IN THE HON’BLE HIGH COURT OF KARNATAKA

AT BENGALURU

Commercial Appeal under Section 13 (1) of the Commercial Courts,

Commercial Division and Commercial Appellate Division of High Courts
Act, 2015

IN THE HON’BLE COURT OF THE LXXXII ADDITIONAL CITY

CIVIL & SESSIONS JUDGE (COMMERCIAL COURT)
AT BENGALURU

Comm O.S No. 3343/ 1986

IN THE HON’BLE HIGH COURT OF KARNATAKA AT

BENGALURU

COM. AP NO. __________ / 2020

RANK OF THE PARTIES

Trial Court High Court

BETWEEN:

Karnataka Power Corporation Limited

A Government company incorporated
under the Companies act,
Office at- No.82, Shakthi Bhavan, Race
Course Road, Bangalore- 560001
Represented by its Authorised Signatory
Mr. D.Gange Gowda Defendant Appellant

AND:

TICIL (INSERT DETAILS)

 Plaintiff Respondent
MEMORANDUM OF COMMERCIAL APPEAL
UNDER SECTION 13 (1) OF THE COMMERCIAL COURTS,
COMMERCIAL DIVISION AND COMMERCIAL APPELLATE
DIVISION OF HIGH COURTS ACT, 2015

The Appellant most respectfully submits as under:

1. The address of the Appellant for the purposes of service of summons

and process by this Hon’ble High Court is as mentioned in the cause-
title above. Additionally, the Appellant may also be served through
their counsel, Ajay J. Nandalike, Manu K, Ashvini Patil, Tanya John,
Yashodhar Hegde, Adhbuth.J.Kaushik, K.M. Sreenath, Pratik Joshi and
Ayusshi Agarwal of M/s. Pragati Law Chambers, #5A, Bharat
Apartments, 44/1, Fair Field Layout, Race Course Road, Bangalore-
560 001.

2. The address of the Respondent for the purpose of service of summons,

notices etc., is as stated in the cause title above.

3. The present Appeal is most humbly preferred, being aggrieved by the

judgment dated 21.12.2019 (“Impugned Order”) passed in Com. O.S.
No. 3343/1986, by the Hon’ble Court of the LXXXII Addl. City Civil
& Sessions Judge at Bengaluru (C.C.H.83) (“Commercial Court”);
whereby the Respondent’s Suit has been erroneously partly allowed
and the Respondent has been entitled to recover Rs Rs.53,59,711.31/-
(Rupees Fifty Three Lakhs Fifty Nine Thousand Seven Hundred and
Eleven only) from the Appellant with future interest at the rate of 12%
per annum from the date of suit till the realization of the entire amount.
The Impugned Order is erroneous and unsustainable in fact and law.
The certified copy of the Impugned Order dated 21/12/2019 is herewith
produced as Annexure – A.

4. The averments made in the Appellant’s Written Statement may be read

as part and parcel of the instant appeal and for brevity, only the
relevant facts leading to the filing of the present Appeal are set out in
brief as below. For the convenience and ease of as well as uniformity
in reference, the parties to the present Appeal are being referred to
their ranks in the present Appeal. The copy of the Written Statement
filed by the Appellant in the suit bearing Com OS No. 3343/1986 is
produced herewith as Annexure- B.

BRIEF FACTS:

The suit was originally filed by the TICIL for judgment and decree to
pay Rs.1,64,74,147/- along with interest at the rate of 18% p.a. and for
permanent injunction restraining the defendant from enforcing the
Bank Guarantee No.31/72 dated 294/1972 issued by the Oriental Bank
of Commerce.

The suit is filed for recovery of monies under two heads – Payment due
on escalation of wage cost and additional work of overbreaks being
done by the Plaintiff. The first claim was raised on the basis that there
was a statutory revision in the minimum wages w.e.f.18.11.1974 by the
State Government and the Board of KPCL in their meeting held on
22.2.1978 resolved to grant escalation on the cost of labour due to
revision of minimum wages at the rate of 27.1785% of the cost of the
work done after 18.11.1974 in view of the escalation of the labour
payable under the living index formula and also 13.72% of the
escalation amounts payable due to revision of minimum wages as
additional costs of the social security benefits. On the basis of the same,
the 2nd Supplementary Agreement was entered into which made it
clear that the Plaintiff was entitled to the escalation. However, KPCL
did not pay the escalation despite various requests and hence the claim
has been made in the present suit. It was the case of KPCL that the
labour escalation has been given effected to by incorporating the same
in the cost of concrete. The Trial Court has upheld KPCL’s case and
rejected the case of TICIL by giving a finding that the labour escalation
was a part of the escalation provided in the schedule. On this basis, the
Trial Court has rejected the claim of Rs.72,89,933/- towards labour
escalation and Rs.10,00,178.90/- towards additional cost of social
security benefits relating to concreting works. As the finding is in
KPCL’s favour and no question of appeal arises in respect of the same,
the same is not examined in detail.
The second claim of TICIL was towards over-breaks which is
essentially ‘excess excavation’ on account of natural causes. KPCL had
agreed to pay for the over-breaks and had in fact paid
Rs.1,53,24,379.97/- which amounted to 80% of the overbreaks and the
balance amount of Rs.53,59,711.31/- was to be paid at the time of
conclusion of the Contract.

KPCL has admitted this fact in its affidavit evidence at para 6 and
elaborated as to why it is not liable to pay the said amount. The same is
extracted for ease of reference:

“6. The Defendant has assessed the extent of overbreaks that have
excavated due to geological reasons in the surge tank and pressure
shafts works and arrived at an amount of Rs.54.55 lakhs, which is the
only payable to the plaintiff subject to recovery of outstanding dues
from the plaintiff to the Defendant as per the terms of the agreement
pertaining to the suit contract. The Defendant is not obliged to pay this
amount to the Plaintiff in view of the fact that the Defendant has filed a
civil suit bearing OS No4173/1987 before this Hon’ble Court for
recovery of the sums due to the Defendant by the Plaintiff in respect of
Head Race Tunnel Contract”

This fact has been buttressed in the cross examination of DW-1 where
the witness has accepted that the Board of KPCL had agreed to pay the
over-breaks at page 19 of the deposition which is extracted
hereinbelow:
“Ex.P.3 is the second supplementary agreement. We admit its contents.
Ex.P.12 is written by the defendant to the plaintiff. I am aware of the
said letter. It is true that in Ex.P.12, it is mentioned that the Board has
approved to release the amount of Rs.54.55 lakhs towards overbreaks.
(Witness voluntarily says “The said release was subject to recovery of
Rs.28.83 lakhs which is subject matter of OS No.4173/1987”)
 The Trial Court has held that the stand of KPCL that the payment is
subject to OS No.4173/1987 is untenable at page 20 of judgment which
is extracted hereinbelow:
“… If really there is any dues payable by the plaintiff to the defendant
relating to another contract for construction of Head Race Tunnel, since
already defendant has filed suit OS No.4173/1987, defendant has to
prove its entitlement to recover the dues and therefore, defendant
cannot withheld this admitted liability / dues payable to the plaintiff
towards over breaks. Therefore, plaintiff is entitled to recover
Rs.53,59,711.31/- towards over-breaks.”

21. Being aggrieved by the Impugned Order passed by the learnt LXXXII
Addl. City Civil and Sessions Judge, (CCH-83), the Appellant has
preferred the present appeal on the following and among other grounds,
which are in the alternative and without prejudice to one another.

GROUNDS:

22. The Impugned Order is erroneous and bad in law as it is contrary to the
settled principles of law and is therefore liable to be set aside.

23. The Hon’ble Trial Court has failed to considered that the Respondent was
acting as an agent of the Appellant inasmuch as the scope of the
Respondent obligations included handling of the Appellant’s raw coal on
behalf of the Appellant (including taking delivery and disposing the raw
coal rejects) apart from the responsibility to wash the raw coal and supply
washed coal to the Appellant. The Respondent acted on behalf of the
Appellant in accepting the delivery of coal from WCL. The duty of the
Respondent to wash the coal on behalf of the Appellant and consequently
transport the same to RTPS in accordance with the Appellant’s
requirements on behalf of the Appellant. In terms of the Agreement, the
Respondent was obligated to dispose the coal rejects as per environmental
regulations. If the Respondent, without the knowledge of the Appellant,
has sold the coal rejects on its own account as a part of the business of the
agency, in such a case the Respondent is liable to refund the benefits of
the same in favour of the Appellant. Being an agent of the Appellant, the
 Respondent is liable to render proper accounts to the Appellant and the
Appellant is entitled to claim the same.

24. The Hon’ble Trial Court has failed to consider that as the Respondent was
merely acting as the Appellant’s agent, the raw coal which was handed
over to the Respondent became the property of the Appellant.
Consequently, the coal rejects which were generated were also the
property of the Appellant. The raw coal was handed over to the custody of
the Respondent specifically for the purpose of washing. The same
amounts to a bailment and the Respondent is accountable to the Appellant
for the entire extent of raw coal handed over to it and not just the washed
coal supplied by it. It is pertinent to mention herein that no title is created
in favour of the Respondent in respect of the raw coal. The Appellant is
entitled to all the monies received by the Respondent using the bailed
goods or the sale of the bailed goods.

25. The Hon’ble Trial Court has failed to consider that the contract of
bailment between the parties was for supply of washed coal and disposal
of rejects in conformity with the environmental regulations. The
Respondent was never the owner of raw coal as the Appellant did not sell
the rejects to the Respondent. The ownership of raw coal vested with the
Appellant at all times. Hence profits, if any, from the sale of coal rejects
must accrue to the Appellant. The right to disposal does not include the
right to sell inasmuch as the Respondent was only conferred a limited
contractual right to ‘dispose’. The Appellant has paid money to the
Respondent for such ‘disposal’. The goods were bailed to the Respondent
for such ‘disposal’. Hence the Appellant as a bailor is entitled to proceeds
from the sale of coal rejects which is a part of the goods bailed to the
Respondent. Hence, the Appellant is entitled to all proceeds generated by
the Respondent during the disposal of the coal rejects. The Respondent is
obligated to render proper accounts to the Appellant regarding the
proceeds generated by the sale of coal rejects.

26. The Hon’ble Trial Court has failed to consider fact that the coal rejects are
the property of the Appellant and the Respondent has unjustly enriched
itself by the sale of Appellant’s property. In this regard, it is also pertinent
 to note here that the Respondent has not only profited by the illegal sale of
coal rejects but also by the payment of consideration for disposal of the
coal rejects, at the cost of the exchequer. Hence the Appellant is entitled
to all the proceeds generated by the Respondent through the sale of the
coal rejects.

27. The Hon’ble Trial Court has failed to consider that regarding the
Principal amount, the Respondent has failed to produce any account sheet
showing the details of all the payments which have been made and has
chosen to claim that the invoices have not been paid without showing a
detailed account statement in respect of the transactions that have taken
place. Hence, the Respondent has failed to prove that the principal
amount in respect of the unpaid bills is also not paid.

28. The Hon’ble Trial Court has erred in allowing the recovery of interest to
be paid on the unpaid and paid bills. It is submitted that the Appellant is
not liable to pay the amounts to the respondent as, payment of interest
upon an interest is not permissible in law. The Hon’ble Trial Court has
erroneously without application of mind has entitled the respondent to
recover the monies from the Appellant.

29. The Hon’ble Trial Court has erred in charging high rate of interest at 18%
per annum. It is submitted that the Hon’ble Trial Court has not given any
reasons for charging the high rate of interest at 18% PA from the date of
the suit. It is also pertinent to mention herein that no speaking order on
such exorbitant rate of interest is also mentioned. Hence, the Hon’ble Trial
Court has erred on the above aspect.

30. The Hon’ble Trial Court has failed to consider that the bank guarantee was
supposed to be renewed in terms of the contract and the same has been
renewed by the Respondent periodically without any demur. When the
Respondent has acquiesced to the extension of bank guarantee from time
to time, to claim the extension of bank guarantee charges is not
permissible as the Respondent has accepted the same. Hence, the Hon’ble
Trial Court has erred in directing the Appellant to pay the bank guarantee
charges. Hence, aggrieved by the order passed by the Hon’ble Trial Court,
the Appellant has preferred this instant appeal
31. It is submitted that the instant appeal is filed well within the period of
limitation as prescribed under the law.

32. Each of the ground raised hereinabove is without prejudice to the other.
The Appellant craves the leave of this Hon’ble Court to alter/ delete/
amend or urge additional grounds at the time of hearing.

PRAYER

WHEREFORE, it is most humbly prayed that this Hon’ble Court be

pleased to:
a. Set aside the Impugned Judgement/Order dated 21/12/2019
passed in Com. O.S. No.3343/1986;
b. Call for records in Com. O.S. No.3343/1986 on the file of
LXXXII Addl. City Civil & Sessions Judge, Bangalore City
(CCH-83)
c. Pass such other orders as may be deemed fit in the facts and
circumstances of the case in the interest of justice and equity.

Date:
Place: Bangalore Advocate for the Appellant
Address for Service:
Pragati Law Chambers,
5A, Bharat Apartments,
44/1, Fair Field Layout,
Race Course Road,
Bangalore – 560 001.