Order
1. The appellants entered into an agreement with the respondent on 10-4-1975 whereunder the respondent herein undertook the execution of construction work in respect of the “Water Supply Scheme for Ukhrul Town”. It appears that on 17-6-1980, the respondent submitted 9th running bill amounting to Rs 2,10,151. Since the amount was not paid, the respondent sent a notice under Section 80 of the Code of Civil Procedure on 5-6-1983. The said notice was received by the appellants on 10-6-1983. On 6-8-1983, the respondent filed a suit for recovery of money. It appears that when the summons of the said suit were served on the appellants, the appellants paid the entire principal money Rs 2,10,151 as demanded under the running bill. However, the respondent proceeded with the suit and claimed interest on the delayed payment of the principal amount. The trial court was of the view that the amount due under the running bill was a debt and, therefore, the appellants are liable to pay interest at the rate of 9%. Consequently, the suit was decreed. The first appeal preferred by the appellants was dismissed by the High Court. It is in this way the appellants have filed this appeal.
2. Ms S. Janani, learned counsel appearing for the appellants, urged that the trial court as well as the High Court have committed serious error in holding that the amount covered by the running bill was a debt. She further argued that the amount payable under the running bill was in the nature of advance and was not a debt on which any interest could be claimed by the plaintiff. On the other hand, learned counsel for the respondent contended that the running bill was for the work done and, therefore, it was an amount due and debt on which the defendants were required to pay the interest. Clause 7 of the agreement runs as under:
“No payment shall be made for a work estimated to cost more than rupees five thousand or less till after the whole of the work shall have been completed and certificate of completion given. But in the case of a work estimated to cost more than rupees five thousand the contractor shall, on receipt receive a monthly payment proportionate to the part thereof then executed to the satisfaction of the Engineer-in-charge whose certificate of the sum so payable shall be final and conclusive against the contractor.
But all such intermediate payments shall be regarded as payment by way of advance against the final payment only and not as payments for the work actually done and completed and shall not preclude the requiring of bad, unsound and imperfect or unskilled work to be removed and taken away and reconstructed or re-erected to be considered as an admission of the due performance of the contract or any part thereof in any respect or the accruing of any claim, nor shall conclude, determine, or affect in any way the powers of the Engineer-in-charge under these conditions or any of them as to the final settlement and adjustment of the accounts or otherwise or in any other way vary or affect the contract.
The final bill shall be submitted by the contractor within one month of the date fixed for completion of the work or of the date of the certificate of completion furnished by the Engineer-in-charge and payment shall be made within three months if the amount of the contract plus that of the additional items is up to Rs 2 lakhs and in six months if the same exceeds Rs 2 lakhs on the submission of such bill. If there shall be any dispute about any item or items of the work then the undisputed item or items only shall be paid within the said period of three months or six months, as the case may be. The contractor shall submit a list of the disputed items within thirty days from the disallowance thereof and if he fails to do so, his claim shall be deemed to have been fully waived and absolutely extinguished.”
3. A perusal of clause 7 shows that no payment is required to be made for the work estimated to cost more than Rs 5000 till after the whole of the work is completed and certificate of completion is given. The aforesaid clause further stipulates that intermediate payment so made shall be regarded as payment by way of advance against the final payment only and that will be subject to the final payment. It is, therefore, clear that whatever is paid at the intermediary stage is not a final payment for the work done, and it has to be treated only as advance paid against the running bill. Once it is held that the nature of payment is an advance, such advance, therefore, is not a debt under the Interest Act. We are, therefore, of the opinion that no interest was payable on such delayed advance.
4. For the aforesaid reason, the judgment under challenge deserves to be set aside. We, accordingly, set aside the judgment of the High Court as well as of the trial court.
5. The appeal is allowed with costs.