Delhi High Court
New India Mosaic & Marble Co. P. ... vs Bhandari Builders Pvt. Ltd. on 8 March, 2013
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: March 1, 2013
Decision on: March 8, 2013
Execution Petition No. 188 of 2005
NEW INDIA MOSAIC & MARBLE CO. P. LTD . .....Decree Holder
Through: Mr. Trideep Pais & Mr. Shivam
Sharma, Advocates
versus
BHANDARI BUILDERS PVT. LTD. ..... Judgment Debtor
Through: Mr. S.S. Jauhar, Advocate
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
08.03.2013
Review Petition No. 217 of 2012
1. This review petition seeks recall of an order dated 22nd March 2012 passed
by the Court in Execution Petition No.188 of 2005.
2. The execution petition has been filed by the Decree Holder ('DH'), New
India Mosaic & Marble Co. P. Ltd., seeking the enforcement of the decree
dated 24th September 2002 passed by the learned Single Judge of this Court
in CS (OS) Nos.3141-A of 1991 and 3142 of 1991, by which an Award dated
29th July 1991 in favour of the DH and against the Judgment Debtor ('JD'),
Bhandari Builders Pvt. Ltd., was made rule of the Court.
3. In terms of the decree the DH had to be paid the principal sum of Rs.
7,90,000 together with simple interest at 12% per annum from 29th July 1991
till the date of payment. The JD had on 3rd November 1995 deposited a sum
of Rs. 9,40,000 in the Court which had then been placed in a fixed deposit
('FD'). The DH withdrew the said sum together with the interest accrued
thereon totalling Rs. 15,10,154 on 25th April 2003. The DH in the present
execution petition has claimed that after accounting for the above amount
received by the DH, a sum of Rs. 5,44,954 is still to be paid by the JD.
4. On 22nd March 2012, this Court passed an order directing that, assuming
the date of the final payment to be 1st April 2012, the amount due to the DH
should be calculated thus:
"(a) The amount payable to the DH in terms of the Award, i.e., the
principal amount of Rs. 7,90,000 plus simple interest at 12% per
annum on Rs. 7,90,000 from 29th August 1991 till 1st April 2012 will
be calculated.
(b) From the above sum, all payments made till date by the JD to the
DH will be subtracted.
(c) The balance amount together with costs of Rs. 20,000/- will be
paid to the DH by the JD on or before 1st April 2012."
5. The JD filed the present review petition seeking recall of the above order
on the ground that it is contrary to the decision of the Supreme Court in
Gurpreet Singh v. Union of India (2006) 8 SCC 457. During the pendency
of the review petition the Supreme Court further explained the law in Bharat
Heavy Electricals Ltd. v. R.S. Avtar Singh & Co. 193(2012) DLT 714 (SC)
[hereinafter referred to as the 'BHEL case'].
6. Learned counsel for both the parties state that the order passed by this
Court on 22nd March 2012 will require to be modified to bring it in
conformity with the law explained in the BHEL case. Consequently, the
review petition is allowed and the order dated 22nd March 2012 is hereby
recalled.
Execution Petition No. 188 of 2005
7. Pursuant to the order passed by the Court, the DH has on 7th January 2013
filed its calculations, in terms of which, according to the DH, as on the date
of the said statement, the balance decretal amount due from the JD, including
the costs of Rs. 20,000, is Rs. 7,75,344.21. On the other hand, the JD has
filed its calculations, in terms of which an excess amount of Rs. 67,290 paid
to the DH should be directed to be refunded to the JD.
8. This Court has heard the submissions of Mr. Trideep Pais, learned counsel
for the DH and of Mr. S.S. Jauhar, learned counsel for the JD.
9. Before dealing with the issues that arise in the execution petition the
background facts may be noted. The Award in the present case was passed
by the learned Arbitrator on 29th July 1991. The operative part of the Award
was as under:
(a) The JD will pay the DH Rs. 7.90 lakhs within a period of 30 days
from the date of the Award.
(b) The JD will pay an additional amount of Rs. 1 lakh towards costs
and expenses of the DH.
(c) The JD shall return to the DH all its machinery and equipment as
per Annexure A to the Award, failing which, the JD will pay to the
DH in addition Rs. 50,000.
(d) If the awarded amount was not paid within one month from the
date of the Award, the JD will pay interest at 12% p.a., from one
month after the date of the Award till the date of payment.
10. The JD filed CS (OS) No. 3142 of 1991 under Section 14 of the
Arbitration Act, 1940 ('1940 Act'). The JD thereafter filed objections to the
Award under Sections 30 and 33 of the 1940 Act in I.A. No. 3636 of 1992 in
CS (OS) No.3141-A of 1991 in which a reply was filed by the DH praying
that the Award be made rule of the Court. During the pendency of the
proceedings before the learned Single Judge, for making the Award a rule of
the Court, the JD deposited a sum of Rs. 9,40,000, which was then kept in a
FD. This deposit was made by the JD on 3rd November 1995, pursuant to an
order passed by the Court on 19th October 1995 in Co. Pet. No.133 of 1985.
11. The objections were disposed of by the learned Single Judge by judgment
dated 24th September 2002. The Award was interfered with only to the extent
that the costs were reduced to Rs. 20,000 and the relief in para (c) above was
set aside as not being part of the claims of the DH before the learned
Arbitrator. The Court held that the said portion of the Award was severable.
With the above modifications, it was directed as under:
"An amount of Rs. 8,97,875.71 is lying deposited in this court in a
fixed deposit account and, therefore, interest has also accrued. The
entire amount due and payable in terms of this order which modifies
the award to the aforesaid extent along with interest at the rate of
12% p.a. from the date of the award till payment, shall be paid to the
petitioner out of the amount lying deposited in this court. A decree
shall be drawn up in terms of this order."
12. The appeal filed by the JD, being FAO (OS) No.392 of 2002, was
dismissed by the Division Bench on 8th April 2009 thus affirming the
judgment dated 24th September 2002 of the learned Single Judge, whereby
the Award dated 29th July 1991 with the modifications as noted hereinbefore
was made rule of the Court.
13. The present execution petition was filed by the DH on 25th October
2005, during the pendency of the appeal. In para 7 of the execution petition,
the DH stated as under:
Amount of suit along with Rs. 7,90,000/- alongwith
interest as per decree or any other interest @ 12% p.a. on the
relief granted by the decree. decretal amount from the date
of the award i.e. 29.7.1991 till
the date of realization which is
amounting to Rs. 19,15,900/- as
on 31.3.2003. However, Rs.
15,10,154 has been received on
25.4.2003.
Rs. 4,05,746/- and Rs. 20,000
towards cost in total Rs.
4,25,746/- along with interest
@ 12% p.a. from 1.4.2003 to
1.7.2005 in total amounting to
Rs. 5,44,954/-.
14. The sum of Rs. 20,000 towards costs was separately claimed.
15. As was noted hereinbefore, during the pendency of the proceedings for
making the Award a rule of the Court, the JD deposited a sum of Rs.
9,40,000, which was then kept in a FD. Till such time the Award was not
made a rule of the Court, the DH did not withdraw the said sum. After the
Award was made a rule of the Court on 24th September 2002, which is the
date on which a decree could be said to be passed, the DH withdrew the sum
together with interest accrued thereon, i.e., Rs. 15,10,154 on 25th April 2003
in terms of the order dated 11th February 2003 passed in IA No.1731 of 2003.
16. Mr. Pais has relied on the decision in the BHEL case as well as the
judgment of this Court in Deepak Electric & Trading Co. v. Union of India
111 (2004) DLT 788. He does not dispute the proposition that the payment
made by the JD during the pendency of the execution proceedings has to be
adjusted first towards the interest and the cost and thereafter towards the
payment of the principal amount, subject to any agreement between the
parties. He refers to Order XXIV Rule 3 of the Code of Civil Procedure, 1908
('CPC') to urge that the interest would cease to run on the amount for which
deposit was made. Upon such deposit being made, interest on that part of the
principal sum that has been paid with the deposit of the amount would cease
to run thereafter. He emphasizes that where the deposit made does not fully
cover the total principal amount + interest that is due on the date of the
deposit, then the interest will continue to run on the balance principal amount
till the date of the actual payment.
17. According to Mr. Pais, the interest earned on Rs. 9,40,000 between 3rd
November 1995 and 25th April 2003, i.e., Rs. 5,70,154, cannot be shown in
any manner to the credit or the account of the JD. This is because once the JD
paid a part of the amount in Court (and not the whole amount), the JD does
not deserve any interest on the said amount and it is open to the DH to utilize
it "in any manner" and not towards the adjustment of interest on the unpaid
balance principal amount. Mr. Pais submits that all that the JD can plead is
that after 3rd November 1995, no interest is payable on Rs. 5,23,398, which
according to the DH is the principal amount that already stood paid with the
adjustment of the sum of Rs. 9,40,000 as against the total principal + interest
+ cost as on the date of deposit, i.e., 3rd November 1995.
18. Mr. Pais submits that the interest earned on Rs. 9,40,000 is not the
concern of the JD. It might well have been that the said sum could be realised
by the DH on 3rd November 1995. If that had happened, the interest payable
on Rs. 26,66,602 from 3rd November 1995 would still enure to the benefit of
the DH and this worked out to Rs. 8,41,251. He also argues that if the deposit
had not been made, the amount owed on 25th April 2003 would be Rs.
18,95,654, whereas what was paid to the DH as on that date, was only Rs.
15,10,154, leaving a balance of Rs. 3,85,500. In other words, he contends that
the release of Rs. 15,10,154 to the JD "has nothing to do with the DH." The
benefit or loss on the earnings on the deposited amount was to the account of
the DH, since, in any event, under the BHEL case, he cannot claim any
interest on it since the date of deposit. He submits that if the logic advanced
by the JD was to be accepted, then longer the deposit remains in Court, the
higher the amount the DH would refund to the JD. He asserts that if the
amount had been released to the DH on 3rd November 1995 itself and the
Court had set aside the Award, on the date of the decree, i.e., 24th September
2002 and the amount would have to be returned to the JD and in any event, it
would not be returned with interest. Likewise, since the balance of the
principal amount was not paid as on that date, interest on it was payable
"irrespective of the interest earned on the earlier amount which was
admittedly a partial satisfaction of the decree."
19. In his reply Mr. S.S. Jauhar, learned counsel for the JD, states that the
matter is no longer res integra after the decision in BHEL case. In the
calculation furnished by the JD to the Court, the appropriation of Rs.
9,40,000 is first towards interest and costs. The JD states that the
appropriation towards the principal amount, after adjusting the interest and
costs is Rs. 5,25,000 leaving a balance principal amount of Rs. 2,65,000.
Interest thereon @ 12% p.a. till 25th April 2003 worked out to Rs. 2,37,864.
The JD accordingly contends that the actual amount thus released on 25th
April 2003 to the DH resulted in an excess payment of Rs. 67,290.
20. The relevant provisions of Order XXI Rules 1 (1), (2) (4) and (5) and
Order XXIV Rules 3 and 4 of the CPC read as under:
"1. Modes of paying money under decree.--(1) All money,
payable under a decree shall be paid as follows, namely:-
(a) by deposit into the Court whose duty it is to execute the decree,
or sent to that Court by postal money order or through a bank; or
(b) out of Court, to the decree-holder by postal money order or
through a bank or by any other mode wherein payment is evidenced
in writing; or
(c) otherwise, as the Court which made the decree, directs.
(2) Where any payment is made under clause (a) or clause (c) of sub
rule (1), the judgment-debtor shall give notice thereof to the decree-
holder either through the Court or directly to him by registered post,
acknowledgement due.
(3) .....
(4) On any amount paid under clause (a) or clause (c) of sub-rule (1)
interest, if any, shall cease to run from the date of service of the
notice referred to in sub-rule (2).
(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.
...
Order XXIV
3. Interest on deposit not allowed to plaintiff after notice.--No
interest shall be allowed to the plaintiff on any sum deposited by the
defendant from the date of the receipt of such notice, whether the
sum deposited is in full of the claim or falls short thereof.
4. Procedure where plaintiff accepts deposit as satisfaction in
part.--(1) Where the plaintiff accepts such amount as satisfaction in
part only of his claim, he may prosecute his suit for the balance;
and, if the Court decides that the deposit by the defendant was a full
satisfaction of the plaintiff's claim, the plaintiff shall pay the costs of
the suit incurred after the deposit and the costs incurred previous
thereto, so far as they were caused by excess in the plaintiff's claim.
(2) Procedure where he accepts it as satisfaction in full.--Where the
plaintiff accepts such amount as satisfaction in full of his claim, he
shall present to the Court a statement to that effect, and such
statement shall be filed and the Court shall pronounce judgment
accordingly; and, in directing by whom the costs of each party are to
be paid, the Court shall consider which of the parties is most to
blame for the litigation."
21. The Constitution Bench discussed the above provisions in Gurpreet
Singh v. Union of India and held, inter alia, as follows:
"27......The principle appears to be that if a part of the principal has
been paid along with interest due thereon, as on the date of issuance
of notice of deposit, interest on that part of the principal sum will
cease to run thereafter. In other words, there is no obligation on the
judgment-debtor to pay interest on that part of the principal which he
has already paid or deposited.
.....
36.......But if there is any shortfall at any stage, the claimant or
decree-holder can seek to apply the rule of appropriation in respect of
that amount, first towards interest and costs and then towards the
principal, unless the decree otherwise directs.
....
49. Though, a decree-holder may have the right to appropriate the
payments made by the judgment-debtor, it could only be as provided
in the decree if there is provision in that behalf in the decree or, as
contemplated by Order 21 Rule 1 of the Code as explained by us
above. The Code or the general rules do not contemplate payment of
further interest by a judgment-debtor on the portion of the principal
he has already paid. His obligation is only to pay interest on the
balance principal remaining unpaid as adjudged either by the court of
first instance or in the court of appeal. On the pretext that the amount
adjudged by the appellate court is the real amount due, the decree-
holder cannot claim interest on that part of the principal already paid
to him. Of course, as indicated, out of what is paid he can adjust the
interest and costs first and the balance towards the principal, if there
is a shortfall in deposit. But, beyond that, the decree-holder cannot
seek to reopen the entire transaction and proceed to recalculate the
interest on the whole amount and seek a re-appropriation as a whole
in the light of the appellate decree."
22. In BHEL case, after noticing the above decisions, the Supreme Court
summarised the principles thus:
"(a) The general rule of appropriation towards a decretal amount was
that such an amount was to be adjusted strictly in accordance with
the directions contained in the decree and in the absence of such
directions adjustments be made firstly towards payment of interest
and cost and thereafter towards payment of the principal amount
subject, of course, to any agreement between the parties.
(b) The legislative intent in enacting sub-rules 4 and 5 is clear to the
pointer that interest should cease to run on the deposit made by the
judgment debtor and notice given or on the amount being tendered
outside the Court in the manner provided in Order XXI Rule 1 Sub-
clause (b).
(c) If the payment made by the judgment debtor falls short of the
decreed amount, the decree holder will be entitled to apply the
general rule of appropriation by appropriating the amount deposited
towards the interest, then towards cost and finally towards the
principal amount due under the decree.
(d) Thereafter, no further interest would run on the sum appropriated
towards the principal. In other words if a part of the principal amount
has been paid along with interest due thereon as on the date of
issuance of notice of deposit interest on that part of the principal sum
will cease to run thereafter.
(e) In cases where there is a shortfall in deposit of the principal
amount, the decree holder would be entitled to adjust interest and
cost first and the 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. What emerges from the above decisions is that there are two separate sets
of provisions in the CPC for deposits made at the pre-decretal and post-
decretal stages. While Order XXI Rule 1 concerns deposits at the post-
decretal stage, Order XXIV Rules 3 and 4 concern deposits made in Court by
a 'claimant' at the pre-decretal stage. This distinction is brought by the
Supreme Court in para 14 of the decision in Gurpreet Singh where it
observed as under:
"14. Now we may consider the provisions in the Code of Civil
Procedure, 1908 (hereinafter referred to as "the Code") that have
relevance to the issue. The rule of appropriation in respect of amounts
deposited in court or in respect of payment into court is contained in
Order 24 of the Code at the pre-decretal stage and in Order 21 Rule 1 at
the post-decretal stage. Though, we are not directly concerned with it,
we may notice that special provisions relating to mortgages are found in
Order 34 of the Code. Under Order 24 Rule 1, a defendant in a suit for
recovery of a debt may at any stage of the suit deposit in court such sum
of money as he considers a satisfaction in full of the claim in the plaint.
Rule 2 thereof provides for issue of notice of deposit to the plaintiff
through the court and for payment out of the amounts to the plaintiff if
he applies for the same. Rule 3 specifically states that no interest shall
be allowed to the plaintiff on any sum deposited by the defendant from
the date of such deposit, whether the sum deposited is in full discharge
of the claim or it falls short thereof. Rule 4 enables the plaintiff to
accept the deposit as satisfaction in part and allows him to pursue his
suit for what he claims to be the balance due, subject to the
consequences provided for therein regarding costs. It also deals with the
procedure when the plaintiff accepts the payment in full satisfaction of
his claim."
24. However, the basic protocol of 'appropriation' at both stages of deposit is
the same. The amount deposited has to be 'appropriated' first towards
interest, then towards costs and only last towards the principal. In the present
case, we have a situation where an Award itself was not made a decree till
24th September 2002. Therefore, as on the date of deposit i.e. 3rd November
1995, the question of appropriation towards the 'decretal' amount did not
arise. Nevertheless the 'appropriation' had to follow the regimen set out in
Order XXIV Rules 3 and 4.
25. It may be mentioned at the outset that the calculations submitted both by
the DH and the JD do not correctly give the exact amount payable towards
interest as in the date of deposit. In terms of the Award, the principal amount
payable to the DH was Rs. 7,90,000. This amount had to be paid along with
simple interest @ 12% per annum with effect from 29th August 1991.
Further, the costs of Rs. 20,000 had to be paid. On 3rd November 1995 the JD
deposited in the Court Rs. 9,40,000. As on that date the amounts payable
under the Award were as under:
(a) Principal = Rs. 7,90,000
(b) Interest @ 12% p.a. = Rs. 3,96,264
(c) Costs = Rs. 20,000
26. Both parties agree that consistent with the requirement of Order XXIV
Rules 3 and 4, the sum of Rs.9,40,000 had to be adjusted first towards
interest and costs. Up to this point there is no dispute between the parties.
As per the calculation explained hereinafter this left Rs.5,23,736 to be
adjusted towards the principal amount. After such adjustment, the balance
principal amount worked out to Rs.2,66,264. On the said balance amount
interest at 12% per annum continued to run.
27. The amount kept in the FD together with the interest accrued thereon was
withdrawn by the DH on 25th April 2003. The amount thus withdrawn by the
DH was Rs. 15,10,154.
28. The case of the JD is that with the payment of the above sum to the DH
on 25th April 2003, the entire balance decretal amount payable as on that date
stood paid. In fact according to the JD an excess sum of Rs. 67,290 was paid
which should be refunded by the DH. The JD calculates the said sum as
under:
"3.0 The appropriation of the deposited sum of Rs. 9,40,000/- (A) shall
be as under:
(a) Interest on principal amount of Rs. 7,90,000/- @ 12%
w.e.f. 29.8.91 to 3.11.95 Rs. 3,95,000/- (B)
Balance (A)-(B) Rs.5,45,000/-(C)
(b) Cost Rs. 20,000/- (D)
Balance (C) - (D) Rs.5,25,000/-
(c) Appropriation towards principal amount Rs. 5,25,000 (E)
(d) Unadjusted principal amount on 3.11.95, payable
by the judgment debtor
(Rs. 7,90,000-Rs. 5,25,000) Rs. 2,65,000/-(F)
(e) Interest @ 12% on unadjusted principal
amount of Rs. 2,65,000 w.e.f. 4.11.95 to
25.4.03 i.e. day of withdrawal of deposited
sum by the decree holder Rs. 2,37,864/- (G)
(f) Total amount to be appropriated by
decree holder on 25.4.03 B+D+E+F+G Rs. 14,42,864/-(H)
4) Amount withdrawn by the decree
Holder on 25.4.03 as per Court order
dt. 11.2.2003 in IA No.1731 of 2003 Rs. 15,10,154-(I)
5) Excess amount received
by the decree holder (I)-(H) Rs. 67,290/-"
29. The above calculation is flawed in light of the legal position that emerges
on a reading of Order XXIV Rules 3 and 4 CPC. In a situation where the
amount deposited by the JD at the pre-decretal stage is not sufficient to cover
the entire principal plus interest claimed on the date of such deposit, while
the JD does not have to thereafter pay any further interest on the amount
deposited, the JD has to nevertheless pay the balance principal sum together
with interest thereon till the date of payment. The JD cannot take the benefit
of the interest that accrued on the sum deposited by it and kept in an FD. The
JD already benefited from that deposit since on the very day of the deposit
the sum was appropriated in a manner that wiped out the interest that was
payable on the date of the deposit, the costs and a portion of the principal
thus leaving a much lesser sum payable by the JD. The JD can derive no
more benefit of such deposit thereafter. Had there been no such deposit, what
would have been ultimately payable on the date that the full payment is
finally received by the DH would be much more.
30. As far as the DH is concerned, the moment the amount deposited in Court
at the pre-decretal stage is appropriated towards the interest and part or whole
of the principal sum claimed, it is a sum belonging to the DH. It belongs
neither to the JD nor even the Court. The interest accruing thereon, if the
amount is placed in an FD, would obviously be to the benefit of the DH. It
would make no difference if the DH in fact withdrew the deposited amount at
a stage when the interest accrued thereon was substantial. That is entirely the
DH's sum. If the Award is subsequently set aside the amount deposited by
the JD would have to be refunded to it by the DH, together with the interest
earned by the DH thereon.
31. Thus, in the instant case while it is correct that on the sum of Rs. 9,40,000
the JD did not have to pay any further interest after 3rd November 1995, the
JD had to nevertheless pay interest at 12% per annum on the balance
principal amount of Rs. 2,66,264 till the date of payment. The amount of Rs.
9,40,000 deposited in the Court by the JD on 3rd November 1995 could not
and did not thereafter belong to the JD. With the appropriation having taken
place on that date itself towards the sums owing to the DH as noted above,
the interest accruing thereon in the FD was the property of the DH. If the DH
had withdrawn the entire amount on 3rd November 1995 itself and placed it in
a separate FD in its name, then surely the interest thereon would belong only
to the DH. Such interest could not go to reduce the balance sum owed by the
JD to the DH.
32. In other words, irrespective of the DH earning interest on the sum already
belonging to the DH by virtue of the appropriation, the JD had to pay the DH
the balance principal amount of Rs. 2,66,264 together with interest thereon at
12% per annum. The mere fact that the DH did not immediately withdraw the
amount that had already come to it and allowed it to earn interest in the form
of an FD cannot deprive the DH of its right to demand that the balance
principal amount is payable to it with interest at 12% per annum in terms of
the Award as made a rule of the Court. Once the JD derives advantage of the
appropriation towards interest, cost and principal (in part or whole) on the
date of the deposit there cannot again be a subsequent 'appropriation' when
the DH withdraws the amount deposited in Court together with interest. With
the first appropriation, the money deposited became the DH's and the JD can
no longer lay any claim to it.
33. At the risk of repetition it may be noted that the calculations filed by both
parties as regards the balance principal amount payable are not accurate. The
position that results from a correct calculation of the interest amount after
accounting for months and days as well is that the JD has to pay the DH the
sum of Rs. 2,66,264 plus the interest at 12% per annum from 3rd November
1995 till the date of payment which should be not later than four weeks from
today.
34. In view of the above conclusion, the question of any refund of any
amount by the DH to the JD does not arise.
35. The execution petition be listed on 23rd May 2013 before the roster Bench
subject to the orders of the Judge-in-charge, Original Side.
S. MURALIDHAR, J.
March 08, 2013
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