CASE NO.: Appeal (civil) 5117 of 1995 PETITIONER: MATHUNNI MATHAI RESPONDENT: M/S. HINDUSTAN ORGANIC CHEMICALS LTD. AND ANR. DATE OF JUDGMENT: 25/04/1995 BENCH: R.M. SAHAI & N.P. SINGH JUDGMENT:
JUDGMENT
1995 (3) SCR 765
The Judgment of the Court was delivered by
R.M. SAHAI, J. The question of law that arises for consideration in these
appeals directed against the judgment and order of the High Court of Kerala
is whether the decretal amount deposited by the judgment-debtor in
pursuance of an order passed by this Court is to be adjusted towards the
principal amount due first or against interest and other charges.
The amounts due under the Land Acquisition Award passed by the Court in
1985 comprised of enhanced market value, solatium at 15% and interest at 4%
on the additional amount. In cross appeal filed by the appellant, the State
and the company the enhancement of market value was affirmed but the
appellant was further granted solatium at 30% of the entire market value,
additional compensation under Section 23(1-A) of the Land Acquisition
(Amendment) Act, 1984 and interest under the amended Section 28 at 9% for
the first year and 15% for the subsequent years. The company challenged the
order of the High Court by way of Special Leave Petition in this Court in
which an order was passed to the following effect:
“Issue notice confined to the question of admissibility of enhanced
compensation with reference to the provisions of the Amended Act, 1984. The
learned Attorney General assured us that the compensation as made in the
award has either been paid or will be paid and to consider the tenability
of adoption of uniform rate of compensation notwithstanding the extent of
land acquired.”
Later on, the Court granted the stay order which read as under :-
“The collections of the enhanced compensation, solatium and interest
payable by the Petitioner herein pursuant to the judgment and order dated
the 1st August, 1986, of the High Court of Kerala at Ernakulam in L.A.A.
Nos. referred to above be and is hereby stayed”.
As a result of the stay order granted by this Court, the respondent did not
deposit any amount. Therefore, the appellant filed an application for
clarification of the order which was disposed of on 7th December, 1987 with
following observations:
“Heard learned counsel for the parties. Our order does not grant any stay
of claims of compensation as awarded by the Land Acquisition Officer and as
enhanced by the reference Court under Section 20 of the Kerala Land
Acquisition Act. What has been actually stayed is disbursement of the
compensation to the extent it has been escalated by referring to the
Amending Act, 1984 by the High Court. The entire compensation not covered
by our present clarification shall be paid within six weeks without
demanding any security. C.M.P. is disposed of”.
After the Order was clarified on 7th December, 1987, the respondent
deposited the amount on 9th January, 1988. The appeal was dismissed on 12th
September 1989. After the dismissal of appeal, the appellant put the decree
in execution in October, 1989 and claimed that after deducting the amount
deposited by the respondent towards amount due, they were liable to be paid
the balance with interest as directed by the court. It was objected as the
respondent having deposited the decretal amount it was liable to pay only
the amount which was stayed by this Court, namely, the escalation by the
Amending Act of 1984 and the interest thereon. Both the appellant and
respondent filed statement showing calculations of the figure arrived at by
them. The executing court allowed the application on the ratio laid down by
this Court in Meghraj & Ors. v. Mst. Bayabal & Ors., AIR (1970) SC 161. In
revision filed by the respondent the order was set aside. The High Court
held that even though Order XXI Rule 1 of the Civil Procedure Code was
amended in 1976, yet the principle laid down by this Court on the unamended
provisions still applied where the judgment-debtor did not specify as to
how the amount deposited was to be appropriated. But that principle was
held not to be available, in this case, as this Court having directed the
respondent to deposit the amount as awarded by the reference court and what
was stayed was the enhancement made by the High Court, the deposit made by
the respondent on 9th January, 1988 was in satisfaction of both the
principal and interest along with cost as granted by the reference court.
The court held that where deposit is made in pursuance of an order passed
by the court, it was not necessary for the judgment-debtor to specify the
manner in which the amount should be appropriated. Reliance was placed on
The Central Warehousing Corporation, Berhampur v. M/s. Govinda Choudhury
and Sons, AIR (1989) Orissa 90 and Improve-ment Trust, Jind v. Narinder
Kumar, AIR (1990) P&H 326.
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 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. In Meka Venkatadri Appa Rao Bahadur
Zamindar Garu & Ors. v. Raja Parthsarathy Appa Rao Bahadur Zamindar Garu,
AIR (1922) PC 233 the rationale was explained thus:-
“There are moneys that are received without a definite appropriation on the
one side or on the other, and the rule which is well-established in
ordinary cases is that in those circumstances the money is first applied in
payment of interest and then when that is satisfied in payment of the
capital”.
But the law or even the agreement entered between the parties may provide
for adjustment of payment in a particular manner. Section 60 of the
Contract Act provides that,
“where the debtor has omitted to intimate and there are no other
circumstances indicating to which debt the payment is to be applied, the
creditor may apply it, at his discretion to any lawful debt, actually due
and payable to him from the debtor, whether its recovery is or is not
barred by the law in force for the time being as to the limitation of
suits”.
The words of the Section are clear. It has been construed broadly by the
courts. The right of the creditor was further explained judicially in Rai
Bahadur Seth Nemichand v. Seth Radha Kishan & Ors., AIR (1922) PC 76 and it
was held that the creditor was not bound to accept a payment on condition
of the judgment-debtor. For the decrees passed by courts, the provision was
made in unamended Order XXI Rule 1 prior to 1976 and it was provided that
the amount be deposited in the court whose duty it was to execute the
decree. It was further provided by sub-rule 2 that where any payment was
made under clause (a) of sub-rule (1) notice of such payment was to be
given to the decree-holder. It was this rule which was construed in
Meghraj’s case (supra). The court held that even though the judgment-debtor
while depositing decretal amount from time to time stated that payments
were being made towards the principal due but in absence e of any evidence
that the decree-holder was informed about the nature of deposit or the
decree-holder appropriated it towards the principal, the ordinary rule
applied and the payments by the judgment-debtor could be appropriated
towards interest and cost as held in Meka Venkatadri case (supra). 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:-
“O.XXI. R.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,
acknowledgment due.
(3)………………………..
(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).”
The amended sub-rule (2) removes the doubt if there was any that the
judgment-debtor is not absolved of the obligation of informing the decree-
holder by written notice even in respect of deposit in court either
directly or by registered post. The purpose of addition of the expression,
‘either through court directly or by registered post acknowledgment due’ is
that the judgment-debtor should not only give notice of payment but he must
ensure that the decree holder has been served with the notice. The ratio
laid down in Meghraj case (supra) applies now with greater rigour. The
reason for the rule both in the unamended and amended provision appears to
be that if the judgment debtor intends that the running of interest should
cease then he must intimate in writing and ensure that it is served on the
decree-holder. Sub-rules (4) and (5) added in 1976 to protect the judgment-
debtor provide for ceasure of interest from the date of deposit or payment.
But the cessation of interest under sub-rule (4) takes place not by payment
alone but from the date of service of the notice referred to in sub-rule
(2). It is not necessary for purposes of this case to decide whether the
creditor was bound to appropriate the amount towards principal once
it was deposited in court and intimation of the deposit was served on the
decree-holder as it does not appear that the respondent ever served any
notice on the appellant about the deposit. It is true that the amount was
deposited in January, 1988. But in absence of any intimation as required by
sub-rule (2) and indication of manner of appropriation, the payment could
not be deemed to have been appropriated towards principal unless the
decree-holder admits it to be so. The reasoning of the High Court that
since the deposit was made in pursuance of order of this Court it would be
deemed that the deposit was towards principal does not appear to be
correct. Factually, there was no direction to deposit. The court only
granted an interim order in respect of escalation. Therefore, the judgment-
debtor was bound to deposit the decretal amount in accordance with law. And
that is provided for by Order XXI, Rule I of the Civil Procedure Code. But
mere deposit in absence of any notice and intimation that it was being
deposited towards principal it was for the decree holder to appropriate it
towards the dues. That is what was laid down in Meghraj case (supra).
There is yet another reason for setting aside the order of the High Court.
Once the appeal was decided and it was held that the amount awarded under
the amended Act, 1984 did not suffer from any error of law except the
amount under Section 23 (1-A), the parties were relegated to the same
position as they were on the date when the interim order was granted. In
other words, the amount due was to be paid on the principal amount and it
cannot be urged that since the respondent had deposited the amount the
principal stood paid and, therefore, no interest or solatium could be
calculated on the principal amount.
In the result, these appeals succeed and are allowed. The Order passed by
the High Court is set aside and that of the Executing Court is restored.
The appellant shall be entitled to his cost.
Appeal allowed.