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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDIC/TION
APPEAL NO.343 OF 2009
IN
SUIT NO.3902 OF 1992
1. Maharashtra Housing and Area ]
Development Authority, Griha Nirman ]
Bhavan, Bandra(East), Mumbai-400051 ]
]
2. The Deputy Chief Executive (Works)
ig ]
Mumbai Housing and Area Development ]
Board, Griha Nirman Bhavan, ]
Bandra (East), Mumbai - 400 051 ]
]
3. The Executive Engineer, Housing ]
Bandra Division, Mumbai Housing ]
Area Development Board, Griha Nirman ]...... Appellants
Bhavan, Bandra(East), Mumbai-400051 ]Org.Defendants
Versus
Pessumal Pamandas Menghrajani ]
carrying on business and Civil Engineers and ]
Government Contractors, in the firm name ]
and style of Jeevan Construction as Sole ]
Proprietor thereof and having his office at ] Respondent
4/54, Daulat Nagar, Thane(East)-400 603 ]Org.Plaintiff
Mr.P G Lad, AGP, for the appellants.
Mr.Pessumal Pamandas Menghrajani – respondent- present in person.
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CORAM : P.B.MAJMUDAR &
R.C.CHAVAN, JJ
DATED : NOVEMBER 06, 2009
ORAL JUDGMENT : (PER R.C.CHAVAN, J.)
1. This appeal is directed against the Judgment dated 22nd
August, 2008, delivered by a learned Single Judge of this Court
whereby the learned Single Judge decreed the respondent/plaintiff’s
suit for payment of interest over the amount which was denied to the
respondent/plaintiff by the appellants.
2. The facts, which are material for deciding this Appeal, are
as under :-
The appellants had engaged the services of the
respondent/plaintiff as a Contractor for carrying out certain civil
works. On 28/1/1987 a work order to that effect was issued. The
said work was completed on 28/2/1988. The respondent/plaintiff
raised certain claims in respect of additional material used and
additional works like use of brick bats in place of bricks, use of
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pumps for de-watering etc. The claims which the respondent/plaintiff
had raised from time to time were not entertained by the appellants-
Authorities. Eventually on 26/10/1990 the Deputy Chief Engineer of
the appellants held that the plaintiff was entitled to sum of Rs.
1,45,764/- as against the various claims of the plaintiff amounting to
Rs.1,50,535.35. Out of these amounts, a sum of Rs.1,20,000/- was
paid to the plaintiff on 3/12/1991 and further sum of Rs.25,764/-
was paid thereafter on 11/3/1992.
3. Since the plaintiff was kept out of the amounts due, after
issuing the notice under Section 173 of the Maharashtra Housing and
Area Development Act, 1976, the plaintiff filed the suit for recovery of
the amount of interest at the rate of 21% per annum on the amounts
denied to the plaintiff from time to time, which came to Rs.
1,31,345.90 on the date of the suit. The plaintiff claimed further
interest at the rate of 21% per annum on this sum from the date of
the suit till realization.
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4. By a Written Statement, the appellants/Defendants denied
the liability to pay such interest, though they admitted that they had
paid the sum of Rs.1,45,764/- as against the claim of the plaintiff to
the tune of Rs.1,50,535.35 after the disputes were raised by the
plaintiff. It was contended that the contract which the appellants had
entered into with the plaintiff did not contain any clause for payment
of any interest. They also raised various other contentions like the
suit being not tenable etc.
5. On these pleadings, three issues were struck by the learned
Single Judge namely as to whether the plaintiff proves that the due
and payable amounts were delayed for a long time from the due dates
by the defendants, whether the plaintiff was entitled to the interest on
the delayed payment from the defendants, and whether the plaintiff
was entitled to payment of Rs.1,31,345.90 with interest thereon @
21% p.a. from the date of suit till judgment. The learned Single
Judge answered the first two issues in the affirmative and ordered
payment of Rs.1,31,345.90 with interest @ 12% p.a. from the date of
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suit till realisation, after considering the evidence tendered. The oral
evidence comprises of only the testimony of the plaintiff. The
appellants had not chosen to tender any oral evidence before the
Court. Aggrieved by the judgment, the appellants are before this
Court.
6. We have heard the learned AGP Shri P G Lad for the
appellants/Defendants and the respondent/plaintiff who is present in
person. The first point that arises for our consideration is, whether
the learned Single Judge rightly held that amounts due and payable
were withheld by the appellants without any justification. The learned
AGP even questioned the entitlement of the respondent/plaintiff to
the amounts already paid. It is submitted by the learned AGP that the
Deputy Chief Engineer came to the conclusion of awarding amounts
claimed by the plaintiff by liberally considering the plaintiff’s claim,
though the same was required tobe rejected.It would be improper and
impermissible to re-open the question of entitlement of the plaintiff to
the amounts for various additional items of work carried out by him,
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since the appellants/Defendants had already paid those amounts. The
elaborate order passed by the Deputy Chief Engineer on 26/10/1990,
which has been considered by the learned Single Judge, shows that
the Deputy Chief Engineer had found that the authorities were wrong
in denying to the plaintiff’s various amounts which he had claimed.
The learned Single Judge has quoted in Para 48, the observation of
the Deputy Chief Engineer that
“…… this entire case is not dealt properly since
beginning in spite of numerous/constant
communication from the Agency and no timely
action from the Board which has resulted into
embarrassing position and this is liable for creating
incident of contractual complications.”
In the face of this it is not open to the appellants to re-agitate
the question of respondent’s entitlement to the amounts claimed.
7. The learned AGP submitted that there was no delay in
payment of amounts to the plaintiff, since the amounts had to be first
ascertained by an “adjudication” by the Deputy Chief Officer
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(Engineer), which was concluded only on 26/10/1990. The amounts
found due were promptly paid thereafter. This contention has to be
rejected for two reasons. Firstly, the plaintiff had been raising his
claims right since the work was executed in 1988. “Decision” by the
Deputy Chief Engineer of the appellants, to whom the claims were
presumably referable under the contract, cannot be equated to an
independent adjudication, over which parties may not have any
control. The appellant has not been able to show what prevented the
Deputy Chief Engineer to promptly decide the claim in 1988 itself. If
when the appellant’s own authorities chose to sit over the matter for
over two years, the appellant cannot take benefit of delay in decision
making. And, ironically, even after the decision, the appellant took
more than one year to pay the amounts which even according to the
appellant’s Deputy Chief Engineer, the plaintiff was entitled to.
8. The appellant cannot take advantage of administrative
procedural delays since it was an internal matter of the appellants for
which the respondent/plaintiff could not be made to suffer. We
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therefore hold that the learned Single Judge has rightly concluded
that the amounts due and payable were withheld without
justification.
9. This takes us to next question as to whether this delay
entitled the plaintiff to claim interest from the date of completion of
work till payment was actually made. The learned AGP Shri Lad
appearing for the appellants submitted that the plaintiff had admitted
in his cross examination that there was no term in the contract
providing for payment of any interest to the plaintiff, and therefore,
there was no contractual foundation for the claim of the plaintiff in
respect of interest. He further submitted that the interest could not
have been paid even under the Interest Act since the sum was not
ascertained till the adjudication, i.e. till 26/10/1990, on which date
the Deputy Chief Engineer decided that the sum of Rs.1,45,764/- was
payable to the plaintiff. Therefore, he submitted that first, since the
sums claimed by the plaintiff were not ascertained, and secondly,
since there was no adjudication ascertaining the sums claimed, there
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was no liability to pay interest. He also submitted that the judicial
pronouncements on this question, right from the Privy Council, would
rule out the payment of interest to the plaintiff.
10. For this purpose he relied upon the judgment of the Privy
Council in the case of Maine and New Brunswick Electrical Power
Co. Ltd. v/s. Alice M Hart, reported in AIR 1929 Privy Council 185.
In that case, the Board considered the question of paying the interest
and observed in the last penultimate para of the judgment as under:-
“Hart conveyed the property purchased to the
defendants. He received from the defendants thestock to be transferred to him, and he accepted
from the defendants, as under the contract he was
bound to do, covenants under seal to performcertain obligations of a continuing character
involving the payment from time to time of sums of
money. Upon the stock having been allotted or
transferred to Hart and the covenants having beenexecuted, Hart had received all the consideration
moving from the defendants to him under the
contract. The plaintiff, as Hart’s successor-in-tilte,::: Downloaded on – 09/06/2013 15:16:24 :::
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claim, does not sue upon the contract, which is
fully executed : she sues upon the covenants. Thosecovenants must be construed according to the
ordinary rules of construction : and if so construed,they do not give the plaintiff interest, she cannot
claim interest unless it is given to her at common
law or under statute. There is no place in thematter for the exercise of equitable jurisdiction
and, therefore, no rule of equity in regard to
interest can have any application.”
11. In the same year, the Judicial Commissioner at Nagpur in
the matter of P P Deo v/s. Narayan and others, reported in AIR
1929 Nagpur 170 held that considering the provisions of Interest Act,
it was not correct to say that the Courts have power to award interest
in all cases where money due is withheld. As the discussion to follow
would unfold, the claim in the suit is for compensation for the loss
caused due to delayed payment, and “interest” is only a measure to
compute the loss. Viewed thus, in our view, the judgments would be
unhelpful.
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12. Relying on the judgment of the Supreme Court in the case
of Thawardas Pherumal and anr. v/s Union of India reported in
AIR 1955 SC 468, the learned AGP Shri Lad submitted that interest
would not be payable as of rule unless certain conditions referred to
by the Supreme Court in Para 30 of the said judgment were fulfilled.
In para 30 of the Judgment, the Supreme Court held as under :-
“The Interest Act, 1939 applies, as interest is not
otherwise payable by law in this kind of case (see —
`B N Ry. Co. v. Ruttanji Ramji’, AIR 1938 PC 67
(J), but even if it be assumed that an arbitrator is a“Court” within the meaning of that Act, (a fact that
by no means appears to be the case), the followingamong other conditions must be fulfilled before
interest can be awarded under the Act :
(1) there must be a debt or a sum certain,
(2) it must be payable at a certain time or
otherwise;
(3) these debts or sums must be payable by
virtue of some written contract at a
certain time;
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(4) There must have been a demand in
writing stating that interest will be
demanded from the date of the demand.
Not one of these elements is present, so the
arbitrator erred in law in thinking that he had the
power to allow interest simply because he thought
the demand was reasonable.”
13.
Therefore according to the learned AGP, in this case, since
sums claimed were not ascertained till the adjudications were
completed on 26/10/1990, there is absolutely no question of payment
of any interest. This contention is fallacious. It is not that the plaintiff
had set his claims to any nebulous amounts. He had quantified his
claim on each items right from the beginning and his first salvo to the
appellants itself would show that he had claimed certain amounts.
Whether this claim was acceptable to the appellants’ authorities
would not be determinative of question whether the sum was
ascertained or not. A reference to the Deputy Chief Engineer’s order
dated 26/10/1990 would itself show that claims for specific sums had
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been raised and had been considered by him. The respondent had
filed a copy of letter dated 12/10/1988 written by him, (Article No.5,
referred to in Q.No.88 in plaintiff’s cross-examination for appellant
taken on 4/10/2007). This letter not only specifies the amount
claimed, but also raises specific demand of interest at 21% p.a. from
27.5.1988 i.e. after leaving a three months grace period after
completion of work on 28.2.1988. Thus the requirements mentioned
in the case of Thawardas are complied.
14. In her erudite judgment, the learned Single Judge has
carefully considered this aspect and has held that the interest is not
only payable if the contract so provides or statute so provides, but also
under the Common Law. In this context, the learned Single Judge has
considered the provisions of Section 3 of the Interest Act and has
found that the interest could have been ordered to be paid since
written notice claiming the amount had been given and in spite of this
notice the amounts claimed were not paid. It would not have been
proper to deny interest to the respondent/plaintiff on the amount
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which he had claimed to have borrowed for completing the work of
the appellants. As early as on 28.12.1988, the plaintiff had, by his
letter, claimed interest as compensation. It may be seen that even the
appellant’s Q.No.61 in the cross examination of the plaintiff on
19/12/2007would show that interest was claimed as compensation.
Therefore, since the respondent/plaintiff had incurred expenditure
when the work was completed on 28/2/1988, he would be entitled to
be compensated for interest, he was required to pay from 28/5/1988
i.e. after the three months of the grace period. The plaintiff’s evidence
in this regard was not rebutted since appellant did not choose to
tender any evidence. In view of this, there is no substance in the
contention of the learned AGP that the learned Single Judge erred in
awarding the interest, which was in the nature of compensation for
the interest which plaintiff was required to pay on amounts borrowed
from his bank.
15. This takes us to the next submission of the learned AGP
that the learned Single Judge erred in awarding the interest at 12%
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per annum as there was no warrant and no evidence for arriving at
such a rate. The learned AGP may be right in submitting that there
was no witness examined by the plaintiff from his Bank to prove that
he had been paying interest on the amount borrowed. But a letter
from bank, Article 25, produced by him before the Court has been
considered by the learned Single Judge in Para 68 of the judgment,
which shows that plaintiff was paying interest at 17.34% p.a. on the
credit facilities availed by him. Apart from that award of interest at
12% per annum, on the amounts which had been denied to the
plaintiff, could not be called erroneous, considering the prevailing
rate of the interest in the market. This was in the nature of
compensation for the loss caused, either by being required to actually
incur this expense by paying interest to his bank or by being denied
the use of these amounts.
16. The learned AGP lastly submitted that the learned Single
Judge has also awarded interest on the decretal amount from the date
of the suit till realization, which amounts to awarding the interest
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over interest and such a compound interest could not have been
granted in a suit for recovery of money. The proposition that interest
would not be awarded on interest is correct. But this is a peculiar case
where the plaintiff has been kept out of the money due and therefore
he incurred a loss which has been compensated by the interest
awarded by the learned Judge. Therefore, award of interest on such
amounts, which are in the nature of compensation, and which the
plaintiff was deprived of, cannot be termed as interest over the
interest. Viewed pragmatically, the plaintiff could be said to have
been awarded damages for the tort of being kept out of the amounts
which were due. Therefore, interest which is awarded from the date
of institution of the suit could be treated as interest on the amount of
compensation to which the plaintiff was entitled on being kept out of
amount due. In view of this, there is no merit in this Appeal which is
accordingly dismissed with costs.
Sd/- sd/-
[R.C.CHAVAN,J] [P.B.MAJMUDAR,J]
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