(2018)1 SCeJ 550


9th March, 2018


(i) Decree - Mode of appropriation of payment – Interest – Principal  -  If there is a direction in the decree as to the mode of appropriation of payment, then appropriation of any payment made by the judgment-debtor has to be strictly in accordance with the direction contained in the decree - If there is no such direction in the decree, then the general principle is that where a judgment-debtor makes payment without making any indication as to how the payment is to be adjusted, it is the option of the creditor to make adjustment firstly towards the interest and then towards the principal - But if the judgment-debtor has indicated the manner in which the appropriation is to be made, then the creditor has no choice to apply the payment in a different manner - Since this Court directed the payment as per Ex.P20 and therefore, the appropriation/adjustment of payment has to be made strictly as stated in Ex.P20. When the direction of the court is to make payment as per Ex.P20, the respondent-contractor cannot turn round and say that the amount received by him will be adjusted towards the interest first and then towards the principal.         


In the present case, the statement of respondent-contractor himself and other circumstances clearly indicate that payment ought to be adjusted only towards the principal amount. As discussed earlier, in Ex.P20 the respondent-contractor himself has shown the labour escalation due as principal amount and interest thereon separately and has given the credit of the advances made by the Board firstly towards the principal and claimed the balanced amount of the principal. At this juncture, we may usefully recapitulate respondent's own letter to the appellant-Board dated 25.11.1994 extracted in para (11) above where the respondent- contractor himself has stated that he has deducted the advances from the principal amount claimed under "Labour Escalation Charges" and "interest" are shown separately.  By his own statement, the respondent-contractor has firstly appropriated the advances towards the labour escalation due i.e. the principal amount. The respondent-contractor is not justified in changing the method of calculation and claim appropriation of the payments firstly towards the interest and then towards the principal amount. The claim of the respondent-contractor for a further sum of Rs.2,29,34,559/- with interest under Ex.P20 cannot be sustained and the direction of the High Court to pay the same is liable to be set aside.                                  

Further held,

 This manner of appropriation, firstly towards the interest is in clear violation of the directions given by this Court to make payment under Ex.P20 and the method of adjustment which the respondent-contractor himself adopted in Ex.P20. In the original Ex.P20, when respondent-contractor himself has expressly adjusted all payments made by the appellant towards principal and not towards interest, the respondent- contractor cannot turn round and change the method of calculation by showing the adjustment of payments made first against the interest and then towards the principal. This important aspect of change in the method of adjustment/appropriation was lost sight by the High Court and the direction of the High Court to make further payment of Rs.4,12,58,224/- under Ex.P20 is not sustainable.      


(ii) Decree - Mode of appropriation of payment – Interest – Principal  -  The general principle of mode of appropriation firstly in payment of interest and thereafter in payment of principal amount is subject to the exception i.e. the parties may agree to the adjustment of the payment in any other manner despite the decree.      


(iii) 'Appropriation of money'  - An 'Appropriation of money' is the indication of an intention that money should be applied in a particular way - Decree - Mode of appropriation of payment – Interest – Principal.


(iv) Interest - Since there is no direction for future interest, in view of sub-section (2) of Section 34 CPC, it must be deemed that the court has refused such interest - CPC  1908, Section 34(2). 

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