BHARAT HEAVY ELECTRICALS LTD. vs. R.S.AVTAR SINGH & CO.

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 JUDGMENT 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 Civil Appeal No. of 2012 1 SLP (@ (C) No.3272 OF 2009) Page 1 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

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 JUDGMENT 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 2 SLP (@ (C) No.3272 OF 2009) Page 2 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

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. JUDGMENT Claimants claim No.9 Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 3 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:-

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 th this day of 15 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: JUDGMENT “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. Civil Appeal No. of 2012 4 SLP (@ (C) No.3272 OF 2009) Page 4 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 st months from today the 31 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 JUDGMENT 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 Civil Appeal No. of 2012 5 SLP (@ (C) No.3272 OF 2009) Page 5 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

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 JUDGMENT 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 Civil Appeal No. of 2012 6 SLP (@ (C) No.3272 OF 2009) Page 6 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

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 JUDGMENT 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. Civil Appeal No. of 2012 7 SLP (@ (C) No.3272 OF 2009) Page 7 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

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 JUDGMENT 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 8 SLP (@ (C) No.3272 OF 2009) Page 8 Execution Petition and the orders passed thereon when the appellant moved the learned Single Judge pursuant to interim orders dated 01.12.2000, the

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 JUDGMENT 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 Civil Appeal No. of 2012 9 SLP (@ (C) No.3272 OF 2009) Page 9 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

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. JUDGMENT 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 1 SLP (@ (C) No.3272 OF 2009) Page 10 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

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 JUDGMENT 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 Civil Appeal No. of 2012 1 SLP (@ (C) No.3272 OF 2009) Page 11 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

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 JUDGMENT 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. Civil Appeal No. of 2012 1 SLP (@ (C) No.3272 OF 2009) Page 12 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

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 JUDGMENT 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 Civil Appeal No. of 2012 1 SLP (@ (C) No.3272 OF 2009) Page 13 Vs. Housing and Urban Development Corporation Limited - reported in (2012) 1 SCC 302 and, therefore, the calculation which was ultimately found as due and

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 JUDGMENT 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 1 SLP (@ (C) No.3272 OF 2009) Page 14 “(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).”

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 JUDGMENT 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 1 SLP (@ (C) No.3272 OF 2009) Page 15 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

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 JUDGMENT 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 Civil Appeal No. of 2012 1 SLP (@ (C) No.3272 OF 2009) Page 16 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,

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 JUDGMENT 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 st months from today the 31 May, 1985.” 13. Noting the nature of relief granted under the award and the ultimate Rule of the Court together, we find that Civil Appeal No. of 2012 1 SLP (@ (C) No.3272 OF 2009) Page 17 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

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 JUDGMENT 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 Civil Appeal No. of 2012 1 SLP (@ (C) No.3272 OF 2009) Page 18 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

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 JUDGMENT 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 1 SLP (@ (C) No.3272 OF 2009) Page 19 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

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 JUDGMENT 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 2 SLP (@ (C) No.3272 OF 2009) Page 20 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

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 JUDGMENT 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 Civil Appeal No. of 2012 2 SLP (@ (C) No.3272 OF 2009) Page 21 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

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 JUDGMENT 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 2 SLP (@ (C) No.3272 OF 2009) Page 22 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

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 JUDGMENT 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 Civil Appeal No. of 2012 2 SLP (@ (C) No.3272 OF 2009) Page 23 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

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 JUDGMENT 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 2 SLP (@ (C) No.3272 OF 2009) Page 24 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

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 JUDGMENT 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 2 SLP (@ (C) No.3272 OF 2009) Page 25 rationale laid therein on this aspect. Though, the question posed for consideration before the Constitution Bench was whether the rule called “different stages of

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 JUDGMENT 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. Civil Appeal No. of 2012 2 SLP (@ (C) No.3272 OF 2009) Page 26 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

JUDGMENT Civil Appeal No. of 2012 2 SLP (@ (C) No.3272 OF 2009) Page 27 20. In paragraph 20, the general rule of appropriation towards a decretal amount has been stated as under:

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 JUDGMENT Civil Appeal No. of 2012 2 SLP (@ (C) No.3272 OF 2009) Page 28 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.

(Emphasis added) JUDGMENT 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 Civil Appeal No. of 2012 2 SLP (@ (C) No.3272 OF 2009) Page 29 has already paid. His obligation is only to pay interest on the balance principal remaining unpaid adjudged as 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, indicated, as 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 JUDGMENT 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. Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 30 (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

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 JUDGMENT 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. Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 31 (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

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 JUDGMENT 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/- Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 32

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 JUDGMENT 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. Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 33 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

JUDGMENT Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 34

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 JUDGMENT 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 3 SLP (@ (C) No.3272 OF 2009) Page 35 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

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 JUDGMENT 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 Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 36 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 JUDGMENT Civil Appeal No. of 2012 3 SLP (@ (C) No.3272 OF 2009) Page 37