Dismissed

State of Kerala v. Secretary, Manjeswar Service Co-Op.

Kerala HC6 Nov 2019RFA/499/2008

Case brief

AI extract

What is this about?

This appeal challenged the trial court's decree awarding 13% interest on damaged funds retained by a government treasury. The high court held that the rate was reasonable under Section 34 of the CPC given the defendant's refusal to release funds and denial of interest during delay, dismissing the appeal.

What did the court decide?

The appellant's prayer for reduction of the interest rate was dismissed; the trial court's decree of 13% interest is affirmed.

State of Kerala Vs Secretary, Manjeswar Service Co-Op. — Consumer Protection | Kerala HC (2019)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MRS. JUSTICE MARY JOSEPH

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WEDNESDAY, THE 06TH DAY OF NOVEMBER 2019 / 15TH KARTHIKA, 1941

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RFA.No.499 OF 2008

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AGAINST THE JUDGMENT IN OS 22/2006 DATED 25-10-2007 OF SUB COURT, KASARAGOD

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APPELLANT/DEFENDANT:

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STATE OF KERALA, REP. BY THE PRINCIPAL SECRETARY (FINANCE), GOVERNMENT OF KERALA, THIRUVANANTHAPURAM.

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BY GOVERNMENT PLEADER

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RESPONDENT/PLAINTIFF:

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THE MANJESWER SERVICE CO-OPERATIVE BANK LTD.NO.32, MANJESWAR REPRESENTED BY ITS SECRETARY.

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R1 BY ADV. SRI.KODOTH SREEDHARAN

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THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 06.11.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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RFA.No.499 OF 2008

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JUDGMENT

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Dated this the 6^th day of November, 2019

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The appeal is originated from judgment dated 25.10.2007

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in O.S. No.22/2006 on the files of Sub Court, Kasaragod. The appellant is State represented by the Principal Secretary (Finance), Government of Kerala, Thiruvananthapuram and the respondent is Manjeswar Service Co-operative Bank Ltd represented by its Secretary. By judgment dated 25.10.07, a suit for realisation of damages was decreed by the Court in favour of plaintiff. Accordingly, the defendant was directed to pay Rs.12,78,111/- as damages with interest at the rate of 13% per annum from the date of the plaint till realisation. The aggrieved defendant/State is before this Court in the appeal on hand.

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The Government Pleader, Smt.Rehna N.S attacked the judgment for the sole reason that 13% interest per annum was awarded by the trial court for the damages assessed, from the date of the plaint till realisation. According to the learned Government Pleader, the interest awarded by the trial court is

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excessive and therefore, modification by reduction in the rate of interest is required.

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The learned Government Pleader addressed this Court on grounds as follows;

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The treasury deposit was made by the plaintiff voluntarily and for their convenience knowingly of the restrictions on withdrawal of amount prevalent at the relevant time.

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The payment of the amount was delayed due to fault of the plaintiff. On the request of the plaintiff, the Government issued ways and means clearance dated 26.06.2000 for payment of Rs.50 lakhs, in fixed deposit, but the plaintiff did not opt to receive any amount in time.

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The defendant is not liable to pay interest after 03.08.2002 and the court below failed to consider that.

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The interest awarded at the rate of 13% per annum from the date of plaint till realisation is exorbitant.

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The plaintiff failed to establish that delay was occasioned in payment due to fault of the defendant.

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RFA.No.499 OF 2008

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Sri. Kodoth Sreedharan, the learned counsel on behalf

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of the plaintiff contended on the contrary that plaintiff was pressurized by the Government officials to make fixed deposit in Sub Treasury, Manjeswar and to open savings bank account in order to tide over the financial constraints faced by State of Kerala. Eventhough Surplus Funds were not available, acceding to the demand of the Government, plaintiff made fixed deposits of Rs.50,00,000/- on 10.07.2000 for one year and receipt No.163304 dated 10.07.2000 was issued in favour of the bank. A savings bank account was also opened on 03.01.1992 as T.P.A 68. The fixed deposit was due for payment on 10.07.2001. The amount standing in T.P.A 68 was meant to be withdrawn as and when necessary for the plaintiff. The amount standing in credit in T.P.A 68 as on 30.10.2000 was Rs.60,49,514/- and the plaintiff wanted to withdraw the same. In view of the instructions issued by State of Kerala against withdrawal of amount exceeding Rs.5,00,000/-, the plaintiff could withdraw only Rs.5,00,000/each on 02.11.2000 and 03.11.2000 as per cheque Nos.177429 and 177430 respectively. In view of the restraint prevalent

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thereafter against withdrawal of money exceeding Rs.2,00,000/-, the plaintiff confined withdrawal of Rs.4,00,000/- on twin occasions through cheques. The balance in the account after withdrawal as above as on 03.01.2001 was Rs.46,49,514/-. Thereafter, a total ban was issued by defendant on withdrawal of money from T.P.A 68 against its promise at the time of opening the Savings Bank Account, that amount in credit in the said account could be withdrawn at any time at the convenience of the depositor. In view of the absolute ban declared by the defendant, the plaintiff was prevented from withdrawing it's own money for convenient utilisation in business and thereby earning profits. Cheques placed by plaintiff Bank on 03.01.2001 and 01.08.2002 before the treasury to get the amount from the Savings Bank Accounts withdrawn, were not honoured. Therefore, the bank was constrained to make representations on 26.12.2001 and 09.04.2002 respectively before the Finance Minister and Chief Minister. In view of the need for money, the Board of Directors of the plaintiff Bank passed a resolution and requested the defendant on 23.11.2001 to release the amount

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remaining in credit in the Savings Bank Account and the fixed deposit which remained matured. The defendant did not permit the plaintiff and thus continued to retain the money belonging to the plaintiff unlawfully. Writ Petition was moved by the plaintiff before the High Court of Kerala as O.P No.10108/2003 seeking for a direction to the defendant to release the amount and by judgment dated 31.03.2003, this Court directed the defendant to pay back the amount covered by the matured fixed deposit with interest within one month, after lifting all restrictions exist then on operation of Savings Bank Account. Though, a month's time was given for compliance, the defendant failed to comply with the directions within time. The principal sum in the fixed deposit alongwith Rs.12,92,054/- as interest was paid only on 05.05.2003. The amount from the Savings Bank Account was also released only on 05.05.2003. The plaintiff Bank was then engaged in advancing loans to it's members as well as non-member depositors with interest at the rate of 18.5% per annum. Due to delayed release of the amount, the plaintiff bank was prevented from transacting it's business and thereby

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suffered heavy loss. Therefore, the plaintiff is entitled to get damages by way of interest at the rate of 17.5% per annum. At the time when lawyer notice was issued, the claim for damages was restricted by calculating interest at the rate of 13% per annum instead of 17.5%. Thus the plaintiff calculated the damages payable to him as Rs.18,32,466/. Rs.12,92,054/- being the sum already paid towards interest calculated at the rate prevalent then and the balance being Rs.5,40,412/- the plaintiff is entitled to receive that. The plaintiff is entitled to get Rs.14,09,249/- towards interest on Savings Bank account. The sum paid by defendant towards interest being Rs.7,36,024/- the defendant is liable to pay Rs.6,73,225/-. Therefore, the total sum of Rs.12,13,637/- is payable towards damages and that is well described in schedule A to the plaint. According to the learned counsel, since the suit is filed on 31.03.2006, the plaintiff is entitled to get Rs.63,974/- being the interest calculated at the rate of 13% from date of lawyer notice till that date and Rs.500/towards cost of notice. According to him, the trial court had adverted to the rival contentions in the backdrop of the evidence

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adduced by the parties and found merit in the claim of the plaintiff for damages and accordingly decreed the suit directing the defendant to pay Rs.12,78,711/- with interest at the rate of 13% per annum from the date of the plaint till the date of realisation.

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Both the plaintiff and defendant had let in oral evidence respectively through the Secretary, Manjeswar Service Co-operative Bank Ltd. and the Junior Superintendent, Sub Treasury Office, Majeshwar. The factum that the plaintiff Bank made fixed deposit of Rs.50,00,000/- at Sub Treasury, Manjeswar on 10.07.2000 vide receipt No.163304 for one year is not disputed. As stated by DW1, Government is legally bound to pay interest at 13% per annum from 10.07.2000 till 09.07.2001. According to him, for the reason that the plaintiff's deposit helped the Government, considering it as a special case, the Government have decided to pay interest at the prevailing rate for fixed deposit, till the treasury was actually ready to make the payment to the plaintiff. According to him, the treasury was not agreeable to the claim made by the plaintiff for damages by

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assessing interest at the rate of 13%. According to him, the payment was delayed but, the plaintiff bank alone was responsible for that, since it failed to avail the arrangement made by the Sub Treasury Officer, Manjeswar on 03.08.2002 for clearance. According to him, the information about the arrangements was received by the plaintiff over telephone on 02.08.2002 and that is well evidenced from the recitals in the lawyer notice issued to the defendant. According to him, the Government is not liable to pay interest for the amount in fixed deposit after 03.08.2002.

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Therefore, the contention of the defendant was that the Government is bound to pay interest for the savings bank deposit only at the rates announced by it from time to time and interest when calculated in accordance with is Rs.7,36,024/- and that was paid to the plaintiff. But admittedly withdrawals from T.P Account was banned by the Government from 02.07.2000 till 21.07.2000. It is an indisputable factum that O.P. No.10108/2003 was filed by the plaintiff before this Court. But the contentions of the defendant was that the plaintiff could have

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availed the arrangement made by them for clearance sufficiently earlier to filing of Original Petition, but, they did not for reasons known to them alone. Admittedly, the direction issued by the High Court of Kerala vide judgment in the Original Petition was complied with and the amount was paid only on 05.05.2003. The stand of the defendant was that since Rs.7,36,024/- being interest for the period from 10.07.2001 till 03.08.2002 was already paid to the plaintiff, there is no basis for the plaintiff making the claim for further sum towards interest. To substantiate the stand, he relied on the oral evidence of DW1 and documentary evidence of Exts.B1 to B7.

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A scrutiny of the evidence of defendant would reveal that, they are admitting that the payment in both deposits were delayed till 03.08.2002. No materials were produced by the defendant to establish that arrangements had been made by them for withdrawal of amount to the plaintiff on 03.08.2002. The defendant is relying on the recitals in the lawyer notice to contend that the information regarding the arrangements for facilitating withdrawal of the amount from the Sub Treasury has

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been communicated to the plaintiff over telephone. Ext.B5 is the lawyer notice issued by the plaintiff to the defendant and it is stated therein about a phone call received by the plaintiff from the Sub Treasury Officer, Manjeswar informing the latter's readiness to release Rs.50 lakhs with interest due only up to the date of maturity. The fixed deposit Receipt had matured on 10.07.2001. The Treasury offered for disbursal of the amount after one year from the date of maturity of the fixed deposit receipts with interest due only up to the date of maturity. No amount was offered to compensate the loss suffered by the bank for the period for which the payment was delayed. The stand of the plaintiff was that due to fault of the Treasury to release its amount in times of necessity, its business was adversely affected and thereby suffered loss. Therefore, the bank has its own reasons for not accepting the arrangement made by the Treasury and the reason also appears as sound one. Admittedly the payment under both deposits in full was made on 05.05.2003. The occasional orders of ban issued by the Government was stated by the defendant as the reason for the delay up to

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03.08.2002. However, out of constraints the plaintiff was forced to file O.P.No. 10108/2003 before this Court. Judgment was passed in the Original Petition directing to make the payment after lifting all bans on withdrawal within one month from the date of the judgment. Despite the direction, the payment was made only on 05.05.2003. The defendant has no cogent explanation for that delay.

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Plaintiff is a Bank engaged in monetary transactions. As pleaded in the plaint and sworn to in the proof affidavit filed in lieu of chief examination, the plaintiff is a Co-operative Society registered under Kerala Co-operative Societies Act and is running a service Co-operative Bank at Manjeswar engaged in accepting deposits from members and non-members and granting loans to members for agricultural and other activities. Though materials are not forthcoming to establish the business activities of the plaintiff as stated above, being a bank run by a Service Cooperative Society, the activities are probable ones. Undoubtedly the bank is entitled to receive the matured amount covered by the fixed deposit receipts and the money standing in its credit in

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the Savings Bank account respectively as and when demand is made for its release. It is improper on the part of defendant to withhold the money due to the bank after a demand for release is made. In the case on hand, neither the money was released on demand nor it was arranged to be released after one year of its due date without any offer to compensate the loss suffered. Even the direction dated 31.03.2003 of this court to release the amount within one month was also found flouted and ultimately the amount was paid only on 05.05.2003. There was not only inordinate delay in payment of the amount due to the bank but also denial of interest for the retained amount for the delayed period.

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The defendant bank is responsible for the delay as latches is found on their part. Therefore, it is unjust to decline damages for the loss sustained by the plaintiff due to the delayed payment. The trial court has correctly found that the plaintiff, in view of the delayed disbursal of money due to it had suffered constraints in its business and thereby loss and therefore is entitled

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to get damages by way of interest, for the period of delay.

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RFA.No.499 OF 2008

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According to the learned Government Pleader, the

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interest at the rate of 13% per annum ordered by the trial court vide impugned judgment for the delayed payment being exorbitant, a reduction by modification on the basis of the declared rates of interest for treasury deposits is expedient in the interest of justice. The learned Government Pleader has relied on Punjab National Bank Vs. M/s Prem De Vastra and others (AIR 2001 Delhi 172) and N.M Veerappa V. Canara Bank and others [(1998) 2 SCC 317] while canvassing for modification of interest. The decisions supra being rendered by the Apex Court under order XXXIV Rule 11 of Code of Civil Procedure, 1908 (for short, 'the CPC') is discarded as having no application in the context of the case.

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Order XXXIV Rule 11 CPC specifically deals with mortgage suits and in the decisions cited, it was held that the courts could exercise discretion, if there were good reasons for doing so, to award a rate of interest which was not necessarily the contractual rate but something less. Accordingly, the interest of 16.5% at contract rate from the date of suit as modified by the

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High Court was set aside and 6% originally fixed by the trial court was restored. As far as mortgage suits are concerned, order XXXIV Rule 11 CPC, the particular provision and not Section 34, the general provision is applicable.

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The case on hand, being a suit for simple money decree, the provision that governs the interest payable is Section 34 CPC.

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Sri. Kodoth Sreedharan, the learned counsel for the plaintiff has cited Aditya Mass Communications (P) Ltd v.A.P.SRTC [(2003) 11 SCC 17] to maintain the judgment under challenge awarding damages by way of interest at the rate of 13% per annum. It was held in the case that quantum of interest to be awarded in a given case is governed by the facts of the case and not by any precedent law unless limited by a Statute.

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In Aditya 's case supra, the Apex court was dealing with a case where the earnest money of Rs.20 lakhs deposited by the appellant while offering his tender was withheld by the respondent stating that it was forfeited. Civil suit was filed for

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declaration which was resisted and a counter claim was also filed.

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Trial court decreed the suit and dismissed the counter claim and directed the defendant to refund the earnest money deposit with interest at the rate of 12% from 17.11.1996 till date of payment.

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The judgment of the trial court when came to be challenged before the High Court, the judgment and decree were upheld and at the same time interest rate was interfered with and modified from 12% to 9% per annum. In the appeal filed before the Apex Court, the judgment of the High Court to the extent it reduced the rate of interest was interfered with and interest at the rate of 12% per annum fixed by the trial court was restored.

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The reasoning of the Apex Court while allowing the appeal and restoring the rate of interest to 12% was that the respondent had retained the money belonging to the appellant without authority of law and had driven him to series of litigations to his detriment. The facts of the case referred to in Aditya 's case supra being identical to the one on hand, this Court finds it safer to adopt the reasoning and thereby to decline the prayer to

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reduce the rate of interest from 13% to 6% as canvassed by the learned Government Pleader. Section 34 CPC empowers the Court to exercise discretion in the matter of imposition of future interest. In the facts and circumstances of the case, 13% interest awarded by the trial court being reasonable, this Court is reluctant to interfere with.

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Appeal fails for the forgoing reasons.

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In the result, appeal is dismissed with costs.

Sd/-

MARY JOSEPH

JUDGE

ttb

State of Kerala v. Secretary, Manjeswar Service Co-Op.

Case brief

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State of Kerala v. Secretary, Manjeswar Service Co-Op.

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