Mr. T. Ali M/s. Kohinoor Roller Flour Mills vs M/s. Koodal Industries Ltd.

The Honourable Mr. Justice M. Venugopal

The Appellant/Respondent/Defendant has filed the instant Second Appeal as against the Judgment and Decree dated 29.06.2004 in A.S. No.

140 of 2000 passed by the Learned Principal District Judge, Madurai in reversing the Judgment and Decree dated 20.03.2000 in O.S. No. 1227

of 1995 passed by the Learned II Additional Subordinate Judge, Madurai.

Plaint Facts:

(i) The Respondent/Appellant/Plaintiff is a limited Company incorporated under the Indian Companies Act, One of the Directors of the

Respondent/Plaintiff Company B. Sundarapandian, is empowered to sue and be sued on behalf of the Company as per resolution of meeting of the

Board of Directors of the Respondent/Plaintiff Company dated 27.04.1993.

(ii) The Respondent/Plaintiff is a manufacturer of wheat flours at Madurai City. The Appellant/Defendant is running a flour mill at Kottayam, Kerala

State. The Appellant/Defendant for the purpose of its business approached the Respondent/Plaintiff at Madurai Town for the supply of Wheat,

which is the raw material for the flour mill of the Respondent/Plaintiff.

(iii) According to the Respondent/Plaintiff it was willing to supply Wheat to the Appellant/Defendant on the specific oral agreement that the

Appellant/Defendant should pay interest at the rate of 30% per annum, compounded with Annual rests (even though 18% per annum interest was

collected as per bill in other cases for the purchase of Wheat-products).

(iv) The Appellant/Defendant had dealings with the Respondent/Plaintiff at Madurai Town by purchasing from 06.10.1992 till 16.02.1993. The

Appellant/ Defendant''s agent one R. Duraisamy acted on behalf of his principal. The Appellant/ Defendant made part payments, which the

Respondent/Plaintiff had credited towards the balance amount due from the Appellant/Defendant. Even these payments were to be extracted from

the Appellant/Defendant by the Respondent/Plaintiff by repeated personal visits to the Appellant/Defendant''s place to collect the amounts, as

letters and telegrams sent from Madurai proved futile. At the end of the accounting year on 31.03.1994, the Respondent/Plaintiff sent a statement

of account with calculation of interest at 30% per annum along with a covering letter, requiring the Appellant/Defendant to pay the balance amount

without further delay. The Appellant/Defendant had kept quiet without sending any reply. However it made some periodical part payments. The

last payment made by the Appellant/Defendant was realised by the Respondent/Plaintiff on 17.03.1995. As per the statement of account sent to

the Appellant/Defendant as on 15.02.1995 there was a balance of Rs. 2,02,340/-. As regards the travelling expenses for collecting the amount

from the Appellant/Defendant, the Respondent/Plaintiff sent a total sum of Rs. 3,597.85/- from 20.09.1993 to 04.01.1995, the details of which

were furnished to the Appellant/Defendant along with the statement of accounts.

(v) The Appellant/Defendant made a part payment of Rs. 36,179/- on 17.03.1995. Interest due on the balance amount of Rs. 1,42,932/- till

16.03.1995 came to Rs. 3,407/-. The further cheque collection charge of Rs. 121/- and travelling expenses of Rs. 249/- incurred on 06.03.1995

were also liable to be paid by the Appellant/Defendant. As on 18.03.1995 a sum of Rs. 1,73,535.85 P. (Rupees One Lakh Seventy Three

Thousand Five Hundred and Thirty Five and Paise Eighty Five only) was still due from the Appellant/Defendant on account of the dealings which

the Appellant/Defendant had with the Respondent/Plaintiff at Madurai The Respondent/Plaintiff sent letters to the Appellant/Defendant on

21.03.1995 and 05.05.1995 demanding the balance amount immediately. The Appellant/Defendant neither paid the balance amount nor sent any

reply.

(vi) The Respondent/Plaintiff caused a lawyer''s notice dated 07.08.1995 to the Appellant/Defendant. The Appellant/Defendant received the notice

on 10.08.1995 and sent a reply on 21.08.1995 to the Respondent/Plaintiff''s Counsel. In reply notice, the Appellant/Defendant totally denied the

Respondent/Plaintiff''s claim. Therefore the suit was filed for the recovery of a sum of Rs. 1,73,535.85 (Rupees One Lakh Seventy Three

Thousand Five Hundred and Thirty Five and Paise Eighty Five only with subsequent interest and costs from the date of plaint till the date of

realisation.

The Written statement Pleas of the Appellant /Defendant:

(i) According to the Appellant/Defendant, there was no oral agreement to pay interest at all that too at 30% per annum compounded with annual

rests. The Respondent/Plaintiff did not mention any special circumstances for entering into such an Agreement to pay an usurious interest (though

according to the Respondent/Plaintiff/ the rate of interest was at 18% per annum). The very claim of interest was penal and usurious. There was no

Agreement for payment of interest at all. As such the claim of interest was unsustainable.

(ii) The said R. Duraisamy never been authorised by the Appellant/Defendant to act as an Agent. There was no principal and Agent relationship as

between the Appellant/Defendant and the said Duraisamy. The averment of the Respondent/Plaintiff that it sent Account Statement for the

accounting year ending on 31.03.1994 and the same was deemed to be accepted was quite unsustainable. The claim of the Respondent/Plaintiff

that he sent a Statement of Account dated 15.02.1995 and there was a balance of Rs. 2,02,340/- was false. The claim regarding cheque collection

charges and conveyance charges were unsustainable.

(iii) The entire accounting was taken and the entire balance was arrived at Rs. 36,179/- only and agreed between the parties. The balance amount

was paid by means of a cheque in full quit. The averment that a sum of Rs. 1,73.538.85/- was payable to the Respondent/Plaintiff was false. The

Appellant/ Defendant did not receive the alleged letters dated 21.03.1995 and 05.05.1995 from the Respondent/Plaintiff.

(iv) For the legal notice of the Respondent/Plaintiff dated 07.08.1995, the same was replied by the Appellant/Defendant on 21.08.1995. The

Appellant/Defendant was not liable to pay any amount. There was no balance amount in the business transaction as between the

Respondent/Plaintiff and the Appellant/Defendant.

(v) The Respondent/Plaintiff quoted a higher price when compared to other and therefore the Appellant/Defendant stopped purchasing the raw

materials from the Respondent/Plaintiff. Aggrieved over the same, the Respondent/Plaintiff filed the present suit with fabricated accounts and,

created evidence.

(vi) The Respondent/Plaintiff did not have any cause of action. The dates mentioned in the plaint were all false. The Respondent/Plaintiff was not

entitled for any relief. The suit was to be dismissed with costs together with compensatory costs u/s 35(A) of the Civil Procedure Code.

Before the trial Court, in the main suit 1 to 3 issues were framed for adjudication, On behalf of the Respondent/Plaintiff witnesses P.W. 1 and

P.W. 2 were examined and Exs. A.l t A.16 were marked. On behalf of the Appellant/Defendant witness D.W. 1 was examined and no documents

were marked.

On appreciation of oral and documentary evidence available on record, the trial Court-dismissed the suit with costs.

The First Appellate Court viz., the learned Principal District Judge- Madurai in appeal set aside the Judgment and Decree in O.S. No. 1227 of

1995 dated 20.12.2000 on the file of the II Additional Sub-Judge, Madurai and decreed the suit for a sum of Rs. 1,35,6487- with future interest

at 6% per annum from the date of the Decree till the date of realisation with proportionate costs.

Being dissatisfied with the judgment and decree dated 29.06.2004 in A.S. No. 140 of 2000 passed by the First Appellate Court, the

Appellant/Defendant has projected the present Second Appeal before this Court.

At the time of admission of the Second Appeal, this Court framed the following Substantial Questions of Law.

(a) Whether claim of interest without any balance of principal is maintainable, in the absence of memo of calculation?

(b) Whether the suit claim has become barred by limitation?

(c) Whether in a commercial transaction, compound interest is recoverable?

The Contentions, discussions and findings on point No. (a):

(i) The Learned Counsel for the Appellant/Defendant submits that the First Appellate Court has failed to appreciate and discuss the point as to

whether the claim of interest alone, independent of principal is sustainable and further the Respondent/Plaintiff has not debited any amount towards

interest in the Account-books.

(ii) Advancing his arguments, it is the contention of the learned Counsel for the Appellant/Defendant that it is nobody''s case that as per Ex. A.15,

the Appellant/Defendant paid an interest of Rs. 1,12,669.65/- and indeed the interest has been collected independent of the principal and claim by

means of a suit only on 09.10.1995.

(iii) Expiating his submissions, it is the submission of the learned Counsel for the Appellant/Defendant that the oral evidence of P.W. 2 has not been

appreciated by the First Appellate Court in a proper, perspective manner and P.W. 2 has deposed before the trial Court that the interest is

payable, the same is not reflected in the account and therefore interest cannot be recovered as a matter of right.

(iv) Added further, it is the plea of the Appellant/Defendant that as on the date of filing of the suit, no amount is due to the Respondent/Plaintiff by

the Appellant/Defendant as per account books

(v) Yet another plea taken on behalf of the Appellant/Defendant is that the Respondent/Plaintiff has not claimed any interest during the year 1992-

1993 and in any event no importance could be attached to Exs. A.4 letter dated 15.04.1994 sent by the Respondent/Plaintiff to the

Appellant/Defendant, only on the basis of oral agreement, which is held as not proved.

(vi) Lastly it is the submission of the learned Counsel for the Appellant that as per Section 34 of CPC and the Sale of Goods Act, the claim of

interest alone is not permissible after the payment of entire principal without a specific contract and that too when both the Courts have held that

the Respondent/Plaintiff has failed to prove the oral contract.

(vii) In response, it is the contention of the learned Counsel for the Respondent/Plaintiff that the First Appellate Court viz., the Principal District-

Judge, Madurai has taken into account the entire oral and documentary evidence available on record and has also come to the correct conclusion

in decreeing the suit for a sum of Rs. 1,38,648/- with future interest at 6% per annum from the date of decree till the date of realisation with

proportionate costs and the same need not be disturbed by this Court at this distance of time.

(viii) At this stage, it is useful for this Court to refer to the evidence of P.W. 1 and P.W. 2 and D.W. 1 for fuller and better appreciation of the

merits of the case.

(ix) P.W. 1 (Respondent/plaintiff''s Director) in his evidence before the trial Court has deposed that the Respondent/Plaintiff Company

manufactures Wheat, Atta, Rava flour and the main product of the Respondent/Plaintiff Company is Wheat and the Appellant/Defendant is also

involved in producing refined wheat flour (Maida) and having a Company at Kottayam in Kerala State and for the Appellant/Defendant Company

also the main product is Wheat and the Wheat will be brought from outside and kept as stock and the flour will be grained and kept under the

Appellant/Defendant from the Respondent/Plaintiff Company urgently asked for Wheat. Since the Appellant/Defendant is running a mill, the

Respondent/Plaintiff accepted and in one week, they agreed to return the money and informed that they could not pay immediately and if the

amount as agreed if not paid within a week, then the said amount will have to be repaid along with interest at 30% per annum, which has been

accepted by the Appellant/Defendant. Since the Wheat is the raw material, the Respondent/Plaintiff''s interest is at 30% per annum and generally

the interest is at 24% per annum.

(x) It is the further evidence of P.W. 1 that the Appellant/Defendant for the raw material of Wheat agreed 30% interest and from 16.10.1992 to

16.02.1993 had transactions with the Respondent/Plaintiff and the ledger page Nos. 71 and 198 is Ex. A.1 and Ex. A.2 is the ledger page No,

306 for the year 1994-1995 and the bill books are Ex. A.3 (five books) which shows that the Appellant/Defendant has received the goods from

the Respondent/Plaintiff and apart from these books, there are other bill receipts and that the Appellant/Defendant approached it through broker

Duraisamy and the said Duraisamy is the Agent of the Appellant/Defendant and that the Respondent/Plaintiff has issued a telegram to the

Appellant/Defendant demanding the amount and he has also asked for the money to be paid by the Appellant/Defendant directly and Ex. A.4 is the

copy of the letter dated 14.04.1994 together with interest slip addressed to the Appellant/Defendant, which has been received by the

Appellant/Defendant and marked as Ex. A.5 for which no reply has been sent by the Appellant/Defendant.

(xi) Continuing further, it is the evidence of P.W. 1 that the Appellant/Defendant has paid the amount amount in small portions and as on

18.03.1995 a sum of Rs. 2,02,340/- has remained as balance and on 17.03.1995 for a sum of Rs. 36,179/-, the Appellant/Defendant issued a

cheque and the Respondent/Plaintiff sent a letter dated 21.03.1995 claiming the balance which is Ex. A.6 and with a receipt, a letter Ex. A.7 dated

05.05.1995 has been written and since the Appellant/Defendant has not sent any reply, no amount has been paid and that Ex. A.13 is the

resolution giving authorisation to him to sue and that Ex. A.14 is the Certificate showing that the Respondent/Plaintiff Company is a registered one.

(xii) P.W. 1(in his cross-examination) has deposed that he cannot state specifically for how many ton weight of Wheat the Appellant/Defendant has

to pay the amount and there is no agreement in writing for purchasing Wheat through the Respondent/Plaintiff that interest should be paid. But the

agreement is oral for payment of interest and that in Exs. A.1 and A.2 registers, there are no interest details to be paid by the Appellant/Defendant

and the final accounts in Ex. A.13 has been prepared on Exs. A.1 and A-2 basis and as per Exs. A.1 and A.2, the Appellant/Defendant has no

due to be paid to the Respondent/Plaintiff and in Ex. A.3-bill book also there is no mention about the payment of 30% compound interest and that

as per Ex. A.2 ledger, the Appellant/Defendant, after payment of amounts in installments has to pay a sum of Rs. 36,179/- and that the said

amount has been paid by the Appellant/Defendant.

(xiii) It is the further evidence of P.W. 1 that as per Exs. A.4 and A.5, the present suit has been filed and in Ex. A.3-bill book, it is mentioned as

24% interest to be paid and since the Wheat is the main product for both the Respondent/Plaintiff and the Appellant/Defendant, additional 6%

interest has been claimed as per oral agreement.

(xiv) P.W. 2(Chartered Accountant) in his evidence has stated that for the Respondent/Plaintiff, he is the Auditor for the past 13 years and that

Auditor firm in Thiagarajan & Company, he is one of the partners and that his father is Thiagarajan and he has audited the accounts of the

Respondent/Plaintiff and as per the inspection, he has given a report and prepared the balance sheet and as per balance sheet prepared by him,

income tax has been paid and he has audited the accounts for the year 1994-1995 and Ex. A.15 Ledger has not been maintained by him.

Moreover, he is not in a possession of the said Ledger and that the Ledger for the year 1994-1995 has been prepared as per Mercantile System

and Cash System and the amount to be paid for the product will be mentioned as the asset and the interest amount will not be mentioned and in the

ledger how much interest amount is to be received from an individual has not been made mentioned of and as per ledger, there is no amount due as

interest.

(xv) D.W. 1 (Appellant/Defendant''s proprietor) in his evidence has stated that in the Appellant/ Defendant Company. Wheat will be purchased

and converted into Maida and with the Respondent/Plaintiff, the Appellant/Defendant Company has 25 years connection and prior to year 1992-

the Appellant/Defendant Company has not paid any interest amount, for the outstanding amount to the Respondent/Plaintiff and from the year

1992-1993 Wheat has been purchased from the Respondent/Plaintiff and it is incorrect to state that the Appellant/Defendant has agreed to pay

30% compound interest and it is incorrect to state that he has agreed to pay that kind of interest in the presence of Agent Duraisamy and for the

wheat purchased during the year 1992, he has not-paid the amount in full and there remained balance and he has paid the balance amount in small

portions and during February 1995, he has paid the final balance amount of Rs. 36,179/- and one Pandian has visited Kottayam and discussed

with him after verifying the accounts has received the aforesaid amount and on that-day all the amounts have been verified and paid and no amount

is due to be paid.

(xvi). D.W. 1 in his further evidence has stated that during the year 1994-1995 (for one year period) no business has been conducted and that the

Appellant/Defendant mill has been closed during the said period and no work has been transacted in the mill in that period and it is incorrect to

state that he knows about the interest of 24% mentioned in the bills and also that it is incorrect to state that he has agreed to pay further 6%

interest.

(xvii) The suit claimed is based on Ex. A.4 notice dated 15.04.1994 sent by the Respondent/Plaintiff addressed to the Appellant/Defendant. In Ex.

A.4 notice dated 15.04.1994. it is mentioned by the Director of the Respondent/Plaintiff that as per the statement, a sum of Rs. 2,92,932/- is due

from the Appellant/Defendant including the accrued interest of Rs. 1,06,753/- for belated payment of the Wheat bills and also a request has been

made to confirm the statement and returned one copy to the Respondent/Plaintiff duly signed. A reading of Ex. A.4 notice dated 15.04.1994 says

that a sum of Rs. 2,92,932/- plus interest at 30% agreed upto the date of payment may be sent to the Respondent/Plaintiff by the

Appellant/Defendant.

(xviii) It is the contention of the learned Counsel for the Appellant/Defendant that as per accounts of the Respondent/Plaintiff admittedly in this case

there are no dues. The Respondent/Plaintiff has filed the present suit claiming interest and a claim for an interest alone in the suit is not maintainable

in the eye of law.

(xix) The Learned Counsel for the Appellant/Defendant projects a plea as per Ledger there is no balance of interest and in the present case oral

agreement relating to interest aspect has not been proved. A perusal of Ex. A.1 ledger for the year 1993 at page 71 and page 198 and also Ex.

A.2 ledger of the Respondent/Plaintiff pertaining to the year 1994-1995 at page 306 indicate that there is no mention of interest and there are no

details in the aforesaid registers/ledgers to point out that the Respondent/Plaintiff can claim interest from the Appellant/Defendant. The details

mentioned in Exs. A.1 and A.2 Ledgers, why it has not found a place in Ex. A.4 has not been properly explained. Before the trial Court, one

Duraisamy, an Agent has not been examined as a witness. The said Duraisamy is said to have acted as an Agent for and on behalf of the

Appellant/Defendant. Though the Respondent/ Plaintiff claimed 30% oral interest has been agreed upon between the parties orally, the same has

not been proved to the satisfaction of this Court by not examining the Agent Duraisamy. The non-examination of said Duraisamy (Agent) is not a

favourable circumstance in favour of the Respondent/Plaintiff. A Perusal of Ex. A.2 ledger of the Respondent/Plaintiff shows that the same has

been verified and found correct on 09.11.1995. In Ex. A.2 ledger on 17.03.1994 by cheque 363416 on Nedungudi Bank Ltd., Cochin, a sum of

Rs. 36,179/- has been entered as the amount as it has been realised. The Learned Counsel for the Appellant/Defendant informs this Court that

after Ex. A.4 notice dated 15.04.1994, the Appellant/ Defendant paid Rs. 13,000/- and odd.

(xx) It is the specific contention of the Learned Counsel for the Appellant/Defendant that when entire amount has been paid as per Ex. A.2, which

has been verified and found correct then in the absence of any oral agreement between the parties to levy interest, the suit filed claiming interest is

not maintainable.

(xxi) The Learned Counsel for the Appellant/Defendant submits that plaint reads as if it is a running account and therefore a claim has been made, a

perusal of the account proves that there is no running account. In fact, the evidence of P.W. 2 (Chartered Accountant) states that as per the

account, there is no due from the Appellant/Defendant. Moreover, there ought to be a due amount as per contract.

(xxii) The learned Counsel for the Appellant also submits that the appellant has stopped purchased, from the year 1995 from the

Respondent/Plaintiff merely because in Ex. A.3 bill book, the terms and conditions of sales clause 3 revers to ""the amount of bill is payable in full at

Madurai and all cheques are accepted subject to realisation and if payment has not-received within seven days from the date of the bill, interest will

be charged at 24% from the date of the bill, it is not open to the Respondent/Plaintiff to claim the interest, when it is the specific case of the

Appellant/Defendant that for the transaction between the parties, there is no agreement to charge interest.

(xxiii) Repelling the contention of the learned Counsel for the Appellant/Defendant, the learned Counsel for the Respondent/Plaintiff submits that as

per Section 73 of the Indian Contract Act, the Respondent/Plaintiff is entitled to claim interest till the date of payment and when there is breach of

contract, the Appellant/Defendant is liable to pay interest to the Plaintiff furthermore- the illustration (n) to Section 73 of Indian Contract Act-is

relied on the side of the Respondent/Plaintiff which runs as follows:

(n) A contracts to pay a sum of money to B on a day specified- A does not pay the money on that day; B in consequence of not receiving the

money on that day is unable to pay his debts, and is totally ruined, A is not liable to make good to B anything except the principal sum he

contracted to pay, together with interest upto the day of payment.

(xxiv) The Learned Counsel for the Respondent/Plaintiff also relies upon Section 61 of The Sale of Goods Act which enjoins as follows:

Interest by way of damages and special damages.

(1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or

special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed.

(2) In the absence of a contract to the contrary the Court may award interest at such rates as it thinks fit on the amount of the price-

(a) to the seller in a suit by him for the amount of the price-from the date of the tender of the goods or from the date on which the price was

payable;

(b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller-from the date on which the

payment was made.

(xxv) The Learned Counsel for the Respondent/Plaintiff also seeks in aid of Section 34 of CPC which speaks of interest and the same is as

follows:

Interest-

(1) Where and in so far as a decree is for the payment of money, the court may, in the decree, order interest at such rate as the court deems

reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on

such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent per annum as the

court deems reasonable on such principal sum from the date of the decree to the date of payment, or to such earlier date as the court-thinks fit.

Provided that where the liability in relation to the sum so adjudged had arisen '' out of a commercial transaction, the rate of such further interest

may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which

moneys are rent or advanced by nationalised banks in relation to commercial transactions.

Explanation I-In this sub-section ''nationalised bank'' means a corresponding new bank as defined in the Banking Companies Acquisition and

Transfer of Undertaking Act 1970 (5 of 1970).

Explanation II-For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of

the party incurring the liability.

(2) Where such a decree is silent with respect to the payment of further interest-on such principal sum from the date of the decree to the date of

payment, or other earlier date, the court shall be deemed to have refused such interest, and a separate suit therefore shall not lie.

(xxvi) At this juncture, this court worth recalls the decision in Associated construction and Engineeering Company and another, reported in AIR

1997 Gau 39 wherein it is observed herein:

The operative portion of the provisions as contained in sub-section (1) and subsection (2) of S. 34 clearly go to indicate that the discretion in the

Court vested under the said provision is not only with regard to the rate of interest, but it is with regard to whether the interest should be awarded

or not. The discretion is two fold, the Court may award interest and may award such interest at such rate as the Court-fee it reasonable to be

awarded, on the principal amount adjudged from the date of the suit till the date of the decree, in addition to any interest adjudged on such

principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding 6 per cent per annum as the Court

deems it reasonable on such principal sum from the date of decree to the date of payment, or to such earlier date as the Court thinks fit.

(xxvii) This Court, also aptly points the decision in A.K. Srinivasa Naidu Vs. S. Jayarama Reddiar Firm, wherein it is laid down as follows:

A seller is entitled to the award of interest on the price of the goods sold provided there was no contract to the contrary as between himself and

the buyer. This liability on the part of the buyer to suffer interest is a statutory liability arising u/s 61(2) of the Sale of Goods Act.

The concept of an ""usage"" has a special significance, as it is to be understood as ""custom"" which is often pleaded in common law litigations. To

establish custom, there should be such clinching and appealing material for the Court to support the case of the litigant to propound such a custom,

Usage and custom are often pleaded, but not proved. That proof of such usage could easily be negatived or falsified by the conduct of the parties

themselves, is an accepted principle.

In the absence of a contract to the contrary, the provisions of the Interest Act would come to the rescue of the creditor, whereby he could claim

interest at 6% per annum on the net debt due provided he makes a demand for that purpose.

(xxviii) Ordinarily, (sic) interest is to be paid at the agreed rate unless penal/excessive or transaction is substantially unfair.

(xxix) Future interest is really in the nature of damage for being kept out of money.

(xxx) A court of law has discretion both as regards rate of interest as to whether interest is to be allowed or not.

(xxxi) In the London Chatham and Dover Railway Company''s case, the House of Lords held that interest cannot be given by way of damages for

detention of a debt.

(xxxii) In Grindlays Bank P.L.C. Vs. Centre for Development of Instructional Technology, , at page 169 in paragraph 33, it is held as follows:

Plaintiff has claimed interest at the rate of 17-1/2% per annum on the ""principle of custom, usage, and trade, practice"" being the bank rate of

interest. Plaintiff has not adduced any evidence as to what is the rate of interest prevalent and if there is any such trade practice or custom or usage.

Plaintiff would have been entitled to interest under Interest Act, 1978 in case demand of interest had been made in a written notice sent to the

defendants. Even such notice has also not been proved on record, As such plaintiff is not entitled to interest up to the date of institution of the suit.

(xxxiii) In Sri Siya Ram and others Vs. Smt. Lilawati, at pages 77-78 in paragraph 9, it is observed hereunder:

Second contention raised on behalf of the appellants is with regard to the interest upon the sum of Rs. 6,000/-payable to the defendants-

appellants. I think that the appellate Court has rightly not awarded interest to the defendants-appellants when they were found guilty of fraud. The

question of interest is discretionary with the Court unless it is agreed upon between the parties or it is provided under some statute. Section 3 of the

Interest Act, 1978 also does not support the claim of the appellants for interest in the facts and circumstances of this case. Section 3 of the Interest

Act, 1978 reads as below:

Power of court to allow interest:

(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest-in respect of any debt or

damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making

such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say, (a) if

the proceedings relate to a debt-payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date

of institution of the proceedings;

(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or

the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings;

Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed

under this section for the period after such repayment...

In view of the above provision, the claim of the appellants for interest is wholly untenable, in my opinion, the impugned judgment does not suffer

from any error of substantial question of law,

(xxxiv) In P. Ram Reddy Vs. State of Andhra Pradesh and another, , it is held as follows:

Where the petitioner an advocate accepted the full amount payable to him by the State Government as his legal remuneration without any protest

for non-payment of interest at the rate of 12% p.m. on the allegedly delayed payment which was made by the State Government without following

the elaborate procedure, otherwise prescribed for the sanction of the individual bills and scrutiny of certificates etc., he cannot subsequently claim

such interest at rate of 12% P.A. It was more so when in the Government orders prescribing scale of fees there was no provision under which he

could be said to be entitled to payment of interest on delayed payment. Case law discussed.

Moreover, even under the provision of S. 4(2)(b) of Interest Act, he could not be said to be entitled to such interest. Further, in so far as the

question of payment of professional fee was concerned, there was no provision under which interest could be said to he chargeable for delayed

payments on such account.

(xxxv) In M/s. Premjit Theatres, Secunderabad Vs M/s. Rashi Mehata & Co. and another reported in AIR 1990 Andhra Pradesh 272 at page

No. 273, it is held as follows:

In the instant case certain amount was lent to get a motion picture released from the Producer for the purpose of exhibiting it in the theatres of the

plaintiff and its sister concerns. The defendants as Distributors and the Plaintiff as Exhibitor were anxious to get the film released and exhibit it in the

plaintiff''s theatres. The Defendants were in need of money and the plaintiff agreed to advance the amount '' on condition that all the prints of the

plaintiff would be delivered for exhibition in the theatres of which he had control. Hence, it was not a mere lending as such. The agreement also did

not contain any clause regarding payment of any interest. On the other hand, the evidence showed that there was no practice, usage and custom

enabling the exhibitor to collect interest. The evidence regarding payment of interest did not show that in the case of monies advanced by the

exhibitors to distributors any interest was charged. Hence, the plaintiff was not entitled as a matter of right, to interest etc.

(xxxvi) Before the First Appellate a memo of calculation for interest claiming at 24% per annum has been filed on the part of the

Respondent/Plaintiff and the same is as follows:

As per A4 Vaddi Chittai-

interest at 30% for 1992-1993 Rs. 16,407.00

Rs. 90,346.00

As per A12 Vaddi Chittai at 30% upto March 1995 Rs. 21,669.00

Rs. 8,860.00

Rs. 4,978.00

Rs. 11,000.00

Rs. 7,959.00

Rs. 4,934.00

Rs. 3,407.00

Rs. 1,69,560.00

Plaint claim also includes As per A12-travelling expenses Rs. 3,597.85

Cheque collection charge Rs. 121.00

Travelling expenses Rs. 249.00

Plaint Amount- Rs. 1,73,535.85

Therefore, interest alone at the rate of 30% per annum comes to So, if interest isRs. 1,69,560.00

calculated at 24% per annum

Rs. 1,69,560 x 24/30 = Rs. 1,35,648.00

(Rupees One Lakh Thirty Five Thousand Six Hundred and Forty Eight only)

(xxxvii) It is the contention of the learned Counsel for the Appellant/Defendant that the trial Court as well as the First Appellate Court have held

that the plea of oral interest has not been proved.

(xxxviii) The Learned Counsel for the Appellant/Defendant submits that before the trial Court, on behalf of the Appellant/Defendant, the decision in

Municipal Committee. Akot Vs. Surajmal Shriram Ginning and Pressing Factory now styled as Brijmohan Jamnalal Ginning and Pressing Factory,

Akola reported in AIR 1938 Nag 119 at page 121 has been cited to the following effect, also in the aforesaid decision, it is inter alia held as

follows:

...In the present case, the right is conferred on the Municipal Committee by S. 77(1) but it has to be enforced according to the special procedure

prescribed by that Act, The Municipal Committee''s right to recover either the tax or any interest on it is not contractual but-statutory. When a

statute creates that right and provides the procedure for enforcing it and also sets up the tribunal to enforce it, the party who has the right must seek

his remedy in the manner and before the authority prescribed by the enactment, The matter would have been different if the Municipal Committee

had derived the right from a source independent of the Statute, It was pointed out by Sir Lawrence Jenkins in 31 Bom 604 at page 609 that where

a special tribunal, out of the ordinary course is appointed by an Act to determine questions as to rights which are the creation of that Act, then

except so far as otherwise expressly provided or necessarily implied, that tribunal''s jurisdiction to determine those questions is exclusive.

(xxxix) Before the First Appellate Court viz., the Principal District Judge, Madurai in A.S.140 of 2000, the Respondent/Plaintiff has relied on the

decision of this Court in Hybro Chains Pvt. Ltd. Vs. Asil Industries Ltd., wherein it is held as follows:

Under Sec. 34 of C.P.C. when there is no contractual rate of interest between the parties, the interest will be at the rate at which monies are lent or

advanced by nationalised bank in relation to commercial transaction. The rate of interest claimed by the banks in commercial transactions varies

from year to year and from bank to bank. The defendant has not produced any evidence as to what was the rate of interest claimed by the

nationalised bank in commercial transactions from 1997 to the date of the suit, i.e. October, 2000. In the absence of any proof that the nationalised

banks were lending or advancing money at 12% interest in relation to the commercial transaction, the custom and usage of interest at 24% in trade

or business or commercial transactions is just and reasonable, especially in a case of this nature where the defendant failed to pay and discharge his

liability for more than five years.

(XL) Section 73 of the Indian Contract Act speaks of ''Compensation for loss or damage caused by breach of contract'' and the same runs thus:

When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract

compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the

parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract- When an obligation resembling those created by contract

has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from

the party in default, as if such person had contracted to discharge it and had broken his contract.

Explanation- In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused

by the nonperformance of the contract must be taken into account.

(XLi) Also the illustration (n) to Section 73 of the Indian Contract Act enjoins as follows:

A contracts to pay a sum of money to B on a day specified, A does not pay the money on that day. B, in consequence of not receiving the money

on that day, is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to

pay, together with interest upon the day of payment.

(XLii) In Union Bank of India Vs. Dalpat Gaurishankar Upadyay, at page 483 it is held as follows:

Under Section 34 of Civil Procedure Code, the Court while decreeing the suit will adjudge, (i) the principal sum and (ii) any interest on such

principal sum prior to the date of institution of the suit. Both amounts adjudged by the Court by way of ""principal sum"" as well as ""interest"" thereon

for the period prior to the institution of the suit together may be termed as ""aggregate amount adjudged"" as payable on the date of the suit. But

interest under S. 34 is not payable on such aggregate amount It is made payable only on the principal sum adjudged. No interest is payable on the

amount of interest adjudged on such principal sum. Interest, whether simple or compound will remain ''interest'' for the purpose of S. 34 and shall

never merge in the principal. The legislature while using the expression ""in addition to any interest adjudged on such principal for any period prior to

the institution of the suit"" in S. 34 in contra-distinction to the expression ""principal sum"" has not made any distinction between the interest computed

by way of simple interest or compound interest. Hence the ""principal sum adjudged"" used in S. 34 of the C.P.C. means the original amount lent

without the addition thereto of any interest whatsoever, This will be the position notwithstanding any agreement between the parties or any

prevailing banking or trade practice to the contrary.

(XLiii) In Syed Shah Masood Ahmad and Others Vs. Bikan Mahuri and Others, , it is held that claim to interest up to the institution of the suit

cannot be allowed when it is not based on any contract.

(XLiv) In the decision of the Honourable Supreme Court in Jagadish Rai and Brothers Vs. Union of India reported in (1999) 3 Supreme Court

Cases at page 257 at pages 258 and 259 and in paragraphs 3 and 4 it laid down as follows:

The claim for interest not having been made before the Court in which proceedings for making the award the rule of the court-were pending

would certainly disentitle the appellant for making such a claim during the first three stages of pre-arbitration and post-arbitration that is between

award and filing of application inasmuch as several considerations will have to be examined before the award of interest and at what rate.

Therefore, when the award had not been challenged for not granting interest? the award could not be upset to that extent. The view taken by the

High Court appears to be correct to that extent. However, that is not the end of the matter. The High Court ought to have further examined

whether the appellant was entitled to any interest after the decree was made in terms of the award. The courts have taken the view that the award

of interest u/s 34 CPC is a matter of procedure and ought to be granted in ail cases when there is a decree for money unless there are strong

reasons to decline the same. In the present case, the appellant had made a claim for interest before the arbitrator but the same had been denied

and no reasons are forthcoming thereto. Whatever that may be, at any rate after the Sub-Judge made an award the rule of the court, the decree

ought to contain a provision for making payment of interest. If such payment had not been made, appropriate correction of the decree could be

ordered to be made when an application had been made before the High Court.

We are conscious of the fact that the appellant had not preferred any appeal against the order made by the Court of the Sub-Judge which made

the award the decree of the court but did not grant any interest. Even so, the grant of interest being a matter of procedure and the appellant having

made an application before the High Court in that regard, we do not think there is any impediment to grant the same by bringing the decree of the

subordinate court in conformity with law, namely, by awarding appropriate interest.

(XLV) It is to be borne in mind that the expression ''principal employed in R.2 and. R.11 of 0.34 of C.P.C. means only the principal'' and not

''principal and interest. Section 34 of C.P.C. which refers to ''interest'' applies where the decree is for payment of money. There is no analogy

between the interest awarded under'' Section 34 of C.P.C. and profit Section 34 of C.P.C. prescribes that in addition to pendente lite and future

interest additional interest adjudged on such principal sum for the period prior to the institution of the suit can also be granted either under the

agreement between the parties or under the statute or as per the usage and custom. No doubt Section 34 of C.P.C. is based upon justice, equity

and good conscience. Indeed, question of interest which a Court may allow in a given case is governed by the facts of the case and not by any

precedent'' unless limited by a statute as opined by this Court.

(XLVI) Ex. A.6 leger of the Respondent/Plaintiff dated 21.03.1995 addressed to the Appellant/Defendant, it is mentioned as follows:

The cheque dated 06.03.1995 for Rs. 36,179/- given by you was realised on 17.03.1995. Hence, we are sending herewith statement (in two

sheets of) of interest and other amounts due from you upto that date.

As per statement a sum of Rs. 1.73,535.85 (Rupees One Lakh Seventy Three Thousand Five Hundred and Thirty Five Paise Eighty Five only) is

still due from you as on 18.03.1995. Please confirm this balance and send your confirmation. Also please send a draft for Rs. 1,73,535/- 85

immediately.

(XLVII) Ex. A.7 is the letter of the Respondent/Plaintiff dated 05.05.1995 addressed to the Appellant/Defendant wherein it is held as follows:

In our letter cited under reference above, we have given you detailed statement showing the interest, travelling expenses and cheque collection

charge due from you. As per statement, a total sum of Rs. 1,73,535- 85/- is due from you (by way of interest Rs. 1,69,568/- travelling expense

Rs. 3,845/- 85 and cheque collection charge Rs. 121/-).

Although you have received our letter, you remain silent on the subject. We request you once again, to send draft for Rs. 1,73,535-85 immediately

in full settlement of the account.

(XLVIII) In Ex. A.11, the Appellant/Defendant''s lawyer notice dated 21.08.1995 addressed to the Respondent/Plaintiff''s lawyer, it is mentioned

that the Appellant/Defendant had paid the entire amount due to the Respondent/Plaintiff and no amount is due and further there was no agreement

between the parties for payment of any interest and the statement of the Respondent/Plaintiff in the notice that there was agreement for payment of

interest at the rate of 30% per annum compounded with annual rest is not correct and the Appellant/Defendant is not liable to pay any amount as

interest. Further, it is also mentioned that the Appellant/Defendant is not liable to pay Rs. 3597, 85 paise as travelling charges for collecting the

amount from the Appellant/Defendant and since the account of the Respondent/Plaintiff is closed, the Appellant/Defendant is not liable to pay any

amount.

(XLIX) Though the Respondent/Plaintiff refers credit bill Ex. A.3 dated 31.03.1992 and on the reverse side of the said document, it is mentioned

that if the amount is not received within seven days from the date of the bill, interest will be charged @ 24% per annum from the date of the bill, it-

has not been established by the Respondent/Plaintiff to the satisfaction of this Court that the Appellant/Defendant has given consent or accepted as

regards the condition of interest and accordingly, this Court comes to an inevitably conclusion that the respondent/Plaintiff is not entitled to claim

the interest amount.

(L) As per Section 22 of the Tamil Nadu Court Fees and Suit Valuation Act 1955 all suits for money can be filed and in a suit for money (including

a suit for damages or compensation, or arrears of maintenance- of annuities, or of other sums payable periodically), fee shall be computed on the

amount claimed.

(LI) Generally, money suits include suits on promissory notes, suits on accounts, suit for recovery of rent- suits on mortgages and the like also in

order to become a money suit, a specific amount must be claimed in the suit as per the decision in Ramakrishna Reddy Vs, Kota Reddi reported in

16 MLJ 58, In the present case, the Appellant/Defendant has paid the entire principal amount due to the Respondent/Plaintiff. Only for the interest

amount, the suit has been laid by the Respondent/Plaintiff. Admittedly the oral agreement between the parties for the payment of any interest has

not been proved. Also, it is the evidence of D.W. 1 that prior to the year 1992-1993 no interest has been paid by the Appellant/Defendant

company. Since the entire principal amount due to the Respondent/Plaintiff has been paid by the Appellant/Defendant, the claim for interest made

by the Respondent/Plaintiff is a money suit as per Section 22 of the Tamil Nadu Court Fees and Suits Valuation Act 1955, But the

Respondent/Plaintiff comes out with a plea that interest has been orally agreed between the parties. However, the Respondent/Plaintiff has failed to

prove the said plea before this Court in a cogent, coherent and in a convincing manner as as to satisfy its judicial conscience. Therefore this Court

opines that the claim for interest is not based on any contract and as such the claim for interest in the plaint cannot be allowed and the point is

answered in favour of the Appellant/Defendant.

The contentions, discussions and finding on point No. and (C):

(i) The suit has been filed by the Respondent/Plaint if before the trial Court against the Appellant/Defendant for a recovery of a sum of Rs.

1,73,535,85 P, With subsequent interest of Rs. 1,73,535,85 paise from the date of plaint till the date of realisation. The purchases said to have

been made by the Appellant/Defendant from the Respondent/Plaintiff from 06.10.1992 to 16.02.1993. From the last date purchase 16.02.1993,

the suit has been filed within a period of three years, on 09.10.1995. Therefore, it cannot be said that the suit claim is barred by limitation and the

point (b) is answered in favour of the Respondent/Plaintiff.

(ii) While answering point No. (a), this Court has come to the conclusion that the Respondent/Plaintiff is not entitled to claim the interest amount as

prayed for in the plaint. When there is no written contract, between the parties to the payment of compound interest and also when the plea of

interest that it-has been agreed between the parties has been negatived by this Court then the Respondent/Plaintiff cannot claim a compound

interest merely because the transaction is commercial in nature and accordingly, the point (c) is answered.

In the result, the Second Appeal is allowed leaving the parties to bear their own costs, Consequently, the judgment and decree of the First-

Appellate Court viz., the Principal District Judge, Madurai in A.S. No. 140 of 2000 dated 29.06.2004 are set aside by this Court for the reasons

assigned in this appeal. The suit O.S. No. 1227 of 1995 on the file of the learned Additional Sub-Judge, Madurai filed by the Respondent/Plaintiff

is dismissed.