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2003 DIGILAW 1208 (JHR)

STATE OF BIHAR v. MIJAJ INTERNATIONAL

2003-09-25

VISHNUDEO NARAYAN

body2003
Judgment : VISHNUDEO NARAYAN, J. ( 1 ) THIS revision has been directed at the instance of the State of Bihar (now jharkhand) the judgment-debtors petitioner against the impugned order dated 27-8-1998 passed in Execution Case No. 1 of 1991 by 2nd Subordinate Judge, Seraikella whereby and whereunder the petition filed by the decree holder for payment of compound interest on the decretal amount from the date of reference till 27-8-1998 was allowed with a direction to the Seristedar of the Court to calculate the interest, accordingly, and to submit a report in respect thereof and further a sum of Rs. 25. 000/- was awarded as special cost against the judgment-debtor petitioner payable to decree holder opposite parties. ( 2 ) THE facts giving rise to this revision are as follows : there was an agreement between the judgment-debtors petitioner and the decree- holder opposite party in the year 1984-85 for erection of dismantled hanger shed on the right bank of Subarnrekha Bandh at chandil and in pursuance of the said agreement the decree-holder opposite party started doing the work in terms of the said agreement and during the continuance of that work a dispute arose between the judgment- debtors petitioner and the decree-holder opposite party and as per the arbitration clause contained in the said agreement the matter was referred to the sole arbitrator for adjudication as per reference dated 5-10-1985. The arbitrator made the award and sent a copy of the award each to the judgment-debtors petitioner and to the decree-holder opposite party but the arbitrator did not send the award to the competent court for making it a rule of the court. In such a situation the decree-holder opposite party filed Title Suit No. 21 of 1989 praying therein to call for the original award from the arbitrator and on hearing both the parties to make the award a rule of the court. The arbitrator awarded Rs. 2,58,222/- along with interest @ 5% in favour of the decree-holder opposite party and against the judgment-debtors petitioner. In spite of the service of notice the judgment- debtors petitioner did not appear in the said suit as a result of which the said suit was decreed ex-parte on 5-10-1985 and the award was made the rule of the court. 2,58,222/- along with interest @ 5% in favour of the decree-holder opposite party and against the judgment-debtors petitioner. In spite of the service of notice the judgment- debtors petitioner did not appear in the said suit as a result of which the said suit was decreed ex-parte on 5-10-1985 and the award was made the rule of the court. For proper appreciation of the matter in controversy the operative portion of the judgment passed in Title Suit No. 21 of 1989 is quoted below which runs thus :"in the result, I find and hold that the plaintiff has a valid cause of action for the suit and is entitled to the reliefs claimed by it. Hence, it is hereby ordered that the suit is decreed ex parte with cost at the minimum ex parte scale. The award dated 30-8-1989 is made rule of the court. The plaintiff is entitled to realize the award money amounting to Rs. 2,58,222/- along with interest at the rate of 15% per annum from the date of reference i. e. from 5-10-1985 till the date of realization defendant Nos. 1 and 3 are directed to pay decretal amount within two months from the date of decree failing which plaintiff will realize the same through the process of the court. "the decree-holder opposite party filed Execution Case No. 1 of 1991 for the execution of thedecree passed in the said title suit when the judgment-debtors petitioner did not abide by the decree, In course of pendency of the said execution case the judgment-debtors petitioner deposited Rs. 2,58,222/- by Bank draft on 12-4-1996 towards the satisfaction of the principal amount under a decree as alleged and, thereafter, the judgment-debtors petitioner further deposited Rs. 4,07,620 on 7-4-1997 against the interest @ 15% per annum on the principal amount which has accrued. The Executing Court directed the seristedar to submit a report about the amount payable to the decree-holder opposite party inclusive of the amount of principal and interest and a report was submitted that the principal and interest thereon from 5-10-1985 to 31-3-1996 comes to Rs. 6,64,338/- payable to the decree holder opposite party inclusive of principal and interest whereas the judgment-debtors petitioner has deposited Rs. 6,65,842/- and thus there is an excess deposit of Rs. 2,246/- made by the judgment-deb tors petitioner. 6,64,338/- payable to the decree holder opposite party inclusive of principal and interest whereas the judgment-debtors petitioner has deposited Rs. 6,65,842/- and thus there is an excess deposit of Rs. 2,246/- made by the judgment-deb tors petitioner. The decree- holder opposite party filed a petition on 24- 6-1997 in the said execution case praying therein for compound interest on the decretal amount of Rs. 2,58,222/- and he claimed rs. 7,23,355 till 19-8-1998 on the basis of the calculation by a Chartered Accountant who has calculated interest @ 15% per annum compound interest on the principal sum of Rs. 2,5. 8,222/ -. A rejoinder was also filed in the said execution case by the judgment-debtors petitioner stating, inter alia, therein that entire decretal dues has been paid and a decree stands satisfied and there is now nothing due and it has also been stated that decree-holder opposite party is not entitled to claim any compound interest on the said principal sum. After hearing both the parties the learned Court below passed the impugned orde dated 17-8-1998 directing the Seristedar to report regarding the decretal amount due against the judgment- debtors petitioner calculating compound interest @ 15% per annum besides saddling a special cost of Rs. 25. 000/- against the judgment-debtors petitioner. ( 3 ) ASSAILING the impugned order as not only illegal but perverse it has been submitted by the learned Standing Counsel No. 1 for the judgment-debtors petitioner that the decree passed in Title Suit No. 21 of 1989 is very clear and explicit in which interest has been allowed @ 15% per annum on the principal sum of Rs. 2,58,222/- till realization and the decree does not state at all that compound interest with annual rest shall be payable on the said principal amount and in the execution petition itself, the decree-holder had claimed simple interest @ 15% per annum on the said principal amount which is evident that in column "g" a sum of Rs. 5,02,096 has been mentioned as decretal due and the decree-holder opposite party has himself not claimed interest at the compound rate and subsequently he has claimed compound interest on the said principal amount which is totally illegal. 5,02,096 has been mentioned as decretal due and the decree-holder opposite party has himself not claimed interest at the compound rate and subsequently he has claimed compound interest on the said principal amount which is totally illegal. It has also been submitted that the Executing Court has no right to go behind the decree and the direction in the order dated 30-5-1994 as well as in the impugned order to calculate the due amount under the decree with interest on compound rate is illegal and is also against the decree. It has also been submitted that the judgment- debtors petitioner had paid Rs. 2,58,222/- by Bank Draft on 12-4-1996 for satisfaction of the principal amount under the decree and, thereafter, a further sum of Rs. 4,07;620/- was deposited on 7-4-1997 for the satisfaction of the interest due till date and asper the report of the Seristedar an excess amount of Rs. 2,246/- has been paid and the entire decree stands satisfied on 7- 4-1997. It has also been submitted that the calculation of the amount due as stated in the petition of the decree-holder opposite party having been calculated by a Chartered accountant is incorrect and illegal and against the terms of the decree in view of the fact that compound interest has not been allowed to the decree-holder opposite parry. Lastly it has been contended that Section 3 (3) (C) of the Interest Act, 1978 mandates that no interest upon interest shall be awarded by the court and viewed thus the learned court below has wrongly exercised its jurisdiction vested to him under the law. It has also been contended that awarding Rs. 25. 000/- as special cost is equally illegal in view of the fact that the entire decree stands satisfied on 7-4-1997. ( 4 ) REFUTING the aforesaid contention it has been submitted by Mr. It has also been contended that awarding Rs. 25. 000/- as special cost is equally illegal in view of the fact that the entire decree stands satisfied on 7-4-1997. ( 4 ) REFUTING the aforesaid contention it has been submitted by Mr. S. B. Gadodia learned counsel for the decree-holder opposite party that the transaction between the parties is a commercial transaction arising out of contractual obligation and the interest allowed on the principal sum shall be capitalized on remaining unpaid and the said principal sum coupled with the interest on annual rest so capitalized shall be adjudged as principal sum every year and in this view of the matter the decree-holder opposite party is entitled to get compound interest with annual rest on the principal sum so capitalized and in this view of the matter the decree-holder opposite parry has rightly claimed compound interest. In support of his contention he has placed reliance on the ratio of the case of central Bank of India v. Ravindra (2002) 1 scc 367 . It has also been contended that the decree-holder opposite party is a Small Scale Industrial undertaking as per clause (1) of Section 3 of the industries (Development and Regulation) Act, 1951 and as per Section 3 read with Sections 4 and 5 of the Interest on Delayed payments to Small Scale And Ancillary Industrial Undertakings Act, 1993, the decree- holder opposite party is entitled for compound interest and in this view of the matter there is no illegality in the impugned order. Lastly it has been contended that this revision filed by the Judgment-debtors petitioner is also not maintainable. ( 5 ) LET us now first advert to the question of maintainability of this revision. The exercise of power under Section 115 of the Code of Civil Procedure (hereinafter referred to as the Code) is broadly subject to the conditions that the decision i. e. the impugned order must be if a court subordinate to the High court decided by it and no appeal does lie either to the High Court or to any lower appellate court against the said decision and in deciding the case subordinate court must appear to have exercised the jurisdiction not vested in it by law or failed to exercise a jurisdiction vested in it by law or acted in the exercise of its jurisdiction illegally or with material irregularity. The purpose behind section 115 of the Code is to provide means to an aggrieved parry to obtain ratification of a non appealable order. Therefore, for the maintainability of a revision petition there must be an error relating to the jurisdiction committed by the court below either by way of assumption of jurisdiction which it does not have or failure to exercise jurisdiction which it has or by exercising its jurisdiction illegally orwith material irregularity. Here in this case the impugned order is a composite order saddling a special cost of Rs. 25,000/- against the judgment-debtors petitioner besides a direction to the Seristedar to calculate the amount due under the decree taking into account the compound interest @ 15% per annum capitalizing the said interest in the principal sum. I have already quoted the operative part of the decree above wherein simple interest @ 15% per annum has been awarded on the principal sum of rs. 2,58,222/- w. e. f. 5-10-1985 till its realization. There is no decree in this case for payment of compound interest @ 15% per annum with annual rest capitalizing the sum with the principal amount. It is the settled principle of law that an Executing Court has no jurisdiction to go behind a decree. The learned Court below has construed the interest @ 15% per annum as compound interest which is not in the decree. The Executing Court has no right to vary the terms of the decree, however, erroneous it may be in the execution proceeding. Therefore, it is a clear case in which the Executing Court has committed a manifest error relating to its jurisdiction which it does not have and the exercise of its jurisdiction is definitely illegal and it equally suffers with material irregularity which has cost irreparable injustice to the judgment-debtors petitioner in this case and in this view of the matter failure of justice has occasioned in this case. Viewed thus the revision filed by the judgment-debtors petitioner is maintainable. ( 6 ) NOW a pertinant question arise as to whether by making payment of Rs. 2,58,222/- on 12-4-1996 and Rs. 4,07,620 on 7-4-1997 the total being Rs. 6,65,842/- by the judgment-debtors petitioner the decree stands satisfied on 7-4-1997 or not. The contention of the learned counsel for the judgment-debtors petitioner is that the payment of Rs. ( 6 ) NOW a pertinant question arise as to whether by making payment of Rs. 2,58,222/- on 12-4-1996 and Rs. 4,07,620 on 7-4-1997 the total being Rs. 6,65,842/- by the judgment-debtors petitioner the decree stands satisfied on 7-4-1997 or not. The contention of the learned counsel for the judgment-debtors petitioner is that the payment of Rs. 2,58,222/- is towards the principal sum and by the said payment the principal sum stands satisfied and by further payment of Rs. 4,07,620 on 7-4-1997 the accrued interest @ 15% per annum stands satisfied and in this view of the matter decree has been fully satisfied on 7-4-1997 in view of the fact that there is no decree for payment of compound interest on the principal and the petition filed by the decree- holder opposite party is misconceived which has resulted in the impugned order. It is pertinent to mention here at the very outset that there is no material on the record that the decree-holder opposite party had consented for the satisfaction of the principal amount under the decree by payment of Rs. . 2,58,222/- made by the judgment-debtors petitioner on 12-4-1996. The normal rule in case of a debt due with interest and cost is that any payment made by the judgment- debtor towards the satisfaction of the decree is in the first instance shall be applied towards the satisfaction of the interest and the remainder, if any, thereafter, to the principal. It is the settled law that the deposit made in the court in payment of decree carrying interest is first to be applied towards interest and cost and the remainder, if any, then towards principal unless the decree-holder was informed that payment was towards principal and he had agreed to that effect. There can be a deviation of the normal rule only in a case with respect to a deposit in court towards decretal amount by the judgment-debtors if he states the mode of adjustment of the decretal dues with the consent of the decree-holder. In respect thereof, the ratio of the case of Meghraj v. Mst. Bayabai, A. I. R. 1970 SC 161 is relevant in this connection which runs thus :". . . . . . . . . . . . . . . In respect thereof, the ratio of the case of Meghraj v. Mst. Bayabai, A. I. R. 1970 SC 161 is relevant in this connection which runs thus :". . . . . . . . . . . . . . . WHERE the mortgagors made no payments under the decree directly to the mortgagees but from time to time made deposits in the Court under Order 21, Rule 1 and in depositing some of theamounts they stated that the payments were towards the principal due, but there was no evidence on the record that the mortgagees were informed that the amounts were deposited towards the principal due, nor was there evidence that the mortgagees accepted the amount towards the principal, the amounts so paid could be appropriated first towards interest and then towards principal due. Unless the mortgagees were informed that the mortgagors had deposited the amount only towards the principal and not towards the interest, and the mortgagees agreed to withdraw the money from the Court accepting the conditional deposit, the normal rule that the amounts deposited in Court should first be applied towards satisfaction of the interest and costs and thereafter towards the principal would apply. It is for the mortgagors to prove an agreement, contrary to normal rule. It cannot also be said that it is the privilege of the debtor to impose conditions subject to which any payment is to be made by the mortgagor, and the mortgagee is bound to accept the condition. "on 12-4-1996 admittedly Rs. 2,58,222/-was paid towards the decretal dues. There is nothing on the record to show that the decree- holder opposite party had agreed for the satisfaction of the principal amount of Rs. 2,58,222/- under the decree by the said payment made by the judgment-debtors petitioner. Therefore the said amount of Rs. 2,58,222/- shall first be adjusted towards the interest accrued till 12-4-1996 on the principal sum aforesaid. It is relevant to mention here that on calculation the amount of interest @ 15% per annum till 12-4-1996 comes to Rs. 4,07,572. 14/- and the payment of Rs. 2,58. 222/- shall, therefore, be adjusted towards the interest and it -cannot be said that the principal amount under the decree has been adjusted by the said payment. Therefore, on 12-4-1996 the principal amount of Rs. 2,58,222/- as well as interest amounting to Rs. 1,49,3507- remained due. Further payment of Rs. 4. 4,07,572. 14/- and the payment of Rs. 2,58. 222/- shall, therefore, be adjusted towards the interest and it -cannot be said that the principal amount under the decree has been adjusted by the said payment. Therefore, on 12-4-1996 the principal amount of Rs. 2,58,222/- as well as interest amounting to Rs. 1,49,3507- remained due. Further payment of Rs. 4. 07. 620/- was made by the judgment-debtors petitioner on 7-4- 1997. On that day there was Rs. 2,58,222/- as principal and a sum of Rs. 1,87,474/- as interest had fallen due for the satisfaction of the decree. Therefore, the sum of Rs. 1,87,4747- out of the amount of Rs. 4,07,6207- shall first be adjusted towards the interest and, thereafter, the remainder amount of Rs. 2. 20,146/- shall stand adjusted towards the principal amount and thus there still remains Rs. 38,0767- due towards the principal amount for the full satisfaction of the decree. Therefore, it cannot be said that by making the payment of the aforesaid two amounts by the judgment- debtors petitioner the decree stands satisfied on 7-4-1997. The decree-holder opposite party is yet to get Rs. 38. 076/- towards the principal sum under the decree along with interest thereon @ 15% per annum from 8-4-1997 towards the full satisfaction of the decree. The report dated 15-4-1997 of the seristedar is of no help to the judgment-debtors petitioner as in the said report interest has been calculated up to 31-3-1996 and not till the date when payment of Rs. 4,07,6207- was made on 7-4-1997. Therefore, the contention of the learned Standing Counsel that the decree stands satisfied on 7-4-1997 has no substance. ( 7 ) LET us now come to the crux of the matter as to whether the impugned order of the Executing Court directing to calculate afresh the amount due under the decree capitalizing compound interest @ 15% per annum is valid and legal. Let us now first look into the decree. The decree holder was held, entitled to realize the awarded money amounting to Rs. 2,58,2227- along with interest @ 15% per annum from 5-10-1985 till the date of realization. It is pertinent to mention here that the decree does not state that compound interest @ 15% per annum has been allowed. The decree is clear and explicit and there is no ambiguity therein. 2,58,2227- along with interest @ 15% per annum from 5-10-1985 till the date of realization. It is pertinent to mention here that the decree does not state that compound interest @ 15% per annum has been allowed. The decree is clear and explicit and there is no ambiguity therein. The decree regarding the interest @ 15% per annum cannot be read as compound interest @ 15% per annum, The word compound cannot be imported in the decree which is not there. It is the settled principle of law that the Executing Court cannot go behind the decree and it has no jurisdiction vested in it to alteror modify the decree. The learned Court below in the impugned judgment has stated that the Executing Court cannot go behind a decree but in spite of that he had directed the Seristedar to calculate the interest @ 15% per annum compound interest on the principal sum of Rs. 2,58,222/ -. It is a manifest error on the part of the Executing Court. Mr. S. B. Gadodia, learned counsel has submitted that there is a practice followed in trade and also established by Bank practice in the case of banking transaction which provide for compound interest on periodical rest and capitalizing thereof with the principal and the interest on the principal sum shall shed the colour of interest and become the part of the principal at the end of the year and shall be adjudged as the principal sum. It has also been submited that this practice has been approved by the Apex Court as well as by several High Courts. The principle is that the interest being unpaid shall be capitalized with the principal and such a practice is also prevalent and recognized in Non-Banking money Lending Transactions. In support of his contention he has placed reliance on the ratio of the case of Central Bank of India ( AIR 2001 SC 3095 ) (supra ). I see no substance in the contention of the learned counsel for the decree holder-opposite party and the ratio of the case of Central Bank of India (supra) is not attracted in this case. The reasons for this are that there is no relationship of debtor and borrower between the parties in this case. No loan was advanced by the decree holder-opposite party to the judgment debtors-petitioner. It is not a case of banking transaction. The reasons for this are that there is no relationship of debtor and borrower between the parties in this case. No loan was advanced by the decree holder-opposite party to the judgment debtors-petitioner. It is not a case of banking transaction. Here the liability has occurred as a result of contractual obligation in execution of some work allotted to the decree holder-opposite party and to crown all no compound interest has been allowed by the decree which is being executed in this execution case. Therefore, the question of payment of compound interest does not at all arise in this case and the interest can never be capitalized being unpaid. and becoming a part of the principal. There is also no material on the record to show that the decree holder-opposite party is a Small Scale Industry Undertaking under clause (j) of Section 3 of the Industries (Development and Regulation) Act, 1951 so as to entitled him to get compound interest with annual rest. Under section 34 of the Code, the Court has a very wide discretion in ordering interest on the principal sum adjudged and may order interest at such rate as the Court deem reasonable to be paid on the said principal sum adjudged from the date of the suit till the date of payment. It is the discretion of the court to award interest. Here in this case the Court in exercise of its discretion has awarded interest @ 15% per annum. The court has not made any order for payment of the compound interest on the principal sum. When the decree is silent regarding payment of compound interest it shall be deemed that the Court had refused compound interest. Theprovisions of the interest Act, 1978 also debars award of interest upon interest. Therefore, the impugned order suffers with illegality and the learned court below has illegally exercised its jurisdiction vested in it. ( 8 ) THERE is merit in this revision and it succeeds. This revision is allowed. The impugned order is set aside. Theprovisions of the interest Act, 1978 also debars award of interest upon interest. Therefore, the impugned order suffers with illegality and the learned court below has illegally exercised its jurisdiction vested in it. ( 8 ) THERE is merit in this revision and it succeeds. This revision is allowed. The impugned order is set aside. The learned Court below is directed to get the decretal dues calculated afresh as per simple interest @ 15% per annum in terms of the decree and in case there is still some due under the decree as per that calculation, necessary direction shall be given to the judgment debtors-petitioners to deposit the said amount within two months for the full satisfaction of the decree. Petition allowed. --- *** --- .