Suit No. 1440 of 1992

7th February, 2000

Petitioner Counsel: Mr. L. H. RAMBHIA with Mr. A. C. VARMA
Respondent Counsel: Mr. SUSHILKUMAR HALVASIA with Mr. V. VARMA i/by M/s. HALVASIA & Co.

JUDGMENT

JUDGMENT :- This is a suit for recovery of money which admittedly is only interest as principal amount due to the plaintiffs from the defendants has already been recovered.

2. The Plaintiffs are a partnership firm whereas defendant No.1 is a company registered under the Companies Act. Plaintiffs pursuant to the order placed by the defendants delivered goods namely different kind of edible oils required by the defendants as raw material for their products. The goods were delivered vide delivery challans which were signed by the defendants and the defendants never raised any objection. It was agreed between the plaintiffs and the defendants that the defendants would pay the price of the goods within the credit period of 60 days from the date of bill and if the defendants fail to pay within that period, then interest at the rate of 18% per annum will be charged on the amount remaining unpaid from time to time beyond the period of 60 days with effect from the date on which the 60 days period expires. The payments were delayed by the defendants beyond the period of six to one year and therefore, by letter dated 24.1.1992 the plaintiffs informed the defendants about the dues and issued debit note for Rs. 3,10,121.37 ps. towards interest for late payment made by the defendants. Plaintiffs were required to pay heavy interest. It was beyond their capacity to absorb the same. A statement showing the particulars and dates of payment and the interest charged was also enclosed with the letter. However, the defendants did not make the payment. By their letter dated 7.2.1992, the defendants replied that they are not agreeable to pay the interest. This letter was replied on 12.2.1992 by the plaintiffs and it was brought to the defendants, notice that instead of paying the amounts of the said bills, the defendants were diverting their finance for making purchases on cash basis and the payments were therefore delayed beyond the tolerable limits. By their letter dated 24.3.1992, the defendants admitted that they did not release the payments to the plaintiffs which was delayed beyond the agreed terms and regretted the inconvenience caused. However, the defendants stated that they could not accept the interest charges to the tune of Rs.3 lakhs. As the defendants did not pay the interest, the plaintiffs issued notice through their Advocate dated 20.4.1992 containing the aforesaid facts and demanded for interest. The defendants by their letter dated 5.5.1992 reiterated their stand that they had never agreed to pay interest and denied their liability and therefore, the Plaintiffs had no alternative than to file the present suit.

3. The Defendants contested the suit by filing written statement. However, it appears that no substantive plea is raised and there is only denial of each and every fact stated by the plaintiff and also denial of each and every material part pertaining to payment of interest and liability to pay interest. It is not disputed that there were dealings between the plaintiffs and the defendants and although the defendants were making payment regularly on many occasions, the payments were delayed. The payments were made as per the convenience of the defendants and whenever funds were available and this was with the consent and knowledge of the plaintiffs. In the past never any interest was claimed and never any interest was paid by the defendants for any delayed payment. There was never any contract for payment of interest. No credit period as such was agreed between the parties. The Defendants for the first time received demand for payment of interest on 26.1.1992 amounting to Rs. 3,10,121/- and immediately by their letter dated 7.2.1992 the plaintiffs were informed that as such the claim was never made in the past and there was not even discussion regarding payment of interest between the parties at any time. The defendants were therefore not agreeable to pay interest. The allegation that the defendants were diverting their funds was not correct and was also denied. There was no agreement to pay interest for delayed payment beyond 60 days and the suit claim pertains only to interest. The same is not maintainable as there was no agreement and there is no liability to pay interest much less at such a huge rate of 18% per annum.

4. On the pleadings stated above issues were settled and the issues with my findings thereon recorded against them are as under and the reasons for the findings are narrated in the paragraphs that follow :-

	ISSUES	FINDINGS
(1)	Whether the plaintiffs prove that it was agreed between the plaintiffs and the defendants that the defendants would be liable to pay to the plaintiffs bills amounts within the credit period of 60 days ?	Yes.
(2)	Whether the plaintiffs prove that the defendants would be liable to pay to the plaintiffs interest at 18% per annum on the amounts of the bills remaining unpaid from time to time after the credit period of 60 days ?	Yes.
(3)	Whether the plaintiffs prove that the defendants are liable to pay to the plaintiffs the amount of Rs.3,10,121.37 ps. as interest as agreed between the parties ?	Yes.
(4)	Whether the plaintiffs prove that in the alternative to claim of interest as agreed as per clause (3) above, the defendants are liable to pay to the plaintiffs the said sum of Rs. 3,10,121.37 as compensation for loss or damage suffered by the plaintiffs as alleged in para 12 of the plaint ?	Yes.
(5)	Whether the plaintiffs prove that in the alternative to claim of the said sum as per clauses (3) & (4), above, the defendants are liable to pay to the plaintiffs interest at 18% per annum as prevalent market rate on the bills amounts remaining unpaid after credit period of 60 days as per custom, practice usage in the market ?	Yes.
(6)	Whether the defendants are liable to pay to the plaintiffs interest at 18% per annum on the bill amounts remaining unpaid from time to time at 18% per annum under sec.3(a) of the Interest Act, 1978 and/or under section 73 of the Indian Contract Act and/or under section 61(1) of the Sale of Goods Act or in the alternative in equity ?	No.
(7)	Whether the plaintiffs are entitled to decree as prayed ?	Yes.
(8)	What order ?	As per the final order.

R E A S O N S

5. Issue Nos. 1, 2, 3, 4 & 5 : All these issues can be conveniently discussed together. The plaintiffs claim is very clear and it is the case of the plaintiffs that there was agreement between the plaintiffs and the defendants whereby the defendants agreed to pay interest on delayed payment especially for the payment delayed beyond the period of 60 days from the date of bill. The plaintiffs partner Mr. Chedda Nitin Dayalji entered the witness box. The plaintiffs also examined one Rohit Thakkar working as oil broker and one of their employee Rajkumar Karsandas Vaghela, who was working as accountant with the Plaintiffs and through the said witness account books and extract of the accounts were produced on record. P.W.1 Chheda initially stated that in terms of the contract the payments were to be made after 15 to 30 days of the delivery. However, later on he admitted that what was agreed was to pay interest beyond the period of 60 days and the interest has been charged only if the payment has been delayed beyond 60 days and the same has been stated in the statement sent to the defendants. It was brought to my notice by the learned counsel appearing for the plaintiffs that the interest has been calculated in the said statement for the period beyond 60 days. The transaction between the plaintiffs and the defendants is a commercial transaction and it is obvious that when the plaintiffs started supplying goods to the defendants, their relations were very good, but later on when the defendants were delaying the payment beyond the limit, there was strained relationship and after that suit was required to be filed as the amount remained unpaid inspite of letter and notice sent through the Advocate.

6. It is pertinent to point out that in the written statement the defendants have not raised any specific plea. They have only denied the plaintiffs case. The defendants examined one Ramakant Kulkarni, D.W.1, who was working in the purchase department of the company and he stated that the plaintiffs were supplying material without any purchase order and when a party supplies materials without purchase order, the understanding is that the payment would be made only after the material is consumed. When the material is supplied without requirement, normally it is just dumped and thus the plaintiff used to dump the material like that because they were earning profit out of it. Thus the plaintiffs were supplying and the defendants were accepting the material as and when supplied, though they did not require those materials and therefore, at times, the payment was made beyond the period of 60 days. However, as the payment was to be made after consuming the material, the fact that it was beyond the period of 60 days is not material. He further stated that in 1991 it was decided to clear all the bills of the plaintiffs and get rid of the plaintiffs. Thereafter they stopped receiving supply from the plaintiffs and so there were disputes. The disputes pertained to the quality of the material supplied and other suppliers were offering materials on better commercial terms. There was settlement of dispute. At the time of settlement though there was no schedule of payment in writing, the schedule of payment was orally agreed, and all payments were made according to that schedule and there is no liability to pay any interest. It is after the payment as per that settlement that the debit notes were raised by the plaintiffs for interest. There was no understanding between the plaintiffs and the defendants for making payment of interest on delayed payments.

7. This witness was not offered for cross examination and the reason stated is that his mother was sick and that he was required to attend to his mother. Sufficient time was given to the defendants to produce the witness for cross-examination. However, the said witness was not produced by the defendants within reasonable time for cross-examination. Therefore, the defendants examined another witness Vijay Narayan Athalye, who is the Vice President of the Defendant-company. He also stated that the material was supplied without purchase order as there was an understanding that the price would be paid after consumption of the material and the material was of inferior quality. However, when it was within tolerable limit, it was accepted. The material supplied after April 1990 was not at all as per the requirement and so the plaintiffs were told not to supply any further material. There was dispute because of that and the plaintiffs were asked to settle their dispute. After November 1990 the defendants arranged for alternative supply. The settlement of the dispute was arrived at orally as to how the payments were to be made and accordingly the payments were made. In the meeting in which the settlement took place the witness was also present although he was not in charge of the purchase. He stated that after the full and final settlement, the payments were made and thereafter the plaintiffs raised debit note and claimed interest for the first time in February 1990. In fact it is not disputed that by letter dated 24.1.1992, the plaintiffs raised their demand for interest. However, there is no material on record to substantiate the case of there being an agreement to pay interest in case of late payment beyond the period of 60 days. Before I proceed to consider the correspondence between the parties, it is necessary to point out that when the witness Kulkarni who was in charge of purchase and was examined for that purpose, was not made available for cross-examination, then whatever he has stated will be of no assistance to the defendants and can be taken advantage of by the plaintiffs.

8. This apart, what the two witnesses of the defendants have said in Court is not supported by any pleading. There was no dispute raised about the quality of the material supplied. Had there been substandard quality supplied by the plaintiffs, then obviously at the first available opportunity, the defendants would have brought to the plaintiffs notice or they would have rejected the goods. Similarly there was never any whisper raised by the defendants that the plaintiffs are sending the goods without there being any order or requirement of the defendants and that they are just dumping the goods for which the payment would be made after the material is consumed. This is also quite abnormal, because nobody would supply the goods and wait for payment till the goods are consumed. Exh.D is a statement which gives particulars about the goods supplied and the dates of payments etc. which was sent to the defendants by letter dated 24.1.1992 along with debit note of the same date. This letter was received and in reply dated 7.2.1992 the defendants have expressed surprise for the receipt of such a letter and stated that it was never discussed amongst them and the plaintiffs. It is further stated in the said letter that since the matter of delayed payment came to the attention of the signatory of the letter, immediate action was taken on the issue as is clear from the schedule of payment. What is stated in this letter is that the defendants are not ready and agreeable to the payment of interest and there was a request made to the plaintiffs to withdraw the same. What is material is that in this letter there is no specific statement that there was never any agreement to pay interest on delayed payment and on the contrary there is a request to withdraw the claim for payment of interest. By letter dated 12.2.1992 Exh.F the defendants were informed that they have diverted their money for cash purchase from other dealers instead of paying the plaintiffs on regular basis and because the defendants were making cash purchase the payment of the plaintiffs was delayed beyond tolerable limit. Further the Defendants in their letter dated 21.3.1992 have clearly stated that the defendants realised that the payment has been delayed beyond agreed credit terms, but considering the general conditions in the market and liquidity crunch which most companies were facing, the plaintiffs would have that the defendants have been trying their level best to clear their payment as far as possible. This is very pertinent part of the letter wherein it is categorically stated that the payment was delayed beyond agreed credit terms and excuse was shown as general condition in the market and liquidity crunch which the defendant and many other dealers were facing, and at the end it was stated that the defendants are sorry for the delayed payment and that they cannot accept interest charges to the tune of more Rs.3 lakhs. This clearly indicates that the defendants were trying to dispute the quantum of interest or that they were contending that they are not agreeable to pay such huge amount by way of interest. In the entire correspondence including the letter of 5.5.1992 which is in reply to the suit notice of 20.4.1992 sent by the plaintiffs through their Advocate, there was no dispute raised regarding the quality of the goods received or that the goods were supplied by the plaintiffs without there being any orders and were dumped and therefore, payment was to be made after consumption of the material. There is no such averment in the written statement and therefore, if the witnesses of the defendants are now stating that this was the reason for delay in payment, then it is an after thought and not acceptable. On the contrary the correspondence clearly shows that the defendants were conscious of the fact that the payments made by them were beyond the agreed credit terms which must be accepted to be 60 days as stated by the plaintiffs witness and as is shown in the statement in which the calculation of interest is made after the period of 60 days.

9. The learned Advocate for the defendants brought to my notice that admittedly the last payment was received by the plaintiffs on 22.1.1992 and the demand for interest was for the first time made on 24.1.1992. The plaintiffs witness also admitted that it is correct that he demanded interest amount from the defendants after he got the entire principal amount and he would not have got the principal amount had he demanded the interest earlier. This may be a practical and shrewd way of plaintiffs dealing with the defendants but it does not lead to an inference that there was no agreement to pay interest when in the correspondence it was admitted that the payment was made beyond the agreed credit terms. It does appear that the relations between the plaintiffs and the defendants had spoiled at that time because the defendants were purchasing goods on cash payment basis from other dealers and the plaintiffs felt that they were diverting their finance and deputing the plaintiffs. The fact that in the past the plaintiffs did not charge interest is not material and even inspite of agreement, the plaintiffs would not have charged interest this time also had the defendants continued to purchase goods from them. That however does not debar the plaintiffs to claim interest as per the agreed terms. The agreement may not have been enforced by the plaintiffs when the relations were good. That however does not debar them from claiming interest, when the delay in payment was from six months to one year.

10. The interest claimed is at 18% per annum which is less than the rate at which the banks are claiming interest and considering the prevailing market conditions, I do not think that the rate is excessive in a commercial transaction. Issue Nos. 1 to 5 are therefore answered accordingly.

11. Issue Nos.6 and 7. : Apart from the agreement, the plaintiffs are claiming interest on the basis of custom in the market. The plaintiffs examined a broker who has stated that during the period he worked as broker in last three years, in case of his customers never any interest was charged. That however does not mean that he is not aware of the custom in market. Moreover it is also a matter of common knowledge that market runs on money. When the payment is not in cash, there is some implied term to pay within a particular period. In any case it is understood that payment will be made in reasonable period. If not made then interest would be charged. The period of 60 days claimed by the plaintiffs to be agreed period appears reasonable. The delay of six months or more unreasonable. The defendants evidence that there is no such custom is required to be rejected.

12. Another aspect of the defendants claim regarding settlement is also after thought as there is no pleadings to that effect. Although their witness Vijay Athalye, who is the Vice President, stated that he was present at the time of settlement, there is no concrete evidence as the witness has not even stated as to how many persons were present in the meeting and who were those persons, when the settlement took place wherein it was agreed that interest will not be charged. His evidence is also not of any help to the defendants and therefore, even according to the market custom interest is payable on delayed payment and the defendants are liable to pay interest as the payment has been delayed beyond six months and interest has been charged only after the lapse of credit period.

13. Another aspect of the matter is that the plaintiffs tried to support the claim by reference to section 73 of the Indian Contract Act as also section 61(2) of the Sale of Goods Act. However, in the course of argument I brought it to the notice of the plaintiffs Advocate that the claim cannot be supported by the provisions of section 73 of the Contract Act or by section 61(2) of the Sale of Goods Act as the claim is not for the price of goods, but it is only for interest. Initially the learned Advocate for the plaintiffs tried to place reliance on Interest Act, but when it was brought to his notice, Advocate that the claim is based on agreement and there is no scope of invoking the provisions of the Interest Act that argument was not pursued. Therefore, issue Nos. 6 and 7 are answered accordingly and the following order is passed:

14. Suit is decreed in part. The Defendants do pay to the Plaintiffs Rs. 3,10,121.37 ps. Since the claim is only for interest, no future interest is awarded. The Defendants do pay costs of the suit to the plaintiffs and do bear their own costs.

Order accordingly.