of necessity but (2) if he is the father and the other members are his sons he may by incurring debt so long as it is not for an immoral purpose lay the estate open to be taken in execution proceedings upon a decree for payment of that debt. (3) if he purports to burden the estate by a mortgage. Then unless that mortgage is to discharge an antecedent debt it would not bind the estat (4) Antecedent debt means antecedent in fact as well as in time that is to say that the debt must be truly independent and not part of the transaction impeached. (5) There is no rule that this result is affected by the question whether the father . who contracted the debt or burdens the estate. Is alive or dead".
17. The doctrine of pious obligation of a son to pay his father's debts elucidated by a Division Bench of the Madras High Court in shanmukam v. Nachu Ammal AIR 1937 Mad 140 as under was also quoted with approval by their Lordships of hte Supreme Court :


"The doctrine of pious obligation of a son to pay his father's debts cannot be restricted to cases where father also happens to be the manager. If this limitation was well founded it would also follow that the father's power of disposing of the son's share for the satisfaction of his own debts must be likewise limited. There cannot be any justificationof such limitation when it is remebered that the son's obligation to pay his father's debts was under the orginal smritis independent of possesion of assets of joint family property. It depends purely upon the relationship of father and son. It is only by case law developed furing the early part of nineteenth century and by statute law in the Bombay presidency that the liability of the son for father's debt was limited to assets and to joint family property. The true basis of the obligation therefore is the relationship of father and son and not the accident of the father being the manager of the Joint Hindu family".


18. It is not denied that the mortgage debt evidenced by Ex. A-2 dated 31-1-1964 is an antecedent debt contracted by venkata kotirathnam as the manager of the joint family consisting of himself and defendants 1 to 3 for the purpose of meeting the expenses of the said joint family and is therefore binding upon the 1st defendant Likewise the Khata debt of Rs. 8.325 incurred by the joint family of venkata kotirathnam and defendants 1 to 3 as the manager of the joint family consisting of himnself and defendants 1 to 3 for the purpose of the business carried on by the said joint family is also binding onthe 1st defendant Equally the debt of Rs. 13,000 due on a promissory note executed by defendants 2 and 3 in favour of the oncern of the plaintiff even after defendants 2 and3 got divided from venkata Kotirathnam and the 1st defendant is binding on the 1st defendant the amount covered by the promissory note having been borrowed for the purpose of the business carried on jointly by venkata Kotirathnam and defendants 1 and 3 in the name and style of sri Balaji Dal Mill as recited in Ex. A-1. Two other documents tendered for reception of additional evidence in C.M.P. No 536 of 1982 for the purposes of establishing that the debt of Rs. 13,000 is not binding on the 1st defendnat as the business in connection with which the debt was incurred was carried on by the 1st defendant and the 3rd defendant only are of no assistance as late venkata Kotirathnam must be deemed to have carried ont he business Jointly with the 3rd defendant for the benefit of the 1st defendant also only the debt of Rs.


3rd defendant for the benefit of the 1st defendant also only the debt of Rs. 3,100 contracted by the 2nd defendant from the concern of the plaintiff and discharged by the 1st defendant from out of the principal amount borrowed under Ex. A-1 is not binding on the 1st defendant as the debt contracted by the 2nd defendant was for the purpose of the business solely carried on by the 2nd defendant In discharging the said debt venkata Kotirathnam did not Act like a prudent man. The amount of Rs. 1,200 in cash received by the 1st defendant towards purchase of stamps for the purpose of execution of Ex. A-1 and the amount of Rs. 17,265 also paid to the 1st defendant before the joint sub-registrar Guntur at the time of registration of Ex. A-1 for the purpose of improving the business carried on by the joint family consisting of Venkata Kotirathnam and the 1st defendant the latter is bound to discharge. The amount of Rs. 17,265 received by venkata kotirathnam was for the benefit of the estate of the joint family consisting of venkata Kotirathnam and the 1st defendant admittedly even after defendants 2 and 3 got themselves divided from venkata kotirathnam and the 1st defendants 2 and 3 got themselves divided from venkata Kotirathnam and the 1st defendant. The latter were carrying on the very same business conducted by the erstwhile joint family consisting of venkata Kotirathnam and the 1st defendant Admittedly even after defendants 2 and 3 got themselves divided from venkata Kotirathnam and the 1st defendant the latter were carrying on the very same business ocnducted by the erstwhile joint family consisting of Venkata Kotirathnam


business ocnducted by the erstwhile joint family consisting of Venkata Kotirathnam and defendants 1 to 3. No evidence was let in on behalf o f the defendants that the amount of Rs. 17,265 paid to the 1st defendant at the time of registration of Ex. A-1 was neither utilised for the business carried on by the joint family consisting of venkata Kotirathnam and the 1st defendant nor applied for any immoral purposes. If therefore follows that the 1st defendants is bound to discharge half of the principal sum of money borrowed under Ex. A-1 minus Rs. 3,100 together with interest. It should however be borne inmind that the other half share of venkata Kotirathnam in the mortgaged property is liable to satisfy the balance of the mortgage debt.


19. In jagannath prasad singh chowdhury v. Surajmul Jalal. AIR 1927 PC 1. Their Lordships of Privy council held:-
 "In the case of mortgages order 34 of the code of civil procedure and not S. 34 of the code of civil procedure would determine the question of the rate of interest".
20. In   K. Venkata  satyanarayana v.  State  Bank  of India  .  It was   reiterated  that the  provisions  of S. 34  of  the C.P.C.  were  not applicable  to cases of  mortgages   and  that  the    award  of  interest was  governed  by  the  provisions  of O. 34   R. 11  of  the  civil  P.c.

21.  It was   next  contended  by  the learned  counsel  for  the appellants  that  compound   interest  at  the rate  of 12%  per annum  with  monthly  rests  stipulated under Ex. A-1  was  usurious  and that the  appellants were   entitled  to the  benefits  of  the Usurious  Loans  Act,  1918.

22.  Reliance  was placed  upon  the  decision in Venkata  Rao  v. Venkatarathnam  SIR  1952  Mad  872  wherein  their Lordships  held  that  anything   above  12%  per  annum  simple  interest  was excessive  having   regard  to the   nature  of the  transactions  in the then   composite  state   of Madras  Their  Lordships  added  (at  p.  876):-


"The  effect  of  Madras  Act  VIII  of 1937  by which sub-sec  (I)  of S. 3 of  the Usurious  loans   Act was   amended and  explanations  and provisos  were  added  is to make  it   obligatory   upon  the   Court  to find  out  whether   there is excessive  interest  and when   once  that is done  to presume  that  the   transaction  was  unfair  we have  already  expressed  the opinion  that  anything    above  12  per  cent  per  annum  simple  interest  is excessive  considering  the  nature  of transactions  in this  state".

23.  In  the said  case  compound  interest  was  charged  at Rs. 1-0-6  per cent  with  monthly  rests.  The same  was held  to be  excessive  within  the meaning  of  the  explanation  inserted   by madras  Act  VIII  of 1937  only  12%  simple   interest  was  awarded  to the creditors  therein.

24.  In Gopala  menon  v. Sreenivasa,   adverting  to the decision  in Venkata   Rao v.  Venkataratnam.   (supra)  Rajamannar  C.J.  Speaking  on behalf    of  the   Bench  observed  (at  p.  361):-


"We  do not  however  understand  the effect  of this   decision  to be to  lay  down  an inflexible  rule  that anything   above  12 per  cent  per  annum  simple  interest  is excessive  whatever  be  the  particular  circumstances  relating   to a particular  transaction  of loan.  So far  as we  are  aware   this decision  has  not  been  under  Their  Lordships  added:

"We   are   clearly   of opinion  that to lay  down  an absolute  maximum  rate  of interest  beyond   which  interest  would  be excessive  within  the  meaning   of the  Usurious  Loans   Act would  be in  direct  contravention  of  what is laid   down   in the Act  itself  S. 3  (2) (a) (b) and  (c)  of the Usurious    Loans  Act  which  continues  to be  applicable    notwithstanding  the  madras  amendment  makes  it abundantly   clear  that  in   deciding   whether  the interest  charged  is  excessive  several  factors  have  to be  taken  into   consideration.


One   important  fact  will be  the risk  incurred  as it  appeared  Or  must  be taken to have  appeared.  Or  must be  taken  to have  appeared,  to  the   creditor   at  the  date  of the loan  In considering   the  question  of risk    S. 3 (2)  (c)  enacts   that  it  will  be material  to take  into  account  the presence  or absence  of security  and  the  value  thereof.  And   the  financial   condition    of  the  debtor  and  the result  of  any   previous  loan   transaction   known  to the  creditor    if  compound  interest   is charged  the periods  at which   it is  calculated  and the total  advantage   which   may  be reasonably   expected  to  have   accrued  from  the  transaction  are   important  factors".

25.   In  the  said  case   compound  interest at 155  with  quarterly  rests   stipulated  between  the parties  was  held  to  be  excessive   and  compound  interest  at  10%  with  yearly   rests   was  allowed.

26.   Their   Lordships  of  the Supreme Court affirmed  the aforesaid  decision of  the  Division  Bench  of  the High Court  of  Madras  in varadachariar  v. Gopala   menon  .


27.  In General  and  Credit    Corporation  (India)  LTd  v.  Venkata  Ramarao    Chandra  Reddy, C.J.  And  jaganmohan  Reddy J.,  as  he  then  was   observed  at  page  434  as  follows:-

"A  Court  has  to determine  whether  a particular  rate  of interest  is excessive   or not   having  regard  to  the    rates  of  interest  at  the time  when  the impugned  transaction  was  entered  into  and  the surrounding   circumstances   what  amounts  to excessive   interest  has to be determined  with   reference  to various factors  such as the security which the  creditor obtained for  the amount advanced  by him, the pecuniary position of the debtor the rate  of interest prevailing at  that time and  the advantages  which the debtor  would  derive  from  the loan.

A  debtor  would get relief under the usurious Loans  Act, only if  it is  established that the  transaction  is substantially     unfair  one.  It is  true    that the explanation   introduced  by the Madras  Amendment  has laid  down that if the interest is excessive  the Court shall  presume  that the transaction was substantially   unfair; but such presumption may be rebutted  by proof  of special circumstances justifying  the rate of interest. Thus before the explanation could be invoked it  should be  established that the interest is excessive. It is  only then that  it may be presumed  that the transaction was  an unfair one".


28.  In Girwar prasad v. Ganeshlal saraogi, AiR  1949  FC  57  patanjali sastri. J., as he  then was  held:-

"In order to be entitled to the  benefits of the usurious  loans Act. 1918 the appellant must   establish.

(1)  That the interest payable   on the  loan  is  excessive  and

(2)  That  the transaction was as between the parties thereto substantially  unfair. It was  frnakly admitted before  us that  the appellant adduced to evidence as to the circumstances  under  which he borrowed  moneys from the respondent the  availability of credit facilities  and possibility  of borrowing on easier terms in that part of the country where  the transactions took place".

29.  On  the facts of  that case, the learne d Judges confirmed the Judgment   of the High Court  allowing  compound  interest at the rate of 12%  as it was not established that the rate of interest charged was in excess of the commercial  rate prevailing  at that time.

30.    The scope  of S. 3 of the Usurious  Loans Act as  amended by the  Madras Amending  Act VIII of 1937  was also  construed in an unreported judgment of  this  Court dated 5-8-1970.  In  Godugula  Lakshmi  narasimha Murthy v. MuthuKumalli  venkata  subbarao (L.P.A. No. 69/68). After  considering  the relevant  case law on the point  the  legal  position was summarised  as under:-


"(1)  The Court can  reopen the transaction and give appropriate  relief in the matter of interest when the transaction is substantially unfair.

(2)  If the interest is ecessive the Court shall presume that transaction is substantially unfair, but this is a rebuttable presumption;

(3) No hard  and fast rule can be  laid down as to what is  reasonable or excessive rate  without reference to the several circumstances enumerated to Cls. (A) (b) and (c) of  the sub-s. (2) of S. 3 of  the Act.

(4) In determining whether the rate is  reasonable or not the Court has to take  into consideration the following  circumstances:

(a) The value of the security offered:

(b) The financial condition of  the debtor including the result of any prior transaction:

(c)  The know or  probable risks in getting  repayment:

(d) if compound  interest was provided for  the frequency of the period of calculation of the interest and

(e) The advantage which the debtor reasonably expected to derive from the transaction".

31. Adverting to the various cases referred to above a Division Bench of  this Court in K. Venkata Satyanarayana v. State Bank of India  (supra) observed (at p. 122):-


"The aforesaid rulings clearly establish that there can be no presumption that the charging of compound rate of interest is per se excessive that the burden of establishing that the interest is excessive lies on the debtor setting up a plea that the interest charged is usurious and that it is only when that is established the presumption under explanation (1) to S. 3 (1) of the usurious Loans Act, as amended by the madras Amendment Act arises".
32. In P. Sambamurthy & sons v. M. Krishna Rao, while adverting to the observations of their Lordships of the Supreme Court in varadachariar v. Gopal Menon (supra) Jeevan Reddy J., observed (at p. 79):-
 "What is relevant to notice is that the Supreme Court did not say that as a rule of law any interest over and above 12% simple is per se usurious and excessive".
33. In anunreported judgment in A.S. No. 334 of 1970 dt. 1-8-1972 on the file of this Court, chinnappa Reddy J. While adverting to the decision in Varadachariar v. Gopala menon (supra) observed that the mortgage in question in the said case was of the year 1936 and that since then there had been change in the market conditions and the economy. He added (at p. 79):-


"The learned subordinate Judge failed to notice that their Lordships of the Supreme Court were concerned with a transaction of the year 1936 whereas in the present case, we are concerned with a transaction of the year 1962. It cannot be pretended that there has been no change in the economy of our country in the meanwhile it is well known that even the bank rate has gone up during this period In those circumstances. I do not see how it can be said that 12% compound in the face of the evidence that there were several other transactions where similar rate of interest was charged can be considered to be excessive leave alone unfair I therefore think that the learned subordinate Judge ought to have allowed the interest as claimed by the plaintiff'.
34. It therefore follows that it cannot be laid down as a rule of law that interest above a particular rate per se is penal or excessive Whether interest is penal or excessive is always a question of fact to be decided on the facts and circumstances of a given case.


35. In S.P. Majoo v. Ganga Dhar their Lordships of the Supreme Court observed (at pp. 603-4):
 "Prior to 1929 the legal position was that under S. 34 of the C.P.C granting a decree for payment of money the Court had full discretion to order interest at such rate as it deemed reasonable to be paid on the principal sum adjudged from the date of the suit onwards But O. 34 Rr. 2 and 4 which applied to a mortgage suit enjoined the Court to order an account to be taken of what was due to the plaintiff at the date of such decree for principal and "interest on the mortgage". The special provision in O. 34 had therefore to be applied in preference to the general provision in S. 34 Till the period for redemption expired therefore the matter was considered to remain in the domain of contract and interest had to be paid at the rate and with the rests specified in the contract of mortgage but after the period for redemption had expired the matter passed from the domain of contract to that of judgment. The right of the mortgagee would henceforth depend not on the contents of his bond but on the directions of the decree".
36. It was held by the Federal Court in Jaigobind singh v. Lachmi Narain Ram AiR 1940 FC 20 that the language of O. 34 R.11 gave a certain amount of discretion to the Court so far as interest pendente lite and subsequent interest was concerned and it was no longer absolutely obligatory on the courts to decree interest at the contractual rates up to the date of redemption in all circumstances even if there was no question of the rate being penal excessive or substantively unfair within the meaning of the usurious Loans Act. 1918.


37. Quoting the aforesaid principle approval their Lordships of the Supreme Court in S.P. Majoo v. Ganga Dhar (supra) observed (at p. 604):-
 "In view of the principle laid down by the Federal Court we are of opinion that in the circumstances of the present case the respondent should be granted interest on the principal sum due at the contractual rate till the date of the suit and simple interest at 6 per cent p.a. on the principal sum adjudged from the date of the suit till the date of the preliminary decree and also at the same rate till the date of realisation".
Sri C.P. Sarathy the learned counsel for the plaintiff urged that the plaintiff would be entitled to the payment of would be entitled to the payment of subsequent interest not only on the principal sum of money borrowed under Ex. A-1 but also on the amount of interest accrued thereon up to the date of redemption Reliance was placed upon the decision in Narharilal v. Firm Bhogilal Amratlal, . Construing O. 34 R. 11 of the civil P.C. V. B. Raju J. Observed (at p. 254):-


"It is provided that the Court may order payment of interest But what is provided in O. 34, R. 11 is interest up to the date on or before which payment of the amount found or declared due is under the preliminary decree to be made. The rule therefore contemplates that a certain amount is found or declared due and that amount has to be paid on or before a date under the preliminary decree. The rule therefore contemplates interest on the amount found due from the date when it is found due up to the date on or before which payment is to be made under the preliminary decree. The amount found or declared due has reference to the amount mentioned in O. 34 R. 2 and O. 34 R. 4 That includes interest from the date of the suit till the date of the preliminary decree. A preliminary decree provides that the amount found or declared due may be paid into the Court on or before such date as the Court may fix within six months from the date on which the Court confirms and countersingns the account taken under sub-cl. (A) of cl. (1) of order 34, R. 2 the Court has therefore to take an account under O. 34 R. 2 sub-cls (a) (b) and (c) of cl. (1) while taking such an account the Court has to include interest as provided in cl. (A) (I) of R. 2 (1). The Court then has to give time for payment of that amount and the time given should be less than six months In regard to the subsequent period which should not exceed six months. The Court has a discretion under O. 34 R. 11 to give interest or not as provided in O. 34 R. 11 the Court has therefore no discretion in regard to the manner of taking account under O. 34 R. 2 and O. 34. R. 4


account under O. 34 R. 2 and O. 34. R. 4 and is bound to include interest while arriving at the amount found due at the date of the preliminary decree. But under O. 34, R.11 the Court has a discretion whether or not to order interest for the subsequent period of six months from the date of the prliminary decree till the time of actual payment'.


38. We are unable to subscribe to and dissent from the view of V.B. Raju. Supreme Court in K. Manick chand v. B. Saleh Mohammed. . In the said case two simple mortgages in succession were executed by three brothers. A Suit wa instituted in the Court of the District judge civil station Bangalore by one Khanmull for recovery of the amount due under the two mortgages. On the foot of the first mortgage the amount claimed was rupees 51,200 as principal and interest. While on the foot of thesecond mortgage the amount claimed as principal and interest was Rs. 60,200. The contractual rate of interest was 1 per cent per mensem. The trial Court decreed the suit on 27th March 1952 after applying the provisions of S. 17 of the Mysore Money Lenders Act No. 13 of 1939 for the purpose of giving effect to the provisions of S. 17 of the Act. The trial Court held that the principal amount of the two loans was Rs. 44,000 being the aggregate of the consideration shown in the two mortgage deeds, and consequently allowed as arrears of interest the sum of Rs. 44,000 A preliminary decree was therefore granted for a sum of Rs. 88,000 comprising of Rupees 44,000 as principal and Rs. 44,000 as interest. The excess interest claimed at the contractual rate of 1 per cent per mensem was disallowed on the ground of the maximum limit for the grant of the total amount of interest laid down under S. 17 of the Act. Thereupon both the parties filed appeals in the High Court of Mysore. The High Court held that the trial Court had wrongly treated the amounts of Rs. 20,000 and Rs. 24,000 as principal amounts of the original loans, and recorded a finding that the principal amounts in fact were Rupees


principal amounts of the original loans, and recorded a finding that the principal amounts in fact were Rupees 15,017-8-0 in respect of the first mortgage deed and Rs. 22,954 in respect of the second mortgage deed. The High Court thus, worked out the aggregate of Rs. 37,971-50 ps. As the principal amount of the two loans advanced under these two mortgage deeds and applying S. 17 of the Act. Granted a decree for this amount as principal together with the same amount as interest. The High Court further held that this would be the arrears of interest to which the appellants would be entitled up to the date fixed for payment of hte redemption money by the judgment of the High Court that the principal amount would carry interest at 6 per cent per annum from the date fixed for redemption till realisation. The decree modified by the High Court was assailed in the Supreme Court.


39. Their Lordships of the Supreme Court observed (at p. 674):-


"Admittedly civil P.C. was applicable to this suit and consequently, interest subsequent to the date of the decree had to be awarded in accordance with O. 34, R. 11 C.P.C. Under R. 11 (a) (I) interest would be payable on the principal amount found or declared due on the mortgage from the date of the decree up to the date fixed for payment at the rate payable on the principal or where no such rate is fixed at such rate as the Court may deem reasonable. In this case the date of the decree by the trial Court was 27th March 1952 while the date fixed for payment became 19th March 1959 as a result of the decree of the High Court . the interest for this period has to be calculated in accordance with R. 11 (a) (I) of O. 34 c.P.c. on the principal amount of Rs. 37,971-50 ps. As regards the rate it is true that under the mortgage deeds, the interest was payable at the rate of 1 per cent per mensem: but under the provisions of hte Act read with the provisions of the Act read with the provisions of the usurious Loans Act (mysore Act IX of 1923) the fair interest payable on the loan would be at the rate of 9 per cent per annum and it is at this rate that the interest must be calculated on this principal amount for this period In addition. Under Rule 11 (a) (ii) of order 34, C.P.C. interest at the rate of 6 per cent per annum has to be allowed on the amount decreed for costs, charges and expenses incurred by the appellants up to the date of the preliminary decree. A further direction that is necessary is that interest under R. 11 (b) of O. 34 C.P.C. will be payable up to the date of realisation or


of O. 34 C.P.C. will be payable up to the date of realisation or actual payment on the aggregate of the two principal sums just mentioned at the rate of 6 per cent per annum which must be deemed to be reasonable as interest at that rate is ordinarily awarded in all decrees in respect of future periods".


40. In our considered view compound interest at the rate of 12% with monthly rests stipulated under Ex. A-1 is excessive and compound interest at the rate of 12% per annum on the principal sum of money borrowed under Ex. A-1 from the date of execution of Ex. A-1 up to the date of the suit and simple interest at the rate of 12% per annum on the principal sum of money from the date of the suit till the date of redemption as fixed by the Court with subsequent interest at the rate of 6% per annum on the principal sum of money from the date of redemption till the date of realisation would be reasonable . the total interest thus worked out up to the date of redemption amounts to Rs. 54.888-85 ps. There shall be a preliminary decree in favour of the plaintiff directing the defendants to pay Rs. 1,03,888-85 ps. With interest at 6% per annum of Rs. 49.000 from the date of redemption as fixed by the lower Court till the date of realisation. The preliminary decree of the lower Court is accordingly modified In the circumstances of the case while maintaining the decree passed by the lower Court for costs we direct the parties to bear their own costs in the appeal suit.


41. In default of payment of the mortgage money the plaintiff shall be entitled to execute the decree by sale of the mortgage property. As already shated, the 1st defendant is bound to discharge half of ht eprincipal sum of money Borrowed under Ex. A-1 minus Rs. 3,100 together with interest as allowed by us. In other words he is bound to discharge his share of Rs. 22.950 together with compound interest at 12% per annum from the date of the suit till the date of redemption as also the subsequent interest on the said sum of Rs. 22,950 at the rate of 6% per annum from the date of redemption till the date of realisation. He is also liable to contribute Rs. 3,111 towards his share of costs decreed by the trial Court. The 1st defendant's half share in the mortgaged property is accordingly made liable. The other half share of venkata Kotirathnam in the mortgage property is liable to satisfy the balance of the mortgage debt. If there is any short fall the plaintiff will be entitled to proceed against other properties of venkata Kotirathnam in the hands of defendants 1 to 7. There shall also be a personal decree against the ist defendant to that extent.

42. In the reuult the appeal suit is allowed in part and c.M.P. No. 536 of 1982 is also allowed.
43. Order accordingly.


M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996

JUDGMENT P. Venkatarama Reddi, J.


1. These appeals and revision petition arise out of an award dated 9-3-1989 made by the arbitrator as modified by the IV Additional Judge, City Civil Court, by his Judgment dated 25-6-1990. The State of Andhra Pradesh represented by the Superintending Engineer, I and CAD (Godavary Valley Circle) filed O.P. No. 395/1989 Under Sections 30 and 33 of the Arbitration Act to set aside the award to the extent the claims were allowed. The O.P. was partly allowed by the IV Additional Judge, City Civil Court. Against that, C.M.A.No. 357/1991 was filed by the respondent in the O.P. (hereinafter referred to as the 'contractor' or 'claimant'). The claimant filed O.P. No. 175/1989 Under Sections 30 and 33 to set aside the award in so far as it went against him. That O.P. was dismissed. Against the Judgment in O.P.No. 175/1989, the contractor filed C.M.A. No. 640/1991 and the State of A.P. has filed C.M.A.N0. 236/1991. The contractor also filed O.S. No. 546/1989 Under Section 14 to 17 of the Arbitrator Act for filing of the Award passed by the arbitrator (D-3 in the suit) and to make it a rule of the Court and to pass a decree in terms thereof. The suit was partly decreed modifying the award. The learned Additional Judge directed D-l and D-2 (State of A.P.) a sum of Rs. 3,84,196/- to be paid to the plaintiff in respect of the claims made by him as against a sum of Rs. 3,96,196/- awarded by the arbitrator. The Court also reduced the rate


3,96,196/- awarded by the arbitrator. The Court also reduced the rate of interest from 18% to 9%. Both sides have questioned this decree. The contractor filed C.M.A.294/1991 and the State of A.P. filed C.R.P. No. 547/1991. O.S.No. 546/1989, O.P. No. 175/1989 and O.P.No. 395/1989 were disposed of by .a common Judgment.


2. The relevant facts are these. A contract was awarded to the appellant in CM. A. No. 357/1991 for doing 'Cement Concrete Lining Work' of Saraswathi Canal, Sriramsagar Project from 8.00 K.M. to 9.00 K.M. The agreement was entered into on 28-2-1983. The value of the contract is Rs. 4,61,663/-. It was to be completed within a period of six months from the date of handing over of the site. The site was handed over on 2-4-1983. The actual work started on 16-6-1983 and it could be completed only on 20-7-1985. The contractor invoked the arbitration clause in the agreement and filed a claim petition before the designated panel of arbitrators. The panel of arbitrators did not make the award within the time stipulated and therefore they become functus ojficio. The claimant, therefore, filed O.P.No. 76/1988 in the Court of the IV Addl. Judge, City Civil Court for the appointment of sole arbitrator for settlement of disputes arose in connection with the aforementioned contract. The Court allowed the petition by an order dated 17-8-1988 and appointed Sri K. Govinda Rao, retired District Judge as sole arbitrator in the place of panel of arbitrators for the adjudication of the disputes. The arbitrator entered on reference on 25-9-1988 on which date claim statement was filed by the contractor. The award was made on 9-3-1989. The arbitrator inter alia held that on account of release of water into the canal on 4 occasions i.e., 13-7-1983,26-2-1984,1-7-1984 and 25-3-1985, the contractor could not execute the work


and 25-3-1985, the contractor could not execute the work within the time schedule. The prolongation of the work was held to be on account of breach of contract and defaults on the part of the employer.


3. We shall now proceed to discuss the claims dealt with in the Award in seriatim and record our conclusions as to whether the impugned Judgment of the Civil Court confirming or modifying the award is sustainable.

4. The relevant details relating to Claim No.1 are as follows:- ________________________________________________________________________________________
  Nature of the claim.  Amount            Amount allowed Civil Court's
                                claimed.           by Arbitrator.   Decision
________________________________________________________________________________________

                                 Rs.                Rs.
 (a) Return of EMD;        12,000/-            12,000/-         Award confirmed.
 (b) Return of Bank
     Guarantee.                 9,000/-             9,000/-           -do-
 (c) Return of FSD        33,064/-            33,064/-               -do-
 (d) Work done but
     not paid                  25,000/-             6,528/-               -do-
 (e) Bills payable on
     the basis of S.S.R.
     Rates in force
     for the work done
     during 1983-84
     and 1984-85.            1,83,293/-          1,70,945/-           -do-
________________________________________________________________________________________

Regarding items (a) to (d), there is no dispute. As observed by the learned Arbitrator, the Earnest Money Deposit etc., was not forfeited on the ground of the contractor committing breach of contract. On the other hand, the finding is that the breach was on the part of the Department. Hence, on the completion of the work, the Department was liable to refund these amounts.


5. The dispute centres around item (e) of Claim No. 1, in respect of which, the arbitrator awarded a sum of Rs. 1,70,945/-. The award on this item has been challenged by the Government on the ground that the Agreement does not provide for extra rates and Clause 59 of A.P. Detailed Standard Specifications (APDSS) is a specific bar against payment of any extra amount for the work done during the prolonged period of contract. It is the finding of the arbitrator that the prolongation of the work much beyond the contractual period was for reasons beyond the control of the claimant and it was solely attributable to the periodical release of water into the canal, which amounted to a breach of fundamental contractual obligation. Admittedly, the water was released in four spells, i.e., on 13-7-1983 to 18-1-84; 26-2-1984 to 11-4-1984; 1-7-1984 to 15-1-1985; and 25-3-1985 to 16-4-1985. The work was ultimately completed on 20-7-1985. It is not the case of the Department that the contractor despite this uncontemplated contingency, could have completed the work earlier. The Department only contended that between 2-4-1983 when the site was handed over and 16-6-1983 when the actual work was started, the contractor could have made more progress. But, here again, the finding of the arbitrator while discussing claims 3 and 4, is that the commencement of the work by the claimant was delayed by reason of defaults on the part of the Department, viz., non-installation of pipeline for curing and non-completion of earth work by another contractor. As far as the prolongation of the work beyond the originally stipulated period of contract,


contractor. As far as the prolongation of the work beyond the originally stipulated period of contract, the arbitrator categorically found that the Department committed breach of contract by frequently releasing water into the canal. This finding has not been assailed nor can it be assailed on any valid ground. On this finding, the learned arbitrator proceeded to hold that "the agreement rates are workable during the agreement period only, due to escalation of prices, for the work done after the agreement period, the claimant had to spend more on labour, machinery and material. The claimant had to spend this extra expenditure due to the default of the Department." The learned arbitrator also observed that the documents marked for the claimant showed that the Departmental authorities gave an assurance to the claimant that he would be paid for the work done beyond the contract period at the current Standard Schedule of Rates (S.S.Rs.) + the tender percentage. The arbitrator referred to Exs. A-14, A-22, A-23 and A-25 in this connection. He also observed that the demand for payment was not in the nature of a claim for compensation which is prohibited by Clause 59 of APDSS. The learned arbitrator relied upon the decision of this Court in State of A.P. v. Shivraj Reddy, (1988)2 APLJ 465 in support of his conclusion that the claim for payment at the prevailing Standard Schedule of Rates for the work done during the extended period of contract does not fall within the mischief of Clause 59 which bars a claim for compensation on account of delays or hindrances to the work from any cause whatsoever.


6. The contention of the learned Government Pleader is that the claim for payment at the prevailing S.S.Rs. + tender percentage is nothing but a claim to award compensation for the loss suffered by the contractor on account of escalation in costs and, therefore, Clause 59 squarely applies. He relies upon the Division Bench decision of this Court in State of A.P. v. Associated Engineering Enterprises, ; and Prasad and Co., Hyderabad v. Superintending Engineer, Irrigation Circle, Chittoor, to which one of us (Venkatarama Reddi, J.) was a party. He has also referred to the recent decision of the Supreme Court in Ch. Ramalinga Reddy v. Superintending Engineer, 1994 (5) SCALE 67 wherein a claim for escalation in rates was negatived, basing on Clause 59. It is also contended that there was no assurance to pay extra rates as observed by the learned arbitrator.

7. On the other hand, it is contended by the learned counsel for the contractor Mr. Prabhakar Sripada that the legitimate claim of the contractor cannot be denied from the stand point of Clause 59 and there are circumstances in the instant case to indicate that the Department itself waived its right to invoke Clause 59 or a clause of like nature. He also invited our attention to the observation of the arbitrator that the contractor did not at any time give an undertaking not to prefer any claim for extra rates during the extended period of the contract nor did the Department prescribe any such condition and therefore the cases cited by the Government Pleader have no application.


8. Clause 59 was considered and applied by this Court in more than one case. In State of A.P. v. Associated Engineering Enterprises, Hyderabad, it was observed at paragraph 26:
 "Applying the principle of the above decision to the fact of the case before us, it must be held that Clause 59 bars a claim for compensation on account of any delays or hindrances caused by the department. In such a case, the contractor is entitled only to extension of the period of contract. Indeed, such an extension was asked for, and granted on more than one occasion. (The penalty levied for completing the work beyond the extended period of contract has been waived in this case.) The contract was not avoided by the contractor, but he chose to complete the work within the extended . time. In such a case, the claim for compensation is clearly barred by Clause 59 of the APDSS which is admittedly, a term of the agreement between the parties."

It may be noticed that in the above case, claim No. 1 which was turned down on the basis of Clause 59 was for compensation pertaining to the Original period of contract as noted at paragraph 31 of the Judgment. Referring to the earlier Division Bench Judgment rendered by Jeevan Reddy, J., (as he than was) and Bhaskar Rao, J, the learned Judges posed the question and answered as follows:-
 "The question is whether any claim for compensation is permissible for the original period of contract ? It was held by a Bench of this Court of which one of us (Jeevan Reddy, J.) was a member - in A.A.O. No. 786 of 1986 dated 1-12-1988, that such a claim is not permissible by virtue of Clause 59 of the APDSS."


In Prasad and Company's case (3 supra), the Division Bench, of which one of us (Venkatarama Reddi, J.) was a member, held that escalation over and above the agreed rates during the currency of the agreement period was clearly barred by P.S.59 of APDSS. In Ramalinga Reddy's case (4 supra), the Supreme Court had gone a step further and held that the claim for the payment of extra rate even for the work done beyond the agreement period was unsustainable in the light of the specific prohibition contained in Clause 59. However, it is not discernible from the Judgment whether the prolongation of the contract was for reasons attributable to the contractor or on account of breach of contractual obligations by the employer as in the instant case. Be that as it may, even assuming that Clause 59 would have in the normal course come in the way of the petitioner claiming escalation in rates for the work done beyond the contractual period, the special facts and circumstances of this case stand apart and do not attract the bar of Clause 59. We agree with the learned counsel for the contractor that the immunity conferred by the exclusionary Clause 59 must be deemed to have been waived and the Department is estopped from taking shelter under it.


9. In Ex. A-14 dated 21-10-1984, the Superintending Engineer in continuation of his letter dated 1-8-1984, directed the Executive Engineer to submit the balance work estimates with current S.S.Rs. of 1983-84 and 1984-85 + tender percentage together with the details of financial implications. A copy of it was marked to the contractor. In his letter dated 25-1-1985. (Ex. A-17), the Superintending Engineer while mentioning the fact that the canal was closed from 15-1-1985, requested the contractor to resume the balance work before 31-1-1985 and to complete the same by middle of April, 1985. The letter further states, "you are requested to come up with a revised month wise programme to complete the work by middle of 4/1985 and apply for extension of time. Your request for the payment of balance work at the rates of 1983-84 is under consideration and will be recommended after scrutiny in this office." In reply to the letters from the Superintending Engineer, the Executive Engineer sent up detailed factual reports and an estimate of financial implications, vide his letter dated 30-7-1985 (Ex. A-22), and reported that the claim of the contractor for extra rates was genuine and for 27% of the work executed by him, the SSRs., of 1983-84 have to be allowed and for 60% of work, the SSRs of 1984-85 + tender percentage should be allowed. He arrived at the total amount as Rs. 1,70,945/- which is the same that was awarded by the arbitrator. He mentioned in the above letter dated 30-7-1985 that "with great difficulty and enthusiasm, the contractor has completed the entire work of lining by


that "with great difficulty and enthusiasm, the contractor has completed the entire work of lining by 30-7-1985 as per the programme." In Ex. A-25 dated 19-12-1986, the Executive Engineer in his letter addressed to the Superintending Engineer stated, "on the assurance given by the departmental officers upto Superintending Engineer's level that his claim will be considered on merits, he has completed the work without entering into litigations and we could create irrigation potential as programmed." The Superintending Engineer who is the officer that signed the agreement with the contractor, in his letters dated 8-7-1987 and 4-6-1987 (Exs. A-26 and A-27) reiterated what was reported by the Executive Engineer and sought the approval of the Chief Engineer for payment of revised rates. Specific reference was made in the award to Exs. A-14, A-20 and A-23. Apart from that, it was observed by the learned arbitrator that the "documents marked for the claimant show that the departmental Engineers gave an assurance to the climate that he would be paid for the work done beyond the contract period at the current SSR Rates +tender percentage prevailing for the years 1983-84 and 1984-85." Hence, we are referring to these letters which were marked before the Arbitrator. The assurances/recommendations made by the departmental officers came in the wake of persistent requests made by the contractor to pay escalated rates, vide Ex. A-9 dated 21-12-1983; Ex.A-10 dated 9-4-1984; Ex. A-12 dated 1-7-1984 and Ex. A-19 dated 15-4-1985 while asking for extension of time. Whenever he sought for extension of time, he was consistently making a request for allowing payment at current S.S.Rs.


extension of time, he was consistently making a request for allowing payment at current S.S.Rs. plus or minus tender premium. This fact is not disputed. As seen from Ex. A-17 etc., the Department itself persuaded the contractor to seek extension of time all the while assuring him that his request for payment of balance work at the extra rates was under active consideration and will be recommended after due scrutiny. Follow up action was taken by calling for reports from the Executive Engineer who in turn submitted proposals for payment on the basis of S.S.Rs. prevailing in 1983-84 and 1984-85. In this state of affairs, the contractor proceeded to do the work whenever it was possible to do. At no point of time, the Superintend ing Engineer or any other departmental official tried to shut out the claim of the contractor on the basis of Clause 59. On the other hand, the correspondence makes it crystal clear that the concerned officials including the Superintending Engineer who signed the agreement being fully conscious of the inability of the Department to keep up to the contractual obligations, lulled the contractor into the belief that his case for extra rates would be favourably considered and made him proceed with the work in larger public interest.


10. It is well settled that a waiver of right may be oral or written or inferred from conduct. Waiver can also arise from a promise of forbearance to enforce a term of the contract. The proposition is succinctly stated in Chitty on Contracts (Volume-1,......25th Edition) at para 1495 as follows:
 "Waiver may also be held to have occurred if, without any request, one party represents to the other that he will forbear to enforce or rely on a term of the contract to be performed or observed by the other party, and the other party acts in reliance on that representation."

Again at para 1497, it is stated that:
 "The party who forbears will be bound by the waiver and cannot set up the original terms of the agreement. If, by words or conduct, he has agreed to led the other party to believe that he will accept performance at a later date than or in a different manner from that provided in the contract, he will not be able to refuse that performance when tendered."
What is said at para 1498 is also apposite:
 "Where one party has induced the other party to accede to his request, the party seeking the forbearance will not be permitted to repudiated the waiver and to rely on the letter of the agreement."

This is exactly the situation here as apparent from the documents referred to or forming part of the award. Though there must be a promise or representation to attract the principle of waiver as pointed out in the Law of Contract by Treitel (8th Edition at page 102), the promise need not be express and direct.


"There must be a promise (or an assurance or representation in the nature of a promise) which is intended to affect the legal relationship between the parties and which indicates that the promisor will not insist on his strict legal rights, arising out of that relationship, against the promisee. Here, as elsewhere, the law applies an objective test. It is enough if the promise induces the promisee reasonably to believe that the other party will not insist on his strict legal rights." However, "to bring the equitable doctrine into operation, the promise or representation must be 'clear' or 'unequivocal', or precise and unambiguous."


On the facts of the case, it can be reasonably said that there was waiver of the right to enforce Clause 59. Alternatively, we hold that the arbitrator's finding that there was an assurance to pay the extra rates cannot be said to be perverse or vitiated by an error of law apparent on the face of the award. The assurance may not be direct or express but it is possible to take the view that there was an implied promise to pay the extra rates for the work done beyond the agreement period notwithstanding Clause 59. The promise had emanated from a competent officer who signed the agreement itself. If the view taken by the arbitrator is reasonably possible or plausible, we cannot interfere with the award on the ground of error apparent on the face of the award. We, therefore, uphold the award in regard to Claim No. 1 (e) and the learned Additional Judge, City Civil Court was justified in confirming the award to this item. Claim No. 2 (Loss of Advances to Labour):-
11. A sum of Rs. 5.16 lakhs was claimed by the contractor to compensate the loss alleged to have been incurred by him on account of advances to labour. The arbitrator rejected the claim and the award was confirmed by the Civil Court in this regard. The arbitrator has given cogent reasons for rejecting this claim. The learned counsel for the contractor could not assail the finding of the arbitrator on any ground germane to Section 30 of the Arbitration Act. Hence, no interference is called for.


12. Claim Nos. 3 and 4 (Charges incurred on idle Labour and Machinery):-The contractor claimed Rs. 2.94 lakhs. The learned arbitrator divided the claim into 4 parts period-wise. In respect of the 3rd claim, he awarded Rs. 12,000/- for the 1st period i.e., between 2-4-1983 and 16-6-1983; Rs. 19,800/- for the 3rd period between 10-2-1984 to 11-4-1984 and Rs. 37,500/- for the 4th period i.e., between 25-3-1985 and 16-4-1985. Altogether, he awarded Rs. 69,300/- under claim No. 3. As regards the 4th claim, the arbitrator awarded Rs. 19,025 /- for the 1st period; Rs. 15,951/- for the 3rd period and Rs. 9,380/- for the 4th period. Altogether, a sum of Rs. 44,358/- was awarded under claim No. 4. In regard to the 2nd period, i.e.,from 22-6-1983 to 29-6-1983, the arbitrator rejected the claims. The award pertaining to claims 3 and 4 was upheld by the Civil Court. The learned arbitrator found, as already noticed, that the work could not be started by the contractor till 16-6-1983 on account of non-supply of pipelines for curing and non-completion of the earth work by the earth work contractor and during this period, the labour and machinery had to remain idle for nearly 40 days by reason of default on the part of the Department. We are of the view that having regard to Clause 59 of the contract, the


the Department. We are of the view that having regard to Clause 59 of the contract, the arbitrator exceeded his jurisdiction in awarding compensation for the 1st period which falls within the stipulated period of contract. Evidently, the Arbitrator acted in disregard of the aforementioned provision. The decision of this Court cited supra squarely apply to the fact situation obtaining in the present case insofar as it relates to the 1st and 2nd periods. As far as the 3rd and 4th periods are concerned, the position is different. The 3rd and 4th periods fall beyond the agreed period of performance of contract. As already seen the finding of the arbitrator is that the Department let in water into the canal for its own reasons and the cross-bunds which were laid to prevent leakage of water from the regulator were breached by the ryots of the locality. The claimant could not, therefore, take up any work and the result was that the labour and machinery remained idle for 30 days during the 3rd period and for 20 days during the 4th period, the learned Arbitrator relied upon the reports of the departmental authorities themselves in support of his conclusion and estimated the quantum of loss accordingly. We have already discussed while dealing with claim 1 (e) about the applicability of of Clause 59 and we reached the conclusion that the Department cannot take shelter under Clause 59 for the work done by the claimant beyond the stipulated period on the principle of 'waiver' and 'estoppel". For the same reason, we are of the view that the award in regard to 3rd 4th periods ought not to be disturbed. Therefore, as far as claim No. 3 is concerned, the award should have been upheld to the extent of Rs. 57,300/- (by deducting Rs. 12,000/-awarded for the 1st period) and as


deducting Rs. 12,000/-awarded for the 1st period) and as regards claim No. 4, it should have been confirmed to the extent of Rs. 25,333/- only (by deducting Rs. 19,025/- awarded for the 1st period). We allow the appeal (C.M.A. No. 236/1991) and the revision (C.R.P. No. 547/1991) filed by the State Government to this extent.


13. The learnea counsel tor the contractor challenged the correctness of the quantum of amounts awarded under claim No. 4. It is commented that the supposition of the arbitrator that the "idle days for both labour and machinery will always be identical." is not correct. We do not think that this proposition even if it does not appeal to the Court introduces a palpable error of law which is a sine qua non for setting aside the award. We, therefore, reject the contention of the learned counsel.


14. Claim No. 5 (Claim for payment towards de-silting and de-watering):-The contractor claimed Rs. 1,05,000/-. The arbitrator awarded Rs. 30,000/-. The learned Additional Judge reduced the amount to Rs. 18,000/-. This reduction has been challenged by the learned counsel for the contractor on the ground that on the basis of the very findings of the arbitrator which in turn were based on the record of the Department, de-silting and de- watering operations had to be done on 4 occasions but not 3 occasions as held by the Court. In modifying the award, the learned Additional Judge pointed out that the record shows that the water was released into the canal in breach of the contract only three times. The learned counsel for the contractor has invited our attention to the letters and reports of the Executive Engineer as well as the facts admitted in the rebuttal statement itself which disclose that there was unexpected release of water on 4 occasions after the work was started or resumed. We see force in this contention. The learned Additional Judge observed that the removal of silt on 22-6-1983 and also on 16-4-1985 was part of the awarded work. We are unable to understand on what basis this observation has been made. In any case, it amounts to entering into the merits of the controversy which is not permissible while dealing with the objections to the award. The fact, however, remains that there is an error apparent on the face of the award insofar as the arbitrator assumed that the work was interrupted on account of the release of water on 5 occasions instead of 4 occasions. Hence, we modify the award by reducing a sum of Rs. 6,000/- instead of Rs. 12,000/- and hold that the arbitrator ought to have awarded a sum of Rs. 24,000/- under claim No. 5.