Shree Digvijay Cement Co Ltd vs. District Development Officer

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

FIRST APPEAL NO. 4812 of 2010

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE JAYANT PATEL

and HONOURABLE MR.JUSTICE Z.K.SAIYED

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• 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
• 2 To be referred to the Reporter or not ?
• 3 Whether their Lordships wish to see the fair copy of the judgment ?
• 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?
• 5 Whether it is to be circulated to the civil judge ?

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SHREE DIGVIJAY CEMENT CO LTD....Appellant(s) Versus DISTRICT DEVELOPMENT OFFICER & 1....Defendant(s)

============================================================== Appearance:

NANAVATI ASSOCIATES, ADVOCATE for the Appellant(s) No. 1 MR DHIRENDRA MEHTA WITH MS KHYATI P HATHI, ADVOCATE for the Defendant(s) No. 12 ==============================================================

CORAM: HONOURABLE MR.JUSTICE JAYANT PATEL and HONOURABLE MR.JUSTICE Z.K.SAIYED

Date : 21/08/2013

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE JAYANT PATEL)

• 1. The present appeal is directed against the judgment and decree passed by the trial court/lower court in Special Civil Suit No.133/07 whereby the trial court has dismissed the suit.
• 2. The short facts of the case are that as per the plaintiff, which is the registered company under the Indian Companies Act, it has factory at Digvijaygram wherein it is manufacturing cement. As per the plaintiff, the lands for factory premises as well as the residential colony were granted on lease bases by the then State of Nawanagar in the year 1944, prior to the independence of the country. The area of the factory is declared as a separate revenue unit named as Digvijaygram and the said revenue unit has also been constituted as a gram under the Gujarat Panchayats Act (hereinafter referred to as the "Act"). It is the case of the plaintiffappellant that water was to be supplied by the then State of Nawanagar so that industry can meet with the requirement for the industrial purpose as well as for drinking purpose. Water works is situated at village Shapar which is at a distance of 7 kms from the factory premises and therefore, the waterline/pipeline has been laid by the Government and the same was being maintained by the Government. However, in the year 1967, the plaintiffappellant requested the Government to handover the maintenance of the said water works in order to ensure the strict and uninterrupted water supply. It is the case of the plaintiff

that the Government agreed for such purpose and the agreement was also made between the plaintiff and District Panchayat, whereby the annual amount for water was agreed to be paid at Rs.500, which was subsequently increased to Rs.750 per annum. On 30.07.1977, the District Panchayat decided to charge Rs.1.50 for 1000 gallon of water and the plaintiff contested the said action of the defendant Panchayat by preferring Special Civil Suit No.105/77 wherein ultimately vide judgment and decree dated 23.08.1984, the suit of the plaintiff was decreed and the resolution of the defendant Panchayat dated 30.07.1977 was declared as null and void. The defendant carried the matter in appeal before this Court being First Appeal No.1585/84 and the same was pending on the date when the suit came to be filed by the plaintiff. In the said proceeding of First Appeal No.1585/84, the plaintiff at the stage of interim stay, carried the proceedings in Letters Patent Appeal, and ultimately, the plaintiff paid the sum of Rs.11.50 lakh as per the direction of this Court in the said proceeding but the fact remains that as per the plaintiff, the First Appeal was pending on the date of the suit. As per the plaintiff, the defendant Panchayat had filed the another suit being Special Civil Suit No.105/83 for claiming a sum of Rs.6,55,067 from the plaintiff wherein the plaintiff filed counter claim for the sum of Rs.6,03,010.20 towards charges for supplying water to Sikka and other villages upto 1993 and the said suit was also pending on the date when the present suit came to be filed.

• 3. The District Panchayat vide letter dated 09.02.1998, called upon the plaintiff to pay the sum of Rs.19,28,847.62 towards water charges and the same by subsequent letter dated 04.05.1999 was enhanced to Rs.34,97,802 as charges upto 01.01.1992 with interest at the rate of 24% p.a. Thereafter, as per the plaintiff, the sum of Rs.90.50 lakhs was demanded as the rent of the pipeline used from October 1991 to December 1997. Subsequently, there were also other correspondences by the District Panchayat calling upon the plaintiff to pay a amount of Rs.1,02,36,600 by addition of the interest at the rate of 24% p.a. and the plaintiff was threatened that if the amount is not paid within 30 days, the properties of the plaintiff will be attached under the Bombay Land Revenue Code. It is under these circumstances, the plaintiff had filed Suit for the declaration that the demand of Rs.34,97,802 towards so called water charges and Rs.1,02,36,600 towards so called rent of using pipeline raised by the DDO be declared as illegal, ultra vires and without jurisdiction and unauthorised.
• 4. The defendant resisted the suit and contended inter alia that as per the agreement dated 23.09.1972 between the plaintiff and defendant,

the management of Shapar Water Works was handed over to the plaintiff for a period of 5 years but the ownership is with the defendants. As per the defendants, as the due water charges were not paid, the defendants had the right to recover the water charges. It was also submitted that number of notices were given to the plaintiff to pay the outstanding amount of the rent but the amount was not deposited and therefore, the notice was issued communicating that the recovery shall be made as per the Land Revenue Code. The Trial Court framed the issues and thereafter, the parties were given opportunity to lead the evidence. Ultimately, the Trial Court dismissed the suit by the impugned judgment. Under the circumstances, the present appeal before this Court.

• 5. We have heard Mr. K.S. Nanavati, learned counsel appearing with Mr.Gandhi for the appellant, Mr.Dhirendra Mehta with Ms. Hathi for the respondents.
• 6. Before we proceed to consider the further aspects, it may be recorded that as declared by the learned counsel appearing for the appellant, pending the litigation, there was settlement on the aspect of payment of water charges and hence, it was submitted on behalf of the appellant that the present appeal is limited to the rent of the pipeline only. Under the circumstances, in the present appeal, we are required to examine the

aspect of authority on the part of the District Panchayat to recover the rent of pipeline and if yes, to what extent and whether the rate of interest at which the principal amount of rent is sought to be recovered can be said as reasonable or warranted by the statute or not?

• 7. We have considered the record and proceeding and the documentary evidence of the paper book made available by the learned counsel appearing for both the sides.
• 8. As such, in the evidence before the trial court, on behalf of the appellant, it was conceded that if th rent of pipeline is fixed at Rs.45,000 per month, the appellant company is agreeable. In the further examinationinchief on behalf of the plaintiff, Mr.Chensinh Raval Amarsinhji Jasol at exhibit 65, a categorical statement has been made by referring to the document at Exhibit 74 which was received by the plaintiff under the Right to Information Act. As per the said report exhibit 74, the rent was assessed at Rs.41,447 and on behalf of the plaintiff it was declared that plaintiff has no objection in giving the said rent amount. It was also stated that if the rent is fixed as per the report of the committee, the plaintiff is agreeable to pay the amount and the dispute for water charges is already settled. The aforesaid shows that, it has transpired during the course of the evidence that the plaintiff was agreeable to pay the amount as per

the report of the committee, exhibit 74. The perusal of the report dated 30.09.2005 at exhibit 74 on the backside of the document, shows that the committee comprising of Executive Engineer, Panchayat Irrigation, Executive Engineer, Panchayat, Road and Building and the Accounts Officer, assessed the monthly rent at Rs.41,447 and yearly rent of Rs.5,21,364 and thereafter, opined that the monthly rent of Rs.45,000 should be recovered towards the utilisation of the pipeline. In the said report, it was also stated that through the very pipeline, the water is being supplied to the other villages, should also be continued.

9. In our view, the aforesaid evidence on record shows that the appellantorig. plaintiff did show willingness to pay the aforesaid rental amount as per the report of the committee, which was suggested at Rs.45,000 per month. Whereas, as per the respondentsdefendants, monthly amount was fixed at Rs.94,000. The calculation for the assessment of the monthly rent has come in the evidence by the documents exhibits 120 to 129. The perusal of the document at exhibit 121 shows that the total cost arrived at is on the premise that as per the standard norms, the estimated cost of the storage tank is Rs.10,20,000/ and the estimated cost of the pipeline was Rs.82,29,000, total Rs.92,46,000. If the said document is considered with the report of the committee at exhibit 74, it appears that the estimated cost of the pipeline as per the said committee is at Rs.89,89,400. However, another aspect which deserves to be recorded is that in the document at exhibit 121, 2% depreciation of the cost is added, whereas as such, the amount of depreciation was required to be excluded. The said is apparent error from the document at exhibit 122. If the amount of depreciation of Rs.1,84,920 is deducted, the net amount of cost may come to Rs.90,61,080 and if rounded off, it would be Rs.90,00,000. If Rs.90,00,000 is taken as the basis, 10% of the estimated cost would come to Rs.9,00,000. So far as 2% by way of depreciation is concerned, the same is not to be added but as observed earlier, is to be deducted. If Rs.9,00,000 is considered as the annual rent, the amount of rent would come to Rs.75,000 per month.

10. At this stage, two aspects are required to be considered and for which, the evidence has come on record and it is rather an admitted position that the pipeline was laid down since the period of the then State of Nawanagar. In any case, it is older by more than 2530 years. If the normal depreciation is considered ever year, by now, it may have a negligible value. The another aspect is that through the very pipeline, it is not that the company itself is only getting water, but the water is being is being supplied to the nearby villages also. Therefore, the utilisation of the pipeline by the appellant company is not to the extent of 100% but could be said as lesser than that. The additional aspect which has come in the evidence is that the maintenance expenses for the water works and as that of the pipeline both are being borne by the appellant company and the District Panchayat is not bearing any expenses for maintenance of the water works as well as for the pipeline. Taking into consideration the aforesaid aspects, if as observed earlier, 75,000 per month could be considered as the cost, the reasonable deduction can be made available to the appellant. If reasonable deduction is considered at the rate of 10%, such amount may come to Rs.67,500 per month. Hence, after taking into consideration the aforesaid aspect during the course of hearing, by rounding the said figure to Rs.68,000 per month, the issue for calculation was deliberated and it was put to the learned counsel for the appellant that whether company would be agreeable for the payment of monthly rent of Rs.68,000 or not as against the amount of Rs.45,000 per month accepted and declared before the trial court.

11. We may record that thereafter, the learned counsel has tendered affidavitcumundertaking on behalf of the appellant company stating that the appellant company is willing to settle the dispute in appeal by making payment of Rs.68,000 per month.

12. It may also be recorded that so far as the

respondent District Panchayat is concerned, it was submitted by the learned counsel Mr.Mehta that the District Panchayat is leaving the matter to the Court for appropriate adjudication of the amount.

• 13. In our view, considering the of the age of the pipeline and the water works, utilisation thereof, supply of the water to the nearby villages and other residents of the nearby villages and the maintenance expenses borne by the appellant Company the estimated cost arrived at by the officers of the Government upon which the reliance has been placed by the District Panchayat, it cannot be said that the amount of Rs.68,000 per month as monthly rent of the pipeline would be inappropriate but on the contrary, as per the evidence on record and more particularly the documents at exhibits 121 to 127, we find that the appropriate monthly rent should have been Rs.68,000 per month and not the amount of monthly rent of Rs.94,000 as assessed by the defendants.
• 14. The aforesaid would lead us to examine the aspects about the chargeability of the interest.
• 15. There is considerable force in the contention of the learned counsel for the appellant that recovery of monthly rent for utilisation of the pipeline could fall as by way of contractual obligation and therefore, if the Panchayat is to

be paid the amount, it could not be said to be in discharge of the statutory liability.

16. Mr.Mehta, learned counsel appearing for the respondents has not been able to show any provision of the Act or the Rules whereby the payment of monthly rent could be termed as a statutory liability upon the person using the same. If the relationship stands as that of the contractual obligation, it may be that the Panchayat would have the authority to recover the amount but such exercise of the power for recovery of the amount could be termed as only for the principal amount. As regards the interest is concerned, Mr.Mehta, learned counsel appearing for the respondent District Panchayat has not been able to show any provision whereby it has been expressly provided that the Panchayat would be entitled to recover the interest at the rate of 24% p.a. on the alleged outstanding amount which falls in the arena of contractual obligation or that the panchayat had to recover the amount under the agreement or the contract. In absence of any express provision shown to this Court for chargeability of the interest at the rate of 24% p.a., the action of the District Panchayat for charging the interest at the rate of 24% p.a. cannot be termed as legal and valid. It is by now well settled that if the interest is expressly provided by way of contractual agreement or by way of statutory provision, such may be permitted to be recovered but in absence thereof, interest can be assessed either by way of compensatory measure for deprivation of the money during the said period or could be considered on the basis of the interest rates prevailing during the said period by way of investment in the banks, etc.

• 17. In our view, if the aforesaid aspects are taken into consideration, reasonable interest to which the Panchayat could be said as entitled to charge would be 12% p.a. and not 24% p.a. as sought to be recovered by the impugned notices.
• 18. At this stage, it may also be recorded that like the principal amount, after arguments were concluded, this Court had called upon the appellant to inquire as to whether they would be agreeable to pay the interest at the rate of 12% p.a. or not. In response thereto, the additional affidavit has been filed on behalf of the appellant company showing their willingness to pay the interest at the rate of 12% p.a. on the arrears. We may also record that on behalf of the District Panchayat, the matter was left to the Court, more particularly on account of the nonavailability of any express statutory provision made for chargeability of the interest at the rate of 24% p.a. Under these circumstances, we find that the Panchayat at the most can recover the interest at the rate of 12% p.a. on the principal amount of monthly rent and also on the unpaid amount of interest minus the

amount already paid from time to time pursuant to the interim order passed in the present litigation.

• 19. We may now further consider the impugned judgment of the trial court. As such, if the reasons recorded at paragraph 19 of the judgment are considered, it appears that the learned Judge did find that the amount of Rs.45,000 per month which was calculated as the rental amount by the committee should have been accepted by the defendants. However, in the final operative portion of the judgment, there is no relief granted even to that extent. Under the circumstances, it can be said that the reasons recorded in the judgment are not in conformity with the operative portion recorded by the trial court.
• 20. On the aspect of evidence recorded, we do not find that discussion is required by dealing with the findings recorded by the trial court, the reason being that this Court while sitting in appeal, can reappreciate the evidence on record and arrive at the finding other than as recorded by the trial court.
• 21. In view of the evidence as considered by us hereinabove, we find that the demand of the District Panchayat could be maintained to the extent of monthly rent of Rs.68,000 per month and the interest at the rate of 12% p.a. on the

monthly rent of Rs.68,000 per month. Therefore, the action of the District Panchayat by the impugned notice for recovery of the amount of monthly rent exceeding Rs.68,000 per month for the period from 1991 onwards and the interest exceeding 12% p.a. on the unpaid amount, both could be said as illegal. The judgment and Decree of the Trial Court for dismissal of the suit in view of the reasons recorded by us hereinabove cannot be maintained and the trial court ought to have allowed the suit to that extent.

• 22. In view of the aforesaid observations and discussions, the impugned judgment and decree of the Trial Court is quashed and set aside with the further order that the suit of the plaintiff shall stand allowed as per the following direction
  • (1) It is held and declared that the action of the District Panchayat by the impugned notices for recovery of the monthly rent of the pipeline is maintained for Rs.68,000 per month from 1991 onwards and the action for recovery of the amount exceeding the amount of Rs.68,000 per month is declared illegal. Further, it is also held that the action of the respondentsdefendants for charging interest can be maintained to the extent of 12% p.a. and charging of interest exceeding 12% p.a. can be said as illegal.

• (2) It is further observed and directed that as on behalf of the appellant company, by way of an affidavitcumundertaking, a declaration is made before this Court to pay the amount of rent at the rate of Rs.68,000 per month from the year 1991 onwards with the interest at the rate of 12% p.a. from the date on which the rent became due until it is paid after giving set off of the amount already paid, the appellant Company shall pay the amount to the defendants in four installments of six week each of all the arrears of the principal and the interest due and shall continue to pay the monthly rent at Rs.68,000 per month. If the aforesaid amount is not paid, the defendants shall be at the liberty to recover the outstanding amount with the additional penal interest at the rate of 3% p.a. and shall also be at the liberty to take appropriate action for prohibiting the utilisation of the pipeline by the appellant in addition to the other remedy available to the defendant District Panchayat in accordance with law.

• 23. Appeal is disposed of accordingly. Decree accordingly. Considering the facts and circumstances, no order as to costs. R & P to be returned to the trial court.

(JAYANT PATEL, J.)

(Z.K.SAIYED, J.)

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