United India Insurance Co. vs Kanwar Lal & Ors.
2014 Latest Caselaw 2826 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI

+              REVIEW PET. 491/2013 in MAC.APP.385/2007

     %                             Date of decision : 30th May, 2014

         UNITED INDIA INSURANCE CO.          ..... Appellant
                         Through Mr. S.L. Gupta with Mr.
                                 Ram Ashrey, Advocates.
                  versus

         KANWAR LAL & ORS.                              .... Respondents
                     Through               Mr. Subash Oberoi and
                                           Mr. C.M. Gopal, Advocates
                                           for R-1 & R-2 along with R-
                                           1 in person.
CORAM :-
HON'BLE MR. JUSTICE J.R. MIDHA

                              JUDGMENT

1. Respondents no. 1 and 2 are seeking review of the judgment dated 27th April, 2012 to the extent that the appellant be directed to pay interest on the principal award amount of Rs. 10,00,000/- from 22nd September, 1999 to 10th November, 2009 in terms of the judgment of the learned Motor Accident Claims Tribunal. Respondent nos. 1 and 2 also seek enhancement of rate of interest from 7% to 9% after 11th November, 2009.

2. The accident dated 17th October, 1998 resulted in death of Praveen Kumar aged 18 years who was survived by his parents (respondents no. 1 and 2) who filed the claim petition before the Claims Tribunal. The Claims Tribunal awarded compensation of Rs. 10,00,000/- to respondents no. 1 and 2 which was challenged

by the appellant before this Court.

3. Vide order dated 14th October, 2009, this Court directed the appellant to deposit Rs.10,00,000/- with UCO Bank within 30 days, in pursuance to which the appellant deposited Rs.9,50,000/- on 10th November, 2009 which was kept in fixed deposit with UCO Bank. The interest on the said fixed deposits was released to respondents no.1 and 2. The original fixed deposit has been released to the respondents in terms of the judgment dated 27 th April, 2012.

4. Vide judgment dated 27th April, 2012, this Court upheld the award passed by the Motor Accident Claims Tribunal and dismissed the appeal. The consequence of the dismissal of the appeal is that the appellant is liable to pay the amount as awarded by the Claims Tribunal. Para 32 of the award is reproduced hereunder:-

"RELIEF:

32. Petitioners will be entitled for a total compensation of Rs.10,00,000/- (Rupees Ten Lacs Only) less the amount of interim award, if any, already received by them along with 7% interest from the date of filing of this petition till realization of the amount. The awarded amount shall be payable to both the petitioners in equal shares."

5. Learned counsel for the appellant submitted that the appellant had deposited the interim award amount of Rs.50,000/- along with interest of Rs.15,350/- with the Claims Tribunal on 28th February, 2003 and therefore, the principal award of Rs.10,00,000/- was reduced to Rs.9,50,000/-. It is further

submitted that the appellant deposited Rs. 9,50,000/- with this Court on 10th November, 2009 in terms of order dated 14th October, 2009 which should be adjusted against the principal award amount of Rs. 9,50,000/-.

6. Learned counsel for respondents no. 1 and 2 submitted that Rs.9,50,000/- deposited by the appellant on 10th November, 2009 has to be first appropriated against the interest and the balance towards principal in terms of Order XXI Rule 1 of the Code of Civil Procedure. According to respondents no. 1 and 2, a further sum of Rs. 8,88,531/- is due and payable as per break up given hereunder:-

Principal award amount as on 10th : Rs. 9,50,000/- November, 2009 Interest on Rs. 9,50,000/- from 22nd : Rs. 6,73,822/- September, 1999 to 10th November, 2009 @ 7% per annum Total outstanding amount as on 10th : Rs. 16,23,822/- November, 2009 Amount deposited on 10th November, : Rs. 9,50,000/- 2009 out of which Rs.6,73,822/- is adjusted towards interest and balance of Rs. 2,76,178/- towards principal Balance principal amount as on 10th : Rs. 6,73,822/- November, 2009 Interest on balance principal award : Rs. 2,14,709/- amount of Rs.6,73,822/- from 11th November, 2009 to 30th May, 2014 @ 7% per annum Total outstanding amount as on 30th : Rs. 8,88,531/- May, 2014

7. The question which has arisen for consideration is whether

the amount of Rs. 9,50,000/- deposited by the appellant on 10th November, 2009 has to be first adjusted towards interest or towards principal.

8. The law on the above question is well settled by the Constitution Bench judgment of the Supreme Court in Gurpreet Singh v. Union of India, (2006) 8 SCC 457. The Supreme Court held that the payment made by the judgment debtor to decree holder has to be appropriated first towards the interest and costs and then towards the principal.

9. In the subsequent case of Bharat Heavy Electricals Ltd. v. R.S. Avtar Singh, (2013) 1 SCC 243, the Supreme Court summarized the principles laid down by the Constitution Bench in Gurpreet Singh (supra). In this case, the appellant paid a sum of Rs. 1,00,00,000/- to the respondent and sought adjustment of the said amount against principal whereas the respondent was seeking its adjustment first against interest. The Supreme Court upheld the judgment of the High Court whereby the above amount was adjusted first against interest and then against principal. The relevant part of the judgment is as under:-

"23. ... In other words, whether the said sum of Rs 1 crore paid by the appellant should be accounted towards the award amount of Rs 1,41,68,474 or to the total figure of Rs 2,19,61,134 as was sought to be applied by the respondent.

xxx

26. In Gurpreet Singh [(2006) 8 SCC 457] at para 14, the implication of Order 21 Rule 1 vis-à-vis the related provisions under Order 24 and Order 34 have been set out which is to the following effect: (SCC p. 468)

"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."

27. In para 20, the general rule of appropriation towards a decretal amount has been stated as under: (Gurpreet Singh case [(2006) 8 SCC 457] , SCC p. 471) "20. ... It was also held that 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 direction,

adjustments be made firstly in payment of interest and costs and thereafter in payment of the principal amount, subject of course, to any agreement between the parties."

28. After referring to the general rule of appropriation in cases where there is shortfall in paying the decree amount what will be the mode of appropriation has been explained in para 26 and in the last part of para 27 in the following words: (Gurpreet Singh case [(2006) 8 SCC 457] , SCC pp. 474-75) "26. Thus, in cases of execution of money decrees or award decrees, or rather, decrees other than mortgage decrees, interest ceases to run on the amount deposited, to the extent of the deposit. It is true that if the amount falls short, the decree-holder may be entitled to apply the rule of appropriation by appropriating the amount first towards the interest, then towards the costs and then towards the principal amount due under the decree. But the fact remains that to the extent of the deposit, no further interest is payable thereon to the decree-holder and there is no question of the decree-holder claiming a reappropriation when it is found that more amounts are due to him and the same is also deposited by the judgment-debtor. In other words, the scheme does not contemplate a reopening of the satisfaction to the extent it has occurred by the deposit. No further interest would run on the sum appropriated towards the principal.

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."

29. The said legal position has been reiterated in para 36 with a little more clarity, which is to the following effect: (Gurpreet Singh case [(2006) 8 SCC 457] , SCC p. 478) "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." (emphasis added)

30. Ultimately, in para 49, the Constitution Bench decision has summed up the legal position as under: (Gurpreet Singh case [(2006) 8 SCC 457] , SCC p. 483) "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 reappropriation as a whole in the light of the appellate decree." (emphasis added)

31. From what has been stated in the said decision, the following principles emerge:

31.1. 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 costs and thereafter towards payment of the principal amount subject, of course, to any agreement between the parties.

31.2. The legislative intent in enacting sub-rules (4) and (5) is a clear 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 21 Rule 1(1)(b). 31.3. 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 costs and finally towards the principal amount due under the decree. 31.4. 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.

31.5. In cases where there is a shortfall in deposit of the principal amount, the decree-holder would be entitled to adjust interest and costs 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 reappropriation."

(Emphasis supplied)

10. In New India Mosaic & Marble Co. P. Ltd. v. Bhandari

Builders Pvt. Ltd., Execution Petition No. 188 of 2005, decided on 8th March, 2013, this Court following Gurpreet Singh (supra) and Bharat Heavy Electricals Ltd. (supra) held as under:-

"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...

xxx

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."

(Emphasis supplied)

11. It is noted that the trend of judicial opinion even before the Constitutional Bench judgment of the Supreme Court in Gurpreet Singh (supra), was that the payment made by the judgment debtor has to be applied first towards costs, then interest, and then towards principal. Reference may be made to Bengal Silk Trading Co. v.

D.S. Bhalla, 1997 (40) DRJ, and A. Tosh and Sons India Ltd. v. N.N. Khanna, AIR 2006 Delhi 251.

12. Applying the aforesaid decisions of the Supreme Court to the present case, it is clear that the amount of Rs. 9,50,000/- deposited by the appellant on 10th November, 2009 in terms of the order dated 14th October, 2009 has to be adjusted first towards the interest on that date i.e. Rs. 6,73,822/- and the balance amount of

Rs. 2,76,178/- has to be adjusted towards the principal. As a result, the balance principal amount on 10th November, 2009 would be Rs. 6,73,822/- (Rs.9,50,000 - 2,76,178/-). The appellant shall be liable to pay interest @ 7% per annum on the balance principal amount of Rs. 6,73,822/- from 11th November, 2009 upto the date of payment. As on date i.e. 30th May, 2014, the amount of interest on balance principal amount of Rs. 6,73,822/- would be Rs. 2,14,709/-.

13. This Court is of the view that the judgment dated 27th April, 2012 does not warrant any review as it is clear from the award of the Claims Tribunal that the respondents are entitled to the interest on the principal award amount of Rs. 6,73,822/- @ 7% per annum from the date of filing of the claim petition before the Claims Tribunal i.e. 22nd September, 1999 up to realization in terms of the award of the Claims Tribunal. However, in order to avoid any controversy being raised by the appellant, it is again clarified that the respondents shall be entitled to interest on the principal award amount of Rs. 6,73,822/- from 11th November, 2009 @ 7% per annum till realization of the amount. The second prayer of the respondents no. 1 and 2 for enhancement of rate of interest from 7% to 9% is not warranted and is, therefore, rejected. The review petition is disposed of on the above terms.

14. The appellant is directed to deposit the balance principal award amount of Rs. 6,73,822/- along with interest thereon @ 7% per annum from 11th November, 2009 with UCO Bank, Delhi High Court by means of a cheque in the name of UCO Bank A/c Kanwar Lal within a period of 30 days.

15. Upon the deposit of the aforesaid amount, UCO Bank shall keep the same in a joint fixed deposit of respondents no. 1 and 2 for a period of one year. The original fixed deposit receipt be released to respondents no.1 and 2. However, no loan or withdrawal shall be allowed to respondents no. 1 and 2 without permission of this Court.

16. List for reporting compliance on 29th August, 2014.

J.R. MIDHA, J MAY 30, 2014 pankaj