SMITHABEN H. PATEL AND OTHERS Vs. M/S. INDUSTRIAL CREDIT AND DEVELOPMENT SYNDICATE, REGISTERED OFFICE AND OTHERS

JUDGEMENT

(1.) AN interesting aspect of the law relating to the question concerning the manner in which instalments paid pursuant to the passing of a decree are required to be appropriated has arisen for consideration in this case. The petitioners are the Judgment Debtors who submitted to a decree in O. S. No. 1727/82 for a sum of Rs.7,29,980.73/ -. The respondents are a financial institution and the decretal amount consisted of certain finances which the respondents had made available to the petitioners as also interest at the agreed rate between the parties. The decree also specified that the petitioners who are the Judgment Debtors, would be entitled to satisfy the decree through instalment payments of Rs.20,000/ -per month. The admitted position is that the petitioners did commence making the instalment payments and continued to do so for a considerable period of time. The dispute has arisen because right from the very inception, the petitioners along with each of their instalment payments, in their covering letter, specified that the installment in question should be adjusted against the principal. As such, the petitioners maintained an account of the depleting balance and thereafter, wrote to the respondents on 21st May -1985, that the principal amount had been wiped out and that the future instalments; which they were sending, should be adjusted -against the outstanding interest and costs: The respondents at this stage, continued to issue the receipts for the instalments which indicated that the payment was accepted against part satisfaction of the Hecree. In July 1987, the real dispute arose because, the petitioners informed the respondents that they had first liquidated the principal amount and that they have thereafter, paid the outstanding interest and costs and that therefore, the decree stands fully satisfied. The respondents replied that being a banking company, they had followed the well -settled rule that the principal, Interest and Costs are computed under three different heads and that as far as the principal is concerned, the Interest keeps running and gets added to the head of Interest and that as far as the instalment payments are concerned, they are first adjusted against the Interest and Costs and after those two heads are wiped out only, does the balance amount get adjusted towards the Principal amount. On the basis of this contention, the respondents pointed out that there is still a substantial amount due which aggregated to Rs.2,15,807.22, - and, since the petitioners disputed this computation, the respondents look out execution proceedings for recovery of that amount on the ground that the decree had not been satisfied.

(2.) BEFORE the executing Court, the petitioners raised the same contention namely, that the decree had been satisfied. The point formulated basically was that the petitioners had consistently indicated the manner in which the payment received from them was to be appropriated and they contended that the respondents did not dispute this position at any time when they accepted the payments. They therefore contended that the Court must uphold the position that there was an arrangement between the parties to appropriate the instalments towards the principal first and towards the other heads thereafter, and in this view of the matter, there was no amount outstanding as wrongly contended by the respondents. The plea canvassed on behalf of the respondents was that they have followed the normal rules applicable in banking practice and which have been consistently enunciated by the Courts for purposes of adjustment of amounts received by way of instalment payment and that consequently, the method of accounting followed by them is liable to be accepted by the Court and the petitioners must be directed to pay up the balance amount claimed. The learned Judge after considering the rival contentions, rejected the plea put forward by the Judgment Debtors and directed recovery of the balance amount. The present C. R. P. is directed against that order.

(3.) AS far as the legal position is concerned, it has given rise to a very violent debate because, the petitioners" learned advocate has submitted that it makes no difference merely because a decree has been passed, but that a perusal of the decree will indicate that there were three distinct debts due from his clients, the Principal, the outstanding Interest and the Costs. He states that these three heads had not been merged by the Court and that in fact, they cannot be merged. According to the learned advocate, the normal principle which the Courts have applied in such cases and which he does not dispute, is that the payments that arc forth -coming would first be adjusted against the head of costs and interest and would thereafter go towards satisfaction of the decree. His case is that this is not an inflexible rule and that Section 59 of the Contract Act gives the debtor the right to specify the manner in which the appropriation is required to be made and it is open to the creditor to either accept that arrangement or revoke it. In support of his contention, learned advocate has submitted that undoubtedly, the Division Bench decision of this Court reported in 1972 (2) MLJ 169 which in turn has followed several of the earlier decisions including the leading case on the point reported in Meghraj and Others Vs. Mst. Bayabai and Others, AIR 1970 SC 161 , has laid down that the interest and costs will first have to be wiped out as the instalments are paid progressively and that the principal will come thereafter. Learned advocate draws my attention to the Supreme Court decision referred to by me wherein the Court, has carved out an exception to the normal rule. Obviously, the Court was taking cognisance, of the ingredients of Section 59 of the Contract Act, and therefore, the Court has itself specified that the normal rule would apply unless there is an agreement to the contrary between the parties. In taking this view, the Supreme Court relied heavily on the well -known decision, of the Privy Council reported in AIR 1922 PC 233 which decision has been followed by the Full Bench of the Allahabad High Court in the case reported in Gajram Singh and Others Vs. Lala Kalyan Mal, AIR 1937 All 1 . The petitioners' learned advocate submitted that the law itself makes provision for a situation whereby the normal rule or the normal course of events can be departed from. Dealing with a situation whereby the creditor is not agreeable to accept such manner of appropriation, the petitioner learned advocate submitted that the creditor must therefore, return the instalments paid and the creditor is entitled to execute the decree if he is not agreeable to accept a different sort of arrangement. In this context, the learned advocate relied on a decision of the Calcutta High Court reported in Life Insurance Corpn. of India Vs. Samarendra Nath Roy, AIR 1979 Cal 243 wherein that Court upheld the position that if a party desires appropriation is a manner other than what is normally accepted, that there is no obligation on the part of the creditor to agree to it, but laid down that in such a situation, it was obligatory on the part of the creditor to refuse the instalment payment and to seek legal redress by way of execution of the decree.