1. This appeal was tiled against the judgment and decree dated 30-1-1987 in OS No.1174 of 1984 on the file of the III Additional Judge, City Civil Court, Hyderabad whereby the learned Judge has decreed the suit against the appellant-defendant, as prayed for with costs and subsequent interest at 12% p.a. from the date of suit till the date of realisation.
2. Aggrieved by the said judgment and decree, the present appeal is filed contending that it view of the attitude of the respondent in showing disinterest in continuing the dealership of the appellant without giving any reasonable time to make appropriate arrangements, the respondent company was put to irreparable loss and, therefore, the Court should have allowed damages to the appellant-defendant, that the respondent-plaintiff is not entitled to refund of the deposit amount unless he clears the outstanding due to the appellant defendant, that the trial Court failed to see that the appellant-defendant has demanded the respondent-plaintiff to pay the amount due along with interest at 18% p.a under Ex.B5 itself, that the defendant is not entitled to receive any interest for the outstanding due from the plaintiff-respondent is illegal and contrary to the provisions of law, it is further contended that the lower Court failed to see that under the provisions of Sale of Goods Act, in the absence of condition in the contract from payment of interest on the outstanding due, the appellant-defendant is entitled to claim interest and the respondent-plaintiff is also liable for payment of interest. The trial Court also erred in granting interest on the entire amount i.e., principal and interest. For all the above reasons, it is prayed to set aside the judgment and decree under appeal.
3. The above suit was filed for recovery of a sum of Rs.84,752.00 with interest, the defendant is a manufacturer and seller of paper products, the plaintiff was appointed as a dealer of the defendant for selling the paper products on the plaintiff depositing an amount of Rs. 1.00 lakh as a security deposit which carry an interest of 12% and thus an agreement was entered into between the parties. It was further agreed that the dealership would be terminated by either side by issuing notice, though the plaintiff accepted the dealership for the specific products i.e., MG Poster Paper, the defendant did not supply the said paper and the plaintiff decided to discontinue the dealership by addressing a letter dated 21-6-1984 and thus the plaintiff is entitled for refund of the deposit amount after giving credit to the total value of the paper to the tune of Rs.52,688.00 supplied by the defendant to the plaintiff and after deducting this amount, the plaintiff is entitled to Rs.84,752.00. inclusive of notice charges. Therefore, the suit was instituted for recovery of the said sum.
4. The defendant filed written statement admitting the appointment of the plaintiff as the dealer and deposit of security amount of Rs. 1.00 lakh. He denied that the agreement was to supply MG poster papers, that the plaintiff failed to fulfil his promise to sell the other paper. It is admitted that the security deposit carried interest of 12% but there is no condition in the agreement to repay the deposit amount, the defendant denied the liability of Rs.84,752.00. It is further asserted that the defendant has supplied MG Craft paper valued at Rs.57,482.41 Ps. and he failed to pay the amount, that the defendant is entitled to claim interest at 18% p.a on that amount which comes to Rs.76,500/- inclusive of interest and if the said amount is deducted, at the most the defendant is liable to repay an amount of Rs.60,740.00 and not Rs.84,752.00 as claimed by the plaintiff and sought for- dismissal of the suit.
5. On the basis of the above pleadings, the trial Court framed the following four issues:
1. Whether the plaintiff is entitled to refund as per the agreement?
2. Whether the plaintiff is entitled to recover the suit amount from the defendant?
3. Whether the plaintiff is entitled for interest as claimed?
4. To what relief?
6. On behalf of the plaintiff, PW1 was examined and Exs. A1 to A6 were marked. Ex.A1 is a receipt passed by the defendant for Rs.75,000/-, Ex.A2 is also a receipt for Rs.25,000/-. Ex.A3 is also a receipt for Rs.75,000/- passed by the defendant agreeing to pay interest at 12% on the deposit amount. Ex.A4 is a letter dated 21-6-1984 written by the respondent-plaintiff to the appellant-defendant informing that he is not interested in dealership and requested for refund of the deposit after deducting the amounts due to the plaintiff for supply of paper. Ex.A5 is a letter dated 19-9-1984 written by the plaintiff to the defendant stating that the plaintiff has to pay Rs.52.688.00 for supply of the paper and after deducting this amount, the plaintiff is entitled for Rs.81,560.00. Ex.A6 is the postal acknowledgment.
7. On behalf of the defendant DW1 was examined and Exs.B1 to B6 were marked. Ex.B1 is a letter dated 4-8-1981 addressed by the plaintiff seeking dealership. Ex.B2 is a letter dated 10-4-1981 written by the defendant informing the plaintiff that they have decided to give the dealership on deposit of amount, Ex.B3 is another letter addressed by the defendant to the plaintiff demanding bill amount. Ex.B4 is another letter dated 26-11-1983 written by the defendant demanding specific bill amount of Rs.52,688.14 Ps. and Ex.B5 is also a letter dated 14-5-1984 demanding Rs.55,607.00 for 14 bills and Ex.B6 is a letter dated 10-2-1984 demanding Rs.52,688.14 Ps.
8. There is no dispute with regard to payment of interest at 12% p,a. on the security deposit of Rs.1.00 lakh by the defendant. As per Ex.A4 the plaintiff terminated the dealership and by the date of termination, the amount due inclusive of interest was Rs. 1,34,240.00. According to the plaintiff, the defendant supplied paper worth Rs.52,688.00 and there was no agreement to pay any interest on this amount, which is the value of the paper supplied and after deducting this amount, he is entitled to a sum of Rs.84,522.00. The defendant admitted receipt of Rs.1.00 lakh and their liability to pay interest at 12% p.a. so the trial Court accepted Ex.B4 dated 26-11-1983. According to the defendant, the plaintiff has to pay an amount of Rs.52,688/- being the value of the goods supplied and the said amount was not paid by the plaintiff and the claim under Ex.B5 was not accepted in the absence of any duplicate bills or entries in the account books reflecting Ex.B4. Therefore, accepting the evidence of PW1, the Trial Court held that the plaintiff is entitled to refund the security deposit as per the agreement and thus held issue No.2 in affirmative that the plaintiff is entitled to claim the suit amount from the defendant.
9. Now the learned Counsel for the appellant submits that though there is no clause in the agreement for collection, of interest on the outstanding due from the plaintiff, as per Section 61 of the Sale of Goods Act, the appellant-defendant is entitled to collect the interest and reliance is placed on the judgment of Punjab and Haryana High Court in Telu Ram Jain v. M/s. Aggrawal Sons, , wherein the Division Bench dealing with similar circumstances has held that sub-section (2) of Section 61 of the Sale of Goods Act is not in the nature of an exception or proviso to sub-section (1) nor is the former subject to the latter. If there was no contract between the parties for the payment of interest, the provisions of sub-section (2) will come into play and be attracted. Sub-section (2) of Section 61 gives wide discretion to the Court to award interest as it thinks fit on the amount of the price from the date of on which the payment was to be made. The seller would be entitled to interest from the date of delivery of goods upto the date of payment even in the absence of any contract for payment of interest.
10. For better appreciation of the facts and the legal position, let us examine Section 61(1) and (2) of the Sale of Goods Act, which reads as under:
Interest by way of damages and special damages :--(1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed.
(2) In the absence of a contract to the contrary, the Court may award interest at such rate as it thinks fit on the amount of the price:
(a) to the seller in a suit by him for the amount of the price from the date of the tender of the goods or from the date on which the price was payable;
(b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller from the date on which the payment was made.
Further sub-section (2) of Section 61 contemplates that in the absence of contract, the Court may award interest at such rate as it thinks fit on the amount of the price to the seller in a suit by him for the amount of the price from the date of the tender of the goods or from the dale on which the price was payable; and to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller from the date on which the payment was made.
11. Therefore, applying the principle laid down in Telu Ram Jain's case and a reading of sub-section (2) of Section 61 of the Act, it can be held that the appellant herein is entitled to collect interest on the amount outstanding due from the respondent. Therefore, though there is no contract to that effect, the respondent is liable to pay interest on the outstanding due. As contemplated under Section 61(2) of the Sale of Goods Act, the Court can award interest at its discretion. Therefore, I hold that the appellant-defendant is entitled to collect interest @ 12% p.a from the respondent-plaintiff against the outstanding dues from the date of receipt of goods from the appellant-defenant till the date of payment of outstanding dues by the respondent-plaintiff to the appellant-defendant.
12. With regard to the other contention raised by the learned Counsel for the appellant that the trial Court has erred in awarding interest on the total amount, which includes principal and interest, on an aggregate, as on the date of filing of the suit, he submitted that as per Section 34 of the Code of Civil Procedure, in a commercial transaction, the appellant is liable to pay interest on the principal from the date of deposit to the date of filing of the suit and future interest on the amount claimed in the suit. Instead of doing so, the trial Court has awarded interest from the date of security deposit to the date of realization of the amount, which is contrary to Section 34 of the Act, In support of his contention, he relied on the judgment of this Court in Indian Sank Rep. by the Zonal Manager, Hyderabad v. P.Venkata Satyavathi and others, 1993 (1) An.WR 607 (DB), wherein a Division Bench of this Court has held that the Court can award, in a money decree, interest from the date of the suit as well as interest subsequent to the decree on the principal sum adjudged. It is also made clear that the granting of interest from the date of suit and from the date of decree is in addition to any interest adjudged on such principal sum for any period to the institution of the suit. It is further held that considering the amendment of 1956, by substituting the words "Principal sum adjudged" for the "aggregate sum" made it clear that the interest subsequent to the suit can only be awarded not on the aggregate sum claimed consisting of principal and interest, but only on the principal sum adjudged. Thus the awarding of interest subsequent to the suit is on the principal sum as adjudged by the Court. If there is no dispute between the parties as to the principal sum originally lent outstanding on the date of suit, there may not be any necessity for the Court to adjudicate upon the same. But in the event of dispute, the Court has to adjudicate the principal sum due, and in any event, the interest subsequent to the suit can only on the principal sum as determined or adjudged by the Court.
13. He further relied on the judgment of Gujarat High Court in Gujarat Agro Oil Enterprises Ltd, Ahmedabad v. Arvind H. Pathak, wherein it was held that in a suit for recovery of amount decreed in favour of plaintiff, when the plaintiff claimed interest on total amount viz., principal and the amount by way of interest, interest at the rate of 12% p.a upto the date of suit can be awarded, but however, such interest has to be calculated only on principal sum and (sic 'not') on total amount.
14. Therefore, if that is the legal position in view of the principle laid down by the Division Bench of this Court and also Gujarat High Court, covering the point involved in this appeal, as seen from the records that there is agreement between the appellant-defendant and the respondent-plaintiff that the security deposit shall carry interest from the date of deposit @ 12% p.a., therefore, I hold that the respondent-plaintiff is entitled to collect interest at 12% p.a from the date of security deposit till the date of filing of the suit. The trial Court has granted interest at 12% p.a., therefore, I am not inclined to accept the finding arrived at by it. Accordingly, I hold that the respondent-plaintiff is entitled to collect interest at 6% p.a. on the principal amount of Rs. 1.00 lakh from the date of filing of the suit to the date of decree and at 6% p.a. on the decreetal amount of Rs. 1,34,240.00 from the date of decree till the date of realisation.
15. Therefore, the appeal is liable to allowed in part and is accordingly allowed partly modifying the judgment and decree of the trial Court as indicated above. No costs.