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Wednesday, April 2, 2014

How to adjust payment made in the absence of specific mention about the appropriation - if the amount deposited by the judgment debtor falls short of the decretal amount, the decree-holder is entitled to apply the rule of appropriation by appropriating the amount first towards interest, then towards costs and subsequently towards principal amount due under the decree; = V. KALA BHARATHI & ORS. … APPELLANTS VS. THE ORIENTAL INS. CO. LTD., BR. CHITOOR … RESPONDENT= 2014 (Apr.Part) http://judis.nic.in/supremecourt/filename=41372

 How to adjust payment made in the absence of specific mention about the appropriation - if the amount deposited by the judgment  debtor  falls short of the decretal amount, the decree-holder is  entitled  to  apply  the rule of appropriation by appropriating the amount  first  towards  interest, then towards costs and subsequently towards principal amount due  under  the
decree; =

whether the amount deposited by the judgment debtor in a decree is to be  adjusted  first towards interest or towards principal decretal amount. =

In view of above and more particularly keeping in  view  the  ratio
of  the  Constitution  Bench  judgment  in  Gurpreet  Singh  (supra),  
where
considering an identical question in respect of Order  XXI  Rule  1  of  the
CPC, 
it was held that 
if the amount deposited by the judgment  debtor  falls
short of the decretal amount, the decree-holder is  entitled  to  apply  the
rule of appropriation by appropriating the amount  first  towards  interest,
then towards costs and subsequently towards principal amount due  under  the
decree; 
we are of the opinion that 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.
27.      We, therefore, allow the appeal, set aside  the  impugned  judgment
dated 29.07.2005 passed by the High Court and restore that of the  Executing
Court dated 18.08.2004.
   28. No orders as to costs.

    2014 (Apr.Part) http://judis.nic.in/supremecourt/filename=41372
P SATHASIVAM, RANJAN GOGOI, N.V. RAMANA

                                                               REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION





                        CIVIL APPEAL NO. 3056 OF 2008





V. KALA BHARATHI & ORS.            …        APPELLANTS

                                     VS.

THE ORIENTAL INS. CO. LTD.,
BR. CHITOOR                                 …       RESPONDENT


                               J U D G M E N T


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  Engineering
      Graduate, Mr. V. Raja Kumar on 29.04.1993  in  a  road  accident,  his
      legal heirs, i.e., the appellants herein filed a claim petition  being
      M.V.O.P. 774 of 1993 before the Motor Accident  Claims  Tribunal  (for
      short, ‘the Tribunal’) claiming -

   3. compensation to the tune of Rs.2 crores.  The vehicle involved in  the
      said accident was insured by the respondent – Insurance Company.   The
      Tribunal  vide  its  Award  dated  29.04.1997  awarded  an  amount  of
      Rs.98,40,500/- as compensation with interest @ 12% p.a. from the  date
      of the petition, i.e., 25.10.1993 till the date of realization,  apart
      from costs quantified at Rs.99,443/-.

   4. Being aggrieved, the respondent – Insurance Company  filed  an  appeal
      under Section 173 of the Motor Vehicles Act,  1988  (for  short,  ‘the
      Act’) and to comply with the provisions contained therein, deposited a
      sum of Rs.25,000/-.  On 15.12.1997, the High Court in C.M.A. No.  1726
      of 1997 granted             stay  of  execution  of  the  Award  dated
      29.04.1997 subject to the condition of depositing a sum of Rs.30 lakhs
      and Rs.99,443/- costs, which amounts were undisputedly deposited.  The
      said order was made absolute on 15.07.1998 subject to the condition of
      depositing a further sum of Rs.30 lakhs, which was also complied with.
      A Division Bench of the  High  Court  partly  allowed  the  appeal  on
      19.12.2001 thereby -

   5. reducing the compensation amount from Rs.98,40,500/- to Rs.56,40,000/-
      , however, the interest rate of 12% p.a. was retained.  The respondent
      –  Insurance  Company  also  deposited  a  sum  of  Rs.23,27,635/-  on
      19.09.2002, claiming to be full and final satisfaction of the award.

   6. The appellants filed Execution Petition No. 11 of 2003  on  06.06.2003
      before  the  Executing  Court  /  Tribunal  claiming  an   amount   of
      Rs.20,16,700/-, which claim was denied by the respondent  –  Insurance
      Company on  the  ground  that  its  liability  to  pay  interest  gets
      discharged when it deposits the award amount in full.   Thus,  relying
      on the principle of accrual method, the respondent – Insurance Company
      claimed that since it satisfied the award  amount  in  full,  no  more
      interest was payable and  as  per  its  calculation,  only  a  sum  of
      Rs.36,650/- was liable to be paid, which was deposited on 29.07.2003.

   7. While adjudicating 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
      Rs.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 adjusted towards the principal decretal amount  and  not
      any component of interest accrued upto that date; and (ii) the  amount
      deposited towards costs, in -

  10. pursuance of the directions of the court,  must  be  adjusted  towards
      that, and not towards payment of the decretal amount.

  11. Learned counsel for  the  appellants  vehemently  contended  that  the
      impugned order cannot be sustained being contrary to law of  the  land
      declared under Article 141 of the Constitution of  India  (for  short,
      ‘the Constitution’).  He also contended that  judicial  discipline  to
      abide by declaration of law made by  this  Court  cannot  be  forsaken
      under any pretext by any authority or court, be it  even  the  highest
      Court in a State.  It tantamount to judicial indiscipline.  In support
      of his submissions, the learned counsel relied upon  the  judgment  of
      this Court Industrial Credit and Development Syndicate (ICDS) Ltd. Vs.
      Smithaben H. Patel & Ors. 1999 (3) SCC 80,  Venkatadri  Appa  Rao  Vs.
      Parthan Sarathy Appa Rao AIR 1922 PC 233, Meghraj Vs. Bayabai 1969 (2)
      SCC 274 and Gurpreet Singh Vs. Union of India 2006 (8) SCC 457.
  12. On the other hand, learned counsel  appearing  for  the  respondent  –
      Insurance Company contended that, in the facts  and  circumstances  of
      the case, there is no -

  13. reason to interfere with the impugned order passed by the High Court.

  14. We have heard learned counsel for the parties  and  gone  through  the
      entire material available on record.

  15. Before adverting to the various issues involved in the  case  and  the
      contentions advanced by the counsel on either side, we have given  our
      anxious consideration to the judgment impugned of the  learned  single
      Judge of the Andhra Pradesh High  Court.   The  learned  Judge,  while
      adjudicating the issue, has considered the judgments of this Court  in
      Meghraj (supra), Industrial Credit and Development  Syndicate  (supra)
      and Rajasthan State Road  Transport  Corporation,  Jaipur  Vs.  Poonam
      Pahwa, AIR 1997 SC 2951 and has passed the judgment by giving  reasons
      which are basis for his conclusion.

11.      We feel that it is appropriate to extract the  relevant  paragraphs
from the impugned judgment.

        “It is true that in a plethora of judgments, 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-à-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 disclose as
        to whether the amount  should  be  adjusted  towards  principal  or
        interest.  However, the expression “interest if any”  occurring  in
        both the provisions is  significant.   A  decree  may  comprise  of
        principle amount claimed in the suit, as well  as  a  component  of
        interest up to the date of decree.  Once a  decree  is  passed  for
        certain amount, it becomes a principle by itself and the  liability
        to pay interest thereon, and if so, the rate at which it is  to  be
        paid, would depend upon the  terms  of  decree.   The  amount  that
        carries the interest till the date of realization would be the  one
        stipulated in the decree.  It is not permissible  for  a  Court  to
        award interest on interest.
        Sub section (3) of Section 3 of the -

        Interest Act clearly  prohibits  grant  of  interest  on  interest.
        Therefore, the only component of the decree that can be related  to
        the expression “interest if any” occurring in sub sections (4)  and
        (5) of Rule (1) is the decretal amount, which, in other  words,  is
        the principal.”




         “It is true that the cases decided so far, do not strictly support
         this view, and in a way, may suggest  the  other  point  of  view.
         However, an effort is made by this Court, to explain  the  purport
         of sub-rules (4) and (5) of Rule 1.  This Court  is  conscious  of
         the  requirement  to  follow  the  precedents,  as  well  as   its
         obligation,  to  give  effect  to  the  legislative  mandate.   An
         endeavor is made to honour both the obligations.  Having regard to
         the importance of the issue and the implications involved  in  it,
         further discussion may ensue at appropriate levels.”



12.      From the above findings of the learned Judge, it  appears  that  he
passed the order basing on three considerations:

           Firstly, the judgments relied upon by the claimants are based on
      the pre-amended provisions of Order 21 Rule 1 C.P.C.

           Secondly,  in  the  cases  which  were  decided  subsequent   to
      amendment, the issue -

           of appropriation of amounts has not fallen for consideration.

            Thirdly, a decree comprises of principal claimed in the suit  as
       well as component of interest.  Hence, once a decree is  passed  for
       certain amount, it becomes principal by itself and Section  3(3)  of
       Interest Act clearly prohibits grant of interest on interest.

13.      Now, before we proceed to 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 money is paid by postal money  order  or  through  a
       bank under clause (a) or clause (b) of sub-rule (1), the money  order
       or payment through bank, as the case may be, shall  accurately  state
       the following particulars, namely:-




               a) the number of the original suit;

               b) the names of the parties or where there are more than  two
                  plaintiffs or more than two defendants, as  the  case  may
                  be, the names of the first two plaintiffs  and  the  first
                  two defendants;

               c) how the money remitted is to be adjusted, that is to  say,
                  whether it is towards the principal, interest or costs;

               d) the number of the execution case of the Court, where  such
                  case is pending; and

               e) the name and address of the payer.


       (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).


       (5)        On any amount paid  under  clause  (b)  of  sub-rule  (1),
       interest, if any, shall cease to run from the date of such payment.


       Provided that, where the decree-holder refuses to accept  the  postal
       money order or -
       payment through a bank, interest shall cease to run from the date  on
       which the money was tendered to him, or where he avoids acceptance of
       the postal money order or payment through bank, interest shall  cease
       to run from the date on which the money would have been  tendered  to
       him in the ordinary course of business of the postal  authorities  or
       the bank, as the case may be.”


14.      A bare perusal of the aforesaid provisions  makes  it  amply  clear
that the scope of Order XXI Rule 1 of the CPC is that  the  judgment  debtor
is required to pay the decretal amount in one of the modes specified in sub-
rule (1) thereof.  Sub-rule (2) of Rule 1  provides  that  once  payment  is
made under sub-rule (1), it is the duty  of  the  judgment  debtor  to  give
notice to the  decree-holder  through  the  Court  or  directly  to  him  by
registered  post  acknowledgement  due.   Sub-rule  (3)  of  Rule  1  merely
indicates that in case money is paid by postal  money  order  or  through  a
bank under clause (a)  or  clause  (b)  of  sub-rule  (1)  thereof,  certain
particulars are required to be accurately  incorporated  while  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   sub-rules   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
interpretation with regard to  appropriation  of  deposited  amount  by  the
decree-holder.
-
16.      In this regard, it is also pertinent to extract  Rule  472  of  the
Andhra  Pradesh  Motor  Vehicles  Rules,  1989  (for  short,  ‘the  A.P.M.V.
Rules’), which is as under:

         “472. Enforcement of an award of the Claims Tribunal:-  Subject  to
       the provisions of Section 174, the Claims  Tribunal  shall,  for  the
       purpose of enforcement of its award, have all the powers of  a  Civil
       Court in the execution of a decree under the Code of Civil Procedure,
       1908, as if the award were a decree for the payment of  money  passed
       by such Court in a Civil Suit.”

The above-said Rule indicates that the award passed by the  Claims  Tribunal
is to be treated as if the decree for the payment of  money  passed  by  the
Civil Court in a civil suit.  Hence,  in  view  of  the  specific  provision
contained in the A.P.M.V. Rules, the award passed by the Claims Tribunal  is
to be treated  as  a  money  decree.   In  Rajasthan  State  Road  Transport
Corporation, Jaipur (supra), this Court held that in executing the award  of
the Claims Tribunal, Executing Court is competent to invoke  the  beneficial
provision under Order 21 Rule 1 of C.P.C.
-
17.      The Privy Council in Venkatadri Appa  Rao  Vs.  Parthasarathi  Appa
Rao AIR 1922 PC 233, held as follows:


           “The question then remains as to how, apart  from  any  specific
       appropriation, these sums ought to be dealt with.  There  is  a  debt
       due that carries  interest.   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.”


                                                         (Emphasis supplied)
     The above principle was reiterated by the Privy Council in Rai  Bahadur
Sethnemichand Vs. Seth Rada Kishen AIR 1922 PC 26.

18. We may notice that the principle laid down in the above  case  has  been
not only approved by the Supreme Court, but also followed in  several  other
subsequent cases.  In Meghraj (supra), it was held as under:

       “4. … Unless the mortgagees were informed  that  the  mortgagors  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  for
payment of decretal amount, except fixing the instalments,  in  the  absence
of agreement between the parties, regarding the mode of payment of  decretal
amount, the -
general rule of appropriation of payments towards decretal  amount  is  that
the said amount is to be adjusted firstly strictly in  accordance  with  the
directions contained in the decree and in the absence of such direction,  it
is to be adjusted firstly towards interest and costs and thereafter  towards
principal amount.  This is, of course, subject to  the  exception  that  the
parties can agree to the adjustment of payment in any other  manner  despite
the decree.  In that case, the Supreme Court had  an  occasion  to  consider
the method of appropriation and after  noticing  various  decisions  of  the
English Courts and the Privy Council, followed  the  judgment  in  Meghraj’s
case (supra).

21. We may also  notice  that  in  Prem  Nath  Kapur  &  Anr.  Vs.  National
Fertilizers Corporation, 1996 SCC (2) 71,  while  differing  with  the  view
taken in Mathunni Mathai (supra), it  was  held  that  the  normal  rule  of
appropriation contained  in  Order  XXI  Rule  1  of  the  CPC  relating  to
execution of decrees for recovery of money stands excluded  by  Sections  28
and 34 of the -
Land Acquisition Act, 1894 and the principles contained  therein  could  not
be extended to execution of award decrees under the said Act.  The  relevant
para of the said judgment, being portion of para 14, reads as under:
       •
       • “14. Equally, the right to  make  appropriation  is  indicated  by
         necessary implication, by the award itself as the award or  decree
         clearly mentions each of the items.   When  the  deposit  is  made
         towards the specified amounts, the claimant/owner is not  entitled
         to deduct from the amount of compensation towards costs, interest,
         additional amount under Section 23 (1-A) with interest and then to
         claim the total balance amount  with  further  interest.   …     …
         …       …        …         …        …         …         …        …
         …”

22.      In Gurpreet Singh (supra), the Constitution  Bench  of  this  Court
had an occasion to consider the issue regarding execution of  money  decree,
the principle of appropriation and its  applicability,  which  was  recently
followed by this Court in Bharath Heavy Electricals Ltd. Vs. RS Avthar  Sing
& Co., 2013 (1) SCC 243,  and  culled  down  the  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 appropriated towards the principal.  In
                            other words, if a -
                         f) part of the  principal  amount  has  been  paid
                            along with interest due thereon as on the  date
                            of issuance of notice of deposit of interest on
                            the part of the principal sum will cease to run
                            thereafter.
                         g) In case where there is a shortfall  in  deposit
                            of the  principal  amount,  the  decree  holder
                            would be entitled to adjust interest and  costs
                            first and then balance  towards  the  principal
                            and beyond that the decree holder  cannot  seek
                            to reopen the entire transaction and proceed to
                            recalculate the interest on the  whole  of  the
                            principal amount and seek for re-appropriation.




23. In the judgment referred to by the High Court in the impugned  judgment,
this Court and the Privy Council consistently have  taken  a  view  that  in
case of appropriation of  amount  unless  the  decree  contains  a  specific
provision, the amounts have to be appropriated as contemplated  under  Order
21 Rule 1.  If there is a  shortfall  in  deposit,  the  amount  has  to  be
adjusted towards interest and costs, then it  has  to  be  adjusted  towards
principal.  The High Court has -
failed to appreciate this fact and  misdirected  itself  in  observing  that
these judgments are prior to the amendment  to  Order  21  Rule  1.  In  our
considered view, as far as this aspect  is  considered,  there  is  no  much
difference in the provisions  prior  to  or  subsequent  to  the  amendment,
because in the objects and reasons for amendment to Order  XXI  Rule  1,  as
observed by the Constitution bench in Gurpreet Singh the legislative  intent
in enacting sub-rules (4) and (5) is  that  interest  should  cease  on  the
deposit being made and notice given or on the amount being tendered  outside
the court in the manner provided.  The intent of the rule  making  authority
is to leave no room for any frivolous pleas of payment of money due under  a
money decree.
24.      We may add that the High Court proceeded on the  assumption  as  if
sub-rules (4) and (5) of Rule 1, which were inserted pursuant  to  Amendment
to C.P.C. in 1976, there is change in procedural law and the tenor  of  sub-
rule (1) thereof.  But, sub-rules (4) and (5)  do  not  have  any  relevance
with regard to appropriation, except stating when interest ceases to -
run. Thus, it is no way guide for appropriation of  amount  as  contemplated
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  is  entitled  to
appropriate the amount  deposited  by  the  judgment  debtor  first  towards
interest, then cost and thereafter towards principal.
26.      In view of above and more particularly keeping in  view  the  ratio
of  the  Constitution  Bench  judgment  in  Gurpreet  Singh  (supra),  where
considering an identical question in respect of Order  XXI  Rule  1  of  the
CPC, it was held that if the amount deposited by the judgment  debtor  falls
short of the decretal amount, the decree-holder is  entitled  to  apply  the
rule of appropriation by appropriating the amount  first  towards  interest,
then towards costs and subsequently towards principal amount due  under  the
decree; we are of the opinion that 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.
27.      We, therefore, allow the appeal, set aside  the  impugned  judgment
dated 29.07.2005 passed by the High Court and restore that of the  Executing
Court dated 18.08.2004.
   28. No orders as to costs.


                                       .................C.J.I.
                                       (P. SATHASIVAM)






                                       .....................J.
                                       (RANJAN GOGOI)



                                       .....................J.
                                       (N.V. RAMANA)
New Delhi,
April 01, 2014.


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