M/S Pink City Rolling Mills PVT. LTD. vs. M/S Shriram Industries

Held

The High Court held that the learned Commercial Court's findings were sound and did not warrant interference. The Court found that the true character of the dispute was not about non-payment of goods, as the entire principal amount had been cleared by the respondent before the suit was filed. The dispute was about the enforceability of the 24% interest clause against a running account. The appellant's conduct, including continuing to supply goods, accepting lump-sum payments without demur, and making its first written claim for interest only after the principal was fully paid, undermined its position. The Court agreed that the parties dealt on a running account, and it would be inequitable to enforce the 24% interest clause invoice by invoice. Therefore, interest was fairly computed only on the balance outstanding after the last invoice. The Court affirmed the Commercial Court's decision to set the interest rate at 9% per annum, the prevailing rate at nationalized banks, rather than the contractual 24%, given the conduct of the parties. The interest was correctly calculated up to the date of the final principal payment (04.08.2021). The appeal was dismissed, affirming the Commercial Court's judgment and decree.

Facts

M/s Pink City Rolling Mills Pvt. Ltd. (appellant) filed a suit for recovery of Rs. 6,85,122.08/- against M/s Shriram Industries (respondent) for goods supplied on credit during FY 2019-20. The total value of goods was Rs. 63,67,711/-, and the respondent paid Rs. 59,47,226.22/-, leaving a principal balance of Rs. 4,20,484.08/-. Further payments of Rs. 2,60,000/- and Rs. 1,60,400/- were made in subsequent financial years, leaving Rs. 84.08/- outstanding. The appellant claimed interest at 24% per annum on late payments, along with GST and CGST, based on a clause in the invoices and a dishonoured cheque. The Commercial Court partly decreed the suit, awarding Rs. 37,518.55/- with interest and costs, leading to this appeal.

Key Issues

1. Whether the appellant is entitled to claim interest at the contractual rate of 24% per annum on delayed payments, as stipulated in the invoices, considering the parties' conduct and the nature of their dealings? (Section 3 of the Interest Act, 1978, and contractual terms) Arguments: Appellant: Contended that the invoices clearly stipulated a 24% per annum interest rate for payments not made within seven days, and a dishonoured cheque for Rs. 3,96,729/- served as an acknowledgment of liability, entitling them to the full claimed amount. Revenue/State: The judgment does not record any specific arguments made by the respondent. However, the Commercial Court's findings, which the High Court affirmed, suggest the respondent's implicit argument was that the parties operated on a running account basis, making the strict invoice-wise 24% interest clause inapplicable.