Dismissed

The Chief Engineer v. M/S. v.U.Seemon Engineers and Contractors

Karnataka HC10 Aug 2023CRP/380/2013

Case brief

AI extract

What is this about?

This High Court dismissed a civil revision petition challenging an execution court order directing payment of a large sum including interest. The court rejected the argument that calculating interest on interest is impermissible, relying on recent Supreme Court precedents which hold that once principal and interest merge into a single due sum, they cannot be segregated for calculation purposes.

What did the court decide?

Revision petition dismissed; order of the trial court upholding the memo of calculation affirming the payment of Rs.14,61,026.30 including interest.

The Chief Engineer Vs M/S. v.U.Seemon Engineers… — Execution and Attachment | Karnataka HC (2023)

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1 - NC: 2023:KHC:28424 CRP No. 380 of 2013

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 10^TH DAY OF AUGUST, 2023

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BEFORE

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THE HON'BLE MR JUSTICE H.P.SANDESH CIVIL REVISION PETITION NO. 380 OF 2013 (EX)

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Between:

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The Chief Engineer, Engineering Service Division, M/s Hindustan Aeronautics Limited, Bangalore - 560 017 Rep by its General Manager.

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…Petitioner

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(By Smt. Keerthi Kumar D. Naik, Advocate)

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And:

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Digitally signed by SHARANYA T Location: HIGH COURT OF KARNATAKA

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M/s. V.U. Seemon Engineers and Contractors, Cliffidale, Kadri Hills, Mangalore – 4, Represented By Its Managing Partner Sri. V.U. Seemon.

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…Respondent

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(By Sri. Abhinav R., Advocate)

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This CRP is filed u/s 115 of CPC, against the order dated 14.8.2013 passed in Execution No.1089/1997 on the file of XIX Additional City Civil and Sessions Judge, Bangalore, and etc.

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This petition, coming on for hearing, this day, the court made the following:

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2 - NC: 2023:KHC:28424 CRP No. 380 of 2013

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ORDER

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Heard the learned counsel for the petitioner and also the counsel appearing for the respondent.

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In this petition the challenge is with regard to the order passed by the executing court in coming to the conclusion that the memo of calculation filed by the decree holder calculating the interest as well as the amount payable by the judgment debtor is correct and therefore the judgment debtor is directed to pay the decree holder Rs.14,61,026.30 paisa as on 29.01.2011 by deducting the amount, if any, paid by him and he is also directed to pay upto date interest till the date of paying the entire amount. The main contention of the revision petitioner before this court is that the trial court committed an error in directing the petitioner herein to pay the interest on the interest and learned Judge has accepted the memo of calculation submitted by the respondent as gospel truth and proceeded to pass the order without examining the payments made by the petitioner and also the way in

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which the calculation is made by the office. By looking into the calculations made by the office coupled with the calculations submitted by the respondent, it is clear that the amount has been calculated by adopting the compounding interest. This court has categorically held in CRP.No.71/2000 and CRP.No.90/2000 dated 06.04.2000 that simple interest at the rate of 19.5% to be worked out on the award. In the calculation submitted by the office, it is clear that time and again the petitioner has paid the amount working out the principal interest and deducting the amounts paid by the petitioner and on the remaining amount again interest is calculated. Though principal of adjusting the amount paid by the party towards principal has been paid and that procedure has not been followed. It is contended that this issue was considered in the earlier Civil Revision Petition No.152/2008 c/w Civil Revision Petition No.153/2008 and extracted the earlier order passed in the revision petition and extracting the same contended that in terms of the said order it is confined only with regard to non-payment of interest on security

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deposit and earnest money deposit and even according to the respondent in their revision petition what was challenged is only that. Therefore, even if it is presumed to be true, it is to be considered only with regard to that aspect of the matter. It is contended that as evident from the records that as against the original claim of for Rs.7 lakhs and odd, the petitioner has paid Rs.16,91,930/- as per the record. The petitioner has paid a sum of Rs.7,30,145/on 12.12.1995, Rs.2,24,249/on 23.08.1996, Rs.1,91,756/- on 01.07.2000, Rs.3,50,000/on 08.08.2005 and Rs.1,95,740/on 10.06.2008. Therefore, the petitioner has already paid the entire amount which the respondent is entitled to under the Award and by misinterpreting the whole thing the respondent has continued to claim the amount without any basis.

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Learned counsel vehemently contend that the

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mode of calculating the interest on interest is not permissible under the law. The counsel in support of her

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5 - NC: 2023:KHC:28424 CRP No. 380 of 2013

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argument also relied upon the order passed by this court in CRP.No.71/2000 c/w CRP.No.90/2000 and contended

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that wherein also this court awarded interest i.e., on simple interest and not on interest on interest. Learned counsel relied upon the judgment of the Hon’ble Supreme Court in Bharat Heavy Electricals Limited Vs. R.S.Avtar Singh and Company – [(2013) 1 SCC 243],

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and brought to the notice of this court Para 31, wherein discussion was made that the general rule of appropriation towards a decretal amount was that such an amount was to be adjusted strictly in accordance with the directions

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contained in the decree and in the absence of such directions adjustments be made, firstly towards payment of interest and costs and thereafter towards payment of the principal amount subject, of course, to any agreement between the parties. The legislative intent in enacting sub-rules (4) and (5) is a clear pointer that interest should cease to run on the deposit made by the judgment-debtor and notice given or on the amount being tendered outside the court in the manner provided in Order 21 Rule 1(1)(b)

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and also in Para 31.4, held that thereafter, no further interest would run on the sum appropriated towards the principal. In other words if a part of the principal amount 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. Learned

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counsel also brought to the notice of this court in Para 36 wherein an observation is made that the courts are not empowered to award interest upon interest.

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Per contra, learned counsel appearing for the respondent in his argument vehemently contend that whatever the amount is paid, first amount will be adjusted towards the interest and if any residue, the same will also be adjusted towards the principal amount and the very contention of the petitioner that if any amount is due towards the interest and the same cannot be levied interest on that amount also cannot be accepted. Learned counsel vehemently contend referring to the judgment of the Honb’le Supreme Court in the case of Morgan

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Securities and Credits Pvt. Ltd., Vs. Videocon Industries Ltd -2022 LiveLaw (SC) 728 brought to the

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notice of this court Para 13, where the Apex Court held that Parliament intended that an award for payment of money may be inclusive of interest, and the “sum” of the principal amount plus interest may be directed to be paid

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by the Arbitral Tribunal for the pre award period. Thereupon, the Arbitral Tribunal may direct interest to be paid on such “sum” for the post award period vide clause (b) of sub-section(7) of Section 31 of the Act, at which stage the amount would be the sum arrived at after the merging of interest with the principal; the two components having lost their separate identities.” Learned counsel in support of his argument relied on Indian Oil Corpn. Ltd.,

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Vs. U.B. Engineering Ltd., and another - 2022

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LiveLaw (SC) 409 and brought to the notice of this court Para 6, wherein with regard to the interest awarding on sum of the money and the Apex Court referring to the judgment in the case of Hyder Consulting (UK) Limited

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Vs. Governor, State of Orissa – (2015) 2 SCC 189,

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and brought to the notice of this court in Para 28 wherein the Apex Court also held that for the purposes of an award, there is no distinction between a “sum” with interest, and a “sum” with interest. Once the interest is “included in the sum” for which the award is made, the original sum and the interest component cannot be segregated and be seen independent of each other. The interest component then loses its character of an “interest” and takes the colour of “sum” for which the award is made. Learned counsel referring to this judgment vehemently contended that the calculation made by the decree holder is correct and the trial court also rightly came to the conclusion that calculation made by the decree holder is correct and also the interest be calculated on sum and not segregating the principal amount and interest once the same is accumulated is due and hence the very contention of the revision petitioner cannot be accepted.

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Having Heard the learned counsel for the revision petitioner and also the learned counsel appearing for the respondent and also perused the impugned order passed by the trial court by accepting the calculation made by the decree holder. Since the decree holder has filed memo of calculation totally claiming Rs.14,61,026.30 paisa as on 29.1.2011 on the ground that the present execution petition is filed for recovery of outstanding amount due in respect of the award passed by the arbitrator in Case No.HAL/LCA-5/86-87 which was decreed by this court in A.C.No.33/92. The crux of the issue between the parties

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is whether the interest is payable on the interest also or only it has to be calculated on the principal amount. No doubt the revision petitioner has also made the payment as contended in the revision petition. But once the principal amount is due and if any amount is paid, first it has to be adjusted towards the interest. If any residue amount is remaining and the same also to be adjusted towards the principal amount and thereafter again if any further payment is made, that has to be adjusted towards

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interest first and also if any residue also to be adjusted towards the principal amount and the very contention that interest on interest is not permissible, cannot be accepted. The Apex Court in the recent judgment which has been referred by the respondent’s counsel also has clearly held that once the amount is due as sum there cannot be segregation as principal amount and interest part and hence the contention of the petitioner’s counsel cannot be accepted. Moreover the counsel for the petitioner relied upon the order passed by this court in CRP.No.71/2008 c/w CRP.No.90/2008 and the same is in terms of the contract between the parties and hence that simple interest is payable on the amount which was taken and when there is a due towards the interest part also, when such being when the amount is accumulated as sum and the very contention of the counsel appearing for the petitioner that it amounts to compound interest cannot be calculated on principal amount as well as the interest amount. The said contention cannot be accepted and once the amount is due and it is taken as sum, including

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principal and interest amount and in view of the judgment of the Apex Court referred supra by the learned counsel for respondent no.2 in both the judgments i.e., in Indian

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Oil Corpn. Ltd., Vs. U.B. Engineering Ltd., and another - 2022 LiveLaw (SC) 409 and Hyder Consulting (UK) Limited Vs. Governor, State of Orissa – (2015) 2 SCC 189, comes to conclusion that for the purpose of awarding, there is no distinction between the sum with interest, and sum without interest. Once the interest is included in the sum for which the award is made, the original sum under the interest component cannot be segregated and the same is independent of each other. The interest component then looses its character of an interest and takes the colour of sum for which the award is made. When such principle is laid down by the Apex Court and the very contention of the petitioner’s counsel that they cannot calculate interest on interest, cannot be accepted and hence I do not find any merit in the petition to set aside the order of the trial court and the trial court has also taken note of the same and in

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particularly in Para 12 taken the contention of the judgment debtor and the same was argued that no interest was payable on earnest money deposit and security deposit amount. The trial court has also taken note of the order passed by this court in CRP.No.152/2008 c/w CRP.No.153/2008 that the interest is also payable on earnest money deposit and security deposit amount. The High Court has also clearly held in Para 12 of the judgment with regard to the rate of interest payable by the judgment debtor. The trial court has also taken note of the order passed by this court in CRP.No.152/2008 and CRP.No.153/2008 and also considered the non-payment of amount, accepted the calculation filed by the decree holder which clearly calculated the interest correctly and he has come to right conclusion even the total amount payable by the judgment debtor. Hence I do not find any ground to set aside the impugned order. In view of the discussion made above, I pass the following:

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NC: 2023:KHC:28424 CRP No. 380 of 2013

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