Dismissed

Arecanut Processing & v. Assistant Registrar of

Karnataka HC17 Nov 2023WP/34535/2018

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition filed by a Co-operative Society challenging a Tribunal order that awarded 6% interest instead of the claimed 15%. The Court held the claim for 15% failed due to lack of documentary evidence supporting the Board resolution and unpleaded reliance on the Interest Act, 1978.

What did the court decide?

The writ petition was dismissed as being devoid of merit; the award and judgment refusing 15% interest were affirmed.

Arecanut Processing & Vs Assistant Registrar of — Cooperative Societies | Karnataka HC (2023)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 17^TH DAY OF NOVEMBER, 2023

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BEFORE

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THE HON’BLE MR. JUSTICE C.M. POONACHA

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WRIT PETITION NO.34535 OF 2018 (CS-RES)

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BETWEEN

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1 . ARECANUT PROCESSING & SALES CO OPERATIVE SOCIETY LTD., APMC YARD, SAGAR, SHIVAMOGGA DISTRICT-577401 REP BY ITS SECRETARY

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...PETITIONER

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(BY SRI JAYAPRAKASH R V, ADVOCATE)

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AND

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1 . ASSISTANT REGISTRAR OF COOPERATIVE SOCIETIES, KUVEMPU ROAD, SHIVAMOGGA-577201

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2 . ASHWINI KUMAR S/O S R THIMMAPPA,. AGED ABOUT 56 YEARS, OCC: ARECANUT MERCHANT, R/O NO.5, APMC YARD, SAGAR, SHIVAMOGGA DISTRICT-577401

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…RESPONDENTS

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(BY SRI SIDDHARTHA BABURAO, AGA FOR R1 SRI S V PRAKASH, ADVOCATE FOR R2)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH ANNX-H, THE JUDGMENT AND ORDER DTD 09.02.2018 IN APPEAL NO.718/2007 ON THE FILE OF THE KARNATAKA APPELLATE

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TRIBUNAL, BANGALORE AND ANNX-E THE JUDGMENT AND AWARD DTD 29.06.2007 IN DISPUTE NO.DRS.6:2004-05 PASSED BY THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES, SAGAR SUB DIVISION, SAGAR IN SO FAR AS IT RELATES TO THE REJECTION OF THE CLAIM OF THE PETITIONER SOCIETY AND ALLOW THE DISPUTE RAISED BY THE PETITIONER AS PRAYED FOR IN THE DISPUTE FILED UNDER SEC.70 OF THE KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959 AND ETC.

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THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 07.11.2023 COMING ON FOR 'PRONOUNCEMENT OF ORDER' THIS DAY, THE COURT MADE THE FOLLOWING:-

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ORDER

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The present petition is filed challenging the order dated 9.2.2018 passed in Appeal No.718/2007 by the Karnataka Appellate Tribunal, Bangalore (hereinafter referred to as ‘the Tribunal’) and the award dated 29.6.2007 passed in Dispute No.DRS.6/2004-2005 by the first respondent – Assistant Registrar of Co-operative Societies.

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The relevant facts necessary for consideration

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of the present petition are that the second respondent, who is a trader carrying on business in Areca nut at Sagar is a member of the petitioner – Society and has been

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carrying on transactions with the petitioner in purchasing Areca nut through tender since 1997-98. In the course of business, on various dates during the period 3.11.2001 to 8.3.2002, the second respondent purchased 728 bags of Areca nut from the petitioner. The petitioner debited the value of the said stocks to the account of the second respondent. The total cost of Areca nut purchased in respect of 728 bags was `46,55,606/-.

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It is the case of the petitioner that has per the Trade Rules and Practice, the second respondent was required to lift the entire stock within 60 days after paying the cost of the Areca nut. However, the same was not lifted by the second respondent despite issuance of various notices by the petitioner, due to which the petitioner sold the Areca nut and put the entire stock of 728 bags for re-tender on 30.6.2004 and in the said retender process fetched a sum of 38,24,426.40, which amount was credited to the account of the second respondent. In the said process, the petitioner was put to a loss of 8,31,179.60. Hence, the petitioner raised a

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dispute under Section 70 of the Karnataka Co-operative Societies Act, 1959 (hereinafter referred to as ‘the Act’) before the first respondent for recovery of the said sum of 8,31,179.60 (hereinafter referred to as ‘Prl. Amount’) as also a sum of 17,63,784.40 towards interest at 15% p.a., and a total sum of `25,94,965/- was claimed.

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The proceedings before the first respondent was contested by the second respondent by filing the statement of objections. Evidence was also adduced by the parties. The first respondent by Award dated 29.6.2007 ordered the second respondent to pay a sum of `8,31,179.60 together with interest at 6% pa., w.e.f., 1.7.2004 till realization.

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The petitioner, being aggrieved by the non granting of interest by the first respondent at 15% pa., as claimed by the petitioner in the dispute raised by it, preferred Appeal No.718/2007 before the Tribunal. The second respondent entered appearance before the Tribunal and contested the said proceedings.

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It is relevant to note that the second

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respondent also filed Appeal No.198/2012 before the Tribunal. The Tribunal by its judgment dated 9.2.2018 passed a common order dismissing the appeal filed by the petitioner as well as the second respondent. Being aggrieved, the petitioner has filed the present petition.

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Learned counsel for the petitioner submits that as per the Trade Rules which govern the transactions between the petitioner and the second respondent which is also acknowledged by the second respondent (Annexure-F to the writ petition), the second respondent is liable to pay interest as decided by the Board of the petitioner. That for the relevant period, the Board of the petitioner had decided that the interest payable would be 15% pm., and hence, the second respondent is liable to pay interest at 15% on the outstanding amount. That the first respondent erroneously rejected the claim of the petitioner towards interest on the ground that the Trade Rules is not applicable to the period during which the transaction took place between the petitioner and the

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second respondent and that no proper reasons have been assigned by the Tribunal while rejecting the claim of the petitioner towards interest. That the first respondent as well as the Tribunal have erred in rejecting the claim of the petitioner towards interest. That even as per the provisions of the Interest Act, 1978, the second respondent is liable to pay interest at the commercial rate and hence, interest at 15% p.a., as claimed by the petitioner is liable to be granted.

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Per contra, learned counsel for the second respondent submits that in the proceedings initiated by the petitioner in Dispute No.DRS:6:2004-05, the second respondent has paid the entire amount as ordered by the first respondent. He further submits that the petitioner has not produced any document under which it is entitled to claim interest at 15% p.a., and the relevant aspect of the matter has been properly adjudicated by the first respondent as well as the Tribunal and the claim of the petitioner towards interest has been rejected, which order ought not to be interfered with by this Court in the

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present writ petition. It is further submitted that in WP.Nos.2934-36/2017 this Court by order dated 7.10.2017 has held that a society like the petitioner is not entitled to claim interest and the said order dated 7.10.2017 is affirmed by a Division Bench of this Court vide order dated 10.4.2019 passed in WA No.6488/2017 and other connected matters. Hence, he contends that the relief sought in the writ petition is not liable to be granted.

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The submissions of both the learned counsel have been considered and the material on record have been perused. The questions that arise for consideration is

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i. Whether the award dated 29.06.2007 by Respondent No.1 and the Judgment dated 09.02.2018 passed by the Tribunal with regard to interest are liable to be interfered with.

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ii. Whether the Petitioner is entitled to claim 15% interest per annum from Respondent No.2 in respect of the amounts due and payable by t respondent No.2 to the Petitioner.

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The essential facts are undisputed with regard to the second respondent being a member of the petitioner-Society and with regard to the fact that 728 bags of Areca nut were purchased by the Society on the request made by the second respondent between 03.11.2001 and 8.3.2002 and the value for the purchase was not paid by the second Respondent, due to which the petitioner sold the 728 bags of Areca nut. As a result of the same, the petitioner was put to loss of 8,31,179.60. i.e., the principal amount. The petitioner, in addition to principal amount claimed interest of 17,63,784.40 and claimed a total sum of 25,94,965/- from the second respondent and a dispute in that regard was raised before the first respondent. The first respondent vide its Award dated 29.06.2007, ordered that the second respondent is liable to pay the petitioner a sum of 8,31,179.60 together with interest @ 6% w.e.f. 01.07.2004 till realization. It is not in dispute that the second respondent has paid the amount in terms of the award dated 29.06.2007 passed by the first Respondent.

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The petitioner has filed Appeal No. 718/2007

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before the Tribunal only with regard to its claim of interest @ 15% which has not been accepted by the Tribunal and the Appeal filed by the petitioner has been dismissed. Hence, it is clear that the question that is required to be considered in the present writ petition is the entitlement of the petitioner to claim interest at 15% per annum on the principal amount.

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It is the contention of the petitioner that as per the Trade Rules, (copy of which is produced as AnnexureF to the writ petition), it is stipulated that interest is liable to be paid as decided by the Board of the petitioner, which Trade Rules has been acknowledged and accepted by the second respondent. It is the further contention that the interest decided by the Board is 15%, which the second respondent is liable to pay. To prove the said case of the petitioner with regard to its entitlement to claim interest at 15% pa., apart from producing the Trade Rules, the petitioner-Society has not adduced any documentary

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evidence to demonstrate that its Board had resolved to charge interest at 15% pa., at the relevant point of time and the said rate of interest has been communicated to the second respondent. It is forthcoming that the petitioner -

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Society has only adduced oral evidence with regard to its entitlement to claim interest and in the absence of the petitioner adducing any documentary evidence in support of its claim for interest at 15% pa., from the second respondent, the claim of the petitioner regarding interest at 15% pa., has been rightly rejected by the first respondent as well as the Tribunal.

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It is the further contention of the petitioner that the second respondent is liable to pay interest having regard to Section 2(a) and (b) of the Interest Act, 1978. It is relevant to note that the entitlement of the petitioner to claim interest by virtue of the Interest Act, 1978 was neither pleaded before the first respondent in the dispute raised by it nor was the same averred in the Appeal filed by the petitioner. The contention regarding interest has also not been averred in the grounds urged in the present

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writ petition. The said contention is being putforth during arguments.

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The contention of the learned counsel for the petitioner that the aspect regarding applicability of the interest being a question of law is ex-facie untenable and liable to be rejected in view of the fact that the claim of interest ought to have been specifically averred in the dispute and the second respondent ought to have an adequate opportunity to contest the same. Hence, question of considering the contention of the petitioner regarding its entitlement to claim in terms of the interest Act, 1978 is untenable and liable to be rejected.

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The said claim regarding interest urged by the petitioner by placing reliance on the Trade Rules has been adequately considered by the first respondent as well as the Tribunal and which has already been considered hereinabove. The petitioner has failed in demonstrating that it is entitled to interest at 15% from the second respondent and the award of the first respondent and the judgment of the Tribunal refusing the same is erroneous

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and is liable to be interfered by this Court in the present writ petition. Hence, question Nos.1 and 2 framed for consideration are answered in the negative.

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In view of the aforementioned, the writ petition

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is dismissed as being devoid of merit.

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Sd/JUDGE

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Nd/BS

Arecanut Processing & v. Assistant Registrar of

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Arecanut Processing & v. Assistant Registrar of

Case brief

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