Karnataka High Court
M/S Gomathi Agencies vs M/S National Textile Corporation ... on 10 June, 2013
Author: N.Kumar
Bench: N.Kumar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 10th DAY OF JUNE 2013
PRESENT
THE HON'BLE MR. JUSTICE N.KUMAR
AND
THE HON'BLE MR. JUSTICE V. SURI APPA RAO
R.F.A. NO. 522/2005
BETWEEN :
1. M/s.Gomathi Agencies,
Gomathi Building,
No.34, Ramasamy Street,
Erode 638 001 Tamil Nadu,
Represented by its
Managing Partner
Sri.V.Shivashanmugam.
2. Sri.V.Shivashanmugham,
Partner, M/s.Gomathi Agencies,
Gomathi Building,
No.34, Ramasamy Street,
Erode 638 001, Tamil Nadu.
3. Sri.V.Srinivasan,
Partner, M/s.Gomathi Agencies,
Gomathi Building,
No.34, Ramasamy Street,
Erode 638 001, Tamil Nadu.
4. Sri.Vadivelu,
Partner, M/s.Gomathi Agencies,
Gomathi Building,
No.34, Ramasamy Street,
Erode 638 001, Tamil Nadu. ...APPELLANTS
(By Sri.K.Chandranath Ariga, Adv.)
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AND :
1. M/s.National Textile Corporation
Limited, (Andhra Pradesh,
Karnataka Kerala & Maha) Ltd.,
Having Registered Office at
Nanjappa Mansion, K.H.Road,
Bangalore - 560 007,
Unity Minerva Mills,
Magadi Road, Bangalore,
Represented by its
Company Secretary.
2. M/s.Selva Kumar & Co.,
C/o.M/s.Gomathi Agencies,
Gomathi Building,
No.34, Ramasamy Street,
Erode 638 001, Tamil Nadu.
Represented by V.Selva Kumar.
3. M/s.Pankaja Lakshmi & Co.,
C/o.M/s. Gomathi Agencies,
Gomathi Building,
No.34, Ramasamy Street,
Erode 638 001, Tamil Nadu. ...RESPONDENTS
. . . .
This R.F.A. is filed under Section 96 read with
Order XLI Rule 1 CPC against the Judgment and Decree
dated 6.11.2004 passed in O.S.No.10571/1996 on the
file of the XXVI Addl. City Civil & Sessions Judge, Mayo
Hall, Bangalore, (CCH-20), decreeing the suit of the
respondent No.1 herein for recovery of money.
This R.F.A. coming on for orders, this day,
N.Kumar J., delivered the following:
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JUDGMENT
Defendants 1 to 4 have preferred this appeal challenging the judgment and decree of the Trial Court, which has decreed the suit of the plaintiff as prayed for.
2. For the purpose of convenience, the parties would be referred to as they are referred to in the original suit.
3. The plaintiff is a Central Government undertaking engaged in the business of Manufacture of Textiles and Textile goods having various constituent units. One such constituent unit of the plaintiff is Minerva Mills, Magadi Road, Bangalore. Under an Agreement dated 01.04.1993 entered into between the plaintiff and the 1st defendant M/s.Gomathi Agencies, the 1st defendant was appointed as the Depot Keeper of its unit of Erode in Tamilnadu for a period of one year from the date of agreement, which expired on 31.03.1994. The 1st defendant performed its obligations in terms of the aforesaid agreement. Even after the expiry of the period of agreement, without entering into 3 -4- the fresh agreement between the parties, the 1st defendant continued to perform its obligations as was done earlier. One of the plaintiff constituent units had despatched one load of 25 cone yarn of 140 bags under Invoice No.2552 dated 20.01.1995 through M/s. Bhandari Interstate Carriers under Lorry Receipt No.069525 dated 20.01.1995 to their depot at Erode. The 1st defendant took delivery of the said consignment and instead of diverting the same to National Textile Corporation, Yarn depot, has created a transaction of sale in favour of the 5th and 6th defendant and despatched copies of the invoices to the plaintiff. Hence, the total value of the consignment thus diverted is Rs.7,07,000/-. However, the defendants 2 to 4 failed to remit the sale proceeds of the consignment within the required time limit. Therefore, a legal notice came to be issued calling upon them to pay aforesaid amount with interest. A police complaint was also lodged. Though the defendant admitted the transaction, they denied the liability to pay the said amount. Therefore, the plaintiff 4 -5- was constrained to file a suit for recovery of the aforesaid amount with interest at 24% p.a.
4. After service of suit summons, defendants 1 and 2 filed a written statement denying the claim and defendants 3 and 4 adopted the written statement filed by defendants 1 and 2. They contended that on the date of the suit transaction, there was no agreement between the parties. They contended that in fact a sum of Rs.1.50 lakh caution deposit is still lying with the plaintiff, which they have not repaid even after the expiry of the agreed period. They took several other legal contentions also.
5. On the basis of the above said pleadings, the Trial Court framed the following issues:
1. Whether Plaintiff proves that, even after expiry of the period of the agreement, first defendant continued to maintain the relationship by operating under the name and style "National Textile Corporation Ltd., Yarn Sales Depot, Gomathi Agencies?5 -6-
2. Whether Plaintiff further proves that, first Defendant, created a transaction of sale in favour of the 5th defendant and 6th defendant as per invoice No.3 dated 21.01.1995 for Rs.3,53,500/- and invoice No.3 dated 21.02.1995 for Rs.3,53,500/-
respectively, and despatched copies of the said invoice to the Plaintiff?
3. Whether Plaintiff proves that defendants 2 to 4 failed to remit the sale proceeds of the consignment so received and apparently sold by first Defendant to the fifth Defendant and sixty Defendant within the required time limit of seven days?
4. Whether Plaintiff proves that in the proceeding of arbitration, first Defendant admitted the liability as answered in para-8 of the Plaint?
5. Whether Plaintiff proves that it is entitled to interest at the rate of 34% p.a. from the date of filing of the suit, till payment?
6. Whether the Plaintiff proves that, Defendants are liable to pay the suit claim?
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7. Whether the Defendants 1 to 4 prove that, this court has no jurisdiction to try the suit?
8. Whether Defendant 1 to 4 prove, that there was no consent for extending the period of agreement?
9. Whether Defendant 1 to 4 further prove that the goods involved in the suit were supplied separately, and independent of and without reference to the above agreement?
10. Whether Defendants 1 to 4 prove that the suit is pre-mature?
11. Whether Defendants 1 to 4 further prove that, since goods involved were intended for the sale depot of the Plaintiff and that since the said goods were entrusted to M/s.Bhandari Interstate Carriers for making delivery to its own depot at Erode, that the Plaintiff has to sue M/s.Bhandari Interstate Carriers, as averred in para-10 of W.S.?
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12. Whether Defendant 1 to 4 further prove that, there is no cause of action for the suit?
13. What order or decree?
6. The plaintiff in order to substantiate their claim examined one Sunil Lal, Sales Manager as P.W.1 and got marked the documents at Ex.P1 to ExP7. On behalf of the defendants V.Shivashanmugam, 2nd defendant was examined as D.W.1 and they also produced six documents at Ex.D1 to Ex.D6.
7. The Trial Court on appreciation of the aforesaid oral and documentary evidence on record held that the plaintiff proved that even after the expiry of the period of agreement the 1st defendant continued to maintain the relationship by operating under the name and style of "National Textile Corporation(APKK & M) Ltd.", Yarn Sales Depot, Gomathi agencies. The plaintiff has proved that the 1st defendant has created a transaction of sale in favour of the 5th and 6th defendants as per Invoice No.3 dated 21-01-1995 for a sum of Rs.3,53,500/- and 8 -9- Invoice No. 3 dated 21.02.1995 for a sum of Rs.3,53,500/- respectively and despatched the copies of the said invoices to the plaintiff. Further the plaintiff has proved that defendants 2 to 4 failed to remit the sale proceeds of the consignment within 7 days, the period prescribed. The Trial Court also held that in the arbitration proceedings, the 1st defendant admitted the liability. It also held that the plaintiff has proved that they are entitled to interest at 34% p.a. from the date of filing of the suit till payment. The defendants have failed to prove that the Court has no jurisdiction that there was no consent for extending the period of agreement. It held all the issues, the burden of which, is on the defendants, in the negative and thus decreed the suit of the plaintiff in favour of the appellant. Aggrieved by the said order, the defendants preferred this appeal.
8. The learned counsel appearing for the appellant vehemently submitted that there is no dispute regarding the value of the goods, which are being supplied. The value is admitted. The dispute is regarding payment of 9
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interest. The claim for interest at 34% is not based on agreement. In that view of the matter, the Trial Court committed a serious error in awarding interest at 24% p.a. for non-payment of money. Therefore, he submitted that a case for interference is made out.
9. The learned counsel appearing for the respondent submits that interest is charged on the basis of trade usage in the absence of any agreement. Even otherwise, a legal notice came to be issued under the Interest Act and therefore, the awarding of interest by the Trial Court cannot be found fault with.
10. Therefore, the short point that arises for consideration in the appeal is whether the plaintiff is entitled to 24% interest in the absence of any agreement.
11. The facts are not in dispute. The goods worth Rs.7,07,000/- was despatched on 21.01.1995, which was duly received by the 1st defendant and then divided to 5th and 6th defendant. The said amount ought to have been paid within a week from the date of receipt of 10
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the goods, which admittedly has not been done. Thereafter a legal notice came to be issued on 16.03.1995 claiming the said amount with interest at the rate of 24% p.a. The suit is filed on 31.05.1996. It is not in dispute that the original agreement, which has been entered into between the parties has come to an end. However, on the same terms and conditions, the business was being continued. In the said agreement there is no provision for payment of interest, much less at the rate of 24%. No evidence is adduced to show the trade usage. Therefore, the interest at 24%, which is claimed and granted by the Trial Court has no basis and therefore, the Trial Court is not justified in decreeing the suit of the plaintiff awarding 24% interest.
11. Then, the question is:
What is the interest the plaintiff is entitled to in the absence of agreement or trade usage?
Admittedly, a legal notice was issued claiming interest and therefore, the interest Act is attracted.
Under the Interest Act, the interest payable would be the rate of interest at which the public Gilt-edged 11
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Securities earn interest, which may be around 8%. At the same time, it is not in dispute that the defendants had deposited a sum of Rs.1,50,000/- as caution deposit with the plaintiff. That amount is lying with the plaintiff, without paying interest thereof. When the plaintiff is claiming interest on the value of the goods supplied in the absence of value trade usage, the defendants are also entitled to interest on the caution deposit, which have been lying with the plaintiff for the last more than 2½ decades. It is also now not in dispute that Rs.1,00,000/- is deposited before this Court on 20.02.2006 and on 01.03.2006, a sum of Rs.1,50,000/- is deposited. In fact these amounts are to be taken into account by the plaintiff and given deduction to.
12. Under these circumstances, we are of the view that proper interest payable by the defendants would be 6% p.a. on the amount outstanding, from the date of suit till the date of payment. That would meet the ends of justice. Hence, the following order:
(a) Appeal is partly allowed.12
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(b) The Judgment and Decree of the Trial Court insofar as decreeing the suit for a sum of Rs.7,40,335/- is affirmed.
(c) The rate of interest at 24% p.a. awarded is reduced to 6% p.a from the date of suit till the realization.
(d) It is made clear that the sum of Rs.1,50,000/- deposited with the plaintiff as caution deposit shall be deducted out of the principal amount.
(e) The sum of Rs.1,00,000/- deposited in terms of the order dated 10.01.2006, shall be deducted out of the decretal amount with proportionate interest.
Parties to bear their own cost.
Sd/-
JUDGE Sd/-
JUDGE SPS 13