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2012 DIGILAW 124 (ORI)

State of Orissa v. Simanchal Das

2012-03-06

S.K.MISHRA

body2012
JUDGMENT S.K.Mishra,J. The State of Orissa represented through the Collector, Ganjam, Superintending Engineer, Southern Minor Irrigation Circle, Berhampur and Executive Engineer, Minor Irrigation Division, Ganjam-I, Berhampur and Assistant Engineer, Minor Irrigation Sub-Division, Paralakhemundi have preferred this appeal against the judgment and decree dated 31.10.2000 and 15.11.2000 respectively passed by the learned Civil Judge (Senior Division), Berhampur in Money Suit No.77 of 2002 decreeing the suit of the plaintiff-respondent for a sum of Rs.52,89,093/-and for future interest @ 12% per annum. 2. Briefly stated, the case of the plaintiff-respondent is that he is an ‘A’ Class Contractor and in response to the tender call notice issued by defendant no.3 for specific items of work under special repair programme, he submitted his tender. The tender of the plaintiff-appellant being the lowest, the same was accepted by the defendant no.3 and the plaintiff-appellant was entrusted with the work after executing the required agreement and complying with other formalities. The appellant’s further case is that, while the contract work was in progress as per the terms and conditions of the original agreement, the defendant-department felt that the works were to be taken up in its entirety instead of doing the same in piecemeal, as the department felt it necessary to strengthen the embankments in full length. The matter was referred to the Chief Engineer, Minor Irrigation, who in his office letter no.37014 dated 13.07.1987 accorded sanction to do the excess quantity of work through the plaintiff-appellant, if he was willing to take up the work as per the terms and conditions of the existing agreement. The plaintiff-respondent vide his letter dated 16.10.1987 expressed his willingness to take up the extra work in each of the fifteen items of work at the tendered rate under respective agreements. So the defendant no.3 vide his letter No.11044 dated 16.10.1987 directed the plaintiff to proceed with the extra work and the plaintiff was supplied with the necessary materials by the department and the plaintiff completed the agreement work as well as the extra work in all respect within the stipulated time and intimated the fact to the defendant no.3 in his letter dated 11.07.1988. In spite of such completion of work, while taking up the final measurement, defendant no.4 confined his measurement only to the works undertaken in respect of the items mentioned in the agreement and did not take note of the actual quantity of extra works done by the plaintiff at the instance of the defendant no.3, though the plaintiff objected to the measurement and requested the defendants 3 and 4 to make full measurement of all the works done by him and to make payment. Defendant no.4 in his letter no.1 dated 07.01.1989 informed the plaintiff that payment for the balance work done beyond the different agreements would be made separately and was requested to accept the part measurement. The plaintiff-appellant was given to understand that the deviation statement would be submitted before the competent authority for approval and payments for such extra work would be made only after the approval of the deviation statement. Though the work as per the agreement was completed and the bill was submitted, the plaintiff-appellant was not paid the balance amount of Rs.1,92,483/-. The plaintiff also was entitled to get an amount of Rs.19,43,087/-towards extra work done by him over and above the agreement items. In spite of repeated demands, the defendants did not pay his dues. Therefore, the plaintiff served a notice under Section 80 of the Code of Civil Procedure, 1908, hereinafter referred to as the ‘Code’, for brevity, but it yielded no result. Thereafter, the plaintiff filed the suit against the defendants for realisation of his dues. 3. The opposite parties in this case filed a joint written statement. After taking evidence from both the sides, the Civil Judge (Senior Division), Berhampur, decreed the suit in part for a sum of Rs.1,92,483/-only, which was the balance amount to be paid to the plaintiff towards the work done as per the agreement. 4. Being aggrieved by that judgment and decree, the respondent preferred First Appeal No.268 of 1996 before this Court and a Division Bench of this Court, as per the Judgment dated 30.08.2000 have set aside the Judgment and decree of the learned Civil Judge (Senior Division) and decreed the suit in full. Further directions were given to quantify the additional work of the appellant as accepted by this Court after giving opportunity of adducing evidence and pass necessary decree in terms of the Judgment passed by this Court. 5. Further directions were given to quantify the additional work of the appellant as accepted by this Court after giving opportunity of adducing evidence and pass necessary decree in terms of the Judgment passed by this Court. 5. In pursuance of the direction given by this Court in the aforesaid First Appeal, both the parties appeared before the learned Civil Judge (Senior Division), Berhampur, but both of them declined to adduce any further evidence to quantify the additional evidence stating that the evidence with regard to such quantification has already been led by the parties through their witnesses. However, in pursuance of the judgment of this Court, the plaintiff-appellant has filed an up-to-date calculation sheet to the claim till 31.10.2000 and have filed their counter to the said calculation sheet filed by the plaintiff on the ground that as per Exts. 6 to 12, the total revised estimate cost of 15 numbers of work has been worked out to Rs.30,11,503/-, which has not been supported by the competent authority. Further, the additional claim filed by the plaintiff-contractor is based on the revised estimate. The quantities in different items of work have also not been recorded in any measurement book to ascertain the quantities of work done. So the defendant denied that the plaintiff is entitled to Rs.21,35,233/-and further pleaded that the plaintiff is not entitled to receive any interest on the same. 6. After hearing both the parties, learned Civil Judge (Senior Division) decreed the suit in full and directed the defendants to pay a sum of Rs.52,89,093/-to the plaintiff including interest upto 31.10.2000 at the rate of 12% per annum. The learned trial Judge further directed the defendants to pay future interest @ 12% per annum on the principal amount of Rs.21,35,570/-. 7. In assailing the findings recorded by the trial court, learned Addl. Government Advocate submitted that the approach adopted by the learned trial Judge is erroneous. It is contended that since the Division Bench in the earlier First Appeal has not directed for calculation of interest, it was not within the jurisdiction of the Civil Judge (Senior Division) to award interest @ 12% per annum. Furthermore, it is contended that this is not being a commercial contract, the award of 12% in absence of any evidence regarding the rate of interest charged by the Commercial Banks at the relevant time, is erroneous. Furthermore, it is contended that this is not being a commercial contract, the award of 12% in absence of any evidence regarding the rate of interest charged by the Commercial Banks at the relevant time, is erroneous. Learned counsel for the respondent, on the other hand, submitted that once the matter has been decided by a Division Bench of this Court, there is hardly any scope for this Court again to re-examine the matter to set aside the order passed by the Civil Judge (Senior Division), which is in accordance with the direction given by the Division Bench in the earlier First Appeal. Describing the transaction in question be a commercial one, learned counsel appearing for the respondent argued that 12% interest per annum is appropriate in view of the fact that generally banks award 12% interest in such kind of transactions. 8. The Division Bench in First Appeal No. 268 of 1996 decided on 30.08.2000 has held as follows: “10. In the result, the judgment and decree of the trial Judge dismissing the appellant’s claim for additional work are hereby set aside and the same is decreed in full. The trial Judge is, therefore, directed to quantify the additional work of the appellant as accepted by us after giving him and the respondents opportunity of adducing evidence and pass necessary decree in terms of this judgment by 31st of October, 2000. The appellant will appear before the trial Judge on 15.09.2000 to receive further direction from him. “ Thus, the Division Bench has decreed the suit in full. It may be noted that the suit is for Rs.21,35,750/-and interest @ 12% is Rs.9,60,826.50 paise, which comes to Rs.30,96,576.50 paise. Since the suit has been decreed by the Division Bench, this Court has hardly any scope to interfere with the finding. The only consideration that required to be addressed in this case is whether the Civil Judge (Senior Division) was correct in awarding interest @ 12% per annum. In this connection, Section 34 of the Code is relevant, which reads as follows: “34. The only consideration that required to be addressed in this case is whether the Civil Judge (Senior Division) was correct in awarding interest @ 12% per annum. In this connection, Section 34 of the Code is relevant, which reads as follows: “34. 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 of 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 lent or advanced by nationalized banks in relation to commercial transactions. Explanation I – In this sub sections ‘nationalized bank’ means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) 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.” 9. Thus, Section 34 provides that when a decree is for money, the Court may order for payment of interest at such rate the court deems reasonable to pay on the principal sum adjudged from the date of the suit to the date of the decree. In addition to interest adjudged from any period prior to the institution of the suit with further interest with such rate not exceeding 6% per annum as the courts deem 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. In addition to interest adjudged from any period prior to the institution of the suit with further interest with such rate not exceeding 6% per annum as the courts deem 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. It further provides that where the liability in relation to the sum of 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 lent or advanced by nationalized banks in relation to commercial transactions. Explanation II provides that 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. 10. Admittedly, in this case there is no contract between the parties with regard to charging of interest. Even in that case, the Court has the discretion to grant interest on the amount to be paid to the plaintiff. The Constitution Bench of the Supreme Court in Central Bank of India v. Ravindra and others, AIR 2001 SC 3095 at Paragraph 55 ruled that the award of interest pendente lite and post-decree is discretionary with the Court as it is essentially governed by Section 34 of the Code dehors the contract between the parties. In a given case if the court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the court may exercise its discretion in awarding interest pendent elite and post-decree interest at a lower rate or may even decline awarding such interest. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner. Thus, it is within the jurisdiction of the Court to award interest and at such rate it finds appropriate to grant such interest pendente lite and future. 11. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner. Thus, it is within the jurisdiction of the Court to award interest and at such rate it finds appropriate to grant such interest pendente lite and future. 11. In this case, the learned counsel for the respondent has relied upon the reported case of Air India Limited v. Cochin International Airport Ltd. and others, AIR 2000 SC 801 ; wherein the Supreme Court having taken into consideration many other cases including the case of Tata Cellular v. Union of India, AIR (1994) 6 SCC 651 , has held that the award of a contract where it is a public or a private party or by a public body or the State is essentially a commercial transaction. At arriving at the commercial decision consideration which are paramount are commercial consideration. The State can choose its own method and arrive at a definite conclusion. It can fix its own terms and conditions by notification for tender and this is not open to the judicial scrutiny. Thus, it is argued that since the mater out of which the present case arises is essentially a contract, the proviso to Section 34 of the Code has been correctly resorted to. In Bangalore Water Supply and Sewerage Board v. M/s. Sugesan & Co. (P) Ltd., Madras, AIR 1999 Madras 49, the Madras High Court has held that where the liability had arisen out of commercial transaction, and that under section 34 of C.P.C., 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., pendent elite interest; and (2) from the date of decree to the date of realisation, i.e. future interest or 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 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. Keeping in view such observations, the Madras High Court allowed interest @ 12% per annum from the date of plaint till realization with the cost of the suit. 12. Thus, the submission of the learned counsel for the State that the court is not having the jurisdiction to award interest is erroneous. Learned Civil Judge (Senior Division) has rightly awarded interest in favour of the petitioner in exercise of the powers conferred under Section 34 of the Code. 13. On the question of awarding 12% interest per annum, it is seen that neither party has adduced any evidence to show what was rate of interest which were being charged at the relevant time on money advanced by the Nationalized Banks in relation to the commercial transactions. Learned Civil judge (Senior Division) has, in absence of any such materials to come to the conclusion that the rate of interest should be 12% per annum. In view of absence of any material to come to such a conclusion, such an approach appears to be unreasonable. Moreover, as observed by the Constitution Bench of Supreme Court of India in Central Bank of India v. Ravindra and others (supra), whenever the component of interest is disproportionate with the component of the principal sum actually advanced the Court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline awarding such interest. This discretion has to be exercised fairly, judiciously and for reasons and not in a arbitrary or fanciful manner. It may be noted here that in the suit, the petitioner has claimed an original sum of Rs.21,35,570/-, but the suit has been decreed for Rs.52,89,093/-, which is more than the double of the principal sum adjudged to be paid to the plaintiff-respondent. Such being the case, this Court comes to the conclusion that interest at a lesser rate has to be granted in favour of the plaintiff-respondent. Such being the case, this Court comes to the conclusion that interest at a lesser rate has to be granted in favour of the plaintiff-respondent. This Court comes to the conclusion that after taking into consideration all factors as discussed above, interest at the rate of 7% per annum on the principal sum adjudged at Rs.21,35,570/-from the date of filing of the suit till the date of decree should be awarded. The plaintiff is further entitled to an interest at the rate of 7% per annum from the date of decree to the date of realization of the entire amount. 14. With this finding, the First Appeal is allowed in part. The judgment and decree passed by the learned Civil Judge (Senior Division), Berhampur is modified to that extent.