V. KALA BHARATHI & ORS.versusTHE ORIENTAL INS. CO. LTD., BR. CHITOOR

                     [2014] 5 S.C.R. 1


               V. KALA BHARATHI & ORS.                         A
                             V.
      THE ORIENTAL INS. CO. LTD., BR. CHITOOR
           (Civil Appeal No. 3056 of 2008)
                      APRIL 01, 2014
                                                               B
      [P. SATHASIVAM, CJI., RANJAN GOGOi AND
                  N.V. RAMANA, JJ.]

     Code of Civil Procedure, 1908 - Or. 21, r. 1 - Motor
accident claim - Compensation - Grant of - Award passed C
under the Motor Vehicles Act comprising of principal amount
alongwith interest and costs -Amounts deposited by judgment
debtor falling short of the decretal amount - Whether amount
deposited by judgment debtor to be adjusted first towards
interest or towards principal decretal amount - Held: On facts,o
the decree passed by the trial Court or the appellate Court
did not contain the mode of appropriation and in the absence
of any such direction, the decree-holder is entitled to
appropriate the amount deposited by the judgment debtor first
towards interest, then cost and thereafter towards principal - E
After such appropriation, decree-holder entitled to interest only
to the extent of unpaid principal amount - Hence, interest be
calculated on the unpaid principal amount - Motor Vehicles
Act, 1988 - Decree.

     On account of demise of an Engineering Graduate, F
in a road accident, his legal heirs, i.e., the appellants filed
claim petition before the Motor Accident Claims Tribunal
claiming compensation to the tune of Rs.2 crores. The
vehicle involved in the said accident-was insured by the
respondent - Insurance Company. The Tribunal vide its G
Award dated 29.04.1997 awarded an amount of
Rs.98,40,500/- as compensation with interest @ 12% p.a.
from the date of the petition, .i.e., 25.10.1993 till the date
of realization, apart from costs quantified at Rs.99,443/-.
                              1                                 H
    2        SUPREME COURT REPORTS             [2014] 5 S.C.R.


A Respondent - Insurance Company filed appeal under
  Section 173 of the Motor Vehicles Act, 1988 and to comply
  with the provisions contained therein, deposited a sum
  of Rs.25,000/-. The High Court granted stay of execution
  of the Award dated 29.04.1997 subject to the condition of
B depositing a sum of Rs.30 lakhs and Rs.99,443/- costs,
  which amounts were deposited. The said order was
  subsequently made absolute subject to the condition of
  depositing a further sum of Rs.30 lakhs, which was also
  complied with. The High Court ultimately partly allowed
c the appeal thereby reducing the compensation amount
  from Rs.98,40,500/- to Rs.56,40,000/-, however, the
  interest rate of 12% p.a. was retained. The respondent -
  Insurance Company thereafter deposited a further sum
  of Rs.23,27,635/- claiming to be full and final satisfaction
  of the award.
0
         The appellants filed Execution Petition before the
    Executing Court I Tribunal claiming an amount of
    Rs.20,16,700/-, which claim was denied by the respondent
    - Insurance Company on the ground that its liability to
E   pay interest gets discharged when it deposits the award
    amount in full. Thus, relying on the principle of accrual
    method, the respondent - Insurance Company claimed
    that since it satisfied the award amount in full, no more
    interest was payable and as per its calculation, only a
F   sum of Rs.36,650/- was liable to be paid, which too was
    deposited. The Executing Court took a view that the
    amounts deposited by the respondent - 1·nsurance
    Company from time to time were liable to be adjusted
    towards the component of interest first and thereafter to
G   the portion of the decretal amount. After taking into
    consideration the amounts deposited by the respondent
    - Insurance Company on different dates, its liability was
    fixed to the extent of Rs.17,70,657/- together with interest
    @ 12% p.a. from the date of filing of the Execution
H   Petition till the date of realization.
 V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.            3
            CO. LTD., BR. CHITOOR
     The respondent - Insurance Company assailed the A
aforesaid calculation I order of the Executing Court in
Civil Revision Petition. The appellants also filed Civil
Revision Petition thereby challenging that the Executing
Court could not have adjusted the amount paid as costs
towards the decretal amount. The High Court allowed B
both the Civil Revision Petitions while holding that (i) the
part payments deserve to be adjusted towards the
principal decretal amount and not any component of ·
interest accrued upto that date; and (ii) the amount
deposited towards costs, in pursuance of the directions c
of the court, must be adjusted towards that, and not
towards payment of the decretal amount.

    The question for consideration in this appeal is
whether the amount deposited by the judgment debtor in
a decree is to be adjusted first towards interest or         D
towards principal decretal amount.

    Allowing the appeal, the Court

     HELD: 1.1. A bare perusal of Rule 1 of Order XXI of E
the Code of Civil Procedure, 1908 makes it amply clear
that the judgment debt.or is required to pay the decretal
amount in one of the modes specified in sub-rule (1)
thereof. Sub-rule (2) of Rule 1 provides that once payment
is made under sub-rule (1 ), it is the duty of the judgment
debtor to give notice to the decree-holder through the F
Court . or directly to him by registered post
acknowledgement due. Sub-rule (3) of Rule 1 merely .
indicates that in case money is paid by postal money
order or through a bank under clause (a) or clause (b) of
sub-rule (1) thereof, certain particulars are required to be G
accurately incorporated while making such payment.
Sub-rules (4) and (5) of Rule 1 states from which date,
interest shall cease to run - in case amount is paid under
clause (a) or (c) of sub-rule (1 ), interest shall cease to run
from the date of service of notice as indicated under sub- H
    4       SUPREME COURT REPORTS              [2014] 5 S.C.R.

A rule (2); while in case of out of court payment to the
  decree-holder by way of any of the modes mentioned
  under clause (b) of sub-rule (1 ), interest shall cease to run
  from the date of such payment. The language contained
  in the said sub-rules clearly indicates the appropriation
B of amount to be made in case the decree contains a
  specific clause, specifying the manner in which the
  money deposited to be appropriated. Sub-rule (1)(c) of
  Rule 1 indicates the money deposited to be appropriated
  as per the direction of the Court, if there is a provision in
c that behalf. In the absence of specific direction with
  regard to appropriation, then only the manner of
  appropriation would arise for consideration. Sub-rules (2)
  to (5) of Rule 1 indicate the procedure to be followed
  when the deposit is made either under clause (a) or (b)
  of sub-rule (1) thereof, but it does not leave any scope
0
  for interpretation with regard to appropriation of
  deposited amount by the decree-holder. [Paras 14 and 15]
  [12-H; 13-A-G]

       1.2. The High Court proceeded on the assumption as
E if sub-rules (4) and (5) of Rule 1, which were inserted
  pursuant to Amendment to C.P.C. in 1976, there is change
  in procedural law and the tenor of sub-rule (1) thereof.
  But, sub-rules (4) and (5) do not have any relevance with
  regard to appropriation, except stating when interest
F ceases to run. Thus, it is no way guide for appropriation
  of amount as contemplated under Order XXI Rule 1 of the
  CPC. [Para 24] [18-E-F]

       1.3. In money suit, the amount consists of principal
G and interest till the suit is filed. But, in case of award
  passed under the Act, the question of inclusion of any
  interest on the decretal amount does not arise.
  Unfortunately, the High Court proceeded on the
  assumption that it amounts to interest on interest which
  is prohibited under Section 3(3)(c) of Interest Act, 1978.
H This is not so, as in the facts and circumstances of the
 V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                 5
               CO. LTD., BR. CHITOOR
present case, the decree passed by the trial Court or the A
appellate Court does not contain the mode of
appropriation and in the absence of any such direction,
the decree-holder is entitled to appropriate the amount
deposited by the judgment debtor first towards interest,
then cost and thereafter towards principal. The appellants B
are entitled to the amount awarded by the Executing
Court, as the amounts deposited by the judgment debtor
fell short of the decretal amount. After such appropriation,
the decree-holder is entitled to interest only to the extent
of unpaid principal amount. Hence, interest be calculated C
on the unpaid principal amount. [Paras 25, 26] [19-A-C, F]

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

     Industrial Credit and Development Syndicate (/CDS) Ltd.      D
Vs. Smithaben H. Patel & Ors. 1999 (3) SCC 80: 1999 (1)
SCR 555; Venkatadri Appa Rao Vs. Parthan Sarathy Appa
Rao AIR 1922 PC 233; Meghraj Vs. Bayabai 1969 (2) SCC
274: 1970 (1) SCR 52+3; Rajasthan State Road Transport
Corporation, Jaipur Vs. Poonam Pahwa AIR 1997 SC 2951:            E
1997 (1) Suppl. SCR 698; Venkatadri Appa Rao Vs.
Parthasarathi Appa Rao AIR 1922 PC 233; Rai Bahadur
Sethnemichand Vs. Seth Rada Kishen AIR 1922 PC 26;
Prem Nath Kapur & Anr. v. National Fertilizers Corporation,
1996 SCC (2) 71: 1995 (5) Suppl. SCR 790; Bharath Heavy           F
Electricals Ltd. Vs. RS Avthar Sing & Co. 2013 (1) SCC 243:
2012 (10) SCR 701 - referred to.
                    Cas\ Law Reference:
    1999 (1) SCR 555               referred to   Para 7           G
    AIR 1922 PC 233                referred to   Para 7
    1970 (1) SCR 523               referred to   Para 7
    2006 (7) Suppl. SCR 422        followed      Para 7, 26
                                                                  H
    6        SUPREME COURT REPORTS                 [2014] 5 S.C.R.


A       1997 (1) Suppl. SCR 698          referred to    Para 10
        AIR 1922 PC 233                  referred to    Para 17
        AIR 1922 PC 26                   referred to    Para 17
        1995 (5) Suppl. SCR 790          referred to    Para 21
B
        2012 (10) SCR 701                referred to    Para 22
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    3056 of 2008.
c       From the Judgment and Order dated 29.07.2005 of the
    High Court of A.P. at Hyderabad in CRP No. 4337 of 2004.

          Y. Raja Gopala Rao, Y. Vismai Rao, Hitender Nath Rath
    for the Appellants.
D
         Mohan Babu A., Debasis Misra for the Respondent.

        The Judgment of the Court was delivered by

        N.Y. RAMANA, J. 1. The short question to be answered
E in this appeal is whether the amount deposited by the judgment
  debtor in a decree is to be adjusted first towards interest or
  towards principal decretal amount.

       2. The facts of the case are - On account of demise of an
  Engineering Graduate, Mr. V. Raja Kumar on 29.04.1993 in a
F road accident, his legal heirs, i.e., the appellants herein filed a
  claim petition being M.V.O.P. 774 of 1993 before the Motor
  Accident Claims Tribunal (for short, 'the Tribunal') claiming
  compensation to the tune of Rs.2 crores. The vehicle involved
  in the said accident was insured by the respondent - Insurance
G Company. The Tribunal vide its Award dated 29.04.1997
  awarded an amount of Rs.98,40,500/- as compensation with
  interest@ 12% p.a. from the date of the petition, i.e.,
  25.10.1993 till the date of realization, apart from costs
  quantified at Rs.99,443/-.
H
 V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                    7
     CO. LTD., BR. CHITOOR [N.V. RAMANA, J.]
      3. Being aggrieved, the respondent - Insurance Company          A
filed an appeal under Section 173 of the Motor Vehicles Act,
1988 (for short, 'the Act') and to comply with the provisions
contained therein, deposited a sum of Rs.25,000/-. On
15.12.1997, the High Court in C.M.A. No. 1726of1997 granted
stay of execution of the Award dated 29.04.1997 subject to the        B
condition of depositing a sum of Rs.30 lakhs and Rs.99,443/-
costs, which amounts were undisputedly deposited. The said
order was made absolute on 15.07.1998 subject to the
condition of depositing a further sum of Rs.30 lakhs, which was
also complied with. A Division Bench of the High Court partly         C
allowed the appeal on 19.12.2001 thereby reducing the
compensation amount from Rs.98,40,500/- to Rs.56,40,000/-,
however, the interest rate of 12% p.a. was retained. The
respondent - Insurance Company also deposited a sum of
Rs.23,27,635/- on 19.09.2002, claiming to be full and final           D
satisfaction of the award.

     4. The appellants filed Execution Petition No. 11 of 2003
on 06.06.2003 before the Executing Court I Tribunal claiming
an amount of Rs.20,16,700/-, which claim was denied by the
respondent - Insurance! Company on the ground that its liability      .E
to pay interest gets discharged when it deposits the award
amount in full. Jhus, relying on the principle of accrual method,
the respondent - Insurance Company claimed that since it
satisfied the award amount in full, no more interest was payable
and as per its calculation, only a sum of Rs.36,650/- was liable      F
to be paid, which was deposited on 29.07.2003.

     5. While adjudicating the aforesaid Execution Petition, the
Executing Court took a view that the amounts deposited by the
respondent - Insurance Company from time to time were liable          G
to be adjusted towards the component of interest first and
thereafter to the portion of the decretal amount. After taking into
consideration the amounts deposited by the respondent -
Insurance Company on different dates, its liability was fixed vide
order dated 18.08.2004 to the extent of Rs.17, 70,657/- together
                                                                      H
    8        SUPREME COURT REPORTS                [2014] 5 S.C.R.


A with interest@ 12% p.a. from the date of filing of the Execution
  Petition till the date of realization.

       6. The respondent - Insurance Company assailed the
  aforesaid calculation I order of the Executing Court dated
  18.08.2004 in Civil Revision Petition No. 4337 of 2004. The
8
  appellants herein also filed Civil Revision Petition No. 6108/
  2004 thereby challenging that the Executing Court could not
  have adjusted the amount paid as costs towards the decretal
  amount. The learned single Judge of the High Court of
  Judicature, Andhra Pradesh, by judgment dated 29.07.2005,
C allowed both the Civil Revision Petitions while holding that (i)
  the part payments deserve to be adjusted towards the principal
  decretal amount and not any component of interest accrued
  upto that date; and (ii) the amount deposited towards costs, in
  pursuance of the directions of the court, must be adjusted
D towards that, and not towards payment of the decretal amount.
       7. Learned counsel for the appellants vehemently
  contended that the impugned order cannot be sustained being
  contrary to law of the land declared under Article 141 of the
E Constitution of India (for short, 'the Constitution'). He also
  contended that judicial discipline to abide by declaration of law
  made by this Court cannot be forsaken under any pretext by
  any authority or court, be it even the highest Court in a State. It
  tantamount to judicial indiscipline. In support of his submissions,
F the learned counsel relied upon the judgment of this Court
  Industrial Credit and Development Syndicate (/COS) Ltd. Vs.
  Smithaben H. Patel & Ors. 1999 (3) SCC 80, Venkatadri Appa
  Rao Vs. Parthan Sarathy Appa Rao AIR 1922 PC 233,
  Meghraj Vs. Bayabai 1969 (2) SCC 27 4 and Gurpreet Singh
G Vs. Union of India 2006 (8) SCC 457.

         8. On the other hand, learned counsel appearing for the
    respondent - Insurance Company contended that, in the facts
    and circumstances of the case, there is no reason to interfere
    with the impugned order passed by the High Court.
H
  V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                   9
      CO. LTD., BR. CHITOOR [N.V. RAMANA, J.]

     9. We have heard learned counsel for the parties and gone       A
through the entire material available on record.

     10. Before adverting to the various issues involved in the
case and the contentions advanced by the counsel on either
side, we have given our anxious consideration to the judgment        B
impugned of the learned single Judge of the Andhra Pradesh
High Court. The learned Judge, while adjudicating the issue,
has considered the judgments of this Court in Meghraj (supra),
Industrial Credit and Development Syndicate (supra) and
Rajasthan State ~oad Transport Corporation, Jaipur Vs.               C
Poonam Pahwa, AIR 1997 SC 2951 and has passed the
judgment by giving reasons which are basis for his conclusion.

    11. We feel that it is appropriate to extract the relevant
paragraphs from the impugned judgment.
                                                                     D
    "It is true that in a plethora of judgments, the Supreme Court
    as well as the High Courts took the view that any amount
    deposited under Rule 1 of Order 21 CPC must be first
    adjusted towards interest. Discussion on those judgments
    vis-a-vis sub-rules (4) and (5) of Rule 1 of Order 21 C.P.C.
                                                                     E
    is prone to be taken or mistaken as an attempt to explain
    the judgments of the Supreme Court or High Courts.
    However, since some of the judgments of the Supreme
    Court were delivered at a time, when sub rules (4) and (5)
    were not on the statue book, and in the judgments
    rendered thereafter, the attention of the Hon'ble Supreme
                                                                     F
    Court and the High Courts was not pointedly invited to these
    provisions in certain cases or they did not fall for
    consideration, it is felt necessary to address the issue ... "

    "Viewed from this context, it is evident that Parliament         G
    added sub rules (4) and (5) with a definite and avowed
    object of assessing the running of interest on the deposits
    made by the decree holder into a Court. The background
    in which those provisions came to be incorporated has
    already been indicated in the preceding paragraphs. Sub          H
    10        SUPREME COURT REPORTS                  [2014] 5 S.C.R.


A        Rules (4) and (5) by themselves do not disclose as to
         wheth1~r the amount should be adjusted towards principal
         or interest. However, the expression "interest if any"
         occurring in both the provisions is significant. A decree
         may comprise of principle amount claimed in the suit, as
8        well as a component of interest up to the date of decree.
         Once a aecree is passed for certain amount, it becomes
         a principle by itself and the liability to pay interest thereon,
         and if so, the rate at which it is to be paid, would depend
         upon the terms of decree. The amount that carries the
c        interest till the date of realization would be the one
         stipulated in the decree. It is not permissible for a Court
         to award interest on interest.

         Sub section (3) of Section 3 of the Interest Act clearly
         prohibits grant of interest on interest. Therefore, the only
D        component of the decree that can be related to the
         expression "interest if any" occurring in sub sections (4)
         and (5) of Rule (1) is the decretal amount, which, in other
         words, is the principal."

E        "It is true that the cases decided so far, do not strictly
         support this view, and in a way, may suggest the other
         point of view. However, an effort is made by this Court, to
         explain the purport of sub-rules (4) and (5) of Rule 1. This
         Court is conscious of the requirement to follow the
F        precedents, as well as its obligation, to give effect to the
         legislative mandate. An endeavor is made to honour both
         the obligations. Having regard to the importance of the
         issue and the implications involved in it, further discussion
         may ensue at appropriate levels."
G       12. From the above findings of the learned Judge, it
    appears that he passed the order basing on three
    considerations:

               Firstly, the judgments relied upon by the claimants
H         are based on the pre-amended provisions of Order 21
 V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                 11
     CO. LTD., BR. CHITOOR [N.V. RAMANA, J.]
    Rule 1 C.P.C.                                                   A

         Secondly, in the cases which were decided
    subsequent to amendment, the issue of appropriation of
    amounts has not fallen for consideration.

          Thirdly, a decree comprises of principal claimed in       B
    the suit as well as component of interest. Hence, once a
    decree is passed for certain amount, it becomes principal
    by itself and Section 3(3) of Interest Act clearly prohibits
    grant of interest on interest.
                                                                    c
    13. Now, before we proceed to decide the legality or
otherwise of the order passed by the learned Judge, it is
worthwhile to examine Rule 1 of Order XXI of the Code of Civil
Procedure, 1908 (for short, 'the CPC'), which reads as under:

                           "ORDER XXI
                                                                    D

           EXECUTION OF DECREES AND ORDERS

    1.     Modes of paying money under decree. - (1) All
    money, payable under a decree, shall be paid as follows,        E
    namely:-

     (a)    by deposit into the Court whose duty it is to execute
            the decree, or sent to that Court by postal money
            order or through a bank; or
                                                                    F
     (b)    out of Court, to the decree-holder by postal money
            order or through a bank or by any ottier mode
            wherein payment is evidenced in writing; or

     (c)    otherwise, as the Court which made the decree,          G
            directs.

    (2) Where any payment is made under clause (a) or clause
    (c) of sub-rule (1 ), the judgment-debtor shall give notice
    thereof to the decree-holder either through the Court or
    directly to him bv reQistered post, acknowledgement due.        H
    12          SUPREME COURT REPORTS                 [2014] 5 S.C.R.


A        (3) Where money is paid by postal money order or through
         a bank under clause (a) or clause (b) of sub-rule (1 ), the
         money order or payment through bank, as the case may
         be, shall accurately state the following particulars, namely:-

B         (a)    the number of the original suit;

          (b)    the names of the parties or where there are more
                 than two plaintiffs or more than two defendants, as
                 the case may be, the names of the first two plaintiffs
                 and the first two defendants;
c
          (c)    how the money remitted is to be adjusted, that is
                 to say, whether it is towards the principal, interest
                 or costs;

          (d)    the number of the execution case of the Court,
D
                 where such case is pending; and

          (e)    the name and address of the payer.

         (4) On any amount paid under clause (a) or clause (c) of
E        sub-rule (1 ), interest, if any, shall cease to run from the date
         of seNice of the notice referred to in sub-rule (2).

         (5) On any amount paid under clause (b) of sub-rule (1),
         interest, if any, shall cease to ·run from the date of such
         payment.
F
         Provided that, where the decree-holder refuses to accept
         the postal money order or payment through a bank, interest
         shall cease to run from the date on which th~ money was
         tendered to him, or where he avoids acceptance of the
G        postal money order or payment through bank, interest shall
         cease to run from the date on which the money would have
         been tendered to him in the ordinary course of business
         of the postal authorities or the bank, as the case may be."

         14. A bare perusal of the aforesaid provisions makes it
H
 V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                    13
     CO. LTD., BR. CHITOOR [N.V. RAMANA, J.]

amply clear that the scope of Order XX! Rule 1 of the CPC is           A
that the judgment debtor is required to pay the decretal amount
in one of the modes specified in sub-rule (1) thereof. Sub-rule
(2) of Rule 1 provides that once payment is made under sub-
rule (1 ), it is the duty of the judgment debtor to give notice to
the decree-holder through the Court or directly to him by              B
registered post acknowledgement due. Sub-rule (3) of Rule 1
merely indicates that in case money is paid by postal money
order or through a bank under clause (a) or clause (b) of sub-
rule (1) thereof, certain particulars are required to be accurately
incorporated while making such payment. Sub-rules (4) and (5)          c
of Rule 1 states from which date, interest shall cease to run -
in case amount is paid under clause (a) or (c) 6f sub-rule (1 ),
interest shall cease to run from the date of service of notice as
indicated under sub-rule (2); while in case of out of court
payment to the decree-holder by way of any of the modes
                                                                       0
mentioned under clause (b) of sub-rule (1), interest shall cease
to run from the date of such payment.

     15. The language contained in the aforesaid sub-rules
clearly indicates the appropriation of amount to be made in
case the decree contains a specific clause, specifying the             E
manner in which the money deposited to be appropriated. Sub-
rule (1 )(c) of Rule 1 indicates the money deposited to be
appropriated as per the direction of the Court, if there is a
provision in that behalf. In the absence of specific direction with
regard to appropriation, then only the manner of appropriation         F
would arise for consideration. Sub-rules (2) to (5) of Rule 1
indicate the procedure to be followed when 'the deposit is
made either under clause (a) or (b) of sub-rule (1) thereof, but
it does not leave any scope for interpretation with regard to
appropriation of deposited amount by the decree-holder.                G

     16. In this regard, it is also pertinent to extract Rule 472 of
the Andhra Pradesh Motor Vehicles Rules, 1989 (for short, 'the
A.P.M.V. Rules'), which is as under:

                                                                       H
    14        SUPREME COURT REPORTS                [2014] 5 S.C.R.


A        "472. Enforcement of an award of the Claims
         Tribunal:- Subject to the provisions of Section 174, the
         Claims Tribunal shall, for the purpose of enforcement of its
         award, have all the powers of a Civil Court in the execution
         of a decree under the Code of Civil Procedure, 1908, as
B        if the award were a decree for the payment of money
         passed by such Court in a Civil Suit."

  The above-said Rule indicates that the award passed by the
  Claims Tribunal is to be treated as if the decree for the payment
C of money passed by the Civil Court in a civil suit. Hence, in view
  of the specific provision contained in the A.P.M.V. Rules, the
  award passed by the Claims Tribunal is to be treated as a
  money decree. In Rajasthan State Road Transport
  Corporation, Jaipur (supra), this Court held that in executing
  the award of the Claims Tribunal, Executing Court is competent
D to invoke the beneficial provision under Order 21 Rule 1 of
  C.P.C.

        1'7. The Privy Council in Venkatadri Appa Rao Vs.
    Parthasarathi Appa Rao AIR 1922 PC 233, held as follows:
E
         "The question then remains as to how, apart from any
         specific appropriation, these sums ought to be dealt with.
         There is a debt due that carries interest. There are moneys
         that are received without a definite appropriation on the
         one side or on the other, and the rule which is well
F        established in ordinary cases is that in those
         circumstances the money is first applied in payment of
         interest and then when that is satisfied in payment of the
         ca f1.lill.L."
G                                              (Emphasis supplied)

        The above principle was reiterated by the Privy Council in
    Rai Bahadur Sethnemichand Vs. Seth Rada Kishen AIR 1922
    PC 26.
H
 V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                   15
      CO. LTD., BR. CHITOOR [N.V. RAMANA, J.]
      18. We may notice that the principle laid down in the above     A
 case has been not only approved by the Supreme Court, but
 also followed in several other subsequent cases. In Meghraj
 (supra), it was held as under:

     "4 .... Unless the mortgagees were informed that the             8
     mortgagors had deposited the amount only towards the
     principal and not towards the interest, and the mortgagees
     agreed to withdraw the money from the Court accepting
     the conditional deposit, the normal rule that the amounts
     deposited in Court should first be applied towards
     satisfaction of the interest and costs and thereafter towards    C
     the principal would apply."

      19. In Mathunni Mathai (supra), it was held that the right
of the decree-holder to appropriate the amount deposited by
the judgment debtor, either in the Court or paid outside, towards D
interest and other expenses is founded both on fairness and
necessity. It was observed that the courts and the law have not
looked upon favourably where the judgment debtor does not
pay or deposit the decretal amount within the time granted as
one cannot be permitted to take advantage of his own default. E
Therefore, the normal rule that is followed is to allow the deposit
or payment, if it is in part, to be adjusted towards the interest
due, etc.

        20. In Industrial Credit and Development Syndicate
  (supra), it has been held that in cases where the trial court has   F
. not prescribed any mode for payment of decretal amount,
  except fixing the instalments, in the absence of agreement
  between the parties, regarding the mode of payment of decretal
  amount, the general rule of appropriation of payments towards
  decretal amount is that the said amount is to be adjusted firstly   G
  strictly in accordance with the directions contained in the
  decree and in the absence of such direction, it is to be adjusted
  firstly towards interest and costs and thereafter towards
  principal amount. This is, of course, subject to the exception
  that the parties can agree to the adjustment of payment in any      H
    16         SUPREME COURT REPORTS              [2014] 5 S.C.R.


A other manner despite the decree. In that case, the Supreme
  Court had an occasion to consider the method of appropriation
  and after noticing various decisions of the English Courts and
  the Privy Council, followed the judgment in Meghraj's case
  (supra).
B
        21. We may also notice that in Prem Nath Kapur & Anr.
  Vs. National Fertilizers Corporation, 1996 SCC (2) 71, while
  differing with the view taken in Mathunni Mathai (supra), it was
  held that the normal rule of appropriation contained in Order
  XXI Rule 1 of the CPC relating to execution of decrees for
C recovery of money stands excluded by Sections 28 and 34 of
  the Land Acquisition Act, 1894 and the principles contained
  therein could not be extended to execution of award decrees
  under the said Act. The relevant para of the said judgment,
  being portion of para 14, reads as under:
D
         "14. Equally, the right to make appropriation is indicated
         by necessary implication, by the award itself as the award
         or decree clearly mentions each of the items. When the
         deposit is made towards the specified amounts, the
E        claimant/owner is not entitied to deduct from the amount
         of compensation towards costs, interest, additional amount
         uncter Section 23 (1-A) with interest and then to claim the
         total balance amount with further interest. ..... .

                                        "
F
       22. In Gurpreet Singh (supra), the. Constitution Bench of
  this Court had an occasion to consider the issue regarding
  execution of money decree, the principle of appropriation and
  its applicability, which was recently followed by this Court in
G Bharath Heavy Electricals Ltd. Vs. RS Avthar Sing & Co.,
  2013 (1) sec 243, and culled down the principles laid down
  in Gurpreet Singh's case as follows:

          a)     The general rule of appropriation towards a decretal
                 amount was that such .:in amount was to be
H
V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                17
    CO. LTD., BR. CHITOOR [N.V. RAMANA, J.]
        adjusted strictly in accordance with the directions       A
        contained in the decree and in the absence of such
        directions, adjustment be made firstly towards
        payment of interest and costs and thereafter
        towards payment of the principle amount subject,
        of course, to any agreement between the parties.          B

   b)    The legislative intent in enacting sub rules (4) and
         (5) is clear to the points that interest should cease
         to run on the deposit made by the judgment debtor
         and notice given or on the amount being tendered         C
         outside the Court in the manner provided in Order
         21 Rule 1 sub clause (0).

   c)    If the payment made by the judgment debtors falls
         short of the decretal amount, the decree holder will
         be entitled to apply the general rule of appropriation   D
         by appropriating the amount deposited towards the
         interest, then towards costs and finally towards the
         principal amount due under the decree.

   d)    Thereafter, no further interest would run on the sum     E
         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 of interest on the part
         of the principal sum will cease to run thereafter.
                                                                  F
   e)    In case where there is .a shortfall in deposit of the
         principal amount, the decree holder would be
         entitled to adjust interest and costs first and then
         balance towards the principal and beyond that the
         decree holder cannot seek to reopen the entire           G
         transaction and proceed to recalculate the interest
         on the whole of the principal amount and seek for
         re-appropriation.

   23. In the judgment referred to by the High Court in the       H
    18        SUPREME COURT REPORTS                [2014] 5 S.C.R.


A  impugned judgment, this Court and the Privy Council
   consistently have taken a view that in case of appropriation of
   amount unless the decree contains a specific provision, the
   amounts have to be appropriated as contemplated under Order
  21 Rule 1. If there is a shortfall in deposit, the amount has to
B be adjusted towards interest and costs, then it has to be
  adjusted. towards principal. The High Court has failed to
  appreciate this fact and misdirected itself in observing that
  these judgments are prior to the amendment to Order 21 Rule
   1. In our considered view, as far as this aspect is considered,
C there is no much difference in the provisions prior to or
  subsequent to the amendment, because in the objects and
  reasons for amendment to Order XXI Rule 1, as observed by
  the Constitution bench in Gurpreet Singh the legislative intent
  in enacting sub-rules (4) and (5) is that interest should cease
D on the deposit being made and notice given or on the amount
  being tendered outside the court in the manner provided. The
  intent of the rule making authority is to leave no room for any
  frivolous pleas of payment of money due under a money decree.

       24. We may add that the High Court proceeded on the
E assumption as if sub-rules (4) and (5) of Rule 1, which were
  inserted pursuant to Amendment to C.P.C. in 1976, there is
  change in procedural law and the tenor of sub-rule (1) thereof.
  But, sub-rules (4) and (5) do not have any relevance with regard
  to appropriation, except stating when interest ceases to run.
F Thus, it is no way guide for appropriation of amount as
  contemplated under Order XXI R,ule 1 of the CPC. In Industrial
  Credit Development Syndicate (supra) which is subsequent to
  the amendment to the provision, this Court has categorically
  observed the procedure to be followed and which squarely
G applies to the case, but the High Court has given its own
  interpretation to the judgment and failed to consider the law laid
  down by this Court in its proper perspective.

       25. The next finding of the High Court is with regard to
H interest on interest.
 V. KALA BHARATHI & ORS. v. THE ORIENTAL INS.                   19
     CO. LTD., BR. CHITOOR [N.V. RAMANA, J.]
       In money suit, the amount consists of principal and interest   A
till the suit is filed. But, in case of award passed under the Act,
the question of inclusion of any interest on the decretal amount
does not arise. Unfortunately, the High Court proceeded on the
assumption that it amounts to interest on interest which is
prohibited under Section 3(3)(c) of Interest Act, 1978 (for short,    B
'the Interest Act'). This is not so, as in the facts and
circumstances of the present case, the decree passed by the
trial Court or the appellate Court does not contain the mode of
appropriation and in the absence of any such direction, the
decree-holder is entitled to appropriate the amount deposited         c
by the judgment debtor first towards interest, then cost and
thereafter towards principal.

     26. In view of above and more particularly keeping in view
the ratio of the Constitution Bench judgment in Gurpreet Singh
(supra), where considering an identical question in respect of        D
Order XXI Rule 1 of the CPC, it was held that if the amount
deposited by the judgment debtor falls short of the decretal
amount, the decree-holder is entitled to apply the rule of
appropriation by appropriating the amount first towards interest,
then towards costs and subsequently towards principal amount          E
due under ttie decree; we are of the opinion that the appellants
herein are entitled to the. amount awarded by the Executing
Court, as the amounts deposited by the judgment debtor fell
short of the decretal amount. After such appropriation, the
decree-holder is entitled to interest only to the extent of unpaid    F
principal amount. Hence, interest be calculated on the unpaid
principal amount.

    27. We, therefore, allow the appeal, set aside the
impugned judgment dated 29.07.2005 passed by the High                 G
Court and restore that of the Executing Court dated
18.08.2004.

     28. No orders as to costs.

Bibhuti Bhushan Bose                                Appeal allowed.   H