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1979 Supreme(Cal) 64
High Court Of Calcutta
Murari Mohan Dutt, Ram Krishna Sharma
LIFE INSURANCE CORPN.OF INDIA - Appellant
Versus
SAMARENDRA NATH ROY - Respondent
C. R. 2595 Of 1978
Decided On : 02/20/1979
GOURI DHAR, RABINDRA NATH CHOWDHURY, SOMNATH CHATTERJI
A creditor is bound to apply a payment made by the debtor according to the debtor's specification, if any. The term "decretal amount" in a decree normally includes both the principal amount and the interest due.
Headnote:
APPROPRIATION OF PAYMENTS - SECTION 60 OF THE INDIAN CONTRACT ACT - CREDITOR'S RIGHT TO APPROPRIATE PAYMENTS - DEBTOR'S SPECIFICATION OF APPROPRIATION - EFFECT - DECRETAL AMOUNT - MEANING AND SCOPE.
Fact of the Case:
The Life Insurance Corporation of India (LIC) filed an execution petition to enforce a mortgage decree obtained by the Calcutta Insurance Company Limited against the opposite party, Samarendra Nath Roy. The decree provided for payment of the decretal amount with interest at 7% per annum with quarterly rests. The opposite party made several deposits in the executing court, specifying in the challans that the payments were towards the "decretal amount". The LIC credited these payments towards interest, leaving a balance of Rs. 13,611.30 due on the decretal amount. The opposite party filed an application for recording full satisfaction of the decree, which was dismissed by the trial court. The LIC filed a Rule challenging the trial court's order.
Finding of the Court:
The court held that the LIC was not justified in appropriating the deposits made by the opposite party towards interest, as the opposite party had specifically stated in the challans that the payments were towards the "decretal amount". The court found that the term "decretal amount" in the context of the decree meant the principal amount of the decree, and not just the interest. The court also noted that the LIC had credited the payments towards interest in its books of accounts, which showed that it understood the term "decretal amount" to mean the principal amount.
Issues: 1. Whether the LIC was justified in appropriating the deposits made by the opposite party towards interest, despite the opposite party's specification that the payments were towards the "decretal amount". 2. Whether the term "decretal amount" in the context of the decree meant the principal amount of the decree, or just the interest.
Ratio Decidendi: 1. Section 60 of the Indian Contract Act provides that where the debtor has not specified the appropriation of a payment, the creditor may apply it at his discretion to any lawful debt due from the debtor. However, if the debtor specifies the appropriation, the creditor is bound to apply the payment accordingly. 2. In the present case, the opposite party had specifically stated in the challans that the payments were towards the "decretal amount". The court found that the term "decretal amount" in the context of the decree meant the principal amount of the decree, and not just the interest. Therefore, the LIC was not justified in appropriating the payments towards interest.
Final Decision: The court discharged the Rule filed by the LIC, holding that the LIC was not justified in appropriating the deposits made by the opposite party towards interest. The court also held that the term "decretal amount" in the context of the decree meant the principal amount of the decree, and not just the interest.
( 1 ) THIS Rule was issued at the instance of the Life Insurance Corporation of India and it is directed against order dated May 23, 1978 of the Second Subordinate Judge, Alipore.
( 2 ) THE Calcutta Insurance Company Limited instituted a suit for mortgage for the realisation of a sum of Rs. 30,000/- advanced by it to the opposite party Samarendra Nath Roy with interest at the rate 7% per annum with quarterly rests as provided in the Mortgage Bond dated Aug. 8, 1947. The suit was eventually decreed on compromise in accordance with the terms embodied in the joint petition of compromise. The terms are as follows :" (a) The plaintiffs do get a final mortgage decree for sale for full amount as claimed with interest at the bond-rate i. e. at 7 per cent per annum with quarterly rests till date and with cost on ex parte scale, such cost not exceeding Rs. 2,100/- and the said entire amount shall carry interest at the bond-rate until actual realisation, (b) The defendant shall pay the interest on decretal amount or such amount as may be outstanding quarterly in March, June, Sept. and Dec. , each year -- the first of such payment to be made in Sept. 1952. (c) The defendant is to pay the decretal amount by 5 annual instalments -- the first of such payment to be made in June, 1953 and the subsequent instalments in June, each year. (d) In respect of all payments time shall be deemed to be essence of the contract. (e) In case of default in payment of interest for any three quarters or part thereof or of any one of the instalments for payment of the decretal amount the entire amount then remaining due shall forthwith become payable and the plaintiff will be entitled to realise the same by sale of the mortgaged property in execution of this decree without any further application therefor and in case of shortfall from the defendant personally. "
( 3 ) THE opposite party having failed to comply with the terms of the decree, the Calcutta Insurance Company Limited put the said decree into execution. During the pendency of the execution case the Life Insurance Corporation Act, 1956 was enacted and, consequently, the Life Insurance Corporation of India was substituted as the decree-holder in place of the Calcutta Insurance Company Limited in Sept. 1966. The opposite party made several deposits in the executing court by challans. In all these challans, the deposits were stated to have been made towards (original in Bengali ). On Aug, 22, 1969, the opposite party made an application in the execution case for entering satisfaction of the decree and for the disposal of the execution proceeding. The application gave rise to Misc. Case No. 9 of 1973. The petitioner filed objection and also a statement of accounts showing that Rs. 81,742. 23 was due from the opposite party till Feb. 23, 1974. The learned Subordinate Judge, by his Order No. 417 dated April 17, 1974, rejected the prayer of the opposite party for recording full satisfaction, holding that according to the terms of the petition of compromise as embodied in the final decree, the petitioner was entitled to claim interest at 7% with quarterly rests on the decretal amount until realisation. Being aggrieved by the said order, the opposite party filed an appeal against the same to this Court being F. M. A. No. 480 of 1975. This Court, by its order dated Nov. 22, 1976 disposed of the appeal holding inter alia that the petitioner was not entitled to claim interest at the compound rate on the entire amount from the date of decree till realisation. In that view of the matter, this Court set aside the order of the learned Subordinate Judge and sent the case back on remand for disposal of the said Misc. case.
( 4 ) AFTER the case went back on remand, the decree-holder prayed for the amendment of the execution petition incorporating therein, the claim of Rs. 65,095. 21 from the opposite party. Subsequently, the petitioner submitted a statement of accounts on Dec. 15, 1977 to show that a su
