Neyveli Lignite Corporation Ltd. vs M/s. S.S. Engineering Co.

Suryamurthy, J.—This is an appeal by the plaintiff from the judgment of the learned Subordinate Judge of Chidambaram, against the refusal

of the learned Subordinate Judge to grant a decree for interest from the date of the two payments for the pumpsets supplied by the respondent.

The Neyveli Lignite Corporation Ltd., Neyveli, represented by the Chairman cum Managing Director, Neyveli who is the appellant herein, is a

public sector undertaking of the Government of India, engaged in the mining of lignite and manufacture and sale of the processed lignite as Loco

and the manufacture and sale of urea and other products. For the mining and manufacturing purposes of the plaintiff-appellant Corporation, tenders

were called for the supply of 2 Nos. Geer pumps of a particular specification set out in the tender notice. The offer made by the respondent was

accepted, and a contract was entered into between the parties on 5th August, 1969. As per the terms of the contract, the two pumps of particular

specification contracted to be supplied by the respondent for Rs. 13,200 were to be despatched by the respondent. The appellant had to pay 90%

of the purchase price against documents through the State Bank and take delivery and in case the pumps did not correspond to the specification,

the appellant had the right to reject them and call for replacement or return of the amount paid together with interest. The respondent despatched

the pumpsets in March and April, 1970 respectively. The appellant paid 90% of the purchase price, viz., Rs. 6,242.80 on 3rd April, 1970 and Rs.

6,242.80 on 8th May, 1970 and took delivery on 24th April, 1970 and 25th April, 1970 respectively. On inspection by the officers of the

appellant, the pumps were found to be defective, and not according to the specification contracted for, and, therefore, they were rejected, and the

respondent was called upon to replace the same or return the 90% of the purchase price received. As the respondent did not comply with the

demands of the appellants in spite of repeated reminders and registered notice, the suit was instituted.

The respondent contested the suit inter alia on the ground that the rejection of the goods by the appellant was not valid and correct, that the

appellant committed breach of the contract, and that in any event, the appellant is not entitled to the interest claimed.

The learned Subordinate Judge found that the respondent supplied two pump sets which are materially defective and which did not conform to

the specifications of the order. Therefore, he granted a decree for a sum of Rs. 12,618.60 being the 90% of the value of the two pumpsets and

motors paid by the appellant. However, he disallowed the claim of the appellant for interest on the two payments made by the appellant from the

date of the payment, but granted interest only from the date of suit and that too only at six percent. The defendant has not filed any appeal against

the judgment of the learned Subordinate Judge, and therefore, the finding that the pumpsets supplied by the respondent were defective and not in

conformity with the specifications agreed upon between the parties and that the respondent thereby committed breach of the agreement and is

liable to refund the money received by way of consideration for the two pumpsets has become final. The plaintiff has preferred this appeal, as

observed already, against the refusal of the learned Subordinate Judge, to grant interest as prayed for.

The first item of pumpset and motor supplied by the respondent to the appellant was paid for on 3rd April, 1970. A sum of Rs. 6,242.80 was

paid towards 90% of the consideration for the sale. A similar amount was paid on 8th May, 1970 to the respondent by the appellant for the

second item of the pumpset and motor supplied. Both of them were found to be defective, and therefore, the appellant insisted upon the

respondent setting right the defects or refunding the money. The respondent never offered to take back the pumpsets and motors or repay the

consideration. The respondent only offered to take the pumpsets to Bombay, repair them and return them. The appellant was not agreeable to this

course unless the respondent executed an indemnity bond for the value of the goods. The respondent did not execute any such bond. Hence the

rights and liabilities of the parties have to be determined with reference to the original agreement. The respondent did not offer at any time to take

back the goods unconditionally and repay the money, and, therefore there is no wrongful detention of the goods by the appellant, as the learned

Subordinate Judge seems to have thought. It is only in pursuance of the decree of the lower Court and by refraining from filing an appeal therefrom

the respondent had conceded the right of the appellant to get back the consideration for the two sales. So long as the respondent was not willing to

concede that he is liable to refund the money and so long as the respondent did not demand the return of the goods promising to refund the money,

the appellant had to detain the goods, because the appellant was the owner of the goods and such detention could not be wrongful. In view of the

finding of the trial Court that the respondent has committed breach of contract and has supplied goods which were not agreed to be purchased by

the appellant but some other goods which were not in accordance with the specifications of the terms of the contract, the finding that there was a

failure of consideration is inevitable. Therefore, I find that the appellant is entitled under S.61 (2)of the Sale of Goods Act to interest on the amount

of price paid, viz., Rs. 6,242 80 with effect from 3rd April, 1970 and on Rs. 6,242.80 with effect from 8th May, 1970. The appellant has claimed

interest at the rate of 12 per cent per annum. Having regard to the bank rate prevailing, this claim is certainly not unconscionable or usurious, nor

has any such contention been put forward. Therefore, the judgment and decree of the Court below are modified and in addition to the decree

already granted to the appellant, the appellant is granted a decree for interest at the rate of 12 per cent on Rs. 6,242.80 with effect from 3rd April,

1970 and on Rs. 6,242.80 with effect from 8th May, 1970. In other words, the suit is decreed for interest as prayed for. The appeal is allowed.

The appellant is entitled to costs throughout as prayed for.