MS PARSVNATH DEVELOPERS LTD v. MS KEDAR NATH GUPTA AND SONS HUF

1. The limited question to be answered in this petition is whether the amount deposited by the petitioner/Judgment Debtor [“JD”] in a preliminary decree is to be adjusted towards interest or towards principal decretal amount.

2. Brief facts are that preliminary decree dated 28.09.2018 was passed by the court of learned Additional District Judge-01, Patiala House Court, New Delhi to the extent of refunding the principal amount of Rs. 34,07,325.20/- (Rs. 29,56,670/- + Rs. 4,50,655.20/-) in CS 56823/2018, titled “Kedar Nath Gupta & Sons (HUF) Vs. M/s. Parsvnath Developers Ltd.”. Petitioner herein is the JD. The relevant paras of the decree read as under:-

3. In compliance of the preliminary decree, petitioner/JD made payments on different dates, as per following details:-

┌─────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┐
│                            Sl. No.                 Date                  Mode of                      Amount        │
│                                                                          payment                                    │
├─────────────────────────────────────────────────────────────────────────────────────────────────────────────────────┤
│                                1.                  03.11.2018          Demand Draft                Rs. 5,00,000/-   │
│                                2.                  07.01.2019          Demand Drafts               Rs.12.00,000/-   │
│                                3.                  13.02.2019          Demand Drafts               Rs. 8,00,000/-   │
│                                                    01.04.2019             Cheque                   Rs. 9,07,325/-   │
│                                               Total Amount                                        Rs. 34,07,325/-   │
│                           4.        Since no orders were passed as to the aspect of interest,                       │
│                           respondent/Decree Holder [“DH”], preferred CM (M) No. 1492/2018                           │
│                           before the High Court. This Court vide order dated 30.11.2021,                            │
│                           directed the payment of interest @ 9% on Rs. 29,56,670/-. Directions                      │
│                           in Para No. 14 & 15 read thus:-                                                           │
│

5. Respondent filed Execution Petition No. 130/2022 for execution of the preliminary decree and the order dated 30.11.2021, passed by the High Court in CM(M) No. 1492/2018.

6. In Execution Petition, petitioner filed an application, seeking extension of time in depositing the decretal amount in terms of preliminary decree and the order passed by this Court on 30.11.2021 along with its calculations.

7. The Civil Nazir filed a Calculation Sheet stating that the total amount due was Rs. 24,97,733/-, but as per the calculation filed by the petitioner, the balance interest payable was Rs. 23.10.381/-. Petitioner filed detailed elucidation of its calculation on 14.02.2023, clarifying how the petitioner reached to the balance interest payable of Rs. 23,10,381/-. Petitioner made further payments of Rs. 5 lakhs on 17.01.2023, Rs. 5 lakhs on 17.02.2023, Rs. 5 lakhs on 12.05.2023, through separate demand drafts towards interest in the abovementioned execution petition.

8. After considering the calculations filed by the parties and the Civil Nazir and after considering arguments from both the sides and while placing reliance on the decision of this Court in the case of Brijesh Kumar Verma Vs. Aurangjeb & Anr., FAO 345/2016, decided on 24.05.2028, the executing court, appropriated the amount paid by the JD, firstly towards interest and the remaining amount towards principal amount and finally concluded that principal amount to Rs. 21,93,104/- along with interest thereon from 12.05.2023 to 26.05.2023 was due and payable. The calculations arrived at by the executing court in its order dated 26.05.2023 are reproduced below:-

9. Feeling aggrieved, petitioner preferred the present petition.

10. Learned counsel, appearing for the petitioner, submits that adjustment of an amount towards principal/interest has to be necessarily in accordance with the specific direction contained in the decree and not otherwise. It is submitted that the learned executing court failed to consider that the specific directions in the preliminary decree were to pay only the principal amount of Rs. 29,56,670/- and Rs. 4,50,655/- only and there was no direction whatsoever to pay the interest.

11. Learned counsel further submits that petitioner paid the entire amount of preliminary decree prior to the order dated 30.11.2021 passed by the High Court ordering to pay the interest and also much prior to filing of the execution petition. It is argued that the amount paid in 2019 cannot be adjusted towards interest when the order of interest was made only on 30.11.2021.

12. While referring to the judgments of Bharat Heavy Electricals Ltd. Vs. R.S. Avtar Singh, (2013) 1 SCC 243 and Brijesh Kumar Verma (supra), it has been submitted that executing court has not considered that the general rule of appropriation towards decretal amount was that such an amount was to be adjusted strictly in accordance with the directions contained in the decree and only in the absence of such directions that the adjustments can be made towards the payment of interest and cost and thereafter towards the payment of principal amount. It is submitted that in CM(M) No. 1492/2018, the High Court only directed the petitioner to pay interest at the rate of 9% per annum on the principal amount but no direction was passed for adjustment of already paid principal amount, firstly towards payment of interest. It is argued that that the learned executing court has not properly interpreted the law and therefore the impugned order is liable to be set aside.

13. In the case of Gurpreet Singh Vs. Union of India, (2006) 8 SCC 457, the Constitution Bench of the Supreme Court held that the payment made by the judgment debtor to decree holder has to be appropriated first towards the interest and costs and then, towards the principal. In the case of Bharat Heavy Electrical Ltd. Vs. R.S. Avtar Singh (supra), the Supreme Court held that the general rule of appropriation towards decretal amount was that such an amount was to be adjusted strictly in accordance with the directions contained in the decree and in the absence of such directions, adjustments be made firstly towards the payment of interest and costs and thereafter towards the payment of the principal amount subject, of course, to any agreement between the parties.