BHARAT HEAVY ELECTRICALS LTD.versusR.S. AVTAR SINGH & CO.

                     [2012) 10 S.C.R. 701


            BHARAT HEAVY ELECTRICALS LTD.                            A
                                v.
                  R.S. A VTAR SINGH & CO.
               (Civil Appeal No. 7239 of 2012)

                      OCTOBER 5, 2012
                                                                     B
     [DR. B.S. CHAUHAN AND FAKKIR MOHAMED
               IBRAHIM KALIFULLA, JJ.]

       Code of Civil Procedure, 1908 - Or.21, r.1 and s.34 -
 Execution of decree - Amount payable under a decree -               C
 Connotation of - Decree of Court making award passed by
 the arbitrator its rule - Part-payment of decretal amount by
judgment debtor - Applicability of the rule of appropriation -
 Payment of interest - Manner of calculation - Held: In stricto
sensu, it is the decree which has to be applied in letter and        D
 spirit in order to find out whether the stipulations contained
 therein were duly fulfilled by the judgment debtor - On facts,
both the arbitral award as well as the Rule of the Court made
a clear distinction between the award amount and the interest
payable and it cannot be stated that the award amount and            E
 the interest mentioned in the award should be merged
together - Respondent-decree holder was entitled to
appropriate payments made by the appellant-judgment debtor
in the first instance to the interest part of it which was due and
payable on the date of the first payment while adjusting             F
whatever balance remained towards principal and calculating
the interest payable on the remaining principal amount till the
next date of payment.

    The respondent had undertaken some contract work
with the appellant in respect of which dispute arose as              G
regards the payment to be made by the appellant. The
dispute went before the sole Arbitrator who passed an
award on 15-3-1982 which was made the Rule of Court
after protracted litigation in judgment dated 31-5-1985.
                            701                                      H
    702    SUPREME COURT REPORTS             [2012] 10 S.C.R.

A The award became final and conclusive. Part payments
  were effected by the appellant (judgment debtor) after the
  date of the decree i.e. 31-5-1985 on 18-10-1985 and
  thereafter on 13-12-2000. The respondent (decree holder)
  filed Execution Petition contending that the appellant did
B not furnish the award amount in its entirety. The appellant
  while resisting the Execution Petition, also filed
  application under Section 47 CPC by taking the stand
  that entire award amount had been fully paid and,
  therefore, there was nothing to be granted in the
c Execution Petition. A Single Judge of High Court
  dismissed the objections and ordered execution. The
  order was affirmed by the Division Bench of the High
  Court and therefore the instant appeal.

       By referring to Order XXI Rule 1(1), (4) and (5) of CPC,
D the appellant submitted that after passing of the award
  by the Arbitrator on 1·5-3-1982 and it was made as a Rule
  of the Court in the order dated 31-05-1985, substantial
  payment towards the decretal amount was made by 18-
  10-1985 and, that, by virtue of the payments made dated
E 18-10-1985 and subsequently on 13-12-2000 the payment
  of entire decretal amount was fully satisfied and nothing
  more remained payable; and that interest, if any,
  mandatorily ceased to run i.e. on and after 13-12-2000 and
  the conclusion to the contrary made by the Single Judge
F of the High Court and the confirmation of the same by the
  Division Bench in the impugned order were liable to be
  set aside. According to the appellant, by 13-12-2000 the
  entire decretal amount was fully paid and the award of
  further interest based on the claim of the respondent by
G the Single Judge as well as by the Division Bench of the
  High Court was not justified. The appellant also submitted
  that by virtue of Section 3(3)(c) of the Interest Act and
  Section 34 of CPC, the Court has no power to award
  interest upon interest.
H
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 703
                         & co.
      The issue in question in the instant appeal, therefore,   A
centered around the interpretation of Order XXI Rules
1(1 ), (4) and (5) of CPC read with Section 34 CPC and
Section 3(3)(c) of the Interest Act.

    Dismissing the appeal, the Court                            B
     HELD: 1.1. A plain reading of Order XXI, CPC is to the
effect that on payment of the amounts payable under a
decree, as provided under sub-rule (1) of rule 1, the
calculation of interest on such amount payable under the
decree would cease to operate from the date of service          C
of notice as stipulated under sub-rule (2) of Order XXI.
The words used in sub-rule (1) in different expressions
means whatever money that is due and payable under a
decree, which could be paid in the manner stipulated in
sub-clauses (a), (b) and (c) of the said sub-rule (1). The      D
prime words, which needs deeper scrutiny are "payable
under a decree". What is required to be scrutinized is as
to how the decree has been made while granting the
relief as regards the payment. [Paras 11, 12] [718-E; 719-
A-C]                                                            E

     1.2. In the instant case, the operative part of the
arbitral award in question disclose that the respondent
was entitled to a sum of Rs.1,42,24,894/- along with
interest at the rate of 12 per cent per annum on the said
                                                                F
amount from 06.01.1981 till the date of payment or decree
whichever was earlier. The Arbitrator after giving credit
to the counterclaim made by the appellant ultimately
worked out the actual amount payable to the respondent
which worked out to Rs.1-,41,68,474/-. The said award of
the Arbitrator was accepted by the respondent. When the         G
award was made as the Rule of the Court in the order
dated 31.05.1985, the only alteration made was the date
of calculation of interest rendered by the Arbitrator. While
the Arbitrator directed such calculation of interest to be
made from 06.01.1981, the Single Judge directed such            H
   704     SUPREME COURT REPORTS             [2012) 10 S.C.R.

A calculation to be made from 12.03.1981. The said order
  of the Court dated 31.05.1985 forms the basis for the
  respondent to make the claim, inasmuch as the award
  became the Rule of the Court only pursuant to the said
  order. Noting the nature of relief granted under the award
B and the ultimate Rule of the Court together, it is found that
  Arbitrator directed that the calculation of payment of
  interest "on the said amount of the award" which should
  run from 06.01.1981 should now run from 12.03.1981 by
  virtue of Rule of the Court dated 31.05.1985. As per the
c direction of the Arbitrator, such payment of interest would
  be payable till the appellant make the payment or the
  decree whichever is earlier. The date of the decree,
  having regard to the applicable provision, would be the
  date of the Rule of the Court, namely, 31.05.1985.
D Therefore, a strict construction of the said direction of the
  Arbitrator as regards the manner of calculation of interest
  would mean either the date of payment or the date of
  decree whichever is earlier. Since, the first date of
  payment in the case on hand was subsequent to the date
  of the Rule of the Court, namely, 31.05.1985, going by the
E direction of the Arbitrator, the calculation of interest .
  should be made up to 31.05.1985. Since, the award
  received the seal of approval only after the same was
  made as the Rule of the Court, it is the stipulation
  contained in the said Rule that would ultimately cover the
F relief really granted in the award as made operative by
  virtue of the Rule ordered by the Court. Therefore, in the
  stricto sensu, it is the decree dated 31.05.1985 which has
  to be applied in letter and spirit in order to find out
  whether the stipulations contained therein were duly
G fulfilled by the appellant. [Paras 12, 13] [719-C-G; 720-A-
  F]

       1.3. The Rule of the Court while approving the award
  of the Arbitrator did not make any substantive alteration
H as regards the entitlement of the respondent on the
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 705
                    & CO.

payment to be made, namely, the sum of Rs.1,41,68,474/ A
-. Even the rate of interest granted by Arbitrator was not
touched by the Court, which was maintained at the rate
of 12 per cent per annum. The Court only directed the
calculation of the said interest payable as from 12.03.1981
instead of 06.01.1981. The only other substantive B
direction contained in the Rule of the Court dated
31.05.1985 was that the respondent was entitled to future
interest at the rate of 12 per cent per annum from the date
of the decree till realization in case the award amount was
not paid within two months from 31.05.1985. From the c
Rule of the Court, it is clear that the Court made a
conscious direction to the specific effect that the
entitlement of the respondent for future interest at the rate
of 12 per cent per annum from the date of decree, namely,
31.05.1985 till the date of realization would be on the 0
award amount if it was not paid within two months from
31.05.1985. Therefore, the calculation of interest payable
up to the date of the decree as well as the time granted
therein, namely, two months from 31.05.1985 and what is
interest payable subsequent thereto has been clearly set E
out in the said part of the Rule. If the said Rule is to be
understood in the manner in which the Court had
directed the calculation of interest to be made it can be
only in the following manner, namely, that the interest
from 12.03.1981 up to 31.07.1985 at the rate of 12 per cent
per annum would be on the award amount, namely, F
Rs.1,41 ,68,474/-. If the award amount was not paid,
namely, the sum of Rs.1,41,68,474/- on or before
31.07.1985, the future interest again at the rate of 12 per
cent per annum can be claimed. Both the award of the
Arbitrator as well as the Rule of the Court makes a clear G
distinction between the award amount and the interest
payable. The award having become the Rule of the Court
and while making the said Rule it was clearly made
known that the award contained an amount which was
payable to the respondent quantifying the said amount H
    706     SUPREME COURT REPORTS               [2012] 10 S.C.R.

A in a sum of Rs.1,41,68,474/-. After quantification of the
  said amount, the Arbitrator dealt with the grant of interest
  independent of the said payment and fixed the rate of
  such interest at 12 per cent per annum. When such a clear
  distinction was consciously made by the Arbitrator while
s passing the award no one can even attempt to state that
  the award amount and the interest mentioned in the
  award dated 15.03.1982 should be merged together and
  state that the award amount would comprise of a sum of
  Rs.1,41,68,474/- and the interest worked out thereon
c became payable when once it was made the Rule of the
  Court and thereby became the decretal amount. Such a
  construction of the said award cannot be made having
  regard to the specific terms of the decree dated
  31.05.1985. [Paras 14 and 15] [720-F-H; 721-A-C-H; 722-
D A-CJ
         1.4. Order XXI Rule 1 does not state the decretal
    amount. The expression used therein is all money
    payable under a decree. TERSELY stated, the decree
    dated 31.05.1985 affirms the award amount, the interest
E   payable at the rate of 12 per cent per annum from
    12.03.1981 till the date of its realization if not paid within
    two months from the date of the decree, namely,
    31.05.1985. Therefore, the said decree dated 31.05.1985
    consisted of the award amount plus interest payable
F   thereon from 12.03.1981 up to the date of the decree,
    namely, 31.05.1985 to be payable within two montbs from
    that date and in the event of non-payment of the said
    amount within two months from 31.05.1985 to calculate
    future interest at the very same rate of 12 per cent per
G   annum from the date of the decree till the realization of
    the award amount. A reading of the opening set of
    expressions of Order XXI Rule 1 is clear to the above
    effect. In the case on hand the payment effected by the
    appellant after 31.05.1985 was once on 18.10.1985 and
H   thereafter on 13.12.2000 when the issue was dealt with
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 707
                    & co.
by the Court in the order dated 12.07.2002. It is not in       A
dispute that the award amount of Rs.1,41,68,474/- earned
interest at the rate of 12 per cent per annum up to the date
of first payment, namely, 18.10.1985 which worked out to
a sum of Rs.78,30,314/- i.e. for the period from 12.03.1981
to 18.10.1985. The total amount payable as on that date        B
under the decree, both the award amount along with the
interest, worked out to Rs.2,19,61,134/-. The said figure,
as calculated by the appellant, was not disputed by the
respondent. On 18.10.1985, the appellant paid a sum of
Rs.1 crore by way of deposit pursuant to the order of the      c
Division Bench dated 13.09.1985 when the appellant
challenged the decree dated 31.05.1985. The respondent
was also permitted to withdraw the said sum of Rs.1 crore
in the said order dated 13.09.1985. [Para 16] [722-E-H;
723-A-D]                                                       D
     1.5. Order XXI Rule 4 CPC states that 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. In the case on hand since
the deposit of the amount pursuant to the order of the         E
Division Bench dated 13.09.1985 came to be made and
was also withdrawn by the respondent from the date of
service of notice as contemplated in sub-rule 2 the same
was deemed to have been effected. Therefore, applying
sub-rule 4 to the case on hand in so far as the cessation      F
of interest is concerned, the same should operate upon
the sum of Rs.1 crore deposited by the appellant and
withdrawn by the respondent. There can be no dispute
and in fact it is not disputed by the parties that on and
after the deposit of Rs.1 crore, no interest was payable       G
on the said sum. [Para 17] [723-E-H]

     1.6. In a Constitution Bench judgment of this Court
in Gurpreet Singh, the implication of Order XXI Rule 1 vis-
a-vis the related provisions under Order XXIV and Order        H
   708      SUPREME COURT REPORTS            [2012] 10 S.C.R.

A XXXIV has been set out and the general rule of
  appropriation towards a decretal amount has been stated.
  Further where there is shortfall in paying the decree
  amount what will be the mode of appropriation has been
  explained. From the said decision, the following principles
B emerge: (i) The general rule of appropriation towards a
  decretal amount was that such an amount was to be
  adjusted strictly in accordance with the directions
  contained in the decree and in the absence of such
  directions adjustments be made firstly towards payment
C of interest and cost and thereafter towards payment of
  the principal amount subject, of course, to any agreement
  between the parties; (ii) The legislative intent in enacting
  sub-rules 4 and 5 is clear to the pointer that interest
  should cease to run on the deposit made by the
  judgment debtor and notice given or on the amount being
0
  tendered outside the Court in the manner provided in
  Order XXI Rule 1 sub-clause (b); (iii) If the payment made
  by the judgment debtor falls short of the decreed amount,
  the decree holder will be entitled to apply the general rule
  of appropriation by appropriating the amount deposited
E towards the interest, then towards cost and finally
  towards the principal amount due under the decree; (iv)
  Thereafter, n.o further interest would run on the sum
  appropriated towards the principal. In other words if a
  part of the principal amount has been paid along with
F interest due thereon as on the date of issuance of notice
  of deposit interest on that part of the principal sum will
  cease to run thereafter; (v) In cases where there is a
  shortfall in deposit of the principal amount, the decree
  holder would be entitled to adjust interest and cost first
G and the balance· towards the principal and beyond that
  the decree holder cannot seek to reopen the entire
  transaction and proceed to recalculate the interest on the
  whole of the principal amount and seek for re-
  appropriation. [Paras 19, 20, 21, 22, 23 and 24] [724-G;
H 725-E-G-H; 727-F-H; 728-A-E]
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SING:1 709
                    & CO.

     1.7. In the case at hand, in the calculation which was   A
sought to be made by the respondent in its statement
filed before the Single Judge, interest was calculated for
the period subsequent to 06.03.2001 that was the date
when the last payment was made by the appellant
wherein the calculation of interest for the period from       B
04.01.2001 to 04.03.2002 was claimed on the entire sum
of Rs.1,42,96,318/- instead of calculating the same on the
balance principal of Rs.1, 19,61,134/-. The Single Judge
rightly rejected such a wrong claim made on behalf of the
respondent while dismissing the objections filed by the       c
appellant. Inasmuch as, the Single Judge as well as the
Division Bench has applied the rule of construction on
Order XXI Rule 1 based on the Constitution Bench
decision of this Court in Gurpreet Singh wherein the
earlier decision of this Court in Prem Nath Kapur, in         D
regard to the rule of appropriation, was also approved,
no illegality is found in the said judgment of the Division
Bench while affirming the order of the Single Judge dated
12.07.2002. [Paras 26 and 28) [729-D-F; 730-H; 731-A-B]

     1.8. As far as the contention based on Section 34 of     E
CPC having regard to the general rule·of appropriation
in cases of this nature where there is a short payment
made pursuant to the decree, no conflict is found with the
said provision insofar as it related to payment of interest
to be payable by the appellant.. As far as the submission     F
made, based on Section 3(3)(c) of the Interest Act is
concerned, the said provision only states de hors the
substantive part of said Section 3, Courts are not
empowered to award interest upon interest. There is no
scope to apply the said section to the case on hand where     G
the controversy is subsequent to the decree where
direction for payment of interest on the award amount has
been spelt out. The issue related to the correctness of the
interest calculated as per the decree of the Court which
made the award its rule. The challenge is not to the decree   H
    710       SUPREME COURT REPORTS               [2012] 10 S.C.R.


A   on the footing that it was in violation of Section 3(3)(c) of
    the lntorest Act. [Para 29] [731-C-E]

         Gurpreet Singh v. Union of India (2006) 8 SCC 457: 2006
    (7) Suppl. SCR 422 - followed.

B      Central Bank of India v. Ravindra and others (2002) 1
  SCC 367: 2001 (4) Suppl. SCR 323; Leela Hotels Limited
  v. Housing and Urban Development Corporation Limited
  (2012) 1 SCC 302: 2011 (13) SCR 156 and Prem Nath
  Kapur and another v. National Fertilizers Corporation of India
C Ltd. and others (1996) 2 sec 71: 1995 (5) Suppl. SCR 790
  - referred to.

                         Case Law Reference:
       2006 (7) Suppl. SCR 422 followed             Paras 8,10,
D                                                         18,19
       2001 (4) Suppl. SCR 323 referred to          Paras 8, 9

       2011 (13) SCR 156            referred to     Para 10

E      1995 (5) Suppl. SCR 790 referred to          Paras 18, 28

        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    7239 of 2012.

        From the Judgment & Order dated 3.11.2008 of the High
F   Cour of Delhi at New Delhi in EFA (OS) No. 9 of 2002.

        A.S. Chandhiok, ASG, J.C. Seth, B.K. Satija, Yamini
    Khurana, Smriti Shukla for the Appellant.

        Ranjeet Kumar, S.K. Maniktala, Varun Panta, S.R. Setia
G for the Respondent.

          The Judgment of the Court was delivered by

       FAKKIR MOHAMED IBRAHIM KALIFULLA, J. 1. Leave
H granted.
 BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 711
    & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

     2. The judgment debtor is the appellant before us. This         A
appeal is directed against the judgment of the Division Bench
of the Delhi High Court dated 03.11.2008 in EFA (OS) No.9 of
2002. The respondent undertook some contract work with the
appellant in respect of which the dispute arose as regards the
payment to be made by the appellant. The dispute went before         B
the sole Arbitrator who passed an award on 15.03.1982 which
was mad~ the Rule of Court after protracted litigation. Thus after
the award became final and conclusive, the respondent herein
filed Execution Petition No.208/2000 contending that the
appellant did not furnish the award amount in its entirety. The      c
appellant while resisting the Execution Petition, also filed EA
No.522 of 2000 under Section 47 of the Code of Civil
Procedure by taking the stand that entire award amount has
been fully paid and, therefore, there was nothing to be granted
in the Execution Petition. The learned Single Judge dismissed        D
the objections by order dated 12.07.2002 which was the subject
matter of appeal in which the impugned judgment came to be
passed by the Division Bench of the High Court of Delhi.
     3. The issue centres around the interpretation of Order XX.I
Rules (1), (4) and (5) of CPC read with Section 34 CPC and           E
Section 3 (3) (c) of Interest Act. Though the legal issue falls
within the narrow compass, to appreciate the respective
contentions of the parties, certain details about award dated
15.03.1982, the order of the Court which granted the seal of
approval to the award dated 31.05.1985 in suit No.594-Af1982,        F
the order of the Division Bench dated 18.07.2000 by which the
challenge to the award and the order dated 31.05.1985 came
to be rejected and the subsequent order dated 31.07.2000
declining to recall the earlier order dated 18.07.2000, thereafter
the order of the learned Single Judge came to be passed on
12.07.2000 in EA No.522 of 2000 in Execution case No.208             G
of 2000 which was subject matter of challenge in the impugned
order of the Division Bench dated 03.11.2008 in EFA (OS)
No.9 of 2002, have to be stated. When we refer to the award
of the Arbitrator dated 15.03.1982, we find the following relief
which was granted in favour of the respondent:                       H
    712       SUPREME COURT REPORTS                [2012] 10 S.C.R.


A                              The Award

          Claimants claims No. 1,2,3,4,5,6,7,8,10,12,13,14 & 15

          I hold that the claimants Mis R.S. Avtar Singh & Co. are
          entitled to a sum of Rs.1,42,24,894/- (Rupees one crore
B         forty two lacs twenty four thousand eight hundred and ninety
          four only) against all their claims and I also hold that the
          claimants are entitled for interest and, I, therefore, award
          a sum of Rs.1,42,24,894/- (Rupees one crore forty two lacs
          twenty four thousand eight hundred and ninety four only) in
c         favour of the claimants with interest@ 12 % per annum
          on the said amount of the award from 6-1-1981 till the date
          of payment or decree whichever is earlier.

          Claimants claim No.9
D
          As this claim was withdrawn by the Claimants in the
          hearing held on 12/9 and 13/9/81, no award is made
          against this claim.

          Respondents counter-claims Nos. 1,2 & 3:-
E
          1 hold that the Respondents M/s. Bharat Heavy Electricals
          Ltd. are entitled to a sum of Rs.56,420/- (Rupees Fifty Six
          thousand four hundred & twenty only) against all their
          counter-claims and I, therefore, award sum of Rs.56,420/-
          (Rupees fifty six thousand four hundred & twenty only) in
F
          favour of the respondents.
          The parties are left to bear their own costs. This disposes
          of claimants claim No.16 regarding costs.
          The above award is made and published by me on this day
G         of 15th Marcy, 1982 at Gandhinagar."
      4. In the judgment dated 31.05.1985 passed in Suit
  No.594A/1982 the award was taken on record and made a
  Rule of the Court and the said order passed in the said suit
H reads as under:
BHARAT HEAVY ELECTRICALS LTD. v. RS. AVTAR SINGH 713
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

    "This suit coming on this day for final disposal before this     A
    Court in the presence of counsel for the parties as
    aforesaid, it is ordered that the objections (I.A. No. 2830/
    1982) filed by respondents to the award dated 15.3.1982
    given by Sh. M.S. Iyengar Arbitrator be and the same are
    hereby dismissed and the said award appended hereto              B
    as Annexure 'A' be and the same is hereby taken on
    record and made a rule of the Court with the modification
    that the claimant shall be entitled to interest at the rate of
    12 % per annum from March 12, 1981 till the date of the
    decree and a decree is hereby passed in terms thereof            c
    which shall form part of the decree.

    It is further ordered that the claimant shall be entitled to
    future interest at the rate of 12 % per annum from the date
    of the decree till realization, in case the award amount is
    not paid within two months from today the 31st May, 1985.        D

    It is lastly ordered that suit No.409-A/1982 is hereby
    disposed of. Given under my hand and the seal of the
    Court this the 31st day of May, 1985."
                                                                     E
     5. When the appellant challenged the said decision of the
learned Single Judge dated 31.05.1985 in FAQ (OS) 188 of
1985, the same came to be dismissed by the order dated
18.07 .2000. During the pendency of the suit FAQ (OS) No.188
of 1985 by way of an interim order dated 13.09.1985 the
recovery under the award was stayed subject to the condition         F
that the respondent paid the sum of Rs.1 crore into the Court
which was directed to be withdrawn by the respondent on
furnishing Bank guarantee for the purpose of restitution in case
the award was set aside. It is not in dispute that in compliance
of the said order necessary deposit was made. The                    G
respondent also realized the said amount of Rs.1 crore on
13.10.1985. The appellant moved an application for recalling
order dated 18.07.2000 of the Division Bench and the same
was also dismissed by the Division Bench on 31.07.2000.
Thereafter, when the Execution Petition No.208 of 2000 was           H
    714      SUPREME COURT REPORTS                 [2012] 10 S.C.R.


A moved, the appellant took notice and filed application under
  Section 47 of the CPC in EA 522 of 2000 and another
  application under Order XXI Rule 26 in application EA 523 of
  2000. The leaned Single Judge of the Execution Court while
  granting time for final reply, in the EA 522 and 523 of 2000 and
8 rejoinder, if any, before the next date of hearing by order dated
  30.01.2001 directed the appellant to deposit in Court a cheque
  for Rs.1,94,91,077/- being the admitted amount in favour of the
  respondent subject to deduction of tax at source along with TDS
  certificate. The execution of the warrant of payment issued on
c 18.10.2000 was directed to be kept in abeyance. The sum of
  Rs.1, 74,93,835/- after deduction of tax at source in a sum of
  Rs.19,97,192/- in all a sum of Rs.1,94,91,077/- was realized
  by the respondent with an undertaking of the respondent that
  in case the Execution Petition found to be not maintainable, he
  would refund the amount of Rs.1,74,93,835/-within a period of
0
  four weeks from the date of the order passed under the
  Execution Petition. The said order was passed on 30.01.2001
  by the learned Single Judge. By filing an undertaking dated
  05.02.2001, the respondent also withdrew the sum of
E Rs.1,74,93,885/-. Ultimately the execution was ordered by the
  learned Single Judge by an order dated 12.07.2002 by
  calculating subsequent interest only in the remaining principal
  amount and dismissed the objection petition.

        6. When the appellant preferred this appeal against the
F said order dated 12.07.2002, in EFA (OS) No.9/2002, an
  interim order came to be passed on 23.08.2002 directing the
  appellant to deposit whatever balance amount due after
  deduction of TDS as per the final order passed by the learned
  Single Judge with a further order to realize the said sum subject
G to restitution and on furnishing security to the satisfaction of the
  Registrar.
        7. According to the learned counsel for the appellant in the
  light of last order dated 23.08.2002 whatever amount which was
  ultimately directed to be paid by learned Single Judge in the
H order dated 12.07.2002 was also paid to the respondent.
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 715
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
Keeping the above factors in mind, counsel for the appellant,      A
Mr. Chandhiok, learned Additional Solicitor General appearing
for the appellant raised the following contentions.

     8. Mr. Chandhiok, learned ASG for the appellant by
referring to Order XXI Rule 1 sub-clauses (1), (4) and (5)         B
submitted that after the passing of the award by the Arbitrator
on 15.3.1982 and it was made as a Rule of the Court by the
learned Single Judge in the order dated 31.05.1985 substantial
payment towards the decretal amount was made by
18.10.1985 and what remained to be paid in satisfaction of the     C
decretal amount was only Rs.41,68,474/- apart from interest
which was due and payable in a sum of Rs.1,53,22,603/- in all
a sum of Rs.1,94,91,077/-. The learned ASG submitted that
after the filing of the Execution Petition and the orders passed
thereon when the appellant moved the learned Single Judge
pursuant to interim orders dated 01.12.2000, the entire balance    D
amounf was also deposited by way of two cheques
representing Rs.1,74,93,885/- and T.D.S. amount of
Rs.19,97,1-92/- in all a sum of Rs.1,94,91,077/-. The learned
ASG, therefore, contended that by virtue of the payments made,
as above, dated 18.10.1985 and subsequently on 13.12.2000          E
the payment of entire decretal amount was fully satisfied and
nothing more remained payable. According to learned ASG
when once the balance principal amount was paid, according
to appellant's calculation, as on 13.12.2000, along with the
interest payable on that amount up to that date on the principal   F
amount by virtue of operation of sub-clauses (4) and (5) of
Order XXI Rule 1 interest, if any, mandatorily cease to run i.e.
on and after 13.12.2000 and the conclusion to the contrary
made by the learned Single Judge in the order dated
12.07.2002 and the confirmation of the same by the Division        G
Bench in the impugned order dated 03.11.2008 are liable to
be set aside. The learned ASG also submitted that in this
context, by virtue of Section 3(3)(c) of the Interest Act and
Section 34 of CPC, the Court has no power to award interest
upon interest. According to him a cumulative consideration of      H
    716       SUPREME COURT REPORTS                  (2012] 10 S.C.R.


A   the above provisions show that with the payment of
    Rs.1,94,91,077/- by 13.12.2000 the entire decretal amount was
    fully paid and the award of further interest based on the claim
    of the respondent by the learned Single Judge as well as by
    the Division Bench was not justified. The learned ASG relied
8   upon the decisions of this Court in the cases of Gurpreet Singh
    Vs. Union of India - reported in (2006) 8 SCC 457 and Central
    Bank of India Vs. Ravindra and others - reported in (2002) 1
    sec    367.
          9. As against the above submissions, Mr. Ranjeet Kumar,
C   learned Senior Counsel appearing for the respondent by
    relying upon sub-rule 1 of Order XXI CPC submitted that all
    money payable under decree referred to sub-rule would include
    principal and the interest payable prior to suit as well as interest
    pendente-lite, post decretal interest and cost. The learned
D   Senior Counsel by relying upon the decision of this Court in the
    case of Ravindra (supra), in this respect, contended that so long
    as the decretal amount which was due as on 18.10.1985 which
    included the award amount along with interest calculated at the
    rate of 12 per cent per annum was due and payable until the
E   entire amount is wiped out, the amount so calculated in the
    Execution Petition as on th'at date, remained unpaid. The
    learned Senior Counsel contended that the payment of
    decretal amount was not satisfied as stipulated under Order XXI
    Rule 1 (1) and consequently the operation of sub-clauses (4)
F   and (5) of Order XXI Rule 1 cannot be held to have operated
    upon until such satisfaction of payment of decretal amount was
    not made by the appellant. The learned Senior Counsel,
    therefore, contended that after the award was made as a Rule
    of the Court after 31.05.1985 and when the first payment of Rs.1
G   crore was made by the appellant on 18.10.1985, the decretal
    amount which was due and payable by the appellant as on that
    date was in a sum of Rs.2, 19,61, 134/- and after giving credit
    to the payment of Rs.1 crore a balance amount of
    Rs.1,19,61,134/- was due and payable as from 19.10.1985.
H   The learned Senior Counsel, therefore, contended that when
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 717
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

the next payment was made by the appellant only on                         A
13.12.2000 in a sum of Rs.1,94,93,885/-, based on the
calculation of the respondent, a further sum of Rs.1 ,42 ,96,318/
- was due and payable which remained unpaid. The learned
Senior Counsel, however, fairly admitted that even as per the
stand of the respondent a miscalculation was made while                    B
working out the interest on principal amount which was not
accepted by the learned Single Judge while granting relief in
the order dated 12.07.2002 and that in any event whatever
calculation ultimately worked out by the learned Single Judge
in the order dated 12.07.2002 was just and proper and the                  c
confirmation of the same by the Division Bench, therefore, does
not call for interference.
      10. Learned Senior Counsel further submitted that after the
 award of the Arbitrator in March 1982 and after it was passed
 as a Rule of the Court in May 1985, the payments were made                D
 by the appellant only pursuant to orders of the Court and the
 respondent had to seek for the redressal of its grievances only
 through Court and that the appellant, therefore, does not
 deserve any indulgence in the payment of interest. Learned
 Senior Counsel by referring to the decision of this Court in the          E
 case of Gurpreet Singh (supra) contended that it was well within
 the rights of the appellant to appropriate the payments made
 by the appellant in the first instance to the interest part of it which
 was due and payable on the date of the first payment while
 adjusting whatever balance remained towards principal and                 F
 calculating the interest payable on the remaining principal
·amount till the next date of payment. The learned Senior
 Counsel, would contend that the same was in accordance with
 what has been authoritatively pronounced by this Court in the
 cases of Gurpreet Singh (supra) and Leela Hotels Limited Vs.              G
 Housing and Urban Development Corporation Limited -
 reported in (2012) 1 sec 302 and, therefore, the calculation
 which was ultimately found as due and payable by the learned
 Single Judge in the order dated 12.07.2002 was perfectly in
 order and, therefore, the confirmation of the said order by the
 Division Bench does not call for interference.                            H
    718       SUPREME COURT REPORTS                   [2012] 10 S.C.R.

A         11. We have considered the submissions of the respective
  counsel and also bestowed our serious consideration to the
  relevant provisions of law, the orders impugned and the various
  other materials placed before this Court as well as the
  decisions relied upon by the respective counsel. At the outset
B in order to appreciate the question of law that arise for
  consideration, one needs to understand the specific provision
  contained in sub-rule (1) of Order XXI before going into the
  details of the facts involved in this case. The opening words of
  sub-rule (1) of Order XXI reads as under:
c         "All money, payable under a decree shall be paid as
          follows, namely:-....... "

          Sub-rule (4) is to the following effect:

D         "(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)."

       A plain reading of the above clauses in the sub-rule of
  Order XXI is to the effect that on payment of the amounts
E payable under a decree, as provided under sub-rule (1), the
  calculation of interest on such amount payable under the decree
  would cease to operate from the date of service of notice as
  stipulated under sub-rule (2) of Order XXI.

F      12. Leaving aside the intimation by way of service, as
  regards the payment as provided under sub-rule (2), inasmuch
  as in the case on hand on different dates the payments were
  made, such payments were all made after due notice to the
  respondent. Therefore, there was no controversy relating to the
G date when the respective payments were made. We are,
  therefore, only concerned with the implication and application
  of sub-rule (1) of Order XXI and the consequent effect on
  whatever payments made, as claimed by the appellant by
  operation of sub-rule (4). Therefore, in the forefront, we wish to
H examine as to what extent the prescription contained in sub-
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVfAR SINGH 719
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
rule (1) of Order XXI was followed by the appellant in making          A
the payments once on 18.10.1985 and subsequently on
13.12.2000. The words used in sub-rule (1) in different
expressions means whatever money that is due and payable
under a decree, which could be paid in the manner stipulated
in sub-clauses (a), (b) and (c) of the said sub-rule (1 ). The prime   B
words, which needs deeper scrutiny are "payable under a
decree". To understand the said set of expressions what is
required to be scrutinized is as to how the decree has been
made while granting the relief as regards the payment. We,
therefore, have to refer to that part of the award of the Arbitrator   c
to understand the nature of relief granted under the said award.
The operative part of the award, as extracted earlier, disclose
that the respondent was entitled to a sum of Rs.1,42,24,894/-
along with interest at the rate of 12 per cent per annum on the
said amount from 06.01.1981 till the date of payment or decree
                                                                       0
whichever was earlier. The Arbitrator after giving credit to the
counterclaim made by the appellant ultimately worked out the
actual amount payable to the respondent which worked out to
Rs.1,41,68,474/-. The said award of the Arbitrator was
accepted by the respondent. When the award was made as
the Rule of the Court in the order dated 31.05.1985, the only          E
alteration made was the date of calculation of interest rendered
by the Arbitrator. While the Arbitrator directed such calculation
of interest to be made from 06.01.1981, the learned Single
Judge directed such calculation to be made from 12.03.1981.
In the said order of the Court dated 31.05.1985 which forms            F
the basis for the respondent to make the claim, inasmuch as
the award became the Rule of the Court only pursuant to the
said order, it is important to make reference to what the Rule
of the Court stated in the said order. In the penultimate
paragraph, it has been specifically stated as under:                   G

     "It is further ordered that the claimant shall be entitled to
     future interest at the rate of 12% per annum from the date
     of the decree till realization, in case the award amount is
     not paid within two months from today the 31st May, 1985."        H
    720      SUPREME COURT REPORTS                 [2012) 10 S.C.R.

A        13. Noting the nature of relief granted under the award and
  the ultimate Rule of the Court together, we find that learned
  Arbitrator directed that the calculation of payment of interest "on
  the said amount of the award" which should run from
  06.01.1981 should now run from 12.03.1981 by virtue of Rule
B of the Court dated 31.05.1985. As per the direction of the
  learned Arbitrator, such payment of interest would be payable
  till the appellant make the payment or the decree whichever is
  earlier. The decree, having regard to the applicable provision,
  would be the date of the Rule of the Court, namely, 31.05.1985.
c Therefore, a strict construction of the said direction of the
  learned Arbitrator as regards the manner of calculation of
  interest would mean either the date of payment or the date of
  decree whichever is earlier. Since, the first date of payment in
  the case on hand was subsequent to the date of the Rule of
  the Court, namely, 31.05.1985, going by the direction of the
0
  learned Arbitrator, the calculation of interest should be made
  up to 31.05.1985. Since, the award received the seal of
  approval only after the same was made as the Rule of the Court,
  it is the stipulation contained in the said Rule would ultimately
E cover the relief really granted in the award as made operative
  by virtue of the Rule ordered by the Court. Therefore, in the
  str!cto sensu, it is the decree dated 31.05.1985 which has to
  be applied in letter and spirit in order to find out whether the
  stipulations contained therein were duly fulfilled by the appellant.

F      14. The Rule of the Court while approving the award of the
  Arbitrator did not make any substantive alteration as regards
  the entitlement of the respondent on the payment to be made,
  namely, the sum of Rs.1,41,68,474/-. Even the rate of interest
  granted by learned Arbitrator was not touched by the Court,
G which was maintained at the rate of 12 per cent per annum.
  The Court only directed the calculation of the said interest
  payable as from 12.03.1981 instead of 06.01.1981. The only
  other substantive direction contained in the Rule of the Court
  dated 31.05.1985 was that the respondent was entitled to future
H interest at the rate of 12 per cent per annum from the date of
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 721
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

the decree till realization in case the award amount was not         A
paid within two months from 31.05.1985. Therefore, the said
part of the decree requires to be deeply examined by applying
the provision contained in Order XXI Rule 1 of CPC read with
Section 3 (3)(c) of the Interest Act as well as Section 34 of
CPC.                                                                 B

       15. With that view when we examine the said part of the
 Rule of the Court, we wish to specifically note that the Court
.made a conscious direction to the specific effect that the
 entitlement of the respondent for future interest at the rate of    c
 12 per cent per annum from the date of decree, namely,
 31.05.1985 till the date of realization would be on the award
 amount if it was not paid within two months from 31.05.1985.
 Therefore, tlte calculation of interest payable up to the date of
 the decree as well as the time granted therein, namely, two         D
 months from 31.05.1985 and what is interest payable
 subsequent thereto has been clearly set out in the said part of
 the Rule. If the said Rule is to be understood in the manner in
 which the Court had directed the calculation of interest to be
 made it can be only in the following manner, namely, that the       E
 interest from 12.03.1981 up to 31.07.1985 at the rate of 12 per
 cent per annum would be on the award amount, namely,
 Rs.1,41,68,474/-. If the award amount was not paid, namely,
 the sum of Rs.1,41,68,474/- on or before 31.07.1985, the future
 interest again at the rate of 12 per cent per annum can be
 claimed. In our considered opinion, it should be on the award       F
 amount which was in a sum of Rs.1,41,68,474/-. We say so
 because both the award of the learned Arbitrator as well as the
 Rule of the Court makes a clear distinction between the award
 amount and the interest payable. The award having become
 the Rule of the Court and while making the said Rule it was         G
clearly made known that the award contained an amount which
was payable to the respondent quantifying the said amount in
 a sum of Rs.1,41,68,4 74/-. After quantification of the said
 amount, the learned Arbitrator dealt with the grant of interest
 independent of the said payment and fixed the rate of such          H
    722      SUPREME COURT REPORTS                 [2012] 10 S.C.R.


A interest at 12 per cent per annum. When such a clear distinction
  was consciously made by the learned Arbitrator while passing
  the award no one can even attempt to state that the award
  amount and the interest mentioned in the award dated
  15.03.1982 should be merged together and state that the
B award amount would comprise of a sum of Rs.1,41,68,4 74/-
  and the interest worked out thereon became payable when
  once it was made the Rule of the Court and thereby became
  the decretal amount. Such a construction of the said award
  cannot be made having regard to the specific terms of the
c decree dated 31.05.1985.
          16. Once we steer clear of the said position as regards
    the decree passed by the learned Single Judge, we are posed
    with the next question as to while applying Order XXI Rule 1
    when payments were made towards the satisfaction of the said
D   decree as provided under Order XXI Rule 1 (a), (b) and (c) what
    would be the implication of sub-rules 4 and 5 of Order XXI. In
    order to understand the said legal implication of Order XXI Rule
    1 read along with sub-rules 4 and 5, in the foremost it will be
    necessary to understand what is contemplated under Order XXI
E   Rule 1, in particular, the opening set of expressions, namely,
    "all money, payable under a decree shall be paid as follows,
    namely:-... " It will be necessary to keep in mind that the said
    provision does not state the decretal amount. The expression
    used is all money payable under a decree. TERSELY stated,
F   as pointed out by us in the earlier paragraph, the decree dated
    31.05.1985 affirm the award amount, the interest payable at the
    rate of 12 per cent per annum from 12.03.1981 till the date of
    its realization if not paid within two months from the date of the
    decree, namely, 31.05.1985. Therefore, the said decree dated
G   31.05.1985 consisted of the award amount plus interest
    payable thereon from 12.03.1981 up to the date of the decree,
    namely, 31.05.1985 to be payable within two months from that
    date and in the event of non-payment of the said amount within
    two months from 31.05.1985 to calculate future interest at the
H   very same rate of 12 per cent per annum from the date of the
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 723
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

decree till the realization of the award amount. In our considered    A
opinion, a reading of the opening set of expressions of Order
XXI Rule 1 is clear to the above effect. In the case on hand the
payment effected by the appellant after 31.05.1985 was once
on 18.10.1985 and thereafter on 13.12.2000 when the issue
was dealt with by the Court in the order dated 12.07.2002. It is      B
not in dispute that the award amount of Rs.1,41,68,474/- earned
interest at the rate of 12 per cent per annum up to the date of
first payment, namely, 18.10.1985 which worked out to a sum
of Rs.78,30,314/- i.e. for the period from 12.03.1981 to
18.10.1985. The total amount payable as on that date under            c
the decree, both the award amount along with the interest,
worked out to Rs.2, 19,61, 134/-. The said figure, as calculated
by the appellant, was not disputed by the respondent. On
18.10.1985, the appellant paid a sum of Rs.1 crore by way of
deposit pursuant to the order of the Division Bench dated             D
13.09.1985 when the appellant challenged the decree dated
31.05.1985. The respondent was also permitted to withdraw
the said sum of Rs.1 crore in the said order dated 13.09.1985.

      17. Keeping the above factual position in mind when we
examine Order XXI Rule 4 CPC, the said sub-rule states that           E
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. In the case on hand since
the deposit of the amount pursuant to the order of the Division
Bench dated 13.09.1985 came to be made and was also                   F
withdrawn by the respondent from the date of service of notice
as contemplated in sub-rule 2 the same was deemed to have
been effected. Therefore, applying sub-rule 4 to the case on
hand in so far as the cessation of interest is concerned, the
same should operate upon the sum of Rs.1 crore deposited              G
by the appellant and withdrawn by the respondent. There can
be no dispute and in fact it is not disputed by the parties that
on and after the deposit of Rs.1 crore, no interest was payable
on the said sum. The only other consideration to be made is in
which component the said sum of Rs.1 crore is to be taken. In         H
    724       SUPREME COURT REPORTS              [2012) 10 S.C.R.


A   other words, whether the said sum of Rs.1 crore paid by the
    appellant should be accounted towards the award amount of
    Rs.1,41,68,474/- or to the total figure of Rs.2,19,61,134/- as
    was scught to be applied by the respondent.

B      18. Before venturing to find out the answer to the said
  question having regard to the Constitution Bench judgment of
  this Court in Gurpreet Singh (supra), wherein the implication
  of Order XXI Rule 1 has been elaborately dealt with we deem
  it appropriate to note the rationale laid therein on this aspect.
  Though, the question posed for consideration before the
C Constitution Bench was whether the rule called "different stages
  of appropriation" set out in Prem Nath Kapur and another Vs.
  National Fertilizers Corporation of India Ltd. and others -
  (1996) 2 sec 71, is correct or whether the rule requires to be
  restated on the scheme of the Land Acquisition Act understood
D in the context of the general rules relating to appropriation and
  the rules relating to appropriation in execution of money decrees
  and mortgage decrees as a concomitant to the said exercise,
  the Constitution Bench specifically dealt with Order XXI Rules
  1, 2, 4 and 5 and has rendered a definite conclusion on the
E application of the abovesaid provision after a detailed
  discussion in its elaborate judgment. Since, the issue has been
  dealt with in extenso in the said decision and the issue has been
  succinctly clarified by the Constitution Bench, we wish to refer
  to those relevant portions of the said decision in order to apply
F the ratio laid down therein to the facts of this case and test the
  correctness of the judgment impugned in this appeal.

        19. In Gurpreet Singh (supra) at paragraph 14, the
  implication of Order XXI Rule 1 vis-a-vis the related provisions
G under Order XXIV and Order XXXIV have been set out which
  is to the following effect:
          "14. Now, we may conl)ider the provisions in the Code of
          Civil Procedure, 1908 (hereinafter referred to as "the
          Code") that have relevance to the issue. The rule of
H         appropriation in respect of amounts deposited in court or
BHARAT HEAVY ELECTRICALS LTD. v. RS. AVTAR SINGH 725
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

    in respect of payment into court, is contained in Order 24        A
    of the Code at the pre-decretal stage and in Order 21 Rule
    1 at the post-decretal stage. Though, we are not directly
    concerned with it, we may notice that special provisions
    relating to mortgages are found in Order 34 of the Code.
    Under Order 24 Rule 1, a defendant in a suit for recovery         B
    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         c
    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       D
    as satisfaction in part and allows him to pursue his suit
    for what he claims to be the balance due, subject to the
    <.,onsequences provided for therein regarding costs. It also
    deals with the procedure when the plaintiff accepts the
    payment in full satisfaction of his claim."
                                                                      E
    20. In paragraph 20, the general rule of appropriation
towards a decretal amount has been stated as under:
    "20 ....... It was also held that the general rule of
    appropriation towards a decretal amount was that such an
    amount was to be adjusted strictly in accordance with the         F
    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, subject of course, to any agreement
    between the parties."                                             G
     21. After referring to the general rule of appropriation in
cases where there is shortfall in paying the decree amount what
will be the mode of appropriation has been explained in
paragraph 26 and in the last part of paragraph 27 in the
following words:                                                      H
    726       SUPREME COURT REPORTS                   [2012] 10 S.C.R.

A         "26. Thus, in cases of execution of money decrees or
          award-decrees, or rather, decrees other than mortgage
          decrees, interest ceases to run on the amount deposited,
          to the extent of the deposit. It is true that if the amount falls
          short, the decree-holder may be entitled to apply the rule
B         of appropriation by appropriating the amount first towards
          the interest, then towards the costs and then towards the
          principal amount due under the decree. But the fact
          remains that to the extent of the deposit, no further interest
          is payable thereon to the decree-holder and there is no
c         question of the decree-holder claiming a reappropriation
          when it is found that more amounts are due to him and the
          same is also deposited by the judgment-debtor. In other
          words, the scheme does not contemplate a reopening of
          the satisfaction to the extent it has occurred by the deposit.
          No further interest would run on the sum appropriated
D
          towards the principal.

          27 ...... The principle appears to be that if a part of the
          principal has been paid along with interest due thereon,
          as on the date of issuance of notice of deposit, interest
E         on that part of the principal sum will cease to run thereafter.
          In other words, there is no obligation on the judgment-
          debtor to pay interest on that part of the principal which
          he has already paid or deposited."

F        22. The said legal position has been reiterated in
    paragraph 36 with a little more clarity, which is to the following
    effect:

          "36 .... ... But if there is any shortfall at any stage, the
          claimant or decree-holder can seek to apply the rule of
G         appropriation in respect of that amount, first towards
          interest and costs and then towards the principal, unless 1
          the decree otherwise directs."

                                                     (Emphasis added)
H
BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 727
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]
     23. Ultimately, in paragraph 49, the Constitution Bench          A
decision has summed up the legal position as under:

    "49. Though, a decree-holder may have the right to
    appropriate the payments made by the judgment-debtor,
    it could only be as provided in the decree if there is            B
    provision in that behalf in the decree or, as contemplated
    by Order 21 Rule 1 of the Code as explained by us above.
    The Code or the general rules do not contemplate payment
    of further interest by a judgment-debtor on the portion of
    the principal he has already paid. His obligation is only to      C
    pay interest on the balance principal remaining unpaid as
    adjudged either by the court of first instance tir in the court
    of appeal. On the pretext that the amount adjudged by the
    appellate court is the real amount due, the decree-holder
    cannot claim interest on that part of the principal already
    paid to him. Of course, as indicated, out of what is paid         D
    he can adjust the interest and costs first and the balance
    towards the principal, if there is a shortfall in deposit. But,
    beyond that, the decree-holder cannot seek to reopen the
    entire transaction and proceed to recalculate the interest
    on the whole amount and seek a reappropriation as a               E
    whole in the light of the appellate decree."

                                              (Emphasis added)

     24. From what has been stated in the said decision, the
                                                                      F
following principles emerge:

    (a) The general rule of appropriation towards a decretal
    amount was that such an amount was to be adjusted strictly
    in accordance with the directions contained in the decree
    and in the absence of such directions adjustments be              G
    made firstly towards payment of interest and cost and
    thereafter towards payment of the principal amount subject,
    of course, to any agreement between the parties.

    (b) The legislative intent in enacting sub-rules 4 and 5 is       H
    728       SUPREME COURT REPORTS                 [2012] 10 S.C.R.


A         clear to the pointer that interest should cease to run on the
          deposit made by the judgment debtor and notice given or
          on the amount being tendered outside the Court in the
          manner provided in Order XX.I Rule 1 sub-clause (b).

          (c) If the payment made by the judgment debtor falls short
B
          of the decreed amount, the decree holder will be entitled
          to apply the general rule of appropriation by appropriating
          the amount deposited towards the interest, then towards
          cost and finally towards the principal amount due under the
          decree.
c
          (d) Thereafter, no further interest would run on the sum
          appropriated towards the principal. In other words if a part
          of the principal amount has been paid along with interest
          due thereon as on the date of issuance of notice of deposit
D         interest on that part of the principal sum will cease to run
          thereafter.

          (e) In cases where there is a shortfall in deposit of the
          principal amount, the decree holder would be entitled to
          adjust interest and cost first and the balance towards the
E
          principal and beyond that the decree holder cannot seek
          to reopen the entire transaction and proceed to recalculate
          the interest on the whole of the principal amount and seek
          for re-appropriation.

F       25. Keeping the above principles in mind, when we
   examine the case on hand, we find from the judgment of the
   learned Single Judge, which has been affirmed by the Division
   Bench, that the principal amount due along with the interest
 · thereon on the date of the first payment, namely, 18.10.1985
G as well as based on the subsequent payments on the remaining
   principal amount and the interest due thereon which has been
   set out in the last part of judgment dated 12.07.2002 of the
   learned Single Judge, the following summing up:

          "To sum up on 03.01.2001 Rs.1, 19,61, 134/- was due
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BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 729
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.)
    towards principal amount and Rs.23,35, 134/- was due             A
    towards interest. The judgment debtor has further to pay
    the principal sum of Rs.1, 19,61, 134/- with 12% interest
    calculated from 04.01.2002 to the date of final payment
    minus Rs.23,35,184/- + Rs.19,97,192/- allowed to be
    deducted as TDS. The contention of the judgment debtor           B
    that only a sum of Rs.1,94,93,885/- was due as on
    03.01.2001 under the decree is wrong and is rejected. As
    such the contention of the judgment debtor that the decree
    holder is charging interest on the amount of interest and
    contravening section 3(3)(c) of Interest Act is incorrect and    c
    is rejected.

    Having regard to the above discussion the objections filed
    by the judgment debtor have no merit the objection
    application is dismissed."
                                                                     D
     26. In fact in the calculation which was sought to be made
by the respondent in its statement filed before the learned
Single Judge, interest was calculated for the period subsequent
to 06.03.2001 that was the date when the last payment was
made by the appellant wherein the calculation of interest for the    E
period from 04.01.2001 to 04.03.2002 was claimed on the
entire sum of Rs.1,42,96,318/- instead of calculating the same
on the balance principal of Rs.1, 19,61, 134/-. In the penultimate
paragraph of the order dated 12.07.2002, the learned Single
Judge rightly rejected such a wrong claim made on behalf of          F
the respondent while dismissing the objections filed by the
appellant.

     27. The Division Bench having examined the order of the
learned Single Judge by applying the principles culled out from
the Constitution Bench decision of this Court ultimately helcj as    G
under in paragraph 26:

    "26. In the present case, it is not in dispute that there was
    neither any notice under Rule 1 of Order XXI nor any
    specific direction contained in the decree or given by the       H
    730       SUPREME COURT REPORTS                [2012] 10 S.C.R.

A         Division Bench, while directing making payment of Rs.1
          crore as a condition for grant of stay of the execution. In
          these circumstances, the Id. Single Judge rightly held that
          the action of the decree holder in adjusting the said amount
          first against the interest of Rs.78,30,314/-, which had
B         become due as on that date was perfectly in order and only
          balance amount of Rs.22,07,340/- could be adjusted
          against principal, thereby, leaving balance amount payable
          towards principal as on 19.10.1985 at Rs.1, 19,61, 134/- on
          which the decree holder was entitled to interest @ 12%
c         p.a. from 19.10.1985 till 6.3.01, when a sum of
          Rs.1,94,91,077/- was paid in this manner accepted the
          calculation made by the decree holder, wherein, no
          arithmetic error or otherwise found. No doubt, in the
          process the appellant is made to pay substantial amount
          towards interest. However, that is its own making. The
D
          award is of the year 1982, which means it was rendered
          more than 26 years ago. Even the decree is of the year
          1985. After the passing of the decree, the appellant chose
          to challenge the same by filing appeal and in the
          meantime, made only part payment of Rs.1 crore. Even
E         when the appeal was dismissed in the year 2000, the
          appellant did not make any payment, which inaction on the
          part of the appellant, compelled the respondent to file the
          execution petition. In the execution petition, also the
          appellant made payment of Rs.1,94,91,077/- on
F         10.10.2000 and wanted to contest the execution petition,
          particularly with regard to the manner in which the amounts
          paid are to be appropriated. Because of these part
          payments, which had to be appropriated first against the
          interest, which kept on mounting, part principal amount
G         always remain payable as a consequence whereof further
          interest on the balance principal amount also became
          payable by the appellant. For this, it is the appellant only
          which is to be blamed."
          28. Inasmuch as, we find that the learned Single Judge as
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BHARAT HEAVY ELECTRICALS LTD. v. R.S. AVTAR SINGH 731
   & CO. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.)

well as the Division Bench has applied the rule of construction       A
on Order XXI Rule 1 based on the Constitution Be.nch decision
of this Court wherein the earlier decision of this Court in Prem
Nath Kapur (supra), in regard to the rule of appropriation, as
set out in paragraph 48, was also approved, we do not find any
illegality in the said judgment of the Division Bench while           B
affirming the order of the learned Single Judge dated
12.07.2002.
      29. As far as the contention based on Section 34 of CPC
 having regard to the general rule of appropriation in cases of
 this nature where there is a short payment made pursuant to          C
the decree, we do not find any conflict with the said provision
 in so far as it related to payment of interest to be payable by
the appellant. As far as the submission made, based on
Section 3(3)(c) of the Interest Act is concerned, the said
provision only states de hors the substantive part of said Section    D
3, Courts are not empowered to award interest upon interest.
We do not fine any scope to apply the said section to the case
on hand where the controversy is subsequent to the decree
where direction for payment of interest on the award amount
has been spelt out. The issue related to the correctness of the       E
interest calculated as per the decree of the Court which made
the award its rule. The challenge is not to the decree on the
footing that it was in violation of Section 3(3)(c) of the Interest
Act. We, therefore, do not find any support in the submission
based upon the said Section 3(3)(c) of the Interest Act. The          F
main contention of Mr. Chandhiok, learned ASG for the
appellant having been already dealt with by the Constitution
Bench decision of this Court referred to above which is binding
and applying the ratio laid down therein, we do not find any
scope to countenance such a submission made before us while           G
impugning the judgment of the Division Bench dated
03.11.2008 as well as that of learned Single Judge dated
12.07.2002. We do not find any merit in this appeal, the appeal
fails and the same is dismissed.
B.B.B.                                       Appeal dismissed.        H