Transfer Of Proceedings U/S 105(1) Of AP Reorganisation Act Is Only In One Direction; From Andhra Pradesh To Telangana: Telangana HC

The Telangana High Court clarified that the transfer of proceedings is only in one direction i.e., from Andhra Pradesh State to Telangana State under Section 105(1) of the Andhra Pradesh Reorganisation Act, 2014.

The Court was deciding a commercial court appeal arising out of a judgment of the Commercial Court, Hyderabad in a suit for recovery of Rs. 38,90,99,890/- with interest pendente lite and future interest.

A Division Bench of Justice Moushumi Bhattacharya and Justice Nagesh Bheemapaka observed, “… the transfer of proceedings contemplated under section 105 of The Reorganisation Act, 2014, pertains to proceedings from the erstwhile State of Andhra Pradesh to the State of Telangana provided the subject matter exclusively falls within the State of Telangana. This would be clear also from section 105(1) of the 2014 Act. Therefore, the transfer is only in one direction, i.e., from the State of Andhra Pradesh to the State of Telangana, if falling under section 105(1) and not the other way around.”

The Bench added that the contention that the Suit should have been transferred from Telangana to Andhra Pradesh (in the reverse direction) is not within the contemplation of Section 105(1) of the 2014 Act and is therefore without basis.

Senior Advocate Kishore Rai Sohni appeared on behalf of the appellant while Senior Advocate Avinash Desai appeared on behalf of the respondent.

Facts of the Case -

The Commercial Court decreed the Suit in favour of the respondent company/plaintiff, holding that it is entitled to recover an amount of Rs. 38,90,99,890/- and is also entitled for interest @ 15% p.a. during the pendency of the Suit and interest @ 6% p.a. till realization of the suit debt on the principal sum. The appellant company/defendant was also directed to pay costs. The appellant, therefore, challenged this judgment on three grounds. The senior counsel for the appellant submitted that the respondent was appointed to execute a drinking water project at Kadapa, which is presently in Andhra Pradesh and hence the Suit would be hit by Section 105 of 2014 Act.

It was submitted that the Suit should have been transferred to the appropriate Court in Andhra Pradesh as per the Central Government Notification which was done in similar Suits pending on the appointed date under the 2014 Act. The third point taken on behalf of the appellant was that the Commercial Court could not have awarded pendente lite interest @ 15% p.a. on the R.A. Bills amounting to Rs. 19,06,73,561/-. He relied on Section 34 of the Code of Civil Procedure, 1908 (CPC) to urge that the interest awarded is unreasonable since it was awarded outside the purview of the said Section.

The High Court in view of the above facts, noted, “… there is no doubt that the respondent/plaintiff was entitled to claim interest on the admitted amount for non-payment of the three RA bills since the RA bills were raised during 2008-2010 and the Suit was filed eight years after the first RA bill. In any event, the respondent is entitled to claim interest even in the absence of any interest clause in the Agreement. The Court agrees with the contention of the respondent that interest @ 15% p.a. during the pendency of the Suit is reasonable in respect of commercial transactions as contemplated by the Agreement dated 24.09.2007.”

The Court elucidated that the object of awarding interest is to put a party back to the same position as the party was before the breach occurred and to mitigate the financial damage suffered by the party.

“It is undisputed that the respondent was not only made to wait for payment for eight long years i.e., till the claim made in the Suit, but also that the respondent was forced to negotiate with the appellant for payment and write innumerable letters to the appellant for clearing the four RA bills”, it added.

The Court, therefore, held that the respondent/plaintiff was not only entitled to recover the money as paid for in the Suit but was also entitled to interest awarded by the Commercial Court in the impugned judgment.

“It is also relevant to state that the appellant did not take any objection with regard to lack of jurisdiction of the Commercial Court on the ground of The Reorganisation Act, 2014 before the Commercial Court itself. The third issue framed is whether the Civil Court would have the jurisdiction to entertain the claim of the plaintiff as with regard to the Arbitration Clause in the Agreement between the parties. The appellant/ defendant’s contention before the Trial Court was that the Suit was not maintainable in view of the Arbitration Clause. Therefore, the plea of lack of jurisdiction under the 2014 Act is a new plea taken by the appellant only in the Appeal”, it further noted.

Accordingly, the High Court dismissed the appeal and refused to interfere with the findings of the Commercial Court.

Cause Title- Andhra Pradesh Industrial Infrastructure Corporation Ltd. v. M/s. NCCIVRCLSMC JV

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