2003 (11) TMI 630 - SC - Indian Laws

SC Adjusts Interest on Mesne Profits; Confirms Settlement Adjustment and Allows Partial Appeals with No Costs.

The SC upheld the HC's determination of mesne profits at Rs. 39,41,920/-. It modified the interest rate from 13% to 6% per annum on mesne profits and the ... Mesne profits - interest under unamended Section 34 CPC - calculation of interest on yearly accruals - amendment of plaint and its procedural consequences - illegal decree is a nullity - adjustment of admitted liability in accounts - goodwill as an asset of partnershipMesne profits - Commissioner's report - Quantum of mesne profits payable to the plaintiff as accepted by the High Court - HELD THAT: - The Court accepted the High Court's determination of the quantum of mesne profits after considering the accounts, the Commissioner's report and other material; there was no justification to reappreciate the evidence and the appellants' counsel indicated willingness to go by the Commissioner's report. The total mesne profits as fixed for decretal purposes is Rs. 39,41,920/-, exclusive of interest, and the High Court's approach to valuation and reliance on alternative valuation methods was held to be just and not to be interfered with. [Paras 7, 43, 51, 54]The High Court's finding as to the quantum of mesne profits is accepted and sustained.Interest under unamended Section 34 CPC - calculation of interest on yearly accruals - amendment of plaint and its procedural consequences - illegal decree is a nullity - Rate and method of computation of interest on the decretal amounts (mesne profits and accounts) - HELD THAT: - The Court held that suits instituted before the 1976 amendment to Section 34 CPC are governed by the unamended provision which caps post-decree interest at 6% per annum. The High Court's allowance of interest at bank commercial rates (and awarding interest beyond the amendment/pleaded claim) was procedurally impermissible because the decree exceeded the terms of the amendment allowed to the plaint and no opportunity was afforded to the defendants to contest the higher claim; therefore that part of the decree is illegal and a nullity. For mesne profits the Court directed interest to be calculated on a year-to-year basis (mesne profits accrue annually and interest is to be applied to amounts falling due at the end of each year) at 6% per annum, and on the lump sum final figure of Rs. 39,41,920/- simple interest at 6% per annum from 6.8.1986 till realization. Similarly, interest on the decree for accounts (para 18(b)) is fixed at 6% per annum from 5th May, 1969 till realization. [Paras 15, 16, 17, 21, 23]Interest on both mesne profits and account decrees is limited to 6% per annum; mesne profits interest to be computed annually on amounts accruing each year and on the final decretal sum from 6.8.1986 at 6% till realization; interest on the accounts decree to be at 6% per annum from 5.5.1969 till realization.Adjustment of admitted liability in accounts - goodwill as an asset of partnership - Adjustment of the admitted liability of late Pravinlal towards the partnership and entitlement to goodwill/share in other account items - HELD THAT: - The High Court's findings on account matters - including that the admitted loan liability (Rs. 4,13,364.24) stood adjusted as of 1972 and that the plaintiff was entitled to her share of goodwill calculated by accepted commercial methods - were examined and upheld. The Court declined to re-open factual/accounting conclusions reached by the High Court and the Commissioner where the High Court had considered the books, attendant irregularities, and alternative valuation methods; the award of a share in goodwill was held to be supported by the reasoning of the courts below. [Paras 69, 70, 71, 72, 75]The High Court's conclusions on adjustment of the admitted liability and on entitlement to goodwill and other account items are affirmed.Res judicata and appeal jurisdiction of Supreme Court - nullity of illegal decree - Whether dismissal of Special Leave Petition earlier bars reconsideration of High Court's interest order and whether the Court can entertain challenges to illegality - HELD THAT: - The Court clarified that dismissal of an SLP does not operate as an affirmation of the impugned judgment and is not res judicata; since these are full appeals after leave, the Supreme Court may examine the legality of the High Court's order. Decrees which are illegal are nullities and may be set aside; accordingly the Court set aside the portions of the High Court decree that awarded interest beyond what was permissible under the unamended Section 34 CPC and which were granted without giving the defendants opportunity to contest the excess claim. [Paras 18, 19, 20, 21, 22]Dismissal of an SLP does not preclude appellate scrutiny; illegal portions of the decree have been set aside as nullities.Final Conclusion: Appeals allowed in part: the High Court's quantification of mesne profits and account awards are sustained, but the rates and computation of interest are revised - interest on both the mesne profits and the accounts decree is fixed at 6% per annum with mesne profits interest to be computed year-by-year and simple interest at 6% on the final decretal sum from 6.8.1986 till realization; accounting adjustments and the award of goodwill are affirmed; appeals disposed accordingly with no order as to costs. Issues Involved:1. Determination of quantum of mesne profits payable to the respondent-plaintiff by the appellants.2. Rate of interest to be awarded on the decretal amount.3. Adjustment of admitted liability of Pravinlal towards the partnership firm in the sum of Rs. 4,13,364.24 paise.Summary:Point No. 1: Determination of Quantum of Mesne ProfitsThe liability to pay mesne profits is not disputed, only the amount payable is contested. The High Court appointed a Commission to determine the mesne profits, which reported a sum of Rs. 33,32,847.83. The High Court, after reviewing the Commission's report and other relevant materials, determined the total mesne profits as Rs. 39,41,920/-. The Supreme Court found no reason to differ with the High Court's findings and accepted the quantum of mesne profits determined by the High Court.Point No. 2: Rate of InterestThe original plaint claimed interest at 6% per annum. The High Court allowed an amendment to claim interest at 13% per annum in para 18(c) but not in para 18(b). The High Court awarded interest based on the rate charged by nationalized banks on commercial transactions, which was found to be incorrect. The Supreme Court held that interest should be calculated at 6% per annum on mesne profits on a yearly basis and on the lump sum amount of Rs. 39,41,920/- from 6th August 1986 till realization. Similarly, for the decree for accounts as per para 18(b) of the plaint, interest at 6% per annum on Rs. 1,23,111.37 from 5th May 1969 till realization was deemed appropriate.Point No. 3: Adjustment of Admitted LiabilityThe appellants argued for the adjustment of Rs. 4,13,364.24 paise liability of Pravinlal towards the partnership firm. The High Court found that this amount had already been adjusted. The Supreme Court upheld the High Court's findings, noting that the adjustment had been made as far back as 1972.Conclusion:The appeals were allowed to the extent of modifying the rate of interest awarded by the High Court. The decree for accounts and mesne profits was modified to award interest at 6% per annum instead of 13%. The Supreme Court upheld the High Court's findings on the quantum of mesne profits and the adjustment of Pravinlal's liability. The appeals were disposed of with no order as to costs.