IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7TH DAY OF OCTOBER 2017 BEFORE THE HON’BLE MR. JUSTICE B.S. PATIL WRIT PETITION Nos.2934-2936/2017 (CS - RES) BETWEEN:
1. M/S. U.BASAPPA & SONS ARECANUT TRADERS MARKET ROAD, SAGAR – 577 401 SHIVAMOGGA DISTRICT REPRESENTED BY ITS PETITIONERS NO.2 TO 4. PARTNERS ON THE FIRM 2. U.C. SIDDALINGESHWARA S/O LATE B.CHANNAVEERAPPA AGED ABOUT 56 YEARS 3. U.C.SANGAMESHWARA S/O LATE B.CHANNAVEERAPPA AGED ABOUT 53 YEARS 4. U.C.BASAVESHWARA S/O B.CHANNAVEERAPPA AGED ABOUT 51 YEARS PETITIONERS 1 TO 4 ARE RESIDENTS OF MARKET ROAD SAGAR TOWN – 577 401 SAGAR, SHIVAMOGGA DISTRICT ... PETITIONERS (BY SRI SUMANTH KUMAR S PATIL, ADVOCATE) AND:
1. THE ADDITIONAL REGISTRAR OF CO-OPERATIVE SOCIETIES (C & M) REGISTRAR OF CO-OPERATIVE SOCIETIES, NO.1, ALI ASKER ROAD BENGALURU – 01 2. THE MANAGING DIRECTOR MALENADU ARECA MARKETING CO-OPERATIVE SOCIETY LTD POST BOX NO.13, A.P.M.C. YARD SHIVAMOGGA – 577 201 ... RESPONDENTS (BY SRI M.A.SUBRAMANI, HCGP FOR R1; SRI.G.F.HUNSIKATTIMATH, ADVOCATE FOR R2) THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 27.10.2016 IN APPEAL NO.292/2011 PASSED BY THE KARNATAKA APPELLATE TRIBUNAL VIDE ANNEXURE – E AND ETC., THESE WRIT PETITIONS COMING ON FOR FURTHER CONSIDERATION THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R Petitioners are traders in Arecanut. Petitioners 2 to 4 are partners of the first petitioner-firm. Second respondent is a Co-operative society constituted under the provisions of the Karnataka Co-Operative Societies Act, 1959. In these writ petitions, petitioners are challenging the order dated 22.10.2016 passed by the Karnataka Appellate Tribunal thereby allowing the appeal filed by second respondent and setting aside the order passed by Deputy Registrar of Co-Operative Societies, Belgaum District and holding that petitioners herein are liable to pay interest at 17% on the dues payable by petitioners to second respondent towards lifting of arecanut.
2. Facts, not in dispute are that petitioners participated in an auction conducted by second respondent-Society and purchased arecanut at two places namely Sagar and Hosanagar branches of second respondent-Society. Upon purchase, stocks commensurate with the purchase made by traders shall be lifted from the godown of the Society by paying value of Arecanut. Petitioners had purchased arecanut worth Rs.54,73,096/- contained in 750 bags from the two branches of second respondent-Society during 2001-02.
There was delay on the part of petitioners in lifting the material from godown of the second respondent-Society. Delay occurred as the Society did not permit petitioners to lift the stock in intervals by paying corresponding value because the Society insisted that entire value had to be remitted at once.
3. This dispute was referred for arbitration before arbitrators appointed under Rule 55(1) of the Karnataka Agriculture Produce Marketing(Regulation and Development) Rules, 1968. The Committee of the Arbitrators resolved the dispute as a result whereof in three installments entire value of arecanut was paid by petitioners in terms of directions issued by Arbitrators. However, Arbitrators did not pass any order with regard to interest and kept the said issue open.
4. The second respondent-Society instituted proceedings under Section 70 before Deputy Registrar of Co-Operative Societies contending inter-alia that out of total amount of Rs.54,48,106/- a sum of Rs.40,00,000/- was appropriated towards interest for the period 2001 to 2004 and therefore, said amount along with other accrued interest totally in a sum of Rs.17,31,051/- had to be paid by petitioners herein towards interest.
5. Petitioners resisted the claim contending inter- alia that there was no liability to pay interest as per the contract let alone under the statute or the rules framed under the Act. It was also contended that even as per Bye- laws of second respondent-Society there was no provision for collecting interest.
6. Both parties led their evidence. The Deputy Registrar of Co-Operative Societies after appreciating evidence of both parties has found that neither in the Rules nor in the contract there was any clause for payment of interest; bye-laws of the Society did not enable collecting interest and that the letter dated 14.8.1990 on which reliance was placed by the Society had nothing to do with the transaction in question which originated in the year 2001-02 and therefore, claim made by the Society seeking interest was not justified.
7. This order was challenged by second respondent-Society before Karnataka Appellate Tribunal. The KAT has allowed the appeal directing that claim made for payment of interest at the rate of 17% was permissible in the light of Ex.P1-letter dated 14.8.1990. In this background, present writ petitions are filed challenging order passed by the Karnataka Appellate Tribunal.
8. I have heard learned counsel for all the parties.
The short question that falls for consideration is:-
Whether the KAT was right and justified in holding that letter of understanding vide Ex.P1 given by petitioners to second respondent-Society could be regarded as an undertaking to pay interest if the stocks were not lifted immediately after the purchase?
9. The letter on which reliance has been placed by second respondent-Society is produced at Annexure-“A”. This letter is dated 14.8.1990. The transaction which was subject matter of dispute was admittedly for the years 2001-02 to 2004-05. In the evidence led on behalf of second respondent-Society, it is categorically stated that as per the provisions of AMPC Act and Rules and Bye-laws framed, there was no provision for collecting any interest. The Deputy Registrar has referred to evidence of persons examined on behalf of second respondent-Society. The witness examined for the society was unable to state how much was the interest payable by the Society and how much was the principal amount, It is the categorical assertion of the Society before the Deputy Registrar that the transaction in question by petitioners herein was with regard to the year 2001-02 spread over till 2004-05 and there was no agreement between the parties for payment of interest. This is evident from the order of Deputy Registrar whereunder evidence of the Society is extracted.
10. Although learned counsel for respondents specifically submitted that letter dated 14.8.1990 was not in dispute and was indeed admitted by petitioners in the course of cross-examination and therefore, petitioners shall not be permitted to resile from the undertaking given in that letter for payment of interest, as rightly held by the Deputy Registrar there is no connection to the letter dated 14.8.1990 and the transaction of the years 2001-02 to 2004-05. If the Society wants to recover interest at 17% for the sale made in the year 2001-02 it should establish by producing cogent evidence that there was an agreement regarding payment of specific interest for the goods sold or that bye-laws of the society, the rules and regulations framed under the APMC Act authorized them to collect interest at a particular percentage. Xerox copy of the letter dated 14.8.1990 cannot form basis for collecting interest at 17% for a transaction which has taken place nearly after 12 years from the date of such letter. There is no link established by the Society between the letter of 1990 and the transaction of the years 2001-02 to 2004-05. This approach of the Deputy Registrar was right and justified and was the result of appreciation of evidence on the part of both the parties. The Karnataka Appellate Tribunal has reversed this order without analyzing the matter in its proper perspective and without bestowing its attention to the nature of the document of the year 1990 as to how it establishes link to the present transaction.
11. Learned counsel for second respondent has placed reliance on a Division Bench judgment of this Court in the case of Mrs.Tahira Rehman and another vs Manipal Sowbhagya Nidhi Limited, Manipal and others [2017(5) Kar.L.J. 378(DB)] to contend that discretion of the Court has to be exercised for levy of interest even where contractual rate is exorbitant or arbitrary in the light of the provisions contained under Section 34 of CPC.
12. The said judgment has no application to the facts of the present case inasmuch as this is not a case where the Court is exercising its discretion to levy interest in exercise of powers under Section 34 of CPC.
13. In the circumstances, order passed by Karnataka Appellate Tribunal suffers from apparent illegality. Hence, same is set aside and the order passed by the Deputy Registrar is restored.
Sd/- JUDGE *alb/-.