Karnataka High Court
Nirani Sugars Ltd vs Spaco Corporation on 11 December, 2025
Author: R.Devdas
Bench: R.Devdas
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IN THE HIGH COURT OF KARNATAKA, AT DHARWAD
DATED THIS THE 11TH DAY OF DECEMBER, 2025
PRESENT
THE HON'BLE MR. JUSTICE R.DEVDAS
AND
THE HON'BLE MR. JUSTICE B. MURALIDHARA PAI
R.F.A. NO.100181 OF 2019 (MON)
C/W. R.F.A. NO.100179 OF 2019 (MON)
R.F.A. NO.100180 OF 2019 (MON)
IN R.F.A. NO.100181/2019
BETWEEN:
NIRANI SUGARS LTD.,
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956,
HAVING ITS REGISTERED OFFICE
AT: 4/2, 1ST FLOOR, LEFT WING,
SIDDHA ENCLAVE, NEHRU NAGAR,
BANGALORE, HAVING ITS
Digitally signed
SUGAR MANUFACTURING UNIT
by V N
BADIGER AND FACTORY SITE AT SY.NO.166,
Location: High
Court of
Karnataka,
KULLALI CROSS, TQ: MUDHOL,
Dharwad Bench.
DIST: BAGALKOT, DULY REPRESENTED
BY MR. MAHESH P. LALAGE,
THE DEPUTY GENERAL MANAGER,
(A & O), AGE: 42 YEARS,
OCC: DEPUTY GENERAL MANAGER,
R/O. MUDHOL, TQ: MUDHOL,
DIST: BAGALKOT-587313.
...APPELLANT
(BY SRI SANGRAM S. KULKARNI, ADVOCATE)
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AND:
SPACO CORPORATION,
B-7/22-23, MIDC MIRAJ,
DIST: SANGLI,
MAHARASHTRA STATE,
A REGISTERED PARTNERSHIP FIRM,
REPRESENTED BY ITS PARTNER,
SHRI. N. N. GURAV,
AGE: 66 YEARS, OCC: TRADE,
R/O. B-7/22-23, MIDC, MIRAJ,
DIST. SANGLI,
MAHARASHTRA STATE-416410.
...RESPONDENT
(BY SRI NANDKUMAR ANNA VHATKAR, ADVOCATE)
THIS REGULAR FIRST APPEAL IS FILED UNDER SECTION
96 READ WITH ORDER 41 RULE 1 AND 2 OF CPC., PRAYING TO
SET ASIDE THE JUDGMENT AND DECREE DATED 11/01/2019
PASSED IN O.S.NO.13/2013 PASSED BY THE COURT OF
ADDITIONAL SENIOR CIVIL JUDGE AND JMFC, MUDHOL, BY
ALLOWING THE PRESENT APPEAL IN THE INTEREST OF JUSTICE
AND EQUITY AND ETC.
IN R.F.A. NO.100179 OF 2019
BETWEEN:
1. NIRANI SUGARS LIMITED,
THROUGH SHRI SANGEMESH NIRANI,
AGE: 32 YEARS, OCC: INDUSTRIALIST,
THE EXECUTIVE DIRECTOR,
M/S. NIRANI SUGARS LIMITED,
R/O. M/S. NIRANI SUGARS LIMITED,
SY.NO.166, KULLALI CROSS,
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VIJAYA NAGAR, TQ. MUDHOL,
DIST: BAGALKOT-587313.
2. SHRI MAHESH P. LALAGE,
AGE: MAJOR, OCC: SERVICE,
DEPUTY GENERAL MANAGER (ACCOUNTS),
M/S. NIRANI SUGARS LIMITED,
R/O. M/S NIRANI SUGARS LIMITED,
SY.NO.166, KULLALI CROSS,
VIJAYA NAGAR, TQ: MUDHOL,
DIST: BAGALKOT-587313,
PRESENTLY REPRESENTED BY
SHIVANAND YARGATTI.
...APPELLANTS
(BY SRI. SANGRAM S. KULKARNI, ADVOCATE)
AND:
THE PARTNER,
SPACO CORPORATION THROUGH
ITS SHRI N. N. GURAV,
AGE: 66 YEARS,
OCC: INDUSTRIALIST,
R/O. B-7/22-23, MIDC MIRAJ,
DIST: SANGLI-416410,
MAHARASHTRA STATE.
...RESPONDENT
(BY SRI. NANDKUMAR ANNA VHATKAR, ADVOCATE)
THIS REGULAR FIRST APPEAL IS FILED UNDER SECTION
96 READ WITH ORDER 41 RULE 1 AND 2 OF CPC., PRAYING TO
SET ASIDE THE JUDGMENT AND DECREE DATED 11/01/2019
PASSED IN O.S.NO.08/2013 PASSED BY THE COURT OF
ADDITIONAL SENIOR CIVIL JUDGE AND JMFC, MUDHOL, BY
ALLOWING THE PRESENT APPEAL IN THE INTEREST OF JUSTICE
AND EQUITY AND ETC.
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IN R.F.A. NO.100180 OF 2019
BETWEEN:
VIJAY SOUHARD CREDIT SAHAKARI LTD.,
MUDHOL, REPRESENTED BY ITS
GENERAL MANAGER,
SHRI GURURAJ MADHAV VAIDYA,
AGE: 70 YEARS, OCC: MANAGER,
VIJAY SOUHARD CREDIT LTD.,
MUDHOL, TQ: MUDHOL,
DIST: BAGALKOT-587313.
...APPELLANT
(BY SRI SANGRAM S. KULKARNI, ADVOCATE)
AND:
M/S. SPACO CORPORATION,
REPRESENTED BY ITS OFFICER-IN-CHARGE
B-7/22-23, MIDC MIRAJ, DIST: SANGLI,
MAHARASHTRA STATE-416410.
...RESPONDENT
(BY SRI NANDKUMAR ANNA VHATKAR, ADVOCATE)
THIS REGULAR FIRST APPEAL IS FILED UNDER SECTION
96 READ WITH ORDER 41 RULE 1 AND 2 OF CPC., PRAYING TO
SET ASIDE THE JUDGMENT AND DECREE DATED 11/01/2019
PASSED IN O.S.NO.103/2012 PASSED BY THE COURT OF
ADDITIONAL SENIOR CIVIL JUDGE AND JMFC, MUDHOL, BY
ALLOWING THE PRESENT APPEAL IN THE INTEREST OF JUSTICE
AND EQUITY AND ETC.
THESE APPEALS, HAVING BEEN HEARD AND RESERVED
ON 29.10.2025, COMING ON FOR 'PRONOUNCEMENT OF
JUDGMENT', THIS DAY, THE COURT PRONOUNCED THE
FOLLOWING:
CORAM: THE HON'BLE MR. JUSTICE R.DEVDAS
AND
THE HON'BLE MR. JUSTICE B. MURALIDHARA PAI
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CAV COMMON JUDGMENT
(PER: THE HON'BLE MR. JUSTICE B. MURALIDHARA PAI)
1. These appeals arise from the judgments and decrees
dated 11.01.2019 passed in O.S. Nos.8/2013, 13/2013 and
103/2012, by learned Additional Senior Civil Judge and JMFC,
Mudhol (briefly 'the trial court' hereinafter).
2. The dispute involved in O.S. Nos.8/2013 and
13/2013 is between same parties and arise out of same set of
facts. The matter involved in O.S. No.103/2012 is ancillary to the
dispute involved in other two suits. As such, for the sake of
convenience all these appeals are taken up for consideration
together.
3. Relevant facts of these suits, briefly noted
hereunder:
3.1 Undisputed/Admitted facts:
a) Spaco Corporation is a partnership firm (referred as
'the plaintiff' hereinafter), is the manufacturer and the supplier of
useful machineries for sugar factories.
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b) Nirani Sugars Limited is a company registered under
Companies Act (referred as 'the defendant' hereinafter), has got
a sugar manufacturing unit in Kullali Village of Mudhol taluk.
c) Vijay Souhard Credit Sahakari Ltd., Mudhol (referred as
'the bank' hereinafter) is a co-operative bank registered under
Karnataka Souharda Sahakari Act, 1997, which is carrying on all
banking activities including transfer of funds by RTGS through its
account with Axis Bank, Jamakhandi.
d) The defendant required sugar bag handling and ash
handling system at their unit. As such, they obtained quotation
from the plaintiff and then issued a Letter of Intent dated
22.07.2010 to the plaintiff for manufacturing, supply, erection
and commissioning of sugar bag handling system and ash
handling at their unit. Afterwards, on 08.09.2010 the defendant
placed a Purchase Order with the plaintiff for supply of the sugar
bag handling system sizes 650 MM, width capacity 752 to 800
bags, worth Rs.95,00,000/-, to be executed in two phases of
Rs.75,00,000/- and Rs.20,00,000/- respectively, subject to
certain commercial terms and conditions.
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e) Meanwhile, the defendant placed one more Purchase
Order dated 23.08.2011 with the plaintiff for ash handling
system for 90 TPH Boiler including supply of required materials
for modifications of existing belt conveyors, drive assembly,
platform and replacement of hood cover for existing belt
conveyor, at the cost of Rs.57,00,000/- and subject to
commercial terms and conditions.
3.2 Contentions of the Plaintiff - M/s Spaco Corporation
(as per plaint averments in O.S. No.8/2013):
a) The plaintiff has carried out entire work of I Phase of
Bag Handling System upto Godown No.3 and Ash Handling
System;
b) Work of II Phase of Bag Handling was also started.
However, the defendant has not released even 30% advance
payment;
c) The plaintiff has supplied the materials worth
Rs.2,02,49,633/- to the defendant from 01.04.2010 to
10.09.2011 as per demand of the defendant;
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d) The defendant has paid only a sum of
Rs.1,72,92,081/- and the last amount received from the
defendant was on 12.4.2012 by RTGS. The defendant was still
due a sum of Rs.29,57,552/- to the plaintiff as on 12.04.2012;
e) On 9.1.2013 the plaintiff maintained the suit for
recovery of Rs.29,57,552/- from the defendant together with
interest at the rate of 18% p.a., from 12.4.2012 till realization of
entire money.
3.3 The contention of the defendant - Nirani Sugars
Limited (as per the plaint averments in O.S. No.13/2013):
a) The delivery of Phase-I was within 8 weeks and of Phase-
II was within January, 2011;
b) The plaintiff did not complete the work of the sugar bag
handling system properly. Therefore, a meeting was held
between the parties on 26.11.2011 regarding the balance
work and after discussions, the minutes of the meeting
were reduced into writing, enlisting 9 items of work to be
completed by the plaintiff;
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c) The plaintiff agreed to supply all the materials before the
end of November, 2011, to complete the balance work on
or before 15.12.2011 and to complete ash handling
conveyor work within 5.12.2011;
d) Regarding new ash handling system, a meeting was held
between the parties on 25.12.2011 and a memorandum
of minutes was prepared enlisting 7 items of work to be
attended by the plaintiff;
e) The plaintiff did not execute and complete the work as
agreed upon in the memorandum of minutes and the
meetings held between them;
f) Therefore, on 21.5.2012 the defendant issued a fresh
work order to Newcon Engineers of Narayanapura,
Dharwad and got balance work done, which was not done
by the plaintiff as agreed, to the extent of Rs.16 Lakhs;
g) The defendant paid more than Rs.1,01,16,750/- for the
work of sugar bag handling system and Rs.36,34,600/-
for ash handling system and it was an additional liability
on the defendant;
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h) The work was to be done by the plaintiff as against the
payment received by them;
i) The time was essence of the contract;
j) The plaintiff did not provide good materials as per the
specification, the quality and performance of the work
was also not good. The defendant had to make
alternative arrangement;
k) The plaintiff is liable to pay the amount spent by the
defendant to complete the work and the loss and
damages suffered on account of breach of contract
committed by the plaintiff. Hence, the defendant
maintained the suit against the plaintiff for recovery of
Rs.1,37,51,350/- together with court cost and interest.
3.4 The contention of the bank - Vijay Souhard Credit
Sahakari Limited, Mudhol (as per the plaint averments in O.S.
No.103/2012):
a) On 12.4.2012 by oversight, the bank transferred a
sum of Rs.24,40,461/- to the bank account of the plaintiff by
RTGS;
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b) The said mistake came to light on the same day and
it was informed to the plaintiff over phone explaining the details
of RTGS wrongly sent and requested to refund the amount;
c) The plaintiff did not oblige to the request of the bank.
Hence, they maintained the suit for recovery of Rs.24,40,461/-
from the plaintiff together with court cost and interest.
4 Based on the pleadings of the parties, the trial court
has framed the following issues:
In O.S. No.8/2013:
1. Whether plaintiff proves that, they have supplied the
materials of an amount of Rs.2,02,49,633/- to the
defendant from 01-04-2010 to 10-09-2011 and
defendant have paid Rs.1,72,92,081/- to them?
2. Whether plaintiff proves that, they have carried out
entire work of 1st Phase and started work of 2nd
Phase?
3. Whether plaintiff proves that the defendants are in
due of Rs.29,57,552/- to their company?
4. Whether plaintiff is entitled for the reliefs sought for?
5. What order or decree?
In O.S. No.13/2013:
1. Whether plaintiff proves that, the defendant was failed
to perform his part of contract well within the time?
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2. Whether plaintiff proves that, due to non performance
of contract on the part of defendant they have got
done the remaining work through Newcon Engineers,
Dharwad by spending an amount of Rs.1,37,51,350/-?
3. Whether plaintiff is entitled for the reliefs sought for?
4. What order or decree?
In O.S. No.103/2012:
1. Whether plaintiff proves that, they have received a
request to Sri.M.G.Langoti for remitting an amount of
Rs.24,40,461/- in his bank account in Syndicate Bank
Kittur through RTGS?
2. Whether the plaintiff further proves that, while editing
the RTGS format in the computer by oversight only
amount portion was edited and other details were
pertaining to the defendant company?
3. Whether defendant proves that this court is not having
jurisdiction to entertain this suit as per the provisions
of Sec 17 (2) of Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest
Amendment Act 2004?
4. Whether defendant proves that, suit is bad for non-
joinder of necessary party?
5. Whether plaintiff bank is entitled for the relief sought
for?
6. What order or decree?
5 The parties to the suit have seriously contested all
the three suits. All these suits were tried before one court i.e,
the learned Additional Senior Civil Judge and JMFC, Mudhol. The
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trial court disposed of these suits by rendering separate
judgments, which were pronounced on the same date. The trial
court decreed the suit in O.S. No.8/2013 and dismissed other
two suits.
6 Sri Sangram S Kulkarni, learned counsel for
defendant-Nirani Sugars Limited submitted that the trial Court
has failed to properly appreciate oral and documentary evidence
available on record in the light of the pleadings of the parties and
thereby grossly erred in dismissing their suit and decreeing the
suit of Spaco Corporation. He has drawn the attention of this
Court to the finding recorded by the trial Court in OS.No.13/2013
that due to non- completion of civil work by the defendant, the
plaintiff could not complete their work and despite proceeded to
hold that the plaintiff has completed all the works entrusted to
them. He further submitted that the trial court has drawn
adverse inference against them based on release/payment of
certain amount to the plaintiff, which was paid as per the
commercial terms and conditions in purchase orders. He
submitted that the trial court has not properly considered the
contents of minutes of meeting produced at Ex.P9 and proceeded
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to hold that they have placed purchase order with Newcon
Engineers without intimating the plaintiff in that regard. In view
of the same, he contended that the impugned judgments and
decrees passed in these suits are liable to be set aside and the
suit in O.S.No.13/2013 is to be decreed as prayed for.
7 Sri Nandakumar Anna Vhatkar, learned Counsel for
the plaintiff has supported the findings recorded by trial Court as
well as the conclusion arrived at by the said court on the ground
that the plaintiff has adduced ample evidence before the trial
Court to prove their case. He submitted that the defendant has
not adduced any acceptable evidence before trial Court either to
show that the plaintiff has not completed the work entrusted to
them or to show any deficiency in the work carried out by the
plaintiff. He further submitted that the defendant has admitted
the plaintiff having supplied the materials as per the purchase
orders and the plaintiff could not complete the work because of
non-completion of civil work by the defendant. In the said
circumstances, he contended that the impugned judgments and
decrees do not need any interference at the hands of this Court.
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8 On behalf of the bank, learned counsel Sri Sangram
S Kulkarni submitted that the trial court has failed to understand
the contention put forth by the plaintiff, who set up a claim of
adjustment against the amount, which was wrongly credited to
their account by the bank and submitted that the trial court has
grossly erred in not taking into account separate entity of the
bank and the defendant as well as absence of any
communication from the defendant to the bank to make such
payment on their behalf. In view of the same, he contended that
the trial Court ought to have decreed their suit in
O.S.No.103/2012 as prayed for.
9 On hearing the parties to the proceedings and
considering the materials on record, the following points would
arise for the consideration this Court:
1. Whether the trial court is justified in holding that
Spaco Corporation has proved that they have
completed entire work entrusted to them and Nirani
Sugars Limited was due a sum of Rs.29,57,552/- to
them as on the date of the suit?
2. Whether the trial court is justified in holding that
Nirani Sugars Limited has failed to prove, having
incurred an additional liability of Rs.1,37,51,350/-
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on account of non completion of the work entrusted
to Spaco Corporation?
3. Whether the trial court is justified in holding that the
transfer of Rs.24,40,461/- by Vijay Souhard Credit
Sahakari Limited to the account of Spaco
Corporation was at the instance of Nirani Sugars
Limited and towards their out-standing dues?
4. What Order?
10 On examining the case papers, it becomes evident
that the dispute involved in these suits primarily concerns the
plaintiff and the defendant regarding the completion or
otherwise of the work entrusted by the defendant to the
plaintiff, pursuant to the purchase orders dated 08.09.2010 and
23.08.2011. The materials on record indicate that referring to
the pleadings of both the plaintiff and the defendant would aid in
understanding their respective contentions and help minimize
the scope of the dispute.
11 The averments of the plaint in O.S.No.8/2013 and
the written statement filed in O.S.No.13/2013 go to show that
the sum and substance of the contention of the plaintiff is as
under:
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a) As per Purchase Order dated 22.07.2010, the plaintiff
was required to supply the materials within a period of 8
weeks i.e. by 22.09.2010. Nonetheless, the plaintiff has
dispatched the materials to the defendant on 01.09.2010
itself as per the letter of intent.
b) The defendant did not pay 30% advance amount as per
commercial terms and conditions mentioned in letter of
intent. Therefore, the plaintiff did not supply goods of
phase II.
c) The defendant issued final Purchase Order on 08.09.2010
i.e. after the material of Phase I was already supplied to
them.
d) Though the plaintiff supplied the materials on
01.09.2010, it was lying idle on site of the defendant for
about one year due to non-completion of civil
construction work of sugar go-down of the defendant and
thereby the plaintiff has suffered severe loss.
e) The plaintiff has completed all the work in time.
However, installation was depending on completion of
civil work on the part of the defendant.
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f) The plaintiff has completed Phase I work immediately
after completion of civil job by the defendant.
g) The plaintiff could not start Phase II work due to non
receipt of advance amount.
h) Insofar as ash handling system after issuance of letter of
intent dated 23.07.2011 the plaintiff dispatched the
materials on 10.08.2011.
i) The defendant issued final Purchase Order on 23.08.2011
i.e., after the materials were already supplied to them.
j) The plaintiff has supplied the materials worth
Rs.2,02,49,633/- to the defendant from 01.04.2010 to
10.09.2011.
k) The defendant has paid only a sum of Rs.1,72,92,081/-
till 12.04.2012.
l) The defendant is still due a sum of Rs.29,57,552/-.
12 Per Contra, the contention of the defendant as per
the averments of the plaint in O.S. No.13/2013 and the written
statement in O.S. No.8/2013 is as follows:
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a) As per the terms of order the plaintiff was required to
deliver Phase-I without eight weeks and Phase-II within
January-2011.
b) The plaintiff did not complete the work of sugar bag
handling system properly and as such a meeting was
held on 26.11.2011 in connection with its balance work
and minutes of such meeting was reduced into writing.
c) The plaintiff had assured to complete the balance work as
enumerated at Sl.Nos.1 to 9 in the minutes of the
meeting within the specifications and stipulations made
therein.
d) Regarding new ash handling system, a meeting was held
on 25.12.2011 and a memorandum of minutes was
recorded on the same date.
e) The plaintiff had assured to complete the pending work
as enumerated at Sl.Nos.1 to 7 of the minutes of the
meeting.
f) In spite of assurance given in such meetings the plaintiff
did not execute and complete the work as agreed upon.
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g) In the above circumstances, on 21.05.2012 the
defendant issued a fresh work order to Newcon Engineers
for designing, fabrication, modifications, alterations,
erection and commissioning of existing sugar bag
assembling, etc.
h) The defendant got the balance work done through
Newcone Engineers, which was not done by the plaintiff
as agreed upon, to an extent of Rs.16,00,000/-.
i) As the plaintiff did not perform their part of contract, the
defendant had to pay more than Rs.1,01,16,750/- for the
work of sugar bag handling system and Rs.36,34,600/-
for ash handling system.
j) The plaintiff did not execute the work as against the
payments received by them and as such the defendant
incurred additional liability of more than Rs.1,37,51,350/.
k) As per the terms of the contract between the plaintiff and
the defendant, the time was essence of the contract.
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l) The plaintiff has not provided good materials as per the
specifications. The quality and the performance of the
work by the plaintiff was also not good.
m) The defendant incurred heavy expenditure for making
alternative arrangement and compelled to get the work
done through some other agency.
n) The plaintiff was liable to indemnify the defendant for the
loss and damage caused on account of breach of contract
committed by them.
13 The pleadings of the plaintiff, as narrated above,
make it clear that even according to the plaintiff, they had not
commenced the work of Phase-II due to non-receipt of the
advance amount. Further, they have contended that the
materials supplied by them on 01.09.2010 remained idle at the
defendant's site for over a year owing to the alleged non-
completion of the civil construction work of the defendant's
sugar go-downs. Thus, it becomes evident that the plaintiff's
claim of having completed all their work on time is not correct.
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14 In addition to the above, the defendant has
specifically averred in their pleadings that two meetings were
held between the representatives of the plaintiff and the
defendant on 26.11.2011 and 25.12.2011 regarding the non-
completion of the work entrusted to the plaintiff. In support of
this contention, the defendant has produced the minutes of
these meetings before the Court. The plaintiff has not seriously
disputed the genuineness of these documents; instead, they
have merely contended that Sri N. N. Gurav, a partner of the
plaintiff firm, was not present at those meetings.
15 Admittedly, the documents in question bear the
signatures of the representatives of both parties. In these
documents, the plaintiff was represented by Sri Belgar and Sri
Umare. The contents of the documents indicate that after
discussions between the representatives of both sides, the
balance work to be attended to by the plaintiff was recorded,
along with an assurance from the plaintiff's side to complete the
said work within the time specified therein. It is not the case of
the plaintiff that they have completed the work as agreed upon
in the meetings held on 26.11.2011 and 25.12.2011. In view of
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the same, it should be held that the plaintiff has utterly failed to
establish their contention of having executed the entire work
entrusted to them by the defendant.
16 It is the definite case of the plaintiff that pursuant to
the purchase orders, they have supplied the materials worth
₹2,02,49,633/- to the defendant between 01.04.2010 and
10.09.2011. In support of this contention, the plaintiff has
produced several documents including extracts of ledger
accounts, invoices, bills, delivery challans, gate pass receipts,
and copies of letters addressed to the defendant. To start with,
the total value of the purchase orders placed with the plaintiff is
only ₹1,52,00,000/- (i.e., ₹95,00,000/- plus ₹57,00,000/-). In
contrast, the plaintiff claims to have supplied materials worth
₹2,02,49,633/-, which far exceeds the total value of the
purchase orders. Further, it is the case of the plaintiff that the
materials relating to the suit transactions were dispatched to the
defendant for the first time on 01.09.2010. Whereas, the
statement of accounts produced by the plaintiff commences with
an entry showing an opening balance as on 01.04.2010 and
reflects transactions between 01.04.2010 and 18.08.2010.
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Added to above, a majority of the documents placed on record
by the plaintiff pertain to the year 2009. Thereby, it is evident
that the plaintiff has failed to substantiate their claim.
17 According to the plaintiff, the defendant had paid a
total sum of Rs. 1,72,92,081/- to them up to 12.04.2012. The
defendant has not disputed this assertion of the plaintiff except
with regard to the alleged last payment made on 12.04.2012
through RTGS. The defendant has also admitted having received
certain materials supplied by the plaintiff. In these
circumstances, it was incumbent upon the plaintiff to adduce
sufficient evidence to establish the actual quantity of materials
supplied to the defendant, their corresponding value, and the
payments received, in order to substantiate the alleged balance
dues. However, the materials on record reveal that the plaintiff
has failed to discharge the initial burden cast upon them in this
regard.
18 Coming to the contention of the plaintiff regarding
the receipt of Rs. 24,40,461/- from the defendant towards the
alleged dues by way of RTGS, the defendant has out-rightly
denied having transferred any such amount to the plaintiff.
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Further, the bank has stated that the said amount was credited
to the plaintiff's account by mistake and constituted a wrong
credit. In the suit filed by the bank for recovery of the said
amount, the plaintiff has taken the stand that the credit was not
erroneous but a valid transfer made under the instructions of
the defendant. However, during cross-examination, Sri N. N.
Gurav, the partner of the plaintiff firm, categorically admitted
that there was no communication from the defendant indicating
the transfer of Rs. 24,40,461/- towards their dues. Hence, it
becomes evident that the transfer of Rs. 24,40,461/- to the
plaintiff's bank account was nothing but a wrong credit given by
the bank through oversight.
19 The plaintiff has sought to justify the above
contention on the ground that although the amount in question
was transferred to their account on 12.04.2012 through RTGS,
there was no communication from the bank regarding any
alleged wrong credit for a considerable period and that the bank
has failed to adduce sufficient evidence to establish that the
transfer was made by mistake. However, the materials on
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record clearly indicate that this contention of the plaintiff is
palpably false.
20 It is because admittedly the plaintiff has written a
letter on 18.4.2012 to the Executive Director of the defendant
on 18.04.2012 and has sent a copy of the said letter to the
bank. The said letter has been produced before the Court by
the bank as Ex.P8 in O.S.No.103/2012. It reads as follows :
"Kind attention Mr. Sangamesh Nirani
Dear Sirs,
We acknowledge with thanks the receipt of an amount of
Rs.24,40,461-00 (Rupees Twenty Four lakhs Forty Thousand Four
hundred Sixty One only) from Vijay Souhard Credit Sahakari Limited
towards our outstanding payment.
We have credited the said amount to your account with us and
we are kindly requested to please credit the said amount to M/s. Vijay
Souhard Credit Sahakari Limited (emphasis supplied) and obliged.
Thanking you,
Yours Faithfully,
For Spaco Corporation
Sd/-
(N.N.Gurav)
Authorised Signatory"
21 The highlighted portion of the letter indicates an
implied admission on the part of the plaintiff that as on
18.04.2012, they were aware of the wrong credit made to their
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account by the bank, as well as of the bank's request to refund
the said amount. Otherwise, there would have been no occasion
for the plaintiff to request the defendant to credit the amount to
the bank. Moreover, if the plaintiff had in fact received Rs.
24,40,461/- through a valid transfer made at the defendant's
instructions, there would have been no necessity for them to
address a letter to the defendant requesting that the said
amount be credited to the bank. Thus, the materials on record
clearly indicate an implied admission on the part of the plaintiff
of having received the said amount as a result of a wrong credit.
Despite such knowledge, the plaintiff not only failed to refund
the amount to the bank but also unlawfully retained it by
advancing untenable contentions. Consequently, it is held that
the bank has established its entitlement to recover a sum of Rs.
24,40,461/- from the plaintiff along with interest thereon at the
rate of 18% per annum from 12.04.2012 till realization, as
prayed for in the suit.
22 Coming to the suit filed by the defendant in
O.S.No.13/2013, they have sought for recovery of
Rs.1,37,51,350/- from the plaintiff together with court cost and
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interest on the ground that the failure on the part of the plaintiff
to complete the work within stipulated time and failure to
provide good materials as per the specification, caused heavy
loss to them. The defendant has quantified their loss under
following heads:
" Part-I (Ash Handling)
a. There was a loss of 50 hours for which
the unit was stopped for non-
performance of work entrusted to the
defendant in ash handling. Export is
14,000/- units per hours and for 50
hours it is 7 lakhs units and ppa rate is
rs.2.968 per unit. Therefore, the total
loss for 7 lakhs unit is Rs.50,77,600/-
2. Labour charges borne by plaintiff
company for 10 days with average 10
casual labour X 3 shift at the rate of
190 per man per day. Rs.57,000/-
3. The amount given to Newcon
Engineeer, as per work order dated
21.05.2012 for items No.3 and 4 of
the said work order. Rs.15,00,000/-
Total Rs.36,34,600/-
Part-II (Sugar handling system)
1. The amount borne by the plaintiff
company towards payment to
Newcon Engineers as per work order
No.87 dated 21.05.2012 item No.3
Rs.30,00,000/-
and 4 of the said work order.
2. There was a 50 hours stoppage of
crushing and due to that there was a
loss of approximate bags for 50
hours. Rs.70,31,250/-
3. Payment made to labour for 50 days
at the rate of 3 casual labour X 3
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shift at the rate of 190 per man for
50 days. Rs.85,500/-
Total Rs.1,01,16,750/-
The total amount of Part-I and II
mentioned above i.e.,
Rs.1,01,16,750/-=Rs.36,34,600/- Rs.1,37,51,350/-
23 Before proceeding further, it would be beneficial to
refer to the legal position relating to the claim of the damages.
In Consolidated Construction Consortium Limited Vs
Software Technology Parks of India, reported in 2025 INSC
574, the Hon'ble Supreme Court of India while dealing with
similar dispute, has explained the legal position as under:
"18. Section 55 of the Indian Contract Act says that
when a party to a contract promises to do a certain
thing within a specified time but fails to do so, the
contract or so much of it as has not been performed,
becomes voidable at the option of the promisee if the
intention of the parties was that time should be of the
essence of the contract. If time is not the essence of
the contract, the contract does not become voidable by
the failure to do such thing on or before the specified
time but the promisee is entitled to compensation from
the promisor for any loss occasioned to him by such
failure. Further, if in case of a contract voidable on
account of the promisor's failure to perform his
promise within the time agreed and the promisee
accepts performance of such promise at any time other
than that agreed, the promisee cannot claim
compensation for any loss occasioned by the non-
performance of the promise at the time agreed, unless,
at the time of such acceptance he gives notice to the
promisor of his intention to do so.
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19. Sections 73 and 74 deal with consequences of
breach of contract. Heading of Section 73 is
compensation for loss or damage caused by breach of
contract. When a contract is broken, the party who
suffers by such breach is entitled to receive from the
party who has broken the contract compensation for
any loss or damage caused to him thereby which
naturally arose in the usual course of things from such
breach or which the parties knew when they made the
contract to be likely to result from the breach of it. On
the other hand, Section 74 deals with compensation for
breach of contract where penalty is stipulated for.
When a contract is broken, if a sum is mentioned in the
contract as the amount to be paid in case of such
breach or if the contract contains any other stipulation
by way of penalty, the party complaining of the breach
is entitled whether or not actually damage or loss is
proved to have been caused thereby, to receive from
the party who has broken the contract reasonable
compensation not exceeding the amount so named or
the penalty stipulated for.
20. A conjoint reading of Sections 55, 73 and 74
would indicate that in a contract whether time is of the
essence or not, if the contractor fails to execute the
contract within the specified time, the contract
becomes voidable at the option of the promisee and
the promisee would be entitled to compensation from
the promisor for any loss occasioned to him by such
failure. However, in case of a contract where time is of
the essence, the contract becomes voidable on account
of the contractor's failure to execute the contract
within the agreed time. The promisee cannot claim
compensation for any loss occasioned by such breach
of the contract unless he gives notice to the promisor
of his intention to claim compensation. This is made
more specific in Section 73. Section 74 contemplates a
situation where penalty is provided for and quantified
as compensation for breach of contract. In such a case,
the party complaining of the breach is entitled to
compensation whether or not actual damage or loss is
proved to have been caused thereby but such
compensation shall not exceed the quantum of penalty
stipulated."
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24 In the present case, there is no dispute between the
parties regarding the entrustment of certain works by the
defendant to the plaintiff under the purchase orders dated
22.07.2010 and 08.09.2010. However, it is an admitted position
that there was no written contract or agreement between them
stipulating the terms and conditions governing the consequences
of failure to perform their respective obligations. Therefore, the
present claim of the defendant is required to be considered in
the light of Sections 55 and 73 of the Indian Contract Act.
25 The first and foremost contention of the defendant is
that time was the essence of the contract. However, the
materials on record do not support this contention. As per the
understanding between the parties, the plaintiff was required to
complete the installation of the sugar bag handling system
within a period of eight weeks from the date of the purchase
order. Based on the admissions of the parties, the said work
ought to have been completed on or before 22.11.2011. It is not
the case of the defendant that upon expiry of the stipulated
period, they withdrew the work entrusted to the plaintiff or
raised any formal protest. On the contrary, even according to
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the defendant, a joint meeting was convened on 26.11.2011 to
discuss the pending work, during which the plaintiff assured
completion of the balance work by 05.12.2011. It is significant
to note that the minutes of the meeting dated 26.11.2011
contain no reference to the time stipulated for completion being
treated as the essence of the contract.
26 It is well settled that when time is of the essence in
a contract, the contract becomes voidable if the promisor fails to
perform within the stipulated period. In such a case, the
promisee cannot claim compensation for any loss caused by the
breach unless a notice is given to the promisor expressing the
intention to claim such compensation. In the present case, the
defendant has not stated anything about having given notice to
the plaintiff regarding their intention to claim compensation,
either during the discussion held on 26.11.2010 or at any
subsequent time.
27 In the aforesaid decision, the Hon'ble Supreme Court
of India has held that a conjoint reading of Sections 55, 73, and
74 of the Indian Contract Act indicates that in a contract,
whether or not time is of the essence, if the promisor fails to
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execute the contract within the stipulated period, the contract
becomes voidable at the option of the promisee. In such a
situation, the promisee would be entitled to claim compensation
from the promisor for any loss sustained by such failure.
Accordingly, it becomes necessary for this Court to examine
whether the defendant's claim for compensation is directly
attributable to the alleged breach of contract.
28 The defendant's claim reveals that compensation has
been sought under several heads namely loss of 50 hours of
operational time due to stoppage of the unit, for non-
performance of the work entrusted to the defendant in ash
handling, labour charges incurred by them, the amount paid to
Newcon Engineers for completing the work under the work order
dated 21.05.2012, and loss on account of 50 hours of stoppage
in crushing operations. A prima facie examination of these
claims indicates that most of them bear no direct nexus with the
alleged non-completion of the work order. Moreover, it is
incumbent upon the defendant to place sufficient evidence on
record to establish the actual loss, if any, suffered due to the
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plaintiff's alleged non-performance of the contractual
obligations.
29 It is the definite case of the defendant that on
21.05.2012, they issued a fresh work order to Newcon Engineers
for designing, fabrication, modification, alteration, erection, and
commissioning of the existing sugar bag and ash handling
systems. A copy of the said work order has been produced
before the trial court. It is pertinent to note that the work order
dated 21.05.2012 does not make any reference to the work
allegedly left unfinished by the plaintiff. Furthermore, in their
pleadings, the defendant has not made any mention of having
issued a work order for completion of the unfinished work of the
plaintiff. This aspect creates an impression that the work
entrusted to Newcon Engineers was an independent contract
undertaken by the defendant as per their own requirement.
30 In addition to the above, the said work order
specifies that the labour charges for design, fabrication,
modification, alteration, erection, and commissioning were fixed
at Rs.80,00,000/-. However, the defendant has claimed a total
amount of Rs.1,37,51,350/- under various heads including
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losses said to have been occasioned due to stoppage of crushing
operations and non-utilization of the unit. The defendant
examined one of the technicians of Newcon Engineers, Sri Kunal
as PW-3 in support of their case. During his deposition, PW-3
merely stated that the defendant had entrusted the work of the
sugar bag handling system in 2012, which had been left
incomplete by the plaintiff and that Newcon Engineers had
completed it. However, PW-3 has not given any definite
statement regarding either the total cost of the said work or the
actual amount paid by the defendant to Newcon Engineers.
Further, neither the defendant nor PW-3 has produced any
supporting document before the trial court such as quotations,
purchase orders, or other records, to show the actual cost of the
work entrusted to Newcon Engineers.
31 It is relevant to note that in paragraph 8 of the plaint
in O.S. No.13/2013, the defendant specifically averred that the
balance work, which was not completed by the plaintiff as
agreed, had been executed at a cost of Rs.16,00,000/-. This
averment was reiterated by Sri Mahesh, the Deputy General
Manager of the defendant, during his evidence. Thus, the
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materials on record probabilise that the defendant incurred only
a sum of Rs.16,00,000/- towards completing the work left
unfinished by the plaintiff to make the facility operational.
32 The question of awarding compensation would arise
only when the promisee establishes that they have sustained a
loss due to breach of contract by the promisor. As already
pointed out, it appears from the record that the defendant
incurred only a sum of Rs.16,00,000/- to complete the work left
unfinished by the plaintiff. However, this by itself cannot be
construed as a loss suffered by the defendant. This is because
the defendant has neither claimed to have made full payment to
the plaintiff in advance nor shown that engaging another agency
to complete the unfinished work compelled them to incur any
additional expenditure. Hence, it must be held that the
defendant has not established having spent any additional
amount to complete the balance work left unattended by the
plaintiff.
33 The defendant has also attempted to contend that
the work executed by the plaintiff did not conform to the agreed
specifications and quality standards. However, it is not the case
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of the defendant that during the meetings held on 26.11.2011
and 25.12.2011, any discussion took place regarding
deficiencies in the specifications, quality of materials, or
workmanship of the plaintiff. In light of the above, this
contention of the defendant cannot be accepted.
34 The defendant has claimed that they are entitled to
compensation under Section 74 of the Indian Contract Act. The
said provision is attracted only when there exist a written
agreement between the parties stipulating a penalty for breach
of contract. In the present case, the defendant has not produced
or even pleaded the existence of any such contract containing
specific terms and conditions regarding penalties for breach. For
the foregoing reasons, it is held that the defendant has failed to
establish any valid ground to claim compensation from the
plaintiff for their failure to complete the entrusted work within
the stipulated period. Accordingly, Point Nos.1 and 3 are
answered in the negative and Point No.2 in the affirmative.
35 In the result, this Court proceeds to pass the
following:
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ORDER
i. The appeals in RFA Nos.100179/2019 and 100180/2019 are allowed with cost throughout. ii. The appeal in RFA No.100181/2019 is dismissed.
iii. The judgment and decree dated 11.01.2019 passed in O.S. No.8/2013 by learned Additional Senior Civil Judge and JMFC, Mudhol is set aside and consequently the said suit, i.e. O.S. No.8/2013, is dismissed. iv. The judgment and decree dated 11.01.2019 passed in O.S. No.13/2013 by learned Additional Senior Civil Judge and JMFC, Mudhol, is confirmed.
v. The judgment and decree dated 11.01.2019 passed in O.S. No.103/2012 by learned Additional Senior Civil Judge and JMFC, Mudhol is set aside and consequently, the said suit, i.e. O.S. No.103/2012, is decreed.
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NC: 2025:KHC-D:17929-DB RFA No. 100181 of 2019 C/W RFA No. 100179 of 2019 RFA No. 100180 of 2019 HC-KAR vi. The defendant in O.S. No.103/2012 namely Spaco Corporation is directed to pay a sum of Rs.24,40,461/- to the Plaintiff therein namely Vijay Souhard Credit Sahakari Limited together with interest thereon at the rate of 12% per annum from 12.04.2012 till the date of its realization.
Sd/-
(R.DEVDAS) JUDGE Sd/-
(B. MURALIDHARA PAI) JUDGE VB, CKK/ CT-AN List No.: 1 Sl No.: 1