Sardul Singh v. IFFCO Tokio General Insurance Co. Ltd.

1. Through the present Execution First Appeal, filed under Section 13(1A) of the Commercial Courts Act, 2015, the Appellant [Decree Holder before the Executing Court] assails the correctness of orders dated 12.07.2024 and 06.08.2024 passed by the learned Commercial Court, Saket [hereinafter referred to as the “Executing Court”] in Execution Petition No. 16/2024, whereby the Executing Court recorded the rival contentions regarding computation of decretal interest, directed production of break-up calculations, and thereafter held that pendente-lite and future interest was payable only on the principal sum of Rs.10,50,000/- and not on the pre-suit interest component, and directed the Respondent [Judgment Debtor before the Executing Court] to pay one month’s interest that remained outstanding.

2. In order to comprehend the issues involved in the present case, the relevant facts in brief are required to be noticed.

3. The Appellant/Decree Holder was the registered owner of a TATA Truck bearing registration No. H-46D-7831, which was insured with the Respondent/Judgment Debtor. On the intervening night of 9/10.11.2014, the truck was stolen when it was parked on the roadside, leading to registration of FIR No. 986/2014 under Section 379 of the Indian Penal Code, 1860. Upon completion of investigation, an untraced report was filed by the police on 17.03.2015. The insurance claim preferred by the Appellant/Decree Holder was repudiated by the Respondent/Judgment Debtor, compelling him to institute C.S.(COMM) No. 218/2019 seeking recovery of Rs.14,28,000/- (comprising Rs.10,50,000/- as insured value of the truck and Rs.3,78,000/- as pre-suit interest), together with pendente lite and future interest @ 12% per annum.

4. Vide judgment and decree dated 08.08.2023, the Commercial Court decreed the suit for Rs.14,28,000/- along with pendente lite and future interest @ 12% per annum, besides litigation expenses and court fees. The Respondent/Judgment Debtor’s Appeal [RFA (COMM.) No. 23/2024] before this Court was dismissed on 31.01.2024, wherein the Division Bench specifically noted that the decretal sum of Rs. 14,28,000/- included Rs.10,50,000/- towards value of the truck and Rs.3,78,000/- towards pre-suit interest, and upheld award of further pendente lite and future interest.

5. The Appellant/Decree Holder thereafter initiated Execution Petition No. 16/2024. The Respondent/Judgment Debtor raised objections contending that pendente lite and future interest could be computed only on the principal sum of Rs.10,50,000/- and not on the aggregate sum of Rs.14,28,000/-, as the latter would amount to grant of compound interest. The Appellant/Decree Holder resisted the objections, asserting that the Executing Court could not go behind the decree, which explicitly awarded interest on the sum of Rs. 14,28,000/-.

6. The Executing Court, vide orders dated 12.07.2024 and 06.08.2024, accepted the objections of the Respondent/Judgment Debtor, holding that the decree could not be interpreted as awarding interest upon interest, and that pendente lite and future interest was confined to the principal sum of Rs.10,50,000/-. It further recorded that the decretal amount had been substantially satisfied except for one month’s interest which was directed to be cleared within 15 days.

CONTENTIONS OF THE APPELLANT

7. Learned counsel for the Appellant/Decree Holder advanced the following submissions: i. That the Executing Court has exceeded its jurisdiction by effectively altering the judgment and decree dated 08.08.2023, which stood affirmed by the Division Bench of this Court vide judgment dated 31.01.2024. ii. That the decree, as drawn, specifically awarded a sum of Rs.14,28,000/- together with pendente lite and future interest @ 12% per annum, and the same attained finality upon dismissal of the Respondent/Judgment Debtor’s appeal. iii. That the decretal amount of Rs.14,28,000/- was treated as the principal adjudicated liability on the date of filing of the suit, being a composite of Rs.10,50,000/- as insured value and Rs.3,78,000/- as pre-suit interest. iv. That once the decree crystallised the liability at Rs.14,28,000/-, the Appellant/Decree Holder was entitled to interest thereon until realisation, and the Executing Court could not reopen or recalculate the components thereof. v. That the Executing Court’s interpretation restricting pendente lite and future interest only to Rs.10,50,000/- amounts to rewriting the decree, which is impermissible under law, as execution proceedings are confined to enforcement and not modification of the decree. vi. That paragraph No.14.[1] of the judgment dated 31.01.2024 clearly records that Rs.14,28,000/- comprised of principal plus presuit interest, and thereafter upholds award of pendente lite and future interest; thus, the plea of “interest upon interest” had already been rejected. vii. That the orders dated 12.07.2024 and 06.08.2024, therefore, suffer from gross illegality and arbitrariness and deserve to be set aside.

CONTENTIONS OF THE RESPONDENT

8. Learned counsel for the Respondent controverted the above submissions and urged dismissal of the Appeal, on the following grounds: i. That the prayer clause in the Appeal itself demonstrates that the principal amount was only Rs.10,50,000/-, being the insured declared value of the truck, while the additional Rs.3,78,000/- represented presuit interest calculated by the Appellant/Decree Holder upto the date of filing. ii. That the Commercial Court, while passing the decree, inadvertently allowed pendente lite and future interest on the entire figure of Rs. 14,28,000/-, thereby resulting in compounding interest. iii. That under Section 3(3)(c) of the Interest Act, 1978, the Courts are expressly prohibited from awarding “interest upon interest,” and any interpretation permitting the same would render the decree unenforceable to that extent. iv. That vide judgment dated 31.01.2024, the Division Bench of this Court merely upheld the award of pre-suit interest in addition to pendente lite and future interest, but did not sanction charging interest on the pre-suit interest component. v. That in paragraph No.14.[1] of the judgment dated 31.01.2024, the Division Bench of this Court has clearly broken down the amount into Rs.10,50,000/- (principal) and Rs.3,78,000/- (pre-suit interest), thereby negating the Appellant/Decree Holder’s contention that interest was to run on the whole of Rs.14,28,000/-. vi. That the Respondent/Judgment Debtor has already satisfied the decree by paying principal plus interest on Rs. 10,50,000/-, save for one month’s balance interest which the Executing Court rightly directed to be cleared by order dated 06.08.2024. vii. That the Executing Court has thus acted within the four corners of the decree and the law, and the present Appeal is wholly misconceived, being an attempt to claim “double interest.” ANALYSIS & FINDINGS

9. This Court has considered the rival submissions advanced on behalf of the parties and perused the material on record. The principal controversy centres around the interpretation of the decretal relief, namely, whether pendente lite and future interest at the rate of 12% per annum was payable on the sum of Rs.14,28,000/- (comprising Rs.10,50,000/- as the insured value of the truck and Rs.3,78,000/- as pre-suit interest) or only on the principal amount of Rs.10,50,000/-. The Appellant/Decree Holder asserts that the entire sum of Rs.14,28,000/- constituted the “principal sum adjudged”, whereas the Respondent/Judgment Debtor maintains that Section 34 Code of Civil Procedure, 1908 [hereinafter referred to as “CPC”] envisages interest only on the principal amount, and not on interest accrued prior to the institution of the suit.

10. The law in this regard stands settled. In Canara Bank v. M. Amarender Reddy & Anr.1, the Supreme Court observed that for the purpose of applying Section 34 of the CPC, the court is first required to adjudicate the principal sum adjudged and distinguish the same from any component of interest. The Court emphasised that pre-suit interest, even when awarded as part of the decree, cannot itself become the base for further interest unless there exists a specific statutory provision or contractual stipulation to that effect. The object of Section 34 of the CPC is to regulate pendente lite and future interest qua the principal adjudged, thereby excluding any notion of “interest upon interest”.

11. Applying the aforesaid principle to the present case, the insured value of the truck, namely Rs.10,50,000/-, constituted the principal sum. The additional amount of Rs.3,78,000/- awarded by the Commercial Court was explicitly on account of pre-suit interest. The Division Bench of this Court, while affirming the decree in appeal on 31.01.2024, also recorded in Paragraph No. 14.[1] that the decretal sum was bifurcated into Rs.10,50,000/- towards value of the truck and Rs.3,78,000/- as pre-suit interest, followed by pendente lite and future interest. There is no indication, either in the judgment of the Commercial Court or in the Appellate Order that interest was to accrue upon the component of pre-suit interest.

12. The Executing Court, while rejecting the Appellant/Decree Holder’s computation, has merely applied this settled principle. Though its reasoning may not have been articulated with clarity, the conclusion arrived at, that pendente lite and future interest was payable only upon Rs.10,50,000/- and not upon Rs.14,28,000/-, is legally sound and in consonance with the ratio of M. Amarender Reddy (supra) as well as the plain language of Section 34 of the CPC.

13. The contention of the Appellant/Decree Holder that the Executing Court has modified the decree is without merit. The Executing Court has not rewritten or diluted the decree; rather, it has construed its terms in light of binding precedent and confined execution to what was lawfully adjudged. In exercise of its supervisory jurisdiction under Article 227 of the Constitution of India, this Court is empowered to clarify and mould the relief so as to align the execution strictly with the decree and governing law. The orders under challenge, when so clarified, disclose no illegality warranting interference.