Holding

The Supreme Court approved the Prem Nath Kapur ratio that appropriation occurs at distinct stages and a decree holder cannot reopen the transaction to claim interest on amounts already received, while interest on solatium is permissible in pending executions only if not barred by the decree.

Summary

Gurpreet Singh appealed against the Union of India challenging the applicability of the rule of appropriation in execution of award decrees under the Land Acquisition Act, 1894 (as amended by Act 68 of 1984) and the entitlement to interest on solatium. The Court examined whether the normal CPC rule of appropriation (Order XXI Rule 1) applies to award decrees, and whether a decree holder can reopen a transaction to claim interest on amounts already received after an appellate enhancement. Relying on Prem Nath Kapur and Sunder, the Court held that interest is payable only on the excess compensation and that the rule of appropriation operates at different stages, preventing re‑appropriation of amounts already received. It clarified that interest on solatium may be claimed in pending executions only if not expressly barred by the decree, applying the Sunder ratio. The Court answered the questions and remanded the matters for disposal by the appropriate bench.

Issues considered

The applicability of the CPC rule of appropriation to award decrees under the Land Acquisition Act.
Whether a decree holder can claim interest on amounts already received after an appellate enhancement of compensation.
The entitlement to interest on solatium in execution proceedings.
The effect of the doctrine of merger on the award decree.

Legislation cited

Code of Civil Procedure, 1908s. Order XXI Rule 1, s. Order XXIV Rule 1, s. Order XXIV Rule 3, s. Order XXXIV
Indian Contract Act, 1872s. 59, s. 60, s. 61
Transfer of Property Act, 1882s. 57

Subjects

rule of appropriationLand Acquisition Actcompensationinterest on solatiumexecution of decreeCivil Procedure Codedoctrine of mergerSunder casePrem Nath Kapur

Judgment

A , GURPREET SINGH
v. .
UNION OF INDIA ·

OCTOBER 19,2006

[Y.K. SABHARWAL, CJI, K.G. BA LA KRISHNAN, S.H. KAPADIA, C.K.
THAKKER AND P.K; BALASUBRAMANYAN, JJ.]

..
· Land Acquisition Act, 1894-Sections 23(/), 23(/A), 28 and 34 (is ·
C amended byAct 68 of 198~): · . •' ·
" . .
Compensation-Rule of appropriation-Applicability of-To the cases
ofaward under the Act-In Prem Nath Kapur's case held that liability to pay·.
interest was only on the excess amount of compensation and rule of
appropriation under Order XX/ Rule I CPC stood excluded by Section 28
D and 34 of the Act-Validity of the judgment on the question of appropriation
referred to Constitution Bench-Held: The ratio in Prem Nath Kapur on the
aspect of appropriation is appraved-Decree holder not entitled to reopen ·
the entire transaction to claim a reappropriation .of the amounts already
received and appropriated at that particular stage merely because appellate
court has enhanced the compensation-Appropriation would be at different
E stages-Award. of interest is confined only _to the excess compensation
awarded-But if there is any shortfall at any stage, rule of appropriation can
be applied in respect ofthat excess amount-Doctrine ofmerger not applicable
in such case-Code of Civil Procedure, 1908-0rder XX/ Rule I. . ..

F Interest on solarium-Whether payable-By Execution Court-
Constitution Bench of Supreme Court holding that. compensation includes
solatiu~Held: 'if claim for interest on solarium is negated by the court i~ :.
reference or in ·appeal, 'execiition COZfrl 'cannot grant the same as it cannot
go behind the decre~But if such claim is not negated.. the same can be
granted by execution court by applying ratio ofConstitution Bench judgment-
G Such interest on solarium can be granted only in pending execution permitting
its recovery from the date of judgment of Constitution Bench-Constitution
of India, 1950-Articles 141 and 142. .

Doctrines:
..
H 422
GURPREET SINGH v. U.0.1. 423
Rule of appropriation-Explained A
Doctrine of merger-Applicability of

Words and Phrases-'Appropriation'-Meaning of

The questions for consideration in the present appeals are whether the B
rule of appropriation in execution of money decrees is the same in the case of
an award decree under Land Acquisition Act, 1894 as in the case of money
decree, or the provisions of Land Acquisition Act as amended by Land
Acquisition (Amendment) Act (Act 68of1984) make that rule inapplicable
or not wholly applicable; and that whether interest can be claimed on solatium
in execution, though not specifically granted by the decree. C
In Prem Nath Kapur and Anr. v. National Fertilizers Corporation of
India Ltd. and Ors., (1995) Suppl. 5 SCR 790, a three Judge Bench of the
Supreme Court had held that the expression 'compensation' under Section
23(1) of the Act as amended by Act 68of1984 read in the context of Section D
28 or 34 thereof, by necessary implication excludes solatium or on the
additional amount under Section 23 (IA) and liability to pay interest was only
on the excess amount of compensation determined under Section 23 (l ); and
that normal rule of appropriation contained in Order XXI Rule l CPC
relating to execution of decrees for recovery of money, stands excluded by
Sections 28 and 34 of the Act in execution of award of decrees of the Act. The E
Constitution Bench of Supreme Court in Sunder v. Union of India, [20011
Suppl 3 SCR 176 overruled the view as regards the content of the expression
'compensation' occurring in Section 23 (1) and Section 28 of the Act, but the
aspect of mode of appropriation of the amount due under an award decree was
not dealt with.
F
When the question as regards the rule of appropriation was raised in
this case before 3 Judges Bench, the same was referred to Constitution Bench
to consider whether the judgment in Prem Nath Kapur would survive the
reasoning in Sunder's case.

Answering the questions, the Court G

HELD: l.l. A claimant or decree holder who has received the entire
a mount awarded by the reference court or who had notice of the deposit of the
entire amount so awarded, cannot claim interest on the amount he has already
received merely because the appellate court has enhanced the compensation H
424 SUPREME COURT REPORTS (2006] SUPP. 7 S.C.R.

A and has made payable additional compensation. Such a blanket re-opening of
the transaction is not warranted even in respect of a money decree. Section
28 of Land Acquisition 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-
B 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. (444-F-H; 445-A-Bf

1.2. On the wording of Section 34 and Section 28 of the Act read with
c 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
D get over the scheme adopted by the Act. (450-E-G(

1.3. 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-if there is provision in that behalf in the decree-or, as contemplated
by Order XXI Rule 1 CPC. CPC or the general rules do not contemplate
E 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 the balance
principal remaining unpaid as adjudged either by the court offirst instance
or in the court of appeal. On the pretext that the amount adjudged by the
appellate court is the real amount due, ~he decree-holder cannot claim interest
F on that part of the principal already paid to him. Of course, out of what is paid
he can adjust the interest 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. (450-A-Df
G
1.4. 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
H and then towards the principal amount due under the decree. But the scheme
GURPREET SINGH v. U.0.1. 425

does not contemplate a reopening of the satisfaction to the extent it has A
occurred by the deposit. No further interest would run on the sum appropriated
towards the principal. 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. (439-C-E; 440-D-E(
B
Mt. Amtul Habib v. Mohammad Yusuf ILR 40 Allahabad 125; Gopalje v.
Sumrit Mandar, AIR (1933) Patna 89; Varki Ouseph v. Narayanan
Parameswara Panicker, AIR (1956) Travancore - Cochin 46; Meghraj and
Ors. v. Mst. Bayabai and Ors., (1969f 2 SCC 274; Industrial Credit and
Development Syndicate now called !.C.D.S. Ltd v. Smithaben H. Patel (Smt.) C
and Ors., (1999( I SCR 555; Jai Ram v. Sulakhan Mal, AIR 1941 LAHORE
386, referred to.

1.5 . 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 D
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 E
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 p
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. (451-F-H; 452-A-Bf

1.6. 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) G
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. (445-C-Ef
H
426 SUPREME COURT REPORTS [20061 SUPP. 7 S.C.R.

A Sunder v. Union of India, 12001 I Suppl. (3) S.C.R. 176 and Mathunni
Mathai v. Hindustan Organic Chemicals ltd. and Ors., 119951 3 SCR 765,
referred to.
I. 7. The ratio of Prem Nath Kapur on the aspect of appropriation is
approved. Considering the scheme of compensation under the Act in the
B context of the specific nature of the items specifically referred to in Section
23 of the Act, the approach adopted in Prem Nath Kapur 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. The essential ratio in the Prem
C Nath Kapur 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
D debtor while making the deposit intimating the decree-holder of his intention.
1451-D-F; 452-B-DI
Prem Nath Kapur and Anr. v. National Fertilizers Corporation of India
Ltd. and Ors., (19951Suppl.5 SCR 790, upheld.
1.8. Appropriation is the act of setting apart or assigning a thing or
E substance to a particular use or person to the exclusion of others; application
to a special use or purpose. 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. (429-D-E-F-G)
F P. Ramanatha Aiyar Advanced law lexicon, 3rd Edition, (2005) page
315; Halsbury's Laws of England, Fourth Edition; Chitty on Contracts, 29th
Edition, Volume I in paragraph 21-059 and Indian Contract Act by Pollock
& Mui/a, 12th Edition, referred to.
Marimella Swyanarayana v. Venkataraman Rao, AIR (1953) Madras
G 458, referred to.
2. 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
H execution court will have necessarily to reject the claim for interest on
GURPREET SINGH v. U.0.1. [ BALASUBRAMANYAN, J.] 427
. . . i \
solatium b~sed on Sunder_'s case on the ground that the execution court ca,nnot A
go behind the decree. But 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 .
1
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 B
execution court to apply the ratio of Sunder and say that the compensation
awarded includ.S solatium and in such an event interest on the amount could
be directed to be deposited in execution. Otherwise, not. 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 C
period. It is clarified in exercise of power under Articles 141and142 of the
Constitution oflndia, with a view to avoid multiplicity of litigation on this
question, that this will n_ot entail any re-appropriation or fresh appropriation
by the decree-holder. (452-E-H; 453-A-B]
Sunder v. Union of India, (20011 Suppl 3 S.C.R. 176, approved. D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4570 of2006. .... ··

From the final Judgement and Order dated 10.4.2003 of the High Court
of Punjab and Haryana at Chandigarh in Civil Rev. No. 77312003 (0 & M).
E
WITH

C.A. Nos. 4549, 4548 and 4547 of2006.
. .
Mukul Rohatgi, P.S. Narasimha, Sridhar Potaraju, Avijeet K. Lala (for Ml
s. P.S.N. & Co.), S.M. Sarin, P.N. Puri, Rohit Rao and John Mathew for the F
Appellant.

( A. Shara~, A.S.G., T.M. Mohd. Yuseff, S.W.A: Qadri, Anil Katiyar,
Shishir Pinaki, Shalinee Ranjan, Amit Anand Tiwari and Sushma Suri for the
Respondent._ · · · · · '
G
The Judgment of the Court was delivered by

PJ(. BALASUBRAMANYAN, l. I. What is the rule of appropriation in
execution of money decrees? ls the rule the same in the case of an award
decree under the Land Acquisition Act or, is there anything in the Land
H
428 SUPREME
. .
COURT REPORTS (2006) SUPP. 7 S.C.R.

A Acquisition Act, I 894 as amended by the Land Acquisition (Amendme~t)
Act, Act 68 of 1984 making thatrule inapplicable or riot wholly applicable?
These are the questions that arise for consideration in these Petitions for
Special Leave to _Appeal.

2. Leave granted.
B
3. In Prem Nath Kapur & Anr. v. National Fertilizers Corporation of
India Ltd. & Ors., (1995) Suppl. 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
C necessary implication excludes solatium and that no interest is payable on
solatium or on. the additional amount under Section 23(l)(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
·D .Act over and above the amount awarded under Section 11 o.f the Act It was
also held that the normal rule of appropriation contained in Order XXI Rule
I 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 XX\ Rule I of the Code could not be extended to execution of award
decrees under the Act. The view as regards the content of the expression
E 'compensation' occurring in Section 23(1) and Section 28 of the Act was
overruled by a Constitution Bench in Sunder v. 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
,F 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
~ G
in Sunder (supra) had to be reconsidered and even otherwise, the correctnes~
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:
H "Having heard the learned counsel for the parties and having perused
GURPREET SINGH v. U.0.1. [ BALASUBRAMANYAN, .I.] 429
the aforesaid decisions, we are of the view that the normal rule that A
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 B
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 v.
Union of India, [200 I] 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- C
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 D
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, E
(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 the same sense in a partnership situation.

(ii) In the shipping of produce, the appropriation is the document by F
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 ao.,ount. This is often known G
as appropriation of payments.

(See P. Ramanathrd1yar' Advanced law lexicon, 3rd Edition, 2005 page 315)

5. We are concerned with the last of the specialized meanings assigned
to the term.
H
430 SUPREME COURT REPORTS (2006] SUPP. 7 S.C.R.

A 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 Halsbwy ·s laws of England, Fourth Edition, thus,

"Where several distinct debts are owing by a debtor to his creditor,
B 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.

C 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."
D 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
E 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,
F "where the debtor has not exercised 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."

G 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 intei...•t due
H before applying it to the earliest items of principal."
GURPREET SINGH v. U.0.1. [ BALASUBRAMANY AN, J.] 431
The relevant provisions governing contractual dealings are found in Sections A
59 to 61 of the Indian Contract Act. According to Pollock and 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 B
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 C
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." D
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 Marimel/a Suryanarayana v. Venkataraman
Rao, AIR (1953) Madras 458. His Lordship stated:
E
"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", F
(1861) 1Mar.572:35E.R. 781 and it is embodied in Section 59, Contract
Act. But when the debtor has not himself made any ap;iropriation, the
right devolves on the creditor who can exercise it at any time, vide
'Cory Bros. & Co. v. Owners of the Turkish. Steamship 'Mecca',

I (1897) A.C. 286; and even at the time of the trial : Vide 'Symore v.
Picket', (1905) 1 K.B. 715. That is Section 60, Contract Act. It is only
G

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."

H
432 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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
B 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
C pre decreetal stage and in Order XXI Rule I 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 I, 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
D 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 dischargf: of the claim or it falls short thereof. Rule 4 enables the
E 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.

l ·l. Order XXI Rule 1 provides the modes of paying money under a
F 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
G the court or directly to him by registered post acknowledgement due. Ori 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 the
year 1976 also contemplates the deposit of the decree amount into court and
H the giving of notice thereof to the decree holder and provides further for
GURPREET SINGH v. U.O.L [ BALASUBRAMANY AN. J.] 433
cessation of interest from the date of notice to the decree holder of such A
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. B
Amtul Habib v. Mohammad Yusuf, (!LR 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 C
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 D
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 E
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 F
(! ), (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 G
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
H
434 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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 view the decisions of the courts below were
B correct and should be affirmed."

The same view was taken by the Patna High Court in Gopalje v. 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
C paid, it would be a valid payment. In Varki Ouseph v. Narayanan Parameswara
Panicker, AIR (1956) Travancore-Cochin 46 a Division Bench of the
Travancore Cochin 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 Mui/a on the Code of Civil Procedure, held that in the
D 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 l(a) from the date
the decree holder has notice of the deposit. In Mu/la's commentary on the
Code of Civil Procedure 15th Edition Vol. lJl dealing with Rule 3 of Order
XXIV it is stated:

E "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 Allahabad High Court in Amtul v. Muhammad (ILR
F 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 XX! Rule 1 of
the Code as it stood prior to its amendment by Act 104 of 1976, this Court
G in Meghraj and Ors. v. Mst. Bayabai and Ors., [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
H
GURPREET SINGH v. U.0.1. [ BALASUBRAMANY AN. J.] 435
deposited in court should first be ·applied towards satisfaction of the A
interest and costs and thereafter towards the principal would apply.

In Venkatadri Appa Row and Ors. v. 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 B
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 interest. There are moneys that
are received without a definite appropriation on the one side or on the C
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, LJ., in the case of Parr's Banking Co.
v. Yates, (1898) 2 QB 460 in these words:
D
"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 E
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 F
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 that the
amounts which were deposited in Court by the mortgagors were
accepted by the mortgagees subject to a condition imposed by the G
mortgagors."

14. In Industrial Credit & Development Syndicate Now Called l.C.D.S.
Ltd v. Smithaben H. Patel (Smt.) and Ors., [1999] 1 SCR 555, this Court
considered the question whether Sections 59 to 61 of the Contract Act would
H
436 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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 tem1s of the agreement arrived at between the parties,
though on the general principle as mentioned in Sections 59 and 60 of the
B 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.
c 15. We may now advert to Order XXXIV of the Code, dealing also with
the execution of mortgage decrees. Rule I0 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 heen properly incurred by him
D since the date of the preliminary decree for foreclosure, sale or red~mption 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
E 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 ih connection
F 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
G 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.

H 16. A Full Bench of the Lahore High Court in Jai Ram v. Sulakhan Mal,
GURPREET SINGH v. U.O.L [ BALASUBRAMANY AN, J.] 437

AIR (1941) LAHORE 386 considered the position in detail. That was a case A
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 B
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 6 I of the Contract Act had no application, the Full Bench proceeded C
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 D
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
E
mortgagee has 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 F
when the property is not subject to a prior mortgage."

I 7. 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 G
the Full Bench of the Lahore High Court was that, in the absence ofa 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 H
438 SUPREME COURT REPORTS [2006) SUPP. 7 S.C.R.

A contained in Rule 1 of Order XX! 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) oth1:rwise, as the Court which made the decree, directs. Sub-
B 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 (I), interest, if
c 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
D 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
E 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 claim or falls short of it.

19. In the objects and reasons for amendment of Order XX! Rule I, it
F 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 though a bank
or by any other mode wherein payment is evidenced in writing. The
G 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 I of Order XX! has been inserted
H accordingly"
GURPREET SINGH v. U.0.1. [ BALASUBRAMANYAN, J.] 439
The legislative intent in enacting sub-Rules (4) and (5) is therefore clear and A
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.
Mui/a in his commentary on the Code 15th Edition Vol. fl at page 1583 has
set out the effect of the rules as follows:

"Normal rule with respect to money decree is (i) the appropriation B
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 I of Order 21, C.P.C. Section 60 of the Contract
Act cannot be invoked for the application of the aforesaid normal
rule."
c
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 D
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 E
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 to the F
decree holder either by approaching the executing court under Order XX!
Rule 2 of the Code or by making the deposit in the execution taken out by
the decree-holder under Order XX! Rule I 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 G
costs. The rule in terms of Order XX! Rule I, 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/ H
440 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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. I0,000/-,
costs and then the principal and claim interest on the whole of the balance
sum again. Certainly, at both stages, ifthere is short-fall in deposit, the decree
B 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
C has now become clear in the light of the amendments to Order XXI Rule I
by Act I 04 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
D 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 XX!
Rule I understood in the context of Order XXlY Rules I to 4 of the Code.
The principle appears to be that if a part of the principal has been paid along
E 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
F 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
G 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 towards the enhanced amount so awarded by the reference
court. While making the appropriation, he can apply the amount deposited,
H first towards the satisfaction of his claim towards interest on the enhanced
GURPREET SINGH v. U.0.1. [ BALASUBRAMANY AN, J.] 44 I
amount, the costs, if any, awarded and the balance towards the land value, A
solatium and the payment under Sections 23. (I A) 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 B
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 C
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 D
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.
E
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 F
completing the formalities contemplated and the enquiry made in terms of
Section I I 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 G
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 H
442 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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
B before 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
C 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.

D 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
E 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
F 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
G 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
H of a period of one year from the date on which possession is taken, interest
GURPREET SINGH v. U.O.L [ BALASUBRAMANY AN. J.] 443

at the rate of fifteen per cent per annum, shall be payable from the date of A
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 B
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 C
heads of Section 23( I).

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 an appeal to the High Court and from the decision of
the High Court in such an appeal, an appeal to the Supreme Court. lfone were D
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 E
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 F
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.
G
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
cont.,,mplated by Section 34 of the Act. The whole of that amount is paid or H
444 SUPREME COURT REPORTS [2006) SUPP. 7 S.C.R.

A 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
B 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
C to take note of the enhanced amounts payable under Section 23( 1), Section
23(1 A), 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,
D 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
E 28 is applied. The enhanced amount thus calculated will have to be deposited
in addition to the amount awarded by the reference Court if it had not already
been deposited.

29. The fourth stage may be when the Supreme Court enhances the
F 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
G 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 ofa 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
H
GURPREET SINGH v. U.0.1. [ BALASUBRAMANYAN. J.] 445

contemplated or warranted by the scheme of the Act. But if there is any A
shortfall at any stage, the claimant or decree hold<;r 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 v. Union of India, [2001] Suppl. 3 S.C.R. 176, this Court
posed the question, what is meant by "the compensation" awarded. The B
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 C
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 D
23( 1A) of the Act. It is on this :;um 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.
E
32. Mathunni Mathai v. 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 F
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 mandatory. This Court while considering Order XXI Rule
I 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 G
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 XX!
Rule I 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 H
446 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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
B 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 nonnal rules of appropriation by virtue of
the provisions of the Land Acquisition Act. In fact, that case was concerned
C 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 XX!
Rule I of the Code and indication of the manner of appropriation, the payment
D could not be deemed to have been appropriated towards principal unless the
decree holder admits it to be so.

33. The quPsti0n 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. v. National
E 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
F additional amount payable under Sections 23(2), 28 and 23(1-A) as amended,
the decree holder laid exc!cution, 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 s.:t aside that order and remanded the execution case
G 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 v.
H Hindustan Organic Chemicals Ltd. & Ors. (supra) and that nothing remained
GURPREET SINGH v. U.O.L [ BALASUBRAMANYAN, J.] 447

to be decided. It was contended that the decree holder was entitled to A
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 B
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 v. Hindustan Organic
Chemicals ltd. & Ors. (supra). This Court posed two questions. When does C
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 D
Land Acquisition Act and after summing up the position held:-

"A reading of the above provisions would establish that tlie 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 E
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 p
per annum shall be paid or deposited from the date of notification
under Section 4( I) 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( I)
read with Section 26 or Section 54. Equally, under Section 26 of the G
. 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."

- H
448 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A Section 34 of the Act fastens liability on the Collector to pay interest on the
amount of compensation determined under Section 23( I) with interest from
the date of taking possession till date of payment or deposit into the court
to which reference under Section 18 would be made. On determination of the
excess amount of compensation, Section 28 empowers the court, if it was
B 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: •
c "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
D 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( I) and (2), 34 and 28 and now Section 23( I-A) of the
E 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
F 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 dete1mined by the Land Acquisition Officer under Section 11
and paid to the party or deposited into the Court or determined under
G 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

H
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
-
GURPREET SINGH v. U.O.L [ BALASUBRAMANY AN, J.) 449

of compensation towards costs, interest, additional amount under Section A
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 under the Land Acquisition
Act since the provisions of the Act were inconsistent with Order XXI Rule
I. Referring to Mathunni Mathai (supra), this Court noticed that the provisions B
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 C
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 D
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 ofreference
and the stage of appeal and provides for payment of interest and solatium E
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. v. 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 F
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
G

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. H
450 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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 if there is provision in that behalf in the decree or, as contemplated
by Order XXI Rule I of the Code as explained by us above. The Code or the
general rules do not contemplate payment of further interest by a judgment
B 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 comse, as indicated, out of what is paid he can adjust the interest
C 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
D 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
E (supra). Slightly ueviating from the reasoning in Prem Nath Kapur (supra) we
have indicated earlier that even going by Order XX! Rule I 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
F 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.

G 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( I), 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
H judgment debtor intimating the decree holder as to how the sum deposited
GURPREET SINGH v. U.0.1. [ BALASUBRAMANYAN, J.) 451
is to be applied in discharge of the obligation of the judgment debtor. Once A
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 B
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 C
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 D
decree, and the amount is received by the decree holder, the decree holder
must be 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 E
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. F
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 appeliate court and the awardee
is given the liberty to withdraw that amount? In such a case, the amount G
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
H
452 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A 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
B 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
C 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 co~ts 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
D (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
E 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. ff, therefore, the claim for interest on solatium had been made and the
same has been negatived either expressly or by necessary implication by the
F 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 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
G 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
H such interest on solatium can be claimed only in pending executions and not
GURPREET SINGH v. U.0.1. [ BALASUBRAMANY AN. J.] 453
in closed executions and the execution court will be entitled to permit its A
recovery from the date of the judgment in Sunder (September 19, 200 I) 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 B
litigation on this question.

45. The appeals wili now be placed before the appropriate Bench for
being disposed of in the light of the answers given by us.

K.K.T. Questions answered.