TMI Blog2011 (11) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-lease of land measuring 11,480 sq. meters in HUDCO Place situated in Andrews Ganj, New Delhi, for construction of a Five-Star Hotel thereupon. The Appellant herein being the highest bidder, a letter of allotment of the said land was issued to it on 31st March, 1997, which was followed by a perpetual sub-lease dated 4th July, 1997. Out of the total consideration, the first installment comprising 40% of the consideration amount was paid by the Appellant herein on 10th April, 1997. The second and third installments, each amounting to ₹ 65,38,29,000/-, were payable by 31st March, 1998, and 31st March, 1999, respectively. It was stipulated in the sub-lease that in case of default in payment of the second and third installments, the same could be paid along with interest at the rate of 20% per annum within three months of the due date. It was further stipulated that in default of payment even in terms of the said relaxation, the allotment would automatically stand cancelled and in such event 50% of the amount paid upto that date would stand forfeited and the balance 50% would be refunded without interest. Admittedly, the second installment was paid by the Appellant herein along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant filed its objections under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 1996 Act , before the High Court. The same was dismissed by the High Court by its order dated 21st January, 2003. Before the said petition was dismissed, the Respondent herein undertook to deposit the principal sum awarded by the Arbitrator on or before 21st October, 2002. The said sum of ₹ 89,78,84,930/-, was allowed to be deposited without prejudice to the rights and contentions of the Respondent herein. When the cheque for the aforesaid amount was brought to Court on 21st October, 2002, the said Respondent got it recorded that it represented the net principal amount due and payable to the Appellant herein under the Award and that the said deposit was without liability on its part to pay future interest thereupon. 6. The first appeal from the said order dated 20th January, 2003, having been dismissed by the High Court on 9th November, 2004, the Respondent filed a Special Leave Petition before this Court, which was dismissed on 12th February, 2008. Although, the Special Leave Petition was dismissed, the rate of interest for the pre-Award period was red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Division Bench of the High Court referred to the decision in Meghraj v. Mst. Bayabai and Ors.: AIR 1970 SC 161, wherein the law in this regard was laid down by this Court that the general rule of appropriation of payment towards a decretal amount is that such an amount is to be adjusted firstly strictly in accordance with the directions contained in the decree and in the absence of such direction, adjustments would have to be made firstly towards payment of interest and costs and, thereafter, in payment of the principal amount. It was, however, indicated that such a principle would be subject to an exception when the parties might agree to the adjustment of the payment in any manner despite the decree. It was, accordingly, held that unless the Respondent herein was able to show that the parties had either impliedly or expressly agreed to adjustment of the said sum of ₹ 89,78,84,930/- towards the principal amount, the Appellant herein would be entitled to appropriate the said amount fully towards the payment of interest. 9. It may be indicated that on 11th October, 2002, the Respondent herein undertook to deposit the principal amount awarded by the Arbitrator on or befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertook to deposit the principal amount awarded by the Arbitrator and also insisted that it be recorded as part of the proceedings that the said payment was to be appropriated towards the principal amount awarded by the learned Arbitrator and was without any further liability on the part of the Respondent to make payment of further interest on the said amount. The Division Bench based its judgment, to a large extent, on the assumption that since the Appellant had remained silent to the said stipulation made on behalf of the Respondent, it would have to be presumed that the Appellant herein had consented to the said proposal. 11. On such reasoning, the Division Bench set aside the order passed by the learned Single Judge on 19th November, 2008, and after noting that a sum of ₹ 50.54 crores had been deposited by the Respondent No. 1 herein during the pendency of the Appeal, directed him to decide in the light of the judgment rendered by the Division Bench as to whether any further amount was payable by the Respondent No. 1 herein to the Appellant in terms of the judgment. Consequential directions were also given on the outcome of such findings. 12. As mentioned hereinbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and voluntary deposit offered to be made by HUDCO in Court amounted to such deposit being made upon an implied acceptance that the same would be appropriated towards the principal amount. It was urged that the issue of implied agreement had never been raised or argued before the learned Single Judge and there is no pleading in support thereof. Mr. Desai also urged that the provisions of Sections 59 and 60 of the Indian Contract Act would also have no application to the facts of this case since they only applied in regard to distinct debts and not for enforcing a decree or what is regarded as a decree by legal fiction. 15. Mr. Desai submitted that the judgments of both the learned Single Judge and the Division Bench were centered around the payment of ₹ 89.78 crores and the manner in which the same was to be appropriated. It was urged that since the same was paid after the passing of the decree, Leela Hotels is entitled to appropriate the said amount first towards the interest and costs and then towards the principal. Mr. Desai urged that on account of the wrong assumptions made by the Division Bench, its judgment under appeal was liable to be set aside. 16. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment cannot be applied to an Arbitration Award under the 1996 Act for the simple reason that the Arbitration Award under the 1996 Act does not attain the status or character of a decree within the meaning of the Code of Civil Procedure. It is to be executed as if it were a decree , which means that it is not a decree. 19. It was thirdly urged by the learned ASG that assuming that the Award could be treated as a decree and the second payment is a post-decretal payment, even then the said payment will have to be treated as appropriation towards the principal sum, since Leela Hotels had been duly intimated of the nature of the deposit and by way of an implied contract, Leela Hotels had appropriated the said sum towards the principal. 20. The learned ASG referred to the decision of this Court in NALCO v. Presteel and Fabrication Pvt. Ltd.: (2004) 1 SCC 540, wherein it had been held that there is no question of any decree being honoured pursuant to the passing of an Award and unlike a judgment within the meaning of the Code of Civil Procedure Code, an Award remains unenforceable during the period available for challenging the Award, and, thereafter, till such time as the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest would be payable in terms of the Award. In fact, although such an assertion had been made by the learned ASG, the same was not seriously opposed by Mr. Desai who had taken the stand that this was not a case of compound interest, but a case of calculating simple interest on the amount as remained unpaid. Mr. Desai also accepted the position that after the Award had been passed by the learned Arbitrator, Leela Hotels had calculated the interest on the basis of yearly rests, but had subsequently given up its claim of compound interest and limited its claim to simple interest after appropriating the amount received from HUDCO, first towards interest and then towards the principal in accordance with the decision in Smithaben's case (supra). 23. Consequently, the only issue which remains for decision is whether the amounts deposited and/or paid by HUDCO to M/s Leela Hotels in terms of the Award of the learned Arbitrator, was first to be appropriated towards payment of the interest due on the principal sum or whether the same was to be appropriated against the principal sum itself. 24. From the submissions made on behalf of the respective parties, the following payments a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate such payment firstly against the interest payable, would, in our view, be squarely attracted to the facts of this case. As was laid down by the Privy Council in Meka Venkatadri Appa Rao Bahadur Zamindar Garu and Ors. v. Raja Parthasarathy Appa Rao Bahadur Zamindar Garu: AIR 1922 PC 233, and later reiterated in Rai Bahadur Seth Nemichand's case (supra), when monies are received without a definite appropriation on the one side or the other, the rule which is well established in ordinary cases is that in those circumstances, the money is first applied in payment of interest and when that is satisfied, in payment of the capital. In the latter case, the said principal was restated and it was indicated that a creditor to whom principal and interest are owed is entitled to appropriate any indefinite payment which he gets from a debtor to the payment of interest. It was also indicated that a debtor might in making a payment stipulate that it was to be applied only towards the principal. If he did so, the creditor was at liberty to refuse payment on such terms, but then he would have to give back the money or the cheque by which the money is proffered and if the same is accepted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai Bahadur Seth Nemichand's case (supra) in interfering with the judgment of the learned Single Judge. The Division Bench seems to have erroneously taken the presence of the Learned Counsel for the Appellant, when the aforesaid undertaking of the Respondent was recorded, in coming to the conclusion that since no objection had been raised with regard to the said deposit, it must be presumed that it had the consent of the Appellant and hence was covered by the provisions of Sections 59 and 60 of the Indian Contract Act, 1872. 30. Regarding the question as to whether the Award of the learned Arbitrator tantamounts to a decree or not, the language used in Section 36 of the Arbitration and Conciliation Act, 1996, makes it very clear that such an Award has to be enforced under the Code of Civil Procedure in the same manner as it were a decree of the Court. The said language leaves no room for doubt as to the manner in which the Award of the learned Arbitrator was to be accepted. 31. Hence, the submissions made by the learned ASG on behalf of HUDCO cannot be accepted and are, therefore, rejected. Consequently, the Appeal succeeds and the judgment and order of the Division Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X
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