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2008 DIGILAW 390 (CAL)

G. K. Samanta v. UNION OF INDIA

2008-04-09

Sanjib Banerjee

body2008
JUDGMENT 1. THE judgment-debtor seeks to turn the tables on the decree-holder to not only deny any further payment but also in insisting that the judgment-debtor is entitled to restitution. 2. ON October 30, 2000 the arbitrator made an award for Rs. 10,68,635/-which included interest of 15 per cent per annum in respect of several heads of claim, reckoned up to the date of the award. The arbitrator afforded the judgment-debtor 90 days' time (that is till January 28, 2001) to pay off the sum awarded or else be liable to interest at the rate of 18 per cent per annum from the date of the award till payment. Such is the position admitted by the parties at the hearing and reflected in the first entry in the list of dates made over on behalf of the judgment-debtor. The judgment-debtor assailed the award on January 21, 2001 and in such proceedings made an application on February 15, 2002 seeking leave to deposit the awarded amount of Rs. 10,68,635/ -. The Court made an order on February 22, 2002 for the deposit to be made with the Registrar, Original Side. The order provided that the "money remains deposit with the Registrar, Original Side, till the disposal of the application." The application referred to in the order was AP no. 16 of 2001, the Union's petition under Section 34 of the Arbitration and conciliation Act, 1996. It is not as if the money was immediately deposited, the union dawdled over the deposit for some nine months. The deposit was not made by January 28, 2001 which was the time permitted by the award, though, in the ultimate analysis, such matter may be of little relevance. 3. THE judgment-debtor refers to a government memorandum of June 18, 1993 where, in the opinion of the Central Public Works Department, any money payable by the department under any arbitral award may be deposited in Court, pending the department's challenge to the award, to arrest interest accruing thereon: "in cases where the awards are interest bearing (it is) proposed the awarded amount may be deposited in the court as provided under the provisions of order 24 of C. P. C. in order to avoid accrual of interest thereon." 4. THE judgment-debtor says that it was in such spirit that the deposit was made and the decree-holder should not be rewarded for allowing the deposit to remain unclaimed in the hope of getting interest at a rate higher than what his investment in a bank would have fetched. The judgment-debtor refers to Order xxiv Rule 3 of the Code to say that no interest may be allowed to the plaintiff on the sum deposited by the defendant from the date of receipt of the notice of deposit, whether the sum deposited is in full of the claim or falls short thereof. On such reasoning, the judgment-debtor says that since the decree-holder has recovered the deposit along with the interest that accrued on the deposit, not only can the decree-holder not claim any further payment under the award, but it is the judgment-debtor which would be entitled to 18 per cent interest on the deposit less the shortfall in the deposit reckoned against the sum that the award amounted to till the date of the deposit. By such sleight of logic and jugglery of figures, the judgment-debtor arrives at an amount of Rs. 4,20,003/- as the sum it claims to be entitled to by way of restitution apart from the costs that it demands upon the decree-holder's attempt to extract further money from it. 5. THE decree-holder has made over a chart, one not without blemish, showing that as at April 1, 2008 the decree-holder has received only the payment of Rs. 11,75,469. 89p from the Registrar, Original Side, on August 12, 2005. He claims that his decretal dues have mounted to Rs. 16,04,227/-, leaving an unrealised sum of Rs. 4,28,757. 11p. The decree-holder insists that he was entitled to credit the amount received from the Registrar first against the interest accrued on the awarded sum till the date of the receipt and thereafter adjust it against the principal sum. On such basis the decree-holder has applied interest of 18 per cent per annum on the principal sum remaining due from August 12, 2005 which, till April 1, 2008, amounts to Rs. 2,03,618/- totaling to a claim of rs. 6,32,375/- rounded off, with an additional claim for interest running till payment and costs. 6. THE judgment-debtor admits that the deposit made by it on November 15, 2002 fell short of the awarded amount due on that day by Rs. 2,03,618/- totaling to a claim of rs. 6,32,375/- rounded off, with an additional claim for interest running till payment and costs. 6. THE judgment-debtor admits that the deposit made by it on November 15, 2002 fell short of the awarded amount due on that day by Rs. 3,92,086/- and contends that such shortfall is more than offset by the interest at 18 per cent that the deposit would have earned but is now lost to it. The judgment-debtor has relied on a judgment reported at AIR 1961 Mad 160 (Lokambal Achi v. P. Srinivasa Pillai and ors.) and places paragraphs 4 and 5 thereof. "(4) All the decisions of this court that have a bearing on this matter have been placed before me by learned counsel. Various other decisions commencing from Rodger v. Comptoir D' Escompete de Paris, (1871) 24 LT 111 were also read and discussed. It is unnecessary to examine these cases seriatim. It will be sufficient to observe that two principles have been held to be applicable to situations similar to the present. One is the principle of restitution incorporated in clear terms in S. 144 C. P. Code. The lower court passes a decree. 7. IN pursuance of that decree, the judgment-debtor puts the money into court or pays it over to the decree-holder. That decree is reversed or altered in appeal. Then the principle of restitution requires that the judgment-debtor should be placed in the position which he would have occupied if the original decree had not been passed. If that decree had not been passed, he would have had the use of the money which he deposited into court or paid over to the decree-holder; and that use he has lost. 8. THAT loss must be made good to him; and that can be done only by requiring the decree-holder to pay interest on the money. This principle has been applied without qualification where either the money has been actually paid over to the decree-holder or has been deposited in court and no conditions have been imposed or difficulties placed in the way of the decree-holder drawing out that amount. If the money has been really made available to the decree-holder he would be bound to pay interest if the decree is reversed. "(5) The other principle is this. If the money has been really made available to the decree-holder he would be bound to pay interest if the decree is reversed. "(5) The other principle is this. Even though the money has been deposited into court, but the deposit has been made subject to a condition like furnishing security which the decree-holder may be unable or unwilling to comply with or other difficulties are placed in the way of the decree-holder with the result that the money was really not available to him at all then he would not be required to pay interest; and the reason of the rule is that to do so would be to require him to pay for an advantage which he never really enjoyed through no fault of his own." In testing the two principles that are eminently just and equitable but may clash, the most equitable adjustment has to be made by court. In the Lokambal achi case, a decree passed by a subordinate Judge was subsequently varied. The defendant deposited the money in court and upon the decree being varied to his benefit, he demanded restitution by payment of interest at the rate of six per cent per annum on the deposit that was liable to be refunded pursuant to the decree being modified. The court held that the equities had to be balanced and directed payment of interest at three per cent per annum. The Madras High Court upheld the order on its appreciation that though upon the money being deposited by the defendant and the plaintiff not withdrawing it the defendant was entitled to be compensated, the extent of compensation would not be such as would have been if the plaintiff had withdrawn the deposit. The interest claim of six per cent by way of restitution that had been reduced to three per cent in the lower court's order was retained by the High Court. 9. THE judgment reported at (2006) 8 SCC 457 (Gurpreet Singh v. Union of india) is next placed by the judgment-debtor in support of its argument that upon the deposit made by it, no interest would run on the amount deposited though interest may be payable on the shortfall. The reliance on the Gurpreet singh case is wholly inappropriate. 9. THE judgment reported at (2006) 8 SCC 457 (Gurpreet Singh v. Union of india) is next placed by the judgment-debtor in support of its argument that upon the deposit made by it, no interest would run on the amount deposited though interest may be payable on the shortfall. The reliance on the Gurpreet singh case is wholly inappropriate. What fell for consideration before the Supreme Court in that matter was whether the rule of appropriation in execution required to be restated or whether the rule did not apply to award of compensation under the Land Acquisition Act, 1894. 10. IT was contented in that case that when a Reference Court (in respect of the collector's award) or the appellate court (in respect of the Reference Court's award) provides enhanced compensation, the operative award is that of the court that awards the enhanced compensation and, going by the doctrine of merger, the operative decree is that of the appellate court. As a corollary, it was suggested that the award of the ultimate court would be the amount payable for acquisition and it was open to the decree-holder to proceed to calculate the amount due to him on that basis and seek a re-appropriation based on such calculation and reckoning the payments already made. It was suggested that a recalculation and adjustment would be called for every time there was an enhancement. The Supreme Court rejected the contention on its appreciation of the scheme of the Land Acquisition Act. The Supreme Court held that the award of compensation under the said Act of 1894 was at four stages with the first being when the award is made under Section 11. Such award has to take in all amounts contemplated by Section 23 (1), Section 23 (1-A), Section 23 (2) and the interest payable under Section 34 of the said Act of 1894. It is the whole of the amount that is to be paid or deposited by the Collector in terms of Section 31 of the Act and there can be no shortfall in such deposit since the Collector has to pay or deposit the amount awarded by him. The Supreme Court held that if there was no shortfall in the deposit or payment by the Collector, the claimant could not claim any interest on that part of the compensation paid to him or deposited for payment with notice to him. The Supreme Court held that if there was no shortfall in the deposit or payment by the Collector, the claimant could not claim any interest on that part of the compensation paid to him or deposited for payment with notice to him. 11. THE judgment-debtor here seeks to twist the observation of the Supreme court that no interest would run upon the compensation being paid or deposited by the Collector, to sustain its argument here. Disregarding the fact that the judgment-debtor seeks to compare apples with oranges, even if the substance of the principle is garnered, it does not further the judgment-debtor's cause. For, if the principle enunciated in Order XXIV is recognised as a substantive rule of justice, it was the same basis on which the Supreme Court's answer to the reference was founded. Whether in the situation contemplated under Order XXIV or in the claimant's right to receive payment of the award or the money deposited pursuant to the award by the Collector in a land acquisition case, the amount that the plaintiff or the claimant receives can never be taken away from him in course of the proceedings for that is his due on the admission of the defendant or the arithmetic that the Collector employs as value for the land that he acquires. 12. THE decree-holder has relied on the judgments reported at AIR 1944 Mad 46 (Periakaruppan Chettiar v. A.L.V.R.S.T. Veerappa Chettiar), AIR 1950 Mad 807 (Mooka Naicker v. A.K. Venkatasami Naidu and anr.), and AIR 1956 Ajmer 68 (Edward Mills Ltd., Beawar v. Union of India and ors.). Both parties have referred to the judgment reported at AIR 1962 Mad 159 (Ranganayaki alias Meenakshi ammal v. L. Bapu Iyer ). In the Ranganayaki case, on an application for stay of execution pending appeal, the judgment-debtor was directed to deposit the decretal amount and the decree-holder was permitted to withdraw it on condition of furnishing security. The decree-holder did not furnish security or withdraw the deposit. The Madras High Court held that the decree-holder in such case would be entitled to interest as the principle in Order XXIV Rule 3 of the Code would apply only where the decree-holder is in a position to take out the money and the entitlement to withdrawal is not laced with any condition. The Madras High Court held that the decree-holder in such case would be entitled to interest as the principle in Order XXIV Rule 3 of the Code would apply only where the decree-holder is in a position to take out the money and the entitlement to withdrawal is not laced with any condition. It is not necessary to refer to the other judgments relied upon by the decree-holder, for the principle is plain to see on a reading of the first three Rules under Order XXIV of the Code. "1. Deposit by defendant of amount in satisfaction of claim. - The defendant in any suit to recover a debt or damages may, at any stage of the suit, deposit in Court such sum of money as he considers a satisfaction in full of the claim. "2. Notice of deposit. - Notice of the deposit shall be given through the court by the defendant to the plaintiff, and the amount of the deposit shall (unless the Court otherwise directs) be paid to the plaintiff on his application. "3. Interest on deposit not allowed to plaintiff after notice. - No interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of the receipt of such notice, whether the sum deposited is in full of the claim or falls short thereof." 13. ORDER XXIV of the Code permits the defendant in a suit to recover debt or damages, to deposit such sum of money that the defendant may consider to be in satisfaction of the claim. Upon the deposit being made in Court a notice is required to be issued by the defendant to the plaintiff and the amount deposited, unless otherwise ordered by court, may be obtained by the plaintiff on its application. No interest shall be allowed to the plaintiff on such sum deposited by the defendant from the date of receipt of the notice. 14. THE underlying principle is to limit the scope of adjudication by permitting an honest defendant to succumb to a part of the claim and immediately make good such sum to the plaintiff. The plaintiff may be entitled to interest on the money deposited till the date of deposit, but will be entitled to no interest on the sum deposited from the date of receipt of the notice of deposit. The plaintiff may be entitled to interest on the money deposited till the date of deposit, but will be entitled to no interest on the sum deposited from the date of receipt of the notice of deposit. For the plaintiff to be disentitled to receive interest, he must both have notice of the deposit and be in a position to unconditionally receive the amount deposited. If the Court does not permit the plaintiff to take the deposit or if it imposes a condition that the plaintiff chooses not to accept, that the plaintiff allows the deposit to remain would not be an embargo on the plaintiff's future claim of interest on the deposit. The deposit made by the defendant is with full prejudice, an acknowledgement by the defendant that the deposit reflects that part of the claim that the defendant admits and does not contest. A deposit with any reservation or a deposit subject to the outcome of the defendant's challenge to the plaintiff's claim in respect thereof does not qualify as a deposit under the first Rule of Order xxiv, nor does it arrest further interest on the deposit. The plaintiff's corresponding disentitlement under Rule 3 is based on the satisfaction of the claim to the extent of the deposit and the plaintiff's unconditional right to immediate payment thereof. 15. THE principle does not apply to the present case. There is a statutory embargo under Section 36 of the Arbitration and Conciliation Act for an award-holder to receive the sum awarded till a petition under Section 34 of the said Act of 1996 for setting aside the award is dismissed or till the expiry of the period permitted by the said Act to assail an award. There is an in-built stay of the implementation of the award upon a court receiving a petition for setting aside the award. 16. IT does not appear from the order of February 22, 2002, nor does the judgment-debtor claim, that the judgment-debtor did not have any grievance to the extent of the sum that it desired to deposit and then deposited in Court. The judgment-debtor does not show that its challenge in the setting aside proceedings was limited to that part of the award that required it to pay the decree-holder in excess of the sum deposited. The judgment-debtor does not show that its challenge in the setting aside proceedings was limited to that part of the award that required it to pay the decree-holder in excess of the sum deposited. In such circumstances, there was no question of the decree-holder seeking payment of the deposit for that would have amounted to implementation of the award which, during the pendency of the Section 34 proceedings, remained expressly barred by Section 36 of the said act of 1996. Order XXIV Rule 3 of the Code does not arrest interest merely upon a defendant or a judgment-debtor putting in a deposit in Court. Interest stops running for the plaintiff or the decree-holder, if the plaintiff or decree-holder is free to receive the amount deposited without any strings attached but fails to obtain payment thereunder. The rule protects the defendant against a laggard so that the plaintiff may not rest assured that a part of his claim is secure and dream of the interest on the sum deposited that he chooses not to take out despite there being no impediment to his withdrawal thereof. It recognises the general principle of interest being a form of compensation or damages for the claimant receiving his debt at a later date than when it fell due, by offsetting the reduced value of money between the date of debt and the date of payment. The defendant's liability to pay further interest is absolved only in the defendant's unequivocal acknowledgement that the sum deposited is unhesitatingly due to the plaintiff. The defendant cannot arrest interest and keep alive his challenge to the claim, to the extent of the deposit. If the defendant retains his right to challenge the plaintiff's entitlement to the money deposited, he remains accountable to the plaintiff for the interest thereon. 17. AN unsolicited deposit in proceedings under Section 34 of the said Act of 1996 when the award-holder does not qualify to implement the award or a deposit by way of security required to be made by an award-debtor pursuant to an order of court at the behest of the award-holder, do not qualify as deposits for the principle in Order XXIV Rule 3 to operate thereon. The rule recognises only a deposit made by volition with the depositor abandoning the challenge to the claim to the extent of the deposit. 18. The rule recognises only a deposit made by volition with the depositor abandoning the challenge to the claim to the extent of the deposit. 18. IN the case of the present decree-holder, it was not even entitled to seek payment of the deposit by reason of the judgment-debtor's challenge to the award remaining unresolved. The petition under Section 34 of the 1996 Act was dismissed on July 23, 2004. The decree-holder applied, by GA 4052 of 2004, to the Court that dismissed the setting aside proceedings to receive the amount deposited earlier by the judgment-debtor. Such application was rejected on November 22, 2004 with the observation that upon the dismissal of the setting aside proceedings, the award "takes the shape of a decree under the Code of Civil procedure and becomes executable." It was thereafter, in execution, that the decree-holder received the payment from the Registrar in August, 2005. Neither the award nor the order repelling the judgment-debtor's challenge thereto required payment received from the decree-holder to be first adjusted against the principal and then against the interest accrued. If the decree sought to be executed did not provide thus, it was open to the decree-holder to set off the amount received first against the interest and then against the principal. If such is recognised to be the position in law, the amount now due to the decree-holder has to be reckoned either on the basis of what the decree-holder claims or on the basis of the unpaid deposit of Rs. 3,92,086/- that the judgment-debtor admits was due in terms of the award in addition to the amount deposited as at the date of the deposit. The sum of Rs. 6,32,375/- that the decree-holder seeks can be rounded of Rs. 6,50,000/- inclusive of the interest on the principal unpaid sum of rs. 4,28,757. 11p together with the costs that the decree-holder is entitled to; or a multiplier at 18 per cent could be taken to operate on the sum of Rs. 3,92,086/ that the judgment-debtor admits that remains due from November 15, 2002 till the date of payment. In either case, it would the sum of Rs. 4,28,757. 11p or the sum of Rs. 3,92,086/- that would be the principal outstanding whether on August 12, 2005 as the decree-holder suggests or on November 15, 2002 on the judgment-debtor's showing. 19. 3,92,086/ that the judgment-debtor admits that remains due from November 15, 2002 till the date of payment. In either case, it would the sum of Rs. 4,28,757. 11p or the sum of Rs. 3,92,086/- that would be the principal outstanding whether on August 12, 2005 as the decree-holder suggests or on November 15, 2002 on the judgment-debtor's showing. 19. FOR the misconceived contention of the judgment-debtor it should be held to its admission. But to do so would amount to requiring it to pay more than what the decree-holder claims as the sum of Rs 3,92,086/- with interest running thereon from November 15, 2002 at 18 per cent per annum would have almost doubled by now. The decree-holder is left to remain satisfied with the sum of Rs. 6,50,000/- which includes the costs of these proceedings. The decree-holder may claim and receive such sum from the Reserve Bank of India to be debited against any money held to the credit of the Union of India, within seven days of the decree-holder's first written demand to such effect. 20. IN anticipation of the money being paid by the Reserve Bank to the decree-holder and subject to the receipt thereof, the present execution proceedings being ec 6 of 2005 and all applications in previous proceedings arising out of the execution of the award are disposed of by recording satisfaction of the award.