Himachal Pradesh High Court
Punjab National Bank, Delhi And Etc. vs Prem Sagar Choudhary And Ors. on 18 May, 1987
Equivalent citations: AIR1988HP33, [1989]66COMPCAS526(HP)
ORDER V.P. Bhatnagar, J.
1. When would interest cease to run on the payments made towards the discharge of the interest-bearing decretal amount, is the main question which falls for determination in these cases. This would, in turn, depend upon the scope and interpretation of Rule 1 of Order XXI as amended by Civil P.C. (Amendment) Act, 1976, which came into force with effect from Feb. 1, 1977.
2. The law on the above point, as it stood before the amendment referred to above, was clear inasmuch as the Supreme Court in AIR 1970 SC 161, Meghraj v. Bayabai had approved the normal rule, based on the conjoint reading of Section 60 of the Contract Act, 1872 and Order XXI, Rule 1 of the Civil P.C. 1908, that any payment made by a judgment debtor was to be applied in the first instance towards the satisfaction of interest and thereafter to the principal amount, unless otherwise indicated by the judgment-debtor while making the payment. The ratio of Meghraj's case (supra) has been consistently followed by the High Courts and a number of authorities have been cited on the point but, for the sake of brevity, there appears no need to notice the same. It has, however, been conceded at the Bar that none of the case law, thus cited, has taken into its ambit the specific amendments inserted in Rule 1 of Order XXI of the Civil P.C., 1908.
3. Rule 1 of Order XXI, before its substitution by the Amendment Act, 1976, read as follows":--
"(1) All money payable under a decree shall be paid as follows : --
(a) into the Court whose duty it is to execute the decree, or
(b) out of Court to the decree-holder; or
(c) otherwise as the Court which made the decree directs.
(2) Where any payment is made under Clause (a) of Sub-rule (1), notice of such payment shall be given to the decree-holder."
Section 60 of the Contract Act may also be reproduced here :--
"60. Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits."
The ratio of Meghraj's case (supra) followed scrutiny of the above provisions.
4. However, drastic changes were made by the Amendment Act, 1976 in Rule 1 of Order XXI which now reads : --
"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 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 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 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) or 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."
5. Manifestly, the payment can be made into the Court, or according to the directions of the Court, in which case it has been enjoined upon the judgment-debtor to give notice of the said payment to the decree-holder, either through the Court or directly by registered post, acknowledgment due. On any such amount paid through the Court, interest has to cease to run from the date of service of the notice. Where payment is made out of Court, no interest will beleviable from the date of such payment to the decree-holder. The proviso to Sub-rule (5) of Rule 1 of Order XXI makes the legislative intendment abundantly clear in the sense that, in case of decree-holder avoiding acceptance of the postal money order or payment through bank, stipulation has been made that the interest would cease to run from the date on which he would have ordinarily received the money sent to him through the above modes. Thus, in view of the new provisions, it is no longer open to the decree-holder to appropriate payments received by him to that part of the decretal amount which does not bear any interest. On the other hand, such payment has to be applied first towards the part of the decretal amount which bears interest, if any.
6. It is of great significance that Sub-rules (4) and (5) postulate cessation of interest on any payment made for the satisfaction of the decretal amount. The words "any payment", as used, given their natural meaning, do not admit any exception.
7. Indubitably, Section 60 of the Contract Act continues to remain on the statute book. It does vest a discretion in the creditor to apply the payment made by the debtor, without indicating to which debt the payment is to be applied, to any lawful debt including a time-barred debt but this section will have to be read subject to the provisions contained in the amended Rule 1 of Order XXI relating to decretal amounts, being specific in nature. In other words, Section 60 of the Contract Act will have no application to a debt in respect of which a decree has been procured from a Court of law to the extent its satisfaction is covered by Rule 1 of Order XXI.
8. Cumulatively, therefore, the normal rule approved in AIR 1970 SC 161, Meghraj v. Bayabai with respect to appropriation of payments to be made towards the satisfaction of interest in the first instance and then of the principal amount of the Court decrees, with all respect, has become inoperative after the amendment of Rule 1, Order XXI by the Civil P.C. (Amendment) Act, 1976.
9. The learned counsel for the decree-holders have drawn my pointed attention to Clause (c) of Sub-rule (3) of Rule 1, wherein the judgment-debtor has been required to state, inter alia, as to "how the money remitted is to be adjusted, that is to say, whether it is towards the principal, interest, or costs," where money is paid by postal money order or through a bank. It has been contended that the above provision still gives an option to the judgment-debtorte-intimate as to whether the payment made by him is to be adjusted towards the interest-bearing part of the decretal amount or not, and that in the absence of such an intimation, the decree-holder would continue to be entitled, as before, to appropriate the: payment in the first instance towards the interest. The insertion of Clause (c) is undoubtedly not very happy but, this provision, in my opinion, would not nullify the categorical statement pertaining to cessation of interest incorporated in Sub-rules (4) and (5). In my view, Sub-rule (3), infact, stands incorporated to ensure that the decree-holder is furnished full particulars about the payment when it is being sent by postal money order or through a bank, but for which he would not know as to why the money order or the payment through the bank is being tendered to him. The salutary principle pertaining to the cessation of interest incorporated in Sub-rules (4) and (5) cannot be deemed to have been whittled down by the provisions of Clause (c). It would, of course, be another matter if the judgment-debtor expressly indicates his intention to pay off in the first instance the interest, for example to ward off the execution of decree for some time as a result of compromise.
10. A copy of this order will be placed in all the three cases which would now be listed before the Registrar for working out, after hearing the parties, the balance amount due, if any, to the decree-holders, keeping in view the observations made above. The cases would be listed before the Court after the report of the Registrar is ready and the parties have been afforded an opportunity to file objections to the said report.
11. A copy of this order be sent to all Courts subordinate to the High Court for information and future guidance.