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State Of Rajasthan v. Raghubir Singh And Others
Factual and Procedural Background
The respondent-plaintiff undertook a building contract for the former State of Udaipur and completed the work on 6 June 1950. Large sums remained unpaid despite repeated demands. On that basis he filed Civil Suit 9 of 1963 before the Senior Civil Judge, Udaipur, claiming Rs 3,19,458/11 with 12 % interest.
The trial court first issued an interim decree for Rs 66,517 on 7 November 1955 and, after full trial, a final decree on 11/30 June 1958 for Rs 1,67,619 together with 4 ½ % interest from the date of suit until realisation. Both parties appealed. The Rajasthan High Court reduced the principal by Rs 9,991 but granted interest from 1 January 1951 (earlier than the suit date) and raised the pendente lite rate to 6 %. The State of Rajasthan obtained a certificate under Article 133(1)(a) of the Constitution (pre-30th Amendment) and appealed to the Supreme Court.
Legal Issues Presented
- Whether the plaintiff was entitled to pre-suit interest under the Interest Act, 1839.
- Whether the High Court was justified in enhancing the pendente lite interest rate from 4 ½ % to 6 %.
- Whether contract clause 16, which states that “neither the earnest money deposit nor the withheld amount shall bear any interest,” bars the award of any interest to the contractor.
- Whether previously litigated factual items (conveyance and lift charges; bond-stones, lintels and sills; cost of Jodhpur slabs; rate for C.P. Teak) could be re-opened on further appeal.
Arguments of the Parties
Appellant's Arguments (State of Rajasthan)
- The Interest Act, 1839, was inapplicable because the amount was not a “sum certain” and the notices allegedly demanded damages, not interest.
- No explicit demand for future interest had been made, a statutory pre-condition under the Act.
- The trial court had exercised discretion in fixing 4 ½ % pendente lite; the High Court should not have interfered.
- Clause 16 of the contract excluded the recovery of interest altogether.
- Reliance placed on Mahabir Prashad Rungta v. Durga Datt and Union of India v. A.L. Rallia Ram to contend that interest could not be awarded in the circumstances.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mahabir Prashad Rungta v. Durga Datt, AIR 1961 SC 990 | Interest Act inapplicable where notice does not specify the sum and claim is for damages. | Distinguished; here the claim was a “sum certain” and notices sufficed. |
| Union of India v. A.L. Rallia Ram, AIR 1963 SC 1685 | Interest cannot be awarded as damages; arbitrator not a “court” under the Act. | Distinguished; Supreme Court held it irrelevant to statutory interest under the Act in a civil suit. |
| Kuppusami Pillai v. Madras Electric Tramway Co. | A demand for past interest implies a claim for future interest. | Relied upon to reject the contention that absence of an express future-interest demand was fatal. |
| Sita Ram v. S. Sullivan, (1901) 2 Punj LR 464 | Same proposition as Kuppusami Pillai. | Used alongside Kuppusami Pillai to bolster the above reasoning. |
Court's Reasoning and Analysis
1. Non-monetary issues barred: The Supreme Court refused to entertain fresh arguments on conveyance and lift charges, bond-stone measurements, Jodhpur slabs, and C.P. Teak rates because these matters had not been questioned in the memorandum of appeal before the High Court and had been settled on evidence.
2. Applicability of the Interest Act, 1839: The Court held that the contractor’s claim was for a “sum certain” ascertainable under the contract, not unliquidated damages. Therefore the Act applied. Two written demands (21 Dec 1950 and 5 Apr 1953) satisfied the statutory requirement that the debtor receive notice that interest would be claimed. Describing the loss as “by way of interest” did not convert the claim into damages.
3. Contractual clause: Clause 16 excluded interest only on “withheld amounts” (five per cent retention money) and, by implication, allowed interest on other sums. The clause therefore supported, rather than barred, the plaintiff’s claim.
4. Rate of pendente lite interest: The trial court supplied no reasons for fixing 4 ½ %. The High Court examined continued defaults by State officials and reasonably increased the rate to 6 %. Exercising its own appellate review, the Supreme Court found no ground to disturb that discretion.
Holding and Implications
Appeal Dismissed with Costs.
The Supreme Court affirmed the High Court’s decree, including: (a) interest from 1 January 1951 under the Interest Act, 1839; and (b) pendente lite interest at 6 %. The decision clarifies that a contractor’s quantified contractual claim constitutes a “sum certain” for purposes of the Interest Act, and that contractual clauses excluding interest on specific items do not necessarily bar interest on the entire debt. No new precedent was set beyond reaffirming established principles governing statutory interest.
O. Chinnappa Reddy, J.— The State of Rajasthan, defendant in Civil Suit 9 of 1963 in the Court of the Senior Civil Judge, Udaipur, is the appellant in this appeal filed pursuant to a certificate granted under Article 133(1)(a) of the Constitution of India (as it stood prior to the 30th amendment). The plaintiff-respondent took a building work on contract from the erstwhile Government of the State of Udaipur. He completed the work on June 6, 1950. Despite demands and notices issued by the plaintiff a considerable amount due to him remained unpaid. He, therefore, filed the suit out of which the appeal arises to recover a sum of Rs 3,19,458/11 together with interest at the rate of 12 per cent. The suit was contested by the State of Rajasthan. An interim decree for a sum of Rs 66,517 was passed on November 7, 1955. After full trial a decree for Rs 1,67,619 (including the sum of Rs 66,517 for which a preliminary decree had already been passed) was passed on June 11/30, 1958. The decree also awarded interest at the rate of 4½ per cent on the amount decreed from the date of suit till the date of realisation. The plaintiff and the defendant preferred appeals to the High Court of Rajasthan. The High Court reduced the decretal amount by a sum of Rs 9991. The High Court, however, held that the plaintiff was entitled to interest from January 1, 1951, and not merely from the date of suit. The High Court also enhanced the rate of interest pendente lite from 4½ per cent to 6 per cent. The High Court having varied the decree of the trial court, the State of Rajasthan sought and obtained a certificate under Article 133(1)(a) of the Constitution and has filed this appeal.
2. The controversy in the High Court related primarily to (i) conveyance and lift charges; (ii) alleged double benefit in regard to bond-stones, lintels and sills; (iii) use of Jodhpur slabs and their high cost; (iv) charge for C.P Teak wood at the same rates as for Burma Teak. In regard to conveyance and lift charges the High Court pointed out that no question was raised in the Memorandum of grounds of appeal and there was, therefore, no justification for permitting the learned Counsel for the State to assail the finding of the trial court relating to those charges. We do not see any reason either why the learned Counsel should be permitted to agitate this question in this appeal. Regarding double-charge for bond-stone, lintels and sills, the complaint of the appellant was that while separate payment was being made for them, they had also been included in the measurements of the walls in which they happened to be fixed. From the office circular issued by the Chief Engineer of the Public Works Department of the United State of Rajasthan on July 12, 1948, it appears that it was the practice uptil then to allow payment for bond-stones, lintels and sills separately without deducting their cubic contents from the general wall masonry. This had always been the practice and this was never objected to by the Accountant General. In view of the practice obtaining till then it could not be said that the contractor had wrongfully claimed double payment for bond-stones, lintels and sills. The use of Jodhpur slabs was not questioned in the written statement. All that was said was that the rate was high but at the trial there was no evidence worth the name, as observed by the High Court to show that the charge was excessive. Again there was no objection to the use of C.P Teak wood instead of Burma Teak wood as the latter was not available. According to the letter of the Superintending Engineer dated February 6, 1950, where Burma Teak wood was not available and C.P Teak wood was used, the rates specified for Burma Teak wood should be taken for C.P Teak wood. It could not, therefore, be said that the contractor had charged more than what he should have for C.P Teak wood.
3. The last question which was argued before us by Shri Jain, learned Counsel for the State of Rajasthan was that no interest should have been awarded for the period before the filing of the suit and that the rate of interest should not have been enhanced by the High Court for the period subsequent to the filing of the suit. It was submitted that the Interest Act, 1839, was not applicable as no sum certain was payable and there was no demand for payment of interest. It was argued that what was demanded by the plaintiff was damages and not interest. It was also contended that the trial court having, in exercise of its discretion, awarded interest at the rate of 4½ per cent pendente lite, the High Court ought not have interfered with the discretion of the trial court. Reliance was placed upon the decision in Mahabir Prashad Rungta v. Durga Datt AIR 1961 SC 990, (1961) 3 SCR 639, (1961) 1 SCJ 569 and Union of India v. A.L Rallia Ram AIR 1963 SC 1685, (1964) 3 SCR 164.
4. We are unable to agree with the submission of the learned Counsel for the appellant. Under the Interest Act, 1839,
“upon all debts or sums certain payable at a certain time or otherwise, the Court before which such debts or sums may be recovered may, if it shall think fit, allow interest to the creditor at a rate not exceeding the current rate of interest from the time when such debts or sums certain were payable, if such debts or sums be payable by virtue of some written instrument at a certain time; or if payable otherwise, then from the time when demand of payment shall have been made in writing, so as such demand shall give notice to the debtor that interest will be claimed from the date of such demand until the term of payment: provided that interest shall be payable in all cases in which it is now payable by law.”
The claim of the present plaintiff was not for the payment of any unliquidated damages or for the payment of any amount arising out of an inchoate or contingent obligation. It was for the payment of a sum which was ascertainable on a calculation made in accordance with the terms of the agreement. It was clearly a “sum certain” within the meaning of the Interest Act. In any case it would be a debt i.e “a sum of money which is now payable or will become payable in the future by reason of a present obligation”. The further question for consideration is whether the plaintiff had made a demand of payment, “so as such demand shall give notice that interest will be claimed from the date of such demand until the term of payment”. The plaintiff issued two notices to the defendant demanding payment. The first was on December 21, 1950, and the second was on April 5, 1953. There is no dispute that in the second notice of demand of payment a definite claim for interest had been made. In the first notice it was said
by withholding payment of his bills absolutely, the Government has put my client to enormous loss by way of interest also .... I intimate to you through this notice that the said Shri Ramsingh claims a sum of Rs 2,50,519 from the Rajasthan State as under:
The learned Counsel submitted that what was claimed by the plaintiff in this notice was damages and not interest and that too for the past, without any indication that future interest was also being claimed. It is true that the plaintiff mentioned “loss by way of interest”, suggesting that what he was claiming was compensation for the damage suffered by him. We are, however, not prepared to construe the notice so literally or technically. The mention of loss was only explanatory. The plaintiff was, without any manner of doubt claiming interest as such. Nor are we impressed with the argument that there was no claim for future interest. In our opinion a claim for past interest would necessarily imply a claim for future interest, vide Kuppusami Pillai v. Madras Electric Tramway Co. Ltd. and Sita Ram v. S. Sullivan (1901) 2 Punj LR 464.
5. In Mahabir Prashad Rungta v. Durga Datt interest was disallowed on the ground that the notice which was given did not specify the sum which was demanded and therefore, the Interest Act did not apply. On the question whether interest could be awarded on grounds of equity it was held that what was claimed by Durga Datt was interest as damages and that it could not, therefore, be awarded. The suit itself was one for damages for breach of contract. We do not think that this case is of any assistance to the appellant. In Union of India v. A.L Rallia Ram AIR 1963 SC 1685, (1964) 3 SCR 164 the Arbitrator had awarded interest by way of compensation since the party had to borrow a large amount of money from its banker to meet its obligation under the contract. The Supreme Court pointed out that interest could not be awarded by way of damages. The Supreme Court also noticed that an Arbitrator was not a Court within the meaning of the Interest Act. No question arose before the Supreme Court whether interest could not be awarded under the Interest Act merely because the notice demanding payment mentioned that the plaintiff had suffered loss of interest also. In our view the condition prescribed by the Interest Act that such demand shall give notice to the debtor that interest shall be claimed is fulfilled if interest is claimed, notwithstanding the fact that the notice of demand explains that loss by way of loss of interest has been suffered. To take any other view would be to be over-technical in the construction of pleadings, including notices preceding the action.
6. We must notice here an argument advanced by the learned Counsel for the appellant that the contract prohibited the award of interest. He relied upon the following sentence occurring in para 16 of the Contract dated May 11, 1947: “Neither the earnest money deposit nor the withheld amount shall bear any interest”. This sentence far from supporting the case of the appellant appears to support the case of the plaintiff. The reference to “the withheld amounts” is to the amounts representing five per cent of the running bills which are required to be withheld at the time of payment of the running bills. The provision that the contractor is not entitled to interest on these withheld amounts appears to imply that interest is claimable on other amounts due to the contractor.
7. While awarding interest pendente lite the trial court adopted the rate of 4½ per cent but the trial court gave no reasons for so doing. The High Court considered the matter in some detail and having regard to the various continuous defaults committed by the defendant and its Officers, the High Court enhanced the rate of interest to 6 per cent. The High Court was justified in doing so and we see no reason to interfere with the discretion exercised by the High Court. In the result the appeal is dismissed with costs.
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