Dsco Cooperative Industrial Society Ltd. Vs. Delhi State Cooperative Bank Ltd. and ors. - Court Judgment

Excerpt:
- - admittedly, it is evident from the copy of pass-book filed by the petitioner, which has been written by the respondent which is at page-96 of the paper book, that when the respondent itself has shown the amount, which was paid by the petitioner to the respondent as payments towards principal amount, the respondent cannot be permitted to alter and appropriate the same towards interest, after petitioner failed to make the installments in the stipulated period. ' (8) it is now well-settled that the normal rule in the case of a debt due with interest is that any payment made by the debtor is in the first instance to be applied towards the satisfaction of interest and thereafter to the principal. i, after the agreement entered into between the parties on 31.8.1987, the petitioner failed to make the payment of monthly installments as agreed.vijender jain, j.(1) i have heard the arguments advanced by the learned counsel for the both the parties at length. the short question involved in this petition is as to whether the action of the respondents in appropriating the amount, which was paid by the petitioner towards repayment of debt in the interest amount, is justified or not. (2) the award was for a sum of rs. 15,77,200.00 along with interest amounting to rs. 2,71,000.00 in addition to the cost amounting to rs. 56,000.00. -the petitioner was also liable to pay future interest till realisation as per the award. it seems that thereafter there was some agreement between the parties and in terms of that agreement the respondent no. i-cooperative bank agreed on 31st august, 1987 to have the amount paid by the petitioner in installments of rs. 30,000.00 per month, i.e. rs. 20,000.00 towards repayment of principal amount and rs. 10,000.00 towards the payment of interest. it is the case of the petitioner that from october, 1987 to july, 1992 forty installments were paid, thereby paying a total sum of rs. 8,00,000.00 towards the repayment of principal amount and rs. 4,00,000.00 towards the payment of interest amount. (3) mr. j.r. midha, learned counsel appearing for the petitioner, has contended that as per the records of the respondent no. i-bank, which is filed at page-96 of the paper book, the respondent no. i has recorded the receipt of the payment aforesaid in these two heads. mr. midha has also contended that once a debtor has deposited the amount in a particular head, the creditor subsequently cannot appropriate it in a different head. according to the learned counsel for the petitioner, the amount paid by the petitioner towards repayment of principal amount, in the event of petitioner's committing default, cannot be appropriated by the respondent-bank in the interest amount, which has been done in this case mr. midha has further contended that the same will be against the provisions of section 59 of the indian contract act. in support of his contentions, he has cited life insurance corporation v. samarendra nath roy, : air1979cal243 , central warehousing corporation v. m/s. govinda chaudhary, : air1989ori90 and prabirendra v. anil chattopadhya, : air1956cal570 . (4) yet another contention raised by the learned counsel for the petitioner is that after the amendment of order 21 rule i of the code of civil procedure in the year 1976, even if a decree is to be executed, the amount so received has to be appropriated first towards the payment of principal amount. in support of this contention, mr. midha has cited the case of punjab national bank v. prem sagar choudhary. . mr. midha has also contended that out of the aforesaid amount, which was awarded under the award, the petitioner has made the payment of a sum of rs. 32,46,480.49 paise, which was much more than the original awarded amount. (5) on the other hand, mr. r.n. bhardwaj, learned counsel appearing for the respondent no. 1-bank, has vehemently argued that the grant of installments was pursuant to the petitioner's fulfillling its obligation under the agreement, which was entered into between the petitioner and the respondent resulting in the letter dated 31st august, 1987. mr. bhardwaj has also contended that the petitioner was a defaulter and, thereforee, in terms of clause-4 of the agreement dated 31st august, 1987, the original award became operative and the respondent was entitled to take the whole amount which was due from the date of defaults principal amount from the petitioner. mr. bhardwaj has further contended that, time and again, the petitioner was informed that he was not making the installments as per the agreement and, thereforee, the petitioner cannot be allow ed to escape the liability to make the payment under the award. (3) after hearing the learned counsel appearing for both the parties, i am inclined to agree with the submissions made by the learned counsel for the petitioner. admittedly, it is evident from the copy of pass-book filed by the petitioner, which has been written by the respondent which is at page-96 of the paper book, that when the respondent itself has shown the amount, which was paid by the petitioner to the respondent as payments towards principal amount, the respondent cannot be permitted to alter and appropriate the same towards interest, after petitioner failed to make the installments in the stipulated period. if the payment was not made pursuant to the agreement dated 31st august, 1987, as per the said agreement, award became operative. but when that award became operative, the amount, which was received by the respondent in the account of principal amount, cannot be appropriated towards payment of interest. that will be in clear violation of the provisions of section 59 of the indian contract act. (7) section 59 of the indian contract act is as follows :- 'application of payment where debt to be discharged is indicated.-where a debtor, owning several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances, implying, that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.'(8) it is now well-settled that the normal rule in the case of a debt due with interest is that any payment made by the debtor is in the first instance to be applied towards the satisfaction of interest and thereafter to the principal. section 60 of the indian contract act provides that where debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor. but if a debtor in making payment stipulates that it is to be credited towards a particular debt, namely, the principal amount, the creditor is not bound to appropriate the same towards the principal. in that case, he must not accept the money, but return it to the debtor. where a debtor makes payment without making any indication as to how the payment is to be adjusted, it is the option of the creditor to make adjustment first of the interest and then of the principal, but if the debtor has indicated the manner in which the appropriation is to be made, then the creditor has no choice to apply the payment in a different manner, thereforee, at the relevant time, when on account of default of the petitioner the agreement in question came to an end, the respondent ought to have returned the amount received as principal amount. but the respondents chose to keep that amount, which was received as principal amount then they could not have appropriated said amount deposited in the principal account, to interest account. (9) in this case when the writ petition was filed on 15.7.1992, the prayer was to quash the orders dated 2.7.1992 and 9.7.1992 passed by respondent no. 2 directing the attachment of the property of the petitioner and auctioning of the same with the further direction for staying the issuance of warrants of arrest against the officials of the petitioner. during the pendency of this writ petition, the petitioner has deposited a sum of rs. 8,12,520.47 paise i.e. rs. 7.77 lakhs due as principal and rs. 35,520.00 towards the payment of interest. however, on 9.5.1995 the petitioner had paid in the court another sum of rs. 12,09,195.69 paise the awarded amount was for a sum of rs. 15,77,200.00 along with interest and cost. (10) as i have discussed above that the petitioner deposited forty installments, thereby paying a total sum of rs. 8 lakhs towards the repayment of the principal amount and rs. 14 lakhs towards the payment of interest amount, the respondents were not justified in appropriating the said deposit of rs. 8 lakhs towards the payment of interest, that will be against the provisions of sections 59 and 60 of the contract act. if the respondents were not to accept the amount in principal amount on account of the default of the petitioner then they could have returned the said amount of rs. 8 lakhs, which was deposited by the petitioner in the account of principal amount and would have shown the whole amount under the award along with interest outstanding against the petitioner. having not done so, the respondents cannot be permitted to appropriate the amount, which was paid towards repayment of principal account. (11) there is yet another aspect of the controversy. according to the counter- affidavit filed by respondent no. i, after the agreement entered into between the parties on 31.8.1987, the petitioner failed to make the payment of monthly installments as agreed. it is the case of respondents that in the year 1988 the petitioner-society paid only rs. 2,50,000.00, in the year 1989 rs. 3,60,000.00, in the year 1990 rs. 3,20,000.00 and in 1991 rs. 1,21,000.00 before filing this writ petition in 1992 rs. 60,000.00 and further amount of rs. 1 lakh per month from 21.7.1992 were paid by the petitioner-society as per the order of this court. as a matter of fact, the agreement dated 31.8.1987 was extended by the conduct of the parties as more time was given to make the payment to the petitioner by the respondent otherwise in the year 1988 when instead of making payment of rs. 3,60,000.00 per year, the society only paid rs. 2,50,000.00, the respondents ought to have invoked clause-4 of the agreement and could have claimed the whole amount due under the award, which was not done. the petitioner-society only made the full payment of rs. 3,60,000.00 in the year 1989 and even in 1990 it paid rs. 3,20,000.00, thereforee, the respondents by their conduct was estopped from canvassing before inc that the agreement dated 31.8.1987 stood terminated. thereforee, in view of the discussions above, i quash the letters dated 2.7.1992 and 9.7.1992 passed by respondent no. 2. in view of the fact that petitioner has deposited a total amount of rs. 32,46,480.49 paise, i direct the respondents to adjust the payment, which was made by the petitioner before issuance of the letter dated 2.7.1992 under the head principal amount as deposited by the petitioner. the respondents will calculate as to any other amount is still outstanding and due after taking into consideration the total payment made by the petitioner as on 2.7.1992. the payment received pursuant to the order of this court will be taken to liquidate the principal amount and then towards adjustment of interest amount. the respondent shall communicate the said outstanding amount, if any, to the petitioner within one month from the date of this order and if any amount is due, the petitioner shall make the payment of the said amount within a period of one month thereafter from the said communication. the writ petition is disposed of in terms of the above order.