1. Petitioners are the judgment-debtors in O.S No. 81 of 1987 — a money decree, and respondents in E.P No. 34 of 1992 of the Court of the Subordinate Judge, Payyannur. They filed E.A No. 160 of 1993 for recording full satisfaction. That E.A was dismissed by the Execution Court. This revision is directed against the said order.
2. According to the revision petitioners, the decree was for an amount of Rs. 98,644.08 towards which the judgment-debtors have made deposits and as per the said deposits the decree stands satisfied. On the other hand, the decree holder maintained that balance amount is due after adjusting the said deposits. Judgment debtors maintained that the deposits made in the Execution Court has to be adjusted against the principal as per Order 21, Rule 1, CPC and on such adjustment, no amount is due; whereas according to the decree-holder since there was no notice as to the mode of adjustment, the decree-holder is entitled to adjust the said payments first towards interest and then against the principal. Accordingly the decree holder has adjusted the part payments towards interest. If the said stand of the decree-holder is correct, the revision petitioners are not entitled to have full satisfaction recorded.
3. Learned counsel for the revision petitioners contended that after the amendment to Order 21, Rule 1, CPC. Section 60 of the Contract Act has to be read subject to Rule 1 of Order 21 and when so read, it could be seen that the deposits made by the revision petitioner have to be adjusted first against the principal. He relied on the decision in Punjab National Bank v. Prem Sagar, AIR 1988 Him Pra 33. On the other hand, learned counsel for the respondent relied on the decision of this court in Hindustan Organic Chemicals Ltd. v. Mathunni Mathai, 1993 (2) Ker LT 984, to contend that the amendment to Order 21, Rule 1, CPC does not bring out such a consequence as is maintained by the revision petitioners. For appreciating the rival contentions it is necessary to read Order 21, Rule 1, CPC. Order 21, Rule 1, CPC 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 send 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 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 acknowledgement 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:
Sub-rule (1) of O. 21, R. 1, CPC deals with modes of payment under the decree. Sub-rule (2) concerns the notice of payments when such payments are made under clause (a) or clause (c) of sub-rule (1), and sub-rule (3) deals with form of intimation when payment is made under clause (a) or clause (c) of sub-rule (1). Sub-rules (4) and (5) deal with the cessation of interest; as per sub-rule (4) when payment is made under clause (a) or clause (c) of sub-rule (1) interest will cease to run from the date of service of notice, and sub-rule (5) enjoins that when the amount is paid under clause (b) of sub-rule (1) interest shall cease to run from the date of payment. Briefly stated, O. 21, R. 1, CPC deals with mode of payment of money under a decree and its consequence. The instant case falls under O. 21, R. 1(a), CPC; the revision petitioners made deposits in the Execution Court. Thus the payment was under clause (a) of sub-rule (1). As per Sub-rule (2) the judgment-debtor should give notice either through court or directly to the decree-holder by registered post, acknowledgement due. There is no case for the revision petitioners that they gave notice as contemplated under Sub-rule (2).
4. But the case of the revision petitioners is, since the decree-holder respondent has withdrawn the amount deposited in court there is sufficient compliance of sub-rule (4). Alternatively, it was contended by the revision petitioners that, with due regard to the mandate in sub-rule (4) the deposits made by them should be adjusted against the principal, first irrespective their giving notice as to the adjustment. It is maintained by the learned counsel that, since sub-rules (4) and (5) enjoin that the interest should cease to run when the payments are made, unless the deposit goes in discharge of the principal, sub-rules (4) and (5) cannot be given effect. It is in support of that the learned counsel relied on the decision in Punjab National Bank's case, AIR 1988 Him Pra 33. Before going into the said decision, it is necessary to understand the law as to appropriation in such circumstance.
5. The Privy Council in M.V Appa Ravo v. R.P Appa Rao, AIR 1922 PC 233, held:
“There is a debt due that carries interest. There are moneys that are received without a definite appropriation on the one side or on the other, and the rule which is well established in the ordinary cases is that in those circumstances the money is first applied, in payment of interest and then when that is satisfied in payment of the capital”.
The Supreme Court in the decision in Meghraj v. Bayabai, AIR 1970 SC 161, followed the decision in M.V Appa Ravo's case, AIR 1922 PC 233, and held:
“The normal rule in the case of a debt due with interest is that any payment made by the debtor is in the first instance to be applied towards satisfaction of interest and thereafter to the principal”.
Thus the general rule is, when money is paid by the judgment-debtors to the decree-holder towards the decree debt without specifying whether the same is towards interest or principal; the decree-holder is entitled to credit it towards interest first and then to the principal. If the debtor states that the payment is towards the principal, the creditor need not accept the payment on those terms and if he does not accept the same, he has to return the money; and if he accepts, he is bound to appropriate the same as stated by the judgment-debtors.
6. The learned Judge in the decision in Punjab National Bank's case, AIR 1988 Him Pra 33, held that with respect to payment of decree debt the normal rule with respect to appropriation of payment towards interest first and then towards principal has become inoperative after the amendment to O. 21, R. 1, CPC by the CPC Amendment Act of 1976. According to the learned Judge, with respect to a decree debt, Section 60 of the Contract Act is inoperative with respect to payment made under O. 21, R. 1, CPC. The basis of the said conclusion by the learned Judge is, since sub-rules (4) and (5) of O. 21, R. 1, CPC enjoin cessation of interest on any payment, the payment should go in discharge of the principal; the reasoning appears to be that unless such payment goes in discharge of the principal, there could be no arrest of the running of interest.
7. This court in the decision in Hindustan Organic Chemicals Ltd.'s case, 1993 (2) Ker LT 984, dissented from the decision in Punjab National Bank's case, AIR 1988 Him Pra 33. Learned counsel for the revision petitioners maintained that since the judgment-debtor in that case made deposits as per the direction of the court, the normal rule in Meghraj's case, AIR 1970 SC 161, was not applicable.
8. The thrust of the argument of the learned counsel is, whereas sub-rule (3) which concerns payment by postal money order or through a bank under cl. (a) or cl. (b) of sub-rule (1) the judgment-debtors should state among other things as to how the money is to be adjusted — whether towards the principal, interest or costs — such a condition is not mentioned so far as deposits made in court under cl. (a) of sub-rule (1). Consequently according to him, as per the wording of the said sub-rule, it is not possible to say that the judgment-debtors are bound to intimate the mode of adjustment of the amount when the amount is deposited under cl. (a) of sub-rule (1).
9. This argument has to be appreciated with due regard to the context; particularly the occasion for enacting cl. (3) of Sub-rule (2). The unamended R. 1 of O. 21 did not contain a specific provision enabling to send the decree amount to court by postal money order or through a bank or to pay out of court to the decree-holder. There was also no specific provision in the unamended Rule as to the cessation of interest with respect to payments made towards the decree amount out of court to decree-holder by postal money order or through a bank or by any other mode wherein the payment is evidenced in writing. The new sub-rules (4) and (5) make provision for cessation of interest on payments towards decree amount.
10. Provisions are made with respect to the mode of adjustment and consequence of such payments. The question as to whether the non-mention of deposit in court in sub-rule (3) absolve the judgment-debtor from stating as to how the remittances have to be adjusted must be decided with due regard to the context and circumstance in which sub-rule (3) was incorporated by the amendment. As noticed, the said provision in clause (3) was necessitated as the judgment-debtors were given a new right to send the amount to the court by money order or through a bank. When the amount is sent to the court by money order or through a bank unless they mention the details as to the number of suit, name of parties etc. mentioned in sub-rule (3), it will be difficult, if not impossible to credit the same against that particular decree debt. And when such details are mentioned, it is necessary in the said context to require the judgment-debtors state the mode of appropriation also. Otherwise when the other requirements are mentioned if the mode of appropriation alone is omitted, that could be interpreted as intentional. Once the context ana circumstance in which sub-rule (3) required the judgment-debtor to state as to how the amount is to be adjusted is thus understood, one cannot say that the law that governed the deposit of amount in court by the judgment-debtors towards the decree amount is in any way intended to be altered. Therefore, it is clear that as a consequence of providing for additional method of payment, provision regarding appropriation also was made in connection with the said payments. That cannot lead to the inference that law regarding deposit of decree amount in court by the decree-holder was intended to be altered. Therefore, though sub-rule (3) does not take in deposits in court by the judgment-debtors that will not relieve them of their obligation to state that the deposit should be adjusted against the principal first. If they fail to do so, general rule that the deposit will go in discharge of the interest first will govern.
11. The said inference cannot in any way be affected by sub-rules (4) and (5) because sub-rule (4) comes into operation only when the amount is paid under cl. (a) or cl. (c) of sub-rule (1). As noticed, there is no case for the revision petitioners that they have stated that the amount deposited by them should be adjusted towards the principal first. The observation in the decision in Punjab National Bank's case, AIR 1988 Him Pra 33, that sub-rules (4) and (5) postulate cessation of interest on any payment made for satisfaction of the decretal amount is not consistent with the said sub-rules because it is not payment of any amount that is material; under the said clauses payments should be under cl. (a), (b) or (c) of sub-rule (1). Unless the payment is as per the said clauses in sub-rule (1), sub-rules (4) and (5) cannot come into operation, and as noticed with respect to a deposit in court towards decree amount by a judgment-debtor unless he states the mode of adjustment; general rule will apply to such deposit in court.
12. There is no case for the revision petitioners that the deposits were accompanied by a statement that the same should be adjusted against the principal. Therefore, merely because the decree-holder withdrew the said deposit, it cannot be said that there was compliance with sub-rule (4) so that the decree-holder was bound to adjust the said deposit towards principal first. With respect, I am unable to agree with the decision in Punjab National Bank's case, AIR 1988 Him Pra 33, and I agree with the view expressed in Hindustan Organic Chemicals Ltd.'s case, 1993 (2) Ker LT 984. When such is the position the contention of the revision petitioners cannot be accepted.
The revision is liable to be dismissed which accordingly is dismissed.
Revision dismissed.