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2007(1) Supreme 521
SUPREME COURT OF INDIA
(From Punjab & Haryana High Court)
Y.K. Sabharwal, CJI., K.G. BalakrishnaN, S.H. Kapadia, C.K. Thakker and P.K. Balasubramanyan, JJ.
Gurpreet Singh—Appellant
versus
Union of India—Respondent
Civil Appeal No. 4570 of 2006
(@ Special Leave Petition (C) No. 8408 of 2003)
With
Civil Appeal Nos. 4549, 4548 and 4547 of 2006
(@ SLP (C) No. 19525 of 2003, 3429 of 2004 and 5609 of 2004)
Decided on 19-10-2006
Counsel for the Parties :
For the Appellant : Mukul Rohatgi, Sr. Advocate, P.S. Narasimha, Sridhar Potaraju, Avijeet K. Lala (for M/s. P.S.N. & Co.) Advocates, S.M. Sarin, P.N. Puri, Rohit Rao and John Mathew, Advocates.
For the Respondent : A. Sharan, A.S.G., T.M. Mohd. Yuseff, Sr. Advocate, S.W.A. Qadri, Ms. Anil Katiyar, Shishir Pinaki, Ms. Shalinee Ranjan, Amit Anand Tiwari and Ms. Sushma Suri, Advocates.
Held : 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. (Para 21)
Going by this principle and for the moment keeping out the scheme of the Land Acquisition Act, it appears to us that on payment or deposit of the amount awarded by the Collector in terms of Section 11 read with Section 31 of the Act, the claimant cannot thereafter claim any interest on that part of the compensation paid to him or deposited for the payment to him once notice of deposit is given to him. Thereafter, when the reference court enhances the compensation with consequential enhancement in solatium and interest under Section 23(1A) of the Act and further awards interest on the enhanced compensation in terms of Section 28 of the Act, the claimant/decree holder can seek an appropriation of the amounts deposited pursuant to that award decree, only towards the enhanced amount so awarded by the reference court. While making the appropriation, he can apply the amount deposited, first towards the satisfaction of his claim towards interest on the enhanced amount, the costs, if any, awarded and the balance towards the land value, solatium and the payment under Sections 23 (1A) of the Act and if, there is a shortfall, claim that part of the compensation with interest thereon as provided in Section 28 of the Act and as covered by the award decree. Once the sum enhanced by the reference court, along with the interest is deposited by the State, there will be no occasion for the claimant/awardee to seek a reopening of the amount awarded by the Collector, substituted by the amount awarded by the reference court and seek to have a re-appropriation of the amount towards what is due. Same would be the position in a case where the amount awarded by the reference court, including the interest is deposited, but the amount is further enhanced in appeal by the High Court. Again, the same principle would apply. The principle would continue to apply when the Supreme Court awards further enhancement in a further appeal to that Court. But if after the award by the reference court the amount is not deposited by the State, interest would run on the compensation in terms of Section 28 of the Act on that amount as provided in Section 28. The same would be the position regarding the enhancement given in appeal by the High Court and in the enhancement given in appeal by the Supreme Court. The mandate of Section 34 and Section 28 that interest would run from the date the Collector takes possession till the particular amount is deposited as provided in those sections ensures that the claimant is recompensed adequately. Section 28 ensures such recompense at each stage of enhancement of compensation.(Para 22)
On the scheme of the Act, it is seen that the award of compensation is at different stages. The first stage occurs when the award is passed. Obviously, the award takes in all the amounts contemplated by Section 23(1) of the Act, Section 23(1A) of the Act, Section 23(2) of the Act and the interest contemplated by Section 34 of the Act. The whole of that amount is paid or deposited by the Collector in terms of Section 31 of the Act. At this stage, no shortfall in deposit is contemplated, since the Collector has to pay or deposit the amount awarded by him. If a shortfall is pointed out, it may have to be made up at that stage and the principle of appropriation may apply, though it is difficult to contemplate a partial deposit at that stage. On the deposit by the Collector under Section 31 of the Act, the first stage comes to an end subject to the right of the claimant to notice of the deposit and withdrawal or acceptance of the amount with or without protest. (Para 26)
The second stage occurs on a reference under Section 18 of the Act. When the reference Court awards enhanced compensation, it has necessarily to take note of the enhanced amounts payable under Section 23(1), Section 23(1A), Section 23(2) and interest on the enhanced amount as provided in Section 28 of the Act and costs in terms of Section 27. The Collector has the duty to deposit these amounts pursuant to the deemed decree thus passed. This has nothing to do with the earlier deposit made or to be made under and after the award. If the deposit made, falls short of the enhancement decreed, there can arise the question of appropriation at that stage, in relation to the amount enhanced on the reference. (Para 27)
The third stage occurs, when in appeal, the High Court enhances the compensation as indicated already. That enhanced compensation would also bear interest on the enhanced portion of the compensation, when Section 28 is applied. The enhanced amount thus calculated will have to be deposited in addition to the amount awarded by the reference Court if it had not already been deposited. (Para 28)
The fourth stage may be when the Supreme Court enhances the compensation and at that stage too, the same rule would apply. (Para 29)
Can a claimant or decree holder who has received the entire amount awarded by the reference court or who had notice of the deposit of the entire amount so awarded, claim interest on the amount he has already received merely because the appellate court has enhanced the compensation and has made payable additional compensation? We have already referred to Order XXI and Order XXIV of the Code to point out that such a blanket re-opening of the transaction is not warranted even in respect of a money decree. Section 28 of the Act indicates that the award of interest is confined to the excess compensation awarded and it is to be paid from the date of dispossession. This is in consonance with the position that a fresh re-appropriation is not contemplated or warranted by the scheme of the Act. 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.(Para 30)
When the judgment debtor State makes a deposit along with the calculation appropriating distinct sums towards various heads of compensation as awarded by the reference court or by the appellate court in the appellate decree, and the amount is received by the decree holder, the decree holder must be taken to be not entitled to seek an appropriation as if the judgment debtor has not made any intimation and that he is entitled to appropriate at his volition. Considering the scheme of compensation under the Act in the context of the specific nature of the items specifically referred to in Section 23 of the Act, we are of the view that the approach adopted in Prem Nath Kapur (supra) is justified. A reappropriation by seeking to reopen the satisfaction already rendered might result in interest being made payable even on that part of the principal amount that had already been deposited and received by the decree holder and that would be in the realm of unjust enrichment.(Para 41)
What is to happen when a part of the amount awarded by the reference court or by the appellate court is deposited pursuant to an interim order of the appellate court or of the further appellate court and the awardee is given the liberty to withdraw that amount? In such a case, the amount would be received by the decree holder on the strength of the interim order and the appropriation will be subject to the decision in the appeal or the further appeal and the direction, if any, contained therein. In such a case, if the appeal is disposed of in his favour, the decree holder would be entitled to appropriate the amount already received by him pursuant to the interim order first towards interest then towards costs and the balance towards principal as on date of the withdrawal of the amount and claim interest on the balance amount of enhanced compensation by levying execution. But on that part appropriated towards the principal, the interest would cease from the date on which the amount is received by the awardee. Of course, if while passing the interim order, the court had indicated as to how the deposited amount is to be appropriated, that direction will prevail and the appropriation could only be done on the basis of that direction.(Para 42)
(ii) Civil Procedure Code, 1908—Orders XXI, XXIV, XXXIV—Execution of money decrees—Rule of appropriation—When a debtor makes a payment which does not satisfy the full debt or it remains a part payment—Rule 3 of Order XXIV of the Code providing for cessation of running of interest on notice of deposit being given pending a suit, can be extended to execution of decrees.
Held : 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 re-appropriation 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.(Para 20)
(iii) WORDS AND PHRASES—Word ‘appropriation’—Meaning—Specialised meanings of the term.
Held : Appropriation is the act of setting apart or assigning a thing or substance to a particular use or person to the exclusion of others; application to a special use or purpose. There are three specialised meanings of the term,
i)In company accounting, it is the division of pre tax profits between corporation tax, company tax, company reserves and dividends to shareholders. The term works in the same sense in a partnership situation.
ii)In the shipping of produce, the appropriation is the document by which the seller identifies to the buyer the relevant unit in shipment.
iii)If a debtor makes a payment to a creditor and does not specify which debt the payment is in settlement of, the creditor may appropriate it to any of the debts outstanding on the debtor’s account. This is often known as appropriation of payments.(Para 4)
JUDGMENT
P.K. Balasubramanyan, J.—What is the rule of appropriation in execution of money decrees? Is the rule the same in the case of an award decree under the Land Acquisition Act or, is there anything in the Land Acquisition Act, 1894 as amended by the Land Acquisition (Amendment) Act, Act 68 of 1984 making that rule inapplicable or not wholly applicable? These are the questions that arise for consideration in these Petitions for Special Leave to Appeal.
2. Leave granted.
3. In Prem Nath Kapur & Anr. Vs. National Fertilizers Corporation of India Ltd. & Ors. [(1995) Supp. 5 SCR 790], a three Judge Bench of this Court held that the expression ‘compensation’ under Section 23(1) of the Land Acquisition Act, 1894 as amended by Act 68 of 1984 (hereinafter referred to as, “the Act”) read in the context of Section 28 or Section 34 thereof, by necessary implication excludes solatium and that no interest is payable on solatium or on the additional amount under Section 23(1)(A) of the Act. In other words, it was held that the liability to pay interest was only on the excess amount of compensation determined under Section 23(1) of the Act by the Civil Court either under Section 26 or on appeal under Section 54 of the Act over and above the amount awarded under Section 11 of the Act. It was also held that the normal rule of appropriation contained in Order XXI Rule 1 of the Code of Civil Procedure relating to execution of decrees for recovery of money, stands excluded by Sections 28 and 34 of the Act and the principles of Order XXI Rule 1 of the Code could not be extended to execution of award decrees under the Act. The view as regards the content of the expression ‘compensation’ occurring in Section 23(1) and Section 28 of the Act was overruled by a Constitution Bench in Sunder Vs. Union of India ((2001) Suppl. 3 SCR 176), wherein it was held that the expression ‘compensation’ awarded would include not only the total sum arrived at as per Section 23(1) but also the sums under the remaining sub-sections of Section 23. Thus, one part of the decision in Prem Nath Kapur (supra) stood overruled, though the Constitution Bench did not say anything about the other aspect dealt with therein, namely, the mode of appropriation of the amount due under an award decree. When these cases came up before a bench of three Judges, this aspect was noticed. The learned Judges felt that the question whether this part of the judgment in Prem Nath Kapur (supra) would survive the reasoning in Sunder (supra) had to be reconsidered and even otherwise, the correctness of the view expressed therein required reconsideration at the hands of a Constitution Bench. It is thus that these Petitions for Special Leave to Appeal have come before us. The question for which the answer is sought from us is indicated by the order of reference in the following words:
“Having heard the learned counsel for the parties and having perused the aforesaid decisions, we are of the view that the normal rule that in case of a debt due with interest, any payment made by the debtor, in the first instance, is to be appropriated towards the satisfaction of interest and thereafter towards principal, subject to a contract to the contrary, is not excluded by the provisions of the Act. The normal principle is embedded on the basis of Section 60 of the Indian Contact Act, 1872. It is also indicated in Order XXI Rule 1(3)(c) of the Code. We may note that the decision in Prem Nath Kapur & Anr. (supra) though has been over-ruled by the Constitution Bench in Sunder Vs. Union of India [2001(7) SCC 211] but the Constitution Bench has not gone into the question of appropriation. The question of appropriation, in the decision in Prem Nath Kapur & Anr. (supra), requires to be re-considered.”
Thus, the question that requires to be answered is whether the rule, of what may be called the different stages of appropriation, set out in Prem Nath Kapur (supra) is correct or whether the rule requires to be re
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