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CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10926 OF 2014
Sharadchandra Ramkrishna Deshmukh, since deceased through heirs
1A Shailaja Sharadchandra Deshmukh, Wife of deceased petitioner
Age 85 years, Occu.: Housewife, Residing at 283, Sahakarnagar No.1, Jyoti Coop. Housing Society Ltd., Pune 411 009
1B Anita Pushkarraj Deshpande, daughter of deceased petitioner
Age 57 years, Occu.: Housewife, Residing at 283, Sahakarnagar No.1, Jyoti Coop. Housing Society Ltd., Pune 411 009
… Petitioner
4, Sumadhur Society, Pune 411 016 through its partners.
1) Amol Giridharlal Karava
Residing at 14, Neelratna 1103/B, Lakaki Road, Model Colony, Pune 411 016
2) Atul Ashok Purandare
Residing at 16/A, Kapila Housing
Society, Gokhalenagar, Pune 411 053
Residing at Yash Classic Complex
Near Cosmos Bank Land, Deep Bungalow Chowk, Shivajinagar, Pune 411 005
4) Amol Pandurang Patil, R/at : 20/B, Krishi Housing Society, Gokhalenagar, Pune 411 052 … Respondents
Mr. Vijay D. Patil with Mr. Yogesh Patil for the
Petitioner.
Mr. Amey Deshpande i/b Mr. Ajit V. Mandlik for
Respondent Nos. 1 to 4.
JUDGMENT
1. By this writ petition under Article 227 of the Constitution of India, the petitioner, being the decree-holder, challenges the judgment and order dated 24th September 2014 passed by the Executing Court. The Executing Court, while adjudicating the amount payable by the judgment-debtor, calculated interest awarded under the decree only up to the date of the counterclaim, i.e., 10th January 2001, and deducted the amount of Rs. 17,00,000/- payable by the decree-holder to the judgment-debtor from the principal amount.
2. The facts and circumstances relevant for adjudication of the issue involved are as under: The Petitioner, as a decree-holder, initiated Special Civil Suit No. 419 of 2000 in the Court of Civil Judge Senior Division, Pune, seeking declaratory relief and permanent injunction. The suit arose from a development agreement between the parties, where disputes emerged over payments, construction work, and mutual obligations. After a detailed examination of the pleadings, evidence, and arguments, the Trial Court delivered its judgment on 31st March 2005, partly decreeing the suit. The operative part of the decree was as follows: “1. The suit is hereby partly decreed as under:
2. Defendants shall pay an amount of Rs.44,0,750/- (Rs. Forty four lakh seven Hundred Fifty only) to the plaintiff along with interest at ther ate of Rs.18% per annum only on the principle amount Rs.38,00,000/- (Rs. Thirty Eight Lax only) from 12.2.2000 to till its realisation towards the consideration amount of development agreement.
3. Defendant shall pay an amount of Rs.15,00,000/- (Rs. Fifteen Lac only) to the plaintiff along with interest at the rate of Rs.18% per annum from the date of suit i.e. 17th April 2000 to till its realisation towards the amount for completing remaining construction work.
4. Defendant shall pay amount of Rs.5,84,000/- (Rs. Five Lac Eighty Four Thousand only) to the plaintiff along with interest at the rate of Rs.18% per annum from the date of the suit to till its realisation.
5. Charge of the decree is created on the North West and North East wing of the suit property and an property bearing CTS NO.557, Sadashiv Peth, Pune described in Schedule of Exh. 5 Rest claim of the plaintiff stands rejected.
6. Plaintiff shall pay an amount of Rs.17,00,000/- (Rs. Seventeen Lac only) to the defendants. Plaintiff and defendants can adjust this amount against the amount payable by the defendant to the plaintiff.
7. Rest claim of the defendants stands rejected
8. Defendant shall pay the suit and bear his own.
9. Decree be drawn up accordingly.”
3. During the execution proceedings, the judgment-debtor filed an application quantifying the net amount payable as Rs. 1,41,04,970, asserting that Rs. 17,00,000/- payable by the decreeholder to the judgment-debtor must be deducted from the principal amount before calculating interest and that the interest on the decretal amount should be calculated only up to the date of the counter-claim, i.e., 10th January 2001.
4. The decree-holder contested this calculation, arguing that the deductions and limitations proposed by the judgment-debtor are contrary to the express terms of the decree. It was submitted that the decree mandates interest at 18% per annum "till realization" and does not restrict its computation to any earlier date. Furthermore, the decree’s language does not direct that the amount of Rs. 17,00,000/- be deducted from the principal before calculating interest. Instead, it provides for adjustment after the determination of the total amounts payable by both parties.
5. The Executing Court, by its impugned order, upheld the judgment-debtor's contention. It relied on Order XXI Rule 19 of the Code of Civil Procedure, 1908, which provides for adjustment of reciprocal liabilities during execution proceedings. The Court concluded that Rs. 17,00,000/- payable by the decree-holder to the judgment-debtor must be deducted from the principal amount of Rs. 38,00,000/- before applying the interest rate of 18% per annum. It further held that the interest on the decretal amount is restricted to the date of the counter-claim, i.e., 10th January 2001, despite the decree explicitly stating "till realization."
6. Mr. Patil submitted that the Executing Court committed a grave error of law in restricting the calculation of interest on the decretal amount up to the date of counter-claim, i.e., 10th January
2001. He contended that the reliance on the judgment in Om Prakash Gupta v. Ranbir B. Goyal, AIR 2002 SC 665, was misplaced, as that decision pertained to the crystallization of rights of parties on the date of filing the suit in the context of specific performance, which is distinguishable from the facts of the present case. The decree in question explicitly awards interest "till realization," leaving no room for curtailment to a prior date. He further argued that the decree stipulates the adjustment of Rs. 17 lakh between the decree-holder and the judgment-debtor without any direction to deduct it from the principal amount before calculating interest. The sequence of calculations as envisaged by the decree must be respected. He relied on the judgment of the Supreme Court in V. Kala Bharathi & Ors. v. Oriental Insurance Co. Ltd., Branch Chittoor, (2014) 5 SCC 577, which affirmed that interest awarded by the court must be calculated in strict adherence to the decree until actual realization unless expressly provided otherwise.
7. Mr. Patil emphasized that the Executing Court cannot rewrite or modify the terms of the decree during execution. He submitted that the role of the executing court is limited to enforcing the terms of the decree as they stand, and it lacks jurisdiction to adjudicate matters that alter or override the express provisions of the decree.
8. Mr. Deshpande, on the other hand, supported the Executing Court’s interpretation, submitting that the reliance on Order XXI Rule 19 of the Code of Civil Procedure, 1908, was justified. He argued that the rule permits the adjustment of reciprocal claims to prevent unnecessary multiplicity of proceedings and enables an equitable resolution of liabilities. According to him, the deduction of Rs. 17 lakh from the principal amount before calculating interest aligns with this equitable principle. He also contended that the Executing Court correctly restricted the calculation of interest up to the date of counter-claim, i.e., 10th January 2001, as the counter-claim marked a significant turning point in the litigation, effectively crystallizing the rights and liabilities of the parties. He argued that such a limitation avoids undue accrual of interest, which would otherwise result in an unjust financial burden on the judgment-debtor, particularly when the decree-holder was also liable to pay Rs. 17 lakh.
9. Mr. Deshpande submitted that adjustments made during execution should aim for fairness and expediency, particularly where the mutual liabilities of parties are undisputed. He contended that the approach adopted by the Executing Court achieves this purpose without causing prejudice to either party.
10. After hearing learned advocates for the parties, it is necessary to set out relevant provisions of Code of Civil Procedure, 1908 which are as under: “ORDER XXI Execution of Decrees and Orders Payment under Decree
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.
19. Execution in case of cross-claims under same decree.— Where application is made to a Court for the execution of a decree under which two parties are entitled to recover sums of money from each other, then— (a) if the two sums are equal, satisfaction for both shall be entered upon the decree; and (b) if the two sums are unequal, execution may be taken out only by the party entitled to the larger sum and for so much only as remains after deducting the smaller sum, and satisfaction for the smaller sum shall be entered upon the decree.”
11. On a meticulous reading of Order XXI Rule 19, it becomes evident that the provision governs the execution of cross-claims within the same decree. It emphasizes that when two parties owe monetary sums to each other under a decree, and these sums are unequal, the execution can be taken out only for the excess amount, with satisfaction recorded for the smaller amount. This rule aims to avoid multiplicity of execution proceedings and ensure fairness in recovery. It provides a mechanism for adjustment of mutual liabilities between the decree-holder and the judgmentdebtor. The provision stipulates that where decrees are set off, the Court must ascertain the net amount payable and pass orders accordingly. The intent of this rule is to ensure that decrees involving mutual obligations are executed equitably without requiring separate execution proceedings for each decree.
12. In the present case, the Executing Court applied this provision to deduct the amount of Rs. 17,00,000/- payable by the decree-holder to the judgment-debtor from the principal amount of the claim decreed in favor of the decree-holder. This interpretation raises a crucial question about whether the deduction should precede the calculation of interest on the principal amount or follow it, in light of the specific terms of the decree and the established principles of execution law.
13. The decree explicitly awards interest at the rate of 18% per annum on the principal amounts of Rs. 38,00,000/-, Rs. 15,00,000/-, and Rs. 5,84,000/- "from the date of suit to till its realisation." It also provides that the amount of Rs. 17,00,000/payable by the decree-holder to the judgment-debtor "can be adjusted" against the amounts payable by the defendant to the plaintiff. The language of the decree, therefore, emphasizes interest accrual on the principal amount until the date of realization. The term "adjustment" implies a mutual set-off mechanism, but it does not inherently suggest that the amount payable by the decree-holder must be deducted before interest is calculated. This distinction is critical because premature deduction of Rs. 17,00,000/- from the principal amount may alter the effective calculation of interest and potentially prejudice the decree-holder's entitlement under the decree.
14. The Executing Court's interpretation of Order XXI Rule 19 to adjust Rs. 17,00,000/- against the principal amount before interest calculation appears to stretch the provision beyond its intent. The rule aims to facilitate efficient execution by setting off reciprocal liabilities, but it does not override explicit terms of the decree. In the absence of specific directions within the decree mandating such a sequence, the adjustment should occur after determining the total amount payable under the decree, including accrued interest. The satisfaction under Order XXI Rule 19 must be entered on the date of the decree itself.
15. The decree-holder contended that the Executing Court erred in restricting the calculation of interest to the date of the counterclaim, i.e., 10th January 2001. Such a finding contravenes the express provisions of Order XXI Rule 1 and Order XXI Rule 19(b) of the Code of Civil Procedure, 1908. Order XXI Rule 1 mandates the appropriation of payments towards interest and costs first, while Order XXI Rule 19(b) clarifies that interest is an integral part of the decretal amount unless otherwise stipulated. Interest awarded in the decree must be calculated as specified, and the executing court cannot restrict the period for which interest is payable unless the decree explicitly so provides. In the present case, the decree clearly awards interest "till realization," making any restriction on the period of interest untenable. It follows from the above analysis that the Executing Court was required to calculate interest in strict adherence to Clauses 2, 3, and 4 of the decree until realization. In cases where the judgment-debtor deposits an amount towards satisfaction of the decree, the deposited amount must first be appropriated towards accrued interest, as per Order XXI Rule 1, and the remaining amount should be adjusted against the principal. The decree-holder is entitled to recover the balance amount, with interest calculated on such reduced principal, until full realization.
16. In light of the foregoing discussion, the impugned judgment and order dated 24th September 2014, passed by the IInd Joint Civil Judge Senior Division, Pune, below Exhibit-208 in the application dated 17th July 2011, is hereby quashed and set aside.
17. The Executing Court is directed to recalculate the amount payable by the judgment-debtor in accordance with the observations made herein. The recalculation must strictly follow the provisions of Clauses 2, 3, and 4 of the decree, along with the adjustments mandated by Order XXI Rule 19 of the CPC, and ensure interest is computed until the realization of the full decretal amount.
18. Given that Execution Petition No. 184 of 2005 has been pending for nearly two decades, the Executing Court is directed to dispose of the petition within a period of six months from the date of this judgment. (AMIT BORKAR, J.)