M/S. Royals Novelty Cloth Bazar (P) Ltd. v. M/S. Subramonia Industries

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.BHAVADASAN** **MONDAY, THE 7TH DAY OF APRIL 2014/17TH CHAITHRA, 1936** ## **RSA.No. 534 of 2011 (E)** **-----------------------AGAINST THE JUDGMENT IN AS 24/2009 of ADDITIONAL DISTRICT COURT-I, TRIVANDRUM, DATED 22-12-2010 AGAINST THE JUDGMENT IN OS 26/2005 of FIRST ADDITIONAL SUB COURT, TRIVANDRUM, DATED 31-07-2008** ## **APPELLANT/RESPONDENT/DEFENDANT:** **-------------------------------------------------------------** **M/S.ROYALS NOVELTY CLOTH BAZAR (P) LTD., ROYALS JUNCTION , ANCHAL PO, KOLLAM REP.BY ITS MANAGING DIRECTOR, P.T.KUNJUMON.** **BY ADVS.SRI.PHILIP J.VETTICKATTU SRI.B.PREMNATH (E)** **RESPONDENT/APPELLANT/PLAINTIFF:** **-----------------------------------------------------------** **M/S.SUBRAMONIA INDUSTRIES,TC 38/2650, SUBRAMONIA BUILDINGS, ARYASALA, THIRUVANANTHAPURAM REP.BY ITS PROPRIETOR V.SUBRAMONIAN S/O.T.VELAYUDHAN ACHARI, TC 39/1453(1), ARYA NAGAR MANACADU PO, THIRUVANANTAPURAM, PIN 695 009.** **BY ADV. SRI.V.AJAKUMAR BY ADV. SRI.T.M.CHANDRAN BY ADV. SRI.SIDHARTH A.MENON** **THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 07-04-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **ds** ## **P.BHAVADASAN, J.** - - - - - - - - - - - - - - - - - - - - - - - - R.S.A. No. 534 of 2011 - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 07[th] day of April, 2014 ## **J U D G M E N T** Aggrieved by the decree of the lower appellate court granting the plaintiffs a decree for a sum of 96,957/- with₹ 6% future interest, the defendant in O.S.No. 26/2005 has come up in appeal. 2. The plaintiff bid for supplying generator set to the defendant company. Their quotation was accepted. 35% of the total price was to be paid in advance and the balance was agreed to be paid on delivery. The value for which the quotation was made, was 5,35,000/-. Suffice to say that as₹ on 1.07.2004, an amount of 54,650/- remained unpaid.₹ Notice was sent to the defendant company calling upon them to pay the amount with interest and the company paid ₹ 12,350/- on 16.11.2004. Thereafter, no further payments were made. Ultimately, notice dated 06.12.2004 was issued calling upon the defendant company to pay a sum of **R.S.A. No. 534 of 2011** **-2-** ₹ 99.259/71 which remained unpaid, to the plaintiff. Suit was laid for recovery of the amount so due. 3. The defendant resisted the suit by pointing out that 35% of the cost of the generator set was paid on 31.05.2002. The generator set was installed belatedly and at the time itself, malfunction had been reported. Field service reports dated 15.07.2002 and 20.07.2002 also show that the machinery was defective. Since it could not work properly, the defendant had utilized the services of M/s. Poduval Industries to whom they paid 14,650/- as charges.₹ According to the defendant company, the value of the generator set was fixed at 4,30,000/- and they agreed to₹ pay only 90,000/- as acoustic charges as against the₹ demand of 1.05 lakhs made by the plaintiff company.₹ Finally, they pointed out that by Exts.B6 and B6(a) the plaintiff company demanded a sum of 54,650/- and their₹ agent by name Sri. P.G. Surendran went over to the office of the defendant company and received an amount of ## **R.S.A. No. 534 of 2011** **-3-** ₹ 12,350/- as full and final settlement of all amounts due from the defendant company. It was accordingly contended that no further amount was due and the claim made is baseless. 4. On the above pleadings, issues were raised. The evidence consists of the testimony of PW 1 and documents marked as Exts. A1 to A9. The defendant examined DW1 and documents marked as Exts. B1 to B6(a). 5. On an evaluation of the materials before it, the trial court came to the conclusion that there were no sustainable claim established by the plaintiff company and dismissed the suit. The plaintiff carried the matter in appeal as A.S.No. 24/2009. 6. The lower appellate court accepted the claim made by the plaintiff and granted a decree as already made mention of. The said decree is under challenge. 7. Notice was issued on the following substantial questions of law formulated in the memorandum of appeal: ## **R.S.A. No. 534 of 2011** **-4-** “1) When Ext.A1 quotation does not show that any interest is to be paid for the delayed payment, is the first appellate court justified in holding that appellant is to pay interest at the rate of 24% per annum. 2) Whether the first appellate court erred in not considering Ext.A6, B6 and B6(a) and taking note of the failure to produce the account accompanying Ext.A6. 3) Whether the first appellate court was justified in granting a decree in the light of he evidence on record.” 8. The learned counsel appearing for the appellant contended that going by Ext. A6, the final claim made as on 01.07.2004 is only a sum of 54,650/- towards the amount₹ then due to the plaintiff company. The learned counsel pointed out that it is an admitted fact that a sum of ₹ 12,350/- has been received through one Surendran who is a person sent by the company for receiving the amount. According to the learned counsel for the appellant, that person had endorsed that the amount of 12,350/- was₹ **R.S.A. No. 534 of 2011** **-5-** received in full and final settlement and that puts an end to the liability towards the plaintiff. Further it is contended that the erection charges which is valued at 12,350/-, was₹ something to be borne by the plaintiff company and the defendant was not liable to pay the amount. Further, it is contended that since the machinery was defective, they had to borrow the service of one M/s. Poduval Industries, who charged 14,650/- and that is also due from the plaintiff₹ company. If these amounts were set off, it could be seen that a much lesser amount remains unpaid. The acoustic cost agreed to pay was only 90,000/- as against 1.05 lakhs as claimed by the plaintiff. 9. The learned counsel for the appellant then contended that there was no agreement for payment of interest at any point of time and a unilateral claim for 24% interest has been simply accepted by the lower appellate court which has no basis or foundation. The learned counsel also pointed out that the claim now made that ## **R.S.A. No. 534 of 2011** **-6-** Mr. Surendran, the person who collected 12,350/- was not₹ an agent and he was not authorized to give a discharge cannot be accepted. In support of the said contention, the learned counsel relied on the decision reported in **S. Balasubramanian Chettiar** v. **Arvind Enterprises Tirunelveli** [AIR 2001 Madras 86], **Ishaq Abdul Karim and another** v. **Madan Lal** [AIR 1965 Allahabad 34] and it was contended that it is within the knowledge of the principal and the agent as to what are the authorities vested with the agent. A third party is not supposed to be aware of the said fact. Having entered the endorsement in Ext. B6 proved as Ext.B6(a), the plaintiff company now cannot claim any further amount. 10. The learned counsel appearing for the respondent on the other hand pointed out that there have been a number of communications issued by the plaintiff company to the defendant from time to time intimating them about the balance amount due and also reminding them the ## **R.S.A. No. 534 of 2011** **-7-** necessity to make the payment. It is contended that the erection charges of 12,350/- was for the acoustics that was₹ supplied later on and not for the generator set which was initially installed. Therefore, that is not liable to be deducted from the amount due to the company. The set off claimed of ₹14,000/- as repairing charges, according to the plaintiff, was without notice to them and without informing them and they are not liable to pay that amount also. 11. In Ext.A8, a notice given on 06.12.2004, the details of payment received and due have been specifically mentioned and there is no reply to the same. Having not disputed the amount made mention of in Ext.A8, the defendant cannot now be heard to say that no amount is due. It is further contended that even assuming that there is no contract regarding the interest that is payable on delayed payment, going by Section 61 of the Sales of Goods Act, there is a statutory obligation. The interest could be determined by the court for the delayed payment or **R.S.A. No. 534 of 2011** **-8-** damages incurred by the person concerned. Therefore it is contended that it cannot be said that no interest is due. The learned counsel therefore justified the finding of the lower appellate court that the amount as claimed in Ext.A8 is due. 12. Whatever be the contention on either side, one needs to start only with Ext.B6. In Ext.B6, the definite stand taken by the plaintiff company is that an amount of ₹ 54,650/- alone is due. There is no claim for any interest therein at the rate of 24%. It is an admitted fact that subsequently, an amount of 12,350/- has been paid as per₹ Ext.B6(a). One of the controversies that arises for consideration is regarding the endorsement in Ext.B6(a). The defendant relies on the endorsement alleged to have been made by the person who had gone to collect the amount to the effect that the amount handed over to him was towards the full and final settlement of the claim due to the plaintiff company. ## **R.S.A. No. 534 of 2011** **-9-** 13. It is true that the decisions relied on by the learned counsel for the appellant say that it is not for the third party to assume or to find out the nature and power of authority enjoined by the agent as that is within the specific knowledge of the principal and the agent. He may be also justified in saying that it is for the plaintiff to prove that the agent had exceeded in his authority and had acted outside the purview of his power so as not to bind the principal. 14. The above principles are so well settled and need no elucidation. The question is whether it applies to the facts of the case. There is nothing in any of the records to show that the person who was sent to collect the sum of ₹ 12,350/- is an agent. He could well be an employee of the plaintiff company. At no point of time, he represented himself as an agent. The mere fact that there is an endorsement in Ext.B6(a), in a letter that is addressed to the benefit of the defendant, unless it is shown that he had the authority to do so, that contention cannot stand. As long as ## **R.S.A. No. 534 of 2011** **-10-** there is nothing to indicate that plaintiff had informed that an agent of his was being sent to collect the amount and he was authorized to receive the same as an agent and make necessary endorsement, that cannot be acted upon. It is significant to notice that the defendant does not associate the said person to any other transactions in the whole transaction entered into between the plaintiff and the defendant. Therefore, the claim that endorsement in Ext.B6 (a) that the amount was finally settled and issued, cannot be accepted. 15. There was considerable debate regarding the right of the defendant in appropriating a sum of 12,350/- which₹ they are called upon to pay which according to them is illegal. The learned counsel appearing for the respondent would say that, that was for erection for acoustics and not for the erection of generator set and that was a separate issue covered by Ext.A3. Ext.A3 clearly specifies that erection charges are liable to be levied for erection of **-11-** ## **R.S.A. No. 534 of 2011** acoustic. 16. The learned counsel for the respondent seems to have a point in that Ext.A3 is very clear to the effect that the erection charges for the value of acoustic which is assessed as 1.05 lakhs. It is disputed by the appellant herein who₹ claimed that it was agreed that only 90,000/- is to be paid₹ including the erection of acoustic. The claim of the appellant that the amount agreed was 90,000/- cannot be accepted₹ for the simple reason that there is no evidence at all in that regard. Whereas, the plaintiff has produced Ext.A3, letter which clearly shows the amount as claimed by them. There is nothing to show that the appellant herein had not agreed for the said amount and there was an mutual understanding by which the amount was agreed at 90,000/-. Therefore,₹ such a contention cannot be countenanced. 17. The claim that the defendant had to incur an expenses of 14,000/- towards the repairing charges of₹ generator set soon after it was installed, cannot be easily ## **R.S.A. No. 534 of 2011** **-12-** ignored. The plaintiff does not dispute the two vouchers produced by the defendant of having incurred expenses in that regard. The claim of the plaintiff is that they are only dealers and they are not liable for any expenses that may be incurred for repairing the machinery. 18. The above contention of the plaintiff cannot be readily accepted. When they undertake to deliver and install the machinery, it pre-supposes that they also guarantee to deliver in a workable condition. If any mechanical defect develops, it is for them to initially rectify the errors. Viewed from that angle, the claim made by the defendant of having incurred 14,000/- cannot be rejected and certainly they₹ are entitled to set off the amount due to them. Therefore, an amount of 26,350/- i.e., the amount of 12,350 paid₹ ₹ and 14,000/- incurred for repairing charges, i.e., the₹ amount admittedly paid, the defendant is certainly entitled to set off. ## **R.S.A. No. 534 of 2011** **-13-** 19. Based on Section 21 of the Sale of Goods Act whereby it is contended that there is no delivery as understood in law, since the machinery was not in a working condition when installed. 20. It is difficult to accept the above contention. The Section contemplates a case of delivery and not the situation where the machinery erected has to be in a working condition. It is only mentioned that the articles should be in a deliverable state. That is different from saying that it should function properly. This contention therefore to be rejected. 21. Coming to the question of interest, true, there is no satisfactory evidence to show that there was an agreement regarding the rate of interest, except the unilateral claim made by the plaintiff at 24%. The plaintiff was not justified in claiming 24% interest. 22. But at the same time, the claim made by the defendant that no interest is payable cannot be accepted in **-14-** ## **R.S.A. No. 534 of 2011** view of Section 61 of Sale of Goods Act,1930, which reads as follows: “ **61. Interest by way of damages and special damages** .--(1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed. (2) In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price-- (a) to the seller in a suit by him for the amount of the price -- from the date of the tender of the goods or from the date on which the price was payable; (b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller -- from the date on which the payment was made.” ## **R.S.A. No. 534 of 2011** **-15-** 23. The learned counsel for the appellant would support his contention that the said provision provides for a reasonable interest being paid for the delayed payment of balance due and thereby damages suffered by the person concerned. In this regard, the learned counsel also relied on the decisions which are already made mention of. 24. The question then arises as to what is the reasonable interest. On going through the various decisions, it is found that normally 12% interest is granted. There is no reason as to why the same should not be granted in this case also. It has already been noticed that there need not be an agreement for payment of interest in view of Section 61(2) of the Sale of Goods Act. 25. It has already been noticed that out of 54,650/-₹ the claim for amount of 26,350/- is liable to be set off and₹ the balance amount of 28,300/- is due to the plaintiff₹ company. That should carry an interest at the rate of 12% from 01.07.2004 till date of the suit and thereafter _pendente_ ## **R.S.A. No. 534 of 2011** **-16-** _lite_ interest and future interest at the rate of 6% from the date of plaint till the date of realization of the amount. 26. Therefore, this appeal is partly allowed. While setting aside the decree passed by the lower appellate court, a modified decree is passed on the following terms: The plaintiff is entitled to realize a sum of 28,300/-₹ with 12% interest from 01.07.2004 till the date of plaint and thereafter at 6% future interest from the date of plaint till realization with costs throughout by proceedings from the defendant company as well as its assets. Sd/- **P.BHAVADASAN JUDGE** ds //True Copy// P.A. To Judge