Karnataka Power Corporation Limited v. Shaik Basha Transport and Civil Contractor
2000-08-21
M.F.SALDANHA
body2000
DigiLaw.ai
JUDGMENT M.F. Saldanha, J.—This appeal which has been preferred by the Karnataka Power Corporation Limited is directed against certain parts of the order passed by the trial Court effectively decreeing the Plaintiff's suit. A few broad features of the case require to be stated. The Plaintiff was the Proprietor of a Transport Company by the name of M/s. Shaik Basha Transport and Civil Contractor, Raichur. The contract in question pertains to the transport of a consignment of steel of approximately 1,500 metric tons from Ambewadi Stores in Karnataka to the project site in Raichur District. The dispute is within a narrow compass in so far as there is no doubt about the fact that the contract was awarded to the Plaintiff on 18.1.1982, that it was valid for two months and that by 12.3.1982 the Plaintiff had already transported the bulk of the consignment leaving only a small portion of 370.560 MT. On 12.3.1982 he received a one sentence termination letter asking him to stop transporting the rest of the consignment. That letter is Ex.P-2 and does not set out any reasons or grounds. The Plaintiff replied that letter five days later pointing out that the action had been abrupt that it was unjustified and more importantly, that he has suffered very heavy loss and damage as a result of the action. According to the Plaintiff, the rate agreed upon was Rs. 540/- per M.T. and it is his grievance that pursuant to the letter Ex.P-2 and the correspondence exchanged that all his payments were held up including payments for the work already executed. Finally, the Plaintiff filed a composite suit before the trial Court for recovery of the outstanding dues and lastly, for the loss of profits along with interest at the rate of 18 percent per annum. The Plaintiff's case was that since he is a small businessman that the withholding of the substantial amount of money due to him had virtually crippled him and even in order or keep his business going, since his capital was locked up that he had no option except to raise money from alternative sources where the prevailing rate of interest was not less than 18% per annum. This was the ground on which the interest was claimed at that rate. 2. The Corporation defended the suit.
This was the ground on which the interest was claimed at that rate. 2. The Corporation defended the suit. The ostensible reason set out by them for the termination of the contract was because the Corporation had indicated in the original tender that the transport had to be done through trailers and according to the Defendants the Plaintiff had not used a single trailer for the transport but that he had used a fleet of trucks. It was the Corporation's case that the contract was not being executed in the manner in which the Corporation had originally intended i.e. by using trailers, and that therefore, the termination was justified, the obvious implication being that the Plaintiff had been guilty of breach of the terms of contract. In amplification of the defence, the Corporation contended that as against the rate of Rs. 540/- per M.T. which according to the Corporation was the acceptable rate for the use of trailers that the existing rate for transport using trucks works out to only approximately Rs. 140/- per M.T. that there was a huge difference between the two rates and since the Plaintiff was billing at the rate applicable to trailers and in fact using trucks that the Corporation was justified in stopping any further transport of its material by him. With regard to the non-payment for the work executed, the defence was that there would have to be a total revision of the rates for the aforesaid reason and that therefore the bill submitted for the contracted rate would have to be scaled down. As far as the interest was concerned, the Corporation disputed its liability in so far as the allegation was that if the contract had to be terminated due to the breach on the part of the Plaintiff that no liability could be foisted on the Corporation. In view of the aforesaid defence, the Corporation also contended that it could not be held liable either for expenses allegedly incurred by the Plaintiff for the non-performance of the contract or for loss of profits. 3. The evidence in this case is relatively limited. Apart from the documents and the correspondence that is on record, the Plaintiff examined himself and the representative of the Corporation was examined as DW-1.
3. The evidence in this case is relatively limited. Apart from the documents and the correspondence that is on record, the Plaintiff examined himself and the representative of the Corporation was examined as DW-1. The learned trial judge took cognizance of the fact that irrespective of the terminology of the tender notice that as far as the contract was concerned that it used the expression trailer/trucks as the mode of transport and that consequently, it was very clear that the option of using either of the two types of vehicles was left to the Plaintiff. The trial Court therefore took the view that the bills submitted by the Plaintiff for the work already done at the prescribed rate was in order and that if the Corporation has wrongly held back the payment for a relatively long period of time that the Plaintiff would be entitled for interest on the said amount. The Court has taken cognizance of the fact that this is a mercantile transaction and since the Plaintiff has deposed to the fact that the rate of interest in the market was not less than 18% per annum, the Court has awarded interest at that rate. On the other two heads, the Court has upheld the claim as far as the costs incurred on transportation, future execution of the contract for a reasonable period of time but has disallowed the claim under the head of loss of profits. The Plaintiff has accepted the verdict of the trial Court and has not appealed against the disallowance of the last head of claim. The Corporation has however preferred the present appeal but has confined the grounds of challenge only to two heads. The Corporation has contended that there is no satisfactory evidence establishing the expenditure incurred by the Plaintiff under the head of future execution of the contract till its termination and secondly, that the liability does not arise as far as this head is concerned because the Corporation was justified in the premature termination.
The Corporation has contended that there is no satisfactory evidence establishing the expenditure incurred by the Plaintiff under the head of future execution of the contract till its termination and secondly, that the liability does not arise as far as this head is concerned because the Corporation was justified in the premature termination. The Corporation has seriously challenged the award of interest at the rate of 18% per annum inter alia on the ground that it is not only unfair and unjust but that even if one were to test it from the point of view of Section 34 of the Code of Civil Procedure that there is no justification for awarding interest at any rate higher than 6% per annum. 4. At the hearing of the appeal, the Corporation's learned Advocate submitted that the tender which preceded the issuance of the contract is the material document because the tender notice very clearly and very unequivocally specified that the transport was to be done using trailers. He also submitted that this aspect would be self-evident from the fact that the accepted rate for the use of trailers works out to Rs. 540/- per M.T. whereas similar figures for the use of trucks was as low as Rs. 140/- per M.T. and his submission therefore was that even assuming that in the formal contract the word 'truck' had not been scored out, that on a perusal of the document, it would have to be held that the understanding between the parties was that the Plaintiff was to use trailers if he wanted to be paid at the rate of Rs. 540/- per M.T. His submission was that in this background, when it came to the notice of the Corporation that the Plaintiff was virtually taking the Corporation for a ride that it became necessary since it is public body, to take immediate steps to stop any further loss accruing. This is the pious justification for the revocation of the contract on 12.3.1982.
This is the pious justification for the revocation of the contract on 12.3.1982. This position has been seriously disputed by the Respondent's learned Counsel who submitted that the contract was effectively for the movement of the steel from Point A to Point B and that irrespective of what the original tender document stated that it is the final contract between the parties that represents the true state of affairs and he submitted that as long as the Plaintiff satisfactorily transported the steel and delivered it within the prescribed period of time that the Corporation cannot be heard to question the type of vehicles in which the material was carried. There is considerable substance in the plea canvassed by the Respondent's learned Counsel because it is a well known business practice that irrespective of the specifications in the tender notice, that pursuant to discussions and negotiations what ultimately emerges in the final contract may admit to many variations. To my mind therefore, the trial Court was fully justified in recording the view that the Plaintiff was within his rights to carry the material in trucks provided it did not cause any prejudice to the Corporation. On the question of the cost factor, to my mind, the trial Court was right in refusing to go into the comparative figures for the simple reason that if on the face of the contract the option was left to the contractor and if he decided to work more efficiently, then he was legitimately entitled to higher earnings. Under these circumstances to my mind, the entire defence pleaded by the Corporation is not only hallow but totally devoid of any substance. I have applied the reverse test in this case for purposes of ascertaining as to whether any prejudice can be said to have been caused to the Corporation from what happened. The material in question was steel, it was not a delicate or perishable commodity and there could always be many options when it came to the method of transporting. Between the two types of vehicles, a smaller truck would have been probably faster and more efficient but the real question is that the Corporation wanted its material to be transported from point A to point B through the use of either of the two types of vehicles.
Between the two types of vehicles, a smaller truck would have been probably faster and more efficient but the real question is that the Corporation wanted its material to be transported from point A to point B through the use of either of the two types of vehicles. The Corporation fixed the rate with open eyes and there is a total prohibition in law from back tracking from this position. 5. I need to observed here that the history of this case is a rather sad reflection of the generally prevailing state of affairs where all sorts of frivolous and untenable objections are pleaded in typical bureaucratic style while totally overlooking the fact that parties with whom the Government and public Corporations are dealing can be pushed to bankruptcy and suicide because of such behaviour on the part of the officers. There is also another aspect of the case which I need to mention only in passing namely that there is a long standing grievance in case after case before the Courts from persons having contractual dealings with Government and other public authorities that they are totally at the mercy of the officers with whom they are dealing and the consequences of blackmail through frivolous and hollow objections with corrupt motives has been extremely damaging to public life. The present case is a typical example of what happens if the contractor does not bend to the pressures executed and the party is driven to a point of no return. The transaction pertains to the early part of 1982. The contractor instituted the suit in 1983. He was unusually fortunate in that the proceeding terminated within one year in contradistinction to suits which normally take 25 years in the trial Court, but then began his tale of sorrow when an appeal was filed which was routinely admitted by this Court in the year 1984 and the appeal is now being disposed of in the year 2000 and one does not really know whether this is the end of the litigation. The Respondent's learned Counsel pointed out to me with some sense of sadness that after his business collapsed the Plaintiff died several years back and that it is his widow and children who are still hoping to recover their dues. 6.
The Respondent's learned Counsel pointed out to me with some sense of sadness that after his business collapsed the Plaintiff died several years back and that it is his widow and children who are still hoping to recover their dues. 6. Coming to the real heads of controversy, they do have a bearing on what has been referred to by me earlier because unless this Court is more than satisfied that the view taken by the trial Court with regard to the main heads of claim is wholly justified, it would not be in order to evaluate the present grounds of appeal. The Corporation's learned Counsel pointed out that the Plaintiff had contended that he had incurred expenditure under two heads namely labour and transport by paying advances to two contractors and that since this amount became irrecoverable due to the abrupt termination of the contract that he was entitled to recover the same from the Corporation. First of all, he dealt with the main plank of defence which is to the effect that if it was the Plaintiff's misconduct which gave raise to the termination of the contract that then the Corporation's liability would not arise; but he further submitted that assuming without admitting, that since the amount awarded by the trial Court is not seriously disputed that the heads would have to be examined independently. He submitted that the onus of proving the quantum of damage lay squarely on the Plaintiff. The learned Counsel is right as far as this principle of law is concerned and he then demonstrated to me that though the Plaintiff has claimed in the correspondence that he is entitled to damages under these two heads that he has not examined the transport contractor or the labour contractor or rather the sub-contractors nor has he produced any worthwhile evidence to support his claim or the quantum thereof apart from bald statements in the witness box that he has incurred damages under these heads. He demonstrated with a reference to the record that it was only at the time when the Corporation's witness DW-1 was in the witness box that the Plaintiff confronted him with two stamped receipts from the alleged sub-contractors indicating that certain amounts had been paid to them.
He demonstrated with a reference to the record that it was only at the time when the Corporation's witness DW-1 was in the witness box that the Plaintiff confronted him with two stamped receipts from the alleged sub-contractors indicating that certain amounts had been paid to them. His submission was that the Plaintiff has not discharged the burden cast on him by the law in so far as even though these two documents have been produced and marked as exhibits that they have not been proved in the manner as required by law. Effectively, what he contended was that the marking of a document does not dispense with its proof and to this extent he relied on the decisions reported in Sait Tarajee Khimchand and Others Vs. Yelamarti Satyam alias Satteyya and Others, AIR 1971 SC 1865 and the extended proposition carved out by the Calcutta High Court in the decision reported in Bijoy Singh Surana and Another Vs. M.S. Ram Singh, AIR 1972 Cal 190 which laid down that such an objection could be raised even at the appeal stage. What was vehemently contended was that these two documents which constitute the solitary evidence on the basis of which the trial Court has awarded the damages have not been proved by summoning the makers of those documents and secondly that even the Plaintiff has not deposed to the contents of the documents because they were produced after the Plaintiff had stepped out of the witness box. Consequently, the learned Counsel submitted that no reliance could be placed on these documents and if this evidence goes, this head of claim would also have to fail. The Respondent's learned Counsel submitted that these documents only corroborate the claims made in the correspondence and by the Plaintiff in the witness box and it was his submission that the Defendants if they desired to dispute the contents of the documents could have seriously insisted on the author being summoned or for that matter they could have asked for the recall of the Plaintiff and not having done so, learned Counsel submitted that there is an unequivocal admission on the part of the Defendants vis-a-vis the contents of those documents.
While I do not dispute the fact that the normal procedure and the better procedure would have prescribed that the documents should have been duly proved by the persons who issued them, if the documents virtually go on record by consent and however at no stage during the trial if there is any formal dispute with regard to their contents, then the Defendants would be precluded from raising any such plea at the appeal stage. There are cases and cases and while there is a formal procedure prescribed for the proof of documents, there is also a relaxation of the procedure which the law admits of in cases where documents are taken on record by consent and relied upon. To my mind therefore, the procedural challenge under this head cannot be sustained. The Court has to take into account certain universal principles which are now accepted by Courts all over the world which are to the effect that if the evidence indicates in the case of an on going contract that the performer had done the requisite planning and organisation by arranging for transport, labour etc. and if the contract is abruptly terminated that the defaulting party would be ipso facto liable for the costs incurred or the costs wasted. In such situations, the Courts have invariably done a mathematical calculation on a future projected basis and awarded the damages because the concept of proof of damages which arises as far as other fields of law where the burden may be stricter gets considerably watered down. In these situations, it is in this background that the finding of the trial Court will have to be upheld as far as the award of damages under this head is concerned. 7. Lastly there was a furious debate with regard to the propriety of awarding of interest at the flat rate of 18 percent per annum. The Corporation's learned Counsel submitted that the provisions of the Code of Civil Procedure would be applicable and that the Court was in error in having awarded anything over and above 6 percent. He placed reliance on the provisions of Section 34 Code of Civil Procedure in this regard. Secondly, his submission was that even on the facts and circumstances of the case the award of a higher rate of interest at 18 percent per annum is unjustified because the contract did not specify any such rates.
He placed reliance on the provisions of Section 34 Code of Civil Procedure in this regard. Secondly, his submission was that even on the facts and circumstances of the case the award of a higher rate of interest at 18 percent per annum is unjustified because the contract did not specify any such rates. In answer to these submissions, the Respondents' learned Counsel has placed reliance on the decisions reported in 1996 (2) KLJ 357 wherein the proviso to Section 34 was relied upon for awarding a higher rate of interest AIR 1990 SC 195 wherein the Court again upheld award of interest at the rate of 15 percent per annum, the Division Bench decision of Karnataka High Court reported in AIR 1993 Kar 9 wherein the rate of interest awarded was at the rate of 15 percent per annum and lastly a decision of the learned Single Judge in the decision reported in AIR 2000 Kar161 wherein again interest at a rate higher than 6 percent was awarded. His submission was that it is well settled law that if it is a commercial transaction and if it is pointed out to the Court that the prevailing rate of interest was 18 percent per annum which the Defendants could not dispute, that the trial Court was justified in having awarded this rate. The submission canvassed on behalf of the Respondents is almost unanswerable. The provisions of Section 34 clearly permit a Court to award interest at higher rate provided a Court confirms to accepted principles. In this case, the Plaintiff has clearly deposed to the effect that the rate of interest in the market was not less than 18% per annum and having regard to the fact that the Corporation has virtually crippled and strangulated the Plaintiff by withholding all his payments, the trial Court was more than justified in having awarded interest at the rate of 18 percent.
There is also another aspect to the dispute in so far as while Courts are adjudicating on situations of this type, what is upper most in the mind of the Court is that the party having suffered damages must be given an equitable compensatory relief and if this is the real spirit or ground on which a higher rate of interest is awarded, it would become similar to a situation in which the Court awards exemplary damages and to my mind, it is not only justified but perfectly within the four corners of the law. 8. In view of the aforesaid position, I see no ground for interference with the decision of the trial Court. The Corporation's learned Counsel stated that the decretal amount under the undisputed head along with interest at the rate of 6 percent per annum has been deposited in the trial Court without prejudice to the Corporation's contentions. The Respondents' learned Counsel states that the original Plaintiff has died and that his widow is now resident in Vishakapatnam with her children. The formal I. As. for bringing the legal representatives on record are allowed and the Appellants' Advocate is directed to carry out the necessary amendments in the cause title. For formality sake, the Respondents' learned Advocate to file the vakalat which he has tendered to the Court with the office indicating that he represents the legal representatives. 9. The trial Court is directed within a period of four weeks to transfer to this Court the amount deposited by the original Defendants along with interest if any that has accrued on the said amount. On receipt of that amount, the Appellants shall compute the balance payable in terms of the decree and shall deposit the said amount in this Court within an outer limit of eight weeks thereafter. Once the amount is deposited in this Court, liberty is granted to the legal representatives of the original Plaintiff or the learned Advocate authorised by them in writing to withdraw the amount from Court. 10. Before parting with this appeal, I need to place on record my appreciation for the high levels of assistance rendered to the Court in the course of the hearing by the two learned Advocates Mr. Dhyan Chinnappa and Mr. S.M. Hegde. The appeal accordingly fails and stands dismissed. In the circumstances of the case, there shall be no order as to costs.
Dhyan Chinnappa and Mr. S.M. Hegde. The appeal accordingly fails and stands dismissed. In the circumstances of the case, there shall be no order as to costs. Even though it is a mere formality, it is clarified that in the first instance the abatement is set aside, the delay is condoned and the appeal which was technically dismissed for default to be treated as having been formally restored.