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TMI Blog1999 (2) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... and current and future interest at the rate of 18 per cent per annum of ₹ 1,80,000 and ₹ 2,31,138.52 from the date of the suit till the date of the payment. The decretal amount was, however, to be paid in monthly instalments of ₹ 20,000 commencing from 1.9.1983 after making the deduction of ₹ 20,000 stated to have been paid in the court. In case of default in the payment of two instalments, the plaintiff-appellant was held entitled to bring the suit schedule property for sale and to realise the entire balance due. In the event of the sale proceeds realised from the sale of the mortgaged property being insufficient to satisfy the decree, the appellant was further held entitled to recover the balance amount personally from defendant Nos. 1 to 6 jointly and severally. Finding that the defendants- judgment debtors had not paid the full amount, the appellant filed an execution petition praying to recover the amount by attachment and sale of the scheduled immovable property as also for the arrest of the judgment debtors. The executing court vide order dated 27.2.1993 over ruled various objections of the judgment debtors and held the decree holder entitled to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mode for payment of the decretal amount excepting the fixing of instalments. It is also not disputed that there is no agreement between the parties regarding the mode of payment of the decretal amount. It is also the admitted position that the general rule of appropriation of payments towards the debt is that in the absence of a specific condition or agreement to the contrary, the money paid by the judgment debtor is first applied in the payment of interest and cost and then when that is satisfied, in payment of capital or the principal amount. In Venkatadri Appa Row and Ors. v. Parthasarathi Appa Row, (L.R. 47 IA 150), the Judicial Committee of the Privy Council had held that upon taking an account of principal and interest due, the ordinary rule with regard to payments by the debtor unappropriated either to principal or interest is that they are first to be applied to the discharge of the interest. This Court in Meghraj and Ors. v. Mst. Bayabai and Ors., [1970] 1 SCR 523 reiterated the position of law and held that the normal rule was that in the case of a debt due with interest any payment made by the debtor was in the first instance to be applied towards satisfaction of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment or adjustment is proved by documentary evidence or the payment or adjustment is admitted by, or on behalf of the decree holder in a reply to the notice given to him under sub-rule (2) of Rule 1, Order 21 of C.P.C. In the absence of payment having been made in accordance with the mode prescribed or the satisfaction recorded under Rule 2, the judgment debtor cannot claim the. benefit of adjustment in the manner insisted upon by him. In order to overcome the legal obstacles in their way, the judgment debtors have sought refuge under the cloak of alleged protection provided by Section 60 of the Indian Contract Act, 1872. It is further submitted that in view of the later judgments of this Court in Mathunni Mathai v. Hindus-tan Organic Chemicals Ltd. Ors., [1995] 4 SCC 26 and in Prem Nath Kapur and Anr. v. National Fertilizers Corporation of India Ltd. and Ors., [1966] 2 SCC 71, the law laid down in Meghraj's case (supra) has to be held as no good law. We are of the opinion that such a plea is far-fetched and begged only for the purpose of putting an imaginary defence to the claim of the appellant- decree holder. Section 59 of the Indian Contract Act deals with the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any debt actually due and payable to him by the debtor at the time. In case neither party makes the appropriation, the payment is to be applied in discharge of the- debts in order of time; and if the debts are of equal standing the payment is made in the discharge of each of them proportionately. It will be seen that these rules have no application to a case in which only one debt is due and at the time of payment, besides the principal sum secured, interest has also accrued due. In such cases, the rule of English Law, laid down as far back as 1702 in (1702) 2 Freeman 261 : 22 ER 1197, Chase v. Box. Is that...... `if a -man is indebted to another for principal and interest and pay the money generally, it shall be applied in the first place to sink the interest before any part of the principal should be sunk.' In (1898) 2 Q.B. 460 = 67 L.J. Q.B. 851' 79 L.T. 821 = 47 W.R. 42, Parr's Banking Co. Ltd. v. Yates, Lord Rigby J. described it as the old and well settled rule that where both principal and interest are due the sums paid on account must be applied first to interest. That rule, where it is applicable is only common justice. To apply the sums paid to princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld result in unnecessary burden upon the financial institutions and conferment of unwanted unilateral discretion in favour of the defaulters. Acceptance of the plea that the amount paid first should be adjusted in the principal amount would not only be against the provision of law but against the public policy as well, To provide security, continuity and certainty in business transaction, the Legislature has been making specific provisions in that regard which may be found in various provisions of the Negotiable Instruments Act or Order 37, Code of Civil Procedure and other statutory provisions. The reliance of the learned counsel for the respondents in Mathunni Mathai's case (supra) is misplaced inasmuch as in that case this court had followed the principles of law laid down in Meghraj case (supra) and held :- The right of the decree-holder to appropriate the amount deposited by the judgment-debtor, either in court or paid outside, towards interest and other expenses is founded both on fairness and necessity. The courts and the law have not looked upon favourably where the judgment debtor does not pay or deposit the decretal amount within the time granted as one cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It may now be seen if the principle laid down in this decision stands diluted by amendment of Rule 1. The relevant portion of the amended rule reads as under: Order XXI, Rule 1 Modes of paying money under decree -(1) All money, payable under a decree shall be paid as follows namely; (a) by deposit into the Court whose duty it is to execute the decree, or sent to that Court by postal money order or through a bank; or (b) out of Court, to the decree holder by postal money order or through a bank or by any other mode wherein payment is evidenced in writing; or (c) otherwise, as the Court which made the decree, directs. (2) Where any payment is made under clause (a) or clause (c) of Sub rule (1), the judgment debtor shall give notice thereof to the decree holder either through the Court or directly to him by registered post, acknowledgement due. (3)....................................... (4) On any amount paid under clause (a) or clause (c) or sub rule (1), interest, if any, shall cease to run from the date of service of the notice referred to in sub rule (2)'. The amended sub rule (2) removes the doubt if there was any that the judgment-debtor is not absol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made, then the creditor has no choice to apply the payment in a different manner. But however he may not agree to the mode of the payment, in which case he must not accept the payment and refund the amount to the debtor . The learned Judge however referred to various circumstances which according to him indicated that the judgment-debtor in that case had made the payments only towards the principal amount and not towards the interest and costs. In view of what has been noticed hereinabove, we hold that the general rule of appropriation of payments towards a decretal amount is that such an amount is to be adjusted firstly 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. Such a principle is, however, subject to one exception, i.e. that the parties may agree to the adjustment of the payment in any other manner despite the decree. As and when such an agreement is pleaded, the onus of proving is always upon the person pleading the agreement contrary to the general rule or the terms of the decree schedule. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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