Maharashtra State Police Housing and Welfare Corporation Ltd. vs Ajay Deep Construction Pvt.Ltd.

(Per FIRDOSH P. POONIWALLA, J.)

This Judgement deals with Appeal No. 9 of 2022 and Appeal No.29 of 2022, both challenging the impugned Judgement dated 28^th June 2021 passed by a Learned Single Judge of this Court in Suit No.1418 of 2003.

In this Judgement, the parties will be referred to as per their nomenclature in the Suit.

By the impugned Judgement dated 28^th June 2021, the Learned Single Judge has decreed the Suit in the following terms:

Appeal No.9 of 2022 is filed by the Defendant and Appeal No.29 of 2022 is filed by the Plaintiff.

The Defendant invited tenders for the construction of 650 quarters for policemen of SRPF Group IX at Amravati, with infrastructural amenities. The Tender contemplated construction of diverse types of quarters as more particularly set out therein. Under the Tender, the Work was to be completed in 36 months. The Plaintiff's bid came to be accepted.

Accordingly, Work Order dated 7^th November 1996 was issued in favour of the Plaintiff for an aggregate estimated value of Rs. 15,29,54,891/-,subsequently revised to Rs. 21,50,35,70/-. The Work was to be completed by 6^th November 1999. The Work was to be supervised by the Defendant through Shree Housing Associates who were its Project Management Consultant (“PMC”) along with the Executive Engineer in charge. The Plaintiff completed the work within the stipulated time. From 27^th December 1996 to 14^th March 1997, RA Bill Nos. 1 to 3 were certified and forwarded by the PMC to the Defendant. The Defendant released payments towards the aforesaid bills.

By a letter dated 21^st March 1997, the Defendant recorded that the Plaintiff was entitled to interest bearing Mobilisation Advance aggregating to Rs. 75.00 lakhs. The Mobilisation Advance was to be recovered in instalments from payments towards RA Bills.

From 5^th May 1997 to 22^nd December 1997, RA Bill Nos. 5 to 13, Escalation Bill Nos. 1 and 2 were certified and forwarded by the PMC to the Defendant. The Defendant did not release payment towards RA Bill Nos. 12, 13 & 14 within the stipulated timelines.

By a letter dated 9^th January 1998, the Plaintiff complained about delayed payments towards RA Bills Nos. 12, 13 & 14 and Escalation Bill No. 3 & 4. The Plaintiff inter alia claimed compensation by way of interest at the rate of 21% p.a. for delayed payments not only towards the previous Bills but also towards the future Bills.

On 23^rd January 1998, the Defendant replied to the Plaintiff’s letter dated 9^th January 1998. In the said letter, the Defendant denied any defaults or breaches on its part.

From 27^th January 1997 to 2^nd March 1998, Escalation Bill No. 3, RA Bill Nos. 14-15 were certified and forwarded by the PMC to the Defendant. The payment in respect thereof was not released within the stipulated timelines.

At a meeting held on 24^th February 1998, the Defendant inter alia assured the Plaintiff to resolve issues pertaining to delayed payments against Bills as recorded in contemporaneous correspondence

From 3^rd April 1998 to 4^th May 1998, RA Bill Nos. 16 and 17, Star Rate Bill No. 1 and Escalation Bill No. 4 were certified and forwarded by the PMC to the Defendant. The payment in respect thereof was not released within the stipulated timelines.

By a letter dated 27^th May 1998, the Plaintiff reiterated issues pertaining to RA Bill payments and requested the Defendant to release payments at the earliest. The Plaintiff inter alia stated that an amount exceeding Rs. 2 crores remained outstanding and drew the Defendant's attention to previous correspondence, including the letter dated 9^th January 1998.

From 6^th September 1998 to 11^th September 1998, RA Bill Nos. 18-34, Escalation Bill Nos. 5-9 and Star Rate Bill Nos. 2 and 3 were certified and forwarded by the PMC to the Defendant. The payment in respect thereof was not released within the stipulated timelines. The Plaintiff addressed repeated correspondence to the Defendant in respect thereof. However, the Defendant failed to resolve the said issues.

On 16^th December 1999, the Plaintiff completed the entire Work well within the stipulated date of completion in accordance with the provisions of the Contract. The Plaintiff thereafter requested the Defendant to issue the Certificate of Completion of the Work.

On 11^th January 2000, RA Bill No. 35 (Final Bill), Final Escalation Bill No. 10 and Final Star Rate Bill No. 4 were submitted by the Plaintiff. In the Final Bill, the Plaintiff had claimed interest on delayed payments of the previous Bills. As per clause 5.16 of the Tender, the Final Bill was to be paid within a period of three months from the date of submission of the final bill. The payment in respect thereof was not released within the stipulated timelines.

On 27^th March 2000, the Defendant recovered interest from the Plaintiff on the mobilisation advance to the tune of Rs. 1,87,568/- from payments in respect of RA Bill No. 8.

By a letter dated 27^th March 2000, the Plaintiff reiterated its claim for interest on delayed payments of the Bills. As per the statements enclosed therein, the Plaintiff claimed an amount of Rs. 69,09,209/- as interest, computed at the rate of 24% p.a.

On 12^th May 2000, the Final Bill was certified and forwarded by the PMC to the Defendant. The payment in respect thereof was not released within the stipulated timelines.

On 30^th May 2000, the Plaintiff resubmitted details of various extra items for an aggregate amount of Rs. 2,82,484/-.

By a letter dated 23^rd June 2000, the Defendant rejected the Plaintiff's claim for extra depth of foundation and approved payment of an amount of Rs. 73,295/- towards laying and joining CI pipeline for gravity main.

On 8^th August 2000, the PMC approved the said payment of Rs.73,295/-.

On 27^th September 2000, under the Defendant's instructions, the Plaintiff submitted the revised bill for an amount of Rs. 8,58,619.77 for extra items as per general additional specification No. 10.6.13 of the tender.

On 10^th November 2000, the Defendant called upon the Plaintiff to provide information in respect of the extra items executed by the Plaintiff.

On 14^th December 2000, the PMC certified an amount of Rs. 8,58,619/- towards extra work of additional depth of foundation.

On 18^th December 2000, the Defect Liability Period as per the contract expired.

On 5^th January 2001, the Defendant released payment against the Final Bill.

By a letter dated 16^th January 2001, the Plaintiff requested the Defendant to release payments against extra items of Work including for increased depth in foundation and increased depth of 200 mm C.I pipe for gravity main.

By a letter dated 22^nd February 2001, the Defendants intimated that the payment towards extra item in respect of increased length of CI pipeline was approved and approvals in respect of other extra works were under scrutiny. The Defendant however rejected the Plaintiff's claim for compensation by way of interest for the delay in payment of the RA Bills

By a letter dated 26^th February 2001, the Plaintiff requested the Defendant to release payments against the Final Bill.

By a letter dated 5^th March 2021, the Plaintiff listed down amounts due and payable to the Plaintiff between 10^th May 2002 and 10^th October 2002. The Defendant released payment against the Final Escalation Bill and the Star Rate Bills.

On 22^nd April 2003, the Plaintiff filed the present Suit i.e. Suit No.1418 of 2003. The Defendant filed its Written Statement on 11^th January 2008. In the Suit, the following issues were framed by a Learned Single Judge of this Court:

As stated hereinabove, the impugned Judgement was passed by the Learned Single Judge of this Court on 28^th June 2021. Being aggrieved by the impugned Judgement, the Defendant filed Appeal No.9 of 2022 and the Plaintiff filed Appeal No.29 of 2022.

By an Order dated 9^th January 2023, this Court admitted both the Appeals. The Appeal filed by the Defendant was admitted subject to depositing of Rs. 30 lakhs with Prothonotary and Senior Master, High Court within four weeks. The Defendant has thereafter deposited the said amount before this Court.

QUANTITY OF 200 MM CI PIPELINE FOR GRAVITY MAIN

In paragraph 20(i) of the Judgement, the Learned Single Judge has directed payment of a sum of Rs.9,32,544/- i.e. the amount of Rs.8,58,619/- towards the excess work of additional depth of foundation and Rs.73,925/- for the excess quantity of 200 mm CI Pipeline for gravity main.

The Defendant has not disputed the granting of Rs.73,925/-towards excess quantity of 200 mm CI Pipeline for gravity main.

FOUNDATION.

Mr.Narayan Sahu, the learned counsel appearing on behalf of the Defendant, submitted that the aforesaid claim ought not to have been granted to the Plaintiff. In this context, he submitted that calling upon the Plaintiff to provide information as set out in the letter dated 10^th November 2000 of the Defendant, can by no stretch of imagination be construed to have waived all the terms and conditions applicable for the purpose of Plaintiff making a claim of extra work. Mr.Sahu submitted that the said letter has called upon the Plaintiff (a) to explain as to why "the extra work was not claimed within the prescribed time limit of the Contract", (b) to submit appropriate drawings for the alleged extra item carried out and (c) authority (or sanction) for execution of the extra item. Mr.Sahu submitted that the impugned judgement, without reference to the contents of the said letter, has wrongly concluded that calling upon the Plaintiff to provide information waived the conditions of the Contract. Further, Mr.Sahu submitted that, assuming that the said letter waived the terms and conditions of clause 9 of the Contract, the said letter cannot be construed to have waived the other terms and conditions of the Contract.

Mr.Sahu submitted that the impugned judgement had failed to take into account Clauses 5 and 6 of the Conditions of Contract. Clause 5 specifically requires that the Contractor (the Plaintiff herein) shall not vary or deviate from the drawings or specifications or execute any extra work of any kind whatsoever unless upon the express authority of the Executive Engineer, which shall be obtained by an order in 'writing of the Executive Engineer' or by a plan or drawing expressly given or 'signed by him as an extra work or variation' or by any subsequent approval 'signed by him'. The said Clause also specifically provides that the foundation shall be carried out to the depth in suitable strata shown in the approved drawings, but if the Executive Engineer is of opinion that they should be shallower or deeper and so direct the Contractor in writing, the difference will be dealt with as per clause 6.

Further, Mr.Sahu submitted that it would also appear from Clause 6 that the Executive Engineer alone shall have the powers to make additions and alterations in the drawing or the specifications, as the case may be, and that the rates for the work as may be added to the Tender, if not specified in the Contract, shall be mutually agreed between the Engineer in Charge and the Contractor. In the event the Contractor commences the additional or altered work for which no rate is entered in the schedule of rates and/or the Contractor is ordered to carry out work before the rates are agreed upon, this Clause specifically requires that the Contractor shall within 7 days of the date of receipt of the order to carry out the work inform the Executive Engineer of the rates which the Contractor proposes to charge for such class of work. In the event the Executive Engineer does not agree to the rates of the Contractor, the Contractor shall, by a notice in writing, be at liberty to cancel the order to carry out such class of work.

Mr.Sahu submitted that a bare perusal of the terms and conditions contained in Clauses 5 and 6 make it clear that, in the event of a necessity arising for extra work, in addition to Clause 9 with regard to stipulation of the time limit of claims to be made and the terms contained in 10.6.13, the Plaintiff was required to comply with the terms contained in Clauses 5 and 6. Mr.Sahu submitted that the impugned judgement completely ignores the prescribed procedure under the Contract required to be complied with for the purpose of claiming any alleged extra work. Mr.Sahu submitted that the PMC had no role, much less any authority whatsoever to certify or authorize any extra work.

Further, Mr.Sahu submitted that the terms contained in Clause 5 and 6 of the Contract specifically requires the Plaintiff to take an order for executing extra work in writing. Admittedly, in so far as the alleged claim of Rs.8,58,619/- towards depth of foundation is concerned, the Plaintiff did not have authority by any specific order in writing of the Executive Engineer to carry out the alleged extra work. The impugned Judgement has completely ignored this specific requirement and has proceeded to erroneously conclude that the Plaintiff is entitled to the said claim.

Mr.Sahu further submitted that the impugned Judgement coming to the conclusion that the objections raised by the Defendant in its letter dated 23^rd June 2000 are an afterthought, is completely incorrect and not borne out by the records. In this context, he submitted that the Plaintiff had earlier on or about October / November 1999 had claimed extra depth of foundation. The said claim, having regard to the terms of the Contract, and in particular Clause 10.6.13, was rejected by the Defendant by a letter dated 12^th November 1999. The Plaintiff again made the said claim by its letter dated 30^th May 2000 read with the PMC’s letter dated 8^th May 2000 referred to in the Defendant's letter dated 23^rd June 2000, by which the said claim of extra depth of foundation was again rejected.

Mr.Sahu submitted that in view of the Plaintiff's consistent illegal claims of extra depth as per revised Bill submitted by a letter dated 27^th September 2000, along with the PMC's letter dated 8^th August 2000, the Defendant, by a letter dated 10^th November 2000, called upon the Plaintiff to submit all the requisite documents and necessary explanation in compliance of the terms and conditions contained in Clauses 5, 6, 9 and 10.6.13 of the Contract.

Mr.Sahu submitted that, in non-compliance of the principles of natural justice and to avoid allegations of arbitrariness, it was specifically stated that the claim of extra item may be considered, if found admissible as per the accepted tender.

Mr.Sahu submitted that, in the light of the contents of the said letter unequivocally calling upon Plaintiff to comply with the terms and conditions of the Contract, the same could not have been and cannot be construed as any waiver nor acceptance of the alleged extra work.

Mr.Sahu submitted that the impugned Judgement, at paragraph 9, had, on the basis of the letter dated 8^th August 2000 of the PMC, relied on the claims of the PMC that instructions by various authorities of Defendant were given at the time of visit to the site for the purpose of extra depth of foundation.

Mr.Sahu submitted that the extra work and the claim in that regard are required to comply with the terms and conditions contained in Clauses 5 and 6 of the Contract. 49. Mr.Sahu submitted that, admittedly, the letter dated 10^th November 2000, contrary to the claims of the PMC, called upon the Plaintiff to comply with the provisions of the Contract as set out therein. Mr.Sahu submitted that, in view thereof, the conclusion of the impugned Judgement with regard to implied approval is dehors the evidence on record.

Mr.Sahu further submitted that the impugned Judgement had failed to consider that the PMC had no authority to certify any extra item and/or work. The terms and conditions of the Contract specifically defines the role of the PMC. Clause 5.6 defines the authority of the PMC and restricts the authority only regarding the work and bill. Clause 5.6 also specifically provides that the PMC, who shall be a representative of the Executive Engineer, is vested with authority only to watch and supervise the work and to test and examine any material to be used and the workmanship employed in connection with the work.

Mr.Sahu further submitted that Clause 5.8 of the Contract further clarifies that any work completed and ready for inspection shall not be considered to have been completed in accordance with the terms of the Contract until the Engineer in Charge shall have certified the work in writing.

Mr.Sahu submitted that, in these circumstances, the impugned Judgement ought not to have allowed the claim of Rs.8,58,619/-.

Mr.Hasmit Trivedi, the learned counsel appearing on behalf of the Plaintiff, submitted that in so far as the claim relating to additional depth of foundation is concerned, the Learned Single Judge has recorded a categorical finding that the work was in fact executed by the Plaintiff and that there is no dispute regarding this between the parties. Further, by a letter dated 4^th December 2000, the PMC had accepted that the additional foundation work involved excavation beyond the contractual depth of 2.00 metres and recommended the same for payment of Rs. 8,58,619/- Thus, the Plaintiff's entitlement to payment for the additional depth of foundation is therefore fully supported by the evidence on record. Mr.Trivedi submitted that, in these circumstances, the impugned Judgement had correctly directed payment of Rs.8,58,619/- towards additional depth of foundation.

As far as the claim for Additional Depth of Foundation is concerned, it is the case of the Plaintiff that for such additional depth of foundation, it had submitted a revised bill for items beyond two metre depth as per general additional specification No.10.6.13 of the tender, amounting to Rs.8,58,619/-. The Revised Bill was submitted with the letter dated 27^th September 2000. There is no dispute between the parties as to the actual work carried out by the Plaintiff in this behalf. Also, it is not in dispute that the Plaintiff had duly raised a bill in respect of this extra work.

The Plaintiff’s claim for extra depth of foundation was rejected by the Defendant by its letter dated 23^rd June 2000. The Defendant’s letter dated 23^rd June 2000 rejects the same on the ground that the Plaintiff had not considered natural ground levels as per Clause 10.6.13 of the Contract. Secondly, it is claimed that the Plaintiff had not submitted its claim for extra work within 30 days of occurrence of the event as per tender condition No.9. The Defendant’s objection in respect of Clause 10.6.13 of the Tender seems to be an after thought. It was never raised earlier. Clause 10.6.13 provides for average depth of excavation of foundation of 2.00 mtrs. with respect to average natural ground level of the plot. If the average depth exceeds 2.00 mtrs. from the natural ground level, then extra quantities of excavation, concrete etc. are required to be paid extra to the contractor. As clearly accepted by the PMC, the extra work of excavation claimed by the Plaintiff involved depth of beyond 2.00 mtrs. The claim is, thus, very much within the terms of the contract, and in keeping with Clause 10.6.13.

So far as tender condition No.9 is concerned, namely non-submission of the claim within 30 days of the occurrence of the event, the Learned Single Judge has recorded that the learned counsel for the Defendant had accepted that the Defendant had waived this condition so far as the item of extra work was concerned. Further, there is also contemporaneous record in the form of Defendant’s letter dated 10^th November 2000 that the Defendant had waived the condition and called for information such as drawings for the extra works and authority for their execution.

Further, it is important to note that the PMC of the Defendant had initially recommended the Plaintiff’s bill in respect of this extra item for payment and there is an evidence on record to show that even the Defendant did not dispute the item earlier.

Further, the nature of this work as an extra item and its value has clearly been reflected in an admitted document, being a letter dated 8^th August 2000 addressed by the PMC to the Superintending Engineer of the Defendant. The PMC also submitted the justification/background and necessity for such extra item. The PMC certified that the contractor, i.e. the Plaintiff herein, had not previously claimed these extra items as per condition No.9 of the detailed tender notice, in anticipation of getting a post facto approval for the same. The PMC also supported the Plaintiff's case that these extra items, which were recommended for payment by the consultant, were a result of instructions given at the time of visits of various authorities of the Defendant and their architect to the work site and were special and technical requirements of the project. Thus, in our view, there is adequate material on record to bear out that these extra works were ordered by the Defendant during the course of inspection at site and there was no need for the Plaintiff to make any claim for extra work under condition No.9.

Further, in any event, a contractual clause such as condition No.9 in the present case, which stipulates the time and manner within which the contractor has to intimate the employer about extra or additional work, has never been considered as a statutory limitation or bar for a claim for extra/additional work. The purpose of such stipulation is to ensure that extra/additional work has actually been done. Once it is established that the work has indeed been done, payment for it cannot be denied on a technical ground such as non-intimation according to the stipulation. This has been held by the Hon’ble Apex Court in the case of Chandigarh Construction Company Pvt.Ltd. vs. State of Punjab' (2020) 11 SCC 161. On the basis of this law and the evidence produced before the Court, in our view, the Plaintiff has clearly made out its case for payment of extra work of Rs.8,58,619/-.

The Defendant has made an attempt to question the authority of the PMC to certify or recommend payment of the contractor's bills. Under the contract, the PMC has been acknowledged as a representative of the Engineer-in-charge in clause 5.6 of the "detailed tender notice to contractor", who was the final authority insofar as completion of any particular work and the contractor's entitlement to payment for such work is concerned. The duties of the representative of the Engineer, mentioned in clause 5.6, include "to watch and supervise the work and to test and examine any material to be used or workmanship employed in connection with the works." The PMC as a representative has a clear authority to approve any work or materials and, by logical extension, to recommend such work or materials for payment. It is another matter that failure to disapprove any work or materials by such representative was not to prejudice the power of the Engineer in charge to thereafter disapprove such work or materials and order their pulling down, removal or breaking up. There is nothing on record to show that the concerned works, approved by the PMC were at any time disapproved or ordered to be pulled down or removed by the Engineer in charge. Further, under Clause 5.16, the PMC has the authority to certify the quality as well as quantity of the work and record the measurements/payment schedule in the measurement book of the Defendant. The bill has to be processed for payment thereafter. The approval of the works and recommendation for payment made by the PMC, thus, go a long way in justifying the contractor's claim for payment in relation to the concerned works. So far as the measurements/payment schedule measurement book are concerned, the documents being in possession of the Defendants, it was for them to produce the same, if, according to them there were no corresponding entries of measurement/payment schedule in the books. They have obviously not done so.

In the light of the aforesaid, the Defendant’s submission that the letter dated 10^th November 2000, cannot be considered as a waiver of the terms and conditions of the Contract cannot be accepted.

Further, for all the aforesaid reasons, the Defendant’s reliance on Clauses 5 and 6 of the Conditions of Contract for rejecting the claim is unfounded.

In our view, the view taken by the Learned Single Judge is a very plausible view and requires no interference in Appeal.

EXTRA LOAD

In paragraph 20(ii) of the judgement, the Learned Single Judge has directed payment of a sum of Rs.2,82,484/- towards the aforesaid extra work.

Mr.Sahu, the learned counsel appearing on behalf of the Defendant, submitted that it would appear from the terms of the Contract that the alleged extra work was well within the scope of work.

In this context, Mr.Sahu referred to Clause 5.1.2 of the Contract which provides that the tender is for construction of residential buildings, including internal plumbing, sanitary fittings, electrification, etc. and all infra structural amenities such as roads, S.W. drains, leveling of plot, external water supply, sanitary, external electrification, garden, compound wall, etc.

Mr.Sahu submitted that Clause 5.3 provides that the special provisions in the detailed specifications and wording of any item shall gain precedence over corresponding contradictory provisions (if any) in the standard specifications of the P.W.D. Handbook where reference to such specification is given without reproducing the details in the Contract.

Mr.Sahu submitted that Clause 9 of the Contract specifically provides that claims of extra work shall be paid separately apart from the interim bills for the main work. The payment of the bills for main work would not be affected for want of decision on the extras or claims not covered under the appendices. Mr.Sahu submitted that this clause clearly provides that claim for any extra work has to be beyond what is provided under the appendices i.e. the specifications referred to in the contract.

Mr.Sahu submitted that Schedule B provides for scope of work and detailed specification of work. He submitted that the items of extra work claimed in terms of the paragraph 20(ii) of the Judgement, namely (i) Compound wall is a part of the specification set out in Schedule B at internal page 191, running page 571 (ii) Ground Storage Reservoir at Type 4 referred to in Particulars of Claim as Type 1, is a part of the specifications set out in clause 7.5 at internal page 136, running page 517 of Vol. III which was separately tendered, and (iii) transformer for extra load is part of "supply and installation of electrical supply and distribution mains" being part of Schedule B at internal page 233, running page 613 of Vol. III of the Suit, at item Nos.11 and 12.

Mr.Sahu submitted that in view of the specific requirements set out in the Contract itself and in the specifications in Schedule B, the purported claims decreed in terms of paragraph 20(ii) on the basis that the said items are not part of the Contract is contrary to the admitted documentary evidence being the Contract (the tender document).

Further, Mr.Sahu submitted that, admittedly, except for the statement annexed to the letter dated 16^th January 2001, no claim was ever submitted by Plaintiff in regard to the alleged extra work referred to hereinabove.

Mr.Sahu further submitted that, without prejudice to the fact that the claims decreed in paragraph 20(ii) are well within the detailed specifications of the contract and was inclusive in the cost of the tender, if the Plaintiff had reasons to believe and treated these items/ quantities as extra item/quantities and intended to claim as such, the same was required to be claimed as per the specific terms of Clauses 5, 6 and 9 of the Contract. Mr.Sahu submitted that the Plaintiff's claim could not have been granted without regard to the contractual terms and based on the principles of pre-ponderance of probabilities.

Mr.Sahu submitted that, for all these reasons, the Learned Single Judge has erroneously decreed the amount mentioned in paragraph 20(ii) of the Judgement.

Mr.Trivedi, the learned counsel appearing on behalf of the Plaintiff, submitted that the Learned Single Judge had categorically held that the works comprising the compound wall for Type-5 quarters, Ground Storage Reservoir (GSR) and transformer for additional load amounting to Rs. 2,82,484/- were not part of the original contractual scope and were executed at the request of the Defendant.

Mr.Trivedi further submitted that the Judgement records that there was no dispute regarding the execution of these works and that the Defendant's witness merely feigned ignorance when questioned about the same. Mr.Trivedi further submitted that, significantly, the Learned Single Judge also found that there was no material on record to demonstrate that the Defendant had ever disputed the valuation of the said works. Mr.Trivedi submitted that the findings relating to the execution, necessity and valuation of the extra works are therefore pure findings of fact based on appreciation of oral and documentary evidence and warrant no interference in appeal.

Further, Mr.Trivedi submitted that the extra works were executed pursuant to instructions issued by the Defendant and its representatives during site inspections and constituted special and technical requirements of the project. Mr.Trivedi submitted that thus the evidence on record establishes not only the execution of the extra works but also the Defendant's knowledge, approval and acceptance thereof.

There is no dispute between the parties as to the execution of these works. The particulars have been submitted by the Plaintiff vide its letter dated 30^th May 2000 (Exhibit P-38). The total claim, originally formulated in the sum of Rs.4,77,139/-, was revised by the Plaintiff to Rs.2,82,484/-. This included the aforesaid three items. The Defendant’s witness, Sunil Marotrao Sambe (DW-1), did not dispute the Plaintiff's construction of these works. He simply feigned ignorance when asked to verify the Plaintiff's construction of these three items. Besides, there is nothing on record to show that the Defendants at any time objected to the value of the work claimed by the Plaintiff. Even at the hearing of this suit, no such submission was advanced by the Learned Counsel for the Defendant. The Plaintiff's witness had deposed extensively on the execution of these extra items of work at paragraph 112 of the Affidavit of Examination in Chief of PW 1 and their values. Having regard to the oral and documentary evidence on record, the Plaintiff can be certainly said to have made out its case for execution of this extra work as well as its value.

In our view, the view taken by the Learned Single Judge, with regard to these three items is a plausible view, and requires no interference in Appeal.

In paragraph 20(iii) of the Judgement, the Learned Single Judge has directed payment of a sum of Rs.1,47,871/- (Rupees One Lakh Forty-seven Thousand Eight Hundred Seventy-one only) towards interest on RA bill Nos. 12, 13 and 14 and bill No.35 (final bill) till the date of the suit. In paragraph 20(iv) of the Judgement, the Learned Single Judge has directed payment of a sum of Rs.2,65,441/- (Rupees Two Lakh Sixty-five Thousand Four Hundred Forty-one only) towards interest on bill No.10 (final bill) of Escalation (labour, material and POL). In paragraph 20(v) of the Judgement, the Learned Single Judge has directed payment of a sum of Rs.27,351/-(Rupees Twenty Seven Thousand Three Hundred Fifty-one only) towards interest on bill Nos.3 and 4 (final bill) of Escalation (star rate) upto the date of the suit.

Mr.Sahu, the learned counsel for the Defendant, submitted that the claim for interest on delayed payment on the face of the Contract is not maintainable, as such, the impugned Judgement ought not to have granted interest on the alleged delayed payment claimed by the Plaintiff. Mr.Sahu submitted that the terms and conditions of the Contract as stipulated in Clause 5 (Additional Instructions to the Contractor), and in particular Clause 5.1.2, shows that the rates agreed under the Contract shall be inclusive of providing infrastructural amenities mentioned in the Contract and that built-up area of the infrastructure as set out therein are not to be considered separately for payment.

Mr.Sahu further submitted that Clause 5.3 read with Schedule of "Tender of the lumpsum Contract" specifically provides that the Contract is for a lumpsum amount quoted by the Plaintiff. Further, clause 5.4 defines the "Contract Sum" which shall mean the sum for which the tender is accepted.

Mr.Sahu further submitted that Clause 5.15 provides for payment and specifies that "Contractor must understand clearly that the rates / offer quoted are for the complete work and include all cost" for the items mentioned therein. It is specifically clarified therein that "no claim for additional payment beyond the prices or rates quoted will be entertained".

Mr.Sahu further submitted that the claim of alleged interest for alleged delayed payment of the bills is claimed on the basis of a misplaced interpretation of Clause 5.16 of the Contract. The said clause only provides for processing the bills for payment within 15 days "if possible". The specification of 15 days, on a true construction of the Contract, cannot be said to be mandatory. The Contract provides for a time limit of 3 months for payment of the final bill, which clearly shows that, in the contract, the time limit is only for the payment of final bill.

Further, Mr.Sahu submitted that the Plaintiff, under the Contract, was not entitled to mobilisation advance. However, at the request of the Plaintiff, the Board of Directors of the Defendant, as a special case, granted approval for mobilisation advance to the extent of Rs.75,00,000/- on the terms and conditions set out in the Defendant's letter dated 21^st March 1997. Mr.Sahu submitted that the Plaintiff accepted the terms and agreed to avail mobilisation advance, which carried interest at the rate of 19% p.a. from the date of release and recovery thereof to commence after completion of 10% of the value of the work against the RA Bills to be raised thereafter. Mr.Sahu submitted that it was specifically agreed that the said advance shall be completely recovered with interest by the time 75% of the value of the Contract is completed.

Further, Mr.Sahu submitted that the Plaintiff, initially, by a Notice dated 9^th January 1998, claimed interest on delayed payment of the running bills. By the said Notice, it was also stated that for the future delayed payments, Plaintiff shall claim interest as set out therein. Thereafter, the Plaintiff, by a Notice dated 27^th March 2000, purported to claim interest on the alleged delayed payment of the Running Account Bills.

Mr.Sahu submitted that the Plaintiff is fully aware that the Contract at clause 5.15 clearly provides that "No claim for additional payment beyond the price or rates quoted will be entertained under the Contract". In addition, clause 5.3 read with the Schedule of "Tender of the lumpsum Contract" clarifies that the Contract is a Fixed Price Contract and no other amount except what is agreed thereunder is payable to the Plaintiff. Mr.Sahu submitted that, in these circumstances, the notices issued by the Plaintiff were illegal and contrary to the provisions of the Contract.

Further, Mr.Sahu submitted that the Learned Single Judge, while granting the claims, under the provisions of Section 3(1)(b) of the Interest Act, 1978, did not consider the provisions of Section 3 in its entirety and in particular sub-section (3) thereof. Sub-section (3) of Section 3 of the Interest Act, 1978 (“Interest Act”) provides that nothing in this Section shall apply in relation to any debt or damages upon which payment of interest is barred by virtue of an express agreement. Mr.Sahu submitted that, in view of the above, the Learned Single Judge ought not to have concluded in terms of paragraph 19 of the impugned Judgement that the Plaintiff is entitled to the interest as set o ut in paragraph 20(iii), (iv) and (v) of the Judgement.

The Plaintiff has contended that the Learned Single Judge was correct in granting the interest that he has directed to pay by the Judgement. In fact it is the case of the Plaintiff that the Learned Single Judge ought to have granted further interest. That aspect of the case of the Plaintiff will be dealt with while dealing with Appeal No.29 of 2022 filed by the Plaintiff.

As far as pre-suit interest is concerned, the claim is broadly of two types, one by way of interest on the principal amounts of running bills and final bill already paid, though with delay, for the period of such delay and the other on the amounts which, though due, were not paid and which have been claimed in the suit by way of principal money. As far as first type is concerned, interest has been claimed on (i) running account bills and final bill paid with delay, (ii) Escalation bills (labour, material, POL) paid with delay and (iii) Escalation bills (star rate) paid with delay. So far as running account bills, including bills for Escalation, both labour, material, POL and star rate, are concerned, the contractual stipulation for payment is to be found in clause 5.16 of the contract, which provides for payment in fifteen days of raising of a bill, if possible. As for the final bill, the contract (Clause 5.16) provides for payment within three months. The submission of the Defendant is that there is no absolute liability on its part to pay running bills within fifteen days. It had to do so only to the extent possible. It was, however, accepted by the learned Counsel for the Defendant before the Learned Single Judge that, so far as the final bill is concerned, its payment had to be made within three months to the extent of undisputed items or claims. It is also submitted by the Defendant that even in the event of delay, assuming such delay to be in breach of contract, there was no stipulation for any interest in the contract and no interest was payable in that case.

Therefore, the first question which arises is whether there was any time-line provided for payment so far as running account bills are concerned. In our view, there was such a time-line, namely, fifteen days of submission of the bill. It did not make a difference that the said stipulation uses the words "if possible". The words “if possible" may introduce a concession in the sense that the employer could get away from consequences of not paying in time by claiming that processing of a particular bill and its payment within the stipulated time was "not possible". If that is his claim in a Court of law, he must plead and prove the same. In our view, the words "if possible" do not bring about any element of tentativeness in the stipulation. In our view, the same would make no commercial sense. The present matter relates to a contract for construction of a housing complex, which is a commercial contract. A clause providing for a tentative time-line in such a contract would make no sense. A better construction, which in all probability would have been intended by the parties, would be to treat these words as an exception.

The second question is, what is the the consequence of non-payment within time. The contract does not provide for any. It has been an established principle of law that interest (that is, pre-suit interest) can be allowed on delayed payment (i) in terms of the agreement entered into between the parties, or (ii) where it is permissible by statute, or (iii) by reason of usage of trade having the force of law. The agreement between the parties does not provide for any interest nor does it bar the claiming of interest. There is no usage of trade. The Plaintiff claims interest under a statute, i.e, the Interest Act. It is the case of the Plaintiff that it has given notices from time to time for claiming interest on delayed payments at 21 per cent per annum from dates mentioned in that behalf in such notices. It is again well settled in law that the Interest Act applies where interest is not otherwise payable by law.

In these circumstances, in our view, interest is payable by the Defendant in terms of Section 3(1)(b) of the Interest Act.

On the basis of the law discussed above, we will consider the facts of this case so far as the Plaintiff's claim on the basis of a notice of demand under Section 3 of the Interest Act is concerned. In the first place, as far as running accounts are concerned, the very first notice of demand under Section 3 was issued in respect of RA bill Nos. 10, 12, 13 and 14, Escalation bills comprising of Escalation (labour, material, POL) and RA bill Nos.2 to 4. RA bill Nos.1 to 10 had already been paid by that time. So also, were the first and second RA bills for Escalation (labour, material, POL). What was outstanding as of the date of this notice i.e. notice dated 9^th January 1998 (Exhibit P-8) were RA bills Nos. 12, 13 and 14 and RA bills Nos. 3 and 4 of Escalation (labour, material, POL). Thereafter, the Plaintiff had addressed reminders for further RA Bills, particularly RA bills Nos. 20 to 34 and RA bill No.35, which was in effect the final bill, and also Escalation RA bills (labour, material, POL) Nos.5 to 9 and RA bill No.10, which was the final bill for Escalation (labour, material, POL) and Escalation (star rate). RA bills Nos.1 to 3 and RA bill No.4, which was a final bill. These reminders are marked as Exhibits P-13, P-14, P-17 to P- 19, P-21 to P-23, P-25, P-27, P-28, P-31, P-33 and P-34. In none of these notices was there any demand for interest in relation to any outstanding bill. The first demand of interest after the notice of 9^th January 1998 was in the Plaintiff's letter dated 27^th March 2000. At that stage, all regular running account bills upto RA bill No.33, Escalation bills of star rate and labour, material, respectively, upto RA bill No.3 and RA bill No.9, had already been paid. What was outstanding was regular RA bill Nos.34 and 35 (which was a final bill) and Escalation (star rate) (fourth and final bill) and Escalation (labour, material, POL) (tenth and final bill).

The Plaintiff annexed a statement of interest payable by the Defendants on delayed payment of bills to the said notice dated 27^th March 2000 (“Exhibit P-35”). The statement includes claims for delay in respect of all regular RA bills, namely, RA bill Nos.1 to 34 and 35 and final bill as well as RA bills of labour, material, etc. from Nos.1 to 9 and 10^th and final bill and RA bills of Escalation (star rate) (being Nos.1 to 3 and fourth and final bill). This was the only demand after the first demand of 9^th January 1998 (Exhibit P-8), which was for RA bill Nos.10 and 12 to 14 and RA bills of Escalation (labour, material, POL) Nos.2 to 4. Further, as held by us hereinbelow, no demand for interest in the event of concluded payments of principal can sustain a suit for recovery of interest under Section 3 of the Interest Act. Accordingly, the Plaintiff can have a valid claim under Section 3 of the Interest Act only in respect of regular RA bill Nos.12 to 14 and Escalation RA bills Nos. 3 and 4 (labour, material, POL) which were covered by the notice for demand dated 9^th January 1998 and for bill No.35, which was the regular final bill, and Escalation final bills i.e. bill No.10 for Escalation (labour, material) and bill No.4 for Escalation (star rate) (which were covered by notice of demand dated 27^th March 2000 (Exhibit P-35).

As far as the rate of interest is concerned, from the material produced by the Plaintiff comprising of official banking documents (which are not contested), 9 per cent per annum appears to be the average or maximum interest payable on deposits by scheduled banks for the relevant period. The Learned Single Judge has therefore correctly awarded interest at the said rate.

For all the aforesaid reasons, the Learned Single Judge has correctly granted interest in the paragraphs 20(iii), (iv) and (v) of the Judgement.

Appeal No.29 of 2022 is filed by the Plaintiff. Mr.Trivedi, the learned counsel for the Plaintiff, submitted that, by the impugned Judgement, the Learned Single Judge allowed the claims for extra three items of work executed and certified. In addition, the Learned Single Judge, however, rejected the claims for interest on delayed payment in respect of most of the bills. In addition, the Learned Single Judge also rejected the claims for pendente lite interest (save and except on the claim of extra items) and post decree interest on all amounts. Mr.Trivedi submitted that the rejection of the Plaintiff’s claim of interest is contrary to the facts and to the provisions of the Interest Act and the Code of Civil Procedure, 1908 (“CPC”).

Mr.Trivedi submitted that the finding that the Plaintiff did not comply with the provisions of the Interest Act is patently illegal. Mr.Trivedi submitted that, under Clause 5.16 of the Tender, the Defendant was liable to release payments towards the Plaintiff's bills within a period of 15 days from the date of certification. Admittedly, the Defendant repeatedly breached the aforesaid stipulation. By a letter dated 9^th January 1998, the Plaintiff issued a notice stating that the Defendant would be liable to pay interest on delayed payment of Bills. The said letter explicitly records the Plaintiff's intention to claim interest on the Bills previously issued as well as future Bills. The Plaintiff adduced oral evidence in support thereof. The oral evidence of the Plaintiff's witness remained uncontroverted. Mr.Trivedi submitted that the aforesaid letter satisfies the requirement of Section 3 of the Interest Act in respect of all Bills certified by the PMC during the subsistence of the contract. Mr.Trivedi further submitted that in its letter dated 23^rd January 1998, the Defendant did not deny the Plaintiff's claim for interest in respect of future bills. In fact, in the Written Statement, the Defendant merely states that the claim for interest is contrary to the contract.

Mr.Trivedi submitted that, in the Judgement, the Learned Single Judge has concluded that the aforesaid letter only expresses an intention to claim interest in respect of the Bills outstanding as on 9^th January 1998. The Learned Single Judge has referred to the said letter dated 9^th January 1998 but failed to consider the effect of its contents. Mr.Trivedi submitted that the contents of the said letter reveal the Plaintiff's intention to claim interest on all delayed payments.

Mr.Trivedi further submitted that the provisions of Section 3 of the Interest Act inter alia serve as a caution to a debtor that he/she shall be liable to pay interest on any delayed payments from the date mentioned in the notice. The Plaintiff's letter dated 9^th January 1998 serves the aforesaid purpose. Mr.Trivedi submitted that the Learned Single Judge failed to appreciate the intention and purport of the letter dated 9^th January 1998. Thus, the finding that the Plaintiff did not comply with the conditions of Section 3 of the Interest Act is unsustainable in fact.

Mr.Trivedi further submitted that the Learned Single Judge had failed to appreciate the plain text of the provisions of the Interest Act. Mr.Trivedi referred to Section 3 of the Interest Act and submitted that the opening words of Section 3(1) are crucial. They described the class of proceedings to which the section applies. That class is defined in two distinct limbs; (i) proceedings for the recovery of any debt or damages and (ii) proceedings in which a claim for interest in respect of any debt or damages already paid is made.

Mr.Trivedi submitted that the second limb is unambiguous. It expressly covers proceedings where the principal debt or damages have already been paid at the date of institution of the suit. No further condition is imposed by the statute. There is no qualification to the effect that the principal must remain outstanding at any particular date.

Further, Mr.Trivedi submitted that Section 3(1)(b) of the Interest Act governs the period in respect of which interest may be awarded where the proceedings arise from a debt or damages other than those falling under a written contract. It provides that the period runs from the date when the creditor notifies the debtor by notice in writing that interest will be claimed, to the date of institution of the proceedings.

Mr.Trivedi submitted that three features of this provision bear close examination. First, the Section requires a notice in writing. It does not require that the principal debt remain outstanding on the date of notice. It does not require that the notice be given before any payment is made. Second, the Section uses the future tense "that interest will be claimed." The notice operates prospectively. It is an intimation of an intention to claim interest. A notice given after payment of principal does not militate against the aforesaid provision. Third, the Section specifies the period for which interest may be claimed from the date of notice to the date of institution of proceedings. The Section does not say the period would be from the date of notice, provided principal remains outstanding. The terminal point is the date of institution. The starting point is the date of notice. Both are fixed by the statute and no other condition is imposed.

Mr.Trivedi then referred to the proviso to Section 3(1) of the Interest Act. Mr.Trivedi submitted that the proviso deals with a situation where the principal has been repaid before proceedings are instituted. It does not say that the notice loses its validity on repayment of principal. It only says that interest shall not be allowed for the period after repayment.

Mr.Trivedi submitted that the Plaintiff's principal claim in the Suit was amounts due towards interest on delayed payments from the respective due dates till the date of filing of the Suit. The Plaintiff states that, in the first instance, notice under the Interest Act was issued vide letter dated 9^th January 1998. Subsequently, the Plaintiff once again recorded its intention to claim interest in the letter dated 27^th March 2000.

Mr.Trivedi submitted that the Learned Single Judge held that the aforesaid letters do not satisfy the requirements of Section 3 of Interest Act. In the Judgement, the Learned Single Judge has concluded that notice under Section 3 of the Interest Act is mandatorily to be issued after the amounts become due and prior to payment of the principal amount in respect where interest is claimed.

Mr.Trivedi submitted that, in other words, the Learned Single Judge has held that if notice is issued prior to amounts becoming due or after payment is received by the creditor, such notice does not comply with the provisions of Section 3 of the said Act.

Mr.Trivedi submitted that in so far as the Learned Single Judge impliedly rejects the notice issued prior to the amounts becoming due, it is submitted that the same is inconsistent with the purpose of Section 3. Section 3 of the Interest Act is enacted to inter alia ensure that the debtor is notified of the desire to claim interest. The Plaintiff submits that a notice issued prior to amounts becoming due serves the aforesaid purpose. In that view of the matter, it is submitted that the conclusion recorded in the Judgement is inconsistent and thus untenable in law.

Mr.Trivedi submitted that the condition which the Learned Single Judge read into Section 3(1)(b), particularly that the notice must be given while the principal remains outstanding, is not found in the Section. It is a condition added by construction. Mr.Trivedi submitted that such a construction is impermissible.

Mr.Trivedi submitted that the 63^rd Report of the Law Commission is an external aid and it is admissible only where the statutory language is ambiguous. Mr.Trivedi submitted that the reports of Law Commissions and Committees which preceded the enactment of legislation are permissible external aids to construction. However, their admissibility is conditional. They may be consulted only where the language of the statute is ambiguous or obscure. They cannot be used to override plain statutory language. In this connection, Mr.Trivedi referred to the judgements of the Hon'ble Supreme Court in R.S. Nayak v. A.R. Antulay (1984) 2 SCC 183 and Bhaiji v. Sub-Divisional Officer, Thandla (2003) 1 SCC 692 and to the judgement of this Court in State of Maharashtra v Dattatraya Balwant Upadhyaya (1976) Mah LJ 550.

Further, Mr.Trivedi submitted that, without prejudice to his submissions on the Law Commission’s Report, reliance on it is misplaced as the Commission was addressing a materially different question. In this context, Mr.Trivedi submitted that the 63rd Report of the Law Commission was entitled "The Interest Act, 1839." Its central concern is identified with precision at paragraphs 4.18 to 4.20 of the Report. At the relevant time, there was a divergence of opinion between High Courts on a specific and well-defined question, namely, whether a suit for interest alone, where the principal debt had already been paid, was maintainable at all. The Commission was addressing the aforesaid divergence. The Commission's recommendation was unequivocal. At paragraph 4.18 it stated that a suit merely for interest, where the principal has been paid, should be permissible. At paragraph 4.19 it observed that there was no rational basis for exempting a debtor from interest merely because the principal had been paid before the suit. Mr.Trivedi submitted that Section 3(1) of the Interest Act (of 1978) gave effect to that recommendation. Mr.Trivedi submitted that the question before the Learned Single Judge was not whether a suit for interest alone is maintainable. Mr.Trivedi submitted that the said question is no longer res intergra. The question actually decided was a different one: Whether a notice given after payment of principal can sustain a claim for interest. Mr.Trivedi submitted that this is a question about the timing condition for a valid notice under Section 3(1)(b). The 63^rd Report does not address that question. It was never before the Commission.

Mr.Trivedi submitted that, in addition to rejecting the Plaintiff's claims for interest, the Learned Single Judge also rejected the Plaintiff's claims for pendente lite interest and post decree interest. Mr.Trivedi submitted that the Judgement contains no reasons in support of the aforesaid rejection. Mr.Trivedi submitted that, in the absence of reasons, the aforesaid rejection is unsustainable in law. He submitted that the provisions of Section 34 of the CPC govern the award of pendente lite and post decree interest. The present case does not reveal any circumstances which may disentitle the Plaintiff from pendente lite or post decree interest.

Mr.Trivedi submitted that it is settled law that if a person is deprived of the use of money to which he is legitimately entitled, he has a right to be monetarily compensated for the said deprivation. The object behind awarding interest to a party, who has suffered loss, due to a legitimate deprivation of the enjoyment of the use of money that he was entitled to rightfully, is to balance the equities, and while doing so, the facts involved in each case must be examined by the Court.

In support of the aforesaid submissions, Mr.Trivedi relied upon the Judgement of this Court in Satish Solvent Extractions Pvt. Ld. V. New India Assurance Company Ltd. 1996 SCC OnLine Bom 2. and the Judgements of the Hon’ble Supreme Court in M/s. Tomorrowland Ltd. v. Housing and Urban Development Corporation Ltd. and Anr. (2025) 4 SCC 19 and Jagdish Rai & Brothers v Union of India (1999) 3 SCC 257.

Mr.Trivedi submitted that the Defendant retained monies lawfully due and payable to the Plaintiff, thereby depriving the Plaintiff of the use and enjoyment thereof. The Plaintiff was consequently compelled to institute and prosecute the present proceedings for recovery of its legitimate dues. The Learned Single Judge has recorded no reasons, whatsoever, for denying pendente lite interest on the claims allowed in favour of the Plaintiff and post-decree interest on the decretal amount. Mr.Trivedi submitted that the present case discloses no circumstance which would justify departure from the settled rule that pendente lite and post-decree interest ought ordinarily to follow a money decree. In these circumstances, Mr.Trivedi submitted that the Plaintiff is entitled to pendente lite and post-decree interest under Section 34 of the CPC and that the impugned Judgement, to the extent it denies such relief, warrants interference by this Court.

Mr.Sahu, the learned counsel appearing on behalf of the Defendant, supported the findings of the Learned Single Judge in so far as they do not grant the aforesaid interest and submitted that the said findings did not call for any interference.

Before considering the submissions of the Plaintiff, it would be worthwhile to consider the facts of the case so for as the Plaintiff’s claim on the basis of a Notice of Demand under Section 3 of the Interest Act is concerned. As far as running account bills are concerned, the very first notice of demand under Section 3 was purportedly issued in respect of RA bill Nos. 10, 12, 13 and 14 and Escalation bills comprising of Escalation (labour, material, POL) RA bill Nos.2 to 4. It is important to note that RA bill Nos.1 to 10 had already been paid by this time. Further, the first and second RA bills for Escalation (labour, material, POL) were also paid by this time. What was outstanding as of the date of this notice (notice dated 9^th January 1998) were RA bill Nos. 12. 13 and 14 and RA bill Nos 3 and 4 of Escalation (labour material, POL). The Plaintiff appears to have addressed thereafter various reminders for further RA Bills, particularly RA bills Nos. 20 to 34 and RA bill No.35, which were in effect the final bill and also Escalation RA bills (labour, material,POL) Nos.5 to 9 and RA bill No.10, which was the final bill for Escalation (labour, material, POL) and Escalation (star rate) RA bill Nos.1 to 3 and RA bill No.4, which was a final bill (Exhibits P-13, P-14, P-17 to P. 19, P-21 to P-23, P-25, P-27, P-28, P-31, P-33 and P-34). In none of these notices was there any demand for interest in relation to any outstanding bill. The first demand of interest after the notice of 9^th January 1998 was in the Plaintiff's letter dated 27^th March 2000. At that stage, all regular running account bills upto RA bill No.33, Escalation bills of star rate and labour, material, respectively, upto RA bill No.3 and RA bill No.9, had already been paid. What was outstanding was regular RA bill Nos.34 and 35 (which was a final bill) and Escalation (star rate) (fourth and final bill) and Escalation (labour, material, POL) (tenth and final bill).

The Plaintiff has annexed a statement of interest payable by the Defendant on delayed payment of bills to this particular notice i.e. notice of demand dated 27^th March 2000. The statement includes claims for delay in respect of all regular RA bills, namely, RA bill Nos.1 to 34 and 35 and final bill as well as RA bills of labour, material, etc. from Nos.1 to 9 and 10th and final bill and RA bills of Escalation (star rate) (being Nos.1 to 3 and fourth and final bill). As noticed above, this was the only demand after the first demand of 9^th January 1998 which was for RA bill Nos.10 and 12 to 14 and RA bills of Escalation (labour, material, POL) Nos.2 to 4.

On this basis, the Learned Single Judge held that no demand for interest in the event of concluded payments of principal can sustain a suit for recovery of interest under Section 3 of the Interest Act. The Learned Single Judge further held that the Plaintiff can have a valid claim under Section 3 of the Interest Act only in respect of regular RA bill Nos.12 to 14 and Escalation RA bills Nos. 3 and 4 (labour, material, POL) (notice for demand dated 9^th January 1998) and for bill No.35 (regular final bill) and Escalation final bills (i.e. bill No.10 for Escalation (labour, material) and bill No.4 for Escalation (star rate)) (notice of demand dated 27^th March 2000).

The first question that arises is whether the notice provided under Section 3 of the Interest Act can be issued after payment of the principal. Section 3 of the Interest Act reads as under:

In our view, on first principles, as the provision stands, from a contextual point of view, it is impermissible to issue a notice under Section 3 of the Interest Act after payment of the principal is made. The purpose of a notice under Section 3 of the Interest Act is to caution the debtor that interest will be charged if the principal amount is not paid and that such charge will be made from a date mentioned in that behalf in the notice. If the principal amount has already been paid, though with a delay, the creditor cannot unilaterally bring about a cause of action for recovery of interest by issuing a notice under the Interest Act.

In our view, a person who has failed to perform a monetary obligation (whether in debt or in damages) should be given notice by the creditor or a person entitled to damages of the intention to claim interest, so that the person liable may stop the negotiation which he might have undertaken or examination of the facts of the case or legal consultation, and pay the principal amount, if he so chooses. Such notice of demand serves two purposes, namely, (a) re-asserting the claim to claim principal and (b) notifying the desire of the claimant to claim interest.

In our view, it is imperative that the claim for principal amount should be outstanding as on the date of the notice of demand of interest. It could not be that the principal amount had already been paid and a fresh claim for interest was made thereafter under Section 3 of the Interest Act. This would turn the law of interest proposed by the legislature on its head. The learned counsel for the Plaintiff is unable to produce any authority to support his case that interest could be claimed by a notice of demand issued after payment of the principal amount and based on such notice, a suit for recovery of only interest could be filed in a Court of law.

Thus, neither on first principles nor on authority could a notice issued under Section 3 of the Interest Act, after payment of the principal, sustain a claim for interest thereunder.

Thus, without taking into consideration the findings of the Law Commission, on a contextual interpretation of Section 3 of the Interest Act, it is clear that the notice provided under Section 3 of the Interest Act cannot be issued after payment of the principal. Thus, the Learned Single Judge’s findings in this regard warrant no interference.

The second challenge raised by the Plaintiff is in respect of non-granting of interest from the date of the Suit till the date of the decree and from the date of the decree till payment in respect of the Bills mentioned in paragraph 20(iii), (iv) and (v) of the impugned Judgement and non-granting of interest from the date of the decree till payment in respect of the sums mentioned in paragraph 20(vi) of the Judgement.

Pendente lite interest and post-decree interest are governed by Section 34 of the CPC, which reads as under:

It is settled law that if a person is deprived of the use of money to which he/she is legitimately entitled, he/she has a right to be monetarily compensated for the said deprivation. The object behind awarding interest to a party, who has suffered loss, due to a legitimate deprivation of the enjoyment of the use of money that he/she was entitled to rightfully, is to balance the equities and, while doing so, the facts involved in each case must be examined.

Paragraph 3 of the Judgement of this Court in the case of Satish Solvent Extractions Pvt. Ld. V. New India Assurance Company Ltd. (Supra), reads as under:

(emphasis supplied)

The Hon’ble Supreme Court in M/s. Tomorrowland Ltd. v. Housing and Urban Development Corporation Ltd. and Anr.(Supra) reiterated the settled principle that in commercial disputes, pendente lite or post-decree interest ordinarily ought to be granted. Paragraph 57 of the said Judgement is relevant in this regard and reads as under:

Similarly, in Jagdish Rai & Brothers v Union of India (Supra), the Hon’ble Supreme Court held that the grant of interest under Section 34 of the CPC is ordinarily warranted in money decrees unless there exists strong reasons for refusing the same. The Hon’ble Court further held that where no reasons are forthcoming for denial of interest, the decree ought to be in conformity with law by avoiding appropriate interest and accordingly, modified the decree to grant post decree interest @ 12% p.a. Paragraphs 3, 4 and 5 of the said Judgement are relevant and read as under:

In view of the law laid down as aforesaid and applying the same to the facts of the present case, the Defendant retained monies lawfully due and payable to the Plaintiff, thereby depriving the Plaintiff of the use and enjoyment thereof. The Plaintiff was consequently compelled to institute and prosecute the present proceedings for recovery of its legitimate dues. In the impugned Judgement, the Learned Single Judge has recorded no reasons, whatsoever, for denying pendente lite interest on the claims allowed in favour of the Plaintiff and post-decree interest on the decretal amount. Further, the present case discloses no circumstance which would justify departure from the settled rule that pendente lite and post-decree interest ought ordinarily to follow a money decree. In these circumstances, in our view, the Plaintiff is entitled to pendente lite and post-decree interest under Section 34 of the CPC and that the impugned Decree, to the extent it denies such relief, warrants interference by this Hon'ble Court.

For the aforesaid reasons, in our view, paragraph 20(iii), (iv) and (v) of the Judgement will have to be modified in order to provide for pendente lite and post-decree interest and paragraph 20(vi) of the Judgement will have to be modified to include post-decree interest.

As far as the rate of interest is concerned, in the Judgement, the Learned Single Judge has held that from the material produced by the Plaintiff comprising of official banking communications (which are not matters of contest), 9% p.a. appears to be the average or maximum interest payable on deposits by scheduled banks for the relevant period. Therefore, the pendente lite interest will be paid by Defendant at the rate of 9% p.a. simple interest.

As far as post-decree interest is concerned, Section 34 provides for the rate of 6% p.a. The proviso to Section 34(1) provides that where the liability in relation to the sum adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed 6% p.a., 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.

As stated hereinabove, in the impugned Judgement, the Learned Single Judge has held that 9% p.a. appears to be the average or maximum interest payable on deposits by scheduled banks for the relevant period. In these circumstances, in our view, post-decree interest will also have to be awarded at the rate of 9% p.a.

In the light of the aforesaid discussion and for the aforesaid reasons:

This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.