*THE HONOURABLE SRI JUSTICE VILAS V. AFZULPURKAR + CIVIL REVISION PETITION Nos.250, 251 and 252 of 2009 %01-06-2010 # A.P. Handicrafts Development Corporation Ltd. ... PETITIONER AND $G. Dattadri (died) per LR’s and others. ...RESPONDENTS Counsel for the Petitioner : MRS. A. ANASUYA Counsel for the Respondents: MR. SHARAD SANGHI <Gist : >Head Note: ? Cases referred: 1. 2005(6)ALD 61 2. (2006)1 SCC 509 3. AIR 1987 SC 1160 4. AIR 1995 SC 455 5. AIR 2001 SC 3095 6. AIR 1999 SC 1036 7. AIR 1995 SC 1572 8. 1996 (1) ALT 71 9. 1998 (1) ALT 749 10. AIR 1970 SC 161 11. (1996) 2 SCC 71 12. (2006) 8 SCC 457 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY, THE FIRST DAY OF JUNE TWO THOUSAND AND TEN PRESENT THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR CIVIL REVISION PETITION Nos.250, 251 and 252 of 2009 Between: A.P. Handicrafts Development Corporation Ltd. ... PETITIONER AND G. Dattadri (died) per LR’s and others. ...RESPONDENTS Counsel for the Petitioner : MRS. A. ANASUYA Counsel for the Respondents: MR. SHARAD SANGHI The Court made the following: COMMON ORDER: All these three revision petitions are at the instance of the judgment debtors in three identical suits and are directed against the dismissal of the review petitions by the executing Court. 2. Since all three matters are similar it would be sufficient if facts in CRP.No.250 of 2009 are noticed. 3. The original first respondent herein (now represented by his legal representatives – respondents 2 to 8) filed a suit for recovery of Rs.4,12,469/- with 24% interest per annum being O.S.No.876 of 1996 on the file of the VII Senior Civil Judge, City Civil Court, Hyderabad. The said respondent herein had claimed that he had supplied handloom fabric to the petitioner herein and as per the invoice – Ex.A2, a sum of Rs.2,85,916/- remained outstanding. The present suit was, therefore, filed for recovery of the said amount together with interest at 24% per annum on the said amount of Rs.2,85,916/- up to the date of suit making the total suit claim to Rs.4,12,469/-. The said suit on contest was decreed by the trial Court for the said sum of Rs.4,12,469/- together with future interest at 18% per annum from 13.06.1996 (date of suit) till realization under judgment and decree dated 23.03.2001. The petitioner filed an appeal being CCCA.No.150 of 2001, which was dismissed by the Division Bench of this Court and the appellate Court did not interfere with the said judgment and decree except reducing the interest, which was allowed by the trial Court at 24% from date of contract till date of suit, to 18%. The operative portion of the judgment in the appeal of this Court is as follows: “24. Without going much deep into this aspect, having regard to the facts and circumstances of the case and also having regard to the commercial nature of transaction, We feel it just to fix the rate of interest at 18% all through i.e. from the date of contract till realization. With this modification in the rate of interest, the appeal is dismissed. No order as to costs.” 4. The respondent herein filed EP.No.117 of 2006 claiming balance at Rs.5,21,703/- based on the memo of calculation filed by the first respondent/decree holder. The petitioner herein, who is judgment debtor, also filed a calculation memo stating that no amount is due to the decree holder. The respondent/decree holder, thereafter, filed application in E.A.No.371 of 2006 under Section 47 of the Civil Procedure Code, 1908 to reject the plea of the petitioner/judgment debtor of payment and full and final settlement vide its memo date 29.08.2006. The executing Court heard the decree holder as well as the judgment debtor and by order dated 15.11.2007 in the said EA came to the conclusion that the petitioner/judgment debtor is due a sum of Rs.2,89,713/- and EA was allowed to that extent. The petitioner herein, thereafter, filed the present review petition numbered as E.A.No.223 of 2008 seeking review of the said order of the executing Court dated 15.11.2007 in E.A.No.371 of 2006. The said review petition was filed, primarily, to bring to the notice of the executing Court that interest on interest cannot be allowed to be recovered under Section 3(3)(c) of the Interest Act and that the principal amount of invoice only being Rs.2,85,916/- the calculation of interest can only be on the aforesaid amount and thereby there is an error apparent on the face of the record. The said application was contested by the respondent/decree holder and by the impugned order the executing Court rejected the said review petition holding that no ground is made out warranting review. Questioning the said impugned order the judgment debtor has filed the present revision. 5. Heard Mrs. A. Anasuya, learned counsel appearing for the petitioner and Mr. Sharad Sanghi, learned counsel appearing for the respondent. 6. Mrs. A. Anasuya, learned counsel, has contended that the decree as granted by the trial Court was modified by the appellate Court and thereby the interest could have been charged on the invoice amount of Rs.2,85,916/- from the date of invoice till realization, only at 18% per annum. She submits that the suit claim made by the respondent/decree holder, which is reflected in the calculations in the EP, covers the interest at 24% calculated by the decree holder on the said invoice amount up to the date of suit and thereafter, 18% interest is allowed form the date of suit till the date of EP. Learned counsel, therefore, submits that the suit claim, therefore, comprises of principal as well as interest. She submits that firstly the interest at 24% is not allowed by the appellate Court vide judgment and decree in CCCA.No.150 of 2001 and secondly, the interest component in the suit claim cannot further attract interest as it is contrary to the provisions of the Interest Act, referred to above. It is also contended that the petitioner had paid 1/3rd of the decretal amount and costs on 12.10.2001 pending the appeal. 7. Based on the provisions of Order 21 Rule 1 (1) to (3) CPC the learned counsel submits that the interest ceases to accrue on the amount deposited by the petitioner/judgment debtor. She also questions the appropriation of the said part payment by the said decree holder towards interest alone and she claims that the said part payment must be appropriated towards the principal and submits that the review application ought to have been allowed by the executing Court. She places strong reliance upon the decision of a learned single Judge of this Court in ORIENTAL INSURANCE COMPANY LIMITED, CHITTOOR v. V. KALABHARATHI[1] for the proposition that when the amounts are deposited into the Court even if the same amounts to part payment against the decree, the same cannot be appropriated towards interest in terms of Order 21 Rule 1 (1) to (3) CPC. 8. Mr. Sharad Sanghi, learned counsel for the respondent submits that no ground for review is made out and the impugned order of the Court below refusing to review the order is not open for interference in the revisional jurisdiction of this Court. He relied upon the following decision of in support of the above proposition: HARINAGAR SUGAR MILLS LTD. v. STATE OF BIHAR[2]; DEVARAJU PILLAI v. SELLAYYA PILLAI[3]; SMT. MEERA BHANJA v. SMT. NIRMALA KUMARI CHOUDHURY[4] and CENTRAL BANK OF INDIA v. RAVINDRA[5] for the proposition that as to the meaning assigned to the words ‘the principal sum adjudged’ and as used under Section 34 CPC. He, therefore, submits that when the appeal was dismissed by this Court, the principal sum adjudged by the trial Court was not interfered with. The said principal sum adjudged as per the above decision, therefore, comprises of the entire suit claim on the date of suit viz. the total amount of Rs.4,12,469/- which was decreed by the trial Court. Alternatively he submits that even if the appellate Court’s decree granting interest at 18% throughout i.e. from the date of contract till realization is interpreted to cover the pre-suit interest as well, even then the memo of calculation submitted by the respondent/decree holder is correct and the petitioner/judgment debtor is still due and payable substantial amounts to the respondent/decree holder. He also submits that the respondent/decree holder is perfectly justified in appropriating the part payment made by the petitioner/judgment debtor, towards the interest, then towards the costs and then towards the principal. The said amount paid by the petitioner/judgment debtor being 1/3rd of the decretal amount and costs, therefore, cannot but be appropriated in the above manner and the decree holder has no right to seek appropriation towards principal. 9. Learned counsel has also relied upon a decision of the Supreme Court in M/s. INDUSTRIAL CREDIT AND DEVELOPMENT SYNDICATE (ICDS) LTD. v. SMT. SMITHABEN H. PATEL AND OTHERS[6] as well as in MATHUNNI MATHAI v. HINDUSTAN ORGANIC CHEMICALS LTD[7] and two other decisions of the learned single Judge of this Court in SUKHDEV PERSHAD v. B. KISHNALAL[8] and CHALLA VENKATA SUBBAYYA v. UNION BANK OF INDIA[9]. 10. In the light of the above rival contentions the points that arise for consideration are: 1. Whether the impugned order is perverse and whether the memo of calculation given by the respondent/decree holder was rightly appreciated by the executing Court? 2. Whether the contention of the judgment debtor that he is entitled for appropriation of the part payment towards principal is justified and if so, whether the interest on the said deposit ceases from the date of deposit in terms of Order 21 Rule1 (i) to (iii) CPC? POINT No.1: 11. The judgment of the trial Court would show that on issue No.2 the trial Court found that the plaintiff was entitled to 24% interest as claimed and consequently, the invoice amount together with interest, which formed the suit claim of Rs.4,12,469/- as on 13.06.1996 (date of suit) came to be decreed. Once the said amount was decreed, the trial Court granted future interest at 18% per annum. It is, therefore, clear that the said suit claim comprises of principal amount i.e. invoice amount of Rs.2,85,969/- + interest thereon at 24% per annum as calculated by the plaintiff up to the date of suit. In appeal, however, the said rate of interest was reduced from 24% to 18% uniformly. Thus, as per the appellate decree, the plaintiff was entitled to interest at 18% throughout i.e. from the date of contract till realization. Though the said appeal was dismissed, to the extent of interest there was a modification. In effect, therefore, the suit claim of the respondent/decree holder stood reduced by award of interest at 18% per annum as against 24% claimed by the decree holder in the suit. When the said decreed was put to execution the decree holder was entitled to interest at 18% from the date of invoice i.e. 12.08.1994 throughout till realization. The executing Court had gone into the said calculation and in Para 5 of its order in E.A.No.371 of 2006 dated 15.11.2007 had calculated 18% interest on the invoice value and as on the date of suit i.e. 13.06.1996 determined the suit claim as Rs.3,81,018/-. While charging further interest from the date of suit i.e. 13.06.1996, however, the executing Court had calculated 18% interest on the said suit claim of Rs.3,81,081/-. 12. The error apparent from the above being that the suit amount of Rs.3,81,081/- comprises of the principal i.e. invoice value of Rs.2,85,916/- and the interest at 18% thereon from the date of invoice till the date of suit. The said interest component in the suit claim, therefore, could not have attracted further interest over it in terms of Section 3 of the Interest Act. The calculations approved by the executing Court in the said order and the finding that the petitioner is due Rs.2,89,713/- as on 20.09.2006 is, therefore, clearly unsustainable. The aforesaid aspect brought out by the petitioner before the executing Court in his application for review, however, remained unconsidered and as such, the first contention of the petitioner that the order of the executing Court in E.A.No.371 of 2006 warranted a review appears just and permissible. The first point is accordingly answered in favour of the petitioner. POINT No: 2 13. The consideration of this aspect would involve interpretation and understanding of Order 21 Rule 1 CPC and for the sake of convenience the same is extracted hereunder. 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, 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 payment 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; (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.] 14. While the learned counsel for the respondent/decree holder relies upon the decision of the Supreme Court in ICDS (6 supra) case, the learned counsel for the petitioner/judgment debtor relies upon the decision of the learned single Judge in ORIENTAL INSURANCE COMPANY LIMITED’s case (1 supra) by contending that the learned single Judge has already considered the said decision of the Supreme Court also and had upheld the scheme under Order 21 Rule 1 (1) to (3) that the interest ceases on deposit. 15. In the factual context it is to be noted that pending the appeal the petitioner/judgment debtor deposited 1/3rd of the decretal amount and costs, the said deposit was made on 12.10.2001. The calculation of interest under the calculation memos of either side are, therefore, to be divided into six parts as under: (i) Invoice amount together with interest from date of invoice till date of suit; (ii) The interest on the invoice amount from the date of suit till date of decree; (iii) The decretal amount viz. principal and interest up to the date when the petitioner/judgment debtor made part payment in pursuance of the interim orders in appeal i.e. 12.10.2001; (iv)The balance decretal amount after adjustment and appropriation of the said part payment to arrive at the balance amount due as on the date of EP; (v) The last payment made by the petitioner/judgment debtor on 30.08.2006 and (vi)Balance, if any, due and payable by the petitioner/judgment debtor. 16. The bone of contention between the parties is with regard to the appropriation of the said part payment made on 12.10.2001. While the learned counsel for the respondent/decree holder contends that as per the normal rule he has to appropriate the said payment towards interest, then towards costs and then towards the principal based upon the decision of the Supreme Court in ICDS case (6th supra) whereas the learned counsel for the petitioner/judgment debtor contends that the moment there is part payment, in terms of Order 21 Rule 1 CPC and its sub-rules, the interest ceases on the deposit and the same has to be adjusted towards principal, based upon the decision of the learned single Judge of this Court in ORIENTAL INSURANCE COMPANY LIMITED’s case (1 supra). 17. In ORIENTAL INSURANCE COMPANY LIMITED’S case (1 supra) this Court has reviewed the entire case law as well as considered the amendment to Order 21 under the 1976 Amendment Act and this Court was of the view, as recorded in para 30, which is extracted hereunder: “30. The deposits made by the judgment-debtors, in compliance with the condition imposed by the appellate Courts, present a different kind of situation. If the orders of the appellate Courts are clear, as to the mode of adjustment, no problem as such, would arise. However, where such orders are silent on that aspect, sub-rule (4) of Rule 1 would govern the situation, and the part payments deserve to be adjusted towards the principal decretal amount, and not any component of interest accrued, upto that date.” This Court, however, has also recorded in para 32 as follows: “32. It is true that the cases decided so far, do not strictly support this view, and in a way, may suggest the other point of view. However, an effort is made by this Court, to explain the purport of sub-rules (4) and (5) of Rule 1. This Court is conscious of the requirement to follow the precedents, as well as its obligations, to give effect to the legislative mandate. An endeavour is made to honour both the obligations. Having regard to the importance of the issue and the implications involved in it, further discussion may ensue at appropriate levels.” This Court noticed the decision of the Supreme Court in ICDS case (6 supra), but was of the view that the effect of Order 21 Rule 1 CPC and its sub-rules, as amended, was not specifically considered therein. 18. In the ICDS case (6th supra), the Supreme Court had considered the very same question and had traced various decisions of the English Courts as well as that of the Privy Council and ultimately, followed by the judgment of the Supreme Court in MEGHRAJ v. BAYABI [10]. The Supreme Court had also noticed PREM NATH KAPUR v. NATIONAL FERTILIZERS CORPN OF INDIA LTD [11] and in para 14 has recorded an opinion as follows: “14. In view of what has been noticed hereinabove, we hold that the general rule of appropriation of payments towards a decretal amount is that such an amount is to be adjusted firstly strictly in accordance with the directions contained in the decree and in the absence of such direction, adjustments, be made firstly in payment of interest and costs and thereafter in payment of the principal amount. Such a principle is, however, subject to one exception, i.e. that the parties may agree to the adjustment of the payment in any other manner despite the decree. As and when such an agreement is pleaded, the onus of proving is always upon the person pleading the agreement contrary to the general rule or the terms of the decree schedule. The provisions of Sections 59 to 61 of the Contract Act are applicable in cases where a debtor owes several distinct debts to one person and do not deal with cases in which the principal and interest are due on a single debt.” In this case, the Supreme Court also referred to the provisions of Order 21, Rule 1 of CPC and its sub-rules. 19. In a latest decision of the Supreme Court in GURPREET SINGH v. UNION OF INDIA[12], a Constitution Bench has considered an identical question with reference to Order 21 Rule 1 CPC and its sub-rules and the said decision would govern the present case and it would be useful to extract the following paragraphs from the said judgment as under: “14. Now, we may consider the provisions in the Code of Civil Procedure, 1908 (hereinafter referred to as, "the Code") that have relevance to the issue. The rule of appropriation in respect of amounts deposited in court or in respect of payment into court, is contained in Order XXIV of the Code at the pre decreetal stage and in Order XXI Rule 1 at the post decreetal stage. Though, we are not directly concerned with it, we may notice that special provisions relating to mortgages are found in Order XXXIV of the Code. Under Order XXIV Rule 1, a defendant in a suit for recovery of a debt may at any stage of the suit deposit in court such sum of money as he considers a satisfaction in full of the claim in the plaint. Rule 2 thereof provides for issue of notice of deposit to the plaintiff through the court and for payment out of the amounts to the plaintiff if he applies for the same. Rule 3 specifically states that no interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of such deposit, whether the sum deposited is in full discharge of the claim or it falls short thereof. Rule 4 enables the plaintiff to accept the deposit as satisfaction in part and allows him to pursue his suit for what he claims to be the balance due, subject to the consequences provided for therein regarding costs. It also deals with the procedure when the plaintiff accepts the payment in full satisfaction of his claim. 25. In the objects and reasons for amendment of Order XXI Rule 1, it was set out as follows: "The Committee note that there is no provision in the Code in relation to cessation of interest on the money paid under a decree, out of Court, to a decree holder, by postal money order or through a bank or by any other mode wherein payment is evidenced in writing. The Committee are of the view that, in such a case, the interest should cease to run from the date of such payment. In case the decree-holder refuses to accept the postal money order or payment through a bank, interest should cease to run from the date on which the money was tendered to him in ordinary course of business of the postal authorities or the bank. Sub-rule (5) in rule 1 of Order XXI has been inserted accordingly" The legislative intent in enacting sub-Rules (4) and (5) is therefore clear and it is that interest should cease on the deposit being made and notice given or on the amount being tendered outside the court in the manner provided. Mulla in his commentary on the Code 15th Edition Vol. II at page 1583 has set out the effect of the rules as follows: "Normal rule with respect to money decree is (i) the appropriation of payments towards satisfaction of interest in the first instance, and (ii) then towards principal amount. But this became inoperative, after the amendment of Rule 1 of Order 21, C.P.C. Section 60 of the Contract Act cannot be invoked for the application of the aforesaid normal rule." 26. Thus, in cases of execution of money decrees or award decrees, or rather, decrees other than