The Fernhill Palace vs J.K. Constructions

A.C. Arumugaperumal Adityan, J.—This appeal has been directed against the decree and judgment in O.S. No. 111 of 1996 on the file of

the Court of Subordinate Judge, Udahamandalam.

The short facts of the case of the plaintiff in the plaint are as follows:

2(a) The plaintiff is the building contractor having its principal place of business at Udahamandalam,. The defendant had entrusted to the plantiff

various civil works to the defendant''s hotel at Udahamandalam. The plaintiff commenced the civil work in the month of July 1990 and the same

was completed by September-1990. The bills were submitted during October-1990. The value of the work done was Rs. 8,04,924/-. After

completion of the work, the plaintiff sent the bills for the various kinds of civil works done to the defendant in October-1990. The defendant herein

paid a sum of Rs. 75,000/- during April 1991 by way of a cheque and the balance was promised to be settled. The defendant after receipt of the

bills wrote a letter dated 20.12.1991 to the plaintiff whereby the defendant had requested to bear with them till 15th January 1992 to settle the

dues. The plaintiff has filed the letter dated 20.12.1991 addressed to the plaintiff which is self explanatory. After the said letter, as promised the

defendant was not able to pay the amount by 15th January 1992, the plaintiff sent a reminder on 22.1.1992 intimating to the defendant that he had

to borrow money from his Bankers and private parties for carrying out the civil works and the plaintiff has to pay interest for the amounts

borrowed which works out to 36% per annum. The said letter was acknowledged by the defendant without any demure and they did not settle the

amount in full. Again on 4.5.1992 the plaintiff sent another reminder with the statement of account claiming interest upto 30th April, 1992. The

defendant accepted the said letter without any reservation and paid a sum of Rs. 1,00,000/- on 25th May 1992 by way of a cheque.

2(b) On 3.6.1992 the plaintiff sent another reminder to the defendant informing the defendant about the amount due inclusive of interest and the

payment made during May 1992. The plaintiff is producing the copies of the letter dated 4.5.1992 and 3.6.1992. Inspite of the said reminders the

defendants did not choose to settle the amount in full and the plaintiff was constrained to send letters dated 1.7.1992, 10.9.1992, 1.10.1992, and

30.10.1992 informing them the amount due along with interest. The defendant acknowledged the said letters and made a payment of Rs.

1,00,000/- on 21.11.1992 by way of a cheque. The plaintiff again sent a reminder on 5.12.1992 claiming the amount due. After the receipt of the

said letter, the defendant paid another sum of Rs. 50,000/- on 31.12.1992 by way of a cheque. After receipt of a sum of Rs. 50,000/- the plaintiff

sent a reminder on 1.1.1993 to the defendant claiming the amount due with interest. After the said letter the defendant made a payment of Rs.

50,000/- on 18.1.1993 by way of a cheque. On 21.1.1993 the defendant had written a letter to the plaintiff regretting for the delayed payment. On

30.1.1993 the defendant had paid a sum of Rs. 1 lakh by way of a cheque. For the letter dated 4.2.1993 received from the defendant, the plaintiff

sent a reply dated 5.2.1993 explaining to the defendant the circumstances under which the plaintiff claimed interest at 36% per annum. After the

letter dated 5.2.1993 the defendant herein made a payment of Rs. 50,000/- on 15.2.1993 by way of cheque, a further sum of Rs. 50,000/- on

20.2.1993 and another sum of Rs. 50,000/- on 28.2.1993 by way of cheques.

2(c) After the receipt of the said amounts the plaintiff sent a reminder on 10.3.1993 to the defendant claiming the amount due with interest. After

receipt of the said letter the defendant herein made a payment of Rs. 50,000/- on 20.3.1993 by way of a cheque and a further sum of Rs.

50,000/- on 31.3.1993 by way of a cheque. As the defendant did not make any payment during April 1993, the plaintiff sent a reminder on

5.5.1993 claiming the amount due with interest and on receipt of the said letter the defendant made a payment of Rs. 50,000/- on 6.5.1993 by

cheque and another sum of Rs. 50,000/- on 18.5.1993 by way of a cheque and two cheques for Rs. 50,000/- each on 22.5.1993. After the said

payment, the defendant failed to pay the balance amount due. As per the statement of accounts maintained by the plaintiff for the suit transaction a

sum of Rs. 5,58,550/- is the amount due from the defendant on the date of filing of the suit. The suit is in time. Hence, the suit for Rs. 5,58,550/-

with 21% interest per annum from the date of the suit till the date of decree and future interest at the rate of 12% per annum from the date of

decree till the date of realization with costs.

The defendant in his written statement would contend that the suit has been filed against the wrong person. The General Manager is only the

employee under the Indian Hotels Company Ltd. The Defendant is not the legal entity. ''Fernhill Palace'' is only the Brand name of the hotel

belonging to Messers Gayathiri Enterprises, a Registered Partnership Firm, having its registered office at The Palace, Mysore. The Ferhill Palace is

not a legal entity. The Taj Group of Hotels is also not a legal entity. It is only a brand name owned by the Indian Hotels Co. Ltd., with registered

office at Mumbai. It is a company incorporated under the Indian Companies Act, 1882. The plaintiff ought to have filed the suit only against this

defendant. The suit is not maintainable on this ground alone. The plaintiff was entrusted with various civil works. The agreement for the said work

was oral/job orders. The work was completed in October 1990 and the plaintiff submitted a bill for Rs. 8.04,924/- and the defendant made

payments on various dated towards the said Bill. In fact the defendant has paid a sum of Rs. 9,43,464/- towards the Bill amount. Though the

defendant has made excessive payment, and he is entitled to get back the money, he is unable to claim the same as it has become time barred. The

plaintiff is not entitled to claim interest for the Bill submitted by him. The plaintiff has filed the suit only for the interest. Only to tarnish the image of

the defendant, the plaintiff has filed this frivolous suit. There is no cause of action to file the suit. The suit is bad for non-joinder of necessary parties.

The suit is liable to be dismissed with costs.

On the above pleadings the learned trial Judge has framed 7 issues for trial. Before the learned trial Judge the proprietor of the plaintiff J.K.

Constructions was examined as P.W.1 and Ex.A.1 to Ex.A.15 were marked. On the side of the defendant, D.W.1 was examined and Ex.B.1 to

Ex.B.6 were marked. After meticulously scanning the evidence both oral and documentary and after giving due deliberations to the submissions

made by the leaned Counsel on both sides, the learned trial judge, after coming to the conclusion that the plaintiff is entitled to the relief asked for in

the plaint, has decreed the suit as prayed for with costs, which necessitated the defendant to approach this court with this appeal.

Now the points for determination in this appeal are as follows:

1) Whether the claim of the plaintiff towards 21% interest per annum for the suit amount is maintainable?

2) Whether the decree and judgment in O.S. No. 111 of 1996 on the file of the court of Subordinate Judge, Udahamandalam, is liable to be set

aside for the reasons stated in the memorandum of appeal?

Point No. 1: The owner of the plaintiff � J.K. constructions, while deposing before the trial Court as P.W.1, has deposed as to the effect that

being the building contractors the plaintiff accepted the civil works entrusted to them by the defendant in the month of July-1990 and completed the

same in the same year in the month of September and that he had submitted a bill for Rs. 8,04,924/- for the work done by the plaintiff for the

defendant. The correspondence between the plaintiff and the defendant in respect of the above said civil work was exhibited by the plaintiff as

Ex.A.1 to Ex.A.14. Even under Ex.B.1, the plaintiff has demanded interest for the delayed payment made by the defendant for the suit transaction.

Under Ex.B.1 the plaintiff has agreed to waive interest, if new contracts are assigned to the plaintiff by the defendant, but there is no material

placed before the Court to show that the new assignment was entrusted by the defendant to the plaintiff to enable them to waive the interest as

agreed upon by them under Ex.B.1. Under Ex.A.10, the defendant had undertaken to clear the dues of the plaintiff before March-1993. The

defendant has further made a request to the plaintiff to reconsider the rate of interest charged by the plaintiff for the delayed payment, i.e., 36% per

annum. A perusal of Ex.A.15 would go to show that in march 1993 a sum of Rs. 5,87,579/01 was the amount due from the defendant to the

plaintiff. The plaintiff has calculated 21% interest per annum for the said sum of Rs. 5,87,578/01. The subsequent repayment made by the

defendant are as follows:

On 20.3.1993 a sum of Rs. 50,000/-

On 31.3.1993 a sum of Rs. 50,000/-

On 06.5.1993 a sum of Rs. 50,000/-

On 18.5.1993 a sum of Rs. 50,000/-

On 22.5.1993 a sum of Rs. 50,000/-

On 22.5.1993 a sum of Rs. 50,000/-

During April-1991 a sum of Rs. 75,000/-

On 25.5.1992 a sum of Rs. 1,00,000/-

On 21.11.1992 a sum of Rs. 1,00,000/-

On 31.12.1992 a sum of Rs. 50,000/-

On 18.1.1993 a sum of Rs. 50,000/-

On 30.1.1993 a sum of Rs. 1,00,000/-

On 15.2.1993 a sum of Rs. 50,000/-

On 20.2.1993 a sum of Rs. 50,000/-

On 28.2.1993 a sum of Rs. 50,000/-

Even though under Exs.A.2, A.10 & A.12 the plaintiff has demanded interest at the rate of 36% per annum, there is no letter of agreement for

interest was produced before the trial Court to show that there was an agreement between the plaintiff and the defendant to pay 36% interest for

the amount due to the plaintiff. The defendant as D.W.1 would admit in the chief examination itself that the building contract work between the

plaintiff and the defendant values Rs. 8,04,924/-, but he would state that a sum of Rs. 9,43,464/- was paid by the defendant. But even under the

written statement filed by the defendant he has not taken such a defence. Even though the defendant would state as D.W.1 that statement of

accounts under Ex.A.15 furnished by the plaintiff is not correct, to contravert Ex.A.15 -statement of accounts, the defendant has not filed any

statement of accounts to show that apart from the repayments made by the defendant under Ex.A.15, the defendant has made other repayments

also to the plaintiff.

6(a) The learned Senior Counsel Mr. A.R.L. Sundaresan appearing for the respondent herein in his argument would contend that since the

transaction between the plaintiff and the defendant is commercial in nature, u/s 34 of CPC the plaintiff is entitled to claim interest for the amount

due from the defendant for the building works carried out by the plaintiff for the defendant. Under Ex.A.10 the defendant has repudiated the rate of

interest charged by the plaintiff at 36% per annum as exhorbitant. The learned Senior Counsel relying on M/s. Bangalore Water Supply and

Sewerage Board, Cauvery Project Division Vs. Respondent: M/s. Sugesan and Co. (P) Ltd., 38, Rajaji Road, Madras-1, would contend that

even charging of 24% interest per annum in a commercial transaction is held by the Division bench of this Court as reasonable and that the plaintiff

has claimed only 21% interest per annum and the same is liable to be allowed. The facts of the above said ratio in brief are that:

The plaintiff filed the suit for recovery of a sum of Rs. 9,43,763/- and for costs, stating that in September 1979 the defendant invited tenders for

clearing the shipping consignments of steel plates weighing abut 5500 M.T. Through Madras Port as per schedule of the tender documents. The

plaintiff submitted its tender quoting Rs. 86.90 per M.T. as their service charges for clearing the goods. Subsequently, by negotiation between the

plaintiff and the defendant the rate was reduced to Rs. 83.90 per M.T. However the said reduced rate was exclusive of all types of charges for

cranage operations; and the storage charges at Rs. 4.00 per M.T. per calender month or part thereof, would be charged for storage exceeding

two months, remained unchanged. There were further negotiations. The plaintiff on 1.2.1980 submitted further tender to the defendant for

clearance of 1500 tons of steel billets at the Madras Harbour and transporting the same to Bangalore. The said tender was accepted by the

defendant through its letter dated 20.2.1980. The plaintiff carried on the clearing operations at Madras Port on behalf of the defendant as per the

two agreements, and they transported the same to bangalore, and submitted their bills between 2.2.1980 and 12.11.1980. The defendant made

part payments and the defendant failed and neglected to pay the balance due as also the security deposit and earnest money deposits. After

adjusting the debits and credits, the plaintiff demanded payment of Rs. 5,92,616/60 by various letters and telegrams. There was no response from

the defendant. The plaintiff issued notice claiming a sum of Rs. 5,92,616/60 towards principal and a sum of Rs. 3,51,146/53 towards interest and

after calculating the interest at the rate of 24% per annum. It was contended on behalf of the defendant that the plaintiff is not entitled to claim any

interest as there was no agreement to pay any interest under the agreement.

In that case, the learned Single judge awarded interest at rate of 24% per annum on the sum of Rs. 5,92,616/60 from the date of decree till the

date of realisation besides awarding costs. Aggrieved by the judgment of the Learned Single Judge, the defendant had preferred an appeal. While

partly allowing the appeal, the Division Bench of this Court has modified the rate of interest from 24% per annum to 12% per annum. The relevant

observation in the said judgment for deciding the appeal on hand runs as follows:

It cannot be disputed that in the present case, the liability has arisen out of a commercial transaction, and that u/s 34 of CPC., a wide discretion has

been conferred on the Courts in the matter of grant of interest. It is equally true that the discretion is to be exercised on sound judicial principles.

Section 34 deals with two stages in regard to the grant of interest, viz., (1) from the date of the suit to the date of the decree, i.e., pendente lite

interest; and (2) from the date of decree to the date of realisation, i.e., further interest. As the Apex Court holds, pendente lite interest can be

awarded at such rate as the court deems reasonable. Under the proviso to Section 34 the rate of such further interest may exceed 6% per annum,

but such rate shall not exceed the contractual rate of interest.

As referred to earlier, the Division Bench of this Court in K. Appa Rao Vs. V.L. Varadaraj (since deceased) and Others, , following the judgment

of the other Division Bench reported in Navis Ammal Fernando and Another Vs. S. Subbiah Iyer, , clearly pointed out that no hard and fast rule

can be laid down either with reference to the percentage of interest or with reference to the nature of interest, whether simple or compound, for the

purpose of determining whether the rate of interest charged in a particular case was excessive or not. Therefore, the exercise of the judicial

discretion in fixing the rate of interest would squarely depend upon the facts and circumstances of each and every case.

In our opinion, Section 34 of CPC leaves it to the discretion of the Court as to what interest is to be decreed by way of Pendente lite interest. So

far as future interest or further interest is concerned, that too also is left entirely to the discretion of the Court, but subject to a limit of 6%.

However, the added proviso would remove the limit to the future interest in a case arising out of a commercial transaction. But, the proviso does

not take away the discretion left to the Court, nor does it limit the scope of exercise of such discretion. The judicial discretion in this regard must

depend upon consideration of all the attending facts and circumstances including the circumstance that the amount decreed was in respect of a

liability arising out of a commercial transaction. The exercise of such discretion shall necessarily be judicial and reasonable.

In the light of principles as discussed above, the interest of justice would be met by fixing the rate of interest at 12% per annum which, in our view,

is reasonable from the date of the suit till the date of realisation of the suit amount.

6(b) The learned trial judge has awarded 21% interest from the date of plaint till the date of decree and 6% future interest per annum from the date

of decree till the date of realization on the principal sum of Rs. 5,58,550/-. With regard to the claim of the principal amount there is absolutely no

contest. From Ex.A.15 it is seen that the defendant has made regular payment of the dues alongwith the interest at the rate of 21% per annum from

October-1990 (till the filing of the suit) leaving a sum of Rs. 5,58,550/- alone to be paid under the suit transaction. Under such circumstances, I am

of the view that the defendant may be directed to pay interest at the rate of 18% per annum for the sum due instead of 21% per annum, as

calculated under Ex.A.15 and thereafter, the defendant is liable to pay 12% interest per annum till the date of decree i.e., upto November-1999,

with future interest at the rate of 6% per annum from the date of decree till the date of realisation. So, as per Ex.A.15-statement of accounts the

interest for the sum of Rs. 8,04,924/- from October-1990 is to be calculated at the rate of 18% per annum till the date of filing of the suit i.e.,

31.5.1996 and thereafter, from date of suit i.e., 31.5.1996 till the date of decree i.e., upto November-1999 the defendant is liable to pay 12% per

annum interest for the amount due on 31.5.1996 after adjustment of the repayments made by them as shown in Ex.A.15, and for the balance, the

defendant is liable to pay only 6% interest per annum from the date of decree till the date of realisation. Point No. 1 is answered accordingly.

Point No. 2: In view of the my discussions in the earlier paragraphs I am of the view that the decree and judgment in O.S. No. 111 of 1996 on

the file of the Court of Subordinate Judge, Udhagamandalam, is to be modified. Point No. 2 is answered accordingly.

In fine, the appeal is allowed in part and the judgment and decree in O.S. No. 111 of 1996 on the file of the Court of Subordinate Judge,

Udahamandalam, is modified as follows: The plaintiff is entitled to claim only 18% interest per annum for the sum of Rs. 8,04,924/- from October-

1990 till the date of filing of the suit i.e., 31.5.1996 instead of 21% per annum, and thereafter the defendant is liable to pay 12% interest for the

amount due as on 31.5.1996 after adjusting the repayments made by the defendant as per Ex.A.15, which comes to Rs. 9,25,000/-. Further the

defendant is also liable to pay future interest at the rate of 6% from the date of decree i.e., from November-1999 till the date of realisation for the

amount due on the date of decree, with proportionate costs. In other respects the judgment and decree of the trial Court is confirmed. Time for

payment is nine months from this date.