Sri. Syed Gafoor vs The Government of Karnataka and Others

N.K. Patil, J.—The Appellant, being aggrieved by the impugned judgment and decree dated 21st August 2006, passed in O.S. No. 26/2005, by the Additional Civil Judge, (Sr. Dn.), at Hassan, (hereinafter referred to as ''the Trial Court'' for short), only in so far as it relates to not awarding interest at 18% on Rs. 10,68,272/-, from the date of suit till the date of payment, has presented this first appeal.

The Appellant herein was the Plaintiff and Respondents were the Defendants before the Trial Court and they would be hereinafter referred as to their rank, before this Court.

The facts in a nutshell are that, the Appellant herein claims to be a Class-I P.W.D. contractor and has been undertaking contract work under the Zilla Panchayath, Hassan and other Departments, represented by Chief Secretary, Government of Karnataka. The fifth Respondent herein had called for tenders from the Class-I P.W.D Contractors for execution of work of remitting and asphalting of Chikkaballapur-Mudigere road till Hamke-K.B. Halla road via Muthiganne Sansattyhalli of Belur Taluk, Hassan District. Pursuant to the said notification, Appellant also submitted his tender to the fifth Respondent on 28th March 2001 along with the Earnest; Money Deposit of Rs. 23,745/- and the estimated cost of the said project was Rs. 16,00,000/- and the period of execution of work was six months, excluding the rainy season.

Thereafter, the tender submitted by the Appellant was accepted and the contract work was entrusted to him. Accordingly, the Appellant and the fifth Respondent signed the agreement and issued the Commencement Certificate and thereafter the Appellant and sixth Respondent took up the work as per the terms and conditions of the contract and carried out the same under the supervision of sixth Respondent. The measurement of work was also taken out and bills were also prepared on time. The Appellant completed the work within the stipulated time as per the terms and conditions of the agreement and completed his work as per Ex.P11 dated 8th February 2002. During the period of contract, some payments were made in respect of some bills for the work carried out by the Appellant. Subsequently, after completion of the entire work, the Appellant submitted his bills for payment, of balance amount with interest. When the balance amount was not paid, he made several oral requests. In spite of his requests and sincere efforts, he could not receive the balance amount for the work carried out by him. Therefore, he was constrained to issue legal notice though his counsel, seeking recovery of the said amount with interest, stating that if the balance amount with interest is not paid, he would be forced to initiate legal proceedings against the Respondents. In spite of it, when he did not receive any amount from the Respondents, he was constrained to file a suit for recovery of money.

The suit filed by the Appellant was registered as O.S. No. 26/2005 before the Trial Court. The Trial Court, after noticing that notice has been caused u/s 80 of the CPC by the Appellant, ordered issuance of notice to Respondents. The Respondents entered appearance and resisted the suit through he District government Pleader. The fifth Respondent filed his written statement, and Respondents 1 to 4 and 6 adopted the same. In the written statement, the Respondents categorically admitted the case pleaded by the Appellant. Further, they have also admitted the bills as also the amounts mentioned in the said bills claimed by the Appellant. But, they have stated that they are unable to pay the final bills for want of funds and there is no mala fide intention in withholding the amount and that the security deposit amount will be refunded on availability of funds after expiry of one year from the date of completion of the work. Further, they have stated that since no funds have been released from the Government, the Respondents are waiting for the same and soon after they receive the funds, the amount due will be paid to the Appellant.

On the basis of the pleadings available on file and after hearing the parties on both sides, the Trial Court framed necessary issues for consideration. They are:

Whether the Plaintiff proves that the Defendants are Liable to pay Rs. 16,10,244/-with interest @ 18% P.A.?

Whether the Plaintiff is entitled to suit claim?

What order or decree?

To prove the case of the Appellant, he has examined PW1 and got marked Exhibits P1 to P7 and the Respondents have led no oral evidence, but have got marked exhibits D1 to D11. The Trial Court, after hearing both sides, has answered issue No. 1 as ''partly affirmative''. So far as second issue is concerned, it answered holding that the Respondents are liable to pay Rs. 10,68,272/- with 6% interest and answered the third issue as per the final order. Being aggrieved by the portion of the order passed by Trial Court, in not awarding interest at the rate of 18%, as sought for by Appellant, or at least at the rate of 10%, Appellant has presented this appeal, seeking the relief as stated above.

We have heard the learned Counsel for Appellant and learned Additional Government Advocate appearing for Respondents.

After careful perusal of the impugned judgment and decree passed by the Courts below, we do not find any error of law or material irregularity as such committed by the Trial. Court in decreeing the suit filed by Appellant, holding that, the Respondents are liable to pay a sum of Rs. 10,68,272/-. After going through the material placed before us, threadbare, it is seen that work assigned to the Appellant has been carried out and completed by him, as per the work completion certificate at Ex.P11, during February 2002 and thereafter the Appellant has submitted the bills seeking balance amount as per Exhibits D4 to D9. The said aspect has been rightly accepted and appreciated by the Trial Court at paragraphs 13 and 14 of its judgment and after proper evaluation of the oral and documentary evidence, has rightly come to the conclusion that the Respondents are in fact, liable to pay a sum of Rs. 10,68,272/-. The reasoning given and the conclusion arrived at by the Trial Court, for holding that the Respondents are liable to pay the said sum to the Appellant, is just, and proper and it does not call for interference.

However, so far as awarding interest: at 6% is concerned, we are of the considered opinion that the Trial Court slipped into an error in awarding interest at only 6% per annum. It is on the lower side for the reason that, admittedly the entrusted work has been duly completed by the Appellant within the stipulated time and he has also received part of the contract amount now and then. But, after completion of the entire work, when the Appellant has submitted the bill seeking balance payment for the work carried out by him, the Respondents, though have categorically admitted the bills and the amounts mentioned therein, have stated that funds are not available and as soon as they receive the funds, the due amount will be paid to the Appellant. In this regard, it must be noticed that the Appellant has waited to receive the due amount for the work already carried out by him for a period of little less than three long years and till the passing of the impugned decree, he has waited for a period of four years, The claim of the Appellant is that he has borrowed the loan by paying interest, though it is not established by cogent evidence. Therefore, the Trial Court observed that even if the amount due is deemed to have been paid four years ago and is kept in fixed deposit; account, in any nationalized bank, it would have earned more than 6% interest. Therefore, taking into consideration the interest of both the parties, the Trial Court awarded interest at the rate of 6% per annum. The said reasoning given by the Trial Court for awarding interest at only 6% is not justifiable nor the same is reasonable. It appears the counsel representing the parties might not have assisted the Court properly. Interest ought to have been awarded at the rate at which it existed on the date on which the payment became due. In the case on hand, the payment became due during February 2002, as per Ex. D11, completion report dated 8th February 2002.

To know the exact rate of interest offered by Nationalized Banks during February 2002, this Court directed the learned Additional Government Advocate, who on authenticated information, submits that the interest offered by Nationalized Banks during 2002 was 8.5%. But, having regard to the facts and circumstances of the case, particularly the fact that the Appellant has completed the work well within the stipulated time as per the terms and conditions of agreement entered by him with the Respondents and also having regard to the fact that the Trial Court has disallowed interest on security deposit and others, and having regard to the avocation of the Appellant and the nature of commercial transactions entered into by the Appellant, as borne out of records, to meet the ends of justice and to safeguard the interest of both the Appellant as well as the Respondents, we deem it fit and proper to award interest at the rate of 9% per annum from the date of institution of the suit till the date of realization.

Having regard to the facts and circumstances of the case and other peculiar circumstances of the case, the appeal filed by Appellant is allowed in part.

The impugned judgment and decree dated 21st August 2006, passed in O.S. No. 26/2005, by the Additional Civil Judge, (Sr. Dn.), at Hassan, is hereby modified, only in so far as it relates to awarding of interest.

Award of interest on Rs. 10,68,272/- is hereby modified from 6% to 9% per annum from the date of institution of the suit till the date of payment.

With this modification the appeal stands disposed of.

Office to draw the decree accordingly.