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In the Matter of: Project Engineering Construction v/s M/s. Hindustan Steel Works Construction Ltd.

    E.C. No. 9 of 2012 (Original Side)

    Decided On, 23 April 2013

    At, High Court of Judicature at Calcutta


    For the Petitioner: Amitava Deb, Advocate. For the Respondent: Asit Kr. Bhattacharya, with S.N. Ghosh, Advocates.

Judgment Text

I.P. Mukerji, J.

This is an application to enforce an arbitral award. It was passed under the old Act, the Arbitration Act, 1940, on 27th July 2002. The award was for Rs.7,34,200/- in favour of the decree holder with interest at the rate of 12% per annum during different periods mentioned in the award till the date of the decree. The counter claim of the judgment-debtor was also allowed to a very small extent with interest at the rate of 12% per annum. The counter claim allowed was Rs. 26,726/-.

The judgment debtor made an application to set aside the award (G.A. No. 1215 of 2003) before this Court. A judgment and order was made by Narayan Chandra Sil, J. on 4th August, 2003 refusing to interfere with the award except to the extent that instead of 12%, the judgment debtor would get interest at the rate of 18% on the said award on their counter claim. On 5th September, 2003 a judgment upon award was passed by this Court. The post decretal rate of interest would be as modified by the order of 4th August. 2003.

The judgment debtor preferred an appeal from that order The appeal court directed them to deposit a sum of Rs. 16 lakhs with the Registrar, High Court Original Side, Calcutta. The judgment debtor did not deposit that money, which was made a condition precedent to staying the operation of the judgment and decree.

Hence the decree-holder made an application for execution of the decree. The Executing Court passed an order on 2nd July, 2004 in that application [E. C. Case No. 19 of 2004] directing the judgment debtor to deposit about Rs.16 lakhs with the Registrar, High Court Original Side. On 28th July, 2004, the judgment debtor deposited the sum of Rs.16 lakhs with the Registrar. On 1st March, 2005 this Court directed the Registrar to pay out a sum of Rs.16 lakhs from that deposit to the decree-holder. Nothing further is heard of this execution application.

On 11th May, 2005, the appeal court directed the judgment-debtor to furnish a bank guarantee for RS. 3,50,000/- in favour of the Registrar, Original Side before 19th May, 2005. The said bank guarantee was furnished by the judgement debtor.

On 10th August, 2006 the appeal was dismissed. Another execution application was filed by the decree-holder (E.C. 51 of 2007). A Special Leave Petition was filed in the Supreme Court by the judgment debtor. This was withdrawn. A review application seeking review of the appeal court’s order is pending in this Court.

On the submission of the judgment debtor that no decree had been drawn up after the appeal was disposed of on 10th August, 2006, the execution application (E.C. 51 of 2007) was withdrawn by the decreeholder on 1st December, 2009 with liberty to file a fresh execution application. Pursuant to such liberty this execution application was filed.


A very interesting point has been raised by the learned counsel for the judgment debtor. There is no dispute with regard to the principal sum under the decree, as claimed in the tabular statement. But it was submitted that after withdrawal of about Rs. 16 lakhs. (In fact, only Rs. 15,84,001/- was received by the decree-holder), interest ceased to run, as the principal sum stood paid. There could be no interest on interest. The decree holder wants appropriation according to the undernoted judgments of the Supreme Court.

Now, the only dispute between the parties is with regard to calculation. Some principles of law are also involved.

Under the common law, where a debtor had separate debts towards a creditor, while repaying a debt, he could signify to his creditor the debt towards which the payment could be appropriated. If the creditor accepted the payment he had to appropriate accordingly (See paragraphs 7 to 12 of Gurpreet Singh Vs. Union of India reported in (2006) 8 SCC 457). If the debtor did not make such a stipulation, the creditor could appropriate the payment towards any debt. (See the said paragraphs of Gurpreet Singh Vs. Union of India reported in (2006) 8 SCC 457). The creditor could so appropriate, irrespective of the time when these debts became payable. This common law principle finds embodiment in Sections 59, 60 and 61 of the Indian Contract Act, 1872. In the absence of exercise of option by the debtor or creditor the interest claim could be satisfied first, according to paragraph 10 of the above report.

In the case of Gurpreet Singh Vs. Union of India this law relating to appropriation was applied towards deposit or payment of the decretal amount under Order 21 Rule 1 (1) (a) (b) and 1 (4) and (5) of the Code of Civil Procedure. The Supreme Court held that when there was part payment of the decree, under the aforesaid sections, the decreeholder was entitled to appropriate the payment, first, towards interest and costs and the residue against the principal. The amounts paid or deposited would not carry any further interest. The rest of the decretal amount would carry interest. The above principle was applied by the Supreme Court in Bharat Heavy Electricals Limited Vs. R.S. Avtar Singh And Company reported in (2013) 1 SCC 243.

Now, it is very plain that each and every deposit of money into Court or creation of security in furtherance of orders passed by the Court does not qualify to be a deposit under the aforesaid rules of Order 21 of the Code of Civil Procedure. To qualify as such the decretal debt should have been deposited in Court or paid under Section 1 (1) (a) of (b) of Order 21 or according to orders of Court as provided under sub-Section 1 (1) (c). It should be unconditional to the credit of the decree. The judgment-debtor should not be left with any present right to claim back the amount. This was pointed out by this the Court in G.A. No. 3333 of 2011, G.A. No. 2430 of 2012 with E.C. No. 28 of 2003 in the case of Sea Stream Navigation Ltd. Vs. LMJ International Ltd. decided on 5th February, 2013.

In Execution Case E.C. 19 of 2004, in compliance of the order of this Court made on 22nd July 2004, the judgment-debtor deposited about Rs.16 lacs with Registrar Original Side, Calcutta on 28th July, 2004.

The execution case was not proceeded with by the decree-holder. On 1st March, 2005, this Court ordered the Registrar, High Court Original Side to release the sum of Rs.16 lacs to the decree-holder.

Therefore, applying the above dicta of the Supreme Court, principal and interest under the decree have to be calculated separately up to 28th July, 2004. The decree-holder should appropriate the interest first and then the principal, due as on that date, from the above sum.

On the balance amount due under the decree on that date, interest is to be calculated as specified by the decree till payment.

No notice or credit can be taken of the amount of Rs.3,50,000/- secured by the bank guarantee, first, for the reason that it was security and not cash and secondly it was not deposited in the executing Court but before the Appeal Court.

In those circumstances, ba

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sed on the above observations, I direct the Registrar, Original Side of this Court to determine the actual amount payable under the decree, himself, or through any senior officer deputed by him, by holding an informal reference and upon hearing the parties, within a period of two months from the date of communication of this order. On that basis the judgment debtor is directed to pay the decretal dues to the decree-holder. Otherwise the decree-holder will file a fresh application for execution apart from taking any steps that may be available to them under the law. This execution application is disposed of. Urgent certified photocopy of this judgment/ order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.