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TMI Blog2014 (4) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... ile in case of out of court payment to the decree-holder by way of any of the modes mentioned under clause (b) of sub-rule (1), interest shall cease to run from the date of such payment. The appellants herein are entitled to the amount awarded by the Executing Court, as the amounts deposited by the judgment debtor fell short of the decretal amount. After such appropriation, the decree-holder is entitled to interest only to the extent of unpaid - principal amount. Hence, interest be calculated on the unpaid principal amount. We allow the appeal, set aside the impugned judgment passed by the High Court and restore that of the Executing Court dated 18.08.2004 - appeal allowed. - CIVIL APPEAL NO. 3056 OF 2008 - - - Dated:- 1-4-2014 - MR P. SATHASIVAM, C.J.I., MR RANJAN GOGOI, J. AND MR N.V. RAMANA, J. JUDGMENT N.V.RAMANA, J. 1. The short question to be answered in this appeal is whether the amount deposited by the judgment debtor in a decree is to be adjusted first towards interest or towards principal decretal amount. 2. The facts of the case are On account of demise of an Eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid Execution Petition, the Executing Court took a view that the amounts deposited by the respondent Insurance Company from time to time were liable to be adjusted - 8. towards the component of interest first and thereafter to the portion of the decretal amount. After taking into consideration the amounts deposited by the respondent Insurance Company on different dates, its liability was fixed vide order dated 18.08.2004 to the extent of ₹ 17,70,657/- together with interest @ 12% p.a. from the date of filing of the Execution Petition till the date of realization. 9. The respondent Insurance Company assailed the aforesaid calculation / order of the Executing Court dated 18.08.2004 in Civil Revision Petition No. 4337 of 2004. The appellants herein also filed Civil Revision Petition No. 6108/2004 thereby challenging that the Executing Court could not have adjusted the amount paid as costs towards the decretal amount. The learned single Judge of the High Court of Judicature, Andhra Pradesh, by judgment dated 29.07.2005, allowed both the Civil Revision Petitions while holding that (i) the part payments deserve to be adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court as well as the High Courts took the view that any amount deposited under Rule 1 of Order 21 CPC must be first adjusted towards interest. Discussion on those judgments vis- -vis sub-rules (4) and (5) of Rule 1 - of Order 21 C.P.C. is prone to be taken or mistaken as an attempt to explain the judgments of the Supreme Court or High Courts. However, since some of the judgments of the Supreme Court were delivered at a time, when sub rules (4) and (5) were not on the statue book, and in the judgments rendered thereafter, the attention of the Hon ble Supreme Court and the High Courts was not pointedly invited to these provisions in certain cases or they did not fall for consideration, it is felt necessary to address the issue Viewed from this context, it is evident that Parliament added sub rules (4) and (5) with a definite and avowed object of assessing the running of interest on the deposits made by the decree holder into a Court. The background in which those provisions came to be incorporated has already been indicated in the preceding paragraphs. Sub Rules (4) and (5) by themselves do not discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decide the legality or otherwise of the order passed by the learned Judge, it is worthwhile to examine Rule 1 of Order XXI of the Code of Civil Procedure, 1908 (for short, the CPC ), which reads as under: ORDER XXI EXECUTION OF DECREES AND ORDERS 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 - ( c) by any other mode wherein payment is evidenced in writing; or ( d) 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) Where mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile making such payment. Sub-rules (4) and (5) of Rule 1 states from which date, interest shall cease to run in case amount is paid under clause (a) or (c) of sub-rule (1), - interest shall cease to run from the date of service of notice as indicated under sub-rule (2); while in case of out of court payment to the decree-holder by way of any of the modes mentioned under clause (b) of sub-rule (1), interest shall cease to run from the date of such payment. 15. The language contained in the aforesaid subrules clearly indicates the appropriation of amount to be made in case the decree contains a specific clause, specifying the manner in which the money deposited to be appropriated. Sub-rule (1)(c) of Rule 1 indicates the money deposited to be appropriated as per the direction of the Court, if there is a provision in that behalf. In the absence of specific direction with regard to appropriation, then only the manner of appropriation would arise for consideration. Sub-rules (2) to (5) of Rule 1 indicate the procedure to be followed when the deposit is made either under clause (a) or (b) of sub-rule (1) thereof, but it does not leave any scope for interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtgagors had deposited the amount only towards the principal and not towards the interest, and the mortgagees agreed to withdraw the money from the Court accepting the conditional deposit, the normal rule that - the amounts deposited in Court should first be applied towards satisfaction of the interest and costs and thereafter towards the principal would apply. 19. In Mathunni Mathai (supra), it was held that the right of the decree-holder to appropriate the amount deposited by the judgment debtor, either in the Court or paid outside, towards interest and other expenses is founded both on fairness and necessity. It was observed that 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 be permitted to take advantage of his own default. Therefore, the normal rule that is followed is to allow the deposit or payment, if it is in part, to be adjusted towards the interest due, etc. 20. In Industrial Credit and Development Syndicate (supra), it has been held that in cases where the trial court has not prescribed any mode fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principles laid down in Gurpreet Singh s case as follows: a) The general rule of appropriation towards a decretal amount was that - b) such an amount was to be adjusted strictly in accordance with the directions contained in the decree and in the absence of such directions, adjustment be made firstly towards payment of interest and costs and thereafter towards payment of the principle amount subject, of course, to any agreement between the parties. c) The legislative intent in enacting sub rules (4) and (5) is clear to the points 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 21 Rule 1 sub clause (D). d) If the payment made by the judgment debtors falls short of the decretal amount, the decree holder will be entitled to apply the general rule of appropriation by appropriating the amount deposited towards the interest, then towards costs and finally towards the principal amount due under the decree. e) Thereafter, no further interest would run on the sum appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated under Order XXI Rule 1 of the CPC. In Industrial Credit Development Syndicate (supra) which is subsequent to the amendment to the provision, this Court has categorically observed the procedure to be followed and which squarely applies to the case, but the High Court has given its own interpretation to the judgment and failed to consider the law laid down by this Court in its proper perspective. 25. The next finding of the High Court is with regard to interest on interest. In money suit, the amount consists of principal and interest till the suit is filed. But, in case of award passed under the Act, the question of inclusion of any interest on the decretal amount does not arise. Unfortunately, the High Court proceeded on the assumption that it amounts to interest on interest which is prohibited under Section 3(3)(c) of Interest Act, 1978 (for short, the Interest Act ). This is not so, as in the facts and circumstances of the present case, the decree passed by the trial Court or - the appellate Court does not contain the mode of appropriation and in the absence of any such direction, the decree-holder ..... X X X X Extracts X X X X X X X X Extracts X X X X
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