Bombay High Court
Dsl Enterprises Pvt. Ltd vs Maharashtra State Electricity ... on 13 March, 2018
Bench: G.S. Patel
DSL Enterprises Pvt Ltd v Maharashtra State Electricity Distribution Co Ltd
916-CHSCDL246-18.DOC
Arun
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
CHAMBER SUMMONS (L) NO. 246 OF 2018
IN
EXECUTION APPLICATION NO. 422 OF 2018
IN
ARBITRATION PETITION NO. 374 OF 2004
DSL Enterprises Private Limited ...Claimant
~ versus ~
Maharashtra State Electricity Distribution ...Respondent/
Company Ltd. Applicant
Mr Chirag Mody, with Mr Rahul Sinha i/b Lex Global Legal
Consultant for the Applicant-Respondent.
Mr RA Dada, Senior Advocate, with Mr Mukul Taly and Ms S
Sridhar, i/b Mohamedbhai & Company, for the Claimant.
CORAM: G.S. PATEL, J
DATED: 13th March 2018
ORAL JUDGMENT:
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1. The Chamber Summons is filed by the Maharashtra State
Electricity Distribution Company Limited ("MSEDCL"), the
unsuccessful respondent to an arbitral award. These are the prayers
in the Chamber Summons:
(a) That upon the Applicant depositing a sum of
Rs.46,89,16,396/- this Hon'ble Court be pleased to declare
that the arbitration award dated 18th June 2004 stands fully
satisfied and the Applicant stands discharged therefrom;
(b) That this Hon'ble Court be pleased to raise
attachment of Applicant's bank account being Schedule as
attached in the Warrant of attachment dated February 22,
2018 vide warrant of attachment (Exhibit "A" hereto);
(c) That pending the hearing and final disposal of the
Chamber Summons Applicant may be allowed to deposit
an amount of Rs.46,89,16,396/- through Demand Draft no
977411 dated 6th February 2018 (Bank of Maharashtra) in
satisfaction of the award dated 18th June 2004 and
attachment of Applicant's Bank account being
0239256010710, Canara Bank, Tamarind Lane branch be
raised;
2. The Chamber Summons was first moved on 24th February
2018. As I was unavailable that day, MSEDCL moved before AK
Menon J. It cited 'grave urgency', and actually applied after court
hours, saying that the attachment in execution of its bank accounts
needed to be raised immediately. Given the time when it was moved,
Menon J directed it be placed before the regular Bench on 26th
February 2018. On that day, 26th February 2018, at the request of
Mr Dada for the decree holder, DSL Enterprises Pvt Ltd ("DSL"),
it was stood over by a day. On 27th February 2018, I passed an ad-
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interim order. I will return to the details of this order presently, but
in sum, since MSEDCL (a) deposited in Court (i) an amount of
Rs.46,89,16,396 admittedly due to DSL; and (ii) an amount of
Rs.98,54,06,315 claimed by DSL; and (b) made a statement in
regard to a potential deduction of tax at source, I ordered the raising
of the attachment of MSEDCL's bank accounts.
3. The parties then completed their filings, to the stage of a sur-
rejoinder. I have now heard Mr Mody for MSEDCL and Mr Dada
for DSL at some length. In my view, and for the reasons that follow,
this entire application is not just untenable in law and unsupported
by facts; it is purely dilatory, certainly vexatious and has resulted in a
quite unforgivable waste of judicial time.
4. An abbreviated statement of facts is thus. On 18th June 2004,
MSEDCL suffered an award in the amount of Rs.179 crores in an
arbitration claim brought by DSL. The arbitral tribunal (Mr Justice
VD Tulzapurkar, Mr Justice SC Pratap and Mr Justice ML Pendse)
awarded interest at 10% per annum from the date of the award until
payment. MSEDCL was also held liable to pay costs. These were
quantified at Rs.1 crore, a very significant sum by any standards, and
especially in 2004. There was no separate award of interest pendente
lite.
5. MSEDCL filed a challenge Petition under Section 34 of the
Arbitration Act. There were certain intervening events and
proceedings, but these are not of immediate relevance to the present
considerations. That challenge Petition was ultimately dismissed by
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a learned single Judge of this Court (Mrs RS Dalvi J) on 18th March
2009. She imposed costs of Rs.1,00,000/- on MSEDCL.
6. DSL moved in execution and proceeded to attach MSEDCL's
bank accounts. The single Judge hearing Execution Applications
(SC Dharmadhikari J) directed MSEDCL to furnish a bank
guarantee in the amount of Rs.75 crores and raised attachment on
MSEDCL's bank accounts subject to fulfilment of that condition.
7. MSEDCL appealed under Section 37 of the Arbitration Act.
On 2nd May 2009, a Division Bench ( JN Patel J, as he then was,
and Mrs Mridula Bhatkar J) stayed the execution of the decree
subject to two conditions; (i) that MSEDCL would deposit Rs.179
crores in Court before 29th June 2009; and (ii) that MSEDCL
would furnish a bank guarantee for Rs.86 crores and would keep this
alive until final disposal of the Appeal.
8. Both parties went to the Supreme Court against the 2nd May
2009 order. On 15th May 2009, the Supreme Court modified the
High Court order. It directed MSEDCL to deposit Rs.65 crores in
this Court and granted DSL the liberty to withdraw this upon DSL
furnishing a bank guarantee. It also directed MSEDCL to furnish a
bank guarantee for Rs.200 crores to the satisfaction of the
Prothonotary and Senior Master of this Court. This bank guarantee
was to be kept alive during the pendency of the Appeal.
9. A good four years went by until, on 19th October 2013,
another Division Bench of this Court (VM Kanade and KR Shriram,
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JJ) dismissed MSEDCL's Appeal under Section 37 of the
Arbitration Act. The Division Bench also imposed costs on
MSEDCL.
10. This was, therefore, the third order of costs against
MSEDCL so far.
11. MSEDCL moved the Supreme Court in a Special Leave
Petition against the order dismissing its Section 37 Appeal. On 28th
November 2013, the Supreme Court passed an interim order
directing MSEDCL to furnish bank guarantee of Rs.100 crores to
the satisfaction of the Prothonotary and Senior Master; directing it
to deposit Rs.100 crores in this Court; giving to DSL to withdraw
this against a bank guarantee; and directing DSL to keep alive its
bank guarantee previously furnished to the High Court while
withdrawing Rs.65 Crores.
12. Early this year, on 18th January 2018, the Supreme Court
dismissed MSEDCL's SLP against the High Court Division Bench
order dismissing MSEDCL's Section 37 appeal. This dismissal was
also accompanied by an order of costs. This is therefore the fourth
order of costs against MSEDCL.
13. This Chamber Summons was then filed sometime in
February 2018. On 27th February 2018, I passed the order I referred
to earlier. Paragraphs 1, 2, 3 and 4 of that order read:
1. Mr Mody has two Demand Drafts. Both Demand
Drafts are in favour of the Prothonotary and Senior Master.
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The first Demand Draft is in the amount of
Rs.46,89,16,396/-. This is admittedly due by the
Respondent to the Petitioner. This Draft will be deposited
with the Prothonotary and Senior Master in the course of
morning and will be deposited immediately in the course of
the day. The Prothonotary and Senior Master will issue an
instrument in favour of the Petitioner in this exact amount
by the end of day tomorrow, 28th February 2018.
Alternatively, payment may be made by the Prothonotary
and Senior Master by RTGS to an account nominated by
the Decree Holder.
2. The second Demand Draft is in the amount of
Rs.98,54,06,315/-. This will also be encashed by the
Prothonotary and Senior Master and will be invested
initially for a period of 15 days. Further renewal will be
subject to the orders of the Court.
3. Mr Mody states that an amount of
Rs.15,12,50,893.09/- has been deducted as tax at source.
Mr Dada submits that no TDS can be deducted on an
award for damages. For the present I will record the
undertaking by the Judgment Debtor to pay the amount in
to the revenue as TDS within time. The amount of TDS will
be retained by the Judgment Debtor on the understanding
that specific undertaking that the question of whether or
not tax is deductible at source will also be decided at the
next hearing. In any case the Judgment Debtor has one
month or 30 days to pay the amount to revenue. The
matter will be listed before then. The undertaking is
accepted as an undertaking to the Court.
4. In view of the foregoing, all bank accounts of the
Judgment Debtor, The Maharashtra State Electricity
Distribution Company Limited, are released from
attachment or orders of freezing with immediate effect. An
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authenticated copy of this order will be communicated to
the Managers of the respective branches. They are
directed to act on production of an authenticated copy of
this order.
14. One further fact must be noted. On 3rd June 2009, DSL
recorded partial satisfaction of the Arbitral Award or decree and it
did so by showing that it had appropriated the amounts withdrawn
(from the MSEDCL deposits made in Court) first towards interest
and costs. It is actually this point that is at the heart of Mr Mody's
case today on behalf of MSEDCL. His submission is that when the
Division Bench ( JN Patel & Mrs Bhatkar JJ) directed a deposit of
the principal amount and separately interest, this necessarily meant
that the DSL was first required to make appropriations towards
principal and then to interest, and could not do it the other way
around. Mr Mody draws my attention to paragraph 9 of the order
dated 2nd May 2009:
9. This contention is strongly opposed by the
respondents on the ground that the respondents have
been deprived of the amount for the last ten years which
has led them to approach BIFR to get itself declared as a
sick industrial unit as they were not paid their dues by the
appellants under the contract which was the subject
matter of arbitration proceedings till passing of the award
in their favour and, therefore, the Court should direct the
appellants to deposit the amount along with interest for
which the order of attachment has already been passed by
the Prothonotary and the award has been confirmed by the
learned Single Judge. We are inclined to grant stay in
favour of the appellants on the condition that the
appellants shall deposit the principal amount which is
in the sum of Rs.179 crores in this Court on or before
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29th June 2009 and furnish a bank guarantee for the
balance amount i.e. 86 crores and the bank guarantee
may be kept alive till the appeal is heard finally and
disposed of. Failure to deposit the amount and furnish the
bank guarantee as directed would result in vacation of the
stay order. On the amount being so deposited by the
appellants, the Prothonotary & Sr Master would invest it in
any nationalised bank as per the usual directions of this
Court in respect of such investment of monies deposited
by the parties in a term deposit initially for a period of one
year. The appeal be listed before the Second Court on 29th
June 2009 for hearing.
15. On the face of it the submission is untenable in law. How to
appropriate an amount paid under or in partial satisfaction of a
decree is always the sole prerogative of the decree holder. It is
subject to only two exceptions: (i) where a court otherwise directs
(either in the decree or in execution), or (ii) where the parties agree
on the mode and manner of appropriation. Barring a judicial order
directing a particular form, manner or mode of appropriation, or an
agreement inter-partes, it is always for the decree holder to decide
how he wishes to appropriate a payment made towards the decretal
debt. As a general rule, the first thing almost always sought to be
satisfied is the decree for interest and costs. The reason is plain. A
decree that awards interest on a principal amount necessarily
implies that interest keeps running on the base principal amount
until the entirety of the decree is satisfied. Unless the decree so
provides, there is no possibility of the judgment creditor on his own
capitalising interest or compounding it, for that would amount to
recovering interest on interest. It is for this reason that a prudent
judgment creditor will always first apply any funds received towards
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interest. If those are left unsatisfied or without appropriation they
will remain in that amount and will not earn further interest. There
is therefore a logical reason why appropriations are first made
towards interest and costs. This is a well settled position in law.1
16. Second, the submission that once a deposit is made as a
condition for stay on execution, the decree is automatically satisfied
and interest stops running is prima facie incorrect. An order of
deposit as a conditional stay is to provide security to the judgment
creditor. It is only when the amount deposited is allowed to be
withdrawn and it is actually applied towards satisfaction of the debt
that there is a reduction of the decretal claim to the extent of that
appropriation. If the amount of the appropriation is wholly
consumed by being applied towards interest and costs, interest on
the principal amount will continue to run. The situation will be
slightly different, if after appropriating towards interest and costs
there is an application towards a part of the principal claim. Then
interest will run on the reduced principal debt.2
17. In PSL Ramanathan Chettiar & Ors v ORMPRM Ramanathan
Chettiar,3 the Supreme Court enunciated the legal principle thus:
1 Industrial Credit & Development Syndicate v Smithaben H Patel & Ors,
(1999) 3 SCC 80 (paras 6, 7 and 14); V Kala Bharathi & Ors v Oriental
Insurance Company Ltd, (2014) 5 SCC 577 (paras19, 20, 26); Jet Airways
(India) Ltd v Sahara Airlines Ltd & Ors, (2011) 113 (3) BLR 1725 (paras
49-51).
2 PSL Ramanathan Chettiar & Ors v ORMPRM Ramanathan Chettiar, AIR
1968 SC 1047 (paras 12, 13,15); Jet Airways, supra, (paras 44, 45,46);
Sino Ocean Ltd v Salvi Chemical Industries ltd, 2017 SCC Online Bom
9401 (paras 23, 24), per KR Shriram J.
3 AIR 1968 SC 1047.
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12. On principle, it appears to us that the facts of a
judgment-debtor's depositing a sum in court to
purchase peace by way of stay of execution of the
decree on terms that the decree-holder can draw it out
on furnishing security, does not pass title to the money
to the decree-holder. He can if he likes take the money
out in terms of the order; but so long as he does not do it,
there is nothing to prevent the judgment debtor from
taking it out by furnishing other security, say, of immovable
property, if the court allows him to do so and on his losing
the appeal putting the decretal amount in court in terms of
Order 21 Rule 1 CPC in satisfaction of the decree.
13. The real effect of deposit of money in court as
was done in this case is to put the money beyond the
reach of the parties pending the disposal of the appeal.
The decree-holder could only take it out on furnishing
security which means that the payment was not in
satisfaction of the decree and the security could be
proceeded against by the judgment-debtor in case of
his success in the appeal. Pending the determination of
the same, it was beyond the reach of the judgment-debtor.
(Emphasis added)
This, I believe, is the principle to be applied.
18. The pronouncement of law by a three-Judge bench of the
Supreme Court in V Kala Bharathi & Ors v Oriental Insurance
Company Ltd4 is the clearest possible enunciation of the principle
applicable.
4 (2014) 5 SCC 577
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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.
... ... ...
19. In Mathunni Mathai [Mathunni Mathai v. Hindustan
Organic Chemicals Ltd., (1995) 4 SCC 26] , it was held that:
(SCC p. 29, para 3)
"3. 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."
It was observed that: (SCC pp. 29-30, para 3)
"3. ... 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 Ltd.
[(1999) 3 SCC 80] , 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
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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 case [(1969) 2
SCC 274] .
26. In view of above and more particularly keeping in
view the ratio of the Constitution Bench judgment in
Gurpreet Singh [(2006) 8 SCC 457] , where considering an
identical question in respect of Order 21 Rule 1 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.
(Emphasis added)
19. If there is the slightest doubt about this principle, and I do not
for a moment believe there is, it is buried by the emphatic
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delineation of the law on the subject -- the precise question of
appropriation absent a judicial direction or an agreement inter partes
-- by the Supreme Court's decision in Industrial Credit &
Development Syndicate v Smithaben H Patel & Ors,5 referenced, as
noted, in V Kala Bharathi. This is what the Supreme Court said in
Industrial Credit & Development Syndicate:
6. In Venkatadri Appa Row v. Parthasarathi Appa Row
[(1920-21) 48 IA 150 : AIR 1922 PC 233] the Judicial
Committee of the Privy Council had held that upon taking
an account of principal and interest due, the ordinary
rule with regard to payments by the debtor
unappropriated either to principal or interest is that
they are first to be applied to the discharge of the
interest. This Court in Meghraj v. Bayabai [(1969) 2 SCC
274 : (1970) 1 SCR 523] reiterated the position of law and
held that the normal rule was that in the case of a debt
due with interest, any payment made by the debtor was
in the first instance to be applied towards satisfaction
of interest and thereafter to the principal. It was for the
debtor to plead and prove the agreement, if any, that the
amounts paid or deposited in the Court by him were
accepted by the creditor/decree-holder subject to the
condition imposed by him. In that case the judgment-
debtor had urged that when the amount was finally
submitted by the mortgagee they were aware of the fact
that certain amounts had been paid conditionally and the
withdrawal of the amounts deposited in the court
amounted to acceptance of the conditions subject to which
the amounts were deposited. In the facts and
circumstances of that case this Court observed thus: (SCC
p. 277, para 7)
5 (1999) 3 SCC 80.
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"But the account submitted by the
mortgagees shows clearly that they had
given credit for the amounts deposited
towards the interest and costs in the first
instance and the balance only towards the
principal. The account submitted by the
mortgagees clearly negatives the plea of the
mortgagors."
The same is the position in the instant case as earlier
noticed and evident from the statement of accounts
(Annexure 'C') admittedly furnished to the judgment-debtor
immediately after payment of the amounts consequent
upon the passing of the decree. To the same effect is the
letter (Annexure 'E') and statement of account
accompanying it.
7. Order 21 Rule 1 of CPC provides the mode of paying
money under the decree. Payments made to the decree-
holder out of court are required to be certified for
adjustment in terms of Rule 2 of Order 21 CPC. Where any
money payable under a decree is paid out of court or is
otherwise adjusted in whole or in part to the satisfaction of
the decree, the decree-holder is to certify such payment
and adjustment towards the court whose duty is to execute
the decree. The judgment-debtor or any person who has
become surety for the judgment-debtor has also a right to
inform the court of such payment or adjustment applying
to the court for the issuance of a notice to the decree-
holder to show cause as to why such payment or
adjustment be not recorded as certified and if, after service
of such notice, the decree-holder fails to show cause why
the payment or adjustment should not be recorded as
certified, the court is obliged to record the same
accordingly. No payment or adjustment can be recorded at
the instance of the judgment-debtor unless it is made in
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the manner provided under Rule 1 or the payment or
adjustment is proved by documentary evidence or the
payment or adjustment is admitted by, or on behalf of the
decree-holder in a reply to the notice given to him under
sub-rule (2) of Rule 1 Order 21 of CPC. In the absence of
payment having been made in accordance with the mode
prescribed or the satisfaction recorded under Rule 2, the
judgment-debtor cannot claim the benefit of adjustment in
the manner insisted upon by him.
8. In order to overcome the legal obstacles in their
way, the judgment-debtors have sought refuge under the
cloak of alleged protection provided by Section 60 of the
Indian Contract Act, 1872. It is further submitted that in
view of the later judgments of this Court in Mathunni
Mathai v. Hindustan Organic Chemicals Ltd. [(1995) 4 SCC
26] and in Prem Nath Kapur v. National Fertilizers Corpn. of
India Ltd. [(1996) 2 SCC 71] the law laid down in Meghraj
case [(1969) 2 SCC 274 : (1970) 1 SCR 523] has to be held
as no good law.
9. We are of the opinion that such a plea is far-
fetched and begged only for the purpose of putting an
imaginary defence to the claim of the appellant-decree-
holder. Section 59 of the Indian Contract Act deals with
the application of payment where debt to be discharged is
indicated and Section 60 where debt to be discharged is
not indicated. The aforesaid Sections 59 and 60 are
reproduced below:
"59. Application of payment where debt
to be discharged is indicated.--Where a
debtor, owing several distinct debts to one
person, makes a payment to him, either with
express intimation, or under circumstances
implying, that the payment is to be applied to
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the discharge of some particular debt, the
payment, if accepted, must be applied
accordingly.
60. Application of payment where debt
to be discharged is not indicated.--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."
A perusal of Section 59 would clearly indicate that it refers
to several distinct debts payable by a person and not to the
various heads of one debt. The principal and interest due
on a single debt or decree passed on such debt carrying
subsequent interest cannot be held to be several distinct
debts. A Full Bench of the Lahore High Court in Jia Ram v.
Sulakhan Mal [AIR 1941 Lah 386 : ILR 1941 Lah 740] dealt
with the scope of Section 59 to Section 61 of the Indian
Contract Act and held:
"Sections 59 to 61, Contract Act, embody the
general rules as to appropriation of payments
in cases where a debtor owes several distinct
debts to one person and voluntarily makes
payment to him. They do not deal with cases
in which principal and interest are due on a
single debt, or where a decree has been
passed on such a debt, carrying interest on
the sum adjudged to be due on the decree.
These sections are based upon the rule of
English Law, well settled since Clayton case
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[(1816) 1 Mer 608 : 14 RR 166] that where a
debtor, owing several distinct debts to one
person, makes a payment to him intimating
that the payment is to be applied in discharge
of particular debt, the creditor, if he accepts
the payment, must apply it accordingly. If,
however, the debtor has omitted to intimate
and there are no circumstances indicating to
which debt the payment is to be applied the
creditor may, at his discretion, apply it to any
debt actually due and payable to him by the
debtor at the time. In case neither party
makes the appropriation, the payment is to
be applied in discharge of the debts in order
of time; and if the debts are of equal standing
the payment is made in the discharge of each
of them proportionately. It will be seen that
these rules have no application to a case in
which only one debt is due and at the time of
payment, besides the principal sum secured,
interest has also accrued due. In such cases,
the rule of English Law, laid down as far back
as 1702 in Chase v. Box [(1702) 2 Freeman 261
: 22 ER 1197] is that
'if a man is indebted to
another for principal and
interest and payeth the money
generally, it shall be applied in
the first place to sink the
interest before any part of the
principal should be sunk'.
In Parr's Banking Co. Ltd. v. Yates [(1898) 2 QB 460 : 67
LJQB 851 : 79 LT 821 : 47 WR 42 : (1895-99) All ER Rep Ext
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1592] Lord Rigby, J. described it as 'the old and well-settled
rule' that where both
'principal and interest are due the sums
paid on account must be applied first to
interest. That rule, where it is applicable is
only common justice. To apply the sums
paid to principal where interest has
accrued upon the debt, and is not paid,
would be depriving the creditor of the
benefit to which he is entitled under his
contract, and would be most unreasonable
as against him'.
Fisher in his standard work on the Law of Mortgages (Edn.
7), p. 620, while dealing with the question of appropriation
of payments towards a mortgage debt, states the law as
follows:
'Where the debtor claims to be discharged by
reason of payments which were not specially
made in respect either of the principal or the
interest of the mortgage, the rule is that a
general payment shall be applied in the
first place to sink the interest, before any
part of the principal is discharged.' "
The judgment of the Lahore High Court is based upon
sound principle and has kept in mind the intention of the
legislature in enacting Sections 59 to 61 of the Act. We do
not agree with the learned counsel for the respondents
that Section 60 of the Contract Act has to be read
independently excluding the provisions of Section 59.
Accepting such an argument would amount to doing
violence to the language employed in the section and the
purpose sought to be achieved by it. Besides, it would also
be contradictory in terms. Section 60, if applied
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independently, cannot be held to be conferring any right
upon the judgment-debtor as it confers a discretion in
favour of the creditor to apply such deposited amount to
any lawful debt actually due and payable by the debtor
when such debtor omits to intimate the discharge of the
debt in the manner envisaged under Section 59. We are of
the opinion that Sections 59 and 60, Contract Act, would
be applicable only in pre-decretal stage and not thereafter.
Post-decretal payments have to be made either in
terms of the decree or in accordance with the
agreement arrived at between the parties though on
the general principles as mentioned in Sections 59 and
60 of the Contract Act. As and when such an agreement
either express or implied is relied upon, the burden of
proving it would always be upon its propounder. The
judgment-debtors, in the instant case, are proved to have
failed in discharging such an onus. There does not appear
to be any obligation on the decree-holder to intimate the
judgment-debtor that the amount paid to him had not been
accepted in the manner specified by him in the letter
accompanying the payment. Insisting upon such a course
would result in unnecessary burden upon the financial
institutions and conferment of unwanted unilateral
discretion in favour of the defaulters. Acceptance of the
plea that the amount paid first should be adjusted in the
principal amount would not only be against the provision of
law but against the public policy as well. To provide
security, continuity and certainty in business transaction,
the legislature has been making specific provisions in that
regard which may be found in various provisions of the
Negotiable Instruments Act, 1881 or Order 37 Code of Civil
Procedure and other statutory provisions.
14. In view of what has been noticed hereinabove, we
hold that the general rule of appropriation of payments
towards a decretal amount is that such an amount is to
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be adjusted firstly, strictly in accordance with the
directions contained in the decree and in the absence
of such direction, adjustments be made firstly in
payment of interest and costs and thereafter in
payment of the principal amount. Such a principle is,
however, subject to one exception, i.e., that the parties
may agree to the adjustment of the payment in any
other manner despite the decree. As and when such an
agreement is pleaded, the onus of proving is always upon
the person pleading the agreement contrary to the general
rule or the terms of the decree schedule. The provisions of
Sections 59 to 61 of the Contract Act are applicable in
cases where a debtor owes several distinct debts to one
person and do not deal with cases in which the principal
and interest are due on a single debt.
(Emphasis added)
20. Mr Mody relies on the decision in Himachal Pradesh Housing
and Urban Development Authority & Anr v Ranjit Singh Rana6 and
Union of India & Anr v MP Trading & Investment RAC Corporation
Ltd.7 I do not believe either of these cases assists MSEDCL. In
Ranjit Singh Rana the entire amount due under the award was
deposited in the Himachal Pradesh High Court even before the
challenge petition was dismissed, i.e. before the award became
enforceable and could be put into execution. The deposit was
specifically towards satisfaction of the award (paragraph 15). In the
present case, the deposits were ad hoc amounts. The amount of
Rs.65 crores deposited by MSEDCL pursuant to the 15th May 2009
Supreme Court order was less even than the interest by then due,
6 (2012) 4 SCC 505.
7 (2016) 16 SCC 699.
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about Rs.80 crores. Further, the deposits were not of the decretal
debt or the amount of the award but were pre-conditions to stay of
execution; there was no such issue in Ranjit Singh Rana. There was,
therefore, no 'payment of the decretal debt' or 'payment under the
decree' within the meaning of the formulation in Ranjit Singh Rana.
Indeed, this is why Ranjit Singh Rana does not reference the three-
Judge bench decision in Ramanathan Chettiar.
21. MP Trading is on similar lines, for here, too, the entire amount
of the award was deposited before the Section 34 petition was
dismissed, i.e. before the award could be put into execution. The
direction for deposit was by the Section 34 court, and was not
ordered as a pre-condition to stay of execution. it could not have
been; because, before the Section 34 court, so long as that petition
was pending, there was nothing to execute, and therefore no
execution of which any stay could be sought. In any case, MP
Trading is said to have been decided on its facts (paragraph 5), and it
therefore has no discussion about 'appropriation' of any amount
towards interest or principal; again, there could not have been,
because the award holder made no withdrawal at all.
22. The argument that MSEDCL advances today is, therefore,
contrary to nearly four centuries of settled law. Viewed from this
perspective, the submission that because of the Division Bench
order, DSL ought to have first appropriated such amounts as it was
allowed to withdraw (against a bank guarantee) towards satisfaction
of the principal is a submission that is entirely without legal
foundation. This in itself is sufficient to warrant a dismissal of the
Chamber Summons.
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23. The order of 2nd May 2009 ( JN Patel and Mrs Mridula
Bhatkar JJ), set out above, in terms says that the matter was being
considered only on the question of stay (of execution and of the
award). Here is the relevant passage again:
We are inclined to grant stay in favour of the appellants
on the condition that the appellants shall deposit the
principal amount which is in the sum of Rs.179 crores in
this Court on or before 29th June 2009 and furnish a
bank guarantee for the balance amount i.e. 86 crores
and the bank guarantee may be kept alive till the appeal
is heard finally and disposed of.
It simply cannot be argued that the deposit was required for payment
of the decretal debt. It was clearly only as a pre-condition to stay of
execution, a very different thing. To say otherwise is to deliberately
twist the words of the Appeal Court. Second, the mere mention of
the words 'principal' and 'interest' do not and cannot amount to a
direction to pay the amount. They are used only to compute or
reckon the amount of the deposit required in order to grant stay.
Third, this order was modified by the Supreme Court's order of
15th May 2009. In that order, the Supreme Court granted leave (in
DSL's Special Leave Petition). It modified the order of deposit,
again as a pre-condition to a stay of execution. Paragraph 5 of the
15th May 2009 order says:
"5. Having regard to the facts and circumstances, we
are of the view that the terms subject to which a stay has
been granted require modification."
In paragraph 6, the modified terms are set out; and these make no
reference to the principal and interest at all. MSEDCL's deposit was
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fixed at Rs.65 crores. It had to give an unconditional bank guarantee
of Rs.200 crores. Stay was granted on that basis. It is, therefore,
futile to refer to the High Court Division Bench order in support of
a case for appropriation, when that order was entirely modified and
substituted, with no mention of either principal or interest, by the
Supreme Court in appeal.
24. At no point, therefore, did any court require any deposit in
payment of the decretal debt or direct appropriation of withdrawals in
any particular mode or manner. There was also, clearly, no
agreement between the parties about the mode of appropriation.
Neither of the two exceptions to the general rule are met.
25. Therefore, in regard to the principal argument that
MSEDCL's deposits pursuant orders of the Division Bench and the
Supreme Court were either clearly directed towards payment of the
principal or must be deemed to have so been, it is sufficient to note
that in every one of those orders the only question before the Court
was in regard to a stay of execution of the decree. The fact that one
or the other Court specified deposit of some amount in cash and
some amount as a bank guarantee makes no difference. This is only
a matter of convenience and to lessen the execution burden on the
judgment creditor. None of these orders, I note, prescribed any
mode of satisfaction of the decree. None of these orders said that
the amount or amounts withdrawn by DSL were to be appropriated
in any particular fashion. Consequently, the general rule giving
primacy to the decree holder to decide how best to effect that
appropriation was never even touched by any of the orders of the
Division Bench or of the Supreme Court.
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26. Mr Dada makes a further point. He says it is on account of the
non-recovery of this debt and MSEDCL's frivolous objections to
DSL's claim that DSL was run into the ground. The amounts in
question, he submits, are not trivial. They materially and directly
affected DSL's cash flow. It had to seek BIFR protection. One of the
consequences was that it had difficulty for a great period of time in
even effecting the necessarily withdrawals, thus pushing into a
further downward spiral. The submission undermines what little
remains of MSEDCL's case today. The necessary implication is that
any amount that DSL withdrew was on a purely ad hoc basis without
there even being a notional break up between principal and interest;
and, in any case, the withdrawal was against security furnished by
DSL in the form of a bank guarantee, i.e. a withdrawal with a
condition attached of guaranteed restitution. The decree was always
one, of principal and continuing interest. There was no distinction
between how much DSL could, on withdrawal, apply towards
principal and how much towards interest. That clearly left DSL at
large to make appropriations of these ad hoc withdrawals in such
manner as it thought fit.
27. What Mr Mody asks of me is to read into the orders of the
Appeal Court and the Supreme Court words not there, and to arrive
at a conclusion entirely tailored to MSEDCL's convenience --
rather than law -- by a process of interpolating alternative meanings
into those very clear orders. That is something I will not and cannot
do.
28. Finally, this: the entire application is nothing more than a
latter-day epiphany. If what MSEDCL says today is correct, then it
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must explain why, at no point in time before this application, has it
ever sought a clarification or a direction from the Court or Courts
that made orders of deposit and withdrawal in regard to the
appropriation of the withdrawals. MSEDCL was aware of its liability
under the arbitral award. It knew of the decree it faced. It knew what
it had to deposit, and what DSL was allowed to withdraw. It had
enough opportunities to seek a clarification. MSEDCL never did. It
sat by. It is only when everything is over bar the shouting that it
comes up with this quite extraordinary sophistry. We should not
mistake the singular purpose of the application: to evade, by any
means at all, even at the risk of raising an argument solidly against
established legal principle, a portion of its decretal liability. As we
shall shortly see, this runs to a pattern that marks MSEDCL's
conduct from the time of the contract in question, even before the
arbitral award.
29. There is one further aspect to be addressed. Mr Mody has a
concern that MSEDCL must deduct tax at source on the decretal
interest awarded. Again, this is incorrect. We should not be misled
by the mere use of the word 'interest'. For the purposes of the
Income Tax Act, this is not interest "earned" as it might be on a
fixed deposit or an investment. This is interest in the form of
mitigation of a loss. When interest is awarded on a decree it forms
part and parcel of the decree itself. It no longer retains its character
as 'interest'. We use word interest only as a term of art, for
convenience, or of want of a better expression. A decree that awards
interest for a past period is actually only compensating the decree
holder for that which he might have earned had he not been put to
the loss. It represents an opportunity cost. There is therefore no
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question of MSEDCL having any liability to the revenue to deduct
income at source. It must pay the amount to the Decree Holder. The
tax liability of the Decree Holder, DSL, is a matter that DSL itself
will address and it is of no concern of MSEDCL.8
30. In my view there is absolutely no substance to this Chamber
Summons. It deserves to be dismissed. It is.
31. The only question that remains is whether there should be
another -- a fifth in sequence -- order of costs. In this, I do not
believe I have any choice in the matter at all. This is an Execution
Application in the Commercial Division. The Commercial Courts,
Commercial Division and Commercial Appellate Division of High
Courts Act, 2015 ("the Commercial Courts Act"), effected
sweeping changes to the Code of Civil Procedure 1908 ("CPC").
Among those changes were significant changes to Section 35 of the
CPC. The Commercial Courts Act substituted an entirely new
Section 35 applicable to commercial matters covered by the new
Act.
32. In its 253rd Report, the Law Commission of India, then under
the chairmanship of Mr Justice AP Shah, former Judge of this Court
and former Chief Justice of the Delhi High Court, in regard to the
Bill proposing the Commercial Courts Act said:9
8 Madhusudan Shrikrishna v Emkay Exports & Ors, 2010 (2) BCR 38;
Islamic Investment v Union of India, 2002 (4) BCR 685; Sino Ocean,
supra, paras 27 and 28.
9 Law Commission of India, 253rd Report, January 2015, Section F(ii),
pp. 45-47.
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3.21.1 As recommended by the Supreme Court of India
and the Law Commission, costs will have to follow the
event as a meaningful deterrent against frivolous litigation.
In the Sahara judgment [Subrata Roy Sahara v Union of
India, (2014) 8 SCC 470, at para 150], the Court observed:
He [the innocent suffering litigant] spends
invaluable time briefing counsel and
preparing them for his claim. Time which he
should have spent at work, or with his family,
is lost, for no fault of his. Should a litigant not
be compensated for, what he has lost, for no
fault? The suggestion to the legislature is,
that a litigant who has succeeded, must be
compensated by the one, who has lost. The
suggestion to the legislature is to formulate a
mechanism, that anyone who initiates and
continues a litigation senselessly, pays for the
same. It is suggested that the legislature
should consider the introduction of a "Code
of Compulsory Costs.... The effort is only to
introduce consequences, if the litigant's
perception was incorrect, and if his cause is
found to be, not fair and legitimate, he must
pay for the same.
3.21.2 In Rameshwari Devi v Nirmala Devi [(2011) 8 SCC
249, at para 55], the Supreme Court noted that another
factor to be considered while imposing costs is "for how
long the defendants or respondents were compelled to
contest and defend the litigation in various courts."
3.21.3 Therefore, the proposed 2015 Bill shall also
contain a clause ensuring that costs shall necessarily
follow the event in all cases, except where the court
gives reasons in writing explaining why costs should
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not follow. The model of costs proposed in the
amendments to the A&C Act, 1996 by the Law Commission
in its 246th Report will also be adopted in this Bill. This will
entail amendments to Section 35 and Section 35-A of the
CPC, which govern the award of costs.
3.21.4 As proposed in the amendments to the A&C Act,
1996 in awarding costs, the court/arbitral tribunal will have
regard to all circumstances including-
a) The conduct of all parties;
b) Whether a party has succeeded in part of
its case, even if the party has not been wholly
successful;
c) Whether the party had made a frivolous
counter claim leading to delay in the disposal of the
case;
d) Whether any reasonable offer has been
made by a party to settle; and
e) Whether the Party had made a frivolous
claim and instituted a vexatious proceeding
wasting the time of the Court.
3.21.5 "Costs" here will mean reasonable costs relating to:
a) fees and expenses of the arbitrators, courts
and witnesses;
b) Legal fees and expenses; and
c) Any other expenses incurred in connection
with the proceedings.
3.21.6 It is proposed to adopt the above model with
suitable changes, to empower the Commercial Divisions
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and Commercial Courts to award costs along the above
lines, and to also make it mandatory to give reasons for not
awarding costs. This, it is intended, will deter parties from
making frivolous claims or engaging in vexatious litigation,
thereby adding to the burden of pendency and delays.
(Emphasis added)
33. Amended Section 35 reads thus:
Costs.
35.(1) In relation to any commercial dispute, the Court,
notwithstanding anything contained in any other law for
the time being in force or Rule, has the discretion to
determine:
(a) whether costs are payable by one party to
another;
(b) the quantum of those costs; and
(c) when they are to be paid.
Explanation. For the purpose of clause (a), the expression
costs shall mean reasonable costs relating to
(i) the fees and expenses of the witnesses
incurred;
(ii) legal fees and expenses incurred;
(iii) any other expenses incurred in connection
with the proceedings.
(2) If the Court decides to make an order for
payment of costs, the general rule is that the
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unsuccessful party shall be ordered to pay the costs of
the successful party:
Provided that the Court may make an order
deviating from the general rule for reasons to be
recorded in writing.
Illustration
The Plaintiff, in his suit, seeks a money decree for breach of
contract, and damages. The Court holds that the Plaintiff is
entitled to the money decree. However, it returns a finding
that the claim for damages is frivolous and vexatious.
In such circumstances the Court may impose costs on the
Plaintiff, despite the Plaintiff being the successful party, for
having raised frivolous claims for damages.
(3) In making an order for the payment of costs, the
Court shall have regard to the following circumstances,
including--
(a) the conduct of the parties;
(b) whether a party has succeeded on part of its
case, even if that party has not been wholly
successful;
(c) whether the party had made a frivolous
counterclaim leading to delay in the disposal of the
case;
(d) whether any reasonable offer to settle is
made by a party and unreasonably refused by the
other party; and
(e) whether the party had made a frivolous claim
and instituted a vexatious proceeding wasting the time
of the Court.
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(4) The orders which the Court may make under this
provision include an order that a party must pay
(a) a proportion of another party's costs;
(b) a stated amount in respect of another party's
costs;
(c) costs from or until a certain date;
(d) costs incurred before proceedings have
begun;
(e) costs relating to particular steps taken in the
proceedings;
(f) costs relating to a distinct part of the
proceedings; and
(g) interest on costs from or until a certain
date. .
Amendment of section 35A.
3. In section 35A of the Code, sub-section (2) shall
be omitted.
(Emphasis added)
34. The amended CPC clearly says that the general rule is that
the unsuccessful party will be ordered to pay the costs of the
successful party. There is a proviso. It says that I may make an order
deviating from this general rule, but I can only do so for reasons to
be recorded in writing. The amended Section also tells us that in
making an order of costs I must have regard to the conduct of the
parties and whether, inter alia, the party made a frivolous claim or
instituted a vexatious proceedings wasting the time of the Court.
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The restriction in Section 35-A(2) is removed; Section 35-A(1), for
compensatory costs, remains. Section 35(4) then says that the order
of costs would include an order that the party must pay a proportion
of the other sides costs, a stated amount in respect of the other
party's costs, cost from a given date and so on. There is also a
provision for interest on costs in Section 35(4)(g). The amended
Section 35 of the CPC also says that it prevails over any other law
for the time being in force or any other rules. It would thus prevail
over any other provisions in the CPC as also any provisions in the
Bombay High Court Original Side Rules.
35. I am actually unable to even envision any reasons that might
fall within the proviso to the general rule. The only submission from
Mr Mody, somewhat predictably, is that MSEDCL is a government
company and these are public funds. The second submission is that
the entire Chamber Summons is based on orders of the Court, and
therefore no costs should be imposed.
36. I do not believe these are even remotely compelling. The
application from MSEDCL is, if anything, too clever by half. It is an
application that ought never to have been made. There is no basis
for this in law. It is contrary to centuries-old settled law. The fact
that MSEDCL has pursuant to the orders of this Court including
my order of 28th February 2018 deposited amounts in Courts is not
an excuse. This matter has today consumed over a fifth of the court
working day for no good reason. Time has been spent before as well.
Mr Dada submits that through out from the very beginning and
going back to the stage of the arbitral proceedings, the conduct of
MSEDCL was to take every conceivable, and, very often, even
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inconceivable defences only to obstruct. Mrs Justice Dalvi observed
that MSEDCL's Petition under Section 34 was an attempt to escape
liability for fundamental breaches. The Arbitral Tribunal (of three
eminent and generally conservative judges on questions of costs)
were moved to impose costs of Rs. 1 crore (though DSL sought
much more) -- and that was 14 years ago, in 2004. The arbitrators
said, even then, that MSEDCL raised 'untenable and unsustainable
defences which led to considerable delay in concluding the
proceedings'. A Division Bench of this Court imposed further costs.
Even the Supreme Court had occasion to comment adversely on the
conduct of MSEDCL. If the argument is that MSEDCL is a
custodian of public funds, then that actually warrants a direction
that the costs I now award ought to be recovered from the salaries of
its officers who authorised the filing of this Chamber Summons. It is
not a reason to make an exception to the general rule. As a custodian
of public funds, MSEDCL was duty bound to be more circumspect
and cautious in the applications that it made.
37. The Arbitral Tribunal imposed costs of Rs.1 crores. That was
in 2004 well before the Commercial Courts Act. Mrs Justice Dalvi
imposed cost of Rs.1,00,000/-, a significant amount in those days
and also prior to the present Act. In this context, some observations
by the Supreme Court in its order dated 18th January 2018 in
paragraph 42 may be usefully reproduced. Here, the Supreme Court
culled out the salient findings in the arbitral award.10
42) Reasoning contained in the Award reveals following
salient findings returned by the Arbitral Tribunal:
10 MSEDCL was the appellant before the Supreme Court.
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(i) The appellant prevented respondent No.2
from performing the contract.
(ii) Respondent No.2 was ready and willing to
perform the contract all throughout.
(iii) The appellant chose not to examine any of
its Superintending Engineers who were in-
charge for giving DTC locations to respondent
No.2 and as found by the Arbitral Tribunal, they
were the kingpins of each circle for performance
of the contract.
(iv) There is considerable merit in the
submission of respondent No.2 that the Minutes
of the Meeting dated 24th June 1998 is a
fabricated document.
(v) It is not possible to accede to the submission
of the appellant that respondent No.2 had adequate
lists of locations available and still failed to install
the contract objects.
(vi) It is obvious that there is something
seriously wrong in the working of the appellant.
Once a letter is listed in the affidavit of documents,
it is surprising how the letter was not traceable. Be
that as it may, the fact remains that prior to the date
of termination of contract, at least in three Circles,
the appellant had directed stoppage of installation
work.
(vii) It is unfortunate that the Head Office of
the appellant lacked control over the field offices
and which ultimately led to the failure of the
project. It is futile to even suggest that the
breach was not a fundamental one.
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(viii) Respondent No.2 was ready and willing to
perform their part of the contract while the
appellant committed a breach by failure to
supply DTC locations as per the terms of the
contract.
(ix) Respondent No.2 invested Rs. 163 crores
in the project.
(x) The appellant failed to prove that deductions
effected in the Performance Certificates were
proper.
(xi) The appellant indulged in tampering the
commissioning reports produced on record. The
attempt does not behove a statutory body and
requires to be deprecated. The attempt made by
the appellant by producing documents which are
tampered with and which are not genuine
indicates that the appellant was willing to go to
any extent to make allegations against
respondent No.2.
(xii) The appellant did not make available large
number of documents disclosed in the affidavit
of documents on the ground that the same are
not available.
(xiii) Counter claim of the appellant is
misconceived and is nothing short of counter
blast to the claim made against respondent No.2.
(xiv) It was the appellant and appellant alone
who had committed fundamental breaches of the
terms of the work order.
(xv) The appellant has raised untenable and
unsustainable defences which led to
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considerable delay in concluding the
proceedings.
These are finding of facts base upon the material evidence
that emerged on the record of the case.
(Emphasis added)
38. These findings were approved by the Supreme Court. It
found no merit at all in MSEDCL's appeal, which it dismissed. The
arbitral findings culled out in the Supreme Court decision, and
quoted above, are oddly prescient: those findings pre-dated the
Commercial Courts Act by a full decade or more, and yet the
wording of those findings is echoed in the Commercial Courts Act:
untenable and unsustainable defences, a frivolous defence, and a
frivolous counter-claim. And yet more: there are factual findings,
now having attained finality, of tampering, fabrication and
falsification -- all against the very body that claims it is a 'custodian
of public funds', and therefore, presumably, in some way sanctified
if not actually canonized. But that 'custodian' has been found to be
wholly remiss in discharging its public duties. This brings to bear
the provision in the amended Section 35, and its sub-clauses, set out
fully above. There is no doubt at all in my mind that this application
is entirely frivolous and is just another attempt to delay the
inevitable. I believe it is time that we sent out a signal that these
practices must stop and the Government authorities must take
responsibility for their actions. Further, the Commercial Courts act
has only deleted the restriction in Section 35-A(2), not the provision
for compensatory costs in Section 35-A(1).
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39. Having regard to the provisions of substituted Section 35,
there will be an order of costs against MSEDCL in the amount of
Rs.30,00,000/-. The amount is, in my view, not unreasonable. I
have had to hear the parties on at least three occasions. The filings
have gone to the stage of a sur-rejoinder. These costs are not merely
compensatory. That is why I have set out the recommendations of
the Law Commission and, in extenso, the provisions of the amended
CPC. The statutory intent is to use costs, which are the general rule
of "you lose you pay", as a deterrent to prevent frivolous litigation.
That kind of litigation, as the Supreme Court itself said, is an
unacceptable clog and burden on the judiciary. A party must know
before it embarks on any judicial misadventure that if it puts up a
case found to be useless, it will have to pay a price, and a steep price
at that.
40. In Dnyandeo Sabaji Naik v Pradnya Prakash Khadekar,11 the
Supreme Court said:
14. Courts across the legal system--this Court not
being an exception--are choked with litigation. Frivolous
and groundless filings constitute a serious menace to
the administration of justice. They consume time and
clog the infrastructure. Productive resources which
should be deployed in the handling of genuine causes
are dissipated in attending to cases filed only to benefit
from delay, by prolonging dead issues and pursuing
worthless causes. No litigant can have a vested interest
in delay. Unfortunately, as the present case exemplifies,
the process of dispensing justice is misused by the
unscrupulous to the detriment of the legitimate. The
11 (2017) 5 SCC 496.
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present case is an illustration of how a simple issue has
occupied the time of the courts and of how successive
applications have been filed to prolong the inevitable. The
person in whose favour the balance of justice lies has in
the process been left in the lurch by repeated attempts to
revive a stale issue. This tendency can be curbed only if
courts across the system adopt an institutional
approach which penalises such behaviour. Liberal
access to justice does not mean access to chaos and
indiscipline. A strong message must be conveyed that
courts of justice will not be allowed to be disrupted by
litigative strategies designed to profit from the delays
of the law. Unless remedial action is taken by all courts
here and now our society will breed a legal culture
based on evasion instead of abidance. It is the duty of
every court to firmly deal with such situations. The
imposition of exemplary costs is a necessary
instrument which has to be deployed to weed out, as
well as to prevent the filing of frivolous cases. It is only
then that the courts can set apart time to resolve
genuine causes and answer the concerns of those who
are in need of justice. Imposition of real time costs is
also necessary to ensure that access to courts is
available to citizens with genuine grievances.
Otherwise, the doors would be shut to legitimate
causes simply by the weight of undeserving cases
which flood the system. Such a situation cannot be
allowed to come to pass. Hence it is not merely a matter
of discretion but a duty and obligation cast upon all
courts to ensure that the legal system is not exploited
by those who use the forms of the law to defeat or delay
justice. We commend all courts to deal with frivolous
filings in the same manner.
(Emphasis added)
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Therefore, in imposing costs as I do, I am following a mandate
directed by the Supreme Court. In my reading of it, the decision
tells us that we have no choice at all. If we do not deal with frivolous
cases most firmly, then the structure of our judiciary and its
functioning are imperilled.
41. The Law Commission Report and the amendment both say
the costs must be reasonable. But what is 'reasonable' must be
governed not by some misplaced sense of awe of money, or a terror
of large amounts. Our hands must be guided by the dictum of the
Supreme Court in decisions like Dnyandeo Sabaji Naik, especially in
commercial matters where the stated legislative intent is to use
costs, as a general rule, to discourage litigation frivolities. None
should be able to 'take a chance on' or gamble in courts. No one has
a vested right to delay a case or the enforcement of a decree. The
costs regime, as re-engineered by the Commercial Courts Act, has
several components. Costs are to function as a deterrent. They are
to be realistic, not illusory (and most certainly not the price of a
couple of coconuts and a cup of coffee). They may also be
exemplary or punitive, as the Supreme Court says, especially when a
court finds, as I have, that the case of the party made to suffer costs
is thoroughly without merit. I have, here, not the slightest doubt that
MSEDCL's only attempt is to persist in the dishonesty and illegality
that seem to have stamped its conduct from the get-go. The words
of the Supreme Court summarizing the arbitral findings are enough
to alarm even the most jaded judicial conscience. That a public body
should be found guilty on evidence of fabrication and manipulation
is unthinkable. What remains of public governance if this is how
statutory bodies conduct themselves? Despite all that has gone
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916-CHSCDL246-18.DOC
before, MSEDCL still claims 'rights' in regard to its decretal debt. It
has none. The costs I award today are, in my view, not unreasonable
having regard to the costs that DSL must have incurred, the waste of
judicial time, and the utter lack of substance in the MSEDCL's
application, and the frivolous and speculative nature of the
application. This order of costs therefore combines elements of
amended Section 35, Section 35-A(1) and the mandate of the
Supreme Court in Dynandeo Sabaji Naik.
42. There will be interest on the amount of costs computed at
10% from today.
43. Mr Mody is instructed to say that MSEDCL deposited the
entire debt and therefore there should be no order of costs. That
deposit was too little too late. It was made only after my order of
27th February 2018. It was also a pre-condition to hearing this
application, one that comes so very late in the day. There was no
deposit of the entire decretal debt at any time before, and, as we
have seen, there is a marked difference between this case and
authorities cited by Mr Mody. This argument is of no avail in any
context.
44. The amount deposited pursuant to my order dated 27th
February 2018 will be allowed to be withdrawn with all accrued
interest. The Prothonotary and Senior Master will make payment to
DSL either by a physical instrument or by RTGS to an account that
it designates. The Prothonotary and Senior Master will act on
production of an authenticated copy of this order.
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45. Mr Dada makes a statement that the DSL will give MSEDCL
credit for the interest earned on the deposit made by MSEDCL
upon receipt of the amount from the Prothonotary and Senior
Master. That statement is noted and accepted.
46. Order accordingly.
(G. S. PATEL, J)
13th March 2018
