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CASE NO.:

Appeal (civil) 4570 of 2006

PETITIONER:

Gurpreet Singh

RESPONDENT:

Union of India

DATE OF JUDGMENT: 19/10/2006

BENCH:

Y.K.SABHARWAL & K.G.BALAKRISHNAN & S.H.KAPADIA & C.K.THAKKER & P.K.BALASUBRAMANYAN

JUDGMENT:

JUDGMENT

(SPECIAL LEAVE PETITION (C) NO.8408 OF 2003)

WITH

CIVIL APPEAL NOS.4549,4548 and 4547 OF 2006

(@ SLP (C) No.19525 of 2003, 3429 of 2004 and 5609 of 2004]

DELIVERED BY:

P.K.BALASUBRAMANYAN, J.

P.K.BALASUBRAMANYAN, J.

1. What is the rule of appropriation in execution of

money decrees? Is the rule the same in the case of an

award decree under the Land Acquisition Act or, is there

anything in the Land Acquisition Act, 1894 as amended by

the Land Acquisition (Amendment) Act, Act 68 of 1984

making that rule inapplicable or not wholly applicable?

These are the questions that arise for consideration in these

Petitions for Special Leave to Appeal.

2. Leave granted.

3. In Prem Nath Kapur & Anr. Vs. National

Fertilizers Corporation of India Ltd. & Ors. [(1995) Supp.

5 SCR 790], a three Judge Bench of this Court held that the

expression 'compensation' under Section 23(1) of the Land

Acquisition Act, 1894 as amended by Act 68 of 1984

(hereinafter referred to as, "the Act") read in the context of

Section 28 or Section 34 thereof, by necessary implication

excludes solatium and that no interest is payable on

solatium or on the additional amount under Section 23(1)(A)

of the Act. In other words, it was held that the liability to

pay interest was only on the excess amount of compensation

determined under Section 23(1) of the Act by the Civil Court

either under Section 26 or on appeal under Section 54 of the

Act over and above the amount awarded under Section 11 of

the Act. It was also held that the normal rule of

appropriation contained in Order XXI Rule 1 of the Code of

Civil Procedure relating to execution of decrees for recovery

of money, stands excluded by Sections 28 and 34 of the Act

and the principles of Order XXI Rule 1 of the Code could not

be extended to execution of award decrees under the Act.

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The view as regards the content of the expression

'compensation' occurring in Section 23(1) and Section 28 of

the Act was overruled by a Constitution Bench in Sunder

Vs. Union of India ((2001) Suppl. 3 SCR 176), wherein it

was held that the expression 'compensation' awarded would

include not only the total sum arrived at as per Section 23(1)

but also the sums under the remaining sub-sections of

Section 23. Thus, one part of the decision in Prem Nath

Kapur (supra) stood overruled, though the Constitution

Bench did not say anything about the other aspect dealt

with therein, namely, the mode of appropriation of the

amount due under an award decree. When these cases

came up before a bench of three Judges, this aspect was

noticed. The learned Judges felt that the question whether

this part of the judgment in Prem Nath Kapur (supra)

would survive the reasoning in Sunder (supra) had to be

reconsidered and even otherwise, the correctness of the

view expressed therein required reconsideration at the

hands of a Constitution Bench. It is thus that these

Petitions for Special Leave to Appeal have come before us.

The question for which the answer is sought from us is

indicated by the order of reference in the following words:

"Having heard the learned counsel for the

parties and having perused the aforesaid

decisions, we are of the view that the normal

rule that in case of a debt due with interest,

any payment made by the debtor, in the

first instance, is to be appropriated towards

the satisfaction of interest and thereafter

towards principal, subject to a contract to

the contrary, is not excluded by the

provisions of the Act. The normal principle

is embedded on the basis of Section 60 of

the Indian Contact Act, 1872. It is also

indicated in Order XXI Rule 1(3)(c) of the

Code. We may note that the decision in

Prem Nath Kapur & Anr. (supra) though

has been over-ruled by the Constitution

Bench in Sunder Vs. Union of India

[2001(7) SCC 211] but the Constitution

Bench has not gone into the question of

appropriation. The question of

appropriation, in the decision in Prem Nath

Kapur & Anr. (supra), requires to be re-

considered."

Thus, the question that requires to be answered is whether

the rule, of what may be called the different stages of

appropriation, set out in Prem Nath Kapur (supra) is

correct or whether the rule requires to be re-stated on the

scheme of the Land Acquisition Act understood in the

context of the general rules relating to appropriation and the

rules relating to appropriation in execution of money decrees

and mortgage decrees.

4. Appropriation is the act of setting apart or

assigning a thing or substance to a particular use or person

to the exclusion of others; application to a special use or

purpose. There are three specialised meanings of the term,

i) In company accounting, it is the division of pre

tax profits between corporation tax, company tax, company

reserves and dividends to shareholders. The term works in

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the same sense in a partnership situation.

ii) In the shipping of produce, the appropriation is

the document by which the seller identifies to the buyer the

relevant unit in shipment.

iii) If a debtor makes a payment to a creditor and

does not specify which debt the payment is in settlement of,

the creditor may appropriate it to any of the debts

outstanding on the debtor's account. This is often known

as appropriation of payments.

(See P. Ramanatha Aiyar Advanced Law Lexicon, 3rd Edition,

2005 page 315)

5. We are concerned with the last of the specialized

meanings assigned to the term.

6. The question in the sense in which we are

concerned with it, arises when a debtor makes a payment

which does not satisfy the full debt or, in other words,

remains a part-payment. The general rule of appropriation

is set out in Halsbury's Laws of England, Fourth Edition,

thus,

"Where several distinct debts are

owing by a debtor to his creditor, the

debtor has the right when he makes a

payment to appropriate the money to any

of the debts that he pleases, and the

creditor is bound if he takes the money,

to apply it in the manner directed by the

debtor. If the debtor does not make any

appropriation at the time when he makes

the payment, the right of appropriation

devolves on the creditor.

An appropriation by the debtor need

not be made in express terms, but must

be communicated to the creditor or be

capable of being inferred; it may be

inferred where the nature of the

transaction or the circumstances of the

case are such as to show that there was

an intention to appropriate."

7. The principle of appropriation is set out in Chitty

on Contracts, 29th Edition, Volume I in paragraph 21-059,

"Where several separate debts are

due from the debtor to the creditor, the

debtor may, when making a payment,

appropriate the money paid to a

particular debt or debts, and if the

creditor accepts the payment so

appropriated, he must apply it in the

manner directed by the debtor; if,

however, the debtor makes no

appropriation when making the payment,

the creditor may do so".

Paragraph 21-061 deals with the creditor's right to

appropriate. It is stated,

"where the debtor has not exercised

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his option, and the right to appropriate

thereof devolved upon the creditor, he

may exercise it at any time "up to the

very last moment" or until something

happens which makes it inequitable for

him to exercise it."

The question of appropriation as between principal and

interest is set out in paragraph 21-067 in the following

words:

"Where there is no appropriation by

either debtor or creditor in the case of a

debt bearing interest, the law will (unless

a contrary intention appears) apply the

payment to discharge any interest due

before applying it to the earliest items of

principal."

The relevant provisions governing contractual dealings are

found in Sections 59 to 61 of the Indian Contract Act.

According to Pollock & Mulla, Indian Contract Act, 12th

Edition, the underlying principle is that when several debts

are due and owing to one person, any payment made by the

debtor either with an express intimation or under

circumstances from which an intimation may be implied

must be applied to the discharge of the debt in the manner

intimated or which can be implied from the circumstances.

Mulla proceeds to observe,

"In England, 'it has been considered

a general rule since Clayton's case that

when a debtor makes a payment he may

appropriate it to any debt he pleases, and

the creditor must apply it accordingly'.

Where several distinct debts are owing by

a debtor to his creditor, the debtor has

the right when he makes a payment to

appropriate the money to any of the debts

that he pleases, and the creditor is

bound, if he takes the money, to apply it

in the manner directed by the debtor. If

the debtor does not make any

appropriation at the time when he makes

the payment, the right of appropriation

devolves on the creditor."

8. The Rule of Appropriation as applied in India was

summed up by Mr. Justice T.L. Venkatarama Aiyar (as he

then was) in the Full Bench decision of the Madras High

Court in Marimella Suryanarayana vs. Venkataraman Rao

(AIR 1953 Madras 458). His Lordship stated:

"The principles governing

appropriation of payments made by a

debtor are under the general law well

settled. When a debtor makes a

payment, he has a right to have it

appropriated in such manner as he

decides and if the creditor accepts the

payment, he is bound to make the

appropriation in accordance with the

directions of the debtor. This is what is

known in England as the rule in

'Clayton's case" (1861) 1 Mar.572: 35E.R.

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781 and it is embodied in Section 59,

Contract Act. But when the debtor has

not himself made any appropriation, the

right devolves on the creditor who can

exercise it at any time, vide 'Cory Bros. &

Co. vs. Owners of the Turkish Steamship

'Mecca', (1897) A.C. 286; and even at the

time of the trial : Vide \026 'Symore vs.

Picket', (1905) 1 K.B. 715. That is

Section 60, Contract Act. It is only when

there is no appropriation either by the

debtor or the creditor that the Court

appropriates the payments as provided in

Section 61, Contract Act."

9. It has to be noted that Sections 59 to 61 of the

Contract Act get attracted only when more than one debt is

due from a debtor to the creditor. The Sections would not get

attracted when there is only one debt due. Nor have they

any direct application in a case where the debt due has

merged in a decree and the applicable rule then would be

what is provided in the decree itself or the general rule

applicable in execution of money decrees.

10. Now, we may consider the provisions in the Code

of Civil Procedure, 1908 (hereinafter referred to as, "the

Code") that have relevance to the issue. The rule of

appropriation in respect of amounts deposited in court or in

respect of payment into court, is contained in Order XXIV of

the Code at the pre decreetal stage and in Order XXI Rule 1

at the post decreetal stage. Though, we are not directly

concerned with it, we may notice that special provisions

relating to mortgages are found in Order XXXIV of the Code.

Under Order XXIV Rule 1, a defendant in a suit for recovery

of a debt may at any stage of the suit deposit in court such

sum of money as he considers a satisfaction in full of the

claim in the plaint. Rule 2 thereof provides for issue of

notice of deposit to the plaintiff through the court and for

payment out of the amounts to the plaintiff if he applies for

the same. Rule 3 specifically states that no interest shall be

allowed to the plaintiff on any sum deposited by the

defendant from the date of such deposit, whether the sum

deposited is in full discharge of the claim or it falls short

thereof. Rule 4 enables the plaintiff to accept the deposit as

satisfaction in part and allows him to pursue his suit for

what he claims to be the balance due, subject to the

consequences provided for therein regarding costs. It also

deals with the procedure when the plaintiff accepts the

payment in full satisfaction of his claim.

11. Order XXI Rule 1 provides the modes of paying

money under a decree. It stipulates that all monies payable

under a decree shall be paid: (a) by deposit into the Court

whose duty it is to execute the decree, or (b) out of court, to

the decree holder in the manner provided, or (c) otherwise,

as the court which made the decree directs. Sub-Rule (2)

provides that where a payment is made by deposit into the

court or as directed in the decree, the judgment debtor shall

give notice thereof to the decree holder either through the

court or directly to him by registered post acknowledgement

due. On any amount paid by way of deposit into the court

or as directed under the decree, interest, if any, shall cease

to run from the date of the service of the notice referred to in

sub-rule (2). Thus, Order XXI Rule 1 after its amendment in

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the year 1976 also contemplates the deposit of the decree

amount into court and the giving of notice thereof to the

decree holder and provides further for cessation of interest

from the date of notice to the decree holder of such deposit.

12. Even before the amendment to the Code, in the

year 1976, the view had been taken that the indication given

by Rule 3 of Order XXIV of the Code providing for cessation

of the running of interest on notice of the deposit being given

pending a suit, can be extended to execution of decrees. In

Mt. Amtul Habib vs. Mohammad Yusuf (ILR 40 Allahabad

125), it was held that where money was paid into court by

the judgment debtor in satisfaction of a decree, interest on

the decree will cease from the date of payment in proportion

to the amount paid, although such amount may not in fact

be the whole amount due under the decree. In that case,

towards the decree amount which included the principal,

interest and costs, the judgment debtors deposited three-

fourth of the principal with interest and costs thereon, on a

plea that one-fourth of the principal belonged to themselves,

a plea that was overruled by the High Court compelling the

judgment debtors to deposit the balance one-fourth amount

also. The question arose in execution whether the decree

holder was entitled to interest on the full amount of the

decree until after the decision of the High Court holding that

the entire amount must be deposited or whether interest

should not be charged on the whole amount but it should be

charged only on the difference between the amount which

they had deposited in court and the full amount of the

decree. In other words, the question was whether the

judgment debtors should be relieved from the obligation of

paying interest on so much of the amount as they had

deposited, from the date of that deposit. The courts below

upheld the plea that interest should not be charged on the

whole amount. In an appeal by the decree-holder, the

Division Bench held,

"The matter is not altogether free

from difficulty. Order XXIV, rules (1), (2)

and (3), provide that in the case of a suit

the defendant may pay into court such

sum of money as he considers as

satisfaction in full of the claim. Notice of

the deposit is given to the plaintiff, who is

entitled to draw the money out, whether

he takes it in full discharge or not, and

no interest is allowed to the plaintiff upon

the amount of the deposit. There is no

corresponding provision as to payment

out of court and the cessation of interest

in execution matters, but there does not

seem to be any reason why the same

thing should not happen in execution

proceedings as in the case of suits."

After referring to the facts and the position that the court

could have ordered the money to be paid over to the decree

holder in partial discharge of the decree debt soon after the

amount was deposited, the court stated,

"We think that in this case we ought

to apply the analogy of the rules which

relate to payment into court of money by

the defendant in a suit, and that in this

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view the decisions of the courts below

were correct and should be affirmed."

The same view was taken by the Patna High Court in

Gopalje vs. Sumrit Mandar (AIR 1933 Patna 89). After

referring with approval to the view expressed in the above

Allahabad case, their Lordships held that the above decision

clearly implied that even if a portion of the decreetal amount

was paid, it would be a valid payment. In Varki Ouseph vs.

Narayanan Parameswara Panicker (AIR 1956 Travancore-

Cochin 46) a Division Bench of the Travancore \026Cochin

High Court after referring to the decisions of the Allahabad

and Patna High Courts, referred to above, and the relevant

portions of the commentaries from Mulla on the Code of

Civil Procedure, held that in the case of a decree which

awards interest on the principal, interest ceases to run on

the amount deposited in the court under Order XXI rule 1(a)

from the date the decree holder has notice of the deposit.

In Mulla's commentary on the Code of Civil Procedure 15th

Edition Vol. III dealing with Rule 3 of Order XXIV it is stated:

"the principle of this rule applies to

proceedings in execution; therefore, if

money is paid into Court by a judgment-

debtor, no interest should be allowed to the

decree holder on the amount so paid,

although such amount may not in fact be

the whole amount due under the decree."

The decision of the Allhabad High Court in Amtul vs.

Muhammad (ILR 40 Allahabad 125) is relied on. We see no

reason not to accept the principle thus enunciated.

13. While dealing with the effect of the deposit made

by a judgment debtor (mortgagor) towards the decree debt in

terms of Order XXI Rule 1 of the Code as it stood prior to its

amendment by Act 104 of 1976, this Court in Meghraj and

others vs. Mst. Bayabai and others (1969 (2) SCC 274)

held:

"Unless the mortgagees were

informed that the mortgagors had

deposited the amount towards the

principal, and not towards the interest,

and the mortgagees agreed to withdraw

money from the court accepting the

conditional deposit: the normal rule that

the amounts deposited in court should

first be applied towards satisfaction of the

interest and costs and thereafter towards

the principal would apply.

In Venkatadri Appa Row and

others vs. Parthasarathi Appa Row (LR

17 IA 150) the Judicial Committee of the

Privy Council observed that upon taking

an account of principal and interest due,

the ordinary rule with regard to payments

by the debtor unappropriated either to

principal or interest is that they are first

to be applied to the discharge of interest.

Lord Buckmaster delivering the judgment

of the Borad observed:

'There is a debt due that carries

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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 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. That rule is

referred to by Rigby, L.J., in the case of

Parr's Banking Co. vs. Yates, (1898 (2)

QB 460) in these words:

"The defendant's counsel relied on

the old rule that does, no doubt, apply to

many cases, namely, that where both

principal and interest are due, the sums

paid on account must be applied first to

interest. That rule, where it is

applicable, is only common justice. To

apply the sums paid to principal where

interest has accrued upon the debt, and

is not paid, would be depriving the

creditor of the benefit to which he is

entitled under his contract.'

Learned counsel for the appellant

contended that in Venkatadri Appa

Row's case (supra) there was no specific

appropriation by the debtor, whereas in

the present case there is specific direction

by the debtor. But the normal rule is

that in the case of a debt due with

interest any payment made by the debtor

is in the first instance to be applied

towards satisfaction of interest and

thereafter to the principal. It was for the

mortgagors to plead and prove an

agreement\027that the amounts which were

deposited in Court by the mortgagors

were accepted by the mortgagees subject

to a condition imposed by the

mortgagors."

14. In Industrial Credit & Development Syndicate

Now Called I.C.D.S. Ltd. vs. Smithaben H. Patel (Smt.)

and others ((1999) 1 SCR 555], this Court considered the

question whether Sections 59 to 61 of the Contract Act

would apply to a debt that has merged in a decree. This

Court held that Sections 59 and 60 of the Contract Act

would be applicable only at pre-decreetal stage and not

thereafter, since post decreetal payments are to be made

either in terms of the decree or in terms of the agreement

arrived at between the parties, though on the general

principle as mentioned Sections 59 and 60 of the Contract

Act. It was also held that the general rule of appropriation

towards a decreetal 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

direction, adjustments be made firstly in payment of interest

and costs and thereafter in payment of the principal

amount, subject of course, to any agreement between the

parties.

15. We may now advert to Order XXXIV of the Code,

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dealing also with the execution of mortgage decrees. Rule 10

of Order XXXIV provides for costs of the mortgagee

subsequent to the decree and enables the court to permit

the mortgagee to add to the mortgage money such costs of

the suit and other costs, charges and expenses as have been

properly incurred by him since the date of the preliminary

decree for foreclosure, sale or redemption up to the time of

actual payment. Under Rule 11, where interest is legally

recoverable, the court may order payment of interest to the

mortgagee as provided in that Rule. Rule 12 deals with sale

of property subject to prior mortgage and provides for

payment out of the said proceeds to the prior mortgagee the

same interest in the proceeds of the sale as he had in the

property sold. Under Rule 13, after the proceeds are

brought into court, the rule of application of the funds is set

out. The amount must be applied first in payment of all

expenses incident to the sale or properly incurred in any

attempted sale; secondly, in payment of whatever is due to

the prior mortgagee on account of the prior mortgage, and

of costs, properly incurred in connection therewith; thirdly,

in payment of all interest due on account of the mortgage in

consequence whereof the sale was directed, and of the costs

of the suit in which the decree directing the sale was made;

fourthly, in payment of the principal money due on account

of that mortgage; and lastly, the residue (if any) shall be paid

to the person proving himself to be interested in the property

sold, or if there are more such persons than one, then to

such persons according to their respective interests therein

or upon their joint receipt. Under sub-Rule (2) it is made

clear that nothing in that Rule or Rule 12 shall affect the

powers conferred by Section 57 of the Transfer of Property

Act.

16. A Full Bench of the Lahore High Court in Jai

Ram vs. Sulakhan Mal [AIR 1941 LAHORE 386] considered

the position in detail. That was a case where the property

had been sold in execution of a mortgage decree and the

question was about the appropriation of the sale proceeds

brought to court. The question was referred to the Full

Bench in view of the conflict of decisions in that Court on

the mode of appropriation. The Full Bench held that

Sections 59 to 61 of the Contract Act embody the general

rules as to appropriation of payments in cases where a

debtor owes several distinct debts to one person and

voluntarily makes payment to him. The Sections do not deal

with cases in which principal and interest are due on a

single debt, or where a decree has been passed on such a

debt, carrying interest on the sum adjudged to be due under

the decree. After thus finding that Sections 59 to 61 of the

Contract Act had no application, the Full Bench proceeded

to hold that the general rule of appropriation of payments

towards a debt was that in the absence of a specific

indication to the contrary by the debtor, the money is first

applied in payment of the interest and then when that is

satisfied, in payment of the capital. That principle applied

even to the sale proceeds of the properties sold in execution

of a mortgage decree. Therefore, in the absence of a

direction to the contrary in the decree, the sale proceeds of

the properties sold in execution of a mortgage decree must

be applied first in payment of subsequent interest and costs,

and thereafter the balance, to discharge the principal sum

declared as payable in the decree. Referring to Rules 12

and 13 of Order XXXIV of the Code, it was stated:

"It will be seen that in the case dealt with

in this rule, after the prior mortgagee has

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been paid off in full, the balance is to be

applied first in payment of the interest

due on the mortgage, in consequence of

which the property was sold, and the

costs, and the balance in payment of the

principal. This is in accord with the

general rule and there seems no reason

why a different principle should be

adopted when the property is not subject

to a prior mortgage."

17. Order XXXIV of the Code contains a scheme of

appropriation in a case where Rules 12 and 13 of that Order

apply and there is a prior mortgage that remains to be

satisfied. The view taken by the Lahore High Court as well

as by the Madras High Court in the decision referred to in

the judgment of the Full Bench of the Lahore High Court

was that, in the absence of a distinct order to the contrary,

the Court must normally follow the rule of law applicable to

the case in handing over the sale proceeds to the decree

holder and the rule of appropriation as referred to in the

decision followed. But the question is whether the same

principle can be extended in view of the specific provision

contained in Rule 1 of Order XXI of the Code especially after

its amendment by Act 104 of 1976. That Rule provides for

the modes of paying money under a decree. The modes are:

(a) by deposit into the Court whose duty it is to execute the

decree, or (b) out of Court, to the decree holder in the

manner provided, or (c) otherwise, as the Court which made

the decree, directs. Sub-rules (4) and (5) seem to be relevant

for our purpose. They read:

"(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."

18. These sub-rules are seen to be consistent with the

scheme of Order XXIV of the Code dealing with payment into

court pending the suit, especially Rule 3 thereof, which

provides that, no interest shall be allowed to the plaintiff on

any sum deposited by the defendant from the date of notice

of the deposit, whether the sum deposited was in full of the

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claim or falls short of it.

19. In the objects and reasons for amendment of

Order XXI Rule 1, it was set out as follows:

"The Committee note that there is no

provision in the Code in relation to

cessation of interest on the money paid

under a decree, out of Court, to a decree-

holder, by postal money order or through a

bank or by any other mode wherein

payment is evidenced in writing. The

Committee are of the view that, in such a

case, the interest should cease to run from

the date of such payment. In case the

decree-holder refuses to accept the postal

money order or payment through a bank,

interest should cease to run from the date

on which the money was tendered to him in

ordinary course of business of the postal

authorities or the bank. Sub-rule (5) in rule

1 of Order XXI has been inserted

accordingly"

The legislative intent in enacting sub-Rules (4) and (5)

is therefore clear and it is that interest should cease

on the deposit being made and notice given or on the

amount being tendered outside the court in the

manner provided. Mulla in his commentary on the

Code 15th Edition Vol. II at page 1583 has set out the

effect of the rules as follows:

"Normal rule with respect to money

decree is (i) the appropriation of

payments towards satisfaction of interest

in the first instance, and (ii) then towards

principal amount. But this became

inoperative, after the amendment of Rule

1 of Order 21, C.P.C. Section 60 of the

Contract Act cannot be invoked for the

application of the aforesaid normal rule."

20. Thus, in cases of execution of money decrees or

award decrees, or rather, decrees other than mortgage

decrees, interest ceases to run on the amount deposited, to

the extent of the deposit. It is true that if the amount falls

short, the decree holder may be entitled to apply the rule of

appropriation by appropriating the amount first towards the

interest, then towards the costs and then towards the

principal amount due under the decree. But the fact

remains that to the extent of the deposit, no further interest

is payable thereon to the decree holder and there is no

question of the decree holder claiming a re-appropriation

when it is found that more amounts are due to him and the

same is also deposited by the judgment debtor. In other

words, the scheme does not contemplate a reopening of the

satisfaction to the extent it has occurred by the deposit. No

further interest would run on the sum appropriated towards

the principal.

21. As an illustration, we can take the following

situation. Suppose, a decree is passed for a sum of

Rs.5,000/- by the trial court along with interest and costs

and the judgment debtor deposits the same and gives notice

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to the decree holder either by approaching the executing

court under Order XXI Rule 2 of the Code or by making the

deposit in the execution taken out by the decree-holder

under Order XXI Rule 1 of the Code. The decree holder is

not satisfied with the decree of the trial court. He goes up in

appeal and the appellate court enhances the decree amount

to Rs.10,000/- with interest and costs. The rule in terms of

Order XXI Rule 1, as it now stands, in the background of

Order XXIV would clearly be, that the further obligation of

the judgment debtor is only to deposit the additional amount

of Rs. 5,000/- decreed by the appellate court with interest

thereon from the date the interest is held due and the costs

of the appeal. The decree holder would not be entitled to say

that he can get further interest even on the sum of

Rs.5,000/- decreed by the trial court and deposited by the

judgment debtor even before the enhancement of the

amount by the appellate court or that he can re-open the

transaction and make a re-appropriation of interest first on

Rs.10,000/-, costs and then the principal and claim interest

on the whole of the balance sum again. Certainly, at both

stages, if there is short-fall in deposit, the decree holder may

be entitled to apply the deposit first towards interest, then

towards costs and the balance towards the principal. But

that is different from saying that in spite of his deposit of the

amounts decreed by the trial court, the judgment debtor

would still be liable for interest on the whole of the principal

amount in case the appellate court enhances the same and

awards interest on the enhanced amount. This position

regarding execution of money decrees has now become clear

in the light of the amendments to Order XXI Rule 1 by Act

104 of 1976. The argument that what is awarded by the

appellate court is the amount that should have been

awarded by the trial court and so looked at, until the entire

principal is paid, the decree holder would be entitled to

interest on the amount awarded by the appellate court and

therefore he can seek to make a re-appropriation by first

crediting the amount deposited by the judgment debtor

pursuant to the decree of the trial court towards the cost in

both the courts, towards the interest due on the entire

amount and only thereafter towards the principal, is not

justified on the scheme of Order XXI Rule 1 understood in

the context of Order XXIV Rules 1 to 4 of the Code. The

principle appears to be that if a part of the principal has

been paid along with interest due thereon, as on the date of

issuance of notice of deposit, interest on that part of the

principal sum will cease to run thereafter. In other words,

there is no obligation on the judgment debtor to pay interest

on that part of the principal which he has already paid or

deposited.

22. Going by this principle and for the moment

keeping out the scheme of the Land Acquisition Act, it

appears to us that on payment or deposit of the amount

awarded by the Collector in terms of Section 11 read with

Section 31 of the Act, the claimant cannot thereafter claim

any interest on that part of the compensation paid to him or

deposited for the payment to him once notice of deposit is

given to him. Thereafter, when the reference court

enhances the compensation with consequential

enhancement in solatium and interest under Section 23(1A)

of the Act and further awards interest on the enhanced

compensation in terms of Section 28 of the Act, the

claimant/decree holder can seek an appropriation of the

amounts deposited pursuant to that award decree, only

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towards the enhanced amount so awarded by the reference

court. While making the appropriation, he can apply the

amount deposited, first towards the satisfaction of his claim

towards interest on the enhanced amount, the costs, if any,

awarded and the balance towards the land value, solatium

and the payment under Sections 23 (1A) of the Act and if,

there is a shortfall, claim that part of the compensation with

interest thereon as provided in Section 28 of the Act and as

covered by the award decree. Once the sum enhanced by

the reference court, along with the interest is deposited by

the State, there will be no occasion for the

claimant/awardee to seek a reopening of the amount

awarded by the Collector, substituted by the amount

awarded by the reference court and seek to have a re-

appropriation of the amount towards what is due. Same

would be the position in a case where the amount awarded

by the reference court, including the interest is deposited,

but the amount is further enhanced in appeal by the High

Court. Again, the same principle would apply. The

principle would continue to apply when the Supreme Court

awards further enhancement in a further appeal to that

Court. But if after the award by the reference court the

amount is not deposited by the State, interest would run on

the compensation in terms of Section 28 of the Act on that

amount as provided in Section 28. The same would be the

position regarding the enhancement given in appeal by the

High Court and in the enhancement given in appeal by the

Supreme Court. The mandate of Section 34 and Section 28

that interest would run from the date the Collector takes

possession till the particular amount is deposited as

provided in those sections ensures that the claimant is

recompensed adequately. Section 28 ensures such

recompense at each stage of enhancement of compensation.

23. Let us now consider the scheme of the Land

Acquisition Act, 1894 as amended by the Land Acquisition

(Amendment) Act 68 of 1984. After the publication of the

preliminary notification under Section 4 of the Act and after

hearing of objections, a declaration has to be made under

Section 6 of the Act. The Collector is then to take the order

for acquisition from the Appropriate Government or the

officer authorized in that behalf by the Government. After

completing the formalities contemplated and the enquiry

made in terms of Section 11 of the Act, the Collector has to

make an award indicating the true area of the land, the

compensation which in his opinion should be allowed for the

land and the apportionment of the compensation among the

persons known or believed to be interested in the land. In

making the award, the Collector shall be guided by Sections

23 and 24 dealing with matters to be considered in

determining the compensation and matters to be excluded in

determining the compensation as enjoined by Section 15 of

the Act. Under Section 12 of the Act, the award becomes

final as between the Collector and the persons interested

and the Collector is to give notice of his award to persons

interested. On making the award, the Collector may take

possession of the land in terms of Section 16 of the Act.

Under Section 31, on making an award under Section 11,

the Collector shall tender payment of the compensation

awarded by him to the persons interested entitled thereto

according to the award, and shall pay it to them unless

prevented by the contingencies referred to in Section 31

itself. Under Section 34 of the Act, when the amount of

compensation awarded is not paid or deposited on or before

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taking possession of the land, the Collector shall pay the

amount awarded with interest thereon at the rate of nine per

cent per annum from the time of taking possession till it

shall have been paid or deposited. But if the compensation

or any part thereof is not paid within a period of one year

from the date on which possession is taken, interest is

payable at the rate of fifteen per cent per annum from the

date of expiry of the said period of one year on the amount of

compensation or part thereof which has not been paid or

deposited before the date of such expiry. It is relevant to

notice that on payment of the amounts thus due, the award

made by the Collector stands satisfied.

24. A person interested, who is not satisfied with the

amount of compensation awarded by the Collector is entitled

to receive the amount under protest and could apply to the

Collector requiring him to refer the matter to the Court in

terms of Section 18 of the Act. The Collector is then to make

a statement to the Court and the Court is entitled to fix the

compensation subject to Section 25 of the Act which

provides that the amount of compensation awarded by the

Court shall not be less than the amount awarded by the

Collector under Section 11 of the Act. In fixing the

compensation, the Court shall have regard to the matters

referred to in Sections 23 and 24 of the Act. Under Section

26, every award shall be deemed to be a decree within the

meaning of Section 2(2) of the Code of Civil Procedure and

every reasoned award shall be deemed to be a judgment as

defined in Section 2(9) of the Code of Civil Procedure. Under

Section 27 of the Act, every award made by the Court shall

also contain directions regarding the costs incurred in the

proceedings in Court, the costs of the claimant found

entitled to enhancement, normally to be borne by the

Collector. Under Section 28 of the Act, the Court which has

awarded compensation in excess of the sum which the

Collector did award as compensation, may direct that the

Collector shall pay interest on such excess at the rate of

nine per cent per annum from the date on which he took

possession of the land to the date of payment of such excess

into Court. The proviso enjoins the Court to direct that

where such excess or any part thereof is paid into Court

after the expiry of a period of one year from the date on

which possession is taken, interest at the rate of fifteen per

cent per annum, shall be payable from the date of expiry of

the said period of one year on the amount of such excess or

part thereof which has not been paid into Court after the

date of such expiry. Two aspects require to be noted. One

is that the interest is payable only on the excess amount of

compensation awarded by the reference court and the

second is that interest on the enhanced amount awarded is

payable from the date of taking possession at the rate of 9%

per annum for the first year after taking possession and

thereafter at 15% per annum till the deposit of the excess is

made. This clearly indicates that there is no scope for the

re-opening of the appropriation already made pursuant to

the award. The other significant factor is that the award

should specify the amount awarded as market value of the

land separately and the other amount, if any, awarded

under other heads of Section 23(1).

25. Under Section 54 of the Act, a person, still not

satisfied with the decree of enhancement in his favour on

the reference under Section 18 of the Act, has a right to file

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an appeal to the High Court and from the decision of the

High Court in such an appeal, an appeal to the Supreme

Court. If one were to go by the definition of 'Court' occurring

in Section 3(d) of the Act, Section 28 providing for payment

of interest on excess compensation may not apply to an

appeal under Section 54 of the Act on the excess, if any

awarded by the High Court or in subsequent appeal by the

Supreme Court. But when in an appeal under Section 54

of the Act, the appellate court further enhances the

compensation, it awards the compensation that the

reference court ought to have awarded and so understood,

Section 28 of the Act may be applied at the appellate stage.

If the expression 'Court' used in Section 28 of the Act is

understood in the generic sense, (on the basis that the

context otherwise requires it), the result would be the same.

The other provision relevant to be noted is Section 53 of the

Act which makes the Code of Civil Procedure applicable to

all proceedings before the Court under the Act save in so far

as the provisions of the Code are found to be inconsistent

with anything contained in the Act. Section 54 also does

not keep out the Code, but makes the appeal under it

subject to the provisions of the Code applicable to appeals

from original decrees.

26. On the scheme of the Act, it is seen that the

award of compensation is at different stages. The first stage

occurs when the award is passed. Obviously, the award

takes in all the amounts contemplated by Section 23(1) of

the Act, Section 23(1A) of the Act, Section 23(2) of the Act

and the interest contemplated by Section 34 of the Act. The

whole of that amount is paid or deposited by the Collector in

terms of Section 31 of the Act. At this stage, no shortfall in

deposit is contemplated, since the Collector has to pay or

deposit the amount awarded by him. If a shortfall is pointed

out, it may have to be made up at that stage and the

principle of appropriation may apply, though it is difficult to

contemplate a partial deposit at that stage. On the deposit

by the Collector under Section 31 of the Act, the first stage

comes to an end subject to the right of the claimant to notice

of the deposit and withdrawal or acceptance of the amount

with or without protest.

27. The second stage occurs on a reference under

Section 18 of the Act. When the reference Court awards

enhanced compensation, it has necessarily to take note of

the enhanced amounts payable under Section 23(1), Section

23(1A), Section 23(2) and interest on the enhanced amount

as provided in Section 28 of the Act and costs in terms of

Section 27. The Collector has the duty to deposit these

amounts pursuant to the deemed decree thus passed. This

has nothing to do with the earlier deposit made or to be

made under and after the award. If the deposit made, falls

short of the enhancement decreed, there can arise the

question of appropriation at that stage, in relation to the

amount enhanced on the reference.

28. The third stage occurs, when in appeal, the High

Court enhances the compensation as indicated already.

That enhanced compensation would also bear interest on

the enhanced portion of the compensation, when Section 28

is applied. The enhanced amount thus calculated will have

to be deposited in addition to the amount awarded by the

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reference Court if it had not already been deposited.

29. The fourth stage may be when the Supreme Court

enhances the compensation and at that stage too, the same

rule would apply.

30. Can a claimant or decree holder who has received

the entire amount awarded by the reference court or who

had notice of the deposit of the entire amount so awarded,

claim interest on the amount he has already received merely

because the appellate court has enhanced the compensation

and has made payable additional compensation? We have

already referred to Order XXI and Order XXIV of the Code to

point out that such a blanket re-opening of the transaction

is not warranted even in respect of a money decree. Section

28 of the Act indicates that the award of interest is confined

to the excess compensation awarded and it is to be paid

from the date of dispossession. This is in consonance with

the position that a fresh re-appropriation is not

contemplated or warranted by the scheme of the Act. But if

there is any shortfall at any stage, the claimant or decree

holder can seek to apply the rule of appropriation in respect

of that amount, first towards interest and costs and then

towards the principal, unless the decree otherwise directs.

31. In Sunder Vs. Union of India [2001 Suppl. (3)

S.C.R. 176], this Court posed the question, what is meant by

"the compensation" awarded. The Court concluded,

"We make it clear that the

compensation awarded would include not

only the total sum arrived at as per sub-

Section (1) of Section 23 but the

remaining sub-Sections thereof as well.

It is thus clear from Section 34 that the

expression "awarded amount" would

mean the amount of compensation

worked out in accordance with the

provisions contained in Section 23,

including all the sub-Sections thereof."

This shows that there is no distinction made between land

value and solatium on the one hand and the interest

awardable on the other, under Section 23(1A) of the Act. It

is on this sum that the interest under Section 34 of the Act

is awarded and if it were a reference, awarded under Section

28 of the Act, in addition to costs, if any. Thus, the award

by the Collector and the deemed decree passed on reference

contain the components of compensation and interest in the

first and interest and costs in the second.

32. Mathunni Mathai vs. Hindustan Organic

Chemicals Ltd. & Ors. [(1995) 3 SCR 765] was a case of

execution of an award decree under the Land Acquisition

Act. The question that was involved in that case was

whether interest ceased to run on the amount under the

award decree being deposited even without notice of deposit

being issued to the decree holder. The High Court had held

in that case that where deposit was made in pursuance of

the order passed by the Court, it was not necessary for the

judgment debtor to specify the manner in which the amount

should be appropriated. Notice of deposit was also not

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mandatory. This Court while considering Order XXI Rule 1

of the Code, as it existed prior to the amendment by Act 104

of 1976, after referring to the decisions of the Privy Council,

held that interest will cease to run only on notice of the

deposit being given and not from the date of the deposit.

This Court further held that after the amendment of Order

XXI Rule 1 of the Code by Act 104 of 1976, this position that

only upon service of notice interest would cease to run, got

reinforced and that the High Court was in error in rejecting

the argument that in the absence of notice of deposit being

given, there was no cessation of the running of interest.

This Court specifically did not decide any other question.

For, this Court stated,

"It is not necessary for purposes of this

case to decide whether the creditor was

bound to appropriate the amount

towards principal once it was deposited

in court and intimation of the deposit was

served on the decree holder as it does not

appear that respondent ever served any

notice on the appellant about the

deposit."

There was no contention in that case based on the scheme

of the Land Acquisition Act and the Court also did not

consider the question whether there was any deviation from

the normal rules of appropriation by virtue of the provisions

of the Land Acquisition Act. In fact, that case was

concerned more with the question whether notice of deposit

was necessary before interest ceased to run, rather than the

mode or manner in which the amount deposited was to be

appropriated even though this Court did observe that in the

absence of any intimation as required by sub-Rule (2) of

Order XXI Rule 1 of the Code and indication of the manner

of appropriation, the payment could not be deemed to have

been appropriated towards principal unless the decree

holder admits it to be so.

33. The question of appropriation in the context of the

Land Acquisition Act and the relevant provisions therein

specifically came up before a Bench of three Judges of this

Court in Prem Nath Kapur & Anr. Vs. National Fertilizers

Corporation of India Ltd. & Ors. (supra), In that case, on

the award being made, the Collector had paid the

compensation including solatium and interest determined

under the award. When the High Court enhanced the

compensation, the enhanced compensation also was

deposited. When some further amounts were awarded by

the High Court on the basis of damages for severance and

subsequently, it enhanced the solatium and interest and the

additional amount payable under Section 23(2), 28 and

23(1-A) as amended, the decree holder laid execution, firstly,

after appropriating the amount received towards costs, then

towards interest on the total compensation and solatium

and then towards the land value. Though the executing

court allowed the claim, the High Court set aside that order

and remanded the execution case for fresh disposal

according to the directions contained in that order. The

directions issued by the High Court were challenged in the

appeal before this Court.

34. When the appeal came up, it was argued on

behalf of the decree holder that the question involved had

been decided in Mathunni Mathai vs. Hindustan Organic

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Chemicals Ltd. & Ors. (supra) and that nothing remained

to be decided. It was contended that the decree holder was

entitled to appropriate the costs from the principal amount

of compensation, as also the interest on the total amount of

compensation from the date of taking possession till date of

payment as determined by the Collector as well as, as

determined by the High Court. The judgment creditor was

entitled to appropriate the principal amount deposited by

the Collector in the first instance towards the costs, then

towards interest on the total amount and the balance

amount and interest accrued thereon, and recover the

balance in execution. The High Court was therefore not

right in interfering with the order of the executing court.

This Court did not accede to the submission that the

question was concluded by the decision in Mathunni

Mathai vs. Hindustan Organic Chemicals Ltd. & Ors.

(supra). This Court posed two questions. When does the

liability of the State to pay interest cease? Whether the

owner of the land is entitled to appropriate from the amount

deposited, the amounts towards costs first and then towards

interest and then towards the principal amount and again

claim interest on the total amount?

35. This Court made a detailed survey of the relevant

provisions of the Land Acquisition Act and after summing up

the position held:-

"A reading of the above provisions would

establish that the award consists of (a)

the compensation determined under

Section 23(1), (b) solatium on the market

value determined under Section 23(2), as

additional sum for compulsory nature of

acquisition, and (c) payment of interest

on the amount of compensation under

Section 11, on excess or part thereof

under Section 26 awarded by court from

the date of taking possession till date of

payment or deposit into the court at the

rates specified under the respective

provisions of Sections 34 and 28. Under

Section 23(1-A), additional amount at 12

per centum per annum shall be paid or

deposited from the date of notification

under Section 4(1) till date of award or

taking possession of land, whichever is

earlier. The additional amount under

Section 23 (1-A) and solatium under

Section 23(2) are in addition to the

compensation under Section 11 and

excess amount determined under Section

23(1) read with Section 26 or Section 54.

Equally, under Section 26 of the Act

award is deemed to be a decree under

Section 2(2) of the CPC for the excess

amount determined by the Court; this

would be so proprio vigore, when the

appellate court under Section 54 has

further enhanced the compensation."

Section 34 of the Act fastens liability on the Collector to pay

interest on the amount of compensation determined under

Section 23(1) with interest from the date of taking

possession till date of payment or deposit into the court to

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which reference under Section 18 would be made. On

determination of the excess amount of compensation,

Section 28 empowers the court, if it was enhancing the

compensation awarded by the Collector, to award interest on

the sum in excess of what the Collector had awarded as

compensation. The award of the court may also direct the

Collector to pay interest on such excess or part thereof from

the date on which he took possession of the land to the date

of payment of such excess into court at the rates specified

thereunder. The Court Stated:

"In other words, Sections 34 and 28

fasten the liability on the State to pay

interest on the amount of compensation

or on excess compensation under Section

28 from the date of the award and decree

but the liability to pay interest on the

excess amount of compensation

determined by the Court relates back to

the date of taking possession of the land

to the date of the payment of such excess

into the court."

The Court concluded:

"It is clear from the scheme of the Act and

the express language used in Sections

23(1) and (2), 34 and 28 and now Section

23(1-A) of the Act that each component is

a distinct and separate one. When

compensation is determined under

Section 23(1), its quantification, though

made at different levels, the liability to

pay interest thereon arises from the date

on which the quantification was so made

but, as stated earlier, it relates back to

the date of taking possession of the land

till the date of deposit of interest on such

excess compensation into the

court.

The liability to pay interest is only on the

excess amount of compensation

determined under Section 23(1) and not

on the amount already determined by the

Land Acquisition Officer under Section11

and paid to the party or deposited into

the Court or determined under Section 26

or Section 54 and deposited into the

court or on solatium under Section 23(2)

and additional amount under Section

23(1-A)."

36. This Court ultimately held that the right to make

appropriation is indicated by necessary implication, by the

award itself as the award or decree clearly mentions each of

the items. When the deposit is made towards the specified

amounts, the decree holder is not entitled to deduct from

the amount of compensation towards costs, interest,

additional amount under Section 23(1-A) with interest and

then to claim the total balance amount with further interest.

Referring to Meghraj (supra), this Court held that the ratio

of that decision was inapplicable to a case of execution

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under the Land Acquisition Act since the provisions of the

Act were inconsistent with Order XXI Rule 1. Referring to

Mathunni Mathai (supra), this Court noticed that the

provisions of the Act were not brought to the attention of the

Court and a decision invited thereon and hence the

observations made therein could not govern a case of

execution of an award decree under the Land Acquisition

Act.

37. On the scheme of the Act, the above conclusions,

with respect, are justified. But, it is argued that when a

reference court or the appellate court awards enhanced

compensation, the operative award is that of the court and

going by the doctrine of merger also, the operative decree is

that of the appellate court. Thus, the award of the ultimate

Court, in the given case, would be the amount payable for

acquisition and it is open to the decree holder to proceed to

calculate the amount due to him on that basis and seek a

re-appropriation based on such a calculation and reckoning

the payment or payments already made. In other words, it

is contended that a recalculation and adjustment would be

called for every time there is an enhancement. In answer, it

is contended that the Act provides for determination of

compensation at different stages, the stage of the award, the

stage of reference and the stage of appeal and provides for

payment of interest and solatium based on the award and

thereafter, only on the excess compensation awarded and in

such a situation, a re-opening of the satisfaction recorded at

the earlier stage is not contemplated or warranted. It is

submitted that the ratio of Prem Nath Kapur & Anr. Vs.

National Fertilizers Corporation of India Ltd. & Ors.

(supra) also supports this position and that in the context of

the relevant provisions, the position adopted in that decision

on this aspect deserves acceptance.

38. We may say with respect that the decision in

Mathunni Mathai (supra) does not answer the question.

That case was concerned with the question of the point of

time of cessation of interest, whether it would be the date of

deposit or whether the date of notice of the deposit. It did

not specifically refer to the relevant sections of the Act and

did not consider their possible impact on the question, Prem

Nath Kapur (supra) dealt with this aspect to the extent of

holding that the Act provides for a mode of appropriation not

consistent with that in Order XXI Rule 1 of the Code or the

general law and to that extent, the scheme of the Act would

prevail.

39. Though, a decree holder may have the right to

appropriate the payments made by the judgment-debtor, it

could only be as provided in the decree \026 if there is provision

in that behalf in the decree \026 or, as contemplated by Order

XXI Rule 1 of the Code as explained by us above. The Code

or the general rules do not contemplate payment of further

interest by a judgment debtor on the portion of the principal

he has already paid. His obligation is only to pay interest on

he balance principal remaining unpaid as adjudged either by

the court of first instance or in the court of appeal. On the

pretext that the amount adjudged by the appellate court is

the real amount due, the decree-holder cannot claim interest

on that part of the principal already paid to him. Of course,

as indicated, out of what is paid he can adjust the interest

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and costs first and the balance towards the principal, if

there is a shortfall in deposit. But, beyond that, the decree-

holder cannot seek to re-open the entire transaction and

proceed to recalculate the interest on the whole amount and

seek a re-appropriation as a whole in the light of the

appellate decree.

40. It is true that the understanding of the expression

"compensation awarded" for the purpose of Section 28 of the

Act in Prem Nath Kapur (supra) was modified. To that

extent one strand of reasoning in Prem Nath Kapur (supra)

also stands discredited. But as we see it, on the question of

appropriation, the decision in Sunder (supra) does not have

such an impact as to compel us to jettison the reasoning

adopted in Prem Nath Kapur (supra). Slightly deviating

from the reasoning in Prem Nath Kapur (supra) we have

indicated earlier that even going by Order XXI Rule 1 of the

Code, the position would be as envisaged in Prem Nath

Kapur (supra). That apart, we are inclined to respectfully

agree with the reasoning in Prem Nath Kapur (supra) that

on the wording of Section 34 and Section 28 of the Act read

with and understood in the light of the stages of the award

of compensation, the question of appropriation would be at

different stages and a decree holder would not be entitled to

reopen the entire transaction to claim a reappropriation of

the amounts already received by him and appropriated at

that particular stage. The reliance on the doctrine of merger

does not enable the decree-holder to get over the scheme

adopted by the Act.

41. Prem Nath Kapur (supra) also indicates that

when an award-decree is passed specifying the amounts

under different heads like the amount under Section 23(1),

the amount under Section 23(2), the amount under Section

23(1A) and the interest under Section 28 and the judgment

debtor makes a deposit of specified sums under these

different heads, it will amount to the judgment debtor

intimating the decree holder as to how the sum deposited is

to be applied in discharge of the obligation of the judgment

debtor. Once a decree holder receives the payment of the

sums thus deposited, he would be accepting the

appropriation made by the judgment debtor under the

award decree on the scheme of the Land Acquisition Act.

This part of the reasoning in Prem Nath Kapur (supra) is, of

course, also based on the reasoning that there is some

inconsistency in Order XXI Rule 1 of the Code and the

scheme of the Act. Prem Nath Kapur (supra) also indicates

that when the decree itself specifies the amount payable

under different heads (the decree has to do so under Section

26 of the Act) and amounts are deposited towards those

different heads, the appropriation would be on the basis of

the direction under the decree which must be taken to be

one for crediting the various sums paid under particular

heads. On the scheme of the Act, especially the wording of

Section 34 and Section 28 of the Act it is not possible to say

that the said approach made in Prem Nath Kapur (supra)

is erroneous or is unreasonable or is not a line of approach

that is not warranted. Therefore, when the judgment debtor

State makes a deposit along with the calculation

appropriating distinct sums towards various heads of

compensation as awarded by the reference court or by the

appellate court in the appellate decree, and the amount is

received by the decree holder, the decree holder must be

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taken to be not entitled to seek an appropriation as if the

judgment debtor has not made any intimation and that he is

entitled to appropriate at his volition. Considering the

scheme of compensation under the Act in the context of the

specific nature of the items specifically referred to in Section

23 of the Act, we are of the view that the approach adopted

in Prem Nath Kapur (supra) is justified. A reappropriation

by seeking to reopen the satisfaction already rendered might

result in interest being made payable even on that part of

the principal amount that had already been deposited and

received by the decree holder and that would be in the realm

of unjust enrichment.

42. What is to happen when a part of the amount

awarded by the reference court or by the appellate court is

deposited pursuant to an interim order of the appellate

court or of the further appellate court and the awardee is

given the liberty to withdraw that amount? In such a case,

the amount would be received by the decree holder on the

strength of the interim order and the appropriation will be

subject to the decision in the appeal or the further appeal

and the direction, if any, contained therein. In such a case,

if the appeal is disposed of in his favour, the decree holder

would be entitled to appropriate the amount already received

by him pursuant to the interim order first towards interest

then towards costs and the balance towards principal as on

date of the withdrawal of the amount and claim interest on

the balance amount of enhanced compensation by levying

execution. But on that part appropriated towards the

principal, the interest would cease from the date on which

the amount is received by the awardee. Of course, if while

passing the interim order, the court had indicated as to how

the deposited amount is to be appropriated, that direction

will prevail and the appropriation could only be done on the

basis of that direction.

43. Thus, on the whole, we are satisfied that the

essential ratio in the Prem Nath Kapur (supra) on

appropriation being at different stages is justified though if

at a particular stage there is a shortfall, the awardee decree

holder would be entitled to appropriate the same on the

general principle of appropriation, first towards interest,

then towards costs and then towards the principal, unless,

of course, the deposit is indicated to be towards specified

heads by the judgment debtor while making the deposit

intimating the decree-holder of his intention. We, thus,

approve the ratio of Prem Nath Kapur (supra) on the aspect

of appropriation.

44. One other question also was sought to be raised

and answered by this Bench though not referred to it.

Considering that the question arises in various cases

pending in Courts all over the country, we permitted counsel

to address us on that question. That question is whether in

the light of the decision in Sunder (supra), the

awardee/decree holder would be entitled to claim interest on

solatium in execution though it is not specifically granted by

the decree. It is well settled that an execution court cannot

go behind the decree. If, therefore, the claim for interest on

solatium had been made and the same has been negatived

either expressly or by necessary implication by the judgment

or decree of the reference court or of the appellate court, the

execution court will have necessarily to reject the claim for

interest on solatium based on Sunder (supra) on the ground

that the execution court cannot go behind the decree. But

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if the award of the reference court or that of the appellate

court does not specifically refer to the question of interest on

solatium or in cases where claim had not been made and

rejected either expressly or impliedly by the reference court

or the appellate court, and merely interest on compensation

is awarded, then it would be open to the execution court to

apply the ratio of Sunder (supra) and say that the

compensation awarded includes solatium and in such an

event interest on the amount could be directed to be

deposited in execution. Otherwise, not. We also clarify that

such interest on solatium can be claimed only in pending

executions and not in closed executions and the execution

court will be entitled to permit its recovery from the date of

the judgment in Sunder (September 19, 2001) and not for

any prior period. We also clarify that this will not entail any

re-appropriation or fresh appropriation by the decree-holder.

This we have indicated by way of clarification also in

exercise of our power under Articles 141 and 142 of the

Constitution of India with a view to avoid multiplicity of

litigation on this question.

45. The appeals will now be placed before the

appropriate Bench for being disposed of in the light of the

answers given by us.