Authority: High Court of Chhattisgarh at Bilaspur

Order Date: 5-10-2026

Case Overview

  • Parties: Food Corporation of India (FCI), a Central Government undertaking (Defendant/Appellant) and M/s Suraj Besan & Rice Mill, a partnership firm (Plaintiff/Respondent).
  • Background: In August 1998 FCI issued Tender No. QS‑9(3‑B)/97‑98 for the sale of damaged grains stored in Raipur depots. The partnership submitted a tender for 1,280.41 metric tons (11,415 quintals) valued at ₹65,38,110.
  • Acceptance: FCI accepted the tender via telegram on 11‑11‑1998; the acceptance letter reached the plaintiff on 16‑11‑1998.
  • Payment & Tax Dispute: Plaintiff requested installment payment and waiver of commercial tax on 17‑11‑1998 and 18‑11‑1998. FCI later informed (via fax on 23‑11‑1998) that commercial tax was payable. Plaintiff contested the tax, sending a legal notice on 24‑11‑1998. FCI removed the tax on 4‑1‑1999.
  • Installments Paid by FCI: ₹25,00,000 on 7‑1‑1999, ₹30,00,000 on 8‑1‑1999, and ₹10,38,110 on 14‑1‑1999.
  • Billing Issues: Order bills No. 7479‑7493 included commercial tax and omitted interest and storage charges details. Final bill presented on 22‑2‑1999 reflected receipt of 11,414 quintals (18 kg) and delivery of 10,944 quintals (2 kg). A separate bill of ₹4,54,741 for the difference in goods and a security deposit of ₹5,000 were also presented.
  • Plaintiff’s Claim: Recovery of the outstanding amount (including alleged interest and storage charges) from FCI.
  • Trial Court Decree (29‑4‑2009): Awarded plaintiff ₹2,46,960 with interest at 12% per annum, deeming no justification for penal interest deduction.
  • Appeal Grounds: FCI argued that deductions were contractually justified, interest rate excessive, and that the suit was time‑barred.
  • Evidence: Plaintiff’s witness Atul Goyal (PW‑1) and defendant’s witness Smt. Lekha Chatterjee (DW‑1). Plaintiff produced 48 documents (Exs. P‑1 to P‑48); defendant produced one document (Ex.D‑1 – No Demand Certificate).
  • Key Findings on Appeal:
  • Commercial tax was deducted despite no contractual provision and was not deposited with the tax department, rendering the deduction unlawful.
  • Storage charges were levied despite the delay being attributable to FCI, not the plaintiff.
  • Section 34 of the Code of Civil Procedure permits interest up to 6% per annum unless a higher contractual rate is justified; no such justification was presented.

Final Outcome

  • The appellate court partially allowed the appeal.
  • The principal decretal amount of ₹2,46,960 is upheld.
  • The interest award is modified: plaintiff entitled to interest at 6% per annum (instead of 12%) on the ₹2,46,960 from the suit filing date 27‑03‑2002 until realization.
  • The decree is to be redrawn accordingly; all other terms of the trial court decree remain unchanged.

Topics: Interest Rate, Food Grain Procurement