Punjab national bankv/s prem sagar air1988 h p33

vasant kulkarni (Querist) 15 October 2011 This query is : Resolved
PL.E-MAIL A COPY OF THE JUDGEMENT IN THE ABOVE CASE.THIS WAS DISCUSSED IN THE FOLLOWING CASE=

BHIKALAL KALIDAS MEHTA V/S PREETISANGAM SAHAKARI BANK LTD. REPORTED IN 2001(1)Mah LJ 665

CIVIL PROCEDURE CODE OR. NO.21 RULE NO.1

APPRORIATION OF PAYMENT MADE TOWARDS DECREE.

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jitender pawaria (Expert) 15 October 2011
Sir,
You want particular this cititation or if i send you one latest cititation on this point.

prabhakar singh (Expert) 15 October 2011
Punjab National Bank, Delhi And ... vs Prem Sagar Choudhary And Ors. on 18 May, 1987
Equivalent citations: AIR 1988 HP 33, 1989 66 CompCas 526 HP
Author: V Bhatnagar
Bench: V Bhatnagar
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.

Sankaranarayanan (Expert) 15 October 2011
Challa Venkata Subbayya vs Union Bank Of India on 4 August, 1997
Equivalent citations: 1998 (1) ALT 749, 1998 94 CompCas 803 AP
Author: R B Reddy
Bench: R B Reddy

JUDGMENT

R. Bayapu Reddy, J.

1. This revision petition is filed questioning the orders of the Subordinate Judge, Nuzvid, dated November 7, 1994, passed in E.A. No. 275 of 1987, in E.P. No. 19 of 1986.

2. The respondent, which is the Union Bank of India, Vijayawada, had obtained a money decree against the petitioner herein in O.S. No. 6 of 1974, on the file of the Sub-Court, Vijayawada. Later on, the respondent filed E.P. No. 19 of 1986, before the Subordinate Judge, Nuzvid, for executing the abovesaid decree and some amount was paid by the petitioner to the respondent in those execution proceedings. Subsequently, the petitioner, who is judgment debtor No. 1 in the E.P. filed E.A. No. 275 of 1987, under Order 21, rule 1 of the Civil Procedure Code, 1908, and section 19 of the Madras Agriculturists Debt Relief Act IV of 1938, contended that he had discharged the entire debt in instalments that by mistake, he made excess payment to a tune of Rs. 30,000; that he is an agriculturist and as such, the debt due from him shall be scaled down as per the provisions of the Madras Agriculturists Debt Relief Act IV of 1938, and that when the debt is thus scaled down, it is found that he made such an excess payment of a payment of about Rs. 30,000 to the respondent and the said amount shall be refunded by the respondent. The respondent decree-holder contested the petition contending that there was no excess payment made by the petitioner; that the decree-holder is entitled to appropriate the open payments made by the petitioner from time to time towards the costs of the suit and interest accrued on the principal amount at the first instance and then adjust the balance amount paid by the petitioner towards the principal; that in view of such appropriation made by the respondent, there was no excess payment as contended by the petitioner and the petition may, therefore, be dismissed.

3. Both the parties filed separate calculation memos along with their written arguments before the lower court and after hearing both sides and on the basis of the material placed before it, the lower court came to the opinion that interest cannot be scaled down as per the provisions of the Madras Agriculturists Debt Relief Act IV of 1938, as contended by the petitioner in view of the provisions of section 21A of the Banking Regulation Act, 1949, which came into force with effect from February 15, 1984; that the respondent is entitled to appropriate the amounts paid by the petitioner towards interest and suit costs in the first instance and then alone appropriate the balance amount towards principal and that in view of such circumstances and in view of the admitted payments made by the petitioner from time to time, it is found that there is an excess payment of only Rs. 1,945.85 made by the petitioner and that the respondent is liable to refund such amount to the petitioner with interest at 12 per cent. per annum till the date of payment. Aggrieved by such orders, the petitioner has filed the present revision. The respondent, which is the bank, has not chosen to question the above said order of the lower court.

4. Heard both the counsel.

5. The first contention of learned counsel for the petitioner is that the interest is liable to be scaled down under the provisions of the Madras Agriculturists Debt Relief Act IV of 1938. Such contention was negatived by the lower court in view of the provisions of section 21A of the Banking Regulation Act, 1949, which came into force with effect from February 15, 1984, and by relying upon the Full Bench decision of this court in State Bank of Hyderabad v. Advath Sakru, , and the decision of the Supreme Court in Bank of

India v. Vijay Transport . In the decision of the

Supreme Court it is held that the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, is a special Indian law and the provisions of section 4(e) of the Madras Agriculturists Debt Relief Act IV of 1938 are applicable to all banks which are nationalised under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, that in view of section 4(e) of the Madras Agriculturists Debt Relief Act IV of 1938, the question of scaling down the debts due to such banks under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, does not arise and that, therefore, the debts due to the nationalised banks cannot be scaled down by invoking the provisions of the Madras Agriculturists Debt Relief Act IV of 1938. The said view was followed in the above cited Full Bench decision of this court.

6. The contention of learned counsel for the petitioner, however, is that section 21A of the Banking Regulation Act, 1949, came into force only with effect from February 15, 1984 that the transactions concerned in the present proceedings are prior to February 15, 1984, and as such, the provisions of section 21A of the Banking Regulation Act, 1949, cannot be given retrospective effect so as to make them applicable to the present case. But such contention cannot be accepted as clearly laid down in the above said Full Bench decision of this court reported in State Bank of Hyderabad v. Advath Sakru, , wherein it is specifically observed that section 21A applies to all transactions entered into between the banking company and its debtor whether the transaction was entered into prior to its commencement or afterwards. Therefore, the above said contention of learned counsel for the petitioner, cannot be accepted.

7. The next contention of learned counsel for the petitioner is that in view of the amended provisions of Order 21, rule 1 of the Civil Procedure Code, 1908, the respondent is not entitled to appropriate the amounts paid by the petitioner towards interest at the first instance and that the said amounts shall be appropriated towards the principal amount at the first instance with effect from February 1, 1977, when the amendment was effected to Order 21, rule 1 of the Civil Procedure Code, 1908. But this contention also cannot be accepted in view of the law laid down by the Supreme Court in decision in Meghraj v. Bayabai (Mst.), , and also in the recent decision of the

Supreme Court reported in Mathai (M.) v. Hindustan Organic Chemicals Ltd., . In the decision of the Supreme Court in

Meghraj v. Bayabai (Mst.), , it is observed in para. 8 of the judgment as follows (headnote) :

"Where the mortgagors made no payments under the decree directly to the mortgagees but from time to time made deposits in the court under Order 21, rule 1 and in depositing some of the amounts they stated that the payments were towards the principal due, but there was no evidence on the record that the mortgagees were informed that the amounts were deposited towards the principal due, nor was there evidence that the mortgagees accepted the amount towards principal, the amounts so paid could be appropriated first towards interest and then towards principal due. Unless the mortgagees were informed that the 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 the principal would apply. It is for the mortgagors to prove an agreement, contrary to normal rule. It cannot also be said that it is the privilege of the debtor to impose conditions subject to which any payment is to be made by the mortgagor, and the mortgagee is bound to accept the condition."

8. In another recent decision of the Supreme Court in Mathai (M.) v. Hindustan Organic Chemicals Ltd., , also the same view was expressed by their Lordships by referring to the above said earlier decision of the Supreme Court and some other decisions. It is observed by their Lordships of the Supreme Court in the said decision after referring to the above cited earlier decision, that in the absence of any intimation as required by sub-rule (2) of Order 21, rule 1 of the Civil Procedure Code, 1908, and indication of the manner of appropriation, the payment could not be deemed to have been appropriated towards the principal unless the decree-holder admits it to be so and that the reasoning of the High Court that since the deposit was made in pursuance of the orders of the Supreme Court it would be deemed that the deposit was towards principal, does not appear to be correct. It was further observed by their Lordships that when the amount is deposited in the absence of any notice and intimation that it was being deposited towards principal, it was for the decree-holder to appropriate it towards the dues in the manner he likes. Their Lordships also referred in their judgment to the amended sub-rule (2) of Order 21, rule 1 of the Civil Procedure Code, 1908, and observed as follows regarding the effect of such amended provisions (page 1574) :

"The amended sub-rule (2) removes the doubt if there was any that the judgment-debtor is not absolved of the obligation of informing the decree-holder by written notice even in respect of deposit in court either directly or by registered post. The purpose of addition of the expression either through court directly or by registered post acknowledgement due' is that the judgment-debtor should not only give notice of payment but he must ensure that the decree-holder has been served with the notice. The ratio laid down in Meghraj's case, , applies now with greater

rigor. The reason for the rule both in the unamended and amended provision appears to be that if the judgment debtor intends that the running of interest should cease then he must intimate in writing and ensure that it is served on the decree-holder. Sub-rules (4) and (5) added in 1976 to protect the judgment debtor provide for ceasure of interest from the date of deposit or payment. But the cessation of interest under sub-rule (4) take place not by payment alone but from the date of service of the notice referred to in sub-rule (2)."

9. The same view was also expressed by this court in the recent decision reported in Sukhder Pershad v. Kishanlal (B.) [1996] 1 ALD

561. It is clear from the views expressed by the Supreme Court in the above cited decisions that the payments of all decretal amounts paid by the judgment debtor must first be appropriated towards interest and then to the principal in the absence of any notice and intimation to the decree-holder by the judgment debtor. The same view holds good even after the amendment effected to Order 21, rule 1 of the Civil Procedure Code, 1908. It is seen from a perusal of the judgment of the lower court that the learned Subordinate Judge has categorically observed after perusing the calculation memo filed by the respondent that the amount paid by the petitioner was correctly appropriated as per the provisions of Order 21, rule 1 of the Civil Procedure Code, 1908. In view of such circumstances, there are no valid reasons to interfere with lower court