Partly allowed

State of Kerala v. Samuel Varghese

Kerala HC6 Jan 2016RFA/879/2013

Case brief

AI extract

What is this about?

In a first appeal regarding a construction contract dispute, the High Court reduced the interest rate of 16% per annum awarded to the plaintiff contractor to 6% per annum. The court held that a rate higher than 6% requires proof of rates applicable to nationalized banks, which was not established by a certificate from a scheduled bank. The other aspects of the decree were confirmed.

What did the court decide?

Interest rate reduced from 16% to 6% per annum from the date of suit till realisation; other decree matters confirmed.

State of Kerala Vs Samuel Varghese — Contract and Commercial Disputes | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE ANTONY DOMINIC

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THE HONOURABLE MR. JUSTICE A.HARIPRASAD

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WEDNESDAY, THE 6TH DAY OF JANUARY 2016/16TH POUSHA, 1937

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RFA.No. 879 of 2013 ()

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AGAINST THE JUDGMENT AND DECREE IN OS NO. 37/2009 of SUB COURT, MUVATTUPUZHA DATED 28-11-2012

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APPELLANT(S)/DEFENDANTS IN THE O.S.:

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STATE OF KERALA

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REPRESENTED BY THE SECRETARY TO GOVERNMENT WATER RESOURCES DEPARTMENT, SECRETARIAT THIRUVANANTHAPURAM.

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THE SUPERINTENDING ENGINEER PROJECT CIRCLE, MUVATTUPUZHA.

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BY. SPECIAL GOVERNMENT PLEADER SHRI P.P.PADMALAYAN

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RESPONDENT(S)//PLAINTIFF IN THE O.S.:

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SAMUEL VARGHESE

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GOVERNMENT CONTRACTOR, KANDATHIPARAMBIL HOUSE MUTTAM P.O., HARIPAD, ALAPPUZHA DISTRICT PIN:690 511.

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BY ADV. SRI.K.BABU THOMAS BY ADV. SMT.MARYKUTTY BABU

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THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 06-01-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ANTONY DOMINIC & A.HARIPRASAD, JJ.

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R.F.A.No.879 of 2013

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Dated this the 6^th day of January, 2016

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JUDGMENT

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A.Hariprasad, J.

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Appeal filed by the defendants challenging the judgment and decree passed by the learned Sub Judge,Muvattupuzha in O.S.No.37 of 2009. The suit is one for declaration and realisation of amounts. Plaintiff, as a contractor, was carrying out the construction work of Muvattupuzha Vally Irrigation Project - left bank main canal under the defendants (the State and the Superintending Engineer, Project Circle, Muvattupuzha). Plaintiff and the 2^nd defendant entered into an agreement on 21.03.1996. Ext.A1 is the true copy of the agreement. Plaintiff made requisite arrangements for carrying out and completing the work in time as agreed to between the parties. He had to complete the work within a period of 12 months from the date of handing over possession of site of work by the defendants. A portion of the site was handed over to the plaintiff on 25.04.1996. Period of 12 months stipulated in the agreement for completion of the work expired on 24.04.1997. Defendants handed over possession of the remaining portions on various later dates and the last one was on 13.08.2002. Due to

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RFA No.879/2013 2

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the inordinate delay in handing over site and other breaches on the part of the defendants, the work could not be completed in time. The plaintiff sustained huge loss and made demands to the defendants for paying the amounts due to him. Since the defendants failed to do so, he sent a notice under Section 80 of the Code of Civil Procedure (in short, “CPC”). In spite of that the amounts were not paid. Hence the suit was filed.

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Second defendant filed written statement admitting that the plaintiff was the contractor appointed for construction of left bank of main canal under the Muvattupuzha Vally Irrigation Project. According to the averments in the written statement, there was no laches on the part of the defendants in handing over the site. The defendants are not responsible for the delay caused. Delay occurred due to reasons attributable to the plaintiff. Plaintiff is not entitled to get any amount.

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The court below examined two witnesses on the plaintiff's side and one witness on the defendants' side. Exts.A1 to A90 were marked on the plaintiff's side and Exts.B1 to B16 series on the defendants' side. Ext.C1 is the expert commissioner's report submitted by the retired Executive Engineer.

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We heard the learned Government Pleader appearing for the

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appellants and the learned counsel appearing for the respondent.

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5. Learned Government Pleader vehementally contended that the

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decree of the court below, whereby 16% future interest per annum has

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RFA No.879/2013

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been granted on various amounts is erroneous. Similarly, there is no legal reason for granting 16% interest from the date of suit till the date of realisation. The Government was prepared to pay money to the contractor as per the priority list of contractors prepared, to whom money was due from the Government.

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Learned counsel for the respondent/plaintiff contended that the project was delayed for seven years and the court below has enumerated reasons for the delay. It specifically found that the delay occurred only on account of the laches on the part of the defendants. This finding is based on evidence and there is no challenge against that finding.

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Admittedly this is a commercial transaction. Section 34 CPC is the provision dealing with payment of interest. Proviso to Section 34(1) CPC would show that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed 6% per annum. The only rider is that it 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 nationalized banks in relation to commercial transactions. The fact that the transaction revealed by Ext.A1 agreement is a commercial transaction is beyond any dispute. But the requirement under Section 34(1) proviso CPC is that a rate higher than 6% could be granted in a commercial transaction, if the amount advanced by nationalized banks in relation to commercial transactions during the

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RFA No.879/2013 4

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relevant time was properly proved. In this case Ext.A90 is the document relied on by the respondent to contend that he is entitled to get 16% interest for the amount. Ext.A90 is a certificate issued from the Federal Bank, Muttom Branch. Admittedly the said bank is not a nationalized bank. It is only a scheduled bank.

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Learned counsel for the respondent contended that scheduled banks are also controlled by the Reserve Bank of India and they also charge the same rate of interest as the nationalized banks. But, we are unable to accept this argument for the reason that Ext.A90 will not satisfy the requirement in the proviso to Section 34(1) CPC. Therefore, we accept the contention of the appellants that the rate of interest awarded by the court below at the rate of 16% per annum is on a higher side. We therefore reduce the interest rate to 6% per annum from the date of suit till realisation.

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Another contention raised by the learned Government Pleader is regarding the grant of `3,63,643/-towards the cost of 32160 bags of cement purchased by the respondent/plaintiff from open market as there was short supply of cement by the defendants. Learned counsel for the respondent took us through the deposition of DW1. She herself admitted that there was short supply of cement during the relevant period and the plaintiff was compelled to purchase cement from open market. DW1 also affirmed that the said amount was due from the defendants to the plaintiff.

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RFA No.879/2013

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The court below rightly decided that issue in favour of the plaintiff. We do not find any reason to interfere in that matter.

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We, therefore, allow the appeal in part. The rate of interest granted by the court below to the respondent/plaintiff under various heads is reduced to 6% per annum from the date of suit till the date of realisation. Rest of the matters in the decree are confirmed. There is no order as to costs.

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ANTONY DOMINIC, JUDGE.

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A. HARIPRASAD, JUDGE.

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cks

State of Kerala v. Samuel Varghese

Case brief

What is this about?

What did the court decide?

State of Kerala v. Samuel Varghese

Case brief

What is this about?

What did the court decide?

What the court decided

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