Partly allowed

Sri Sadashivanagowda v. M/S Weizmann Homes Ltd.

Karnataka HC19 Jul 2024RSA/666/2008

Case brief

AI extract

What is this about?

In a Second Appeal regarding a hire-purchase suit, the High Court modified the First Appellate Court's decree. The Court held that while defendants are jointly liable for the principal balance, the 36% interest claim was unjustified as evidence showed a contractual rate of 15.75%. It also rejected uncalled-for claims for seizure and legal expenses, awarding interest based on the specific contract

What did the court decide?

The appeal is partly allowed. The decree is modified to award 15.75% interest from the date of suit and 6% p.a. for future interest, plus principal, but rejected claims for cheque and seizure charges

Sri Sadashivanagowda Vs M/S Weizmann… — Contract and Commercial Disputes | Karnataka HC (2024)

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IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH

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DATED THIS THE 19^TH DAY OF JULY, 2024

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BEFORE

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THE HON'BLE MR JUSTICE C.M. POONACHA

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REGULAR SECOND APPEAL NO. 666 OF 2008

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BETWEEN:

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SRI. SADASHIVANAGOWDA S/O VEERABHADRAPPA GOWDA AGE: 55 YEARS, OCC: SERVICE, R/O YELIGAR ONI, HOSAYALLAPUR, DHARWAD.

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…APPELLANT

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(BY SRI S.H. MITTALKOD, ADVOCATE SRI V.M.SHEELVANT, ADVOCATE)

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AND:

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M/S. WEIZMANN HOMES LTD., (FORMERLY KNOWS AS WEIZMANN LTD) BY ITS AUTHORITUSED SIGNATORY AND P.A.HOLDER SRI. PRASAD B.KULKARNI, MAJOR, OCC: SERVICE, 1^ST FLOOR, REVANKAR COMPLEX, COURT CIRCLE, HUBBALLI-580029.

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SRI BALAWANT GUNDMI, AGE: MAJOR, OCC: BUSINESS, PROF OF M/S. BEEJE AGRO INDUSTRIES BASEL MISSIO COMPOUND, P.B.ROAD, HUBBALLI.

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…RESPONDENTS

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(NOTICE ISSUED TO R1 AND R2 ARE SERVED BUT UNREPRESENTED)

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THIS RSA IS FILED U/SEC.100 OF CPC, PRAYING TO SET ASIDE THE JUDGMENT AND DECREE DATED 27.07.2007 PASSED BY THE II ADDITIONAL CIVIL JUDGE (SR.DN.), HUBBALLI IN R.A.NO.31/204.

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THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 03.06.2024, COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, POONACHA. J., DELIVERED THE FOLLOWING:

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JUDGMENT

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The present second appeal is filed by the defendant No.1 under Section 100 of the Code of Civil Procedure, 1908¹ challenging the judgment and decree dated 27.07.2007 passed in R.A.No.31/2004 by the Court of II Additional Civil Judge (Senior Division) Hubli² and the judgment and decree dated 29.11.2003 passed in O.S.No.166/2002 by the Court of I Additional Civil Judge (Junior Division), Hubli³ , whereunder, the suit for recovery of money has been dismissed by the Trial Court and the appeal filed by the plaintiff before the First Appellate Court has been allowed on the suit decreed, ordering the defendants to jointly and severally to pay ₹42,911/- with interest at the rate of 6% per annum from the date of suit till date of realization.

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The parties herein are referred to as per their status before the Trial Court for the sake of convenience.

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1 Hereinafter referred to as the ‘CPC’

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2 Hereinafter referred to as the ‘First Appellate Court’

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3 Hereinafter referred to as the ‘Trial Court’

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3. The relevant facts necessary for consideration of

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the present appeal are that, the plaintiff filed a suit for recovery of money against the defendant Nos.1 and 2 contending that, the defendant No.1 approached the plaintiff in the month of April - 2000 and expressed his desire to acquire a Bajaj Caliber vehicle under the here purchase scheme of the plaintiff. Subsequent to the negotiations between the parties, they entered into an Agreement of Hire Purchase on 15.04.2000⁴ . That in terms of the Agreement, the plaintiff delivered the vehicle to the defendant No.1 and a sum of ₹4,459/- was to be paid by the defendant No.1 as hire charges every month. That the amount financed by the plaintiff to the defendant No.1 was ₹42,370/- and the finance charges payable by the defendant No.1 was ₹6,679/-.

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It is the further case of the plaintiff that, the defendant No.2 was a guarantor to the said transaction and that the terms and conditions of the Agreement are clearly set out in the said agreement. That the defendants were required to pay a monthly hire charges of ₹4,459/-

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4 Hereinafter referred to as the ‘Agreement’

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from 15.05.2000 and the total sum payable as agreed by the defendants to the plaintiff was a sum of ₹49,049/including the finance charges.

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It is the further case of the plaintiff that, after

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taking possession of the vehicle, the defendant No.1 was not regular in payment of hire charges to the plaintiff as a result of which, as per the terms of the said Agreement, the vehicle was repossessed by the plaintiff. That the same was sold after inviting offers from the intending buyers. That after the amount was adjusted to the account of defendant No.1, even after appropriation of the sale consideration, the defendant No.1 was due to the plaintiff ₹23,688/-. The plaintiff also got issued legal notice on 03.03.2001 and 17.11.2001 claiming the amount payable.

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However, the defendants did not made payment of the same. Hence, the plaintiff a suit for recovery of money

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claiming the following amounts:

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a) Towards over due amount ₹23,688/-

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b) Towards O.D.Interest @36% till 31.10.200 ₹16,823/-.

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c) Towards cheque return charges ₹ 400/-. d) Towards the seizing charges ₹ 1,000/-. e) Towards parking charges ₹ 1,000/-.

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f) Towards legal expenses ₹ 5,000/-.

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Total ₹ 47,911/-.

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The plaintiff also sought for future interest at the rate of 36% p.a.

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The defendant No.1 entered appearance before

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the trial court and contested the suit by filing written statement contending that, the plaintiff ought to have sold the vehicle in public auction by inviting public tender in order for the vehicle to be sold at the highest price. However, the plaintiff has not followed the said procedure after seizing the vehicle which has resulted in hardship to the defendant No.1. That the vehicle which was seized was a brand new one and no amount was due to the plaintiff. Hence, the defendants are not liable to pay any amount to the plaintiff. Further, the defendants have not received any notice from the plaintiff, since, the notice was sent to the wrong address. Hence, the defendant sought for dismissal of the suit.

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The Trial Court, consequent to the pleadings of

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the parties framed the following issues:

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1. Whether plaintiff proves that, the defendants No.1 and 2 are jointly and severally liable to pay Rs.47,911/- to the plaintiff under Hire Purchase Agreement dated 15.4.2000?

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2. Whether plaintiff proves that the defendants are liable to pay interest at the rate of Rs.36% p.a.on Rs.23,688/- from the date of suit till realization of entire amount?

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3. Whether plaintiff is entitled for the reliefs sought for?

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4. Whether defendant No.1 proves that, the suit itself is not maintainable as alleged in para 2 of written statement?

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5. Whether defendant No.1 is entitled for compensatory costs?

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6. What order or decree?

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The plaintiff examined himself as PW.1. Ex.P.1 to

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19 were marked in evidence. The defendant No.1 examined himself as DW.1. Ex.D.1 to Ex.D.8 were marked.

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The Trial Court by its judgment and decree dated 29.11.2003 dismissed the suit. Being aggrieved the plaintiff preferred R.A No.31/2004. The defendant No.1 entered appearance before the First Appellate Court and

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contested the same. The First Appellate Court framed the

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following points for consideration:

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1. Whether the judgment and decree dated 29/11/2003 is not based on pleadings and evidence and hence it needs interference by this court?

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2. What order?

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The First Appellate Court, upon a re-appreciation

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of the oral and documentary evidence on record, allowed

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the appeal and passed the following order:

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“The appeal is allowed with costs. The judgment and decree dated 29/11/2003 passed in O.S.No.166/2002 by the Ist Addl. Civil Judge (Jr.Dn) Hubli is hereby set aside and consequently the suit is decreed.

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The defendants are held jointly and severally liable to pay Rs.42911/-with interest at the rate of Rs.6% p.a. from the date of suit till the date of realisation. Further the defendants are directed to make payment within six months from today.

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Office to draw decree accordingly

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Send the copy of this judgment along with

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LCR to the lower court forthwith.”

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Being aggrieved, the present second appeal is

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filed by defendant No.1.

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This Court vide order dated 10.01.2024 framed

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the following substantial questions of law:

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(1) Whether the respondent being the owner of the vehicle allegedly hired to the appellant, which was seized by it, was entitled to recover the remaining hire charges and demand and collect overdraft interest at the rate of 36% p.a.?

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(2) Whether the respondent being the owner of the vehicle that was hired to the appellant, was entitled to seek recovery of the overdue hire charges along with interest, seizure and parking charges?

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Learned counsel for the appellant assailing the judgment and decree passed by the First Appellate Court contends that, the procedure followed by the plaintiff is erroneous and not proper and the plaintiff ought to have sold the vehicle in public auction. He further submits that, the plaintiff is not entitled for interest @ 36% p.a on the amount due and that the account of the defendant has been charged with various un-authorised debits. Hence, he

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seeks for allowing of the appeal.

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The respondent is served and un-represented.

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The submissions of the learned counsel for the appellant have been considered and the material on record including the records of the Trial Court and First Appellate Court have been perused.

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The transaction between the parties, inter alia the execution of the Hire Purchase Agreement dated 29.02.2000 (Ex.P.4) is undisputed and that, in furtherance to the said Agreement, the defendant No.1 had taken delivery of the vehicle and has paid the monthly hire charges for a few months. It is further undisputed that, due to the default in payment of the monthly hire charges by the defendant No.1, the plaintiff repossessed the vehicle in question and sold the same.

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Before the contentions of the appellant are considered, it is relevant to notice the findings recorded by both the Courts.

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The Trial Court while adjudicating upon the issues framed by it has held that the defendant has not pledged the vehicle with the plaintiff. However, it held that the

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plaintiff is not entitled to interest at the rate of 36% per annum, since the promissory note (Ex.P4(b)) discloses the interest at the rate of 15.75%. Since there was no public auction, it was held that the procedure adopted by the plaintiff to sell the vehicle is not proper and is illegal. Further, it has held that the plaintiff was required to file the suit only within the Courts at Bangalore city, and hence, the suit was not maintainable, and dismissed the suit.

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The First Appellate Court, while considering the points framed has, noticing that the signature of defendant No.1 on Ex.P4 is not denied, has recorded a finding that it cannot be held that Ex.P4 is not binding on defendant No.1. A finding has also been recorded that the transaction between the plaintiff and defendant No.1 was not a mere loan transaction, but was a Hire Purchase Agreement.

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The First Appellate Court has further held that there are no documents produced by the defendant to show that the plaintiff would issue demand notice for default of payment of each installment, and only after

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receipt of such demand notices, defendant No.1 is required

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to make the payment of the interest.

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Further, noticing Clause-18 of the Hire purchase agreement, it has been held that the same confers the power on the plaintiff to re-possess the vehicle and dispose of the same for recovery of money due not only under the agreement, but also under the other agreements. It is further noticed that the Hire Purchase Agreement (Ex.P4) does not prescribed for sale of vehicle through public auction or intimating of the borrower. It has been further held that defendant No.1 has not been able to prove that the price fetched in the sale by the plaintiff is not the maximum price.

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The First Appellate Court, noticing that the plaintiff has issued notices to the defendant No.1 on 17.01.2001 (Ex.P9) and 03.3.2001 (Ex.P15) respectively, and noticed that the same has not been questioned. It further noticed that the plaintiff has produced the account extract (Ex.P5), wherein, after debiting the sale proceeds of the vehicle, the closing balance is shown as ₹23,688/-,

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which is claimed as actual due in the suit along with interest which amount is shown as ₹16,823.87/-. Further, it is noticed that interest is calculated at 36% and since Ex.P5 itself is not denied, and the defendants have not replied to the notices issued, it has been held that the defendants are liable to pay interest at 36%. Hence, the First Appellate Court has decreed the suit as noticed above.

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It is forthcoming from the aforementioned that, as noticed above, the transaction between the parties i.e., the execution of the Hire Purchase Agreement (Ex.P4) is undisputed. Further, as rightly noticed by the First Appellate Court, the Hire Purchase Agreement itself stipulates under Clause-18, that the plaintiff has a right to re-possess the vehicle and dispose of the same for recovery of the amounts.

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It is forthcoming from a perusal of the account extract (Ex.P5) that the amount due was ₹49,188/-, and after deducting a sum of ₹25,500/- towards amounts

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realized upon sale of the re-possessed vehicle, the balance due as on 13.08.2001 is a sum of ₹23,688/-.

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The plaintiff has, in the plaint, sought for recovery of the said amount together with interest at 36% per annum. The First Appellate Court noticing that the defendant No.1 has not replied to the notices (Ex.P9 and Ex.P15), and has not denied the statement of account, held that the defendant No.1 is liable to pay the said amount.

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It is relevant to note that in the Hire Purchase Agreement at Clause-10, it is stated that on default of payment of monthly installment of the hire amount due, the defendant is liable to pay the plaintiff liquidated damages at 36% per annum. However, it is further relevant to note that a demand promissory note dated 29.02.2000, has been executed by the defendant No.1 along with a consideration receipt, and the signature of defendant No.1 is marked as Ex.P4(a). The signature of the guarantor is also forthcoming on the said demand promissory note and consideration receipt. It is relevant

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to notice that in the said demand promissory note it has been specifically contracted by the defendants with the plaintiff that they are jointly and severally liable to pay a sum of ₹42,370/- together with interest at 15.75% per annum.

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Although the said document has been produced by the plaintiff and specifically marked, wherein, the liability to pay the amount together with interest at 15.75% per annum has been specifically agreed, the plaintiff has not pleaded nor adduced evidence as to the justification for claiming interest at 36% as against 15.75% as stated in the demand promissory note. Hence, the plaintiffs are not entitled to claim interest at higher amount than 15.75% per annum as specifically contracted with the defendants.

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The First Appellate Court merely on the ground stated that the defendant No.1 has not disputed the demand notices and the statement of account has held that the defendants are liable to pay interest at 36% per annum. It is forthcoming that the defendants have

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specifically contested the case of the plaintiffs for recovery of money. Hence, the finding that the defendants have admitted the rate of interest due to non contest of the legal notices (Ex.P9 and Ex.P15) as well as the statement of account (Ex.P5) is erroneous and is liable to be set aside.

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It is further relevant to note that the plaintiff in support of the amounts which has been claimed in the suit, has produced the statement of account (Ex.P5), wherein, they have shown the various amounts due, amounting to a sum of ₹23,688/-, as has been noticed above. Further, the plaintiff has also furnished the statement showing the interest details claiming interest at 36%. However, as has been held herein above, the plaintiff is not entitled to claim interest at 36% and is entitled to claim interest only at 15.75%.

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Further, it is relevant to note that, in addition to the principle amount due of ₹23,688/- and interest, the plaintiff has claimed ₹400/- towards cheque return charge, ₹1,000/- each towards seizing charges and packing

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charges, and ₹5,000/- towards legal expenses. It is noticed that in support of the claim towards seizing charges, the plaintiff has produced the bills of the investigators dated 12.06.2001 and 08.08.2001(Ex.P6 and Ex.P7 respectively), which discloses that the investigator has charged a sum of ₹1,000/- towards seizing charges and ₹1,000/- towards packing charges. It is further forthcoming that the legal notices dated 03.03.2001 (Ex.P8 and Ex.P14) and 17.4.2001 (Ex.P9) has been issued by the plaintiff demanding payment of the amounts due. It is noticed that the plaintiff has produced copies of six legal notices (Ex.P8, Ex.P9, Ex.P14, Ex.P15, Ex.P16, and Ex.P17) which discloses that the legal notices have been sent to the defendants and in the said legal notices, it is also indicated that the defendants are liable to pay the legal notice charges indicated therein.

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However, it is necessary to note that there is no material produced by the plaintiff to demonstrate that the said amounts towards seizure charges and legal charges that have been claimed by the investigators and its legal

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counsel have been paid. Further, the plaintiff has not produced the details of the re-possessed account and only an entry dated 31.08.2008 at Ex.P5 shows that a sum of ₹25,500/- has been transferred from the re-possessed account to the ledger account of the defendants. With regard to the cheque return charges also there are no documents to demonstrate that the plaintiff has incurred the said amount.

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In view of the aforementioned, the plaintiff is not entitled to the other amounts claimed in a plaint, and is only entitled to the principle amount of ₹23,688/- together with interest at 15.75%.

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With regard to rate of interest in view of the discussion made above, the plaintiff is only entitled to claim interest @ 15.75 percent up to the date of suit which is contractual rate of interest. With regard to the rate of interest that is to be granted during pendency of the suit and for future of interest, it is relevant to note that Section 34 of the CPC vests a wide discretion to the Court to award such rate of interest keeping in mind the facts and

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circumstances of the case. Having regard to the same and having regard to the principles laid down in the Constitution bench of the Hon’ble Supreme Court in the case of Central Bank of India Vs. Ravindra⁵ , it is just and proper that the defendants be directed to pay interest @ 6% per annum from the pendency of the suit as also towards future interest.

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Having regard to the discussion made above, the substantial question of law Nos.1 and 2 are answered partly in the ‘affirmative’.

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Hence, pass the following:

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ORDER

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i. The above appeal is partly allowed.

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ii. The judgment dated 27.07.2007 passed in

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R.A No.31/2004 by the II Additional Civil Judge (Sr.Dn), Hubli , is modified and it is held that the defendants are jointly and severally liable to pay the plaintiff a sum of

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5 AIR 2001 SC 3095

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₹23,688/- together with interest at the rate of 15.75% from 01.9.2001 till date of suit and interest at 6% p.a. from date of suit till date of payment together with

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proportionate cost.

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iii. Modified decree to be drawn accordingly.

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Sd/JUDGE

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PJ (para 2-17) & PMP (para 18-31) CT:GSM List No.: 1 Sl No.: 3

Sri Sadashivanagowda v. M/S Weizmann Homes Ltd.

Case brief

What is this about?

What did the court decide?

Sri Sadashivanagowda v. M/S Weizmann Homes Ltd.

Case brief

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What did the court decide?

What the court decided

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