IN THE SUPREME COURT OF PAKISTAN 
(Appellate Jurisdiction) 
 
 
PRESENT: 
MR. JUSTICE ANWAR ZAHEER JAMALI 
MR. JUSTICE DOST MUHAMMAD KHAN 
MR. JUSTICE UMAR ATA BANDIAL 
 
 
CIVIL PETITIONS NO. 816-L AND 817-L OF 2009 
(On appeal from the judgment dated 31.03.2009 of the Lahore 
High 
Court, 
Lahore 
passed 
in 
FAO 
No. 
143 
of 
2007&C.R.1058/07). 
 
 
Najm Koreshi  
 
 
 
 
 
Petitioner  
Versus 
 
Chase Manhattan Bank now Muslim Commercial  
Limited, Lahore and others  
 
 
 
Respondents  
 
 
For the petitioner   
 
Rai Ahmed Nawaz Kharal, ASC 
 
 
 
 
 
a/w petitioner  
 
For the respondent 1 
 
Mr. Munawar-us-Salam, ASC 
 
Date of hearing: 
 
 
28.04.2015 
 
JUDGMENT 
 
 
                 UMAR ATA BANDIAL, J.— The petitioner is the decree-
holder under a judgment and decree dated 17.01.1995 passed by 
the learned Civil Court for the recovery of £152,542.97 from the 
respondent No.1 judgment-debtor bank with costs and “periodically 
prevalent interest as prayed for till the realization of the decretal 
amount” (“Decree”). The Decree further allows the judgment debtor 
bank to “hold” in Pounds Sterling the equivalent of Rs.3,709,505.50 
till decision of its claim in respect of a finance facility allegedly 
provided by the judgment debtor bank to the petitioner decree 
holder’s business company, respondent No.2. The present dispute 
between the parties arising from execution proceedings of the 
Decree is about the method of calculating interest under the Decree: 
C.P. NO. 816-L OF 2009 etc. 
2
Whether it is charged on the principal amount decreed or is charged 
on the aggregate of the said amount and the amount of interest 
accrued thereon.  
2. 
 
By RFA No. 290 of 1992 the judgment-debtor bank 
appealed the said judgment and decree before the learned High 
Court. It furnished a bank guarantee equivalent to the principal 
amount under the Decree, that is, £152,542.97 as security for 
interim relief restraining execution of the Decree taken out by the 
petitioner vide his application filed on 12.09.1995. The RFA No.290 
of 1992 was dismissed by the High Court on 10.11.1998 whereupon 
the available bank guarantee was encashed and credited in full to 
the account of the petitioner on 23.12.1998. Thereafter the pending 
execution application was activated by the petitioner for realization 
of the remaining amount due under the Decree from the judgment 
debtor bank.  
3. 
 
By 
judgment 
dated 
31.03.2009 
(“Impugned 
Judgment”) the learned High Court disposed of the petitioner’s Civil 
Revision No.1058 of 2007 and FAO No.143 of 2007 and the 
judgment debtor bank’s Civil Revision No.812/2007 each filed 
against the order dated 21.04.2007 passed by the learned Executing 
Court. The Impugned Judgment affirmed the order under challenge 
and held that the petitioner decree holder was entitled to receive 
interest on the principal decretal amount of £152,542.97 from the 
date of filing of suit on 26.02.1992 up to the date of encashment of 
the bank guarantee on 23.12.1998. The outstanding amount of 
interest for the said period was calculated to be £138,644.06 vide 
order dated 16.07.2001 by the learned Executing Court. This figure 
was endorsed by the Executing Court’s aforesaid order dated 
21.04.2007 that is affirmed by the learned High Court. Nevertheless, 
C.P. NO. 816-L OF 2009 etc. 
3
the Impugned Judgment has remanded re-calculation of the 
accrued interest amount under the Decree to the learned Executing 
Court.  
4. 
 
The petitioner is aggrieved by the Impugned Judgment 
of the learned High Court because it denies him payment of interest 
on the aggregate of the principal amount decreed together with 
interest accrued on the that amount till realization of the said 
aggregate as allegedly ordered in the Decree. It is also objected that 
both the Impugned Judgment and the order of the learned 
Executing Court dated 21.04.2007 upheld by the said judgment, 
disregard the fresh calculation of the accrued interest made by a 
second local commission appointed by a consent order dated 
13.03.2007 passed by the learned Executing Court. That calculation 
is made on compound basis with effect from the date of alleged 
default by the judgment debtor bank and opines that default by the 
judgment debtor bank under the Decree is still continuing.   
5. 
 
To explain his contentions, the learned counsel for the 
petitioner has read from the decree dated 17.01.1995 wherein the 
following relief is granted:  
“It is ordered that suit of the plaintiff succeeds and 
therefore 
a 
decree 
for 
recovery 
of                   
£152,542.97 (£75,000/- plus £77,542.97) is hereby 
granted, in terms of foreign currency keeping in view 
the dictum laid down in case Terni SPA Vs. PECO cited 
in 1992 SCMR 2238, in favour of the plaintiff and 
against the defendant No.1 Chase Manhattan Bank 
(now Muslim Commercial Bank Limited) with costs and 
periodically prevalent interest as prayed for till 
realization of the decretal amount. However, the 
defendant No.1 Bank shall hold an amount in Pounds 
Sterling equivalent to Rs.3,709,505.50 alleged finance 
facility given to defendant No.2 company till the 
decision thereabout by the proper forum.”   
 
C.P. NO. 816-L OF 2009 etc. 
4
The learned counsel for the petitioner has argued that the order to 
pay “periodically prevalent interest as prayed for till the realization 
of the decretal amount” contemplates two parts of the decretal 
amount. Firstly, the principal amount adjudged and secondly, the 
amount of accrued interest chargeable till realization of the decretal 
amount. The obligation to pay interest under the Decree continues 
until the aggregate of the said two parts of the decretal amount are 
discharged fully by the judgment debtor bank. By this treatment 
interest under the Decree accrues on a compound basis and not at 
a simple rate. The accumulation of interest on compound basis is 
allegedly consistent with the term contained in the Decree that 
interest should accrue “as prayed for in the suit”. The prayer in the 
plaint seeks payment of interest at the agreed rate. According to the 
conditions of the term deposit slips issued to the petitioner by the 
judgment debtor bank, the agreed rate of interest is the average of 
the rates given on the petitioner’s two deposits made respectively at 
13.125% and 14.125% per annum calculated quarterly on a 
compound basis. Accordingly, the learned High Court and the 
learned Executing Court have fallen into error and thereby denied 
lawful fruits of the Decree to the petitioner.  
6. 
 
The learned counsel for the respondent judgment 
debtor-bank has defended the Impugned Judgment. He opposed the 
claimed entitlement of the petitioner to receive interest payments for 
the period after payment of the principal amount adjudged, that is, 
£152,542.97 on 23.12.1998. He argues that the principal amount 
adjudged under the Decree is the decretal amount. Payment of 
interest under the Decree is directed until realization of the decretal 
amount and not on the unpaid interest that has accrued on the said 
amount during the intervening period. The petitioner’s entitlement 
C.P. NO. 816-L OF 2009 etc. 
5
to receive interest is for the period commencing the date of filing of 
the suit on 26.02.1992 until the payment of the decretal amount on 
23.12.1998. The interest amount accruing for that period was 
determined by the learned Executing Court on 16.07.2001 at 
£138,644.60. After deducting there-from £39,463/- being the 
foreign currency equivalent of the sum to be withheld under the 
Decree, the learned Executing Court concluded in the said order 
dated 16.07.2001 that the interest amount payable to the petitioner 
for the afore-noted period is £99,181.06. This determination was 
challenged by the petitioner before the learned High Court through 
Civil Revision No. 1925 of 2001. However, on 22.03.2006 that 
petition was withdrawn whereupon the said determination of 
outstanding interest liability made in Executing Court’s order dated 
16.07.2001 attained finality. The adjudicated interest amount of 
£99,181.06 was ultimately paid under order of the Executing Court 
to the petitioner on 16.02.2010 out of attached funds of the 
judgment debtor bank lying with the State Bank of Pakistan. 
Therefore, the judgment debtor bank has fully discharged the 
principal amount adjudged and the accrued interest amount 
payable under the Decree. The Decree has accordingly been fully 
satisfied by the judgment debtor bank. The petitioner is actually 
claiming interest upon interest to be paid on a compound rate by 
the judgment debtor bank which claim has no warrant under the 
Decree.  
7. 
 
After hearing the submissions by the learned counsel 
for the parties, the controversy in relation to the satisfaction of the 
decree dated 17.01.1995 simplifies to the issue whether the 
obligation of the judgment debtor bank to pay further interest under 
the Decree accrues upon the outstanding principal amount 
C.P. NO. 816-L OF 2009 etc. 
6
adjudged or upon the aggregate of the said amount with the amount 
of unpaid interest accumulated on the said principal amount. The 
corollary of the said issue is whether further interest payable under 
the Decree is to be calculated at a compound rate of interest or a 
simple rate of interest.  
8. 
 
It may also be noted at the outset that the charging and 
payment of interest, inter alia, under decrees passed by the Courts 
of law was declared contrary to the injunctions of Islam and 
therefore illegal and void by the judgment dated 23.12.1999 passed 
by the learned Shariat Appellate Bench of this Court in M. Aslam 
Khaki vs. Muhammad Hashim (PLD 2000 SC 225) affirming the 
judgment dated 14.11.1991 given by the learned Federal Shariat 
Court in Mahmood-ur-Rahman Faisal vs. Secretary Ministry of 
Law (PLD 1992 FSC 1). Both judgments were set aside by the 
learned Shariat Review Bench of this Court in United Bank Ltd. vs. 
Farooq Brothers (PLD 2002 SC 800). The matters in issue in the 
proceedings 
include, 
inter 
alia, 
the 
identification 
of 
the 
characteristics of financial transactions that bear the taint of Riba. 
This controversy has by the said review judgment of this Court been 
remitted to the learned Federal Shariat Court for decision afresh. No 
decision has yet been rendered in the remanded matter by the 
learned Federal Shariat Court. Consequently, judicial decrees 
ordering payment of interest are presently enforceable.  
9. 
   
It is settled law under the provisions of the Code of Civil 
Procedure, 1908 (“CPC”) that an Executing Court has jurisdiction 
to implement a decree under execution strictly in accordance with 
its terms. Reference is made to Naseem Akhtar vs. Shalimar 
General Insurance Company (1994 SCMR 22) and Ahmed Yar 
Khan Jogezai vs. Province of Balochistan (2002 SCMR 122). In 
C.P. NO. 816-L OF 2009 etc. 
7
the present case, the Decree under execution dated 17.01.1995 
neither grants interest for the period prior to filing of the suit nor 
awards interest on the aggregate of the principal amount of the 
Decree and interest pendente lite. Interest is awarded by the Decree 
till realization of the “decretal amount”. It is an appealing argument 
by the petitioner that the payment of further interest until 
“realization” of the “decretal amount” is an obligation under the 
Decree; therefore the amount of accumulated further interest forms 
a part of the decretal amount. Consequently, payment made on 
23.12.1998 by the judgment debtor bank in an amount equal to the 
principal adjudged amount satisfies only a part of the Decree. The 
bank’s liability to pay interest under the Decree continues and 
further interest adds up on the unpaid amount of interest that was 
outstanding when the principal adjudged amount was discharged 
on 23.12.1998. The rival argument on behalf of the judgment debtor 
bank is that the petitioner’s contention is entirely presumptuous 
and finds no support from the terms of the Decree.    
10. 
 
To evaluate the respective contentions of the learned 
counsel for the parties set out above it would be useful to first 
consider the provisions of Section 34 CPC that are relevant to the 
present dispute. These are reproduced below: 
“34. Interest—(1) Where and in so far as a decree is 
for the payment of money, the Court may, in the 
decree, order interest at such rate as the Court deems 
reasonable to be paid on the principal sum adjudged, 
from the date of the suit to the date of the decree, in 
addition to any interest adjudged on such principal 
sum for any period prior to the institution of the suit, 
with further interest at such rate as the Court deems 
reasonable on the aggregate sum so adjudged, from 
the date of the decree to the date of payment, or to 
such earlier date as the Court thinks fit.  
C.P. NO. 816-L OF 2009 etc. 
8
(2) Where such a decree is silent with respect to the 
payment of further interest on such aggregate sum as 
aforesaid from the date of the decree to the date of 
payment or other earlier date, the Court shall be 
deemed to have refused such interest, and a separate 
suit therefor shall not lie.” 
  
11. 
 
It is clear from the foregoing provisions of Section 34 
CPC that the Court passing a decree has discretion to order interest 
at such rates as it deems reasonable accruing for different periods 
either on principal or aggregate amounts. The said legal provision 
expressly contemplates the award of interest pendente lite on the 
principal sum adjudged and also post decretal further interest on 
the aggregate of the said principal sum together with interest 
accrued thereon till the date of payment of the aggregate amount. As 
the award of interest on a decree is discretionary therefore, the 
terms on which it is ordered must be spelled out clearly in the 
contents of the decree. Otherwise, silence of the decree in the matter 
of further interest is to be deemed as refusal under Section 34(2) 
CPC. The rate at which interest is ordered to accrue and whether 
such interest is to be calculated at a simple rate or a compound rate 
are also discretionary elements that ought to be specified in a 
decree.  
12. 
 
It is a matter of record that the petitioner decree holder 
withdrew his challenge filed before the learned High Court against 
the order of the learned Executing Court dated 16.07.2001. This 
order fixes the outstanding interest amount accruing under the 
Decree as on 23.12.1998 when an amount of £152,542.97 
equivalent to the principal sum adjudged was paid to the petitioner.  
Accordingly, the said determination of interest attained finality 
against the decree holder. The judgment debtor bank, however, filed 
C.P. NO. 816-L OF 2009 etc. 
9
a review application under Section 114 read with Order XLVII of the 
CPC against the said order dated 16.07.2001 before the learned 
Executing Court. This application was a non-starter on both its 
maintainability and merits and shall be dealt with later.  
  
13.        The order dated 16.07.2001 of the learned Executing Court 
treats the principal amount adjudged by the Decree to be the 
decretal amount. It determines £99,181.06 as the amount of 
interest that is outstanding under the decree having been calculated 
from the date of filing of the suit until the date of realization of the 
principal amount adjudged. The equivalent of £99,181.06 was 
ultimately paid to the petitioner through the process of the learned 
Executing Court on 16.02.2010. Whether the interest amount of 
£99,181.06 calculated until the date of payment of the principal 
amount adjudged on 23.12.1998, is also subject to accrual of 
further interest until its payment on 16.02.2010 depends on the 
terms of the Decree. The Decree is silent about the accrual of 
interest on interest or on any aggregate amount. Clearly the Decree 
does not order the charging of compound interest. On the other 
hand, it orders for interest to be charged and paid until realization 
of the decretal amount but the meaning of the term “decretal 
amount” is not given.  
14. 
 
For interest under the Decree to be applied and 
calculated, it is necessary that the base figure, that is, “decretal 
amount”, is an ascertained or a readily ascertainable amount. The 
view that the expression “decretal amount” should be an 
ascertained sum finds support from the terms of Order XXI Rule 23-
A CPC wherein for raising an objection to a decree, the judgment 
debtor must deposit or secure the “decretal amount” with the 
C.P. NO. 816-L OF 2009 etc. 
10
executing court. Likewise in Muhammad Sadiq vs. WAPDA       
(PLD 2003 SC 290) it has been held that deposit in Court under 
Order XXI Rule 1 CPC of money payable under a decree entitles a 
judgment debtor to the relief of suspension in the accrual of further 
interest. For a deposit to be made to avail the said relief it is 
necessary that the requisite amount is ascertained or readily 
ascertainable. Such a sum is the principal amount adjudged and 
the decretal amount. In the present case also such sum is the 
decretal amount upon which interest under the Decree is to accrue.  
15. 
 
It cannot be disputed that the payment of interest on 
the decretal amount is also an obligation of the judgment debtor 
bank under the Decree. This obligation continues until the decretal 
amount is paid in full. On that reasoning unpaid interest accruing 
until payment of the principal amount of the decree should add on 
to the remaining sum of the principal amount adjudged and become 
a part of the balance decretal amount that is subject to interest. 
However, as noted above, there is no order in the Decree for 
payment of interest on the unpaid amount of accrued interest. 
Interest pendente lite and further interest are both discretionary 
reliefs granted under Section 34 CPC. Unless expressly ordered in a 
decree such interest accrues on principal amount adjudged and not 
on the aggregate of that amount with accumulated interest. The net 
effect in the present case is that accrual of interest occurs at simple 
rate rather than compound rate. This principle of law stands 
endorsed in M.Y Malik & Co. vs. Splendours International (1997 
SCMR 309).   
16. 
 
Delay in discharging the decretal obligation to pay 
interest does not carry any apparent cost for the judgment debtor 
bank under the Decree. Possibly on that perception the judgment 
C.P. NO. 816-L OF 2009 etc. 
11
debtor bank after payment of the principal amount adjudged on 
23.12.1998 took its sweet time to pay the amount of interest 
accrued up to that date. The said accrued amount of £99,181.06 
was paid to the petitioner on 16.02.2010, almost 9 ½ years later. 
Delay in the discharge of the interest liability under the Decree as 
accrued on 23.12.1998 attracts a principle of law that went un-
noticed by learned High Court. This is the principle of appropriation 
of payments towards the discharge of moneys due under a decree 
that orders payment of principal amount adjudged, interest and 
costs. The rule on the appropriation of payments for the adjustment 
of a debt carrying interest was stated by the Privy Council in Meka 
Venkatadri vs. Raja Parthasarathy (AIR 1922 PC 233). It was held 
therein as follows:  
“The question then remains as to how, apart from any 
specific appropriation, these sums ought to be dealt 
with. There is a debt due that carries interest. There 
are moneys that are received without a definite 
appropriation on the one side or on the other, and the 
rule which is well-established in ordinary cases is 
that in those circumstances the money is first applied 
in payment of interest and then when that is satisfied 
in payment of the capital.”  
 
That said rule has also been cited with the approval in Rai Bahadur 
Seth Nemichand vs. Seth Radha Kishen (AIR 1922 PC 26). More 
recently it has been followed by the Indian Supreme Court in M/s. 
I.C.D.S. Ltd. vs. Smithaben H. Patel (AIR 1999 SC 1036). It is 
explained that:  
“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, adjustment, be made firstly in payment 
of interest and costs and thereafter in payment of the 
C.P. NO. 816-L OF 2009 etc. 
12
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.”  
 
17. 
 
In the present case the Decree dated 17.01.1995 does 
not fix the manner in which payments are to be appropriated under 
the three heads of liability ordered by it, namely principal sum 
adjudged, accrued interest thereon and costs of the suit.  Applying 
the above noted principle of appropriation of payments the initial 
payment of £152,542.97 made by the judgment debtor bank on 
23.12.1998 is first to be adjusted against accrued interest amount 
of £99,181.06 and then costs of Rs.70,223/- leaving an amount of 
roughly £53,000/- for adjustment against the decretal amount, that 
is the principal sum adjudged. After appropriating the payment 
made by the judgment debtor bank in the above mentioned order, 
an amount exceeding £100,000/- out of the decretal amount 
remains outstanding for payment on 23.12.1998. That amount 
accrues interest at the rate applied by the order of the learned 
Executing Court dated 16.07.2001. The second payment of 
£99,181.06 made by the judgment debtor bank on 16.02.2010 is 
again subject to appropriation under the principle cited above. As 
there remained outstanding a part of the decretal amount after 
appropriation of payment made on 23.12.1998 therefore such 
outstanding amount incurs interest until 16.02.2010 when the 
second payment was made by the judgment debtor bank. Subject to 
C.P. NO. 816-L OF 2009 etc. 
13
the calculation and adjustment of accrued interest amount until 
16.02.2010 the satisfaction of the decree is to be obtained strictly in 
accordance with the principle of appropriation of payments that is 
discussed above. This is a task to be accomplished by the learned 
Executing Court.  
18. 
 
During the course of hearing, the learned counsel for 
the petitioner has forcefully stressed restoration of the order by the 
learned Executing Court dated 13.03.2007. This order accepted the 
review application filed by the judgment debtor bank against the 
order dated 16.07.2001 solely by acting on the consent of the 
petitioner decree holder to the appointment of another local 
commission for making a fresh calculation of interest accrued on 
the decretal amount. No grounds are discussed nor reasons given to 
justify review of the order dated 16.07.2001. Equally, the binding 
effect of the order dated 16.07.2001 on the petitioner decree holder 
following the withdrawal of his Civil Revision No. 1925 of 2001 
against the said order stands overlooked by the learned Executing 
Court. On 21.04.2007, the said learned Court perused the report 
filed by the new local commission appointed on 13.03.2007. This 
report recommended £557,910.31 as accrued interest under the 
decree until 23.12.1998. By order dated 21.04.2007 learned  
Executing Court rejected the fresh calculation of interest for 
repeating in entirety the decree holder’s version of the interest 
account submitted in the learned Executing Court. It was also 
observed that the said report had been prepared without associating 
the judgment debtor bank. The said order concludes that the local 
commissioner’s report is one sided and that the interest calculation 
made by the learned Executing Court in its order dated 16.07.2001 
is fair and correct. It is clear that the order dated 13.03.2007 by the 
C.P. NO. 816-L OF 2009 etc. 
14
learned Executing Court is invalid for its several defects, including 
the failure to establish the grounds of maintainability of a review 
application against the order dated 16.07.2001 and the absence of 
reasons on the merits to justify review. Indeed consent of parties 
alone cannot reopen closed proceedings nor satisfy legal conditions 
predicating the exercise of jurisdiction by a Court of law. 
Accordingly, the order dated 13.03.2007 by the learned Executing 
Court was rightly disregarded by the same Court in order dated 
21.04.2007.  
19. 
 
For the foregoing reasons, these petitions are converted 
into appeals and partially allowed. The impugned judgment dated 
31.03.2009 of the learned High Court is set aside. However, the 
remand order made therein to the learned Executing Court is 
reaffirmed for undertaking afresh the calculation of liability of the 
judgment debtor bank and the realization of dues under the Decree 
in accordance with the principles set out above. No order as to 
costs.             
 
Judge 
 
 
Judge 
 
 
Judge  
Announced in open Court 
 
on_05.06.2015 
at Islamabad.  
 
 
Judge 
 
APPROVED FOR REPORTING.