BHARAT HEAVY ELECTRICALS LTD. Vs R.S.AVTAR SINGH & CO.
Bench: B.S. CHAUHAN,FAKKIR MOHAMED IBRAHIM KALIFULLA
Case number: C.A. No.-007239-007239 / 2012
Diary number: 3533 / 2009
Advocates: B. K. SATIJA Vs
S. R. SETIA
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Reportable
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7239 OF 2012 (@ SLP (C) NO.3272 OF 2009)
Bharat Heavy Electricals Ltd. ….Appellant
VERSUS R.S. Avtar Singh & Co. .…Respondent
J U D G M E N T
Fakkir Mohamed Ibrahim Kalifulla, J.
1. Leave granted.
2. The judgment debtor is the appellant before us. This
appeal is directed against the judgment of the Division
Bench of the Delhi High Court dated 03.11.2008 in
EFA (OS) No.9 of 2002. The respondent undertook
some contract work with the appellant in respect of
which the dispute arose as regards the payment to be
made by the appellant. The dispute went before the
sole Arbitrator who passed an award on 15.03.1982
which was made the Rule of Court after protracted
litigation. Thus after the award became final and
conclusive, the respondent herein filed Execution
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Petition No.208/2000 contending that the appellant
did not furnish the award amount in its entirety. The
appellant while resisting the Execution Petition, also
filed EA No.522 of 2000 under Section 47 of the Code
of Civil Procedure by taking the stand that entire
award amount has been fully paid and, therefore, there
was nothing to be granted in the Execution Petition.
The learned Single Judge dismissed the objections by
order dated 12.07.2002 which was the subject matter
of appeal in which the impugned judgment came to be
passed by the Division Bench of the High Court of
Delhi.
3. The issue centres around the interpretation of Order
XXI Rules (1), (4) and (5) of CPC read with Section 34
CPC and Section 3 (3) (c) of Interest Act. Though the
legal issue falls within the narrow compass, to
appreciate the respective contentions of the parties,
certain details about award dated 15.03.1982, the
order of the Court which granted the seal of approval
to the award dated 31.05.1985 in suit No.594-A/1982,
the order of the Division Bench dated 18.07.2000 by Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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which the challenge to the award and the order dated
31.05.1985 came to be rejected and the subsequent
order dated 31.07.2000 declining to recall the earlier
order dated 18.07.2000, thereafter the order of the
learned Single Judge came to be passed on 12.07.2000
in EA No.522 of 2000 in Execution case No.208 of
2000 which was subject matter of challenge in the
impugned order of the Division Bench dated
03.11.2008 in EFA (OS) No.9 of 2002, have to be
stated. When we refer to the award of the Arbitrator
dated 15.03.1982, we find the following relief which
was granted in favour of the respondent:
The Award Claimants claims No. 1,2,3,4,5,6,7,8,10,12,13,14 & 15 I hold that the claimants M/s R.S. Avtar Singh & Co. are entitled to a sum of Rs.1,42,24,894/- (Rupees one crore forty two lacs twenty four thousand eight hundred and ninety four only) against all their claims and I also hold that the claimants are entitled for interest and, I, therefore, award a sum of Rs.1,42,24,894/- (Rupees one crore forty two lacs twenty four thousand eight hundred and ninety four only) in favour of the claimants with interest @ 12 % per annum on the said amount of the award from 6-1-1981 till the date of payment or decree whichever is earlier.
Claimants claim No.9
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As this claim was withdrawn by the Claimants in the hearing held on 12/9 and 13/9/81, no award is made against this claim.
Respondents counter-claims Nos. 1,2 & 3:-
I hold that the Respondents M/s. Bharat Heavy Electricals Ltd. are entitled to a sum of Rs.56,420/- (Rupees Fifty Six thousand four hundred & twenty only) against all their counter-claims and I, therefore, award sum of Rs.56,420/- (Rupees fifty six thousand four hundred & twenty only) in favour of the respondents.
The parties are left to bear their own costs. This disposes of claimants claim No.16 regarding costs.
The above award is made and published by me on this day of 15th Marcy, 1982 at Gandhinagar.”
4. In the judgment dated 31.05.1985 passed in Suit
No.594A/1982 the award was taken on record and
made a Rule of the Court and the said order passed in
the said suit reads as under:
“This suit coming on this day for final disposal before this Court in the presence of counsel for the parties as aforesaid, it is ordered that the objections (I.A. No. 2830/1982) filed by respondents to the award dated 15.3.1982 given by Sh. M.S. Iyengar Arbitrator be and the same are hereby dismissed and the said award appended hereto as Annexure ‘A’ be and the same is hereby taken on record and made a rule of the Court with the modification that the claimant shall be entitled to interest at the rate of 12 % per annum from March 12,1981 till the date of the decree and a decree is hereby passed in terms thereof which shall form part of the decree.
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It is further ordered that the claimant shall be entitled to future interest at the rate of 12 % per annum from the date of the decree till realization, in case the award amount is not paid within two months from today the 31st May, 1985.
It is lastly ordered that suit No.409-A/1982 is hereby disposed of. Given under my hand and the seal of the Court this the 31st day of May, 1985.”
5. When the appellant challenged the said decision of the
learned Single Judge dated 31.05.1985 in FAO (OS)
188 of 1985, the same came to be dismissed by the
order dated 18.07.2000. During the pendency of the
suit FAO (OS) No.188 of 1985 by way of an interim
order dated 13.09.1985 the recovery under the award
was stayed subject to the condition that the
respondent paid the sum of Rs.1 crore into the Court
which was directed to be withdrawn by the respondent
on furnishing Bank guarantee for the purpose of
restitution in case the award was set aside. It is not in
dispute that in compliance of the said order necessary
deposit was made. The respondent also realized the
said amount of Rs.1 crore on 13.10.1985. The
appellant moved an application for recalling order
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dated 18.07.2000 of the Division Bench and the same
was also dismissed by the Division Bench on
31.07.2000. Thereafter, when the Execution Petition
No.208 of 2000 was moved, the appellant took notice
and filed application under Section 47 of the CPC in
EA 522 of 2000 and another application under Order
XXI Rule 26 in application EA 523 of 2000. The leaned
Single Judge of the Execution Court while granting
time for final reply, in the EA 522 and 523 of 2000 and
rejoinder, if any, before the next date of hearing by
order dated 30.01.2001 directed the appellant to
deposit in Court a cheque for Rs.1,94,91,077/- being
the admitted amount in favour of the respondent
subject to deduction of tax at source along with TDS
certificate. The execution of the warrant of payment
issued on 18.10.2000 was directed to be kept in
abeyance. The sum of Rs.1,74,93,835/- after
deduction of tax at source in a sum of Rs.19,97,192/-
in all a sum of Rs.1,94,91,077/- was realized by the
respondent with an undertaking of the respondent that
in case the Execution Petition found to be not
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maintainable, he would refund the amount of
Rs.1,74,93,835/- within a period of four weeks from
the date of the order passed under the Execution
Petition. The said order was passed on 30.01.2001 by
the learned Single Judge. By filing an undertaking
dated 05.02.2001, the respondent also withdrew the
sum of Rs.1,74,93,885/-. Ultimately the execution was
ordered by the learned Single Judge by an order dated
12.07.2002 by calculating subsequent interest only in
the remaining principal amount and dismissed the
objection petition.
6. When the appellant preferred this appeal against the
said order dated 12.07.2002, in EFA (OS) No.9/2002,
an interim order came to be passed on 23.08.2002
directing the appellant to deposit whatever balance
amount due after deduction of TDS as per the final
order passed by the learned Single Judge with a
further order to realize the said sum subject to
restitution and on furnishing security to the
satisfaction of the Registrar.
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7. According to the learned counsel for the appellant in
the light of last order dated 23.08.2002 whatever
amount which was ultimately directed to be paid by
learned Single Judge in the order dated 12.07.2002
was also paid to the respondent. Keeping the above
factors in mind, counsel for the appellant, Mr.
Chandhiok, learned Additional Solicitor General
appearing for the appellant raised the following
contentions.
8. Mr. Chandhiok, learned ASG for the appellant by
referring to Order XXI Rule 1 sub-clauses (1), (4) and
(5) submitted that after the passing of the award by the
Arbitrator on 15.3.1982 and it was made as a Rule of
the Court by the learned Single Judge in the order
dated 31.05.1985 substantial payment towards the
decretal amount was made by 18.10.1985 and what
remained to be paid in satisfaction of the decretal
amount was only Rs.41,68,474/- apart from interest
which was due and payable in a sum of
Rs.1,53,22,603/- in all a sum of Rs.1,94,91,077/-.
The learned ASG submitted that after the filing of the Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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Execution Petition and the orders passed thereon when
the appellant moved the learned Single Judge
pursuant to interim orders dated 01.12.2000, the
entire balance amount was also deposited by way of
two cheques representing Rs.1,74,93,885/- and T.D.S.
amount of Rs.19,97,192/- in all a sum of
Rs.1,94,91,077/-. The learned ASG, therefore,
contended that by virtue of the payments made, as
above, dated 18.10.1985 and subsequently on
13.12.2000 the payment of entire decretal amount was
fully satisfied and nothing more remained payable.
According to learned ASG when once the balance
principal amount was paid, according to appellant’s
calculation, as on 13.12.2000, along with the interest
payable on that amount up to that date on the
principal amount by virtue of operation of sub-clauses
(4) and (5) of Order XXI Rule 1 interest, if any,
mandatorily cease to run i.e. on and after 13.12.2000
and the conclusion to the contrary made by the
learned Single Judge in the order dated 12.07.2002
and the confirmation of the same by the Division
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Bench in the impugned order dated 03.11.2008 are
liable to be set aside. The learned ASG also submitted
that in this context, by virtue of Section 3(3)(c) of the
Interest Act and Section 34 of CPC, the Court has no
power to award interest upon interest. According to
him a cumulative consideration of the above provisions
show that with the payment of Rs.1,94,91,077/- by
13.12.2000 the entire decretal amount was fully paid
and the award of further interest based on the claim of
the respondent by the learned Single Judge as well as
by the Division Bench was not justified. The learned
ASG relied upon the decisions of this Court in the
cases of Gurpreet Singh Vs. Union of India - reported
in (2006) 8 SCC 457 and Central Bank of India Vs.
Ravindra and others - reported in (2002) 1 SCC 367.
9. As against the above submissions, Mr. Ranjeet Kumar,
learned Senior Counsel appearing for the respondent
by relying upon sub-rule 1 of Order XXI CPC
submitted that all money payable under decree
referred to sub-rule would include principal and the
interest payable prior to suit as well as interest Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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pendente-lite, post decretal interest and cost. The
learned Senior Counsel by relying upon the decision of
this Court in the case of Ravindra (supra), in this
respect, contended that so long as the decretal amount
which was due as on 18.10.1985 which included the
award amount along with interest calculated at the
rate of 12 per cent per annum was due and payable
until the entire amount is wiped out, the amount so
calculated in the Execution Petition as on that date,
remained unpaid. The learned Senior Counsel
contended that the payment of decretal amount was
not satisfied as stipulated under Order XXI Rule 1 (1)
and consequently the operation of sub-clauses (4) and
(5) of Order XXI Rule 1 cannot be held to have
operated upon until such satisfaction of payment of
decretal amount was not made by the appellant. The
learned Senior Counsel, therefore, contended that after
the award was made as a Rule of the Court after
31.05.1985 and when the first payment of Rs.1 crore
was made by the appellant on 18.10.1985, the decretal
amount which was due and payable by the appellant
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as on that date was in a sum of Rs.2,19,61,134/- and
after giving credit to the payment of Rs.1 crore a
balance amount of Rs.1,19,61,134/- was due and
payable as from 19.10.1985. The learned Senior
Counsel, therefore, contended that when the next
payment was made by the appellant only on
13.12.2000 in a sum of Rs.1,94,93,885/-, based on
the calculation of the respondent, a further sum of
Rs.1,42,96,318/- was due and payable which
remained unpaid. The learned Senior Counsel,
however, fairly admitted that even as per the stand of
the respondent a miscalculation was made while
working out the interest on principal amount which
was not accepted by the learned Single Judge while
granting relief in the order dated 12.07.2002 and that
in any event whatever calculation ultimately worked
out by the learned Single Judge in the order dated
12.07.2002 was just and proper and the confirmation
of the same by the Division Bench, therefore, does not
call for interference.
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10. Learned Senior Counsel further submitted that after
the award of the Arbitrator in March 1982 and after it
was passed as a Rule of the Court in May 1985, the
payments were made by the appellant only pursuant to
orders of the Court and the respondent had to seek for
the redressal of its grievances only through Court and
that the appellant, therefore, does not deserve any
indulgence in the payment of interest. Learned Senior
Counsel by referring to the decision of this Court in the
case of Gurpreet Singh (supra) contended that it was
well within the rights of the appellant to appropriate
the payments made by the appellant in the first
instance to the interest part of it which was due and
payable on the date of the first payment while
adjusting whatever balance remained towards
principal and calculating the interest payable on the
remaining principal amount till the next date of
payment. The learned Senior Counsel, would contend
that the same was in accordance with what has been
authoritatively pronounced by this Court in the cases
of Gurpreet Singh (supra) and Leela Hotels Limited
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Vs. Housing and Urban Development Corporation
Limited - reported in (2012) 1 SCC 302 and, therefore,
the calculation which was ultimately found as due and
payable by the learned Single Judge in the order dated
12.07.2002 was perfectly in order and, therefore, the
confirmation of the said order by the Division Bench
does not call for interference.
11. We have considered the submissions of the respective
counsel and also bestowed our serious consideration to
the relevant provisions of law, the orders impugned and
the various other materials placed before this Court as
well as the decisions relied upon by the respective
counsel. At the outset in order to appreciate the question
of law that arise for consideration, one needs to
understand the specific provision contained in sub-rule
(1) of Order XXI before going into the details of the facts
involved in this case. The opening words of sub-rule (1) of
Order XXI reads as under:
“All money, payable under a decree shall be paid as follows, namely:-…….”
Sub-rule (4) is to the following effect: Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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“(4). On any amount paid under clause (a) or clause (c) of sub-rule (1), interest, if any, shall cease to run from the date of service of the notice referred to in sub-rule (2).”
A plain reading of the above clauses in the sub-rule of
Order XXI is to the effect that on payment of the amounts
payable under a decree, as provided under sub-rule (1), the
calculation of interest on such amount payable under the
decree would cease to operate from the date of service of notice
as stipulated under sub-rule (2) of Order XXI.
12. Leaving aside the intimation by way of service, as regards
the payment as provided under sub-rule (2), inasmuch as
in the case on hand on different dates the payments were
made, such payments were all made after due notice to
the respondent. Therefore, there was no controversy
relating to the date when the respective payments were
made. We are, therefore, only concerned with the
implication and application of sub-rule (1) of Order XXI
and the consequent effect on whatever payments made,
as claimed by the appellant by operation of sub-rule (4).
Therefore, in the forefront, we wish to examine as to what
extent the prescription contained in sub-rule (1) of Order Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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XXI was followed by the appellant in making the
payments once on 18.10.1985 and subsequently on
13.12.2000. The words used in sub-rule (1) in different
expressions means whatever money that is due and
payable under a decree, which could be paid in the
manner stipulated in sub-clauses (a), (b) and (c) of the
said sub-rule (1). The prime words, which needs deeper
scrutiny are “payable under a decree”. To understand the
said set of expressions what is required to be scrutinized
is as to how the decree has been made while granting the
relief as regards the payment. We, therefore, have to refer
to that part of the award of the Arbitrator to understand
the nature of relief granted under the said award. The
operative part of the award, as extracted earlier, disclose
that the respondent was entitled to a sum of
Rs.1,42,24,894/- along with interest at the rate of 12 per
cent per annum on the said amount from 06.01.1981 till
the date of payment or decree whichever was earlier. The
Arbitrator after giving credit to the counterclaim made by
the appellant ultimately worked out the actual amount
payable to the respondent which worked out to
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Rs.1,41,68,474/-. The said award of the Arbitrator was
accepted by the respondent. When the award was made
as the Rule of the Court in the order dated 31.05.1985,
the only alteration made was the date of calculation of
interest rendered by the Arbitrator. While the Arbitrator
directed such calculation of interest to be made from
06.01.1981, the learned Single Judge directed such
calculation to be made from 12.03.1981. In the said order
of the Court dated 31.05.1985 which forms the basis for
the respondent to make the claim, inasmuch as the
award became the Rule of the Court only pursuant to the
said order, it is important to make reference to what the
Rule of the Court stated in the said order. In the
penultimate paragraph, it has been specifically stated as
under:
“It is further ordered that the claimant shall be entitled to future interest at the rate of 12% per annum from the date of the decree till realization, in case the award amount is not paid within two months from today the 31st May, 1985.”
13. Noting the nature of relief granted under the award and
the ultimate Rule of the Court together, we find that
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learned Arbitrator directed that the calculation of
payment of interest “on the said amount of the award”
which should run from 06.01.1981 should now run from
12.03.1981 by virtue of Rule of the Court dated
31.05.1985. As per the direction of the learned Arbitrator,
such payment of interest would be payable till the
appellant make the payment or the decree whichever is
earlier. The decree, having regard to the applicable
provision, would be the date of the Rule of the Court,
namely, 31.05.1985. Therefore, a strict construction of
the said direction of the learned Arbitrator as regards the
manner of calculation of interest would mean either the
date of payment or the date of decree whichever is earlier.
Since, the first date of payment in the case on hand was
subsequent to the date of the Rule of the Court, namely,
31.05.1985, going by the direction of the learned
Arbitrator, the calculation of interest should be made up
to 31.05.1985. Since, the award received the seal of
approval only after the same was made as the Rule of the
Court, it is the stipulation contained in the said Rule
would ultimately cover the relief really granted in the
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award as made operative by virtue of the Rule ordered by
the Court. Therefore, in the stricto sensu, it is the decree
dated 31.05.1985 which has to be applied in letter and
spirit in order to find out whether the stipulations
contained therein were duly fulfilled by the appellant.
14. The Rule of the Court while approving the award of the
Arbitrator did not make any substantive alteration as
regards the entitlement of the respondent on the payment
to be made, namely, the sum of Rs.1,41,68,474/-. Even
the rate of interest granted by learned Arbitrator was not
touched by the Court, which was maintained at the rate
of 12 per cent per annum. The Court only directed the
calculation of the said interest payable as from
12.03.1981 instead of 06.01.1981. The only other
substantive direction contained in the Rule of the Court
dated 31.05.1985 was that the respondent was entitled to
future interest at the rate of 12 per cent per annum from
the date of the decree till realization in case the award
amount was not paid within two months from
31.05.1985. Therefore, the said part of the decree
requires to be deeply examined by applying the provision Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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contained in Order XXI Rule 1 of CPC read with Section 3
(3)(c) of the Interest Act as well as Section 34 of CPC.
15. With that view when we examine the said part of the Rule
of the Court, we wish to specifically note that the Court
made a conscious direction to the specific effect that the
entitlement of the respondent for future interest at the
rate of 12 per cent per annum from the date of decree,
namely, 31.05.1985 till the date of realization would be
on the award amount if it was not paid within two
months from 31.05.1985. Therefore, the calculation of
interest payable up to the date of the decree as well as
the time granted therein, namely, two months from
31.05.1985 and what is interest payable subsequent
thereto has been clearly set out in the said part of the
Rule. If the said Rule is to be understood in the manner
in which the Court had directed the calculation of interest
to be made it can be only in the following manner,
namely, that the interest from 12.03.1981 up to
31.07.1985 at the rate of 12 per cent per annum would
be on the award amount, namely, Rs.1,41,68,474/-. If
the award amount was not paid, namely, the sum of Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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Rs.1,41,68,474/- on or before 31.07.1985, the future
interest again at the rate of 12 per cent per annum can
be claimed. In our considered opinion, it should be on the
award amount which was in a sum of Rs.1,41,68,474/-.
We say so because both the award of the learned
Arbitrator as well as the Rule of the Court makes a clear
distinction between the award amount and the interest
payable. The award having become the Rule of the Court
and while making the said Rule it was clearly made
known that the award contained an amount which was
payable to the respondent quantifying the said amount in
a sum of Rs.1,41,68,474/-. After quantification of the
said amount, the learned Arbitrator dealt with the grant
of interest independent of the said payment and fixed the
rate of such interest at 12 per cent per annum. When
such a clear distinction was consciously made by the
learned Arbitrator while passing the award no one can
even attempt to state that the award amount and the
interest mentioned in the award dated 15.03.1982 should
be merged together and state that the award amount
would comprise of a sum of Rs.1,41,68,474/- and the
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interest worked out thereon became payable when once it
was made the Rule of the Court and thereby became the
decretal amount. Such a construction of the said award
cannot be made having regard to the specific terms of the
decree dated 31.05.1985.
16. Once we steer clear of the said position as regards the
decree passed by the learned Single Judge, we are posed
with the next question as to while applying Order XXI
Rule 1 when payments were made towards the
satisfaction of the said decree as provided under Order
XXI Rule 1 (a), (b) and (c) what would be the implication
of sub-rules 4 and 5 of Order XXI. In order to understand
the said legal implication of Order XXI Rule 1 read along
with sub-rules 4 and 5, in the foremost it will be
necessary to understand what is contemplated under
Order XXI Rule 1, in particular, the opening set of
expressions, namely, “all money, payable under a decree
shall be paid as follows, namely:-…” It will be necessary
to keep in mind that the said provision does not state the
decretal amount. The expression used is all money
payable under a decree. TERSELY stated, as pointed out Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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by us in the earlier paragraph, the decree dated
31.05.1985 affirm the award amount, the interest
payable at the rate of 12 per cent per annum from
12.03.1981 till the date of its realization if not paid within
two months from the date of the decree, namely,
31.05.1985. Therefore, the said decree dated 31.05.1985
consisted of the award amount plus interest payable
thereon from 12.03.1981 up to the date of the decree,
namely, 31.05.1985 to be payable within two months
from that date and in the event of non-payment of the
said amount within two months from 31.05.1985 to
calculate future interest at the very same rate of 12 per
cent per annum from the date of the decree till the
realization of the award amount. In our considered
opinion, a reading of the opening set of expressions of
Order XXI Rule 1 is clear to the above effect. In the case
on hand the payment effected by the appellant after
31.05.1985 was once on 18.10.1985 and thereafter on
13.12.2000 when the issue was dealt with by the Court in
the order dated 12.07.2002. It is not in dispute that the
award amount of Rs.1,41,68,474/- earned interest at the
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rate of 12 per cent per annum up to the date of first
payment, namely, 18.10.1985 which worked out to a sum
of Rs.78,30,314/- i.e. for the period from 12.03.1981 to
18.10.1985. The total amount payable as on that date
under the decree, both the award amount along with the
interest, worked out to Rs.2,19,61,134/-. The said figure,
as calculated by the appellant, was not disputed by the
respondent. On 18.10.1985, the appellant paid a sum of
Rs.1 crore by way of deposit pursuant to the order of the
Division Bench dated 13.09.1985 when the appellant
challenged the decree dated 31.05.1985. The respondent
was also permitted to withdraw the said sum of Rs.1
crore in the said order dated 13.09.1985.
17. Keeping the above factual position in mind when we
examine Order XXI Rule 4 CPC, the said sub-rule states
that on any amount paid under Clause (a) or Clause (c) of
sub-rule 1, interest, if any, shall cease to run from the
date of service of the notice referred to in sub-rule 2. In
the case on hand since the deposit of the amount
pursuant to the order of the Division Bench dated
13.09.1985 came to be made and was also withdrawn by Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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the respondent from the date of service of notice as
contemplated in sub-rule 2 the same was deemed to have
been effected. Therefore, applying sub-rule 4 to the case
on hand in so far as the cessation of interest is
concerned, the same should operate upon the sum of
Rs.1 crore deposited by the appellant and withdrawn by
the respondent. There can be no dispute and in fact it is
not disputed by the parties that on and after the deposit
of Rs.1 crore, no interest was payable on the said sum.
The only other consideration to be made is in which
component the said sum of Rs.1 crore is to be taken. In
other words, whether the said sum of Rs.1 crore paid by
the appellant should be accounted towards the award
amount of Rs.1,41,68,474/- or to the total figure of
Rs.2,19,61,134/- as was sought to be applied by the
respondent.
18. Before venturing to find out the answer to the said
question having regard to the Constitution Bench
judgment of this Court in Gurpreet Singh (supra),
wherein the implication of Order XXI Rule 1 has been
elaborately dealt with we deem it appropriate to note the Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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rationale laid therein on this aspect. Though, the question
posed for consideration before the Constitution Bench
was whether the rule called “different stages of
appropriation” set out in Prem Nath Kapur and another
Vs. National Fertilizers Corporation of India Ltd. and
others - (1996) 2 SCC 71, is correct or whether the rule
requires to be restated on the scheme of the Land
Acquisition Act understood in the context of the general
rules relating to appropriation and the rules relating to
appropriation in execution of money decrees and
mortgage decrees as a concomitant to the said exercise,
the Constitution Bench specifically dealt with Order XXI
Rules 1, 2, 4 and 5 and has rendered a definite
conclusion on the application of the abovesaid provision
after a detailed discussion in its elaborate judgment.
Since, the issue has been dealt with in extenso in the said
decision and the issue has been succinctly clarified by the
Constitution Bench, we wish to refer to those relevant
portions of the said decision in order to apply the ratio
laid down therein to the facts of this case and test the
correctness of the judgment impugned in this appeal.
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19. In Gurpreet Singh (supra) at paragraph 14, the
implication of Order XXI Rule 1 vis-à-vis the related
provisions under Order XXIV and Order XXXIV have been
set out which is to the following effect:
“14. Now, we may consider the provisions in the Code of Civil Procedure, 1908 (hereinafter referred to as “the Code”) that have relevance to the issue. The rule of appropriation in respect of amounts deposited in court or in respect of payment into court, is contained in Order 24 of the Code at the pre-decretal stage and in Order 21 Rule 1 at the post-decretal stage. Though, we are not directly concerned with it, we may notice that special provisions relating to mortgages are found in Order 34 of the Code. Under Order 24 Rule 1, a defendant in a suit for recovery of a debt may at any stage of the suit deposit in court such sum of money as he considers a satisfaction in full of the claim in the plaint. Rule 2 thereof provides for issue of notice of deposit to the plaintiff through the court and for payment out of the amounts to the plaintiff if he applies for the same. Rule 3 specifically states that no interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of such deposit, whether the sum deposited is in full discharge of the claim or it falls short thereof. Rule 4 enables the plaintiff to accept the deposit as satisfaction in part and allows him to pursue his suit for what he claims to be the balance due, subject to the consequences provided for therein regarding costs. It also deals with the procedure when the plaintiff accepts the payment in full satisfaction of his claim.”
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20. In paragraph 20, the general rule of appropriation
towards a decretal amount has been stated as under:
“20.……It was also held that the general rule of appropriation towards a decretal amount was that such an amount was to be adjusted strictly in accordance with the directions contained in the decree and in the absence of such direction, adjustments be made firstly in payment of interest and costs and thereafter in payment of the principal amount, subject of course, to any agreement between the parties.”
21. After referring to the general rule of appropriation in
cases where there is shortfall in paying the decree
amount what will be the mode of appropriation has been
explained in paragraph 26 and in the last part of
paragraph 27 in the following words:
“26. Thus, in cases of execution of money decrees or award-decrees, or rather, decrees other than mortgage decrees, interest ceases to run on the amount deposited, to the extent of the deposit. It is true that if the amount falls short, the decree-holder may be entitled to apply the rule of appropriation by appropriating the amount first towards the interest, then towards the costs and then towards the principal amount due under the decree. But the fact remains that to the extent of the deposit, no further interest is payable thereon to the decree-holder and there is no question of the decree-holder claiming a reappropriation when it is found that more amounts are due to him and the same is also deposited by
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the judgment-debtor. In other words, the scheme does not contemplate a reopening of the satisfaction to the extent it has occurred by the deposit. No further interest would run on the sum appropriated towards the principal.
27……The principle appears to be that if a part of the principal has been paid along with interest due thereon, as on the date of issuance of notice of deposit, interest on that part of the principal sum will cease to run thereafter. In other words, there is no obligation on the judgment-debtor to pay interest on that part of the principal which he has already paid or deposited.”
22. The said legal position has been reiterated in paragraph
36 with a little more clarity, which is to the following
effect:
“36.……But if there is any shortfall at any stage, the claimant or decree-holder can seek to apply the rule of appropriation in respect of that amount, first towards interest and costs and then towards the principal, unless the decree otherwise directs .”
(Emphasis added)
23. Ultimately, in paragraph 49, the Constitution Bench
decision has summed up the legal position as under:
“49. Though, a decree-holder may have the right to appropriate the payments made by the judgment- debtor, it could only be as provided in the decree if there is provision in that behalf in the decree or, as contemplated by Order 21 Rule 1 of the Code as explained by us above. The Code or the general rules do not contemplate payment of further interest by a judgment-debtor on the portion of the principal he
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has already paid. His obligation is only to pay interest on the balance principal remaining unpaid as adjudged either by the court of first instance or in the court of appeal . On the pretext that the amount adjudged by the appellate court is the real amount due, the decree-holder cannot claim interest on that part of the principal already paid to him. Of course, as indicated, out of what is paid he can adjust the interest and costs first and the balance towards the principal, if there is a shortfall in deposit . But, beyond that, the decree-holder cannot seek to reopen the entire transaction and proceed to recalculate the interest on the whole amount and seek a reappropriation as a whole in the light of the appellate decree.”
(Emphasis added)
24. From what has been stated in the said decision, the
following principles emerge:
(a) The general rule of appropriation towards a
decretal amount was that such an amount was to
be adjusted strictly in accordance with the
directions contained in the decree and in the
absence of such directions adjustments be made
firstly towards payment of interest and cost and
thereafter towards payment of the principal
amount subject, of course, to any agreement
between the parties.
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(b) The legislative intent in enacting sub-rules 4 and 5
is clear to the pointer that interest should cease to
run on the deposit made by the judgment debtor
and notice given or on the amount being tendered
outside the Court in the manner provided in Order
XXI Rule 1 sub-clause (b).
(c) If the payment made by the judgment debtor falls
short of the decreed amount, the decree holder will
be entitled to apply the general rule of
appropriation by appropriating the amount
deposited towards the interest, then towards cost
and finally towards the principal amount due
under the decree.
(d) Thereafter, no further interest would run on the
sum appropriated towards the principal. In other
words if a part of the principal amount has been
paid along with interest due thereon as on the date
of issuance of notice of deposit interest on that
part of the principal sum will cease to run
thereafter.
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(e) In cases where there is a shortfall in deposit of the
principal amount, the decree holder would be
entitled to adjust interest and cost first and the
balance towards the principal and beyond that the
decree holder cannot seek to reopen the entire
transaction and proceed to recalculate the interest
on the whole of the principal amount and seek for
re-appropriation.
25. Keeping the above principles in mind, when we examine
the case on hand, we find from the judgment of the
learned Single Judge, which has been affirmed by the
Division Bench, that the principal amount due along with
the interest thereon on the date of the first payment,
namely, 18.10.1985 as well as based on the subsequent
payments on the remaining principal amount and the
interest due thereon which has been set out in the last
part of judgment dated 12.07.2002 of the learned Single
Judge, the following summing up:
“To sum up on 03.01.2001 Rs.1,19,61,134/- was due towards principal amount and Rs.23,35,134/- was due towards interest. The judgment debtor has further to pay the principal sum of Rs.1,19,61,134/-
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with 12% interest calculated from 04.01.2002 to the date of final payment minus Rs.23,35,184/- + Rs.19,97,192/- allowed to be deducted as TDS. The contention of the judgment debtor that only a sum of Rs.1,94,93,885/- was due as on 03.01.2001 under the decree is wrong and is rejected. As such the contention of the judgment debtor that the decree holder is charging interest on the amount of interest and contravening section 3(3)(c) of Interest Act is incorrect and is rejected.
Having regard to the above discussion the objections filed by the judgment debtor have no merit the objection application is dismissed.”
26. In fact in the calculation which was sought to be made by
the respondent in its statement filed before the learned
Single Judge, interest was calculated for the period
subsequent to 06.03.2001 that was the date when the
last payment was made by the appellant wherein the
calculation of interest for the period from 04.01.2001 to
04.03.2002 was claimed on the entire sum of
Rs.1,42,96,318/- instead of calculating the same on the
balance principal of Rs.1,19,61,134/-. In the penultimate
paragraph of the order dated 12.07.2002, the learned
Single Judge rightly rejected such a wrong claim made on
behalf of the respondent while dismissing the objections
filed by the appellant.
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27. The Division Bench having examined the order of the
learned Single Judge by applying the principles culled out
from the Constitution Bench decision of this Court
ultimately held as under in paragraph 26:
“26. In the present case, it is not in dispute that there was neither any notice under Rule 1 of Order XXI nor any specific direction contained in the decree or given by the Division Bench, while directing making payment of Rs.1 crore as a condition for grant of stay of the execution. In these circumstances, the ld. Single Judge rightly held that the action of the decree holder in adjusting the said amount first against the interest of Rs.78,30,314/-, which had become due as on that date was perfectly in order and only balance amount of Rs.22,07,340/- could be adjusted against principal, thereby, leaving balance amount payable towards principal as on 19.10.1985 at Rs.1,19,61,134/- on which the decree holder was entitled to interest @ 12% p.a. from 19.10.1985 till 6.3.01, when a sum of Rs.1,94,91,077/- was paid in this manner accepted the calculation made by the decree holder, wherein, no arithmetic error or otherwise found. No doubt, in the process the appellant is made to pay substantial amount towards interest. However, that is its own making. The award is of the year 1982, which means it was rendered more than 26 years ago. Even the decree is of the year 1985. After the passing of the decree, the appellant chose to challenge the same by filing appeal and in the meantime, made only part payment of Rs.1 crore. Even when the appeal was dismissed in the year 2000, the appellant did not make any payment, which inaction on the part of the appellant, compelled the respondent to file the execution petition. In the execution petition, also the appellant made payment of Rs.1,94,91,077/- on 10.10.2000
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and wanted to contest the execution petition, particularly with regard to the manner in which the amounts paid are to be appropriated. Because of these part payments, which had to be appropriated first against the interest, which kept on mounting, part principal amount always remain payable as a consequence whereof further interest on the balance principal amount also became payable by the appellant. For this, it is the appellant only which is to be blamed.”
28. Inasmuch as, we find that the learned Single Judge as
well as the Division Bench has applied the rule of
construction on Order XXI Rule 1 based on the
Constitution Bench decision of this Court wherein the
earlier decision of this Court in Prem Nath Kapur
(supra), in regard to the rule of appropriation, as set out
in paragraph 48, was also approved, we do not find any
illegality in the said judgment of the Division Bench while
affirming the order of the learned Single Judge dated
12.07.2002.
29. As far as the contention based on Section 34 of CPC
having regard to the general rule of appropriation in
cases of this nature where there is a short payment made
pursuant to the decree, we do not find any conflict with
the said provision in so far as it related to payment of Civil Appeal No. of 2012 (@ SLP (C) No.3272 OF 2009)
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interest to be payable by the appellant. As far as the
submission made, based on Section 3(3)(c) of the Interest
Act is concerned, the said provision only states de hors
the substantive part of said Section 3, Courts are not
empowered to award interest upon interest. We do not
find any scope to apply the said section to the case on
hand where the controversy is subsequent to the decree
where direction for payment of interest on the award
amount has been spelt out. The issue related to the
correctness of the interest calculated as per the decree of
the Court which made the award its rule. The challenge is
not to the decree on the footing that it was in violation of
Section 3(3)(c) of the Interest Act. We, therefore, do not
find any support in the submission based upon the said
Section 3(3)(c) of the Interest Act. The main contention of
Mr. Chandhiok, learned ASG for the appellant having
been already dealt with by the Constitution Bench
decision of this Court referred to above which is binding
and applying the ratio laid down therein, we do not find
any scope to countenance such a submission made
before us while impugning the judgment of the Division
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Bench dated 03.11.2008 as well as that of learned Single
Judge dated 12.07.2002. We do not find any merit in this
appeal, the appeal fails and the same is dismissed.
…..……….…………………………...J. [B.S. Chauhan]
……………. ………………………………J.
[Fakkir Mohamed Ibrahim Kalifulla]
New Delhi; October 05, 2012
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