Sikkim High Court

Cheif Engineer, Roads And Bridges ... vs Kmc Brahmaputra Infastructure Ltd on 6 May, 2024

Author: Meenakshi Madan Rai

Bench: Meenakshi Madan Rai

     THE HIGH COURT OF SIKKIM : GANGTOK
                       (Civil Extraordinary Jurisdiction)
                            DATED : 6th May, 2024
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 SINGLE BENCH : THE HON'BLE MRS. JUSTICE MEENAKSHI MADAN RAI, JUDGE
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                         WP(C) No.06 of 2024
Petitioner              :        The Chief Engineer,
                                 Roads & Bridges Department,
                                 Government of Sikkim

                                            versus
Respondent              :         KMC Brahmaputra Infrastructure Limited

               Writ Petition under Article 226 and
             Article 227 of the Constitution of India
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 Appearance
      Mr. Chetanya Kapoor, Advocate (through V.C.) with Mr. Girmey
      Bhutia, Advocate for the Petitioner.
      Mr. Rohan Batra, Advocate with Mr. Dhruv Sethi and Mr. Hemlal
      Manger, Advocates for the Respondent.
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                                JUDGMENT

Meenakshi Madan Rai, J.

1. The short question for consideration before this Court

is; whether interest continues to accrue on a partial deposit made

by the Judgment Debtor, till the entire award amount is made

good?

2. The Learned Commercial Court, vide Order dated 28-

09-2023, in Commercial (Civil Execution) Case No.01 of 2023, was

of the view that under Order XXI Rule 1(4) of the Code of Civil

Procedure, 1908 (hereinafter, "CPC"), the interest on money would

cease to run from the date of service of notice referred to in Order

XXI Rule 1(2) CPC. That, such interest would cease to run when all

money payable in the decree is paid by deposit in the Court. That,

as only 75% of the awarded amount was deposited in Court, as

such, interest @ 12% was to be calculated on the total award, from

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

the date of the award, i.e., 22-02-2019, till its full realization. The

calculation made by the Decree Holder was ordered to be taken as

reference by the Judgment Debtor. Hence, the instant Petition.

3. Learned Counsel for the Petitioner advanced the

contention that, the Learned Commercial Court erroneously

observed that, the interest on the award will cease only when all

money payable under the decree is deposited into the Court. That,

contrarily, neither Order XXI Rule 1(4) of the CPC nor Order XXI

Rule 1(2) of the CPC mandates such a requirement. That, in fact

interest will no longer be charged on any amount paid to the

Decree Holder after notice issued by the Judgment Debtor. That,

the Petitioner in Arbitration Case No.04 of 2019, vide Orders of the

Learned Commercial Court dated 17-07-2019 and 26-08-2019 was

directed to deposit ₹ 2,74,79,138/- (Rupees two crores, seventy

four lakhs, seventy nine thousand, one hundred and thirty eight)

only, into the Court, which was duly complied with by the Petitioner

on 26-09-2019. That, it is a settled legal principle that in cases

where there is a short fall in deposit of the principle amount, the

Decree Holder would be entitled to adjust interest and costs first

and the balance towards the principle amount. That beyond that,

the Decree Holder cannot seek to re-open the entire transaction

and proceed to re-calculate the interest on the whole of the

principle amount and seek for re-appropriation. That, as the

Respondent was permitted to deposit 75% of the amount before

the Learned Commercial Court (supra), and the amount was

withdrawn/paid to the Respondent on 01-06-2023, the Respondent

cannot demand interest on the 75%, as interest ceases to run from

the date of deposit by the Judgment Debtor. That, interest would

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

be payable to the Decree Holder only on the unpaid 25%. To fortify

his submissions, strength was garnered from Himachal Pradesh

Housing and Urban Development Authority and Another vs. Ranjit Singh

Rana . Hence, the impugned Order be set aside.

4. Per contra, Learned Counsel for the Respondent

submitted that no infirmity emanates in the Order of the Learned

Commercial Court which thereby warrants no interference by this

Court, in view of the fact that there is no palpable error in the said

order. In this context, the attention of this Court was invited to the

decision of the Supreme Court in Central Council for Research in

Ayurvedic Sciences and Another vs. Bikartan Das and Others . That,

75% of the amount that was deposited in Court by the Judgment

Debtor, was for the purpose of obtaining a stay of the execution of

the arbitral award and was not a deposit towards the decretal dues

in execution of the award. The deposited amount consequently was

neither payable nor accessible to the Respondent. Hence, the

observation of the Learned Commercial Court that the interest

would accrue on the entire awarded amount till it was deposited in

totality cannot be faulted. To fortify his submissions, reliance was

placed on P.S.L. Ramanathan Chettiar and Others vs. O.R.M.P.R.M.

Ramanathan Chettiar and Delhi Development Authority vs. Bhai Sardar

Singh and Sons .

5. Due consideration has been afforded to the rival

submissions put forth by Learned Counsel for the parties. All

documents on record including the impugned Order as also the

citations relied on have been carefully perused.

(2012) 4 SCC 505

2023 SCC OnLine SC 996

AIR 1968 SC 1047

2020 SCC OnLine SC 1450

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

6. To comprehend the matter in its entirety the

chronology of events leading to the instant Writ Petition are

narrated briefly. The Petitioner on 05-05-2010 invited bids for the

construction of a two-lane Gangtok Bypass Road, from Ranipool to

Burtuk in East Sikkim, measuring 23.14 kms. The Respondent‟s

bid was accepted and a contract dated 22-12-2010 was executed

between the Petitioner and the Respondent. The contract was

terminated on account of a breach of the terms of the contract and

arbitration invoked by the Respondent, seeking damages of ₹

89,62,36,528/- (Rupees eighty nine crores, sixty two lakhs, thirty

six thousand, five hundred and twenty eight) only, which computed

"loss profits" of ₹ 11,49,59,328/- (Rupees eleven crores, forty-nine

lakhs, fifty nine thousand, three hundred and twenty-eight) only.

The Learned Arbitral Tribunal gave its award on 18-12-2018

(corrected on 22-02-2019), allowing the Respondent‟s claim

towards "loss of profits" to the extent of ₹ 5,74,79,664/- (Rupees

five crores, seventy four lakhs, seventy nine thousand, six hundred

and sixty four) only. A Section 34 Petition under the Arbitration

and Conciliation Act, 1996 (for short, "Arbitration Act") was filed

before the Learned Judge, Commercial Court, being Arbitration

Case No.04 of 2019, on a limited issue, i.e., assailing the finding of

the Arbitral Tribunal on "loss of profits". The Learned Commercial

Court vide its Judgment dated 17-06-2021, set aside the award on

"loss of profits". Aggrieved, the Respondent was before a Division

Bench of this Court, under Section 37 of the Arbitration Act. This

Court, vide Judgment dated 20-12-2022, set aside the order of the

Learned Commercial Court and restored the award of the Learned

Arbitral Tribunal on the "loss of profits". The Petitioner preferred a

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

Special Leave Petition before the Supreme Court of India against

the Judgment of this Court dated 20-12-2022. By an Order dated

08-05-2023, the Supreme Court refused to interfere with the

impugned Judgment and dismissed the petition. Following the

above development, on 16-02-2023 the Respondent filed the

Execution Case being, Commercial (Civil) (Exe.) Case No.01 of

2023 before the Learned Commercial Court, under Section 36 of

the Arbitration Act, read with Order XXI Rules 10 and 11 of the

CPC, seeking execution of the Arbitral Award dated 18-12-2018.

After hearing Learned Counsel for the parties, the Order which is

assailed herein was passed.

7. In order to determine the question at hand, the Order

dated 17-07-2019 of the Learned Commercial Court is to be

perused which inter alia reads as follows;

"...................................................... In view of the above developments and submissions, it is hereby ordered that subject to the Petitioner depositing 75% of the awarded amount(along with interest till date) before the next date of hearing there shall be a stay on the operation of the impugned award.

In the event of the above amount being deposited, as agreed, the registry shall invest the same in an interest bearing fixed deposit(in a scheduled bank).

........................................" [emphasis supplied]

(i) In compliance thereof, the deposit was made by the

Petitioner on 26-09-2019, on which date the operation of the stay

became effective. The relevant portion of Order of the Learned

Commercial Court dated 26-09-2019 is extracted below;

"............................................................................ A cheque for ₹ 2,74,79,138/- in terms of the orders dated 17.07.2019 & 26.08.2019 of this Court has also been filed by the Petitioner.

................................................................ Ld. Counsel for the Respondent would, however, submit that certain interest amount(s) have not been added in the cheque amount.

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

To this, Ld. Counsel for the Petitioner would submit that the interests have been added upto the date of the concerned order that was passed on 17.07.2019, in view of the fact that the order itself indicated that the interest was to be paid till the said date.

The above submissions are hereby recorded. For the removal of any doubt it is made clear that the operation of the award shall be deemed to have been stayed with effect from today.

...................................." [emphasis supplied]

8. It is now imperative to consider the provisions of Order

XXI Rule 1 of the CPC which deals with modes of paying money

under decree and provides as follows;

"ORDER XXI EXECUTION OF DECREES AND ORDERS Payment under decree

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 payments 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, acknowledgment due.

(3) Where money is paid by postal money order or through a bank under clause (a) or clause (b) of sub-rule (1), the money order or payment through bank, as the case may be, shall accurately state the following particulars, namely:--

(a) the number of the original suit;

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

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

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

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

(e) the name and address of the payer.

(4) On any amount paid under clause (a) or clause (c) of sub-rule (1), interest, if any, shall cease to run from the date of service of the notice referred to in sub-rule (2).

(5) On any amount paid under clause (b) of sub-rule (1), interest, if any, shall cease to run from the date of such payment: Provided that, where the decree-holder refuses to accept the postal money order or payment through a bank, interest shall cease to run from the date on which the money was tendered to him, or where he avoids acceptance of the postal money order or payment through bank, interest shall cease to run from the date on which the money would have been tendered to him in the ordinary course of business of the postal authorities or the bank, as the case may be."

9. In the first instance, it is evident that the above

extracted provision deals with all money payable under a „decree‟.

As urged by Learned Counsel for the Respondent, 75% award

amount deposited in the Court was evidently not in execution of

the decree but was made for the purpose of obtaining a stay, as

concludes from the Order of the Learned Commercial Court, dated

17-07-2019 and 26-09-2019 (supra).

10. It is worthwhile in the above context to consider the

observation of the Hon‟ble Supreme Court in P.S.L. Ramanathan

Chettiar (supra) the relevant Paragraphs of which are extracted

hereinbelow;

"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 Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

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.

.................................................................................................

15. The last contention raised on behalf of the respondent was that at any rate the decree-holder cannot claim any amount by way of interest after the deposit of the money in court. There is no substance in this point because the deposit in this case was not unconditional and the decree-holder was not free to withdraw it whenever he liked even before the disposal of the appeal. In case he wanted to do so, he had to give security in terms of the order. The deposit was not in terms of Order 21 Rule 1 CPC and as such, there is no question of the stoppage of interest after the deposit." [emphasis supplied]

11. In Nepa Limited through its Senior Manager (Legal) vs.

Manoj Kumar Agrawal the dispute before the Court was whether the

Respondent is entitled to interest @ 18% as per the award on the

principal amount of ₹ 14,49,300/- till the decision of the appeal

under Section 37 of the Act on 02-02-2012 or interest @ 18% on

the net principal amount, after the set off/adjustment of interest

due on 08-11-2001 from ₹ 7,78,280/- which was withdrawn by the

Respondent on 08-11-2001. The Supreme Court went on to

observe that;

"13. Aggrieved, the respondent preferred a civil revision before the High Court of Madhya Pradesh at Jabalpur, which had been allowed by the impugned order dated 19.06.2017, inter alia holding that in terms of Order XXI, Rule 1, sub-rules (4) and (5) of the Civil Procedure Code, 1908, the appellant having failed to give notice for deposit of amount of Rs. 7,78,280/-, the respondent would be entitled to interest @ the rate of 18% per annum, even on the sum of Rs. 7,78,280/-, which was withdrawn by him, till the decision of the appeal under Section 37 of the Act, on 02.02.2012.

................................................." [emphasis supplied]

The Supreme Court opined that the Judgment of the High

Court was unsustainable and contrary to the law and held that

2022 SCC OnLine SC 1736

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

when the deposited amount is withdrawn and gets credited in the

account of the Decree Holder, he is not entitled to interest on the

deposited amount, even when there is failure on the part of the

Judgment Debtor to issue notice of deposit. In the absence of

notice, the interest would cease to run from the date when the

amount is transferred/credited in the account of the Decree

Holder. If notice is issued, interest ceases to run from the date of

service of notice. In pith and substance, the Supreme Court

concluded hereinabove that no interest liability would occur to the

Appellant on the amount which was withdrawn and paid to the

Respondent. That, interest is payable only on the amount that is

not paid.

12. In Delhi Development Authority vs. Bhai Sardar Singh and

Sons , the Supreme Court discussed the provisions of Order XXI

Rule 1(1) CPC and elucidated as follows;

"15. A reading of the aforesaid sub-rules clarifies that when money is paid under a decree, the interest, if any, shall cease to run either from the date of direct payment or from the date of service of notice to the decree holder, wherever applicable. Sub-rules 4 and 5 do not stipulate that the interest would stop running only and only when the entire amount as per the decree shall stand paid. This Court, as will be seen below, has held that money even when paid in part towards the decree would cease to accrue interest to the extent of the amount paid.

................................................" [emphasis supplied]

The above extract succinctly explains the legal position on

Order XXI Rule 1(4) and Rule 1(5) CPC.

13. The Constitution Bench of the Supreme Court in

Gurpreet Singh vs. Union of India referred to the provisions of Order

XXI Rule 1 and Order XXIV of the CPC and observed that the

2020 SCC OnLine 1450

(2006) 8 SCC 457

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

former applies to the post-decretal stage and the latter to the pre-

decretal stage. It was inter alia propounded that;

"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." [emphasis supplied]

The oft repeated legal position that money even when paid in

part towards the decree, would cease to accrue interest to the

extent of the amount paid is clarified in the Paragraph (supra).

14. Pausing here momentarily, as the issue of notice

provided under Order XXI Rule 1(4) and Order XXI Rule 1(2) is not

raised, no discussions are required in this context.

15. Indeed, while considering the extract from Gurpreet

Singh (supra) I am conscious of the distinction that arises in the

context of a deposit made in terms of Order XXI Rule 1(1) CPC,

which pertains to payment of decretal dues and is thus applicable

to the post-decretal stage, vis-à-vis the deposit made by the

Judgment Debtor, the Petitioner herein, into the Court for the

purpose of obtaining a stay of the execution of the award. The fact

that 75% deposit amount made by the Petitioner into the Court

was towards obtaining a stay, for buying peace has not escaped

my notice. As propounded in P.S.L. Ramanathan Chettiar (supra), in

such a circumstance, the right to the deposit or the title to the

money does not pass to the Decree Holder.

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

16. In the instant matter, having meticulously perused the

Order of the Learned Commercial Court, I cannot bring myself to

agree with the view expressed therein that, interest will cease to

run only when „all‟ money payable under the Decree is paid by the

Decree Holder by making the deposit into the Court. In my

considered view, Rule 1(4) of Order XXI CPC, relied on by the

Learned Commercial Court to make its observations, nowhere

specifies that interest would truncate only when the entire award

amount is deposited into the Court. 75% of the award amount was

deposited by the Petitioner into the Court on 26-09-2019 and was

released to the Petitioner on 01-06-2023 from which date, in my

considered view, interest on the amount ceases.

17. Four points thus stand clarified from the foregoing

discussions, viz.;

(i) Interest on the deposit of 75% of the award amount

made available to the Decree Holder on 01-06-2023,

will not continue till the deposit of „all' the award

money is made into the Court, as erroneously held by

the Learned Commercial Court.


                 (ii)    The interest on the 75% deposit will truncate on the

                         date      when       the      money        was      withdrawn          by     the

Respondent, which admittedly was on 01-06-2023.

(iii) Contrary to the stance of the Petitioner, the accrual of

interest does not cease on 26-09-2019, the date on

which 75% of the award amount was deposited by it in

Court, for the reason that, the amount was not

accessible to the Respondent, having been deposited

The Chief Engineer, Roads & Bridges Department, Government of Sikkim vs. KMC Brahmaputra Infrastructure Limited

for obtaining a stay and not by way of satisfying the

decretal dues.

(iv) Interest on 25% would accrue from the date of award

till 01-09-2023, when admittedly the amount was made

available to the Respondent.