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CASE NO.: Appeal (civil)  4570 of 2006

PETITIONER: Gurpreet Singh

RESPONDENT: Union of India

DATE OF JUDGMENT: 19/10/2006

BENCH: Y.K. SABHARWAL, K. G. BALAKRISHNAN & S. H. KAPADIA C. K. THAKKER P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T  (@ SPECIAL LEAVE PETITION (C) NO.8408 OF 2003) WITH   CIVIL APPEAL NOS.4549,4548 and 4547 OF 2006     (@ SLP (C) No.19525 of 2003,  3429 of 2004 and 5609 of 2004]

P.K. BALASUBRAMANYAN, J.

        1.              What is the rule of appropriation in execution of  money decrees?  Is the rule the same in the case of an  award decree under the Land Acquisition Act or, is there  anything in the Land Acquisition Act, 1894 as amended by  the Land Acquisition (Amendment) Act, Act 68 of 1984  making that rule inapplicable or not wholly applicable?   These are the questions that arise for consideration in these  Petitions for Special Leave to Appeal.

2.              Leave granted.

3.              In Prem Nath Kapur & Anr. Vs. National  Fertilizers Corporation of India Ltd. & Ors. [(1995) Supp.  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 necessary implication  excludes solatium and that no interest is payable on  solatium or on the additional amount under Section 23(1)(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  Act over and above the amount awarded under Section 11 of  the Act.  It was also held that the normal rule of  appropriation contained in Order XXI Rule 1 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 XXI Rule 1 of the Code could not  be extended to execution of award decrees under the Act.   The view as regards the content of the expression  ’compensation’ occurring in Section 23(1) and Section 28 of  the Act was overruled by a Constitution Bench in Sunder  Vs. 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)

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but also the sums under the remaining sub-sections of  Section 23.  Thus, one part of 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 in Sunder (supra) had to be  reconsidered and even otherwise,  the correctness 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:

"Having heard the learned counsel for the  parties and having perused the aforesaid  decisions, we are of the view that the normal  rule that 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 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 Vs. Union of India  [2001(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- 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 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,  

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 which the seller identifies to the buyer the  relevant unit in shipment.  

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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 account.   This is often known  as appropriation of payments.    

(See P. Ramanatha Aiyar Advanced Law Lexicon, 3rd Edition,  2005 page 315)

5.              We are concerned with the last of the specialized  meanings assigned to the term.

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 Halsbury’s Laws of England, Fourth Edition,  thus,  

"Where 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.

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."

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 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,  

"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."

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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 interest due  before applying it to the earliest items of  principal."

The relevant provisions governing contractual dealings are  found in Sections 59 to 61 of the Indian Contract Act.    According to Pollock & 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 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 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."

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 Marimella Suryanarayana vs. Venkataraman Rao  (AIR 1953 Madras 458).  His Lordship stated:

       "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" (1861) 1 Mar.572: 35E.R.  781 and it is embodied in Section 59,  Contract Act.  But when the debtor has  not himself made any appropriation, the  right devolves on the creditor who can  exercise it at any time, vide ’Cory Bros. &  Co. vs. Owners of the Turkish Steamship

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’Mecca’, (1897) A.C. 286; and even at the  time of the trial : Vide \026 ’Symore vs.  Picket’, (1905) 1 K.B. 715.   That is  Section 60, Contract Act.   It is only 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."

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 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 pre decreetal stage and in Order XXI Rule 1  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 1, 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 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 discharge of the claim or it falls short  thereof.   Rule 4 enables the 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.

11.             Order XXI Rule 1 provides the modes of paying  money under a 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 the  court or directly to him by registered post acknowledgement  due.  On 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 the giving of notice thereof to the  decree holder and provides further for cessation of interest  from the date of notice to the decree holder of such deposit.

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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. Amtul Habib vs. Mohammad Yusuf (ILR 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 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 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 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 (1), (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 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 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 correct and should be affirmed."

The same view was taken by the Patna High Court in  Gopalje vs. Sumrit Mandar (AIR 1933 Patna 89).  After

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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 paid, it would be a valid payment.   In Varki Ouseph vs.   Narayanan Parameswara Panicker (AIR 1956 Travancore- Cochin  46) a Division Bench of the Travancore \026Cochin  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 Mulla on the Code of  Civil Procedure, held that in the 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 1(a)  from the date the decree holder has notice of the deposit.    In Mulla’s commentary on the Code of Civil Procedure 15th  Edition Vol. III dealing with Rule 3 of Order XXIV it is stated:  "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 Allhabad High Court in Amtul vs.  Muhammad (ILR 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 XXI Rule 1 of the Code as it stood prior to its  amendment by Act 104 of 1976, this Court in Meghraj and  others  vs. Mst. Bayabai and others (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 deposited in court should  first be applied towards satisfaction of the  interest and costs and thereafter towards  the principal would apply.

In Venkatadri Appa Row and  others vs. 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  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 other, and the  rule which is well established in ordinary  cases is that in those circumstances the  money is first applied in payment of

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interest and then when that is satisfied in  payment of the capital.   That rule is  referred to by Rigby, L.J., in the case of  Parr’s Banking Co. vs. Yates, (1898 (2)  QB 460) in these words:  

"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 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 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\027that the amounts which were  deposited in Court by the mortgagors  were accepted by the mortgagees subject  to a condition imposed by the  mortgagors."

14.             In Industrial Credit & Development Syndicate  Now Called I.C.D.S. Ltd. vs. Smithaben H. Patel (Smt.)  and others ((1999) 1 SCR 555], this Court considered the  question whether Sections 59 to 61 of the Contract Act  would 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 terms of the agreement  arrived at between the parties, though on the general  principle as mentioned Sections 59 and 60 of the 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.   

15.             We may now advert to Order XXXIV of the Code,  dealing also with the execution of mortgage decrees. Rule 10  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 been  properly incurred by him since the date of the preliminary

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decree for foreclosure, sale or redemption 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 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 in connection 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 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.

16.             A Full Bench of the Lahore High Court in Jai  Ram vs. Sulakhan Mal [AIR 1941 LAHORE 386] considered  the position in detail.  That was a case 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 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 61 of the  Contract Act had no application, the Full Bench proceeded  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 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 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

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general rule and there seems no reason  why a different principle should be  adopted when the property is not subject  to a prior mortgage."

17.             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 the Full Bench of the Lahore High Court  was that, in the absence of a 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  contained in Rule 1 of Order XXI 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) otherwise, as the Court which made  the decree, directs.  Sub-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 (1), interest, if 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  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 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 XXI Rule 1, it was set out as follows:

"The Committee note that there is no

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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 through a  bank or by any other mode wherein  payment is evidenced in writing.  The  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  1 of Order XXI has been inserted  accordingly"

The legislative intent in enacting sub-Rules (4) and (5)  is therefore clear and 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.  Mulla in his commentary on the  Code 15th Edition Vol. II at page 1583 has set out the  effect of the rules as follows:

"Normal rule with respect to money  decree is (i) the appropriation 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  1 of Order 21, C.P.C.   Section 60 of the  Contract Act cannot be invoked for the  application of the aforesaid normal rule."

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 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 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 decree holder either by approaching the executing  court under Order XXI Rule 2 of the Code or by making the  deposit in the execution taken out by the decree-holder  under Order XXI Rule 1 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

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to Rs.10,000/- with interest and costs.  The rule in terms of  Order XXI Rule 1, 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/- 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.10,000/-, costs and then the principal and claim interest  on the whole of the balance sum again.  Certainly, at both  stages, if there is short-fall in deposit, the decree 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 has now become clear  in the light of the amendments to Order XXI Rule 1 by Act  104 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 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 XXI Rule 1 understood in  the context of Order XXIV Rules 1 to 4 of the Code.  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.  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 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 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, first towards the satisfaction of his claim  towards interest on the enhanced amount, the costs, if any,  awarded and the balance towards the land value, solatium  and the payment under Sections 23 (1A) of the Act and if,

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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  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 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 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.

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  completing the formalities contemplated and the enquiry  made in terms of Section 11 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 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 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 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

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payable at the rate of fifteen 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.

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  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 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 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 of a period of one year from the date on  which possession is taken, interest at the rate of fifteen per  cent per annum, shall be payable from the date of 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 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 heads of Section 23(1).   

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.  If one were 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

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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 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 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.

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 contemplated by Section 34 of the Act.  The  whole of that amount is paid or 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 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 to take note of  the enhanced amounts payable under Section 23(1), Section  23(1A), 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, 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 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 compensation and at that stage too, the same  rule would apply.

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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 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 of a 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  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.

31.             In Sunder Vs. Union of India [2001 Suppl. (3)  S.C.R. 176], this Court posed the question, what is meant by  "the compensation" awarded.  The 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 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 23(1A) 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.  

32.             Mathunni Mathai vs. 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 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 1  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 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

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XXI Rule 1 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 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 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 normal rules of appropriation by virtue of the provisions  of the Land Acquisition Act.  In fact, that case was  concerned 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 XXI Rule 1 of the Code and indication of the manner  of appropriation, the payment could not be deemed to have  been appropriated towards principal unless the decree  holder admits it to be so.  

33.             The question 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. Vs. National 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  additional amount payable under Section 23(2), 28 and  23(1-A) as amended, the decree holder laid execution, 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 set aside that order  and remanded the execution case 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 vs. Hindustan Organic  Chemicals Ltd. & Ors. (supra)  and that nothing remained  to be decided.  It was contended that the decree holder was  entitled to 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

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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 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 vs. Hindustan Organic Chemicals Ltd. & Ors.  (supra).  This Court posed two questions.  When does 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 Land Acquisition Act and after summing up  the position held:-

"A reading of the above provisions would  establish that the 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 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 per annum shall be paid or  deposited from the date of notification  under Section 4(1) 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(1) read with Section 26 or Section 54.   Equally, under Section 26 of the 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."

Section 34 of the Act fastens liability on the Collector to pay  interest on the amount of compensation determined under  Section 23(1) 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 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

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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:

"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 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(1) and (2), 34 and 28 and now Section  23(1-A) of the 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 into the  court\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005 \005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005   The liability to pay interest is only on the  excess amount of compensation  determined under Section 23(1) and not  on the amount already determined by the  Land Acquisition Officer under Section11  and paid to the party or deposited into  the Court or determined under 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 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 of compensation towards costs, interest,  additional amount under Section 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 1.  Referring to  Mathunni Mathai (supra), this Court noticed that the  provisions of the Act were not brought to the attention of the  Court and a decision invited thereon and hence the

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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 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 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 of reference and the stage of appeal and provides for  payment of interest and solatium 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. Vs.  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 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 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.     

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 \026 if there is provision  in that behalf in the decree \026 or, as contemplated by Order  XXI Rule 1  of the Code as explained by us above.  The Code  or the general rules do not contemplate 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  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 course,  as indicated, 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

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appellate decree.   

 40.             It is true that the understanding of the expression  "compensation 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 (supra).  Slightly deviating  from the reasoning in Prem Nath Kapur (supra) we have  indicated earlier that even going by Order XXI Rule 1 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 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.

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(1),  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 judgment debtor  intimating the decree holder as to how the sum deposited is  to be applied in discharge of the obligation of the judgment  debtor.   Once 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 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 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 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

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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.

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 appellate court and the awardee 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 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 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 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 debtor while making the deposit  intimating the decree-holder of his intention.  We, thus,  approve the ratio of Prem Nath Kapur (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 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.  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  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 expressly or impliedly by the reference court  or the appellate court, and merely interest on compensation

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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  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 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  litigation on this question.

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