1. What is the rule of appropriation in the case of short fall in deposit of the amount due under an award in Land Acquisition Reference? I heard Mr. Pius C. Mundadan, Advocate on behalf of the claimants, Mr. N.N. Sugunapalan, Senior Advocate on behalf of the requisitioning authority and the Government Pleader on behalf of the State.

2. A Constitution Bench of the Supreme Court in Gurpreet Singh Vs. Union of India [(2006) 8 SCC 457] held as follows:

“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 if there is any short fall 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.”

3. The above decision was quoted with approval in Bharat Heavy Electricals Ltd. Vs. R.S. Avtar Singh & Co. [2013 AIR (Civil) 11] wherein it is held as follows:

“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”

The Supreme Court has reiterated the same principle in V. Kala Bharathi and others Vs. The Oriental Insurance Co. Ltd. [2014(2) KLJ 275] wherein it is held as follows:

“If there is a short fall in deposit, the amount has to be adjusted towards interest and costs, then it has to be adjusted towards principal.”

4. The awards in the Land Acquisition References (L.A.R. Nos. 119 and 120 of 2001 - Sub Court, North Paravur) were originally passed on 31.10.2005. The awards were challenged in Land Acquisition Appeals by the requisitioning authority and execution proceedings were levied by the award holders simultaneously. The requisitioning authority made a partial deposit in the execution petitions and also filed execution applications to record the same. There was also a plea in the execution applications to appropriate the partial deposit towards the principal amount awarded in the Land Acquisition References. The execution applications (E.A. Nos. 754/2007 and 753/2007) in the execution petitions (E.P. Nos. 457/2006 and 452/2006) filed on 21.08.2007 came up for hearing on 14.08.2008. The parties are at variance as to whether the execution applications were allowed or not in view of the scribblings found on the original. But nothing turns out even if the execution applications for appropriation had been 'allowed' on 14.08.2008. This is because the awards which were put into execution had been set aside in the Land Acquisition Appeals even before on 19.02.2008 itself. The claimants maintain that the execution applications were merely 'closed' on 14.08.2008 while terminating the execution proceedings itself in view of the appellate decrees.

5. There can be no compartmentalisation of the principal amount, interest and costs when the awards were non-existant on the date of alleged appropriation. The partial deposits could only be appropriated towards interest and costs and then towards the principal amount as per the law laid down. The partial deposits cannot be appropriated towards the principal amount as sought by the requisitioning authority in the execution applications. The fact that the deposits were made when the awards were in force is of no avail since the execution applications came up for hearing after the awards were set at naught. The requisitioning authority thereafter filed another set of execution applications for refund of the partial amounts deposited. Such execution applications were obviously filed on the basis that the awards had been set aside which implies that there could be no appropriation as sought.

6. The ex