Right Of Decree Holder For Post Decree Interest When Judgment Debtor Deposits Decretal Amount Into Court

Statutory Scheme For Payment Under A Money Decree

1. Order 21 Rule 1 of the Code of Civil Procedure, 1908 (“CPC”) postulates the modes of paying money under a decree. Order 21 Rule 1 reads as under:

“1. Modes of paying money under decree. —(1) All money, payable under a decree shall be paid as follows, 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

(b) out of Court, to the decree-holder by postal money order or through a bank or by any other mode wherein payment is evidenced in writing; or

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

(2) Where any payments 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 by registered post, acknowledgment due.

(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:—

(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) 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, 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 sub-rule (1), interest, if any, shall cease to run from the date of service 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:

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 the money was tendered to him, or where he avoids acceptance of the 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.”

2. Sub-Rule 1 of Order 21 of CPC clearly mandates as under:

a. That the “All money, payable under a decree shall be paid” as set out in the manner prescribed under clauses (a) to (c) of Sub-Rule -1 of Rule 1 of Order 21;

b. Therefore, what is important to note is that the payment under the money decree must be as per one of the modes set out in Order 21 Sub-Rule 1 of CPC under which all money payable under the decree should be paid by the judgment debtor;

c. It is to be noted that one of the modes of payment set out in clause (a) of Sub-Rule 1 of Order 21 is by depositing the money payable under the decree into court whose duty is to execute the decree;

d. Sub-Rule 2 of Order 21 mandates that when any payment is made under clause (a) of Sub-Rule 1, the judgment debtor shall give notice thereof to the decree-holder;

e. In effect therefore, mere deposit of all money payable under the decree under clause (a) of Sub-Rule 1 of Order 21 is not sufficient but the judgment debtor should also issue a notice under Sub-Rule 2 of Order 21 of such deposit to decree holder to enable the decree holder to withdraw such money which in turn will trigger Sub-Rule 4 of Order of 21 wherein the interest will cease to run from the date of service of such notice upon the decree holder.

“Deposit In Court” And “Actual Payment” – The Difference

In view of the aforesaid statutory scheme let us now analyze the position of law, jurisprudence and precedents on effect of deposit of decretal amount by judgement debtor into court and what is the effect of the same as far post decree interest is concerned.

What is important therefore is whether the expression “payment” includes within its ambit the deposit of the entire awarded amount into court, which is the issue dealt in the present thought paper. Let us therefore examine what does the expression payment means in common parlance as under:

a. Concise Oxford English Dictionary (Tenth Edition-revised) defines 'Payment' –

(1) The action of paying or the process of being paid.

(2) An amount paid or payable

b. Webster Comprehensive Dictionary (International Edition) Volume two defines 'Payment'

(1) the act of paying.

(2) Pay; requital; recompense

c. The Law Lexicon, 2nd Edition by P. Ramanatha Aiyar, 2^nd Edition Reprint inter alia, states:

'Payment' is defined to be the act of paying, or that which is paid; discharge of a debt, obligation or duty; satisfaction of claim; recompense; the fulfillment of a promise or the performance of an agreement; the discharge in money of a sum due.

The expression payment appears to be elastic as it not only covers varied meanings but also seems to be inclusive. However, the Supreme Court in a landmark case of P.S.L Ramanathan Chettiar v. O.R.M.P.R.M Chettiar^[1] held as follows:

“12. On principle, it appears to us that the facts of a judgment- debtor's depositing a sum in court to purchase peace by way of stay of execution of the decree on terms that the decree- holder can draw it out on furnishing security, does not pass title to the money to the decree-holder. He can if he likes take the money out in terms of the order; but so long as he does not do it, there is nothing to prevent the judgment- debtor from taking it out by furnishing other security, say, of immovable property,' if the court allows him to do so and on his losing the appeal putting the decretal amount in court in terms of Order 21 Rule 1 C.P.C. in satisfaction of the decree.

13. The real effect of deposit of money in court as was done in this case is to put the money beyond the reach of the parties pending the disposal of the appeal. The decree- holder could only take it out on furnishing security which means that the payment was not in satisfaction of the decree and the security could be proceeded against by the judgment debtor in case of his success in the appeal. Pending the determination of the same, it was beyond the reach of the judgment-debtor.

15. The last contention raised on behalf of the respondent was that at any rate the decree-holder cannot claim any amount by way of interest after the deposit of the money in court. There is no substance in this point because the deposit in this case was not unconditional and the decree-holder was not free to withdraw it whenever he liked even before the disposal of the appeal. In case he wanted to do so, he had to give security in terms of the order. The deposit was not in terms of Order 21 Rule 1 C.P.C. and as such, there is no question of the stoppage of interest after the deposit. In the result, the appeal is allowed, the order of the High Court set aside and that of the Subordinate Judge restored. The respondent will pay the costs of this appeal.”

Consequently, the Supreme Court in Chettiar's case (supra) effectively held that since the deposit of the decretal amount was unconditional and judgment debtor was not free to withdraw the said amount the same did not amount to payment as per Order 21 Rule 1 of CPC.

Similar view was taken by Kerala High Court in the case of Union of India v. B. Bhogilal^[2]. It was held that even if decree holder is aware of the deposit of the decretal amount into court and if the decree holder is not entitled to receive it unless the court granted permission to do the same, it cannot be said to be payment under Order 21 Rule 1 of CPC. The court also held that the execution of the decree was stayed by the appellate court and any payment made thereafter cannot be made over to the decree holder unless specifically directed by the court and the amount paid by the judgement debtor cannot be said to be a payment under Rule 1, Sub-Rule 1, clause (a) of Order 21 of CPC. The court therefore held that the interest, if any, shall not cease to run from the date of such deposit.

In the case of Kumar Y.K Sinha Roy v. Union of India^[3] the Calcutta High Court after following Chettiars' case (supra) also took a similar view to the effect that the deposit of decretal amount does not pass title to decree holder and the same cannot be said to have effect of exempting the payment of interest by the judgment debtor after the date of deposit as the decree holder could not withdraw the deposited amount except on satisfaction of the conditions imposed by the court.

There may be a scenario where the decree holder is granted liberty by the Court to withdraw the deposited amount on furnishing security of equivalent amount. In such event if the decree holder is not able to furnish such security would the decree holder be entitled to post decree interest despite having liberty to withdraw the deposited amount? This issue was dealt with by the Madras High Court almost six decades ago in the case of Mooka Naicker v. A. K Venkatasami Naidu^[4]. It was held that even if a decree holder is unable to furnish security and withdraw the deposited amount, such decree holder would still be entitled to post decree interest and cannot be denied post decree interest just because he has no means to furnish the security. The Delhi High Court after relying upon the aforesaid judgments of Chettiar, B. Bhogilal and Kumar Sinha and Mooka Naicker (supra) once again affirmed the position of law in the case of Hindustan Construction Corporation v. Delhi Development Authority^[5] and held as under:

“5. The only question to be determined in this petition is as to whether the deposit of the decretal amount by the judgment-debtor under the orders of the Appellate Court, could be construed as payment to Decree-holder or not….. A perusal of the judgements cited by learned Counsel for the decree-holder and particularly the judgment of the Apex Court in the case of P.S.L. Ramanathan Chettiar & Others v. O.R.M.P.R.M. Ramanathan Chettiar (Supra) make it clear that the deposit of decretal amount by a judgment-debtor in the Court to purchase peace by way of stay of execution of the decree does not pass title in the deposited money in favour of the decree holder and as such, is not a payment in terms of Order 21 Rule 1 of the Code of Civil Procedure which prescribes specific modes for the satisfaction of a money decree.

6. The payment made to a Decree-holder under Rule 1 of Order 21, CPC and a deposit made by a Judgment-debtor in Court for obtaining stay of execution of decree against him are altogether different courses adopted by a Judgment-debtor. Payment under Order 21 Rule 1, CPC satisfies a Decree-holder whereas a deposit in the Court to avoid execution keeps the amount beyond the reach of Decree-holder and leaves him waiting for its release. The deposit of the decretal amount, therefore, by a judgment-debtor as a condition for obtaining stay of the execution of the decree cannot be treated at par with payment to the Decree- holder. As such, inspite of such deposit the interest, as ordered in favour of the decree-holder by the Court passing the decree, continues to run against the Judgment-debtor till the Decree-holder actually receives the money. The rationale behind this view is that a Judgment-debtor who files an appeal to challenge a Decree and applies for stay of execution pending disposal of his appeal seeks to avoid payment of decretal amount to the Decree-holder and as such, upon getting stay of execution, even on deposit of decretal amount, succeeds in preventing payment of decretal amount to Decree-holder. Therefore, his liability to pay interest to Decree-holder continues till the amount is actually paid to Decree-holder. A Judgment-debtor, therefore, on whose appeal the execution is stayed subject to deposit of decretal amount in Court must take appropriate steps by way of requesting the Court to ensure that the deposited amount is invested fruitfully, so that at the end of the day, in case has appeal is dismissed and the amount be- comes payable to Decree-holder, the interest earned on the deposited amount is available for discharging the liability of interest.”

Further, the Delhi High Court in the case of Engineering Projects (India) Ltd. v. Arvind Construction Company Ltd.^[6] took a similar view as was taken in Hindustan Construction Corporation (supra) case wherein the judgment debtor deposited part of the decretal amount before the appellate court and liberty was granted to the decree holder to withdraw the same after furnishing a bank guarantee. The court after laying stress on the object of payment under Order 21 Rule 1 held that the object of Sub-Rule 1 of Rule 1 of Order 21 of the CPC is only where money is paid unconditionally in the manners provided therein and such payment should be treated towards the decree and that is when interest would stop as per Clauses 4 & 5 of Rule 1 of Order 21 of CPC. The court further observed that such payments must be unconditional payments towards the decree and not payments made partial or in whole for obtaining stay of the decree. Since the deposited money was released to the decree holder on the condition of furnishing a bank guarantee and the decree holder incurred costs towards furnishing bank guarantee in terms of averments, the court held that the same does not amount payment towards the decree and directed that the decree would continue to earn interest till the appeal is disposed of.

A conspectus of the aforesaid judgments therefore leads to a conclusion that the rule is merely depositing the decretal/awarded amount into court does not mean actual payment to the decree holder under Order 21 Rule 1 of the CPC and a decree holder is entitled for post decree/award interest if the payment contemplated under Order 21 Rule 1 is not made to decree holder read with Sub-Rules (2) and (4) of Order 21. However, there is one more viewpoint on the present issue which is dealt with hereinunder.

Departure From The “Rule Of Payment”

While one can reckon from the aforesaid judgments that the rule with respect to the present issue is settled and deposit of the decretal amount into court does not amount to payment as contemplated under Order 21 Rule 1, the Supreme Court however in the case of Himachal Pradesh & Urban Development Authority v. Ranjit Singh Rana^[7] took a departure from this general law laid down by the Supreme Court in Chettiar's (supra) case. In Ranjit Rana's (supra) case the Supreme Court was dealing with an order of the Himachal Pradesh High Court, wherein it was held by the High Court that Ranjit Rana was entitled to post award interest @ 18% p.a under Section 31(7) (a) and (b) of the Arbitration and Conciliation Act, 1996 (“Act”) from the date of the award till the date of actual payment. In the present case the entire awarded amount was deposited by judgment debtor with the High Court on May 24, 2001 and the issue which was framed by the Supreme was “Whether May 24, 2001 when the entire award amount was deposited by the appellants into the High Court is the date of payment?”. The Supreme Court after considering the law on interest to be granted under Section 31 (1) (b) and various definitions of expression “payment” held as under:

“15. The word 'payment' may have different meaning in different context but in the context of Section 37 (1)(b); it means extinguishment of liability arising under the award. It signifies satisfaction of the award. The deposit of the award amount into the Court is nothing but a payment to the credit of the decree- holder. In this view, once the award amount was deposited by the appellants before the High Court on May 24, 2001, the liability of post-award interest from May 24, 2001 ceased. The High Court, thus, was not right in directing the appellants to pay the interest @ 18% p.a. beyond May 24, 2001.”

In Ranjit Rana's (supra) case however the Supreme Court did not have an occasion to discuss, mention or refer to Chettiar's (supra) case which lays down the law on payment/interest post decree under Order 21 Rule 1 of CPC as discussed above.

Treatment/Interpretation Of “Chettiar's Case” And “Ranjit Rana's Case” By Courts

In the case of Union of India v. M.P Trading & Investment RADC Corporation Ltd.^[8] Ranjit Rana's (supra) case was relied upon by the judgment debtor to canvass the point that since the principal amount was deposited in the High Court, decree holder is not entitled for post award interest. Supreme Court after considering the ratio laid down in Ranjit Rana's (supra) case held that since the judgement debtor has not deposited the full amount in terms of the award, the decree holder shall be entitled to interest as per the award from the date of award till the principal amount was deposited in the High Court including post award interest on the balance amount which was not deposited by the judgment debtor.

In the case of Adidas India Marketing Pvt. Ltd. v. Hicare India Properties Pvt. Ltd.^[9] the Delhi High Court after considering the ratio laid down in Chettria's (supra) and Ranjit Rana's (supra) cases took a view that amount deposited before the court as an condition for admission of Petition under Section 34 of the Arbitration & Conciliation Act, 1996 (“Act”) without making any payment to the decree holder would entitle the decree holder for post award interest and mere deposit of awarded amount in court would not stop post award interest from the date of deposit.

In the case of NTPC Ltd. v. V. U Seemon^[10] the Delhi High Court was dealing with an issue with respect to differential interest to be paid from date of deposit of decretal amount. While referring to Ranjit Rana's (supra) case, the court held that in Ranjit Rana the entire amount including interest was deposited in the court and the same cannot be construed as authority in the cases where rule of appropriation of interest is applicable and allowed the decree holder to first appropriate the interest amount and thereafter apply the remainder amount towards the principal amount under the award.

Despite Ranjit Rana's (supra) case the Bombay High Court in the case of Sino Ocean Ltd. v. Salvi Chemical Industries^[11] took a similar as was taken by Delhi High Court in in Hindustan Construction Corporation (supra).

The ratio laid down by Supreme Court in Ranjit Rana's (supra) case was further distinguished by Bombay High Court in the case of DSL Enterprises Pvt. Ltd. v. Maharashtra State Electricity Distribution Company Ltd.^[12] where the issue was how to appropriate amount paid under or in partial satisfaction of a decree. Ranjit Rana's (supra) case was cited by the judgment debtor to make it a point that once money is deposited in court interest stops running on the same. However, the Bombay High Court while distinguishing Ranjit Rana's case held as under –

“22. Mr. Mody relies on the decision in Himachal Pradesh Housing and Urban Development Authority & Anr v Ranjit Singh Rana and Union of India & Anr v MP Trading & Investment RAC Corporation Ltd. I do not believe either of these cases assists MSEDCL. In Ranjit Singh Rana the entire amount due under the award was deposited in the Himachal Pradesh High Court even before the challenge petition was dismissed, i.e. before the award became enforceable and could be put into execution. The deposit was specifically towards satisfaction of the award (paragraph 15). In the present case, the deposits were ad hoc amounts.”

The Bombay High Court in DSL Enterprises (supra) case took an exception to the law laid down in Ranjit Rana's (supra) case by observing that once the entire decretal amount is deposited into Court before dismissal of challenge under Section 34 of the Act and where execution proceedings have not started, in such cases post decree interest will stop running after the deposit of the entire decretal amount but in cases where amounts are deposited in peace meal manner post decree interest will not stop running. The Bombay High Court relied upon on Chettiar's (supra) case in DSL Enterprises (supra) case while deciding the same.

Similar view as taken in Sino Ocean Ltd. (supra) case was also taken by Bombay High Court in the case of Atlanta Ltd. v. Executive Engineer^[13].

In the case of Delhi Development Authority v. Bhai Sardar Singh^[14] which is a judgement later than Ranjit Rana's (supra) case, the Supreme Court while dealing with the issue of rate of interest to be awarded to decree holder held as under:

“20. When we turn to the facts of the present case, we have no doubt in our mind that the payment of Rs. 58,80,280/- made by the appellant, as recorded in the order dated 20^th May 2002, cannot be treated as payment in terms of Rule 1 of Order XXI of the Code as this amount was deposited in the Court, but the respondent was not permitted and allowed to withdraw in spite of their application. To this extent, the High Court is right in relying upon the decision of this Court in P.S.L Ramanathan Chettiar (supra)…”

In the case of Bharat Sanchar Nigam Ltd. v. Vinod Kumar Tyagi^[15] the Delhi High Court after considering the ratio laid down in Chettiar's, Ranjit Rana's, M.P Trading (supra) cases held that the decree holder is entitled to post award interest and held that Ranjit Rana's (supra) case is not applicable as the decree holder was unable to withdraw the amount till disposal of the appeal under which the decretal amount was deposited by the judgment debtor.

In the case of Nepa Limited v. Manoj Kumar Agarwal^[16] the Supreme Court was dealing with awarding interest on the part of decretal amount which was withdrawn by the decree holder under the order of the court after furnishing a personal undertaking. It was contended by the decree holder that though he has withdrawn the part of decretal amount deposited in the court, but as per Chettiar's (supra) case he is entitled to post decree interest on the entire decretal amount including, which was withdrawn, as the same was withdrawn under a conditional order of the court. It was also contended by the decree holder that no notice was served under Sub-Rule 4 of Rule 1 of Order 21 of CPC. The Supreme Court after considering the ratio in Chettiar's and Bhai Sardar's (supra) cases held that the decree holder was not entitled to the interest for the amounts which he had already withdrawn as it was accepted and admitted position that the decree holder had withdrawn the part of decretal amount and therefore no notice under Sub-Rule 4 of Rule 1 of Order 21 of CPC was required to be served upon him. The Supreme Court further held that even if such withdrawal was pursuant to a condition imposed by the court and if the decree holder has withdrawn it after furnishing personal undertaking which was not onerous and limited to the amount withdrawn, the decree holder was not entitled for interest on the entire decretal amount even if the withdrawal was under a conditional order of the court. This judgment is passed by the Supreme Court owing to peculiar facts of the case wherein the decree holder attempted to take undue advantage of the provisions of law and settled legal proposition which the Supreme Court fairly distinguished while applying to the decree holder's case.

The Karnataka High Court in the case of The Divisional Manager v. Nagaraj^[17] held that mere deposit of awarded amount in the court does not amount to payment. The Karnataka High Court while rendering the Nagaraj (supra) judgment however did not discuss or mention any of the judgments set out above.

The Delhi High Court in the case of Cobra Instalaciones Y Servcices v. Haryana Vidyut Prasaran Nigam Ltd.^[18]after considering the judgements of Chettiar and Ranjit Rana (supra) held that if the awarded amount is deposited into court and the decree holder is served with notice under Sub-Rule 4 of Order 21 and if he does not chose to withdraw the same, such decree holder is not entitled to post award interest as he failed to take steps to withdraw the amount by not making an application for its withdrawal. In this case, it was categorically submitted by the Counsel appearing for the decree holder that in Ranjit Rana's (supra) case the decision of Chettiar's (supra) was not considered which was rendered by three judge bench. Recently, similar view was once again taken by Delhi High Court in the case of PCL Sticco (JV) v. National Highways Authority of India^[19].

Author's View

1. The rule of actual payment to the decree holder and post decree/award interest under Order 21 Rule 1 of CPC can be understood/summarized on following footholds:

i. Decretal amount deposited into court for obtaining a stay of a decree/award will entitle the decree holder for post decree interest as the same otherwise is out of reach of decree holder;

ii. The decree holder must be in a position to withdraw the amount deposited into court by judgment debtor without any condition or order of the court. If not, even in such cases a decree holder is entitled for post decree interest;

iii. Once judgment debtor gives notice to decree holder under Order 21 Sub-Rule 4 of such deposit of awarded amount into court, the decree holder cannot claim any post decree interest and interest, if any, shall cease to run from the date of service of such notice referred to in Sub-Rule 2 of Order 21;

iv. Even if decretal amount is deposited into court, but the same is done in peace meal manner, in such cases also the decree holder is entitled to post decree interest;

v. A decree holder cannot claim post decree interest if he fails to withdraw the deposited amount when there was no condition imposed upon the decree holder by the court or the judgment debtor and notice under Sub-Rule 4 of Order 21 is served upon a decree holder;

vi. If the decree holder has withdrawn the partly deposited decretal amount under a conditional order of court of furnishing personal undertaking which is limited to the amount withdrawn, the decree holder in such cases will not be entitled to post decree interest on the entire decretal amount even if such withdrawal was under the conditional order of the court;

2. The above discussion read with various judgements of Supreme Court and High Courts leads to a conclusion that what is contemplated under Order 21 Rule 1 of CPC is actual payment and merely depositing the decretal/awarded amount into court cannot be equated with actual payment enshrined under Order 21 Rule 1. This rule is drawn by the courts considering the fact that the money deposited by the judgement debtor into court is not only out of reach of decree holder, but he cannot also withdraw it unconditionally or without the order of the court into which such money is deposited. Obviously, such rule is carved out by the courts also because a decree holder who has succeeded in obtaining a money decree in his favour should also be able to enjoy the actual fruits of a decree/award and therefore entitled to post decree/award interest if no payment as contemplated in Order 21 Rule 1 is made to the decree holder. Therefore, the difference of depositing the decretal amount into Court cannot be equated with actual payment contemplated under Order 21 Rule 1 unless the decree holder is permitted to withdraw such deposited amount unconditionally.

3. I feel the courts have adopted a correct approach in this regard as predominantly, recovering the amounts under a money decree under Indian judicial system is in any event an onerous and time-consuming task. Despite monies deposited into court, by awarding post decree/award interest to the decree holder, the courts have ensured that a decree holder who has succeeded in a litigation is compensated for his wait which also is a mitigating factor in balancing hardship suffered by a decree holder in long drawn court battle including the expenses involved in such litigation and financial loss he has suffered in such bargain.

4. The Supreme Court and High Courts in their various decisions have not only prescribed the rule of actual payment as is held in Chettiar's (supra) case but have also molded the said rule on case-to-case basis depending on the facts of each case. Though Ranjit Rana's (supra) case still holds the field and being referred not only by the Supreme Court and High Courts it may not be correct to say that Ranjit Rana's (supra) is per incuriam, but I believe that the same may be distinguished and/or reconsidered by the Supreme Court in appropriate case when the present issue arises before the Supreme Court in context of laying down law on the subject. However, presently from the trend of precedents set out above, I am of a considered view that the ratio laid down in Chettiar's (supra) case is still followed by the Courts as a binding precedent when the issue of awarding post decree interest to a decree holder arises before the courts. This is also because Chettiar's (supra) case is rendered by three judge bench and Ranjit Rana's (supra) case is delivered by two judge bench without adverting to the ratio laid down in Chettiar's (supra) case and the law applied by various High Courts as discussed above.

5. Therefore, it can be conveniently concluded that mere deposit of the decretal amount into court will not amount to payment under Order 21 Rule 1 and the decree holder will be entitled for the post decree/award interest in the circumstances read with the precedents as discussed above.

The author is Head of Legal, Navi Mumbai IIA Private Limited. Views are personal.