IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF NOVEMBER, 2019 BEFORE THE HON’BLE Dr. JUSTICE H.B.PRABHAKARA SASTRY R.F.A.No.662 OF 2018 BETWEEN:
Karnataka Handloom Development Corporation Limited (KHDC) No.1, Priyadarshini, Commercial Complex, Tank Road, Ulsoor, Bangalore – 560 042.
Represented by its Managing Director.
(By Sri. Murali B.S., Advocate) AND:
Sri.A. Vijaykumar, S/o. A. Vasudevrao, Aged about 63 years Retired Sales Manager No.30, 1st A Cross, Ashwathnagar, New Extension, Sanjaynagar, Bangalore – 560 094.
…Appellant …Respondent (By Sri. N. Suresha & Sri.R. Channakeshava, Advocates) **** This Regular First Appeal is filed under Order 41 Rule 1 read with Section 96 of the Code of Civil Procedure, 1908, against the judgment and decree dated:07-12-2017 passed in O.S.No.727/2015 on the file of the XLII Additional City Civil and Sessions Judge at Bengaluru City (CCH.No.43), partly decreeing the suit of the plaintiff for recovery of money.
This Regular First Appeal coming on for Hearing this day, the Court delivered the following:
J U D G M E N T This is a defendant’s appeal. The present respondent as a plaintiff had instituted a suit in O.S.No.727/2015 against the present appellant arraigning it as a defendant in the Court of the learned XLII Additional City Civil and Sessions Judge at Bengaluru City (CCH.No.43) (hereinafter for brevity referred to as the “Trial Court”) for the relief of recovery of money from the defendant.
2. The summary of the case of the plaintiff in the Court below was that, as a Sales Manager in the defendant – Karnataka Handloom Development Corporation Limited (hereinafter for brevity referred to as the “Corporation”), the plaintiff retired from service on 31-01-2014. However, the defendant Corporation did not settle his terminal benefits. Aggrieved by the same, the plaintiff issued a legal notice dated 29-04-2014 calling upon the defendant Corporation to settle his terminal benefits together with interest at the rate of `18% per annum. Subsequently, the defendant Corporation after illegally deducting a sum of `9,176-55 had partly settled the terminal benefits of the plaintiff. This made the plaintiff to issue one more legal notice on 19-08-2014 questioning the deduction of a sum of `9,176-55 and claiming it back with interest at the rate of `18% per annum thereupon. The defendant Corporation issued an untenable reply. This made the plaintiff to institute the present suit against the defendant Corporation claiming interest on the terminal benefits at the rate of `18% per annum from 31-01-2014 to 04-08-2014 which was the date of settlement of the terminal benefits and also seeking refund of the deducted amount of a sum of `9,176-55 with interest there upon at the rate of `18% per annum.
3. In response to the suit summons, the defendant Corporation appeared through its counsel and filed its Written Statement. In its Written Statement, the defendant Corporation though admitted that the plaintiff was its employee who retired as a Sales Manager on 31-01-2014 and also the deduction of a sum of `9,176-55 from out of the terminal benefits payable to the plaintiff, but contended that the said deduction was towards the shortage of stocks and the same was deducted in accordance with the Rules and the procedure prevailing in their Corporation. Regarding the alleged delay in settlement of the terminal benefits of the plaintiff, the defendant Corporation put forward its alleged financial loss and difficulty as the causes for delay.
4. Based on the pleadings of the parties, the Trial Court framed the following issues for its consideration:-
“1. Whether the plaintiff proves that the defendant is liable to pay the terminal benefits to the plaintiff as alleged in the plaint?
2. Whether the plaintiff proves that he is entitled to get 18% interest on the terminal benefits?
3] Whether the plaintiff proves that the defendant is liable to pay Rs.1,42,879-65 as on the date of the suit?
4] Whether the plaintiff proves that the defendant is liable to pay future interest? If so, at what rate?
5] Whether defendant proves that the defendant company is going under loss and as such, there is delay in making settlement of the terminal benefits?
6] What order or decree?”
5. The plaintiff got himself examined as PW-1 and got produced and marked documents from Exs.P-1 to P-14. From the side of defendant- Corporation, neither any witness was examined nor any documents were marked as exhibits.
6. The Trial Court by its impugned judgment and decree answered issues No.1, 2 and 3 in the affirmative, issue No.4 in the affirmative holding that the plaintiff was entitled for simple interest at the rate of `9% per annum and issue No.5 in the negative, and proceeded to decree the suit partly, entitling the plaintiff for simple interest at the rate of `9% per annum on the terminal benefits amount of `14,65,494-74 from the date of retirement till realisation. However, the plaintiff’s claim for refund of a sum of `9,176-55 with interest thereupon was rejected by it. It is against the said judgment and decree, the defendant Corporation in the Trial Court has preferred this appeal.
7. Lower Court records were called for and the same are placed before this Court.
8. Heard the arguments of the learned counsel for the appellant/defendant Corporation and learned Counsel for the respondent/plaintiff.
9. Perused the materials placed before this Court including the memorandum of appeal and the impugned judgment.
10. For the sake of convenience, the parties would be henceforth referred to with the ranks they were holding before the Trial Court respectively.
11. During the pendency of the appeal, learned counsel for the appellant/defendant has filed I.A.No.2/2018 under Order XLI, Rule 27 read with Section 151 of the Code of Civil Procedure, 1908, seeking permission to adduce its additional evidence in the form of production of a Balance Sheet as of 31-03-2016.
12. In the light of the above, the points that arise for my consideration in this appeal are:
1] Whether I.A.No.2/2018 filed under Order XLI, Rule 1 r/w. Section 151 of the Code of Civil Procedure, 1908, deserves to be allowed?
2] Whether the interest awarded by the Trial Court at the rate of `9% per annum requires reconsideration?
3] Whether the judgment and decree under appeal warrants inference at the hands of this Court?
13. Learned counsel for the appellant/defendant in his single point argument submitted that though he is not disputing the liability of the appellant/ defendant – Corporation to pay interest on the alleged delayed payment of 184 days in settling the terminal benefits of the plaintiff, but the financial difficulty of the appellant Corporation which has been running under loss also simultaneously cannot be ignored.
He further submitted that even if the interest liability fastened upon the appellant Corporation by the Trial Court is confirmed by this Court, still, the said rate of interest awarded by the Trial Court at the rate of `9% per annum is on the higher side since the Government Order dated 21-08-2003 has mandated that, in such a case, rate of interest shall not exceed `8% per annum, as such, the decree under appeal be modified suitably.
14. Learned counsel for respondent/plaintiff in his argument submitted that the deduction made by the appellant/defendant Corporation of a sum of `9,176-55 from out of the terminal benefits payable to the plaintiff is unwarranted as such, the said finding be answered in favour of the plaintiff/respondent herein.
He further says that the interest, if confined at the rate of `8% per annum, be treated as a compounding interest on annual basis.
15. The appellant Corporation has sought permission to produce a copy of the Balance Sheet as on 31-03-2016 through I.A.No.2/2018 which is filed under Order XLI, Rule 27 r/w. Section 151 of the Code of Civil Procedure, 1908, to support his contention that the appellant Corporation is financially suffering loss, as such, it is unable to pay any interest.
16. Learned counsel for the appellant Corporation in his argument reiterated the contentions taken up by it in the application.
A perusal of the materials placed before this Court would go to show that the document now sought to be produced is the copy of the Balance Sheet as on 31-03-2016. The entitlement of the respondent/plaintiff for his retirement benefit is as on 31-01-2014, which was the date of his retirement. As such, it was two years prior to the alleged Balance Sheet dated 31-01-2016. Therefore, it is not the case that as on 31-01-2014, the appellant Corporation had suffered loss and the same has been depicted in the alleged Balance Sheet which is now sought to be produced. Even otherwise assuming for a moment that the appellant Corporation is under loss as per its Balance Sheet, still, it cannot deny the terminal benefit of its retired employee who has already retired two years prior to the said date of the Balance Sheet. It cannot also deprive him of his entitlement to interest on the delayed payment of pensionary benefits. Therefore, the document now sought to be produced even though is of a subsequent year from the date of institution of the suit, would in no way, help or assist this Court in adjudicating this matter. As such, I.A.No.2/2018 does not deserve to be allowed.
17. From the above arguments of the parties, the facts which are not in dispute are that, the present respondent (plaintiff in the Trial Court) retired from the services of the appellant Corporation on 31-01-2014 and that his terminal benefits were settled by the appellant Corporation only on 04-08-2014 which had taken 184 days in the process. While settling the terminal benefits, the appellant Corporation had also deducted a sum of `9,176-55 towards shortage in the stock. The Trial Court has rejected the plaintiff’s claim for refund of the said amount. The said finding of the Trial Court has not been challenged by the plaintiff either by preferring an appeal or by filing a cross objection to this appeal. As such, the said finding of the Trial Court regarding rejection of the plaintiff’s claim for refund of a sum of `9,176-55 has reached its finality. Therefore, the contention of the respondent herein (plaintiff) that this Court to direct refund of the said amount to him cannot be entertained.
18. The only point that remains for consideration is, the rate of interest that was as decreed by the Trial Court, whether requires any modification in it.
In this regard, while submitting that the Trial Court ought not to have awarded interest at the rate of `9% per annum and the maximum rate of interest should have been confined to `8% per annum, the learned counsel for the appellant Corporation has produced and relied upon a Government Order bearing No.FD(Spl.)1 PEN 03 Bangalore, dated 21-08-2003 issued by the Finance Department of the Government of Karnataka.
Though the learned counsel for the respondent/plaintiff concedes that such a Government Order was in force as on the date of the settlement of his terminal benefits, he submits that the rate of interest at `8% per annum be considered as an interest compounded annually.
19. A reading of the said Government Order dated 21-08-2003 in its preamble goes to show that, considering the prevailing rate of interest, the Government had reduced the rate of interest payable to Government Servants on their terminal benefits from `12% per annum to `8% per annum vide the said order dated 21-08-2003 with immediate effect. The said order no where mentions that the said rate of interest which was re-fixed at `8% per annum was compoundable in any manner. The said rule clearly goes to show that the rate of interest on the belated payments of pensionary benefits was fixed at `8% per annum, which means, it is not a compoundable one. Therefore, the said Government Order makes two points clear.
The first point is that, the rate of interest on the belated payment of pensionary benefits shall be at the rate of `8% per annum, as such the order of the Trial Court which has granted interest at the rate of `9% per annum requires modification in the form of revocation and re-fixation of the interest at the rate of `8% per annum.
Secondly, the said Government Order no where mentions that the said re-fixation of interest at the rate of `8% per annum has to be compounded either quarterly or half yearly or even on annual basis. Therefore, when there is no specific basis about the compoundability or cumulative effect of the rate of interest, it has to be considered as a simple interest at the rate of `8% per annum.
Therefore, the second point of argument of the learned counsel for the respondent/plaintiff that in case the interest is re-fixed at `8% per annum, the same be treated as compoundable annually, also is not acceptable.
20. As a result, the judgment and decree passed by the Trial Court requires a limited interference in the form of modification and reduction of the rate of interest awarded at the rate of `9% per annum to `8% per annum.
Accordingly I proceed to pass the following:-
O R D E R [i] I.A.No.2/2018 is hereby rejected;
[ii] The appeal is allowed in-part;
[iii] The impugned judgment and decree dated 07-12-2017 passed in O.S.No.727/2015 by the XLII Additional City Civil and Sessions Judge at Bengaluru City (CCH.No.43) is hereby modified to the extent that the rate of simple interest awarded at the rate of `9% per annum on the terminal benefits amount of `14,65,494-74 is reduced and re-fixed at the rate of `8% per annum, however, confining and confirming it from the date of retirement till realisation, which in the instant case is for a period from 31-01- 2014 to 04-08-2014 [iv] The other terms of the decree of the Trial Court remains unaltered;
[v] Draw the modified decree accordingly.
Registry to transmit a copy of this judgment along with the Lower Court records to the concerned Trial Court, without delay.
Sd/- JUDGE BMV*