Telangana High Court
The A.P. Power Generation Corporation … vs Lohman Castings Private Limited on 7 April, 2026
Author: K. Lakshman
Bench: K. Lakshman
HON'BLE SRI JUSTICE K. LAKSHMAN
AND
HON'BLE SRI JUSTICE VAKITI RAMAKRISHNA REDDY
CITY CIVIL COURT APPEAL Nos.160 OF 2006 & 131 OF 2009
DATE: 07-04-2026
Between in CCC No.160 of 2006:
The A.P. Power Generation Corporation Limited
& 2 Others .. Appellants -
Defendants
Vs.
Lohman Castings Private Limited .. Respondent -
Plaintiff
This Court made the following:
COMMON JUDGMENT:
(Per Hon’ble Sri Justice K. Lakshman)
Heard Mr. V. Hari Haran, learned Senior Counsel for the
appellant in CCCA No.131 of 2009 & respondent in CCCA No.160 of
2006 and Mr. Mohd. Adnan, learned counsel for the respondents in
CCCA No.131 of 2009 & appellants in CCCA No.160 of 2006.
2. CCCA No.160 of 2006 is filed by the defendants in O.S.
No.362 of 2002, challenging the judgment and decree dated
27.01.2006 passed by learned XI Additional Chief Judge (fast Track
Court), City Civil Court, Hyderabad, whereas CCCA No.131 of 2009
is filed by the plaintiff challenging the very same judgment and decree
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CCCA No.160 of 2006 & 131 of 2009
to the extent of awarding interest @ 6% per annum only on the
principal sum.
3. The plaintiff in O.S. No.362 of 2002 is M/s. Lohman
Castings Private Limited, Visakhapatnam, while the defendants are
the Andhra Pradesh Power Generation Corporation Limited, its Chief
Engineer (Generation), Hyderabad and the Chief Engineer,
Kothagudem Thermal Power Station, Palwancha, Khammam District.
4. For the sake of convenience, the parties are hereinafter
referred to as they were arrayed in O.S. No.362 of 2002.
5. The plaintiff filed the aforesaid suit (O.S. No.362 of 2002)
for recovery of total sum of Rs.68,23,298/- (i.e.,Rs.15,20,905/-
towards principal & Rs.53,02,393/- towards interest) with costs and
interest at the applicable rates as per the Provisions of the Interest on
Delayed Payments to Small and Ancillary Industrial Undertakings
Act, 1993, against the defendants contending as under:
i) The plaintiff is a registered Small Scale Industrial
Undertaking. It carries on business of manufacturing of
various types of castings required for Thermal Power
Stations.
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CCCA No.160 of 2006 & 131 of 2009
ii) Defendant No.1 was in need of the said products and
accordingly used to place orders from 1983 onwards and
the plaintiff used to supply the same.
iii) In the said process, the defendants placed purchase orders
vide Exs.A1 to A13, which are dated 15.04.1993,
05.08.1993, 21.04.1993, 04.01.1994, 19.02.1994,
10.08.1992, 27.11.1993, 27.11.1993, 11.08.1994,
04.10.1993, 28.05.1994,31.10.1991, 06.06.1994,
07.09.1993 and 01.08.1994 and the plaintiff supplied all
the material except the material covered by Ex.A10 and
purchase order No.CKK/P2/DMA/DN/20/94.
iv) Even then, the defendants did not pay the entire value and
they are due and liable to pay an amount of
Rs.15,20,905/- along with interest of Rs.53,02,393/-
thereon, which is claimed under Interest on Delayed
Payments to Small Scale and Ancillary Industrial
Undertakings Act, 1993.
v) One of the Directors of the plaintiff, Mr. Gutta Kattaiah
Chowdary was found to have embezzled the money
worth Rs.45.00 lakhs belonging to the defendants in
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CCCA No.160 of 2006 & 131 of 2009
collusion with their officials by producing fake letter of
authorization, for which the defendants instituted
criminal proceedings against the said Director and other
Officials. On the said pretext, the defendants are not
paying the aforesaid amount.
vi) After exchange of legal notice and reply between the
plaintiff and the defendants, the plaintiff filed the
aforesaid suit seeking the aforesaid amount against the
defendants.
6. Defendant No.2 filed a detailed written statement denying
the claim of the plaintiff contending as under:
i) The plaintiff quoted discrepant purchase orders, which would
bring out that the plaintiff itself is not certain about the supplies
made and the amounts due.
ii) The plaintiff was never regular and prompts in supplying the
material.
iii) All the purchase orders are subject to terms and conditions
peculiar to each of them and, therefore, the plaintiff could not
have combined all the claims and filed a single suit. Thus, the
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CCCA No.160 of 2006 & 131 of 2009suit is bad for mis-joinder of proper parties and lack of cause of
action.
iv) The defendants denied the supply of material against the
purchase orders except two.
v) They are not liable to pay an amount of Rs.15,20,905/- and so
also the interest as claimed by the plaintiff.
vi) The suit is barred by limitation.
vii) There is no cause of action.
vii) Trial Court has no territorial jurisdiction to entertain the suit.
7. Basing on the aforesaid pleadings, learned trial Court framed
the following issues:
1. Whether the plaintiff supplied materials to the
defendants under (15) purchase orders placed by the
defendants (under document No.3 to 17 of the plaint)?
2. Whether the defendants accepted such supplies valued
at Rs.15,20,905/- except the two under purchase order
Nos.CKK/P2/DMA/DN20/94 and CK/P23/DMA/130/
93-94, dt.4-10-1994?
3. Whether it were the terms of the supply orders that
90% of the value of the goods supplied by the plaintiff
would be paid within 30 days of receipt of such goods
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CCCA No.160 of 2006 & 131 of 2009and bill, in duplicate and balance 10% would be paid
after expiry of guarantee period of (18) months?
4. Whether the defendants unreasonably withheld such
payments on the ground that Mr. Gutta Kattaiah
Chowdary who was also Director of other companies
such as M/s. Ramakrishna Engineering Company,
Pattancheruvu, M/s. Bright Engineering Company and
M/s. Vishwashanti Engineering Company, had
fraudulently withdrawn money from the defendants
and cheated them?
5. Whether the plaintiff is a Small Scale Industry entitled
to charge the recoverable amounts with interest as
contemplated under the partition “interest on delayed
payment to Small Scale and Ancillary Industrial
Undertakings Act 1993”?
6. Whether the plaintiff is entitled to recover the suit
amount with costs and interests as prayed for?
7. Whether the suit is barred by time?
8. Whether the suit is bad for misjoinder of cause of
action?
9. Whether there is cause of action?
10. To what relief?
8. During trial, plaintiff examined its Managing Director as
PW.1 and exhibited Exs.A1 to A65. On behalf of the defendants, their
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CCCA No.160 of 2006 & 131 of 2009
Divisional Engineer was examined as DW.1. During cross-
examination of PW.1, Exs.B1 and B2 were marked.
9. On consideration of the entire evidence, both oral and
documentary and upon hearing both sides, vide judgment and decree
dated 27.01.20006, learned trial Court decreed the suit with costs for
Rs.15,20,905/- towards principal and Rs.53,02,393/- towards interest,
making a total of Rs.68,22,298/- with interest @ 6% per annum on the
principal amount from the date of suit till realization.
10. Challenging the aforesaid judgment and decree, the
defendants filed CCCA No.160 of 2006, on the following grounds:
i) Trial Court erred in decreeing the suit without any proof of
supply of material to the defendants as there is a specific
pleading in the written statement that the plaintiff has not
supplied the entire material covered by all the purchase orders
except two.
ii) The trial Court also erred in observing that the burden lies on
the defendants that Mr. Gutta Kattaiah Chowdary withdrew
their amounts in excess of supplies as Director of Plaintiff
Company.
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CCCA No.160 of 2006 & 131 of 2009
iii) Interest on Delayed Payments to Small Scale and Ancillary
Industries Undertakings Act, 1993, has no application to the
case of the plaintiff.
iv) The plaintiff has not produced any documentary proof with
regard to rate of interest i.e., Prime Lending rates by the State
Bank of India from time to time.
v) The interest of Rs.53,02,393/- granted by trial Court is without
any basis.
vi) The suit is hopelessly barred by limitation, for the reason that
the purchase orders are between 15.04.1993 and 01.08.1994,
whereas the suit was filed on 24.09.2002. Thus, Section – 14 of
Limitation Act, 1963, has no application to the case on hand.
vii) Therefore, the trial Court erred in decreeing the suit, as such,
the same is liable to be set aside.
11. The plaintiff also filed an appeal vide CCCA No.131 of
2009, challenging the impugned judgment and decree to the extent of
awarding interest @ 6% per annum on the principal amount of
Rs.15,20,905/- from the date of suit till realization instead of awarding
interest as per the provisions of the Interest on Delayed Payments to
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CCCA No.160 of 2006 & 131 of 2009
Small and Ancillary Industrial Undertakings Act, 1993, on the
following grounds:
i) The transaction between the plaintiff and the defendants is a
commercial transaction regulated by the Statute, namely the
Interest on Delayed Payments to Small and Ancillary Industrial
Undertakings Act, 1993 (for short ‘Act, 1993’), as amended by
Act No.23 of 1998, as such, the plaintiff is entitled to the
interest at the rate prescribed under the said Act, 1993 till the
date of realization, but not @ 6% per annum.
ii) The said Act, 1993 is specifically enacted for the protection of
Small Scale and Ancillary Industries. The plaintiff is a Small
Scale Industry. The Micro, Small and Medium Enterprises
Development Act, 2007, Act No.27 of 2006 was replaced with
the said Act, 1993. Therefore, it is entitled for the said interest
at 1½ time of prime lending rate charged by the State Bank of
India.
12. In view of the aforesaid rival submissions, the following
points arise for consideration by this Court:
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CCCA No.160 of 2006 & 131 of 2009
i) Whether the plaintiff supplied the material to the defendants,
and the defendants received the same?
ii) Whether the plaintiff is entitled for the suit claim?
iii) Whether the plaintiff is a Small Scale Industry, and if so, it is
entitled for the said interest at 1½ time of prime lending rate
charged by the State Bank of India?
iv) Whether the suit is barred by limitation
v) Whether the trial Court was right in decreeing the suit?
Point Nos.(i) & (ii):
13. As discussed supra, the main contention of the plaintiff is
that it is a Private Limited Company registered in the year 1982. It
deals with supply of various items of spare materials required for
Thermal Power Stations. Since the date of its inception, it had been
submitting tenders for supply of aforesaid material to the defendants at
Kothagudem and Ramagundam, and accordingly supplying the same
under various purchase orders issued by the defendants from time to
time satisfactorily. Defendant No.1 issued fifteen (15) purchase
orders during the period between 1991 and 1994 and the material
covered by the said purchase orders were supplied by the plaintiff.
The said purchase orders were marked as Exs.A1 to A14 except two
purchase orders dated 07.09.1993 and 01.08.1994. Despite receipt of
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CCCA No.160 of 2006 & 131 of 2009
the said material covered by the aforesaid 15 purchase orders, the
defendants failed to pay the amount. Therefore, the plaintiff filed the
aforesaid suit. Though learned trial Court decreed the suit, awarded
less interest @ 6% per annum from the date of suit till the date of
realization, which is contrary to the provisions of the Act, 1993,
learned trial Court failed to consider that the plaintiff company is a
Small Scale Industrial Unit registered with the Department of
Industries vide registration No.01/20/03164, dated 13.01.1984, i.e.,
prior to the supply of the said material.
i) Whereas, it is contended by the defendants that the alleged
purchase orders relate to the period between 19.08.1992 and
11.08.1994, whereas the suit was filed on 24.09.2002. Therefore, the
suit is hopelessly barred by limitation. It is also contended by the
defendants that Mr. Gutta Kattayya Chowdary, Executive Director of
the plaintiff company, in collusion with others, played fraud on the
defendants and drawn the amounts without supplying material.
Therefore, the defendants decided not to entertain any
purchase/contracts from the plaintiff till the outcome of the criminal
case. Therefore, the defendants are not liable to pay any amount,
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CCCA No.160 of 2006 & 131 of 2009
much less the suit amount. Without considering the same, learned
trial Court decreed the suit and, therefore, the same has to be set aside.
ii) As far as the plaintiff’s entitlement in respect of decretal
amount is concerned, perusal of record would reveal the defendants
placed fifteen (15) purchase orders as mentioned in paragraph No.2 of
the judgment of which serial Nos.1 to 3 and 5 to 14 were marked as
Exs.A1 to A14. The purchase orders mentioned at serial Nos.4 and 15
were not marked. All the said purchase orders relate to the period
between 31.10.1991 (Ex.A12) and 11.08.1994 (Ex.A9), whereas in
paragraph No.3 of the plaint, it is mentioned that the said fifteen
purchase orders relating to the period between 19.08.1992 and
11.08.1994. According to the plaintiff, as per terms of purchase order,
the defendants have to pay 90% of the amount due under each bill
within thirty (30) days after receipt of goods, and balance 10% after
expiry of guaranteed period of eighteen (18) months. The total value
of the material supplied under the aforesaid 15 purchase orders is
Rs.15,20,905/-, and the defendants are due and liable to pay the said
amount. But, the defendants withheld the said amount on the ground
that the said Gutta Kattaiah Chowdary, one of the Directors of the
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CCCA No.160 of 2006 & 131 of 2009
plaintiff company withdrew monies from defendant No.1 in collusion
with its employees and five others by using fake letters of authority
(LOA) in the name of three fictitious companies i.e., (i) M/s.
Ramakrishna Engineering Company; (ii) M/s. Bright Engineering
Company; and (iii) M/s. Vishwashanti Engineering Company, without
supplying material and thereby cheated the defendants.
iii) Whereas, it is the case of the defendants that though they
are due and liable to pay the amount to the plaintiff, on account of
withdrawal of amount by the aforesaid Director in collusion with its
employees and five others by using fake AOA and with regard to the
same, there are criminal proceedings are pending and unless and until
the same are concluded, they cannot pay the amount.
iv) In this regard, it is apt to note that the plaintiff company got
issued a notice dated 26.08.1996 vide Ex.A14 to the defendants,
enclosing statement of account showing the amount due against each
bill. Pursuant thereof, reply was sent by defendant No.2 vide Ex.A15
letter No.CGG/311/F.L.C./571/96, dated 05.11.1996, which makes
significant and is extracted as under:
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CCCA No.160 of 2006 & 131 of 2009“With reference to your letter dt.26.8.96, this is to inform
that release of any payments can’t be considered at this
stage, since legal proceedings instituted against this firm
are pending in the court of law….”
v) Ex.A52, letter addressed by the office of defendant Nos.1
and 2, dated 03.08.1996 to the plaintiff company also plays a vital role
to support the contention of the plaintiff. Therefore, the same is
relevant and extracted as follows:
“The LOA No.52/94-95 of the Superintending Engineer,
Ramagundam Thermal Power Station for Rs.3,28,110-30
pending in this office will be released soon on finalisation
of K.T.P.S. Fake LOAs case by C.B.C.I.D, Andhra
Pradesh, Hyderabad.”
In view of the aforesaid letters, it is clear that the defendants did not
deny the due amount by them to the plaintiff, and what all they stated
is with regard to the pendency of criminal proceedings against the
aforesaid Director of plaintiff’s company, they cannot consider at that
stage. But, strangely, ignoring the aforesaid letters, in the written
statement filed by the defendants in the suit, took a contradictory
statement by denying their liability. Thus, the defendants cannot be
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CCCA No.160 of 2006 & 131 of 2009
permitted to both approbate and reprobate as held by the Hon’ble
Supreme Court in R.N. Gosain v. Yashpal Dhir1.
vi) As already stated above, as per the plaint, the decretal
amount pertains to the period from 19.08.1992 and 11.08.1994 arising
out of said 15 purchase orders. The defendants examined DW.1 on
their behalf before the trial Court. During cross-examination, he
categorically admitted that the suit claim pertains to 15 purchase
orders placed by them with the plaintiff company. Ex.A37, letter
No.CKK/P23/B.M:A/ D.No. 1372/94, dated 05.11.1994 addressed by
defendant No.2 to the plaintiff company reveals with regard to Ex.A10
– purchase order dated 04.10.1993. In the said letter, defendant No.3
did not express anything negatively and on the other hand he
mentioned that the purchase order (Ex.A10) was found to be generally
in order and was approved. It is apt to note that this letter is dated
05.11.1994, whereas as per Ex.A64-charge sheet, the alleged
embezzlement of amount by one of the Directors of the plaintiff
company pertains to the period from 21.06.1994 to 22.09.1994. That
is to say, by the date of the said letter of defendant No.3, dated
05.11.1994, the defendants must have known about such
1
. (1992) 4 SCC 683
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CCCA No.160 of 2006 & 131 of 2009
embezzlement of amount. In such circumstances, defendant No.3 did
not mention anything in his letter dated 05.11.1994 and on the other
hand approved the material supplied vide Ex.P10 – purchase order.
vii) Even otherwise, as per Ex.A54 letter dated 18.01.1995
addressed by defendant No.3 to the plaintiff, its Engineers inspected
the Cage bar and found suitable for their works and accordingly
requested the plaintiff to despatch the material. As per charge sheet
(Ex.A64), the crime was registered on 13.11.1994 by Punjagutta
Police Station against the aforesaid Director of the plaintiff company.
Thus, as on the date of Ex.A54 letter, the aforesaid crime had already
been registered by the police upon receipt of report given by the
defendants. Having knowledge about such alleged embezzlement of
amount, the defendants still continued the transactions with the
plaintiff company. But when comes to the payment of due amount,
the defendants take the shelter of embezzlement of amount by the
aforesaid Director of the plaintiff company and withheld the said
amount.
viii) Ex.A18, legal notice dated 10.06.2002 got issued by the
plaintiff company to the defendants requiring them to pay the
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CCCA No.160 of 2006 & 131 of 2009
aforesaid due amount shown in the statement enclosed thereto. The
defendants also gave reply to the said notice vide Ex.A24, dated
01.07.2002. In the said reply, it has been categorically admitted about
the supply of material by the plaintiff to them. However, they stated
that the Directors of the plaintiff company drawn an amount of
Rs.45.00 lakhs in excess of the material supplied under different
names and, therefore, they are not liable to pay any amount to the
plaintiff. They further stated that the claim was barred by limitation
and that the plaintiff is not entitled any interest under the Act, 1993.
Perusal of Ex.A24 reply does not disclose about the embezzlement of
amount by the aforesaid Director of the plaintiff company.
ix) With regard to the contention of defendants that they are not
liable to pay the amount on account of embezzlement of amount by
one of the Directors of the plaintiff company, namely Mr. Gatta
Kattaiah Chowdary in collusion with its employees and five others by
submitting fake and forged LOAs (Bills) purported to have been
prepared and sent from KTPS, Paloncha in defendant Nos.1 and 2
office, for the purpose of wrongful gain, perusal of record would
reveal that Ex.A64-charge sheet discloses that Mr. Gatta Kattaiah
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CCCA No.160 of 2006 & 131 of 2009
Chowdary, one of the Directors of the plaintiff company, is shown as
accused No.2. In the array of accused, the Investigating Officer did
not show him as the Director of M/s. Lohman Castings Private
Limited, Anakapalli and only shown him as “Gutta Kattaiah
Chowdary S/o Jaganmohan Rao, aged 35 yrs, Occ: Business, R/o
MIG-76, Autonagar, Visakhapatnam’. However in an un-numbered
paragraph No.3 of page No.2 of the charge sheet, he is described as
the Director of the plaintiff company. The allegation levelled against
him is that he along with other accused conspired together in Srilatha
Lodge at Paloncha and decided to defraud huge amounts from APSE
Board by submitting fake bills (LOAs) at Vidyut Soudha, Hyderabad.
In pursuance of their conspiracy, they floated fictitious firms, M/s.
Ramakrishna Engineering Co., IDA, Jeedimetla, Hyderabad, showing
S.M. Reddy, a fake name of accused No.3 therein as the proprietor of
the said firm. Subsequently, accused Nos.1 to 3 prepared and got
prepared fake bills (LOAs) No.79, 84 and 254 purported to have been
prepared and sent by KTPS, Paloncha in favour of M/s. Ramakrishna
Engineering Co., and submitted at Vidyut Soudha on 21.06.1994,
21.06.1994 and 30.08.1994, respectively stating that the said firm
(Company) had supplied certain materials Aluminium Bronz Wheels
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CCCA No.160 of 2006 & 131 of 2009
against LOA Nos.79 and 84 and Main Shafts against LOA No.254 to
KTPS, Paloncha, though actually had not supplied anything by the
said firm and defrauded an amount of Rs.28,62,793.80ps.
x) Perusal of the entire charge sheet would disclose that the
Investigating Officer did not examine either the other Directors of the
plaintiff company or its employees as to whether the fraud played by
accused No.2 – Gatta Kattaiah Chowdary, one of the Directors of the
plaintiff company, representing the plaintiff company or in his
individual capacity, and not even cited them as witnesses. Thus, it is
clear that the said Gatta Kattaiah Chowdary committed the offences
punishable under Sections – 468, 471 and 420 read with 120-B of IPC
in his individual capacity and not on behalf of the plaintiff company.
Had the said Director been committed the aforesaid offences
representing the plaintiff company, the Investigating Officer certainly
would have made the plaintiff company also as an accused in the said
crime. In fact, after coming to know about the fraud played by Mr. G.
Kattayya Chowdary, the plaintiff company removed him from the post
of Executive Director and Director of its Company in the
Extraordinary General Body Meeting held on 30.11.1994 and the
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same was intimated to the defendants vide Ex.A31 letter dated
01.12.1994. The fraud was allegedly committed by the Director of the
plaintiff company not on its behalf and on behalf of another company.
The plaintiff company itself did not commit the fraud. The Director
was removed from the Directorship and share holder of plaintiff
Company after coming to know such fraud. This Court set aside the
circular blacklisting the plaintiff company, implying that the
defendants’ action against the company was unjustified. Therefore, the
defendants’ refusal to pay was unlawful, and the plaintiff company
was justified in pursuing legal remedies before filing the civil suit.
Thus, the defendants cannot evade the payment under the aforesaid 15
purchase orders by taking shelter of embezzlement of amount by the
aforesaid Director of the plaintiff company. Point Nos.(i) & (ii) are
answered accordingly.
Point No.(iv):
14. With regard to the contention of the defendants that the suit
claim is barred by limitation, they placed reliance on the decision in
Consolidated Engineering Enterprises v. Principal Secretary,
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CCCA No.160 of 2006 & 131 of 2009Irrigation Department 2. Whereas, it is case of the plaintiff that
when the defendants issued a Circular vide Ex.B1 dated 17.05.1995
not to entertain any purchases/contracts from the plaintiff company till
the outstanding of case lodged by them with police with regard to
embezzlement of funds is settled and finalized, they have filed writ
petition vide Ex.A59, W.P. No.16000 of 1998 before this Court
challenging the said Circular. The said writ petition was dismissed
vide 15.06.1998. Challenging the said order, the plaintiff filed W.A.
No.1063 of 1998 and the same was allowed 25.01.2002. Therefore, in
a good faith the plaintiff initiated all the aforesaid proceedings and as
such, limitation must be excluded for the said period. The said
principle was laid down by the Apex Court in Union of India v. West
Coast Paper Mills Ltd. 3.
i) Perusal of record would reveal that in the said writ appeal,
the defendants filed counter (Ex.A60), wherein paragraph No.3, the
defendants specifically mentioned as under:
2
. (2008) 7 SCC 169
3
. AIR 2004 SC 3070
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CCCA No.160 of 2006 & 131 of 2009“….Since legal proceedings instituted against the firms are
pending in the court of Law, the release of any payments
cannot be considered at this stage.”
ii) The aforesaid counter was filed on 24.07.1998. A Division
Bench of this Court, vide order dated 25.01.2002 allowed the said writ
appeal quashing the said circular dated 17.05.1995. In the said order,
there is no observation with regard to exemption of limitation.
However, the Division Bench observed as under:
“All other contentions raised by the parties are left open to
be agitated at an appropriate stage.”
iii) In the writ petition as well as writ appeal, one of the
contentions of the plaintiff is that the defendants are due and liable to
pay the suit amount under the aforesaid 15 purchase orders, moreover,
the relief sought in the writ petition is not only challenging the said
Circular dated 17.05.1995, but also a direction for payment of
Rs.15,20,905/- with interest @ 24% per annum after declaring the said
circular as illegal. Though the defendants denied the same in their
counter filed in the writ appeal on 24.07.1998, however, admitted that
the same cannot be considered at that stage as extracted above. After
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CCCA No.160 of 2006 & 131 of 2009
allowing the writ appeal on 25.01.2002, the plaintiff filed the suit on
24.09.2002.
iv) In view of the aforesaid discussion, it is clear that the
plaintiff company supplied goods between 19.08.1992 and 11.08.1994
and payment became due thereafter. However, the defendants did not
deny the supply of goods, but withheld payment because of the
alleged fraud committed by the aforesaid Director of the plaintiff
company representing another floated company. The cause of action
continued until the legality of the defendants’ circular was decided in
the writ proceedings. Therefore, limitation cannot be computed
merely from 1994. Time spent in writ and writ appeal proceedings
must be excluded. The plaintiff company filed the writ petition in
1998 challenging the defendants Circular dated 17.05.1995 that
blacklisted the plaintiff company and withheld payment. Under
Section – 14 of the Limitation Act, 1963, the time spent prosecuting
another civil proceeding in good faith and with due diligence in a
Court lacking jurisdiction or incapable of granting the relief must be
excluded when calculating limitation. The plaintiff company with a
bona fide belief approached this Court seeking relief of withholding
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CCCA No.160 of 2006 & 131 of 2009
payment due to blacklisting. The matter continued until the writ
appeal allowed setting aside the said Circular. Therefore, the entire
period from filing the writ petition in 1998 until disposal of the writ
appeal must be excluded. Since the suit was filed on 24-07-2002, it
falls within three years from the date when the writ appeal was
allowed on 25.01.2002. In view of the same, the suit is not barred by
limitation as contended by the defendants. Point No.(iv) is answered
accordingly.
v) In Consolidated Engineering Enterprises1 relied upon by
the defendants, the case pertains to the Arbitration and Conciliation
Act, 1996. In the said case, whether the provision of Section 14 of the
Limitation Act would be applicable to an application submitted under
Section – 34 of the Arbitration and Conciliation Act, 1996 for setting
aside the Award passed by the Arbitrator. As per Section 34 (3) read
with the proviso makes it abundantly clear that the application for
setting aside the award on the grounds mentioned in sub-section (2)
will have to be made within three months. The period can further be
extended, on sufficient cause being shown, by another period of 30
days but not thereafter. Thus, as far as application, for setting aside
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CCCA No.160 of 2006 & 131 of 2009
the award is concerned, the period of limitation prescribed is three
months which can be extended by another period of 30 days, on
sufficient cause being shown to the satisfaction of the Court. Section –
29 (2) of the Limitation Act inter alia provides that where any special
or local law prescribes for any suit, appeal or application, a period of
limitation is different from the period of limitation prescribed by the
Schedule. The Arbitration and Conciliation Act, 1996 is a specific
legislation excludes applicability of general provisions. In the present
case, the suit was filed under the provisions of CPC. Therefore,
Limitation Act, 1963 applies. Thus, the said decision is inapplicable
to the facts of the present case.
vi) In State of Uttar Pradesh v. Nawab Hussain4 relied upon
by the defendants, the suit hit was dismissed on the ground that it was
hit by res judicata. In the case on hand, though the plaintiff sought
two reliefs in the writ petition with regard to quashing of the Circular
dated 17.05.1995 and consequential direction for payment of the
aforesaid amount, the said writ petition was dismissed. In the appeal
filed by the plaintiff, though the said circular was quashed, suit claim
was not granted. However, it was observed that all other contentions
4
. (1977) SCC 2 806
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CCCA No.160 of 2006 & 131 of 2009
raised by the parties are left open to be agitated at an appropriate
stage. Thus, suit claim was not granted and there was no observation
or finality with regard to the amount due and the suit was filed for the
said amount, the same would not hit by res judicata. Thus, this
decision is also not applicable to the facts of the present case.
Point Nos.(iii) & (v):
15. Learned trial Court having considered the entire evidence,
both oral and documentary, decreed the suit and there is no error in it.
However, learned trial Court granted future rate of interest @ 6% per
annum on the principal amount from the date of suit till realisation.
Challenging the said rate of interest, the plaintiff filed CCCA No.131
of 2009.
i) It is the specific contention of the plaintiff that the
transaction between the plaintiff and the defendants is a commercial
transaction regulated by the Statute, namely the Interest on Delayed
Payments to Small and Ancillary Industrial Undertakings Act, 1993 as
amended by Act No.23 of 1998, as such, it is entitled to the interest at
the rate of 1½ time of prime lending rate charged by the State Bank of
27
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CCCA No.160 of 2006 & 131 of 2009
India for the reason that the plaintiff is a Small Scale Industry. To
show that the plaintiff is a Small Scale Industry, it has filed Ex.A25,
certificate of registration as a Small Scale Industrial Unit in the year
1984. The defendants did not adduce any rebuttal evidence on the
said aspect. Therefore, it can be said that the plaintiff is a Small Scale
Industrial Unit.
ii) Now, coming to the rate of interest to which the plaintiff is
entitled to. The plaintiff filed statement dated 22.06.2007 issued by
the State Bank of India, Anakapalle Branch, wherein the Bank
furnished the SBI Prime Lending Rates (SBAR) for the period from
01.04.2002 till 22.06.2007. The same is relevant and extracted as
under:
S.No. Date w.e.f. Rate of interest
01. 01/04/2002 11.50
02. 01/11/2002 11.25
03. 05/05/2003 11.50
04. 01/01/2004 10.25
05. 01/05/2006 10.75
06. 02/08/2006 11.00
07. 27/12/2006 11.50
08. 20/02/2007 12.25
09. 09/04/2007 12.75
iii) Section – 3 deals with ‘liability of buyer to make payment’.
The same is relevant and is extracted as under:
28
KL,J & VRKR,J
CCCA No.160 of 2006 & 131 of 2009“3. Liability of buyer to make payment.-Where any supplier
supplies any goods or renders any services to any buyer, the
buyer shall make payment therefor on or before the date agreed
upon between him and the supplier in writing or, where there is
no agreement in this behalf, before the appointed day:
Provided that in no case the period agreed upon between
the supplier and the buyer in writing shall exceed one hundred
and twenty days from the day of acceptance or the day of
deemed acceptance.”
iv) Section – 4 of the Act, 1993 deals with ‘date from which
and rate at which interest is payable’ and the same is relevant and is
extracted as under:
“4. Date from which and rate at which interest is payable.-
Where any buyer fails to make payment of the amount to the
supplier, as required under section 3, the buyer shall,
notwithstanding anything contained in any agreement between
the buyer and the supplier or in any law for the time being in
force, be liable to pay interest to the supplier on that amount
from the appointed day or, as the case may be, from the date
immediately following the date agreed upon, at one and a half
time of Prime Lending Rate charged by the State Bank of India.
Explanation .-For the purposes of this section, “Prime
Lending Rate” means the Prime Lending Rate of the State Bank
of India which is available to the best borrowers of the bank.”
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CCCA No.160 of 2006 & 131 of 2009
v) Section – 5 deals with ‘liability of buyer to pay compound
interest’. The same is relevant and extracted as under:
“5. Liability of buyer to pay compound interest.-
Notwithstanding anything contained in any agreement between a
supplier and a buyer or in any law for the time being in force,
the buyer shall be liable to pay compound interest (with monthly
interests) at the rate mentioned in section 4 on the amount due to
the supplier.”
vi) Section – 6 deals with ‘recovery of amount due’. The same
is relevant and extracted as under:
“6. Recovery of amount due.- (1) The amount due from a
buyer, together with the amount of interest calculated in
accordance with the provisions of sections 4 and 5, shall be
recoverable by the supplier from the buyer by way of a suit or
other proceeding under any law for the time being in force.
(2) Notwithstanding anything contained in sub-section (1),
any party to a dispute may make a reference to the Industry
Facilitation Council for acting as an arbitrator or conciliator in
respect of the matters referred to in that sub-section and the
provisions of the Arbitration and Conciliation Act, 1996 (26 of
1996 shall apply to such dispute as if the arbitration or
conciliation were pursuant to an arbitration agreement referred
to in sub-section (1) of section 7 of that Act.”
30
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CCCA No.160 of 2006 & 131 of 2009
vii) In view of the above, Section – 4 of the Act, 1993 provides
that where a buyer fails to make payment to a supplier (a small-scale
industrial undertaking) within the prescribed period, the buyer is liable
to pay interest on the delayed amount. The rate of interest is
specifically fixed as 1½ times of the Prime Lending Rate (PLR)
charged by the State Bank of India. If the buyer fails to make
payment within this period, the buyer becomes statutorily liable to pay
interest on the delayed amount. The interest is not discretionary but
mandatory. Normally, under Section – 34 of the Civil Procedure
Code, Courts may grant reasonable interest (often around 6%) after
the filing of the suit. However, the Act, 1993 is a Special Statute. It
overrides general provisions relating to interest.
viii) Where a special Law prescribes a specific rate, the Court
must follow that statutory mandate instead of applying the general
discretion under CPC. The Legislative objective behind the Act, 1993
is to protect Small Scale Industrial Units from financial hardship, to
ensure timely payments and to penalize buyers, who make delay
payment. Granting only 6% interest defeats this purpose. In the
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CCCA No.160 of 2006 & 131 of 2009
present case, the transaction is governed by the Interest on Delayed
Payments to Small and Ancillary Industrial Undertakings Act, 1993.
ix) As per the Interest on Delayed Payments to Small Scale and
Ancillary Industrial Undertakings Act, 1993, as amended by Act
No.23 of 1998, the defendants being the buyers must pay the price
within the prescribed period. If payment is delayed, statutory interest
accrues automatically. The liability is continuing in nature. Thus, the
plaintiff, being a Small Scale Industrial Unit, is entitled to interest at
1½ times the Prime Lending Rate of the State Bank of India with
monthly rests. The trial Court erred in granting only 6% interest,
which is contrary to the statutory mandate. Hence, the decree should
be modified to award interest in accordance with the provisions of the
Act, 1993 until realization of the amount.
x) In Shanti Conductors Private Limited v. Assam State
Electricity Board5, the facts of the case are that on 31.3.1992, the
Electricity Board placed an order for supply of material for Rs.1.22
Cores. The supplies were to be made between June and December,
1992. On 13.5.1992, another order was placed by the said Board for a
5
. (2019) 19 SCC 529
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CCCA No.160 of 2006 & 131 of 2009
total of Rs.32.49 lakhs and goods were to be made between January
and February, 1993. On 23.09.1992, the President of India
promulgated an Ordinance i.e., the Interest on Delayed Payments to
Small Scale Ancillary Industrial Undertakings Ordinance, 1992.
Subsequently, on 02.04.1993, the interest on the said Act, 1993 was
enacted and it was deemed to have come into force w.e.f. 23.09.1992.
Meanwhile, the said Company supplied the material on 04.10.1993.
On 05.03.1994, the entire payment of Rs.2.15 Crores was received by
the said Company. On 10.01.1997, the said Shanti Conductors filed a
suit for recovery of Rs.53.68 lakhs claiming interest on delayed
payments. The said suit was decreed. The Board filed appeal before
the High Court of Gauhati. The Division Bench referred the matter to
full Bench. The Full Bench after framing certain questions answered
the reference holding that a suit for interest could be filed. Act, 1993
is also applicable to contracts entered into prior to 23.09.1992. Interest
would be calculated from 23.09.1992 till the payment is made to the
supplier. Then, the Board filed an appeal before the Hon’ble Supreme
Court, wherein the Apex Court held that Act, 1993 has no
retrospective application and that supplier has an accrued right to
claim a higher rate of interest in terms of Act only with regard to sale
33
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CCCA No.160 of 2006 & 131 of 2009
agreements entered after the date of commencement of Act i.e.,
23.09.1992. Whereas, in the present case, the transactions covered by
15 purchase orders were between 19.08.1992 and 11.08.1994 and the
supplies must have made even after 19.08.1992 only. That is to say,
by the date of supplies made by the plaintiff, the Act, 1993 came to
force. Further, in the present case, the plaintiffs claimed not only the
principal amount, but also interest. In the aforesaid decision, the suit
was filed exclusively for the interest accrued on delayed payments.
Therefore, this decision would not render any assistance to the
defendants.
16. For the foregoing discussion, this Court is of the considered
view that the defendants failed to make out any case to set aside the
impugned judgment and decree, and on the other hand, the plaintiff
has established its case for entitlement of interest as prayed by them.
Point Nos.(iii) & (v) are answered accordingly.
17. The appeal filed by the defendants in C.C.C.A. No.160 of
2006 is dismissed, confirming the judgment and decree dated
27.01.2006 passed by learned XI Additional Chief Judge (fast Track
Court), City Civil Court, Hyderabad, in O.S. No.362 of 2002, to the
34
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CCCA No.160 of 2006 & 131 of 2009
extent of suit claim of Rs.68,22,298/- and the costs thereon, whereas
the appeal filed by the plaintiff in C.C.C.A. No.131 of 2009 is allowed
setting aside the judgment and decree dated 27.01.2006 to the extent
of awarding rate of interest @ 6% per annum on the principal amount
of Rs.15,20,905/-. However, this Court grants the interest at the rate
of one and half times the Prime Lending Rate charged by the State
Bank of India from the date of suit till realization on the principal
amount of Rs.15,20,905/-. In the circumstances of the case, there
shall be no order as to costs.
As a sequel thereto, miscellaneous applications, if any, pending
in the appeals shall stand closed.
_________________________________
K. LAKSHMAN, J
_________________________________
VAKITI RAMAKRISHNA REDDY, J
7th April, 2026
Mgr
