Partly allowed

Rajasthan State Seed Corp Limited v. M/S Vijay Seeds Companu Jalana

Rajasthan HC9 Dec 2021CFA/204/1992

Case brief

AI extract

What is this about?

The High Court of Rajasthan allowed the first appeal partly, modifying the trial court's decree. While upholding the principal recovery of Rs. 54,388/-, the Court reduced the awarded interest rate from 18% to 12% per annum due to insufficient evidence, affirming the trial court found on the validity of withholding funds and bank guarantee revocation.

What did the court decide?

The decree was modified to allow recovery of the principal amount of Rs. 54,388/- with interest at 12% per annum instead of 18% per annum.

Rajasthan State Seed Corp Limited Vs M/S Vijay… — Execution and Attachment | Rajasthan HC (2021)

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(1 of 8)

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[CFA-204/1992]

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Civil First Appeal No. 204/1992

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Rajasthan State Seed Corporation Limited, III Floor, Krishi Bhawan, Bhagwan Dass Road, Jaipur.

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----Appellant

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Versus

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M/s Vijay Seeds Company, Jhalana (Maharashtra) A registered partnership firm, through its partner Shri Vijay Kumar son of Bhagwan Dass, Kagaliwal resident of Lakaldkot Jalna (M.S.)

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----Respondent

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For Appellant(s) : Mr. Dinesh Yadav For Respondent(s) : --

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HON'BLE MR. JUSTICE SUDESH BANSAL

Judgment

Reportable

09/12/2021

The present first Appeal has been filed assailing the judgment and decree dated 24.03.1992 whereby the respondentplaintiff’s suit for recovery of money for Rs. 74,100/- was decreed against the appellant-defendant with interest @ 18% per annum.

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The relevant facts of case as culled out from the record are that one agreement dated 02.03.1982 was entered into between the plaintiff-firm and defendant-company whereby and where under the plaintiff-company was required to supply the certified Jawar seeds CSH-5 variety as per the standards set out under the Seed Act, 1966 and it was agreed that seed should not be discoloured, diseased or damaged. In order to ensure performance of

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(2 of 8) [CFA-204/1992]

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agreement, plaintiff furnished bank guarantee of Rs.18,250/, being 5% of the value of total quantity of seeds.

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The plaintiff filed a civil suit for recovery of money, alleging inter alia that the seeds duly certified by the Andhra Pradesh Seeds Certification Agency of Tamilnadu were supplied: first slot of 500 quintals of certified seeds CSH-5 variety was supplied and thereafter, second slot of 500 quintals jawar seeds were supplied. The plaintiff has averred in the plaint that defendant has made payment of 95% of the bill amount but has withheld 5% payment of the bill amount, total Rs.36,138/- and further has revoked the plaintiff’s bank guarantee for amount of Rs.18,250/-. Therefore, the plaintiff alleged that principal amount of Rs.54,388/- is leviable from the defendant and calculating interest @ 18% p.a. thereupon up to the date of filing of the suit for a total sum of Rs.74,100/-, the suit for recovery was filed.

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The defendant-company submitted written statement and in all fairness admitted the agreement dated 02.03.1982 as also, has not disputed the supply of seeds in furtherance to the agreement and has admitted withholding 5% of the total value of seeds as also revocation of Bank guarantee. However, defendant took defence that the supplied seeds were of sub-standard quality and were not supplied within time, therefore, the defendant received several complaints from the farmers and to meet out the complaints of farmers, the defendant-company had to re-supply seeds to 158 farmers second time. The defendant-company, tried to justify withholding of 5% amount of the total value of supplied seeds, being Rs.36,138/- and revocation of the Bank guarantee of Rs.18,250/-, placing reliance on the conditions No.5 & 8 of the agreement dated 02.03.1982.

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(3 of 8)

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[CFA-204/1992]

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Apart from merits, the defendant also placed reliance on the arbitration clause mentioned at point No.10 in the agreement dated 02.03.1982 to contend that in view of the arbitration clause, the plaintiff should have referred the dispute, if any to the chairman of the defendant-company for final decision.

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As per rival pleadings of both the parties, learned Trial Court settled four issues including issue of relief. After recording evidence of both the parties, issue No.1 was decided against the defendant with the finding that defendant has failed to prove that the supplied seed was of sub-standard quality and it had to resupplied the seeds to the farmers on receiving their complaints.

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Issue No.2, pertaining to the maintainability of civil suit despite arbitration clause was also decided against the defendant with the findings that such objection has not been taken by the defendant within the parameters of Section 34 of the Arbitration Act, 1940.

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While deciding issue No.3 pertaining to the rate of interest, the Trial Court allowed interest @ 18% p.a. and finally, a decree for recovery of amount of Rs.74,100/- has been passed. From the date of filing of suit, 18% p.a. interest has been ordered to be paid on principal due amount of Rs.54,388/- until its realization.

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Feeling aggrieved by the findings and impugned judgment and decree dated 24.03.1992, this first appeal has been filed.

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Perusal of the previous order-sheet dated 23.10.1992 shows that during the course of first appeal, the interim stay order on the execution of impugned decree was passed with the condition that in case the appellant-defendant deposits the entire decretal amount before the Trial Court, same may be allowed to be withdrawn by the respondent-plaintiff on furnishing the solvent

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(4 of 8)

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[CFA-204/1992]

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security to repay the said amount with interest @ 12% p.a. It appears from the record that appellant-defendant submitted cheque No.817080 dated 21.12.1992 to deposit the decretal amount before the Trial Court, but the cheque was returned to the appellant vide order dated 12.01.1993 with the finding that the execution petition has not been filed so far.

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Learned counsel for the appellant has argued that in view of the arbitration clause contained in the agreement dated 02.03.1982 the proceedings of present Civil suit should have been stayed under Section 34 of the Arbitration Act, 1940. It is argued that the present civil suit was filed on 04.09.1984 and defendant filed put in appearance on 16.10.1985 and filed one application dated 21.09.1985 to press the arbitration clause and to stay the proceedings of civil suit, however, this application was dismissed vide order dated 24.07.1987 with the findings that since defendant has already filed written statement on 20.07.1985 prior to filing of the application, so objection under Section 34 of the Arbitration Act is not liable to succeed. As this objection was also taken in the written statement, so specific issue No.2 was framed, which has been decided by a separate order dated 13.04.1989.

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Learned counsel for the appellant submits that this order dated 13.04.1989 is illegal and the objection of the defendant deserves to be sustained. To deal with this objection, it is necessary to look into the provisions of Section 34 of the Arbitration Act, 1940, which reads as under:-

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“ 34. Power to stay legal proceedings where there is an arbitration agreement. - Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other patty to the agreement or any person claiming under him in respect of any matter

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(5 of 8)

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[CFA-204/1992]

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agreed to be referred, any party to such legal proceedings may at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings. ”

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A perusal of the aforesaid provision itself reveals that in order to succeed with the objection, the defendant should remain ready and willing to do all things necessary to the proper conduct of arbitration. In support of such interpretation, the judgment of Hon’ble Apex Court delivered in case of Food Corporation of India vs. M/s Thakur Shipping Company Ltd. & Ors. reported in AIR 1975 SC 469 and another judgment of Calcutta High Court in case of Srish Chandra Guha Vs. The Food Corporation of India reported in AIR 1975 Calcutta 215 may be referred. Having considered the ratio of law, as propounded in these judgments, the defendant has not remained ready and willing to get adjudicated the subject matter of dispute of the present suit through arbitration, which is essential requirement of law to invoke the benefit of Sec.34 of the Arbitration Act, 1940.

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It is required for defendant to comply with the pre-requisites of Sec.34 of the Act of 1940 and mere objection is not suffice. Accordingly, the objection of defendant is not sustainable neither on facts nor on law. Thus, this Court is not inclined to interfere on the findings of issue No.2 and this objection of appellantdefendant has been rightly turned down.

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(6 of 8)

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[CFA-204/1992]

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As far as findings of issue No.1 are concerned, the defendant got recorded the statement of DW-1 Narayan Singh and statement of DW-2 Narendra Pal Singh. No documentary evidence has been produced to show that the supplied seed was of sub-standard quality, same was not sprouted 100%, the complaints of farmers were received and the defendant had to re-supply the seeds to the farmers. Further clause 5 of the agreement dated 02.03.1982 gives right to claim for liquidated damages, in case of short supply or non-supply within time and the seed does not conform to the standards set out under the Act of 1966.

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In the present case, firstly the defendant has miserably failed to produce any evidence that the seed was not supplied within time and the same was of sub-standard quality and further, the defendant has not claimed any liquidated damages but the defendant by its own has withheld 5% amount of the value of seeds. Thus, withholding of amount of Rs.36,138/- being 5% of total value of the seed by the defendant, taking resort of clause 5 of the agreement dated 02.03.1982 cannot be held justified and the Trial Court has rightly directed to pay this amount to the plaintiff. As far as revocation of Bank guarantee by the defendant is concerned, since the defendant has failed to prove any breach of the conditions of agreement dated 02.03.1982, the Bank guarantee should have been returned and the defendant could not have revoked the Bank guarantee. Thus, the Trial Court has rightly ordered to pay back amount of bank guarantee Rs.18,250/- to the plaintiff. Accordingly, this Court affirms the finding of issue No.1 as recorded by the Trial Court.

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(7 of 8)

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[CFA-204/1992]

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As far as rate of interest allowed by the Trial Court @ 18% p.a. is concerned, in the agreement dated 02.03.1982, no contract about the rate of interest was entered into between the parties. There is no written agreement between the parties as to what would be the rate of interest, in case of delayed payment or nonpayment. The Trial Court has awarded interest @ 18% p.a., merely on the basis of oral evidence of plaintiff. Oral statement of PW-1 Vijay Kumar may not be treated suffice to assume that rate of interest was agreed at the rate of 18% per annum, therefore, the findings of issue No.3 pertaining to the rate of interest @ 18% p.a. are based on insufficient evidence and the rate of interest, @ 18%p.a. applied by the Trial Court seems to be on higher side. In absence of any written contract about the rate of interest, this Court deems it just and proper to allow recovery of principal due amount with interest @ 12% p.a. instead of @18% p.a.

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It is also to be noted that this Court, while passing interim order dated 23.10.1992, asked the plaintiff decree holder to furnish the security for restitution of the decretal amount with interest @ 12%, in case the decretal amount, if deposited by the appellant is withdrawn. Thus, this Court deems it just and proper to allow 12% interest per annum, instead of 18% interest per annum. To this extent, the findings of issue No.3 are modified.

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The final outcome of the aforesaid discussion is that the respondent-plaintiff is entitled to recover the principal amount of Rs.54,388/- (36,138/-, balance cost of value of seed + 18,250, amount of bank guarantee) with interest @ 12% per annum from the date, it is due and up to the actual payment. Thus, this First Appeal is partly allowed and the judgment and decree dated

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(8 of 8)

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[CFA-204/1992]

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24.03.1992 passed by the trial court is modified to the extent mentioned herein above. The decree may be prepared accordingly.

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The record of the Trial Court be sent back.

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No order as to costs.

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(SUDESH BANSAL),J