Haryana State and Another vs Maruti Ltd. and Another

A.L. Bahri, J.—The company judge, on August 23, 1985, passed a decree for the recovery of Rs. 61,542 with 15 per cent. per annum interest from the date of the petition till realisation in favour of Maruti Limited (in liquidation) against the State Transport Controller, Haryana, and the General Manager, Haryana Roadways. Feeling aggrieved, the defendants (Haryana State and another) have come up in appeal.

Maruti Ltd. (in liquidation) filed a petition suit u/s 446, read with sections 456 and 468, of the Companies Act, 1956, for recovery of Rs. 84,927.96 ; the principal amount claimed was Rs. 61,542 and interest at the rate of 12 per cent. per annum with effect from February 15, 1977, till the date of the institution of the suit Rs. 23,385.96. The plaintiffs agreed to perform the job of bus body fabrication for the appellants. A running account was opened by the company wherein entries were made from time to time of the amounts due on account of the work done and the amounts received. The last entry of payment was made on February 15, 1977, relating to payment of Rs. 24,583.76. As per the account, a sum of Rs. 61,542 was due to the company from the present appellants for the recovery of which the suit was filed. The appellants contested the claim. It was admitted that a sum of Rs. 54,442 was still due to the company. A sum of Rs. 7,100 was deducted which the appellants could deduct under the agreement for late delivery of some of the bus-bodies fabricated by the company. The aforesaid amount which was admitted to be due was detained under the directions of the Income Tax Department as certain amounts towards taxation were due to the Income Tax Department from the company aforesaid. On the pleadings aforesaid, the following issues were framed :--

(1) Whether the respondents are entitled to recover "an amount of Rs. 7,100 with interest from the petitioner ?

(2) Are the petitioners entitled to stop the payment of Rs. 54,442 at the instance of the Income Tax Department ?

(3) Are the respondents entitled to recover interest on the amount claimed in the petition. If so, at what rate ?

(4) Is the petition not maintainable in view of the arbitration clause existing in the agreement ?

(5) Is the petition barred by limitation ?

(6) Relief.

Under issue No. 1, it was held that the appellants were not entitled to deduct any amount on account of late delivery of the fabricated vehicles. The relevant clause in the agreement which envisaged imposition of penalty, of Rs. 100 per day for the late delivery of the fabricated vehicles beyond 90 days was illegal and not enforceable. It amounted to a penal clause. No arguments were addressed on issues Nos. 2, 5 and 6. The same were answered against the appellants. Under issue No. 3, it was held that the company was entitled to 15 per cent. per annum interest on the admitted amount from the date of the petition till realisation.

We have heard counsel for the parties. Learned counsel for the appellants has argued under issue No. 1 that the appellants were entitled to deduct a sum of Rs. 7,100 with interest on account of late delivery of the fabricated bus bodies by the company and that Clause 5(b)(ii) of the agreement entered into between the parties was not penal. There is no force in this contention. Such a clause imposing a penalty of Rs. 100 per day beyond 90 days for late delivery of fabricated vehicles was penal in nature and could not be enforced in a court of law. It was rightly pointed out by the learned single judge that if any actual damages had been suffered by the appellants due to late delivery of the fabricated bus bodies, the appellants could be entitled to such damages. In the present case, the appellants did not produce any evidence regarding the actual damage suffered by them on that account. It cannot be said that any consolidated amount was fixed as damages for late delivery of the fabricated bus bodies. Finding of the learned single judge on issue No. 1 is, therefore, affirmed holding that the appellants could not deduct the sum of Rs. 7,100 on account of late delivery of the fabricated bus bodies.

With regard to the admitted claim of Rs. 54,452 as covered by issue No. 2, learned counsel for the appellants has argued that the aforesaid amount was detained under instructions from the Income Tax Department as a huge amount of tax was due to the Income Tax Department from the company. In this respect, reference was made to the notice, annexure R-1, by the Income Tax Department u/s 226(3) of the Income Tax Act (page 56 of the record). When liquidation proceedings had commenced against the company, even the Income Tax Department could not proceed for the recovery of taxes against such a company. Furthermore, there is no evidence that the appellants paid any amount to the Income Tax Department on behalf of the company so that the same could be adjusted in the present proceedings. As and when the Income Tax Department moves the company judge for recovery of taxes against Maruti Limited (in liquidation) proper orders could be passed but, in the present proceedings, the appellants could not withhold the amounts due to the company on that account, more so, when the appellants have not met the liability of the company by making any payment to the Income Tax Department. Finding of the learned single judge on issue No. 2 is, therefore, affirmed.

Learned counsel for the appellants, while addressing arguments on issue No. 3, has argued that since in the petition filed by the company, interest was claimed at the rate of 12 per cent. per annum on the amount due as well as future interest at the same rate, the company judge was not justified in allowing future interest at the rate of 15 per cent. per annum from the date of the petition. There is force in this contention. A perusal of the petition filed by the company shows that the claim for interest was made at the rate of 12 per cent. per annum on the principal amount due up to the date of the petition as well as from the date of filing of the petition up to the date of the payment. The court could grant the relief as claimed in the petition but not further relief which was not claimed. Shri J. S. Narang, learned counsel for the company, referred to the provisions of Section 34 of the CPC in support of his argument that while allowing interest from the date of filing of the petition till the decree and further interest the discretion was with the court and when such a discretion has been exercised within the limits provided u/s 34, the decree passed by the single judge cannot be upset. This contention cannot be accepted. The relevant extract of Section 34 of the CPC is reproduced as under :

"34. Interest.--(1) Where and in so far as a decree is for the payment of money, the court may, in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged in such principal sum for any period prior to the institution of the suit (with further interest at such rate not exceeding six per cent. per annum as the court deems reasonable on such principal sum), from the date of the decree to the date of payment or to such earlier date as the court thinks fit :

Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent. per annum, but. shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions."

Section 34(1), as reproduced above, is in two parts. The first part relates to the grant of interest prior to the institution of the suit and the second part relates to the grant of further interest from the date of the decree to the date of the payment. The proviso added to the section only covers the grant of further interest in respect of amounts due out of a commercial transaction at the discretion of the court which may exceed six per cent. per annum but will not exceed the contractual rate of interest and where there is no contractual rate, the rate at which the moneys are lent or advanced by the banks in commercial transactions. No doubt the wording of the aforesaid provision leaves the discretion with the court in the matter of grant of interest but such discretion has to be exercised in a judicial manner keeping in view the facts and circumstances of the case. May be the bank rate was 161/2 per cent. per annum in 1985 when the proceedings were commenced, as has been argued by learned counsel for the company, and the grant of 15 per cent. interest on the amount due would be, within the maximum limit prescribed in the proviso to Section 34(1) of the Code of Civil Procedure, as reproduced above. However, when the petitioners limited their claim to only 12 per cent. per annum interest, the court could not, even in the exercise of its discretion, grant interest at a higher rate than was claimed in the petition. The single judge was not thus justified in granting interest on the amount due at the rate of 15 per cent. per annum from the date of the suit till realisation. Reasonable interest would only be the rate of 12 per cent. per annum as claimed in the petition. The finding of the single judge in this respect is, therefore, modified.

No other point has been raised in this appeal.

For the reasons recorded above, this appeal is partly allowed. Judgment and decree of the learned single judge is modified. The claim of Maruti Limited stands decreed for the recovery of Rs. 61,542 with 12 per cent. per annum interest from the date of the filing of the suit till the date of realisation. There shall be no order as to costs.