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2012 (10) TMI 1016 - SC - Indian LawsWhether Learned Single Judge as well as the Division Bench has applied the rule of construction on Order XXI Rule 1? Whether Section 3(3)(c) of the Interest Act, the said provision only states de hors the substantive part of said Section 3, Courts are not empowered to award interest upon interest?
Issues Involved:
1. Interpretation of Order XXI Rules (1), (4), and (5) of CPC. 2. Application of Section 34 CPC and Section 3(3)(c) of the Interest Act. 3. Calculation and payment of interest on the award amount. 4. Appropriation of payments made towards the decretal amount. Issue-wise Detailed Analysis: 1. Interpretation of Order XXI Rules (1), (4), and (5) of CPC: The central issue revolves around the interpretation of Order XXI Rules (1), (4), and (5) of the CPC. The court examined the specific provision contained in sub-rule (1) of Order XXI, which states, "All money, payable under a decree shall be paid as follows, namely:...". Sub-rule (4) indicates that on any amount paid under clause (a) or clause (c) of sub-rule (1), interest shall cease to run from the date of service of the notice referred to in sub-rule (2). The court noted that the payments made by the appellant were after due notice to the respondent, thus there was no controversy relating to the date when the respective payments were made. The court emphasized the need to understand the decree's terms to determine the money payable under it, specifically noting that the 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. 2. Application of Section 34 CPC and Section 3(3)(c) of the Interest Act: The appellant contended that the court has no power to award interest upon interest by virtue of Section 3(3)(c) of the Interest Act and Section 34 of CPC. The court, however, clarified that 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 was not to the decree on the footing that it was in violation of Section 3(3)(c) of the Interest Act. Therefore, the court found no merit in the submission based upon Section 3(3)(c) of the Interest Act. 3. Calculation and Payment of Interest on the Award Amount: The court examined the calculation of interest on the award amount as stipulated by the Arbitrator and the subsequent decree. The Arbitrator awarded a sum of Rs. 1,42,24,894/- with interest at 12% per annum from 06.01.1981 till the date of payment or decree, whichever was earlier. The decree modified the interest calculation date to 12.03.1981 and specified that future interest at 12% per annum would apply from the date of the decree till realization if the award amount was not paid within two months from 31.05.1985. The court clarified that the interest should be calculated on the award amount of Rs. 1,41,68,474/- up to 31.07.1985, and future interest would apply on the award amount if unpaid within the stipulated period. 4. Appropriation of Payments Made Towards the Decretal Amount: The court referred to the Constitution Bench judgment in Gurpreet Singh v. Union of India, which elaborated on the implications of Order XXI Rule 1 and the general rule of appropriation. It was noted that the general rule of appropriation towards a decretal amount is to adjust payments first towards interest and costs and then towards the principal amount due under the decree. The court applied this principle to the payments made by the appellant. The appellant deposited Rs. 1 crore on 18.10.1985, which was appropriated first towards the interest due, leaving a balance principal amount. Subsequent payments were also appropriated in a similar manner. The court found that the calculations made by the learned Single Judge and affirmed by the Division Bench were in accordance with these principles and did not warrant any interference. Conclusion: The court dismissed the appeal, upholding the calculations and appropriations made by the learned Single Judge and affirmed by the Division Bench. The court found no merit in the appellant's contentions and confirmed that the interest and principal payments were correctly calculated and appropriated as per the applicable legal provisions and the decree.
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