Summary
An arbitral award of Rs 14,49,300 carried 18% interest. While the award-debtor's Section 37 appeal was pending, it was granted a stay on depositing 50%, and the award-holder withdrew Rs 7,78,280 on a personal undertaking in November 2001. The Madhya Pradesh High Court held that, as no notice of deposit was given under Order XXI Rule 1, interest ran on the whole principal until the appeal was dismissed in 2012. The Supreme Court reversed that holding. Once deposited money is withdrawn and credited to the decree-holder, interest stops on it even without formal notice. A restitution undertaking does not make the payment conditional. Interest at 18% therefore runs only on the net principal left after the withdrawal.
Issues
- Whether interest at the awarded rate continues on an amount deposited under a conditional stay order and withdrawn by the decree-holder on a personal undertaking, until the appeal is decided, where no notice of deposit under Order XXI Rule 1(4) CPC was served.
Provisions considered
- Order XXI, Rule 1(4) and (5), Code of Civil Procedure, 1908Notice of deposit enables the decree-holder to withdraw it; where the deposited amount is in fact withdrawn and credited to him, interest ceases from that date even without notice (Gurpreet Singh). (¶¶ 13, 14)
- Sections 34, 36 and 37, Arbitration and Conciliation Act, 1996With the Section 34 objections dismissed, the award was executable as a decree; the Section 37 appellate court's stay operated only on the undeposited balance. (¶¶ 18, 19, 21)
- Section 144, Code of Civil Procedure, 1908Left open to the appellant to seek restitution of any over-payment. (¶ 26)
Held
- Where the judgment-debtor deposits money and the decree-holder withdraws it, interest on that amount ceases from the date it is credited to him, even without a formal notice of deposit; here the deposit followed an order made in the respondent's presence and he withdrew it within three days. (¶¶ 14, 15)
- Ramanathan Chettiar and DDA v. Bhai Sardar Singh are distinguishable because in both the deposited money was never withdrawn by the decree-holder; under the 1996 Act an award whose objections are dismissed is executable as a decree. (¶¶ 17, 18, 19, 20)
- A beneficiary of an interim stay must pay interest on the amount withheld, but not on the amount paid over; a personal undertaking to restore the money does not make the payment conditional, since money is fungible and interest compensates only for deprivation of its use. (¶¶ 21, 22, 23, 24)
Result
Civil Appeal No. 3984 of 2019 allowed; the Madhya Pradesh High Court order dated 19.06.2017 in Civil Revision Petition No. 368 of 2012 set aside; interest at 18% per annum payable on the net principal of Rs 9,13,483 or Rs 9,30,300 (to be computed by the executing court) from 08.11.2001 until payment, with Section 144 CPC remedies left open for any over-payment.