NEPA LIMITED THROUGH ITS SENIOR MANAGER (LEGAL) versus MANOJ KUMAR AGRAWAL on 8 December 2022

1. By award dated 14.04.2000, the appellant, M/s Nepa Limited,Ewas held liable to pay Rs. 14,49,300/- to the respondent, Manoj KumarAgrawal. The amount was towards refund of the balance security deposit,which was made by Manoj Kumar Agrawal in terms of the agreementdated 25.10.1996. The award had stipulated that Rs. 14,49,300/- wouldcarry an interest @ the rate of 18% per annum from the date of theFaward, till payment.

2. It is an accepted case that the appellant paid an amount of Rs.1,50,000/- to the respondent on 22.10.2001. It is also undisputed that thispayment would be adjusted/set-off against the interest, and not from theprincipal amount of the award, i.e., Rs.14,49,300/-.

3. The objections filed by the appellant under Section 34 of theArbitration and Conciliation Act, 1996[1] were dismissed on 28.02.2001.

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4. The appellant had thereupon preferred an appeal under Section37 of the Act before the Division Bench of the High Court. On 30.10.2001, H

1 For short, the “Act”.

the Division Bench passed an order whereby, on the appellant depositing50% of the awarded amount within ten days from the date of the orderbefore the executing court, the execution proceedings for the balanceamount were to remain stayed. The respondent was entitled to withdrawthe deposited amount after furnishing personal undertaking for restitutionof the amount if he is so directed, within three months from the date ofthe final disposal of the appeal. The direction/order attaching the propertiesof the appellant was to continue.

5. Pursuant to the interim order, the appellant had deposited Rs.7,78,280/- on 05.11.2001. On 08.11.2001, the respondent withdrewRs.7,78,280/-, after furnishing personal undertaking in terms of the orderdated 30.10.2001.

6. The appeal preferred by the appellant under Section 37 of theAct was dismissed by the Division Bench on 02.02.2012.

7. It may be stated here that the respondent had also challengedthe award by filing objections under Section 34 of the Act, which weredismissed. Thereupon, the respondent had filed an appeal under Section37 of the Act which was also dismissed. It is stated by the respondent,who appears in-person, that both the appellant and the respondent hadpreferred a special leave petition before this Court, which were dismissed.

8. Learned counsel appearing for the appellant accepts that thepayment of Rs.7,78,280/-, which was withdrawn by the respondent on08.11.2001, would be first adjusted/set-off against the interest elementpayable in terms of the decree, which in this case, is the award. Thebalance amount would be set off/adjusted towards the principal amountpayable. To this extent also, there is no dispute.

9. The dispute before us is whether the respondent is entitled tointerest @ the rate of 18% as per the award on the principal amount ofRs. 14,49,300/- till the decision of the appeal under Section 37 of the Acton 02.02.2012, or interest @ the rate of 18% is payable on the netprincipal amount[2] after the set-off/adjustment of interest due on08.11.2001 from Rs.7,78,280/- which was withdrawn by the respondenton 08.11.2001.

2 See paragraph 25 below. As per calculations made by the appellant vide Annexure ‘A’to this judgment the net principal amount payable is Rs. 9,13,483/-. As per thecalculations made by the respondent vide Annexure ‘B’ to this judgment the net principalamount payable is Rs.9,30,300/-.

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A10. On 01.08.2012, the respondent had filed an application forrecovery of amount of Rs. 3,97,382/- along with the interest. On18.08.2012, the respondent had filed another application stating andclaiming that he was entitled to interest on Rs.14,06,259/-, i.e., the principalamount awarded along with the 18% interest till the decision of the appealunder Section 37 of the Act, which was decided on 02.02.2012.[3]B

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11. The executing court vide order dated 05.10.2012 held that therespondent is entitled to decree in the sum of Rs. 3,97,382/- along withthe interest @ the rate of 18% per annum.

12. The appellant paid an amount of Rs. 4,15,629/- on 31.10.2012.CThe payment was computed on the basis of the order passed by theexecuting court quantifying the decree amount as Rs. 3,97,382/- andincluded interest payable on the said amount.

13. Aggrieved, the respondent preferred a civil revision beforethe High Court of Madhya Pradesh at Jabalpur, which had been allowed Dby the impugned order dated 19.06.2017, inter alia holding that in termsof Order XXI, Rule 1, sub-rules (4) and (5)[4] of the Code of CivilProcedure, 1908[5], the appellant having failed to give notice for depositof amount of Rs. 7,78,280/-, the respondent would be entitled to interest@ the rate of 18% per annum, even on the sum of Rs. 7,78,280/-, whichwas withdrawn by him, till the decision of the appeal under Section 37 ofEthe Act, on 02.02.2012.

14. In our opinion, the judgment of the High Court is unsustainableand contrary to the law. In the present case, it is accepted and admittedposition that the respondent had withdrawn amount of Rs. 7,78,280/-,which had been deposited by the appellant, on 08.11.2001. In thisF

3 It appears that some payments were made by the appellants post dismissal of theirappeal under Section 37 of the Act on 02.02.2012. Therefore, the figures mentioned donot tally with awarded amount etc.

4 Order XXI – Execution of Decrees and Orders–

1. Modes of paying money under decree. –Gxxxxxx(4) On any amount paid under clause (a) or clause (c) of sub-rule (1), interest, ifany, 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 ceaseto run from the date of such payment.

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background, the question of notice in terms of sub-rule(4) to Rule 1 toOrder XXI of the CPC becomes irrelevant. In Gurpreet Singh v. Unionof India, (2006) 8 SCC 457, a five Judges Bench of this Court hadexamined Rule 1 to Order XXI of the CPC, post the substitution by ActNo. 4 of 1976, and observed that the effect of the substitution is thatupon deposit of the decretal amount in the court and giving notice thereofto the decree holder, there would be cessation of interest from the dateof notice to the decree holder of such deposit. Rule 1 to Order XXI ofthe CPC also postulates payment by the judgment debtor to the decreeholder by other specified modes, namely, by postal money order, bank orby payment evidenced in writing, in which case the interest ceases torun from the date money is tendered. The legislative intent clearly, isthat the interest would cease on the principal amount paid by the judgmentdebtor to the decree holder. Issue of notice is to enable the decree holderto withdraw the amount deposited. Therefore, when the deposited amountis withdrawn and gets credited in the account of the decree holder, he isnot entitled to interest on the deposited amount, even when there is failureon the part of the judgment debtor to issue notice of deposit. In absenceof notice, the interest would cease to run from the date when the amountis transferred/credited in the account of the decree holder. If notice isissued, interest ceases to run from the date of service of notice.

15. In the present case, order dated 30.10.2001 was passed in thepresence of the parties including the respondent. Thereupon, the appellanthad deposited Rs. 7,78,280/- before the executing court on 05.11.2001.The respondent had notice of the deposit and accordingly had withdrawnthe said amount, i.e., Rs. 7,78,280/- on 08.11.2001.

16. The respondent, who appears in-person, has relied on thejudgments of this Court in P.S.L. Ramanathan Chettiar and Others.vs. O.R.M.P.R.M. Ramanathan Chettiar, AIR 1968 SC 1047 and thedecision dated 13.02.2020 in C.A. No. 3867 of 2010, Delhi DevelopmentAuthority through its Vice Chairman vs. Bhai Sardar Singh and Sons,to submit that the order dated 30.10.2001 being conditional and thewithdrawal of Rs. 7,78,280/- being in terms of the conditional order i.e.,on furnishing of personal undertaking given by the respondent, thedirection for payment of interest @ the rate of 18% on Rs.7,78,280/-would continue till the decision of the appeal under Section 37 of the Acton 02.02.2012. It is only then that the complete title and the payment gotvested in the respondent.

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A17. In our opinion, the submission made is fallacious and is contraryto law. In Ramanathan (supra), the amount which was deposited by thejudgment-debtor was not withdrawn by the decree holder. The judgmentin Ramanathan (supra) in paragraph 12 thereof, specifically states that“on principle, it appears to us that the facts of a judgment-debtor’sdepositing a sum in court to purchase peace by way of stay ofBexecution of the decree on terms that the decree holder can draw itout on furnishing security, does not pass title to the money to thedecree holder. He can if he likes take the money out in terms of theorder, but so long as he does not do it, there is nothing to preventthe judgment-debtor from taking it out by furnishing another security,Csay, immovable property, if the court allows him to do so and on hislosing the appeal putting the decretal amount in court in terms ofOrder XXI Rule 1 of the CPC in satisfaction of the decree”.Theaforesaid narration makes it clear that this was not a case in which thedecree holder had withdrawn the money. The penultimate paragraph ofthis judgment records that the deposit made was not unconditional, andDthat the decree holder was not free to withdraw the amount whenever helikes even before the disposal of the appeal. In order to do so, he had togive security in terms of the order, which he did not furnish. It may benoted that this judgment is prior to the substitution of Rule 1 to Order XXIof the CPC by Act No. 104 of 1976 with effect from 1[st] February 1977.[6]E18. In the decision of this Court in Delhi Development Authority(supra), the money deposited by the Delhi Development Authority inthe court was not withdrawn by the contractor Bhai Sardar Singh andSons. In fact, an application was filed by Bhai Sardar Singh and Sons topermit them to withdraw the money, but they were not permitted to doFso. In this background, it was held that the deposit was not payment interms of Rule 1 to Order XXI of the CPC. Under the Arbitration Act,1940, the award can be executed after the award is made Rule of theCourt. Therefore, an award under the Arbitration Act, 1940 per se wasnot a decree of the Court. Under the provisions of the Act, i.e., the Act,1996, an award is a decree of the Court and is executable, unless objectionsGare filed under Section 34 of the Act.[7]

6 Whether the amendment has the effect of substitution of the principle enunciated inRamanathan’s case (supra), need not be examined in this decision.

7 Post substitution by Act No.3 of 2016 with retrospective effect from 23rd October2015, the legal position has undergone change. Section 36 as it stood before theHAmendment Act 3 of 2016 reads:

19. In the present case, objections under Section 34 of the Actwere filed and dismissed on 28.02.2001. Thereupon, the award wasexecutable.

20. In Delhi Development Authority(supra), on the aspect ofliability of Delhi Development Authority to pay interest on the depositmade in court for failure to issue written notice, it was held that it wasnot necessary. The reason was that the decree holder was aware of thedeposit made by the judgment debtor. Therefore, the decree holder cannotbe permitted to urge and plead that he was served a notice of the deposit.Accordingly, the decree holder, it was held, was not entitled to interestpost the decision, even when the judgment debtor had not served anyformal notice as required under sub-rule (4) to Rule 1 to Order XXI ofthe CPC.

21. In the present case, the appellate court, on the appeal preferredunder Section 37 of the Act did grant stay, subject to the condition thatthe appellant would deposit 50% of the amount. Rs. 7,78.280/- wasdeposited by the appellant on 05.11.2001. The stay, therefore, onlyoperated for the balance amount. On the balance amount, certainly, theappellant would be liable to pay interest @ the rate of 18% per annumtill the date of actual payment. However, on Rs.7,78,280/- paid, afteradjusting/appropriating payment due on the interest accrued, on thebalance principal amount paid to the respondent, interest would not bepayable.

22. The respondent has relied on the principle that the interimorder merges into the final order. In Civil Appeal No. 2417 of 2022,decided on 25.03.2022, titled State of Uttar Pradesh through Secretaryand Ors. v. Prem Chopra, this Court had referred to an earlier decisionin State of Rajasthan v. J.K.S Synthetics and Anr., (2011) 12 SCC518, wherein it has been observed that where a stay is granted by wayof interim order on dismissal of the writ petition or vacation of the interimorder, the beneficiary of the interim order shall have to pay interest onthe amount withheld or not paid by him by virtue of the interim order.The aforesaid observations, in fact, support the appellant and not therespondent. The observations hold that the person liable to make payment “36. Enforcement. – Where the time for making an application to set aside thearbitral award under section 34 has expired, or such application having been made, ithas been refused, the award shall be enforced under the Code of Civil Procedure, 1908(5 of 1908) in the same manner as if it were a decree of the Court.”

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Awould have to pay the principal amount along with the interest which isspecified in the contract or the statute as he had enjoyed benefit of thestay order. The interest is payable only on the amount that is not paid. Itwill be incongruous to hold that the person would be liable to pay interesteven in respect of the amount, which has been paid and handed over tothe decree holder.B

23. This Court in Raunaq International Limited v. I.V.R.Construction Limited and Others, (1999) 1 SCC 492, has observedthat the parties, at whose instance, interim orders are obtained, shouldbe made accountable for the consequences of the interim order. Theseobservations obviously are relevant in the context of the present case toCthe extent that the appellant is liable to pay interest @ the rate of 18%per annum on the amount which was not paid to the respondent. However,the amount which was withdrawn and paid to the respondent, no interestliability would occur and would be payable.

24. The respondent submits that the payment of Rs. 7,78,280/-Dbeing conditional, the respondent would have been under an obligation torefund the said amount in case the appellant had succeeded in the appealunder Section 37 of the Act, 1996. This argument does not impress, as inthe event the appellant had succeeded in their appeal, the entire amountpaid would have been refundable. The undertaking was not onerous,Eand was to operate only if the amount of Rs. 7,78,280/- was not refundedby the respondent. The respondent had obviously used and utilized themoney. The appellant did not have any right on the money paid to therespondent, who could use it in a manner and way he wanted. Therewas no charge. Money is fungible and would have gotten mixed up withFthe other amounts available with the respondent. Right to restitution wouldnot make the payment conditional. Interest has been jurisprudentiallydefined as the price paid for money borrowed, or retained, or not paid tothe person to whom it is due, generally expressed as a percentage ofamount in one year. It is in the nature of the compensation allowed bylaw or fixed by parties, for use or forbearance or damage for itsGdetention.[8] In the context of the present case, interest would be thecompensation payable by the appellant to the respondent, for the retentionor deprivation of use of money. Therefore, once the money was paid to 8 Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC 189, as quoted inHWebster’s Third New International Dictionary and Corpus Juris Secondum.

NEPA LIMITED THROUGH ITS SENIOR MANAGER (LEGAL)v. MANOJ KUMAR AGRAWAL [SANJIV KHANNA, J.]

the respondent, interest as compensation for deprivation of use of moneywill not arise.[9]

25. In view of the aforesaid reasons, we allow the present appealand set aside the impugned order dated 19.06.2017, whereby the appellanthad been directed to pay interest @ the rate of 18% per annum onRs.14,49,300/- from the date of the award till the date of decision of theappeal under Section 37 of the Act on 02.02.2012. We hold that theappellant would be liable to pay interest @ the rate of 18% onRs.9,13,483.00/9,30,300.00[10] (the exact amount to be calculated anddetermined by the executing court) with effect from 08.11.2001 till thepayment was/is made.

26. Learned counsel for the appellant has submitted that theyhave made over-payment and our attention is drawn to annexure (P-12), which shows that they have paid total amount of Rs. 56,70,096/-.We would not like to go into the said aspect, as this would relate tocomputation and calculations. The appellant is entitled to invoke Section144 of the CPC and take recourse to appropriate remedies available tohim in law, in case over-payment had been made to the respondent.

27. The appeal is allowed in the aforesaid terms.

28. Pending application(s), if any, shall stand disposed of.

9 We have not examined and decided the issue either way – whether interest would bepayable on the amount withdrawn in case withdrawal is on conditions like furnishingbank guarantee etc.

10 We have taken the figures from the calculations made by appellant – M/s NepaLimited, which is enclosed as Annexure ‘A’ and by Manoj Kumar Agarwal – respondent,which is enclosed as Annexure ‘B’ to this judgment. As per the appellant, the principalamount due and payable is Rs.9,13,483/-. However, as per the respondent, the principalamount due and payable is Rs. 9,30,300/-. The difference is only Rs.17,000/-, albeit,the correct computation would be made by the executing court.

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456SUPREME COURT REPORTS

AAnnexure ‘A’

BCD

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Sheet of Calculation of Interest by NEPA Limited Through its Senior–Manager (Legal) Appellant F

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Annexure ‘B’A

–Sheet of Calculation of Interest by Manoj Kumar Agrawal Respondent B

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Bibhuti Bhushan Bose

(Assisted by : Preetam Bharti, LCRA)

Appeal allowed.

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