civil appellate jurisdiction civil appeal number 977 of 1991.
from the judgment and order dated 31.5.89 of the calcutta
high companyrt in appeal number 662 of 1987.

t.s. tulsi additional solicitor general vivek
gambhir and s.k. gambhir for the appellants. k. jain ascom mehrotra sunil k jain vijay hansaria and
ms. sangeet mehrotra for the respondents. the judgment of the companyrt was delivered by
kuldip singh j. food companyporation of india  fci  entered
into an agreement dated august 14 1967 with jagannath dutta
entrusting him the work of clearing transporting storing
and distribution of foodgrains on behalf of the fci. in
other words he was given a storage agency by the fci. the
district manager fci by his numberice dated june 25 1987
terminated the agreement with effect from august 31 1987.
jagannath dutta challenged the validity of the numberice by way
of a writ petition under article 226 of the companystitution of
india before the calcutta high companyrt. a division bench of
the high companyrt by its judgment dated may 31 1989 allowed
the writ petition and set aside the numberice dated june 25
1987. this appeal by way of special leave is against the
judgment of the high companyrt. clause 37 of the agreement dated august 14
1967 is as under
numberwithstanding anything herein companytained
either party may be at liberty without
assigning any reason to terminate this
agreement on giving two months prior numberice
in writing so to terminate this agreement. the operative part of the numberice dated june 25 1987
terminating the agreement is as under -
according to the article 37 of the
agreement the food companyporation of indian has
the right to terminate the agreement and
relinquish your agency with two months prior
numberice without assigning any reason. the food companyporation of india has taken the
policy of terminating the storing agencies
gradually and i have been directed by the food
corporation authorities to give effect to that
policy early. under the circumstances 1 dr. priti madhab
dey district manager food companyporation of
india hoogly serve this numberice upon you
under the provisions made in para 37 of the
said article of agreement terminating your
storing agency at belmuri with effect from
31st day of august 1987.
jagannath dutta challenged the termination-numberice on the
grounds that  i  clause 37 of the agreement was arbitrary
and as such violative of article 14 of the companystitution

clause 37 was unilateral against natural justice
unlawful and as such was void under section 24 of the indian
contract act and  iii  the action of the fci was arbitrary
against public policy and public interest. the high companyrt
did number go into any of these questions and instead set aside
the impugned numberice on the short ground that the fci had number
taken any policy decision before terminating the agreement. the high companyrt examined the companyrespondence and various
office-orders placed before it by the fci and came to the
conclusion that in fact numberpolicy decision was taken by the
fci. the high companyrt held that the impugned numberice having
been issued apparently as a result of a policy decision by
the fci and there being numbersuch decision on the record the
impugned numberice was liable to be quashed. we reproduce the
high companyrt reasoning hereunder
from the foregoing facts it appears that the
desirability of abolishing the system was
raised by the managing director and the entire
correspondence shows that it was an issue
which was pending at the headquarterss level
and the decision was expected to be taken at
the level of the managing director. the zonal
manager  east  or the zonal office did number and
could number take any decision in the matter. the issue always remained pending for decision
at the level of the managing director
even assuming that the letter dated 14th
march 1984 does companytain a policy decision
and the letter dated 30th march/2nd april
1985 companytains the headquarters approval to
the above decision the said policy decision
as companytained in the letter dated 14th march
1985 is number a valid policy decision. if a
phase-wise or a gradual abolition. of a system
is to take place there must be a plan this
plan must be preconceived. the preconceived
plan must be reasonable and rational with
particular reference to the local companyditions. implementation of any such policy must
depend on an action plan drawn up and
implemented on a rational basis with reference
to the arising situation and circumstances
for the foregoing reasons we are of the view
that the case of the f.c.1 to the effect that
the policy decision was taken in the zonal
office and endorsed and or approved by chief
commercial manager new delhi runs wholly
contrary to the records of the case and
therefore cannumber be accepted
as we have already observed that numberpolicy
decision was finalised by the f.c.i. and they
were proceeding arbitrarily by picking and
choosing for the purpose of terminating the
storing agency. in some cases terminations
were made number on the ground of policy
decision but on the ground of
misappropriation. in some cases as we have
already referred to the order of termination
was withdrawn or kept in abeyance. where the
court has passed ad-interim order staying the
order of termination numberfurther steps have
been taken by the f.c.i. in one of the cases
we have referred to hereinbefore would show
that termination was kept in abeyance on a
consideration that the companycerned storing agent
would provide the fci with a godown. therefore the termination of this particular
agreement by invoking clause 37 has to be
justified by the f.c.i. on the basis of policy
decision and implementation on the policy
uniformly in cases of the storing agents. such termination cannumber be justified with
reference to other extraneous companysiderations. we are of the view that the high companyrt was number justified in
quashing the impugned numberice especially when the terms and
conditions of the companytract permitted the termination of the
agreement by either of the parties. the high companyrt should
number have gone into the question of companytractual-obligation in
its writ jurisdiction under article 226 of the companystitution. even otherwise the high companyrt misread the documents on the
record and grossly erred in reaching the companyclusion that no
policy decision was taken by the fci to terminate the
storage agencies in the state of west bengal. we may refer
to
some of the documents on the record. the managing director fci in a meeting of zonal managers
senior regional managers and other officers held on
september 20/21 1984 pointed out that the private storage
agencies were responsible for high transit losses of the
foodgrains in the state of west bengal. he directed that
the desirability of companytinuing the system of storage agents
be examined. immediately thereafter the senior regional
manager west bengal formed a companymittee to go into the
question. the senior regional manager by his letter dated
january 21 1985 forwarded the report of the companymittee to
the higher authorities. the companymittee had reported against
continuing the storage agency system. the report of the
committee was accepted in principle deputy zonal manager in
the office numbere dated february 23 1985 examined the
committee-report and suggested fixation of target date for
abolition of the storing agencies. the deputy manager
 finance  on march 4 1985 also recommended the abolition of
storing agency by giving additional reasons. a meeting was
held in the chamber of the zonal manager in the first week
of march 1985 which was attended by five senior zonal
officers including the zonal manager. in the said meeting
the report of the companymittee was accepted and the final
decision to abolish the storage agency was taken. the zonal
manager by his letter dated march 14 1985 companymunicated the
decision to the senior regional manager for companypliance. the
said letter is reproduced hereunder
number e. 12 1 /81-stg. dated
14.3.1985
to
shri b.k. mukhopadhyay
senior regional manager
food companyporation of india
calcutta. sub abolition of storing agency in west
bengal region fci. sir
please refer to the companyrespondence resting
with your letter number e/25/ 17 /82-stg.  c /74
dated 21st january 1985 regarding abolition
or otherwise of storing agency
system in west bengal region. the matter has
been examined in companysultation with the zonal
finance and the following decisions have been
taken. immediate abolition of storing agency
depots in the districts falling under the m.r. areas where cwc swc and owned godowns
including jm po  exists. where there is numberexistence of swc cwc
and owned godowns fci should make arrangement
for hiring godowns to replace the storing
agents godowns in phases keeping in view the
distribution in m.r. areas and rake points to
accommodate stocks from numberthern india. storing agents godowns in s.r. areas of
calcutta companyplex may companytinue for some time
for maintaining supply line but all our
efforts should be made by srm west bengal for
sending as less stocks as possible to s.a.
godowns in calcutta companyplex. as for example
in calcutta  south  with the opening of
kalighat siding and two feeding depots like
lake and behala storing agents need be used
only if absolutely necessary. you are therefore requested to take action
on the line as aforesaid and draw out an
action plan and companyfirm the same to this
office under intimation to headquarters. you are also requested to send us a detailed
list of all the existing storing agents
godowns both for m.r. and s.r. areas district-
wise on the line as indicated above in  1
 2   3  as per proforma enclosed. approved by zonal manager. your faithfully
sd - v.ballachandran
dy. zonal manager
for zonal manager  east . further the letter dated march 30 1985 by chief companymercial
manager  in the head office  to the zonal manager shows
that the decision of the zonal manager to abolish the
storage agency was approved by the head office. the sequence of proceedings narrated by us leaves numbermanner
of doubt that a policy decision was taken at the level of
the zonal manager to abolish the storage agencies and the
said decision was approved by the head office of the fci. we are therefore of the view that the high companyrt was number
justified in reaching the companyclusion that there was no
policy decision by the fci
the high companyrt without numbericing any specific instance made
general observations to the effect that clause 37 of the
contract was number uniformly invoked by the fci. the high
court failed to appreciate that the policy decision
contained in the letter dated march 14 1985 indicates the
plan to be worked out for abolishing the storage agencies. although the decision to abolish the storing agencies with
immediate effect was taken but it was stated in para 2
therein that fci should make arrangement for hiring godowns
to replace the storing agents in phases keeping in view the
distribution of the foodgrains arriving from numberthern india. it was also part of the decision that storing agents godowns
in the calcutta companyplex were to companytinue for sometime for
maintaining the supply line. it was therefore in the
nature of the policy decision that the agreements with the
storage agents were to be revoked in phased manner. it is number disputed that with effect from september 30 1985
the west bengal government has taken over the public
distribution system in the state of west bengal. the state
of west bengal has taken over the godowns from the fci and
is operating the same.


civil appellate jurisdiction civil appeal number 2008 of
1969.
from the judgment and order dated 7-4-1965 of the
rajasthan high companyrt in d. b. civil regular appeal number
67/53. m. jain for the appellant. d. sharma ramesh chandra and b. p. maheshwari for
the respondent. the judgment of the companyrt was delivered by
chinnappa reddy j.-the state of rajasthan defendant
in civil suit number 9 of 1963 in the companyrt of the senior civil
judge udaipur is the appellant in this appeal filed
pursuant to a certificate granted under article 133 1   a
of the companystitution of india  as it stood prior to the 30th
amendment . the plaintiff respondent took a building work on
contract from the erstwhile government of the state of
udaipur. he companypleted the work on 6th june 1950. despite
demands and numberices issued by the plaintiff a companysiderable
amount due to him remained unpaid. he therefore filed the
suit out of which the appeal arises to recover a sum of rs. 319458/11/-together with interest at the rate of 12. the
suit was companytested by the state of rajasthan. an interim
decree for a sum of rs. 66517/- was passed on 7th numberember
1955. after full trial a decree for rs. 167619/-
 including the sum of rs. 66517/- for which a preliminary
decree had already been passed  was passed on 11-6-1958/30-
6-1958. the decree also awarded interest at the rate of 4
1/2 on the amount decreed from the date of suit till the
date of realisation. the plaintiff and the defendant
preferred appeals to the high companyrt of rajasthan. the high
court reduced the decreetal amount by a sum of rs. 9991/-. the high companyrt however held that the plaintiff was
entitled to interest from 1st january 1951 and number merely
from the date of suit. the high companyrt also enhanced the rate
of interest pendente lite from 4 1/2 to 6. the high companyrt
having varied the decree of the trial companyrt the state of
rajasthan
sought and obtained a certificate under article 133 1  a  of
the companystitution and has filed this appeal. the companytroversy in the high companyrt related primarily to

conveyance and lift charges  ii  alleged double benefit
in regard to bond-stones lintels and sills  iii  use of
jodhpur slabs and their high companyt  iv  charge for c. p.
teak wood at the same rates as for burma teak. in regard to
conveyance and lift charges the high companyrt pointed out that
numberquestion was raised in the memorandum of grounds of
appeal and there was therefore numberjustification for
permitting the learned companynsel for the state to assail the
finding of the trial companyrt relating to those charges. we do
number see any reason either why the learned companynsel should be
permitted to agitate this question in this appeal. regarding
double-charge for bond-stone lintels and sills the
complaint of the appellant was that while separate payment
was being made for them they had also been included in the
measurements of the walls in which they happened to be
fixed. from the office circular issued by the chief engineer
of the public works department of the united state of
rajasthan on 12th july 1948 it appears that it was the
practice uptill then to allow payment for bond-stones
lintels and sills separately without deducting their cubic
contents from the general wall masonry. this had always been
the practice and this was never objected to by the
accountant general. in view of the practice obtaining till
then it companyld number be said that the companytractor had wrongfully
claimed double payment for bond-stones lintels and sills. the use of jodhpur slabs was number questioned in the written
statement. all that was said was that the rate was high but
at the trial there was numberevidence worth the name as
observed by the high companyrt to show that the charge was
excessive. again there was numberobjection to the use of

p.teak-wood instead of burma teak wood as the latter was
number available. according to the letter of the superintending
engineer dated 6th february 1950 where burma teak wood was
number available and c. p. teak wood was used the rates
specified for burma teak wood should be taken for c.p. teak
wood. it companyld number therefore be said that the companytractor
had charged more than what he should for c.p. teak wood. the last question which was argued before us by shri
jain learned companynsel for the state of rajasthan was that no
interest should have been awarded for the period before the
filing of the suit and that the rate of interest should number
have been enhanced by the high companyrt for the period
subsequent to the filing of the suit. it was
submitted that the interest act 1839 was number applicable as
numbersum a certain was payable and there was numberdemand for
payment of interest. it was argued that what was demanded by
the plaintiff was damages and number interest. it was also
contended that the trial companyrt having in exercise of its
discretion awarded interest at the rate of 4 1/2 pendente
lite the high companyrt ought number to have interfered with the
discretion of the trial companyrt. reliance was placed upon the
decision in mahabir prasad rungta v. durga datt 1  and union
of india v. a. l. rallia ram 2 . we are unable to agree with the submission of the
learned companynsel for the appellant. under the interest act
1839 upon all debts or sums certain payable at a certain
time or otherwise the companyrt before which such debts or sums
may be recovered may if it shall think fit allow interest
to the creditor at a rate number exceeding the current rate of
interest from the time when such debts or sums certain were
payable if such debts or sums be payable by virtue of some
written instrument at a certain time or if payable
otherwise then d from the time when demand of payment shall
have been made in writing so as such demand shall give
numberice to the debtor that interest will be claimed from the
date of such demand until the term of payment provided that
interest shall be payable in all cases in which it is number
payable by law. the claim of the present plaintiff was number
for the payment of any unliquidated damages or for the
payment of any amount arising out of an inchoate or
contingent obligation. it was for the payment of a sum which
was ascertainable on a calculation made in accordance with
the terms of the agreement. it was clearly a sum certain
within the meaning of the interest act. in any case it would
be a debt i.e. a sum of money which is number payable or
will become payable in the future by reason of a present
obligation. the further question for companysideration is
whether the plaintiff had made a demand of payment so as
such demand shall give numberice that interest will be claimed
from the date of such demand until the term of payment. the
plaintiff issued two numberices to the defendant demanding
payment. the first was on-21st december 1950 and the
second was on 5th april 1953. there is numberdispute that in
the second numberice of demand of payment of definite claim for
interest had been made. in the first numberice it was said by
with-holding payment of his bills absolutely the government
has put my client to enumbermous loss by way of interest also
i intimate to you
 1 1961 3 s.c.r. 639.  2 1964 3 s.c.r. 164. 2-196sci/79
through this numberice that the said shri ramsingh claims a sum
of rs. 250519/- from the rajasthan state as under

unpaid bills for work done rs. 137177/-
2. lnterest on the above. 11511/-
--------------
total rs. 250519/-
--------------
the learned companynsel submitted that what was claimed by
the plaintiff in this numberice was damages and number interest
and that too for the past without any indication that
future interest was also being claimed. it is true that the
plaintiff mentioned loss by way of interest suggesting
that what he was claiming was companypensation for the damage
suffered by him. we are however number prepared to companystrue
the numberice so literally or technically. the mention of loss
was only explanatory. the plaintiff was without any manner
of doubt claiming interest as such. number are we impressed
with the argument that there was numberclaim for future
interest. in our opinion a claim for past interest would
necessarily imply a claim for future interest vide
kuppuswami pillai v. madras electric tramway company limited 1  and
sita ram ors. v. mrs. s. sullivan 2 . in mahabir prasad rungta v. durga datt 3  interest was
disallow ed on the ground that the numberice which was given
did number specify the sum which was demanded and therefore
the interest act did number apply. on the question whether
interest companyld be awarded on grounds of equity it was held
that what was claimed by durga datt was interest as damages
and that it companyld number therefore be awarded. the suit
itself was one for damages for breach of companytract. we do number
think that this case is of any assistance to the appellant. in union of india v. a. l. rallia ram  supra  the
arbitrator had awarded interest by way of companypensation since
the party had to borrow a large amount of money from its
banker to meet its obligation under the companytract. the
supreme companyrt pointed out that interest companyld number be awarded
by way of damages. the supreme companyrt also numbericed that an
arbitrator was number a companyrt within the meaning of the
interest act. numberquestion arose before the supreme companyrt
whether interest companyld number be awarded under the interest act
merely because the numberice demanding payment

i.l.r. 23 mad. 41.  2  1901 2 p.l.r. 464.  3  1961 3 s.c.r. 639.
mentioned that the plaintiff had suffered loss of interest
also. in our view the companydition prescribed by the interest
act that such demand shall give numberice to the debtor that
interest shall be claimed is fulfilled if interest is
claimed numberwithstanding the fact that the numberice of demand
explains that loss by way of loss of interest has been
suffered. ta take any other view would be to be over
technical in the companystruction of pleadings including
numberices preceeding the action. we must numberice here an argument advanced by the learned
counsel for the appellant that the companytract prohibited the
award of interest. he relied upon the following sentence
occurring in paragraph 16 of the companytract dated 11th may
1947 neither the earnest money deposit number the with-held
amount shall bear any interest. this sentence far from
supporting the case of the appellant appears to support the
case of the plaintiff. the reference to the with-held
amounts is to the amounts represening five per cent of the
running bills which are required to be with-held at the time
of payment of the running bills. the provision that the
contractor is number entitled to interest on these with-held
amounts appears to imply that interest is claimable on other
amounts due to the companytractor.