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2007 DIGILAW 417 (HP)

H. P. S. I. D. C. v. M&I Watches

2007-10-05

DEV DARSHAN SUD

body2007
JUDGMENT (Dev Darshan Sud, J.) - This judgment will dispose of objections preferred by the Judgment Debtors under Section 47 of the Code of Civil Procedure in opposition to the decree which the Decree Holder seeks to execute. 2. The Judgment Debtors alleged that a compromise decree was passed holding the Judgment Debtors liable to pay a sum of Rs. 64.80 lacs in five half yearly installments alongwith interest @ 11.5% per annum from the date of decree. The Decree Holder alleges that the Judgment Debtors have already paid Rs. 51.22 lacs. The first installments of Rs. 12.96 lacs alongwith interest Rs. 3.63 lacs, totalling Rs. 16.59 lacs, was paid on 4.12.1998 and the second installment of Rs. 12.96 lacs plus 0.47 lacs as interest, aggregating to rupees 13.43 lacs was paid on 5.6.1999 and thereafter, two bank drafts of rupees 4 lacs and one lac, respectively, were paid in the Court. Thus, a total sum of rupees 51.22 lacs has been paid by the Judgment Debtors to the Decree Holder towards the decretal amount. The Judgment Debtors have also paid a sum of Rs. 2 lacs by way of bank draft at the time of filing of the present objections. Therefore, by adding Rs. two lacs, a total sum of Rs. 53.22 lacs has been paid to the Decree Holder towards the principal amount. It is alleged that the amount was to be adjusted first towards the principal and thereafter towards the interest. It is specifically pleaded by the possession that with every payment made, an affidavit was submitted in Court stating that the amount paid is to be apportioned against the principal only. 3. These objections have been resisted by the Decree Holder. It is averred that the payment has not been made in terms of the decree and that the entire amount became payable at once in terms of the decree. It was the discretion of the Decree Holder to adjust the payment first towards the interest and then towards the principal. 4. On 10.6.1998, this Court disposed of the suit in the following terms :- “It is stated by the learned Counsel appearing for the parties that the matter stands amicably settled between them. An application under Order 23 Rule 3 read with Section 151 CPC has been filed for recording the compromise. The application is signed by both the learned Counsel. On 10.6.1998, this Court disposed of the suit in the following terms :- “It is stated by the learned Counsel appearing for the parties that the matter stands amicably settled between them. An application under Order 23 Rule 3 read with Section 151 CPC has been filed for recording the compromise. The application is signed by both the learned Counsel. The parties through their learned Counsel accept the compromise mentioned in the application, which is marked as Ex.C-1. In pursuance of the compromise two bank drafts covering a total sum of Rs. 16.20 lacs are being handed over by the defendants to the learned Counsel for the plaintiff and have been accepted by him. The compromise Ex.C-1 shall form part of the decree. Consequently, the suit of the plaintiff is decreed for Rs. 64.80 lacs which would be payable by the defendants in five half yearly instalments alongwith 11.5% interest per annum from the date of the decree. It is further made clear that the first instalment shall be paid on or before 5th December, 1998 and the second on 5th June, 1999 and so on. The last instalment has been agreed to be paid on 5th December, 2000. It is, however, made clear that in case of default of any instalment, the entire balance amount shall become due at once. Decree is ordered to be passed in these terms. Defendants No. 1 to 5 are granted permission to sell the assess i.e. plant and machinery installed in the factory at Chambaghat under supervision of the plaintiff and the sale proceeds shall be paid and adjusted towards the decretal amount. The suit is disposed of in the aforesaid terms. There shall, however, be no order as to costs. Copy dasti, as prayed for, on usual terms.” 5. It is undisputed before me that the installments, as ordered by this Court, have not been paid to the Decree Holder in time. Obviously, default having occurred, the entire balance amount would become due and payable at once. The short controversy requiring determination is whether there has been a proper appropriation of the amount paid by the Judgment Debtors to the Decree Holder. Learned Counsel appearing for the Judgment Debtors submits that the amount had to be appropriated towards the principal as the payments had been made on a specific understanding that this amount should be so appropriated. 6. Learned Counsel appearing for the Judgment Debtors submits that the amount had to be appropriated towards the principal as the payments had been made on a specific understanding that this amount should be so appropriated. 6. In Maghraj and others v. Mst. Bayabai and others, AIR 1970 SC 161, the Hon’ble Supreme Court has held :- “5. In Venkatadri Appa Row v. Parthasarathi Appa Row, Ind App 150 : AIR 1922 PC 233 the Judicial Committee of the Privy Council observed that upto taking an account of principal and interest due, the ordinary rule with regard to payments by the debtor appropriated either to principal or interest is that they are first to be applied to the discharge of interest. Lord Buckmaster delivering the judgment of the board observed : “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 a satisfied in payment of the capital. That rule is referred to by Rigby, L.J., in the case of Parr’s Banking Co. v. Yates, 1898(2) QB 460, in these words : “the defendant’s counsel relied on the old rule that does, no doubt, apply to many cases, namely, that, where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable, is only common justice. To apply the sums paid to principal where interest has accrued upon the debt, and is not paid, would be depriving the creditor of the benefit to which he is entitled under his contract.” 6. Counsel for the appellant contended that in Venkatadri Appa Row’s case, 48 Ind App 150 : AIR 1922 PC 233 there was no specific appropriation by the debtor, whereas in the present case there is specific direction by the debtor. But the normal rule is that in the case of a debt due with interest any payment made by the debtor is in the first instance to be applied towards satisfaction of interest and thereafter to the principal. But the normal rule is that in the case of a debt due with interest any payment made by the debtor is in the first instance to be applied towards satisfaction of interest and thereafter to the principal. It was for the mortgagors to plead and prove an agreement - that the amounts which were deposited in Court by the mortgagors were accepted by the mortgagees subject to a condition imposed by the mortgagors in the present case there is no evidence which supports the contention raised by counsel for the appellant. 7. Counsel urged that, in any event, when an account was finally submitted by the mortgagees they were aware of the fact that certain amounts were paid in Court and they knew that those amounts were paid conditionally and when the mortgagees withdrew the amounts deposited in Court they must be deemed to have accepted the conditions subject to which the amounts were deposited. But the account submitted by the mortgagees shows clearly that they had given credit for the amounts deposited towards the interest and costs in the first instance and the balance only towards the principal. The account submitted by the mortgagees clearly negatives the plea of the mortgagors. 8. An argument somewhat faintly suggested before us 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 needs no serious consideration.” 7. Again in M/s. Industrial Credit and Development Syndicate now called I.C.D.S. Ltd. v. Smt. Smithaben H. Patel and others, AIR 1999 SC 1036, this decision has been reiterated by the Hon’ble Supreme Court holding :- “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. 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.” 8. Learned counsel appearing for the Objections has relied upon R. Lingraj v. Dr. Arumugha Pandian, AIR 2002 Madras 254, in support of his contention that the decree must be complied towards principal and then towards the interest. The record of the case shows that the apportionment has to be in terms of the decree which has been passed i.e. to say in terms of the installments which are fixed pursuant to the compromise having been arrived at between the parties. This having not been adhered to, the Judgment Debtors cannot insist of the appropriation of the money in a particular manner. 9. As I have held, the record does not show that there has been any agreement inter se between the parties altering the terms of the decree. In this eventuality, it cannot be said that the appropriation of the money by the Decree Holder is against the settled principle of law as laid down in this judgment. The decree was very specific in directing the payments to be made in half yearly installments and providing for the consequences in case of default. Admittedly, a default having occurred, the entire amount became due and payable at once. In such an eventuality, it cannot be said that the Judgment Debtors can claim the right or privilege in law to direct the appropriation of the money paid/deposited in a particular manner. 10. Learned Counsel for the Judgment Debtors has also submitted that the calculations of the interest have been wrongly made by the Decree Holder. He submits that the amount of interest has been charged by the Decree Holder by compounding the interest on half yearly basis. It is not disputed before me that the calculations in fact included interest which has been compounded. He submits that the amount of interest has been charged by the Decree Holder by compounding the interest on half yearly basis. It is not disputed before me that the calculations in fact included interest which has been compounded. The submission of the learned Counsel for the Judgment Debtors requires to be accepted as the decree never contemplated payments of interest on compounding basis. 11. This application is partly allowed. The contention of the Judgment Debtors that the amount shall require to be appropriated first towards the principal sum and thereafter towards interest, is rejected. The second contention that interest cannot be charged by compounding it on half yearly basis is accepted. It is directed that the execution shall proceed only on the amount due from the Judgment Debtors after adjusting the amount which had been paid by the Judgment Debtors and the interest calculated on simple interest basis. There shall be no order as to cost. M.R.B. ———————