Karnataka High Court
S Sridhara S/O Late A.N.Sampath Iyengar vs M/S Batliboi Limited Batliboi House on 29 March, 2010
Bench: N.Kumar, K.Govindarajulu
EN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 29'?" DAY OF MARCH 2010
PRESENT Q
THE HON' BLE MR. JUSTIQE N. .
THE HON' BLE MR. JUSTTQE
RFA NO 774 OF' 2008
RFA.NO.774[2008 'A 1'
BETWEEN
1. ssR3DHARA'jg7 . g 'V _
s/0 LATE':A__
MAJoR,._ «:fi_ 'é " ' ., V
R/ 0- G4, 303;' iEVE'RE:3T APA RTMENT,
8TH
BANGALORE 3-» E
PRORRIWR, ' - -.
UNIVERSAL V1'$SS.ELS gAND STRUCTURSES,
N--O.353--354,'9'1"H CROSS,
.~4m~1E':x/IAIN, PEENYA IV PHASE
-"BANGALORE 5'8"?'
. --. APPELLANT
M(Ey"E;~i: ADV)
"M/s BA'I'LIBOi LIMITED
" BATLIBOI HOUSE
SWAMI VIVEKANANDA ROAD
JOGESHVVARI (WEST) X'/'
I 2008
MUMBAI 400 102,
AND HAVING ITS SUBORDINATE OFFICE
AT N099/2, N.R.ROAD,
BANGALORE 2,
REPRESENTED BY ITS
MANAGING DIRECTOR.
2. M/S BATLIBOI ENVIRONMENTAL"ENGIPIEE::RSILTI3.If, I
BATLIBOI HOUSE, GOVANDI w;EST,._ ; I
MUMBAI 400 043, "
WORKING FOR AND ON BEHAL 'OE-
M/S BATLIBOI L'I'D., " ,_ I _
AND HAVING ITS SUBORDINATE OFFICES --
AT No.99/2, N.R.RQAD, _ . .
BANGALORE 560 0I)2~.
-- I RESPONDENTS
(By Sri: V SANJAY'E{RISHNA'FQR_ .3; 23
TIIIS V. EI1IEE"i',':;I/S':.:9§;,§ of CPC AGAINST THE
JUDGEMEIIWAND'-I DATED 19.03.2008 PASSED IN
OS.NO.6218,'2OG'.';--~._ON FILE OF THE XIX ADDL.CI'I'Y
CIVIL AND. 'SESSIONS'--EUDGE, BANGALORE CITY,
CCI~I.NO.18;__ I)ECREE"[1\T»G""'.THE SUIT FOR RECOVERY OF
I _ 1. "M./S"'BA'I*L1BOIL1M1'I*ED
BATLIBO1 HOUSE
I , _SwAMI VIVEKANANDA ROAD
_ JOGESHWARI WEST
MUMSA1 40 0012
I 'I M/S EATLIBOI ENVIRONMENTAL ENGINERS LTD
BATLIBOI HOME. GOVANDI WEST
X/,
MUMBAL43
REP BY ITS AUTHORIZED SIGNATORY
SR1 RAMESH K CHINIWAR
(By Sri: V SANJAY KRISHNA, ADV]
hum
SR1 s SRIDHARA .»
S/O LATE A N SAMPATI-E IYENGAR V
AGEDABOUTGQYEARS _ --
R/O c-4, 303, EVEREST A.EA..'mx4E1x{T.
8TH MAN, MALLESHWARAM.- . f ~
BANGALORE ' '
THE PROPRIETOR _ ,, * ;V ..
UNVIERSAL VESSELS ANO STRUCTURES.
NO 353 --2»=54,'j.:.s_.:,n.E-';"1»~i CROSS, "
arm MA.IN.I?EENi'A 1.\j_;':r.§>_:¥iAs;+: v
RESPONDENT
[By Sr}: : C
'V - REA IS Ei'L'EO ms 96 OF THE cpc AGAINST THE
JUDG.EM_ENT.AND OECREE DT. 19.3.08 PASSED IB OS NO.
€~2i«8/O3;-. 'O1 \V} FILE OF THE XIX ADL. CITY CIVIL &
- sESS1ONs ' « L 'JUDGE.
_ DECREEING 'THE SUIT FOR RECOVERY OF MONEY.
BANGALORE CITY (CCH.NO. 38).
. ~-- . APPEALS COMING ON FOR ADMISSION THIS
'=.I.)AY, "KUMAR 3., DELIVERED THE FOLLOWING:
A/..
JUDGMENT
These two appeals arise out of the same and decree and therefore, they are taken, consideration together and dispQsed'"o.fj_ by 9 judgement.
2. O.S.6218/20(l_1 is / Vessels and Structures Limited for a judgment and Vdecree jointly and severally of Rs. 14,48, 132/-
with interest' monthly from the date of oi "date of realization.
3.» For the'p1"1rpose of convenience, the parties are .«"referredE"to asthey Varereferred to in the original suit. V' T' , M/s Universal Vessels and _ Struetur._es -. engaged in the business of industrial lahrioation and Inanufacturing of industrial boilers. The "defendant is a public limited company registered R/it under the Companies Act, 1956. The second defendant is a subsidiaiy company of the first defendant. defendants are engaged in the business of _ manufacturing and construction. / s J..Vija3Ian:agar" = g Steel Limited (for short hereinafter refer:'reAd.'to' were setting up a steel near' Hosg'et§fl=a_nd..'3 contracted with M/s i_ndomag4i: Limited (for short hereinafter '_'iSTL") for the construction Q P IST L Were the main la of the work was entrustgedmvbiy to: V defendant. The first defendant! engaged the plaintiff for manufacturing.,V/'fa1).'rication of two chimneys for the said firstvwdefendant vide its Purchase Orders l2i.'1~2}i9gae and 6.12.1986 contracted with the 1 plaintiff»-..fo1*.iAfabrication and supply of two 70 Metre High '4 The said chimneys were fully fabricated, inspected by ISTL accepted and cleared for dispatch. The T "fabricated parts of the Chimneys were dispatched in t/ stages and the last dispatch was on 12.8.1998. in the meanwhile, the first defendant had transferred the~related business to the second defendant which is a the first defendant. The bills" were it defendants and the bills werelA:'«Vaccérnpanie*d. inspection and acceptance certificates lSTI...'"
In other words, all the vlrere fully inspected and acceptedl if erected at the plant site;~at::«é.J:pZ\v'Sl.::A__'b3l'l 1998. The total value. the plaintiff for the defendants Purchase Orders was Rs.36,9s,4s1 and a sum of Rs.23,9s0/- for extra fabricatio'n cf anchor washers. The defendants 'made ad hoc basis from time to time.
had requested them to make _ payrnent"on'4:"'hfl1 to bill basis, there was inordinate delay in ,p,t1:esarp.set'tlement of the dues even though as per the I-lnrchase Order, the payments were to be made by the T "defendants within 30 days from the date of dispatch. M/ s ESTL made a direct payment to the plaintiff for a sum of Rs.3,00,00()/- by cheque in August 1998.
5. The plaintiff is a small--scale ar§ite_witii.. limited resources. The defendants werefivsuupposedV~ detailed drawings for the fabricatioriof :
gave only general sketch. the had to develop all the No help was forthcoming fr01ri't.he responsibility of the and size of the steel. The defendants did not care to The defendants requested care of these things and the e_vplai:jp1;t;i.ffE §bliged"t11e_._defendants in this regard. Although tl1ere.was'i:1ordiI:ate delay in the Supply of steel plates, the Ifirfished in time. lnspite of rise in costs, the held firm and was completed Within the amount. The plaintifl" suffered extreme hardship . if lhebause of the inordinate delay in the payment of the dues K//.
by the defendants. The plaintiff suffered humiliation as it could not meet financial obligations to M/ Lakshmi Ispat, who supplied steel for the chimneys. The executives of M/sI 0' used to Visit the factory of the days and create scenes in "cl.ientsl"
demanding payment ofits dues. e>«:t:i*e'ri1e"'§situation was explained to the the plaintiffs letter dated , positive response from the have not even taken steps such as half gauge plates and balance scrap steel.
Even ithoughl thisifact brought to the notice of the iter aiiayide plaintiffs letter dated 27.5.2000 no taken by the defendants so far.
06.. The Board of Directors of the plaintiff personally ":0.a;1pr"oached the executives of the defendants by visiting 0 and by writing letters and through telephone. 1/ The defendants have an office in Bangalore headed by the Vice President at No.99/2 , N.R.Road, plaintiff has visited the said office on many met the executives there, who oraiiy assured' matter but nothing concrete was ":The reminded the defendants on 'seireral .oecasio_i:1sV§"*::"The last"
letter was dated 27.7.2095. thongh 'the-~ defendants have received letters, 4' n_t)fi.:'V:.g;es9pQnS€ from the defendants. liable to pay Rs.8, 14,807:/: the work done by the plaintiff submits that it is a "undertaking as defined under sectio11--v5?{ of if the 'Interest? on Delayed Payments to Small- V. dfseaplze' lUndertak1n' gs {Amendment} 1 Act 32/ 1993) (hereinafter referred to as _ the 'Act'.-__for The defendants are buyers as defined dander the Act and in View of the provisions of Sections 4 S of the Act as amended by Section 23/1998, the " "defendants are liable to pay interest on the above amount 10 at the rate of one and half times the prime lending rates of the State Bank of India which comes to annum compounded monthly from the appointed defined under the Act. Therefore;--- thef; aiieu if liable to pay to the plaintiff a surrrVof--"
the balance amount due towa1*ds the Workdddoneddd interest at 19.87% per'arinurricon2r§ounded"Ir;ontl1ly till the date of the filing of theieurat e£Rs.6,33,325/~. Therefore, in all surrtof --d.
'' the name of the firm which tivas'-- a Realising the mistake, the causeu"titleV.was danieriided to show that the plaintiff is t_vthe,_pi:oprVietvor of"the___fnv'm. After service of summons, the defendants lenitered appearance and they have filed a joint statefneiitiddri V..They contended that the court has no ' Vjurisdietienv to try the suit. The parties have in fact agreed to the jurisdiction of the courts in Mumbai. if Further the entire transaction has taken pace at Mumbai. a/ L T "Rs.8,l4,807/- as stated in Para 8 of the plaint and Vic 11 " Therefore, it was submitted that the suit filed the plaintiff at Bangalore is not majntainable. They that the defendants herein engaged the plaintiff for fabrication and suppl.-y""of-- Chirrmeys at the rate of Rs.14,l2,500/~ each. Subseq:fe'nt1y,.thpttirchasetolrdert was' t amended and purchase tV'iw._as tli1*Icretased to Rs.14,70,23l.0O. Both were placed from Mumbai; ~:tspecificallyitfrnentioned therein and agreed to the jurisdiction of Mumbal Vtrnade by the plaintiff to the effect' delay in payment of the dnesppbyttthe'defendants 1s denied as false. In fact, the {twigs due toftlie delay caused by the plaintifi in as per the terms of the order. It _ is denied' the proprietor of the plaintiff firm met the at Mumbat and contacted them over telephone payment of dues. The liability to pay 12 Rs.6,33,325/~ as claimed in Para «M9 was denied,' The entire claim of the plaintiff is imaginary and false}:
letter dated 27.5.2000 the plaintiff has lakhs as the amount due from it said claim is not admitted by the In the plaintiff has made a ciaiizfloef Rea,Li,8iof;'0}l"be§s1des"
interest. By a letter ':d.a_teds the"'plaintifi" has Claimed in all Rs. stated that a sum of to M/s Ganesh Lakshmi Vtliatlthere is no privity of contrast" and the said Ganesh l "crystal clear that the plaintiff has been ldiflferent claims at different points of in the claim of the plaintiff. They pay the suit claim. Subsequently, an _ addit§,on--al' 'si?1'itten statement came to be filed by the defendant. It is submitted that by express .0 agreetnent between the parties, in the Purchase Order, the " "jurisdiction of the courts to resolve any dispute was 13 conferred upon the courts in Mumbai. It is further submitted that as per the terms and conditions' between the parties in the said Purchase Universal Vessels and Structures"'waS a steel only from M / s Sandeep bound by the said terms to' have purchased from .}1::\'l§/_'S to the tune of Rs.10,O0,000/"--V. conditions annexed to dated 6.12. 1996 specifically to abide by the terms the plaintiff having terms and conditions of the said contract' h.as"151o to claim any amount fiom this tngchlessddé the suit claim. The defendants Aspeei1icaiI3:'.y,deifty:"the averment that the plaintiff is a small- ' V' _ scaie~--un.de1*taking as defined section 2 of the Interest on V:)e],:a,yedVV'§ayments to SInal1--scale and Anciliary industrial Undeftakings (Amendment) Act, 1998 (Central Act 1/ "I4 32/ 1993) and as such the plaintiff is not entitled to claim any interest under the said Act.
8. On the aforesaid pleadings, the trial court' the following issues :~
1. Whether the defendants .proVes_--'that:'_'th'is Vleoutjftl has no territorial 3'urisdietion'_'_'tK\L_'«'gnteftanlthe.suit and grant relief? V p 2 A V
2. Whether the defendants are liable to 145,807/-- towards the done;
"proves that the defendants afe--.liable t'oApayt:_i11terest at the rate of £0.87% per :e..o1npo1_mded monthly amotmting to ;s.e,s3,325/a as claimed?
'' . H was subsequently reeasted substituting lgthe rate of interest as 19.87% in place of 10.87%. ll"~«'_.1'he plaintiff in support of his claim exaxnjned as V. PW-1 and he had produced 17 documents which are 3/"
l5 marked as Exs.P.l to '£3.17. On behalf of the defendant one Ramesh was examined as DW--1 and he has General Power of Attorney as EX.D-- l.
9. The trial court on appreciation"-«of documentary evidence on record held'-that defe1'i'da.nt-.Vy has failed to establish that "Bangal0re"("';otiijt'VVhas not territorial jurisdiction. :"l?he that the total steel supply was tons of steel was supplied 85.75 tons of steel was Lakshrni Ispat amounting' to The labour charges is ca1cu1atedVVat_Vd% at the rate of Rs.8.50 per Kg. ..Theie'ost_:of.__raW¥'steel.is calculated at Rs.92,920.89. The iiroviding stiffeners etc., extra Excise Duty one Chimney (actuals) is calculated at ',.,_.,_"~.Rs.2,56,l$'63.21. KS'? and Cess is ecalcuiated at . In all, the total amount comes to _R<§.38,l8,4~20/-. The amount received is Rs.28,4}.,783/--. it/"
16
The claim is restricted by the plaintiff to Rs.8,14,807/» thus giving up the claim of about Therefore, the trial Court held that the _ established that the defenda1_V1tM _is .1iabi§~'.. 'ta '-_pay'"
Rs.8, 14,807/-.
10. Insofar as issue No.'3_is concernedvg ifvheld that the plaintiff is an as srnalkscale industrial unit as per after referring to Sections 3,4 the one-deiayed Payments to Small Scale' industrial Underta king (Amendment) the subsequent amendment held thatxxt-he v.interestV.:ca1cu1ated and claimed by the = in accord_ance with law. As far as interest from Tdate»..4of suit is concerned, it has awarded at 12% £rorti'the_' of the suit till the date of realisation on Thus it partly decreed the suit of the Aggrieved by the said judgment and decree of ' trial court, the plaintifi" has preferred RFA 7'?4/2008 L/.
17 complaining that the future interest is awarded only on the price of the goods which was supplied and not principal sum adjudged. Secondly on the transaction in question is a commercial V plaintiff is entitled to interest at thé«,a§-_e¢d as of The defendant has also pteiened 977 / 2008 challenging.th.e" the insofar as holding that the territorial jurisdiction to" the.V~suitAy""--i_"-- ..
ll ..... Counsel for the ;i2._ learned Counsel appearing for élvthep that in the light of the judgment of the apex Court in Central C _ of: us. Ravindra and others, reported in 367, the principal sum adjudged includes principal amount plus the interest accrued on nionthly rests in this case by virtue of the provisions of the 18 aforesaid Act. It is on that ground, the future interest should have been awarded. Therefore, he submits that the judgment of the trial court is contrary to the judgment of the Apex Court. He also submitted that the _ of interest should have been awarded as the = question is a commercial transaction. .. 5
13. Per contra, the __1earried'- coun'sei' for'; the defendants submitted that contracts 'betirgeen the parties specifically stit;A:,ii;e.te Bombay Court will have jurisdiction between the parties.1._ InspiteV"of~ term agreed to between the parties Veiiclusive jurisdiction on Bombay ._VC0u,_rif's, 1 __the_ triai«..court committed a serious error in e11te1'tainir1g"'th'e«_suit at Bangalore and decreeing the suit of VTherefore, he submits that in the light of . "the settled legal position and the various judgments of the ":d.gi,13;:;:;.{""{',ourt, the judgment and decree is liable to be set V. lastide and the plaint to be returned for presentation to the l9 proper court at Bombay. He also submitted that though the plaintiff is a small--scale industrial unit provisions of the Act applies to the plaintiff g-Vet _ the benefit of Sections 4,5 and 6 offlthe Acton-i the" = suit is filed, the plaintiff should V'eon1tinue such. In the absence of 'ei(iden'ce to thhatfieffepcti, the,"
trial court comrriitted a__ seriou_s._e'rror.._Vir1 graritingilie relief insofar as the interest coricernedfunder the provisions of the aforesa.i(:'1f'act. q_ he ..;ds;ubrr1its that the interest awarde.d7ia':'-_Vexcessive'-7 V the said finding also requires to be set _asiVde..4 ' ' .' aforesaid facts, and the rival «..contei1ti_ons., the that arise for consideration in this ' appeal. l as Li1':.der:-
if (1), .l)iflr;ether the Bangalore Court had territorial " 3 jurisdiction to entertain the suit in the light of the express term under the contract conferring exclusive jurisdiction on Bombay Courts? 21
contend that even if the Bangalore Court has jurisdiction, when parties by agreement confine the jurisdiction Vtoaone court, the jurisdiction of the other court _ Therefore, the court at Bangalore couid. v entertained this suit.
16. The law on the "is not open to the parties by' coiifer jurisdiction on a court which does two courts or more have to: proceeding, an agreement"he:tnreeti§V " to the effect that the disputeltshail of such courts only is not contrary toiithe' puVb1ic_>'po':iicy. Such agreement does not 'i V' "contravene Section'"28'Vof the contract. When the parties ':33? an agreenient..conf1ne the jurisdiction to one court only, then__Vthe~ courts jurisdiction to entertain the suit 'stands.' eifcluded. it is based on the principle that when _ by a solemn agreement, agree to have the disputes .adjudieated in a particular court, the said agreement is to 22 be respected. That is the reason why the objection regarding territorial jurisdiction have to be raisedalsatj or before settlement of issues and normally it 'as preliminary issue. If the court Mfzrids _tl1at:jit V. territorial jurisdiction, it should return.."fcr presentation to the proper cou'rt__so their * of the parties and the;__courtpS_._4.l:_jthe..pii1§iiC'pVVvi%i1oney is saved. But, once the parties do not insist a preliminary point and lisisues and then a holding that the court has juristficétion', that arises is whether the appellateijgcourt even 'it "comes to the conclusion that the no territorial jurisdiction can set aside the Ajt1dg3,nerit:"'on ground alone. The power of the appellate V V . court to-..':se't':"aside the judgment of the triai court on the oi territorial jurisdiction is governed by Section 21
-l Code of Civii Procedure, 1908, which reads as "n'nder:--
23
"21. Objections to jurisdiction: {(1}}No objection as to the place of suing shaii be a11oweg:l'r'.._r._ by any Appellate or Revisional Court unless A. objection was taken in the Court of first "
at the earliest possible oppoijtunity and" it cases where issues are settleelatjorp settlement, and unless. there. 'has 'an consequent failure of it __ _ 'A V' {(2)} No objection as _to"'the-.competence of a Court with reference"'to limits its jurisdiction shall be byflppellate or Revisionat Court was taken in the hat" the earliest possible cases where issues before such settiernent, u_1rEess~"i'herei hasibeen a consequent failure of iusaas; _ it C V_ _v [(331 as to the competence of '_ _~'3l;he_"executing__C_ourt with reference to the local lirriits jurisdiction shall be allowed by any V' T. 2 Revisional Court unless such j""objectiojn.e'was taken in the executing Court at the V possible opportunity, and uniess there AA has been a consequent failure 0fjust1ce.] H17. Therefore, it is clear Subsection (1) of Section makes it clear that no objection as to the piace of L/...
24 suing shall be allowed by any party and uniess such objection was taken in the court of first instance fat»cthe earliest possible opportunity and in all cases wl1ere'.is'si1_e'sy are settled at or before such settlement. arid. unless there has been a conseciuentcpfaiiureyi'of'§ustice.' Before, the appellate court, .i'n-terferes 'with e. and decree of the trial court_:on_ the that it is passed by a court jurisdiction, three conditions have to be satisfied; " an objection as to the laceyoilfiiiys-1_1i11:'_ should' .havembeen taken in the court the .- the earliest possible opportunity." ypSeeondiy,:"an'issue should have been raised and therexshould be a consequent failure of justice. i V' " Apex Court had occasion to interpret this pro:risiori_ case of RSDV Finance Company {P} Limited Shrea Vallabha Glass Works Limited, AIR 1993 SC That was a case where the learned Single Judge held that the Bombay Court had jurisdiction to l/ 25 entertain the suit. The Division Bench of the Bombay High Court reversed the fmding on the questior1~.._of territorial jurisdiction and then dismissed that context the Supreme Court hats:-..held a;sVutidierl:ll¥" .
" "Sub-section (1) of Section. of Codejofill Civil Procedure, 1903 -..__pro\}ides 3 objection as to the pl2tce:'0»f suing shell allowed by any vapzpellate" oij'--re'iri'sioné1}'vcourt unless such objection .was the court of the first insta,z2ce_ e:3irlie'stjVV..l§)ossible opportunity, g1l.:...casesvlxw.here'issues are settierlfit s.ettle1n_ent and unless there 11.as'-been coI1seq'uentlfai}.ure of justice. "
Thelaboive lays down that such an
4. object§iolni'~as tolnthevlvplace of suing shall be allowed by the appellvanit'l«.or.:l"revisional court subject to the following ulilllthehitl such objection was taken in the court of the first instance at the earliest possible opportunity, (2) in cases Where issues are settled. then at or before such settlement of issues, 26 (3) there has been a consequent failure of }'ustic_:e__. In the present case, though the first p are satisfied, the third condition -- failure of--- justice: is not-«.. fulfilled. As already rnentioned,' aboize,u"eeth4ere dispute regarding the ine1its'of..theVc1a.{1i'i, has admitted that thedeposit4_l:Vof:__Rs_f1(l;'Ot,l1(ll)()2?~ by the plaintiff as well as the We are thus clearly of View:"tha'tlthvere:';.is"ho of justice in decreeing the learned Single Judge of On the contrary, it would the ' failure of justice to the plaintiff inlcasev siichtehjeetion relating to jurisdiction is to he as 'l'ie--ld by the division bench of the High l.ap:pe.llate jurisdiction. "
has produced material in support of for the supplies made valued at Rs.36,96,4~31/-- d\.ie'from the defendant to the plaintiff. It has set off the T "value of the scrap as authorised by the defendants 3. 27 Rs.39,84i/-- and in all paid Rs.28,81,624/--. However the balance amount due in terms of the invoice is V'alu.edras Rs.8,14,80'7/-. The defendants in the do not specifically deny this claim); ""It'is«_ The plaintiff in the course of his 'evictence prod;ueed~.VV the invoices, the correction t'o-nthe invoices further V amounts which are added which fact is acknowledged The entire correspondence ' appreciation of the aforesaid oral. on record, the trial Court is the balance amount due. Inscrar as'ti1e"oiig.§li12:a1"biil value of Rs.36,96,431/- is concerned, in order' tovcome to that conclusion, all that is to be seen is the correspondence between the parties prior tlozthep«coirignencernent of the 13s. In fact, in this case apart V --Vfro1ri""the----V:documenta1y evidence, the plaintiff is examined it 1; On behalf of the defendants, their power of holder is also examined as DW--1. They did not " choose to produce any documentary evidence. Th L/,....
28 principle underlining to set--aside the decrees of the Courts on the ground of territorial jurisdiction is if the is at a far off place, if prevented from defending, inspite of the agreement between,'the"parties.'to:v lliaveilthe trial conducted in a particular u_A.thel.'v';:jri13cip'1é,s'~ natural justice is violated 'justice the is instant case, that 'not pleaded by the defendant. Defendant It has its office at the transaction » is taken part_ati__Eangalorei;j imynave the assistance of a best legal iixvliolhnave cross--exarnined the plaintiff at length; 'have als.o"c.idduced evidence and it is on V appreciation of aforesaid material, the trial court has claim is established. That is why even ftliére is no challenge seriously to the claim. V sThel"¢ha1'1engé is to the territorial jurisdiction of the Civil it Unless in appeal the defendant establishes failure of justice, the appellate court has no jurisdiction to " eritertain and uphold the objection regarding territorial l/"
29
jurisdiction of the trial court to decree the suit. Therefore, when the trial court had conducted a fullmfledged defendant had full opportunity not only to the claim of the plaintiff but also to'"lead' it material on record shows part of the cause of..action"
at Bangalore, it cannot be said"v--ithat. the and' decree passed by the want of territorial jurisdiction. matter, we do not see any the Judgment of the trial of Want of territorial
20. po1N*r'No.2:
contractvhetween the parties is not in dispute. of the supplies made is Rs.36,96,431/-- As supply, the amount of Rs.28,81,624/-- made,":.The balance payable is Rs.8,i4,807/~. In fact, is clear from the material on record that the plaintiff given up a claim roughly of about Rstwo lakhs. As L/.
30 stated eariier there is no specific deniai of this claim in the written statement. No positive evidence is adducedVc'b:yc.the defendant's witness to show the incorrectness _ claim. On" the contrary, the it it invoices raised from time to time, :V?$fhi{C"1i1A.'C1€E!.3'Iy:f1}€i1fiQIitfd the amount due to the plainti_ff---by On contrary accepting the said c1a.ini,._payine1its__a1fe§made in instalments. There is delay-in the payments. Therefore, the cou:4t'oa ai)'p?reciatiori" of the oral and documentary" evidence rightly held that the piaintiffvhasd ise}s:,abii§ii¢:de of Rs.8,14,807/-- and thereforetthe %sa;id_. not call for interference. I _;LIA1isVofai""'as,.__.t}'.1e claim for interest in a sum of concerned, that amount is arrived by corn.;:$odundiiVig_ interest on monthiy basis, in terms of the "Act. Atirrzittediy, there was no contract between the to compound the interest. It is in that context we K have to see whether the piaintifl" has a right to compound L//t 3} the interest and whether the claim made is legally sustainable. In that regard, the plaintiff has pleaded in the plaint that it is a Small Scale iedeistaeil unit with a limited resource. it is-Ia''s1nall_:scale~VI,iadu4st,I'i:1lu 9' l undertaking as defined under of Delayed payments to Small 9 Undertakings Act, 1993.,_«' "louyers as defined under the Act. if provisions of Sections 4 by Act No.23 of 1998, the pay interest on the above half times the Prime Lendir1é"'R!ates of India which comes to 19.8',?f% eomfioundeld monthly from the 'appointed :'&defined the Act. Therefore, they have Rs.e,33,325/-- as interest on 8,14,807/- 9 _ at compounded monthly till the date of filing 94 H this.' When the defendant filed a written statement traifersirig these allegations, initially these allegations were " not denied at all in the written statement filed on 32 12.9.2003. Subsequently in the additional written statement filed, they have specifically denied V.-"those allegations. in other words, the plaintiff has court with a specific case that the plaintiff "
interest and compounding of inte:{'estf'on._V rr1_o1*.1llell1.:l'v rates the light of the provisions of the aforesaid as is Small Scale Industrial undertaki.i1g._ Theuldereindamiizs put i on alert, as stated eatiier .,ai--legationsfVV were not denied in the written statélnent but later in 2007 a1legatiorisA}.vere.Vhspecijlicallv "denied. In view of the specificvi'de1iialL;g to have raised an issue. has Even the parties did not move the court for an issue on that aspect. But ., ,,.gonethe1~ess»t.the understood the case of each other. evidence in support of their respective contentions" therefore, the Court being conscious of coiatested issue while dealing with issue No.3 has A into the legal aspect of the Act, the application of the if to the case of the piaintiff and the effect of Sections 4 V-
33 and 5 of the Act to the transaction in question. That is clear from the Judgment the discussion at paragrarvgiihg 46 as well as paragraph 47. Section 4 is amendment and after looking into .. registration certificate shovving Scale industry issued by tlie'~..appropriate come to the conclusion that is a.p'p-licablei, interest is compoundable 'the.era_te~i.g'of4 is 19.87% as claimed by the ;)lainti.ff~as"the interest was not disputed by. eithefiin written statement or in the .71
22. In-..ord.er afifjreciate the correctness of the < it is to look into the provisions of the :Ac't., ---Indian parliantent in order to provide for and_.'regulate._tf1e payment of interest on Delayed Payments Smallscale and Ancillary Industrial undertakings and "'t:tor:gnii;1tters connected therewith or incidental thereto, has " igllhberiacted 'The Interest on Delayed Payments to Small Scale L/..
34 and Ancillary Industrial Undertakings Act, 1993. Act No.82 of 1993 which came into force from 2.4.199$:;f"~«.%I'he Act defines who is a buyer and who is a definitions of Section 2(0) and 2(fl fgeads 2(c] "buyer" means whoeverikbuiysii receives any servicesiisfroni ta consideration. _ 9 it 2(fl "Supplier"
undertaking or a industria} undertaking: registration
certificateiei Qirectorate of Industries of a word has been defined at Section 2(b) reads as underfl = V i"'~b}g_ ..rwi1ere é'in;y------objection is made in writing by regarding acceptance of goods or ~_ thirty days from the day of the "'de1ix;e1'yAfof goods or the rendering of services, the day___on which such objection is removed by the " _ V supplier."
i"E9xp1anation ~»»~ For the purposes of this clause-
(i) "the day of acceptance" means ~»~ 35
(a) the day of actual delivery of goods or the rendering of services; or
(b) where any objection is made the buyer regarding acceptanee-._ofv 'or V' services within thizjtydays ~fro_1n" of V' the delivery of goods "the. of services. the dayaon vvhich such' obj_ecti}onVhis_V" v removed by the ~. A '
(ii) "the day of t}eemed"'aeeept.arice"{ where no objection' by the buyer regarding ; or services of the delivery or services, the day of """ delivery "ofgoods or the rendering of the baelezygtroizrrd of these ciause, we have to see SAeet.iyon deals with iiability to pay compound interest, vvhi<:h;: reads as under:
Where any supplier supplies any goods or renders any services to any buyer, the buyer it shall make payment therefor on or before the date agreed upon between him and the x/ 36 supplier in writing or where there is no __ agreement in this behalf, before the appointed"
9! day.
In the year 2998 by Amendme:itmAct« 1_9'-98 of 1998) Section 3 has been amende_d by4'ins:e:ting provis;on reads as under:
"Provided that agreed upon between theVV_sj;1pplieVr buyer in writing s§a'a1_1':-exceedy one ~21i1~ndred twenty days §fI=o'121" fi§1g';'.day:of1'aeceptfance or the day of deemed aeeeptar1e«e.'"'vVd.' .. V' V' Section Act stands amended by way of way of Amendment act.
. tntedVV%Seetion.__r¢ads as under:
I buyer fails to make payment of the A£:LI_IV1Ol1.Iit:i'tjDA:'[hC suppiier, as required under Section 3, buyer shali, notwithstanding anything 2 » Contained in any agreement between the buyer and supplier or in any law for the time being in force, be liable to pay interest to the suppiier on :..Subsection (1) thereof and after subsection (1), 37 that amount fi'om the appointed day or, as the case may be, from the date immediately fo11owing.V_:the-..v date agreed upon, at one and haif time of Lending Rate charged by the State it 'A V Explanation to the Section defines V Lendiilg Rate means. A' "Explanation--~ For section, "Prime Le--.*:1.ding,-Rat_e--" S ''means' the...» 'Prime Lending Rate of the"-State itidia which is available to the bestAbr_)tfI'owerst%of Section 'with: of interest which reads as underj"
contained in any agreement supplier and a buyer or _;'i"n..anyV the time being in force, the {'b%3;yere' shall bveiiiliable to pay compound interest rests) at the rate mentioned in the amount due to the supplier."
Section 6 was retained and it was given the z/ 38 subsection (2) was added by way of amendment._..___ That section reads as under: p "{2} Notwithstanding anything contairied 7 i" it sub--section (1), any party to a disp-:::'tc-- « make a reference to the Facilitation Council for acting as = .01:
conciliator in respect oi':tlie_matters in that subsection and Vtl1e%'provisi'onjsi of the Arbitration and, Co_nciliationi;Act,. 199(-llshall apply to such tiiiiéaafggrlijirtration or conciliation. were . "a,i'ibitration agreementlgeeferred ito"; in' (1) of Section ' 231A' of the aforesaid provisions make it clearddtllelintention of the" parliament in enacting of legis'lat--ic11. This legislation is to protect the units from the heavy burden of _inter_est. these industrial establishments borrow %ll"'~-g'_"Inoney" Nationalised Banks. The transaction is ' "'eo;a1rricrcial in nature. Both in View of Banking practice as V' iyyvell as Banking Regulation Act, 1945, the interest payable V. 39 by these entrepreneurs is compounded either quarterly, half yearly or yearly depending upon the nature' loan, purpose for which the money is to agreement between the parties:
after borrowing monies from their goods and services to commercial practice vi:i1.§',fi iofV""in't}erest on overdue amount is not circumstances if there is a '--flie.___atnount due to the Small Scale 3 and consequently when Nationalised Banks is cornpouncied V to the principal, these entregneneurs V-wo'u'id stand to loose. That is one of the whyemniotwithstandirig the industrial policy is.1iberaiise,d fili up is given to those entrepreneurs, in _ the end of iheday many of them are out of business. It is in H in this context pariiament has passed this legislation now separateiy providing for compounding of interest for the T "delayed payment from the buyers to the Smail Scale Units 40 notwithstanding the agreement between the parties. The prime lending rate is taken as the basis and that is the interest the customers of these units have irrespective of the contract between the is in the nature of welfare po1icy...m_.eant"Vto"' interest of the entrepreneurs which many social problems like uiieiiiployinent social'-L' security.
24. Keeping_ in for which this enactment is the admittedly the 'Industrial Unit registered with the Governrnehrit. of. and the evidence on record ternis"of....the orders placed by the defendants "ha'-res tiianufactured two chimneys and they have supplied customers. Though the payment has to be h"=..«.._'*rnade irivdicme iumpsum, the defendants have taken their to make payments in instalments and inspite of repeated requests and reminders, the entire amount is not i/ 41 paid. In the plaint it is categoricaily stated that fabricated parts of the chimneys were dispatched in stages dispatch was on 12.8.1998. If the period is _ for the payment of said arnountiwthe v prescribing the tirnehlimit. That is'».hoWthe'1ap'pointed.._da:y"
comes into operation. It is on"that calculated interest compoundiz1:;§:p'it_monthly this amount of Rs.6,33,325,t'--p--.iso__ Though the defendant disppfced 'z3:1'e"" the balance amount, they '1*ia_i\?;e..15i().'[ :.Q_i§puteq:fr'the calculation made by the "(itice defendants are liable to pay the 'amount is liable to be paid by the dgefendaritr-.y\fi'th interest under the Act. That is the Court has done and therefore, we tctmnot f'irid.v,»fa{iit:'with the said finding recorded by the trial V _ Court.
it t tPo1N"r NO.3:
"The triai Court has not been abie to appreciate the "effect of compounding of interest. In this regard it is Why 42 useful to refer to the decision of the Constitution Bench of the Apex Court which has clarified the legal position case of Central Bank of India ---v-
(2002) 1 sec 367. After noticing liaayméforg amendment in 1956 and tliereafter words used in Section 34, tfi-e:"ApexV. Court under:
" A few points are of the provision._._ if the decree. he the court would the date of
t.he"'suit;j:V cou'it'rziay*la1so"vl}e called upon to adjudge V payable by the defendant to for the pre--suit period _ .which"intere.st on the findings arrived at 'noted' b.y.._.us hereinabove, obviously be such interest as has already stood and having shed its character as interes_t;i:: has acquired the colour of the it uprincvipal and having stood amalgamated in the principal sum would be adjudged so. The principal sum adjudged would be the sum actually loaned plus the amount of interest on periodical rests which practice has stood L/he 43 capitalised. Interest pendente lite and future interest {i.e. interest post--decree not exceeding 6 percent per annum) shall be awardedppponv such principal sum i.e. the principal 'V'.
adjudged on the date of thepsnit. It- settled that the use of word «tV"'ina13f"-- Section 34 confers a discretioingonthe co'u_rt'~to «. "
award or not to awardi._interest"~or to interest, at such rate asiviéitideemsii interest, so far as': 1"~u_ture°.inte--rest"is concerned may commence froni of:'th_e.Vdeeree and may be naade to" stop 'either with payrnenifv the court thinks " " V i
26).' :'1'herefore,. clear when interest is compo_u_nded',~. it character of interest and takes V' "the the ' principal. The only condition is that there" an agreement between the parties or statnte provide for the same. In the instant case.
x""<.__V'thpere isnno agreement between the parties but Statute rgoverns the parties and the transaction between them. i .W'nen once this Act specifically provides for compounding of interest monthly, thus the interest so compounded ceases to be interest and it becomes the Unfortunately the plaintiff while drafting the" ~ making the claim has made claims it it it to have created confusion in the the law is well settled on =point.~.. . Vcorhpound interest becomes part be the sum adjudged and dueaon Suit. When future interest: .th_e:f'interest is to be awarded orid principal the (~i~) the compounded judgment of the trial court is erroneous and requires to be rectified. Accordingly, it is r y 2'7. . Insofar as future interest is concerned, it is ' governeddby Section 34 of CPC which reads as under:
":34. Interest ~ (1) where and insofar as a decree is for the payment of money, the Court 45 may, in the decree, order interest at such rate as the Court deerns reasonable to be paid on principal sum adjudged, from the date of "
to the date of the decree, in addition"'«1;:c:) interest adjudged on such piincipai period prior to the ir1stitution.poif'_"thi'e further interest at such*rate percent, per annum .i::the reasonable on such principa} _fro1n 'the* " date of the decree to thealdate' or to such earlier date as the "
relation to the sunilso had'-ariseirovut of a commercial trarIsa'ctionV,V'tlEie,: further interest may exceed-rpsixv annurn, but shall not €§1f{C€(3.d the contractual rate of interest or where "t'n'er.e: is n no contractual rate, the rate at which V lent or advanced by nationalised " , 'banks7i;1 relation to commercial transactions. _ _E)rp1.anation 1- In this sub--section, "nationalised 3" x means corresponding new bank as defined in the Banking Companies {Acquisition and 'Transfer of Undertakings) Act, 1970 [5 of 1970) L/.
46 Explanation II M For the purposes of this section, a transaction is a commercial transaction, if it connected with the industry, trade or business' the party incurring the liability.
(2) Where such. a decree is re'sp,ectVV»of the payment of further interest'.on--__such'1;.;§;1¢cipéJ,"'~..
sum from the date of the "decree to date' of payment or other earlier the Cou-rtivshall be deemed to have 'refi«--1sed s11ch,__'.i1*1terest, and a separate suit therefor shafl' not by way of amendment in 1970 provides liability in relation to the sum So LAad4'jui;1ddg€dhv" hadfiansen out of the commercial the ratewof such further interest may exceed ll annum but shall not exceed the _ contractual, §?'rate of interest or Where there is no contractual rate, the rate at which the moneys are lent or ladvariced by Nationalised Banks in relation to commercial
-transactions. Therefore, the court has been vested with L/.
47' the power to award future interest at a rate more than 6% as was the case earlier but it has no power to aw.-a':'d:"more than the agreed rate of interest. In other words, is a matter of discretion in exercising discretion';-tithe' Court V has to bear in mind the nature of is commercial transaction, thelrate at whichv_;the"V'rr1oneys"' lent and advanced by na~tionaiise'd_: or theeagjreed rate of interest.
28. the] of the case, the transaction the fact that the goods were supphed ' in instalments and substantial made and after the Act the jfiionld entitied to compounding of interest and to?o-»iti1e"rate of 19.87%, the rate of interest Le. 12% aweededifijthetdmai court from the date of decree en the fdate of 'pajfinent is reasonable and do not call for " " '~ :ti1:_tei*ference.
48
29. Learned counsel for the respondent submitted that in order to get benefit of this Act, firstly the plaintiff should be carrying on the business on the date_.of"
the evidence it is admitted that he has _ it and therefore, he is not entitled tcj.Jthe:'i1i«te2jest.* it was contended that the: _aforesaid S' of constitution bench of the Apexubolurt has-no iapplication to the facts of the case 'ease«.was arisen out of the Banking Regu_lation_.1 a contract for compounding V. The of the Act does not mention that as the Small Scale industries _shoult@l functiontngtv Small Scale industry should be a defendant should be the buyer, there should 'jcontract to supply the goods or services and lxthe should be due in respect of that contract. ":jQnce""t.hese essential ingredients are established, the Act directs the liability to pay which is statutorily Vested on 49 the defendant and does not depend on the plaintiff carrying on the business on the day the suit is ffled.._a:1d therefore, we see no substance in the said co_ntentio'n.V Insofar as application of the _ judgment is concerned, it is truegin ..Vsaid'ju_d'gn:1Vent it is clear that compounding of _ interest V. andgthat added to the principal, looses and takes the colour of the «apply tofa case of compounding of interest. '--pertnitte'd.'h3%,V--.eontract, trade, _.usage or undeéj the ecase'*'"the Supreme court has undermtihe present Act but the pn'ncip1eA'aVpp1tes.,V_." A:.If.:'tf:i:e'"Regulation 1945 provides for compounding.' of 'interest? and in pursuance of the same, the" the nationalised bank and the Court held the compounding of V dd _ interest become a part of pnncipai as on the date of s It is because of that when the parliament enacted the present Act, they have used the non~abstante T " clause that notwithstanding anything contained in any SO agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount, from the appoi11ted..day':o'ry:'as the case may be. This -provision would V' principle which is laid down y_ Constitution Bench equally applies A.thel.'fat:'"ts :
case.
31. When the iajvcr, coznpounding of interest monthly, it fol1o\V7V«_rVt_~3'l'll__i_1i..1terest become part of principal that wo*{,1ld~ adjudged on the ciéfié ofsrfitmg tlaefsuit orilylrhich the plaintiff would be entitled' 'to ~~._:l"*l'herefore, We do not see any substance in this' contention also.
' " =3_1:';..__ln result, we pass the following order:
ORDER y (a),_l§FA 977/ 2008 is dismissed without costs. it lb) RFA 774/2008 is allowed in part with proportionate costs. Decree of the trial court. is [L/,/ 51 afiirmed. It is modified oniy to the extent of awarding of interest at 12% p.21. from suit till the date of realisation of Rs. (C) The High Court registry is .dire(_:ted1" fjaystlredddd amount in deposit in 9??
respondent in the ' Ordered accordingly.
Sd/~ EEIEDGE