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2018 Supreme(Kar) 1151
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
SREENIVAS HARISH KUMAR, J.
The Secretary to the Government of India & Ors. - Appellants
Versus
Sri. P.M. Shankarappa, S/o. Marulappa - Respondent
Regular First Appeal No.1151 of 2003
Decided On : 03-12-2018
For the Appellant : Sri. B. Pramod, CGC.
For the Respondent:Sri. K.G. Kamath, Advocate, for M/s Kamath and Kamath, Advocates.
Headnote:
Contract Act - Section 70 and 65 - Civil Procedure Code,1908 - section 34 - Suit for recovering - deduct the interest - Appellants are the defendants in the suit O.S.90/2001 on the file of Senior Civil Judge, Kadur. The said court by its judgment dated 16.7.2003 directed the defendants - plaintiff wanted to close the above deposit accounts and when he approached the Post Master, the latter insisted on an application to be given for withdrawing the deposits. The respondent gave an application to the Post Master on 20.4.2000. By letter dated 25.4.2000 the plaintiff was informed that the matter had been referred to higher authority and after receiving information from the higher authority, payments would be made. Some time later the Post Master at Yagati closed the deposit accounts and made payment to the plaintiff after deducting the entire monthly interest paid to him. The plaintiff, noticing the deduction - defendants to pay back the interest amount deducted by them. Since the defendants failed to make him the payment as demanded by him, he instituted a suit for recovering – Held, plaintiff’s money with them are bound to compensate the plaintiff, though they are not under obligation to pay the agreed rate of interest. The trial court has applied section 70 of the Indian Contract Act, probably for the reason that the defendants derived benefit from the deposit made by plaintiff who did not do so gratuitously. This finding given by the trial court cannot be said to be incorrect, but directing the defendants to pay interest at the contractual rate cannot be upheld. Since subsequent deposits made by plaintiff was against the rules governing the scheme, all that the plaintiff is entitled to is compensation, may be in the nature of interest, for the benefit derived by the defendants from the plaintiff’s money. The doctrine of “Quantum Meruit” can be applied to compensate the plaintiff - interest required to be paid is in the nature of compensation, it should not be too low or exorbitant. An enquiry may also be held; and the trial court may be directed to hold an enquiry; but having regard to age of the suit, in my opinion without ordering an enquiry, a reasonable rate of interest may be fixed having the yardstick as the rate of interest probably in vogue under the other schemes. This is just an approximation to avoid future litigation - Appeal is allowed in part
JUDGMENT :
1. The appellants are the defendants in the suit O.S.90/2001 on the file of Senior Civil Judge, Kadur. The said court by its judgment dated 16.7.2003 directed the defendants to pay Rs.2,41,500/-with costs to the plaintiff. Hence this appeal.
2. In a nutshell the pleadings are as follows : -
Attracted by high rate of interest introduced by the appellants in a scheme called MIS, the plaintiff made certain investments on different dates in the post office at a place called Yagati, Kadur Taluk. Details of the investment are as follows :-
| Date | Account No. | Amount |
| 15.11.1994 | 38024 | Rs.1,02,000/- |
| 05.01.1995 | 38025 | Rs.1,02,000/- |
| 20.02.1995 | 38026 | Rs.1,02,000/- |
| 18.3.1998 | 38040 | Rs.1,02,000/- |
The interest being accrued every month on the above deposits was being credited to the S.B. Account of the plaintiff at the post office. The plaintiff wanted to close the above deposit accounts and when he approached the Post Master, the latter insisted on an application to be given for withdrawing the deposits. The respondent gave an application to the Post Master on 20.4.2000. By letter dated 25.4.2000 the plaintiff was informed that the matter had been referred to higher authority and after receiving information from the higher authority, payments would be made. Some time later the Post Master at Yagati closed the deposit accounts and made payment to the plaintiff after deducting the entire monthly interest paid to him. The plaintiff, noticing the deduction, issued a legal notice calling upon the defendants to pay back the interest amount deducted by them. Since the defendants failed to make him the payment as demanded by him, he instituted a suit for recovering the amount deducted by the defendants along with interest and other charges, the details of which are tabulated as below :-
| A/c No. | Amount Deposited | Amount returned to the plaintiff | Amount deducted by the defendant |
| 38024 | 102000 | 41,225 | 60,775-00 |
| 38025 | 102000 | 42,333 | 59,670-00 |
| 38026 | 102000 | 43,435 | 58,565-00 |
| 38040 | 102000 | 84,320 | 17,680-00 |
|
|
| Total | 1,96,690-00 |
| Further interest from August 1999 to 06.06.2000 for 10 months @ Rs.1105/-p.m. for 4 accounts | 44,200-00 | ||
| Notice charges claimed | 500-00 | ||
| Contingent expenditure & typing charges | 110-00 | ||
| Grand total amount | 2,41,500-00 | ||
3. In the written statement of the third defendant, it is admitted that the plaintiff made the deposits as mentioned in the plaint and that the post office also credited the interest periodically to the S.B. Account of the plaintiff. But what is specifically pleaded is that in the monthly income scheme (MIS) introduced by the Government of India, the maximum that an individual could invest was Rs.2,04,000/-. Even if an individual deposited in more than one account, the maximum limit should not exceed Rs.2,04,000/- and any investment made beyond this limit was against the rules and regulations concerning that scheme; the depositor was not entitled to bonus or interest. On 13.09.1994 the plaintiff invested an amount of Rs.2,04,000/-and he further invested money in the said scheme on subsequent dates as mentioned in the plaint. He knew that he could not have invested more than Rs.2,04,000/- and yet he invested the money without disclosing the investment made on 13.09.1994. For this reason a decision had to be taken to close down the investments made on 15.11.2004, 05.1.1995, 20.02.1995 and 18.03.1998. While returning the deposit money, the defendants had to deduct the interest paid on those deposits. There was nothing illegal.
4. The trial court framed seven issues based on the pleadings, examined one witness PW-1 from plaintiff’s side and two witnesses DW-1 and DW-2 from th
