Headnote:Motor Vehicles Act, 1988, Sec. 171 read with C.P.C., Order 21 Rule (1) Sub Rule (4), (5) and Interest Act, 1978, Sec. 3(3)(c) — Award of interest — Whether the amount deposited by judgment debitor in a decree is to be adjusted first towards interest or towards principle decretal amount? — Held — Entitled to the amount awarded by the Executing Court, as the amounts deposited by the judgment debtor fell short of the decrectal amount — After such appropriation, the decree holder is entitled to interest only to the extent of unpaid principal amount — Interest be calculated on the unpaid principal amount. (Para 26)
       Appeal allowed.
        eksVj ;ku vf/kfu;e] 1988] /kkjk 171 lifBr fl-iz-la-] vkns'k 21 fu;e ¼1½ mifu;e ¼4½] ¼5½ ,oa C;kt vf/kfu;e] 1978] /kkjk 3¼3½¼x½ & C;kt dk vf/kfu.kZ; & D;k fMØh esa fu.khZr _.kh }kjk tek djkbZ xbZ jkf'k igys C;kt ds ys[ks ;k ewy fMØh jkf'k ds ys[ks lek;ksftr djuh gksrh gS\ & vfHkfu/kkZfjr & fu"iknu U;k;ky; }kjk vf/kfuf.kZr jkf'k dk gdnkj gS] D;ksafd fu.khZr _.kh }kjk tek djk;h xbZ jkf'k fMØh dh xbZ jkf'k ls de Fkh & ,sls fofu;kstu ds i'pkr~] fMØh/kkjh vlankf;r ewy jkf'k dh lhek rd gh C;kt dk gdnkj gksrk gS & vlankf;r ewy jkf'k ij C;kt dh x.kuk dh tkosA ¼in la[;k 26½
       vihy Lohdkj dhA

Judgement Key Points

Key Points: - The appropriate method of appropriation of deposits made by the judgment debtor under Order XXI Rule 1 CPC when the decree amount is not fully deposited, including whether to first adjust towards interest, costs, or principal (!) (!) (!) - The legislature’s intent behind sub-rules (4) and (5) of Order XXI Rule 1 CPC and the principle that interest cease to run on deposits upon service of notice or payment, and that no interest on interest can be awarded under the stated circumstances (!) (!) (!) (!) - The Court’s holding that, where deposits fall short of the decretal amount, the decree-holder is entitled to appropriation first towards interest, then costs, then principal, and thereafter no further interest on the already appropriated principal (!) (!) (!) (!) - The consistency of this position with Meghraj, Industrial Credit and Development Syndicate, Gurpreet Singh, and Bharath Heavy Electricals Ltd. decisions, including the Privy Council guidance on appropriation and interest (!) (!) (!) (!) (!) (!) - The appellate order restoring the Executing Court’s decree, allowing the claimant to receive the amount awarded with interest only on the unpaid principal after appropriation (!)

Question 1?

Question 2?

Question 3?

Hon'ble RAMANA, J.—The short question to be answered in this appeal is whether the amount deposited by the judgment debtor in a decree is to be adjusted first towards interest or towards principal decretal amount.

2. The facts of the case are – On account of demise of an Engineering Graduate, Mr. V. Raja Kumar on 29.04.1993 in a road accident, his legal heirs, i.e., the appellants herein filed a claim petition being M.V.O.P. 774 of 1993 before the Motor Accident Claims Tribunal (for short, ‘the Tribunal’) claiming -

3. Compensation to the tune of Rs.2 crores. The vehicle involved in the said accident was insured by the respondent – Insurance Company. The Tribunal vide its Award dated 29.04.1997 awarded an amount of Rs.98,40,500/- as compensation with interest @ 12% p.a. from the date of the petition, i.e., 25.10.1993 till the date of realization, apart from costs quantified at Rs.99,443/-.

4. Being aggrieved, the respondent – Insurance Company filed an appeal under Section 173 of the Motor Vehicles Act, 1988 (for short, ‘the Act’) and to comply with the provisions contained therein, deposited a sum of Rs.25,000/-. On 15.12.1997, the High Court in C.M.A. No. 1726 of 1997 granted stay of execution of the Award dated 29.04.1997 subject to the condition of depositing a sum of Rs.30 lakhs and Rs.99,443/- costs, which amounts were undisputedly deposited. The said order was made absolute on 15.07.1998 subject to the condition of depositing a further sum of Rs.30 lakhs, which was also complied with. A Division Bench of the High Court partly allowed the appeal on 19.12.2001 thereby -

5. Reducing the compensation amount from Rs.98,40,500/- to Rs.56,40,000/-, however, the interest rate of 12% p.a. was retained. The respondent – Insurance Company also deposited a sum of Rs.23,27,635/- on 19.09.2002, claiming to be full and final satisfaction of the award.

6. The appellants filed Execution Petition No. 11 of 2003 on 06.06.2003 before the Executing Court / Tribunal claiming an amount of Rs.20,16,700/-, which claim was denied by the respondent – Insurance Company on the ground that its liability to pay interest gets discharged when it deposits the award amount in full. Thus, relying on the principle of accrual method, the respondent – Insurance Company claimed that since it satisfied the award amount in full, no more interest was payable and as per its calculation, only a sum of Rs.36,650/- was liable to be paid, which was deposited on 29.07.2003.

7. While adjudicating the aforesaid Execution Petition, the Executing Court took a view that the amounts deposited by the respondent – Insurance Company from time to time were liable to be adjusted -

8. Towards the component of interest first and thereafter to the portion of the decretal amount. After taking into consideration the amounts deposited by the respondent – Insurance Company on different dates, its liability was fixed vide order dated 18.08.2004 to the extent of Rs.17,70,657/- together with interest @ 12% p.a. from the date of filing of the Execution Petition till the date of realization.

9. The respondent – Insurance Company assailed the aforesaid calculation / order of the Executing Court dated 18.08.2004 in Civil Revision Petition No. 4337 of 2004. The appellants herein also filed Civil Revision Petition No. 6108/2004 thereby challenging that the Executing Court could not have adjusted the amount paid as costs towards the decretal amount. The learned single Judge of the High Court of Judicature, Andhra Pradesh, by judgment dated 29.07.2005, allowed both the Civil Revision Petitions while holding that (i) the part payments deserve to be adjusted towards the principal decretal amount and not any component of interest accrued upto that date; and (ii) the amount deposited towards costs, in -

10. Pursuance of the directions of the court, must be adjusted towards that, and not towards payment of the decretal amount.

11. Learned counsel for the appellants vehemently contended that the impugned order c

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2014 Supreme(Raj) 218

SUPREME COURT OF INDIAV. Kala Bharathi & Ors. Vs. Oriental Insurance Co. (Ramana, J.)HON'BLE P. SATHASIVAM, CJI.HON'BLE RANJAN GOGOI, J.HON'BLE N.V. RAMANA, J.V. Kala Bharathi & Ors.VersusThe Oriental Insurance Co. Ltd., Br. ChitoorCivil Appeal No. 3056 of 2008, decided on 01.04.2014

Question 1?

Question 2?

Question 3?

Cases Referred (7)

SUPREME COURT OF INDIA
V. Kala Bharathi & Ors. Vs. Oriental Insurance Co. (Ramana, J.)
HON'BLE P. SATHASIVAM, CJI.
HON'BLE RANJAN GOGOI, J.
HON'BLE N.V. RAMANA, J.
V. Kala Bharathi & Ors.
Versus
The Oriental Insurance Co. Ltd., Br. Chitoor
Civil Appeal No. 3056 of 2008, decided on 01.04.2014