ORDER
S.S. Subramani, J.
1. On 21.4.1998, I gave certain directions to respondent to deposit a sum of Rs. 9,00,000 on or before 15.6.1998 for payment to petitioners. Subsequently, on 28.8.1998, I passed further order after deposit was made. Though deposit was made belatedly, I excused the delay.
2. In my first order, dated 21.4.1998, I only tentatively fixed the rate of interest. On 28.8.1998, 1 held that petitioners herein are entitled to 15% interest. In paragraph 13 of my order dated 28.8.1998, I said,
…in spite of the conduct of the respondent, I feel that interest of justice will be met if 15% interest is paid on the principal amount due to the petitioners. Interest has to be calculated on the basis of instalments as and when it becomes payable. After arriving at the total figure, the amount already deposited by the respondent will have to be adjusted, and the balance will have to be arrived at on that basis. Respondent is directed to pay the balance amount to the petitioner within one month….
I wanted compliance to be reported to this Court and the case was adjourned to 6.10.1998.
3. Both parties disputed the amount that is due to them. Respondent filed a statement on 16.10.1998 where balance amount was shown as Rs. 5,76,809.18. Petitioners objected to the same and filed another statement along with memo as on 28.10.1998, a sum of Rs. 6,70,766.60 is due to them. For verification of the said statement and also the objection statement filed by petitioners, Government Pleader took time. On 5.11.1998, another statement was filed by the Government Pleader. As per the said statement, a sum of Rs. 4,53,327.31 is due to the petitioners. The same is also seriously opposed by petitioners’ counsel. One of the main objections raised by petitioners regarding the last statement filed by Government Pleader is that the amount of Rs. 67,320.82, which was deposited on 21.6.1988 and 14.6.1989 is adjusted towards principal. After adjusting that amount towards principal, interest has been calculated for the balance amount.
4. According to the learned Senior counsel for the petitioners, on the date when Rs. 67,320.82 was deposited more than Rs. 3,50,000 was due and it is for the petitioner to decide in what way the amount deposited has to be appropriated. The State has not stated as to how appropriation has been made. Therefore, it is for the petitioner who are the creditors to decide as to the manner of appropriation. If this contention is accepted, learned Senior counsel submitted that the entire statement of Government Pleader is only to be discarded and the statement filed by petitioners has to be accepted.
5. I find force in the said contention of the learned Senior Counsel for the petitioners.
6. Under Section 60 of the Indian Contract Act, creditor has got the right for appropriation. The section read thus:
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 limitation of suits.
7. In the recent decision of Honourable Supreme Court reported in Mathunni Mathai v. Hindustan Organic Chemicals Ltd. and Ors. , this point has been considered. In paragraphs 3 and 4 of the judgment, Honourable Supreme Court held thus,
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 v. Raja Parthusarathy Appa Rao Bahadur Zamindar Garu A.I.R. 1922 P.C. 233; LR, 48 I.A. 150 : 26 C.W.N. 33, 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, 60. 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 Kishen A.I.R 1922 P.C. 26 : 26 C.W.N. 153 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 provisions was made in unamended Order 21, Rule 1 prior to 1976 and it was provided that the amount to 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 Case. 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 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 Venkataderi case….
8. Commenting on Section 60 of the Indian Contract Act, Pollock and Mulla in their book on Indian Contract and Specific Relief Acts, 11th Edition at page 645, said thus,
If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor,” and he may exercise that right until the very last moment, and need not declare his intention in express terms….
At page 646 of the same book, it is further said thus,
If money is paid by the debtor to the decree-holder towards the decretal debt without specifying whether it is towards interest or principal, the decree-holder is entitled to credit it to interest first and then to principal. This is the general rule.
9. In view of this settled legal position, the statement filed by the respondent is not correct, and the same is not in accordance with the directions given by me. Petitioner is entitled to appropriate the amount deposited towards interest. As per petitioners’ statement as on 28.10.1998, a sum of Rs. 6,70,766.60 is due. The said amount is to be deposited by. respondent. Even though there was direction to deposit the entire balance within a period of one month, in view of the dispute regarding amount, the same could not be deposited in time. I direct respondent to pay the said amount by way of draft on Canara Bank, Wandoor branch Wandoor, Malapuram District, Kerala State, in the name of the petitioners. While getting the draft, respondent is directed to include interest upto the date of purchasing draft with interest at 15%. The amount has to be paid as directed within one month from today. Report compliance by 23.12.1998.