2023 Supreme(Guj) 363

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
A.S. SUPEHIA, DIVYESH A. JOSHI, JJ.
Oil And Natural Gas Corporation Limited. - Appellant
Versus
Hindustan Chemicals Company (Prop. Hindustan Engineering And Industries Ltd.) – Defendant
R/First Appeal No. 2002 Of 2018 With Civil Application (For Interim Relief) No. 1 of 2018
Decided On : 21-04-2023

The trial court has misdirected itself on the issue of awarding the interest pendent lite and future interest as envisaged under Section 34 of the CPC.

Headnote:

Interest - Contract Dispute - Section 34 of the Civil Procedure Code - 34(1) - 34(2) - 34(3) - The court allowed the suit in part and directed the respondent to pay the amount of Rs.54,01,332.02 to the appellant, however, the trial court rejected the prayer of the appellant to the extent of the claim towards interest. The trial court has misdirected itself on the issue of awarding the interest pendent lite and future interest as envisaged under Section 34 of the CPC. The appellant had claimed the interest at the rate of 18% per annum on the amount of Rs.54,01,332.02, however, before this Court, it is submitted that the discretion of awarding the fixation of rate of interest is left to the wisdom of this Court. The trial court has misdirected itself in rejecting the claim of the appellant claiming interest on the decretal amount from the date of filing of the suit till realization of the decretal amount by observing that there is no such provision made in the contract. The trial court was oblivious of the fact that the claim of recovery of interest on the unpaid principal amount; though it was covered as per the clauses of the agreement, the interest, which was claimed by the appellant was pendent lite, which can never be encompassed in the contract since the parties to the agreement would not foresee the filing of litigation claiming interest pendent lite. The trial court has totally misdirected itself in denying the interest pendent lite and further interest as per the provision of section 34 of the CPC on the decretal amount. The judgments in the case of Raj & Sandeep Ltd. and in the case of Ganjam District Tractor Owners’ Association and Others will not rescue the respondent since the issue is raised in the first appeal rests on the provisions of Section 34 of the CPC and not as per the contract agreed upon between the parties. The law enunciated by the Apex Court in the said decisions will not apply to the facts of the present case, but the issue is governed by the decision of the Constitution Bench of the Apex Court in the case of Ravindra. Since the respondent was expected to pay the arrears along with the principal amount, which was paid on 03.01.1992 and despite calling upon the respondent, they have chosen not to pay the interest on arrears and denied the liability and the appellant was constrained to file special civil suit for recovery of the said amount, the trial court was required to suitably compensate the appellant by awarding interest pendent lite. Since a specific statement is made before this Court by the learned advocate Mr.Mehta for the appellant leaving on the discretion to the Court to fix the appropriate rate of interest on such decretal amount, we are not inclined to grant 18% interest pendent lite as claimed in the suit. In the considered opinion of this Court, looking to the facts and in the interest of justice, it would be appropriate that the respondent is directed to pay the interest of 6% on the decretal amount from date of filing of the suit till the date of decree. However, as per the proviso to sub-section(1) to Section 35 of the CPC, since the liability has arisen out of commercial transaction, the grant of further interest from the date of decree till realization will be governed by contractual rate as per clause 5.02 of the Contract, Exh.106 which is fixed at ½%. Thus, the plaintiff shall be entitled to ½ % interest on such amount till its realization. The first appeal is allowed in the aforesaid terms. Registry shall accordingly draw the decree. As a sequel, the civil application does not survive and the same is disposed of accordingly. Record and proceedings are ordered to be sent back to the concerned trial court. No order as to costs. Further Order: After the judgment was pronounced, learned senior advocate Mr. Mihir Joshi requests for stay of the judgment and order passed by this Court, since the matter is pending since 2018 and the suit is of the year 1994. Hence, the operation and implementation of the judgment and order is stayed for a period of twelve weeks.

Fact of the Case:

The plaintiff-ONGC and the defendant had entered into a contract on 12.03.1980 with regard to supply of gas. There was a dispute with regard to fixation of gas price, which resulted in a litigation. The appellant demanded the interest at the rate of 18% over the arrears as per the contract dated 12.03.1980. The trial court allowed the suit in part and directed the respondent to pay the amount of Rs.54,01,332.02 to the appellant, however, the trial court rejected the prayer of the appellant to the extent of the claim towards interest. The denial of interest on the said amount has given rise to the present appeal.

Finding of the Court:

The trial court has misdirected itself on the issue of awarding the interest pendent lite and future interest as envisaged under Section 34 of the CPC. The trial court has misdirected itself in rejecting the claim of the appellant claiming interest on the decretal amount from the date of filing of the suit till realization of the decretal amount by observing that there is no such provision made in the contract. The trial court was oblivious of the fact that the claim of recovery of interest on the unpaid principal amount; though it was covered as per the clauses of the agreement, the interest, which was claimed by the appellant was pendent lite, which can never be encompassed in the contract since the parties to the agreement would not foresee the filing of litigation claiming interest pendent lite. The trial court has totally misdirected itself in denying the interest pendent lite and further interest as per the provision of section 34 of the CPC on the decretal amount.

Issues: The trial court has misdirected itself on the issue of awarding the interest pendent lite and future interest as envisaged under Section 34 of the CPC. The trial court has misdirected itself in rejecting the claim of the appellant claiming interest on the decretal amount from the date of filing of the suit till realization of the decretal amount by observing that there is no such provision made in the contract.

Ratio Decidendi: The trial court has misdirected itself on the issue of awarding the interest pendent lite and future interest as envisaged under Section 34 of the CPC. The trial court has misdirected itself in rejecting the claim of the appellant claiming interest on the decretal amount from the date of filing of the suit till realization of the decretal amount by observing that there is no such provision made in the contract.

Final Decision: The first appeal is allowed in the aforesaid terms. Registry shall accordingly draw the decree. As a sequel, the civil application does not survive and the same is disposed of accordingly. Record and proceedings are ordered to be sent back to the concerned trial court. No order as to costs. Further Order: After the judgment was pronounced, learned senior advocate Mr. Mihir Joshi requests for stay of the judgment and order passed by this Court, since the matter is pending since 2018 and the suit is of the year 1994. Hence, the operation and implementation of the judgment and order is stayed for a period of twelve weeks.