Thales Dis India Pvt Ltd v. Tatvik Biosystems Pvt. Ltd. & Ors.

2018. In the said reply, defendants admitted their liability, and requested a time of 4 months to clear dues.

15. Plaintiff, in its reply to said response, sought for a firm payment schedule to be proposed by the defendants. As the assurances of the defendants turned out to be hollow, another notice dated 10th January 2019 was sent, in response to which, a cheque bearing no. 894841 was issued by the defendants. The same was dishonoured.

16. Two more post-dated cheques were issued bearings no(s). 894852 and 894853 dated 28th May 2019 and 26th June 2019. Both the cheques were for Rs. 25,00,000/- (Rupees Twenty-Five Lakhs only).

17. By e-mail dated 14th August 2019, plaintiff expressed its intention to deposit cheque no. 894852, since its was nearing the date of expiry. Upon assurance made by defendants, for payment of Rs. 10,00,000/- (Rupees Ten CS(COMM) 410/2023 6 of 25 Lakhs only), the plaintiff deferred the date of the deposit. However, said payment was, yet again, not made.

18. The other cheque, bearing no. 894853, was dishonoured despite prior intimation of deposit, being given by the plaintiff vide e-mails dated 17th September 2019 and 23rd September 2019.

19. Further assurance was given by the defendants vide e-mail dated 4th November 2019, however, was again not honoured.

20. Legal notices were again sent on 2nd September 2021.

21. Pre-institution mediation was admitted and notices were issued to defendants on 12th May 2022. Upon the defendants consenting to the same, proceedings were held on 9 dates. Defendant no. 2 appeared before the mediator, to represent defendant no.1. The mediation proceedings culminated into a ‘non-starter’ report on 6th October 2022.

22. The plaintiff submits a tabulation of dues already cleared by the defendant, against the outstanding invoices noted above, the said tabulation has been extracted as under: CS(COMM) 410/2023 7 of 25

23. Having adjusted the payments already made, the remaining outstanding liability of the defendants amounts to Rs. 4,00,52,020/- (Rupees Four Crore Fifty-Two Thousand and Twenty only). CS(COMM) 410/2023 8 of 25

24. The counsel for the plaintiff submits that the suit is within limitation, since the outstanding invoices dated 25th September 2017 envisage that payments be made within sixty days of issuance. Thus, the limitation would start running from 24th November 2017.

25. Accordingly, the limitation would have ended on 25th November 2020. However, in light of acknowledgements of payments made by the defendants, the plaintiff seeks to derive benefit from Section 18 of the Limitation Act, 1963.

26. The plaintiff presses upon two instances of acknowledgement of debt: firstly, vide e-mail dated 28th February 2018, secondly, vide reply notice dated 14th May 2018.

27. Plaintiff seeks to rely upon a decision of the Karnataka High Court in Sudarshan Cargo Pvt. Ltd. v. Techvac Engineering Pyt. Ltd., 2013 SCC OnLine Kar 5063, to contend that acknowledgement of debt via e-mail would satisfy the requirements under Section 18 of the Limitation Act, 1963.

28. As also, decisions of the National Company Law Appellate Tribunal (‘NCLAT’) in PEC Ltd. v. Tathagat Exports (P) Ltd. 2022 SCC OnLine NCLAT 3006 and R.R. Gopaljee v. Indian Overseas Bank 2020 SCC OnLine NCLAT 1049, to further the proposition that acknowledgement of debt under a reply to a legal notice would satisfy the requirements of Section 18 of the Limitation Act, 1963. CS(COMM) 410/2023 9 of 25

29. Thus, limitation period would end on 28th February 2021, in relation to acknowledgement dated 28th February 2018, and on 14th May 2021, in relation to acknowledgement dated 14th May 2018.

30. Counsel for the plaintiff submits that in light of the Supreme Court’s judgment in Cognizance for Extension of Limitation, In re, (2022) 3 SCC 117 and the second proviso to Section 12A of the Commercial Courts Act, 2015 (‘CCA’), the limitation would end on 11th July 2023, in relation to the first acknowledgement and on 24th September 2023, in relation to the second acknowledgement. It is pertinent to note, according to counsel for the plaintiffs, that the parties were in mediation for ‘4 months and 24 days’.

31. The present suit was instituted on 31st May 2023 and thus would be within the limitation threshold.

32. It is also submitted that the plaintiff can derive benefit under Section 19 of the Limitation Act, 1963, on account of the acknowledgement towards payment made by the defendants vide e-mail dated 20th January 2020 in respect of the payment that was received on 09th June 2020.

33. The counsel for the plaintiffs submits the following tabulation to support their submissions in relation to limitation: CS(COMM) 410/2023 10 of 25

34. In relation to the relief sought, places reliance on the decisions of this Court to contend that rate of interest, if specified in the outstanding invoice, would be applicable to the dues arising thereunder. The decisions relied upon by the plaintiffs are as under: i. CHL Ltd v. Alitalia Airlines, 2011 SCC OnLine Del 2543 ii. Pasupati Acrylon Ltd. v. Assam Syntex Ltd., 1997 SCC OnLine Del iii. Coim India Pvt. Ltd. v. Kurt O John Shoe Components(I) Pvt. Ltd., 2013 SCC OnLine Del 2505 iv. Dura-Line India Pyt. Ltd. v. BPL Broadband Network Pvt. Ltd., 2003 SCC OnLine Del 1160 CS(COMM) 410/2023 11 of 25 v. Wockhardt Ltd. v. Satish Ahuja, 2002 SCC OnLine Del 941

35. Reliance is also placed on the decision of the High Court of Bombay in Jatin Koticha v. VFC Industries Pyt. Ltd. 2007 SCC OnLine Bom 1092, to place forth the proposition that if good/ services under an invoice are accepted by the recipient, without objection to its terms, the same would constitute a contract, even if not signed by the parties to the same. Evidence

36. POs have been exhibited as PW-1/2. The copy of the unpaid invoices, bearing no(s). D1700234 and D1700235 have been exhibited as PW-1/3. Emails dated 12th February 2018, 26th February 2018, 28th February 2018, 2nd April 2018, have been exhibited as PW-1/4. Exhibit PW-1/5 is the ledger account maintained in the name of the defendant company. The first legal notice issued by the plaintiff dated 17th April 2018 is exhibited as PW-1/6. The reply and rejoinder to the reply to the said notice have been exhibited as PW- 1/7 and PW-1/8, respectively. Copy of the second legal notice dated 10th January 2019 has been exhibited as PW-1/9. E-mail communications exchanged between the parties are contained in exhibit PW-1/10. The final legal notice issued by the plaintiff has been exhibited as PW-1/11 with the ‘non-starter’ report issued by the Mediator, exhibited as PW-1/12. Analysis

37. In the opinion of this Court, basis the following documents and evidence on record, the liability of the defendants stands admitted: i. E-mail dated 28th February 2018 (Ex. PW-1/4): CS(COMM) 410/2023 12 of 25 ii. Reply dated 21st May 2018, to the legal notice sent by the plaintiff (Ex. PW-1/7): CS(COMM) 410/2023 13 of 25 iii. The ledger of accounts dated 17th August 2021 (Ex. PW-1/5), maintained by the plaintiff in relation to the defendants, is also instructive, as regards liability suffered by the defendants. The said ledger of accounts has been extracted hereunder, for ready reference: CS(COMM) 410/2023 14 of 25 Limitation

38. The claim of the plaintiffs qualifies the tests of the Limitation Act, 1963, for the following reasons: i. In light of acknowledgements of liability made in e-mail dated 28th February 2018 (Ex. PW-1/4) and reply dated 21st May 2018 to the legal notice sent by the plaintiff (Ex. PW-1/7). ii. Thus, in light of Section 18 of the Limitation Act, 1963, the limitation period would effectively start running from the dates of said acknowledgements and end on 21st February 2021 and 14th May 2021. Section 18 of the Limitation Act, 1963, reads as under: “18. Effect of acknowledgment in writing.— CS(COMM) 410/2023 15 of 25 (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received. Explanation.—For the purposes of this section,— (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right, (b) the word “signed” means signed either personally or by an agent duly authorised in this behalf, and

(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.” (emphasis supplied) iii. Also, decision of the Supreme Court in Cognizance for Extension of Limitation, In re (supra), would extend the limitation for further period. The relevant extract of the said decision is as under: CS(COMM) 410/2023 16 of 25 “5. Taking into consideration the arguments advanced by the learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of MA No. 21 of 2022 with the following directions:

5.1. The order dated 23-3-2020 [Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10: (2021) 3 SCC (Cri) 801] is restored and in continuation of the subsequent orders dated 8-3-2021 [Cognizance for Extension of Limitation, In re, (2021) 5 SCC 452: (2021) 3 SCC (Civ) 40: (2021) 2 SCC (Cri) 615: (2021) 2 SCC (L&S) 50], 27- 4-2021 [Cognizance for Extension of Limitation, In re, (2021) 17 SCC 231: 2021 SCC OnLine SC 373] and 23-9- 2021 [Cognizance for Extension of Limitation, In re, 2021 SCC OnLine SC 947], it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasijudicial proceedings.

5.2. Consequently, the balance period of limitation remaining as on 3-10-2021, if any, shall become available with effect from 1-3-2022.

5.3. In cases where the limitation would have expired during the period between 15-3-2020 till 28-2-2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply.” CS(COMM) 410/2023 17 of 25 iv. Further, it’s a matter of record that the parties were in mediation for the period between 17th May 2022 and 26th September 2022. ‘Nonstarter’ report dated 6th October 2022 (Ex. PW-1/12) is on record. v. At this juncture it is pertinent to take note of the tabulation provided by the plaintiffs in paragraph no. 33 above, in light of the same, the claim of the plaintiff survives the test of limitation. Interest payable

39. Terms and conditions mentioned in invoices bearing no(s). D1700234 and D1700235 (Ex. PW-1/3), stipulate that, in the event payments are not made within 60 days from the date the invoice is raised, interest, at the rate of 18% per annum, shall become payable.

40. It is pertinent to note from the record that no objections have been raised to the said invoice(s), and goods were duly received under the same. Objections were raised to the rate of interest, only at the stage of reply dated 21st May 2018 (Ex. PW-1/7), to the legal notice sent by the plaintiff.

41. Reliance may be placed on the decision of the Bombay High Court in Jatin Koticha (supra), relevant paragraph(s) of the said judgment, read as under:

CS(COMM) 410/2023 18 of 25 each purchase order. The invoices, as stated above, contained the terms and conditions. There is a clear parole acceptance of the invoice on the part of the defendants. The defendants accepted delivery of the goods along with the invoice without any demur or suggestion that they do not accept any of the terms whether pertaining to the rate, price, quantity etc. It makes no difference therefore that the invoices are not signed by both the parties. I am of view that the invoices must be treated as a written contract and the suit based on such invoices is a suit based on the written contract. This view is fortified by the Madras High Court reported in The Madras Law Journal Reports 1988 page 187 (Lucky Electrical Stores, by partner Mahendra Kumar Shah v. Ramesh Steel House by Partner Babulat)1 where the Chief Justice M.N. Chandurkar, rejected the contention similar to the one applied by the defendants in this case. The relevant observation reads thus… …..

13. It was next contended on behalf of the defendants that there is no stipulation as to the interest in the contract. Having held that the written contract in this case are the invoices, it must be held that there is a stipulation for interest in view of the specific term in the invoice that interest at the rate of 21% p.a. will be charged on over due payments. Hence, the suit is decreed in the sum of Rs. 4,39,585/- i.e. the principal amount plus interest at the rate of 21% p.a. till the filing of the suit. The defendants are liable to pay future interest however at the rate of 18% per annum on the principal sum of Rs. 3,82,096/- from the date of filing of the suit till realisation and/or payment and costs. Decree be drawn up accordingly. Summons for judgment and the suit stands disposed of accordingly.” CS(COMM) 410/2023 19 of 25

42. In light of the aforesaid, interest shall be payable at the rate of 18% per annum from 24th November 2017, i.e. sixty days from the date of default. Pendente lite and future interest payable

43. At this juncture, it is apposite to refer to Section 34 of the Code of Civil Procedure, 1908, (‘CPC’), which reads as under:

CS(COMM) 410/2023 20 of 25 with the industry, trade or business of the party incurring the liability.] (2) Where such a decree is silent with respect to the payment of further interest [on such principal sum] from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefor shall not lie.”

44. The Supreme Court in Central Bank of India v. Ravindra (2002) 1 SCC 367, held as under:

CS(COMM) 410/2023 21 of 25 or with such earlier date as the court thinks fit. Shortly hereinafter we propose to give an indication of the circumstances in which the court may decline award of interest or may award interest at a rate lesser than the permissible rate.” …..

44. We are of the opinion that the meaning assigned to the expression “the principal sum adjudged” should continue to be assigned to “principal sum” at such other places in Section 34(1) where the expression has been used qualified by the adjective “such”, that is to say, as “such principal sum”. Recognition of the method of capitalisation of interest so as to make it a part of the principal consistently with the contract between the parties or established banking practice does not offend the sense of reason, justice and equity. As we have noticed, such a system has a long-established practice and a series of judicial precedents upholding the same. Secondly, the underlying principle as noticed in several decided cases is that when interest is debited to the account of the borrower on periodical rests, it is debited because of it having fallen due on that day. Nothing prevents the borrower from paying the amount of interest on the date it falls due. If the amount of interest is paid there will be no occasion for capitalising the amount of interest and converting it into principal. If the interest is not paid on the date due, from that date the creditor is deprived of such use of the money which it would have made if the debtor had paid the amount of interest on the date due. The creditor needs to be compensated for deprivation. As held in Pazhaniappa Mudaliar v. Narayana Ayyar [AIR 1943 Mad 157: (1942) 2 MLJ 753] the fact situation is analogous to one as if the creditor has advanced money to the borrower equivalent to the amount of interest debited. We are, therefore, of the opinion that the expression “the principal sum adjudged” may include the amount of interest, charged on periodical rests, and capitalised with the principal sum actually CS(COMM) 410/2023 22 of 25 advanced, so as to become an amalgam of principal in such cases where it is permissible or obligatory for the court to hold so. Where the principal sum (on the date of suit) has been so adjudged, the same shall be treated as “principal sum” for the purpose of “such principal sum” — the expression employed later in Section 34 CPC. The expression “principal sum” cannot be given different meanings at different places in the language of same section i.e. Section 34 CPC. …..

48. It was also submitted that Section 34 CPC is general in its application to all money suits and if banking practice or banking contracts providing for capitalisation of interest charged on periodical rests were to be recognised it will mean that application of Section 34 would be different in suits filed by banks and in suits filed by creditors other than bankers. In our opinion it is bound to be so. Section 34 is a general procedural provision and whether it would apply or not and if apply then to what extent would obviously depend on the fact situation of each case.

49. We are, therefore, of the opinion that the two-Judge Bench decision of this Court in Corpn. Bank v. D.S. Gowda [(1994) 5 SCC 213] and the three-Judge Bench decision in Bank of Baroda v. Jagannath Pigment & Chemicals [(1996) 5 SCC at p. 280] are correctly decided and are, therefore, affirmed. A creditor can charge interest from his debtor on periodical rests and also capitalise the same so as to make it a part of the principal. Such a course can be justified by stipulation in a contract voluntarily entered into between the parties or by a practice or usage well established in the world to which the parties belong. Such practice is to be found already in vogue in the field of banking business. Such contract or usage or practice can stand abrogated by legislation such as usury laws or debt relief laws and so on. ….. CS(COMM) 410/2023 23 of 25 55...However, we propose to place on record a few incidental observations, without which, we feel, our answer will not be complete and that we do as under: (1) Though interest can be capitalised on the analogy that the interest falling due on the accrued date and remaining unpaid, partakes the character of amount advanced on that date, yet penal interest, which is charged by way of penalty for non-payment, cannot be capitalised. Further interest i.e. interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be opposed to public policy. (2) Novation, that is, a debtor entering into a fresh agreement with a creditor undertaking payment of previously borrowed principal amount coupled with interest by treating the sum total as principal, any contract express or implied and an express acknowledgement of accounts, are the best evidence of capitalisation. Acquiescence in the method of accounting adopted by the creditor and brought to the knowledge of the debtor may also enable interest being converted into principal. A mere failure to protest is not acquiescence. (3) The prevalence of banking practice legitimatises stipulations as to interest on periodical rests and their capitalisation being incorporated in contracts. Such stipulations incorporated in contracts voluntarily entered into and binding on the parties shall govern the substantive rights and obligations of the parties as to recovery and payment of interest. (4) Capitalisation method is founded on the principle that the borrower failed to make payment though he could have made and thereby rendered himself a defaulter. To hold an amount debited to the account of the borrower capitalised it should appear that the borrower had an opportunity of making the payment on the date of entry or within a reasonable time or period of grace from the date of debit entry or the amount falling due and thereby avoiding capitalisation. Any debit CS(COMM) 410/2023 24 of 25 entry in the account of the borrower and claimed to have been capitalised so as to form an amalgam of the principal sum may be excluded on being shown to the satisfaction of the court that such debit entry was not brought to the notice of the borrower and/or he did not have the opportunity of making payment before capitalisation and thereby excluding its capitalisation. ….. (8) Award of interest pendente lite and post-decree is discretionary with the court as it is essentially governed by Section 34 CPC dehors the contract between the parties. In a given case if the court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the court may exercise its discretion in awarding interest pendente lite and post-decree interest at a lower rate or may even decline awarding such interest. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner.

45. Basis the aforesaid position of law, in the facts circumstances of the present case, and considering the rate of interest leviable under the invoices, the prevailing market rate and the nature of the transaction between the parties, this Court deems it fit to award pendente lite and future interest at the rate of 9% per annum till the date of realization of payment. Relief

46. Accordingly, the suit of the plaintiff is decreed for a total amount of Rs. 8,06,50,968/- (Rupees Eight Crore Six Lakhs Fifty Thousand Nine Hundred Sixty-Eight only) [(Rs. 4,00,52,020/- as principal) + (Rs. 4,05,98,948/- as CS(COMM) 410/2023 25 of 25 interest)], along with pendente lite and future interest at the rate of 9% per annum, on the said amount, till the date of realization of payment,

47. Decree sheet be drawn up accordingly.

48. Pending applications, if any, be rendered infructuous.

JUDGE MARCH 24, 2025