Bombay High Court
Daulat Shetkari Sahakari Sakhar … vs State Of Maha. Thr. Prin. Sec. And Ors on 13 January, 2025
2025:BHC-AS:1321
WP 5742-23 final.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 5742 OF 2023.
Daulat Shetkari Sahakari Sakhar Karkhana ]
Ltd., Halkarni, Taluka Chandgad, District - ]
Kolhapur, through its Managing Director ] ...Petitioner.
Versus
1) The State of Maharashtra through the ]
Principal Secretary, Department of ]
Cooperation, Mantralaya, Mumbai - 400 ]
032.
2. Commissioner of Sugar and ]
Registrar, Co-operative Societies, ]
Maharashtra State, Pune. ]
3) Collector of Kolhapur having his office ]
at Kolhapur. ]
4. The Sahyadri Co-Operative Credit Society ]
Limited, Belgaum having its office at ]
C.T.S. No.3957 Kali Ambarai, College ]
Road, Belgaum, Karnataka through its ]
Authorised Officer. ]
5. M/s. Tasgaonkar Sugar Mills Ltd. ]
A Company registered under the ]
Companies Act, 1956, and having its ]
Registered Office at Sumati Niwas, 1 st ]
Floor, Near Hotel Ameya, Shivsena ]
Bhavan Peth, Shivaji Park, Dadar, Mumbai ]
- 400 028 through its Authorised Officer. ] ...Respondents.
WITH
WRIT PETITION NO. 5874 of 2023.
1. Mr. Eknath Subrao Patil, ]
Age: 40 years, Occu: Agriculturist at Post ]
Saroli, Taluka - Gadhinglaj District - ]
Kolhapur. ]
2. Mr. Sanjay Ananda Patil, ]
Age: 43 years, Occu: Agriculturist at Post ]
Sairaj 1 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
Saroli, Taluka - Gadhinglaj District - ]
Kolhapur. ]
3. Mr. Maruti Shankar Patil ]
Age:49 Years, Occu: Agriculturist at Post ]
Saroli, Taluka - Gadhinglaj, ]
District -Kolhapur ]
4. Mr. Sonappa Tanappa Patil ]
Age : 72 Years, Occu: Agriculturist at ]
Post Saroli, Taluka - Gadhinglaj, ]
District - Kolhapur. ]
5. Mr. Dashrath Remaji Patil ]
Age : 49 Years, Occu: Agriculturist at ]
Post Saroli, Taluka - Gadhinglaj, ]
District - Kolhapur. ]
6. Mr. Rajaram Vithoba Tikka ]
Age : 53 Years, Occu: Agriculturist at ]
Post Sambare, Taluka - Gadhinglaj, ]
District - Kolhapur. ]
7. Mr. Tanaji Dattu Mhatugade ]
Age : 48 Years, Occu: Agriculturist at ]
Post Tavrewadi, Taluka - Gadhinglaj ]
District - Kolhapur. ]
8. Mr. Prakash Narayan Nandwadekar ]
Age : 53 Years, Occu: Agriculturist at ]
Savatwadi Post Kandewadi, Taluka - ]
Gadhinglaj District - Kolhapur. ]
9. Mr. Dadu Santu Kurade ]
Age : 76 Years, Occu: Agriculturist at ]
Savatwadi, Post Kandewadi, Taluka - ]
Gadhinglaj District - Kolhapur. ]
10. Mr. Shivaji Govind Nandwadekar ]
Age: 66 Years, Occu: Agriculturist at ]
Savatwadi, Post Kandewadi, Taluka - ]
Gadhinglaj, District - Kolhapur. ]
11. Mr. Manohar Babu Shinde ]
Age: 58 Years, Occu: Agriculturist at ]
Post Kandewadi, Taluka - Gadhinglaj, ]
District - Kolhapur. ]
12. Mr. Bajirao Ladoba Desai ]
Age: 75 Years, Occu: Agriculturist at ]
Post Kandewadi, Taluka - Gadhinglaj, ]
Sairaj 2 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
District - Kolhapur. ]
13. Mr. Madhukar Bhimrao Desai ]
Age: 72 Years, Occu: Agriculturist at ]
Post Kandewadi, Taluka - Gadhinglaj, ]
District - Kolhapur. ]
14. Mr. Pandurang Bhimrao Desai, Age: 77 ]
Years, Occu: Agriculturist at Post ]
Kandewadi, Taluka - Gadhinglaj, ]
District - Kolhapur. ]
15. Mr. Jayvant Bhagana Gholse ]
Age: 47 Years, Occu: Agriculturist at ]
Malgad, Post Mangaon, Taluka - ]
Chandgad, ]
District - Kolhapur ]
16. Mr. Maruti Laxman Malvikar ]
Age: 40 Years, Occu: Agriculturist at ]
Nandavade, Taluka - Chandgad, District - ]
Kolhapur ]
17. Mr. Nagoji Shattu Shinde ]
Age: 77 Years, Occu: Agriculturist at ]
Nandavade, Taluka - Chandgad, District - ]
Kolhapur ]
18. Mr. Shivaji Nagoji Patil ]
Age: 58 Years, Occu: Agriculturist at ]
Nandavade, Taluka - Chandgad, District - ]
Kolhapur ]
19. Mr. Shankar Gavdu Patil ]
Age: 64 Years, Occu: Agriculturist at ]
Nandavade, Taluka - Chandgad, District ]
- Kolhapur ]
20. Mr. Manohar Shankar Sutar ]
Age: 57 Years, Occu: Agriculturist at ]
Nandavade, Taluka - Chandgad, District - ]
Kolhapur ]
21. Mr. Balram Jotiba Phadake ]
Age: 68 Years, Occu: Agriculturist at ]
Nandavade, Taluka - Chandgad, District ]
- Kolhapur. ] ...Petitioners.
Sairaj 3 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
Versus
1. State of Maharashtra ]
Through the Secretary, Department of ]
Cooperation, Mantralaya, Mumbai - 400 ]
]
032.
2. District Magistrate Collector Nagala ]
Park, Having office at Kolhapur ]
3. Commissioner of Sugar and Special ]
Registrar, Cooperative Societies, ]
Maharashtra State, Sakhar Sankul Shivaji ]
]
Nagar, Pune - 411 005.
4. Regional Joint Director (Sugar) Kolhapur ]
Region, Kolhapur ]
5. Navhind Cooperative Credit Society Ltd. ]
Yellur (Multi-State) having office at ]
Maruti Galli, Taluka and District - ]
Belgaum, Karnataka ]
6. Sahyadri Cooperative Credit Society Ltd. ]
Belgaum having its office at C.T.S. ]
No.3957, Kali Ambarai, College Road, ]
]
Belgaum, Karnataka
7. Daulat Shetkari Sahakari Sakhar ]
Karkhana Ltd., Halkarni Taluka ]
Chandgad, District - Kolhapur through ]
]
its Managing Director
8. M/s. Tasgaonkar Sugar Mills Ltd. ]
A Company registered under the ]
Companies Act, 1956 and having its ]
Registered Office at Sumati Niwas, 1st ]
Floor, near Hotel Ameya, Shivsena ]
Bhavan Peth, Shivaji Park, Dadar, ]
Mumbai - 400 028. ] ...Respondents.
Sairaj 4 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
WITH
WRIT PETITION NO. 5743 OF 2023
Daulat Shetkari Sahakari Sakhar Karkhana ]
Ltd., Halkarni, Taluka Chandgad, District - ]
Kolhapur, through its Managing Director ] ...Petitioner.
Versus
1. The State of Maharashtra through the ]
Principal Secretary, Department of ]
Cooperation, Mantralaya, Mumbai - 400 ]
032. ]
2. Commissioner of Sugar and Registrar, ]
Cooperative Societies, Maharashtra ]
State, Pune ]
3. Collector of Kolhapur having his office ]
at Kolhapur. ]
4. The Navhind Co-operative Credit ]
Society Limited, Yellur (Multistate) ]
having its Office at Maruti Galli, Yellur, ]
Taluka and District Belgaum Karnataka ]
and one of its Branch at Halkarni, ]
Taluka Chandgad, District - Kolhapur, ]
through its Authorised Officer ]
5. M/s. Tasgaonkar Sugar Mills Ltd. ]
A Company registered under the ]
Companies Act, 1956, and having its ]
Registered Office at Sumati Niwas, 1 st ]
floor, Near Hotel Ameya, Shivsena ]
Bhavan Peth, Shivaji Park, Dadar, ]
Mumbai - 400 028 through its ]
Authorised Officer ] ...Respondents.
------------
Mr. A. A. Kumbhkoni, Senior Advocate i/b Mr. Chetan Patil for the
Petitioner in WP Nos. 5742 of 2023 & 5743 of 2023.
Mr. Akshay Kapadia and Mr. Kishore Lawate for Respondent Nos. 5 & 6 in
WP Nos. 5742 of 2023 & 5743 of 2023.
Mr. Drupad Patil and Mr. Dheeraj Patil for the Petitioner in WP No. 5874
of 2023.
Mr. S. S. Patwardhan i/b Mr. Mrunal Shelar for Respondent Nos. 5 & 6 in
Sairaj 5 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
WP No. 5874 of 2023 and for Respondent No. 4 in WP Nos. 5742 of 2023
and 5743 of 2023.
Ms. Tanu N. Bhatia, AGP for Respondent-State.
------------
Coram : Sharmila U. Deshmukh, J.
Reserved on : 11th November, 2024
Pronounced on : 13th January, 2025.
JUDGMENT :
1. Rule. With Consent, rule made returnable forthwith in all
Petitions and taken up for final hearing.
THE CHALLENGE:
2. Exception is taken to Collector’s order dated 31 st March, 2023
computing the amount payable to the Respondent No. 4-Sahyadri Co-
operative Credit Society Ltd in Writ Petition No.5742 of 2023 and
Respondent No. 4-Navhind Co-operative Credit Society Ltd. in Writ
Petition No.5743 of 2023, by applying contractual rate of interest and
directing payment of Rs.19,60,00,000/- and Rs.34,16,00,000/-
respectively from the auction proceeds, which were deposited in this
Court in the year 2011 and transferred to the office of Collector vide
order dated 27th February, 2023.
THE ISSUE:
3. The issue arising for consideration is whether the deposit of
auction proceeds in this Court amounts to payment in discharge of
debt relieving the Petitioner from the liability of interest payment at
Sairaj 6 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
contractual rate from the date of deposit.
PARTIES TO THE PROCEEDINGS:
4. Writ Petition No.5742 of 2023 and Writ Petition No.5743 of 2023
have been filed by the Sugar Factory and Writ Petition No.5874 of 2023
is filed by the sugarcane growers raising common issues and claiming
right in the balance of auction proceeds received from sale of pledged
sugar. As common issues arise, with consent, the Petitions were taken
up for hearing together. Common submissions were advanced and all
the three petitions are being disposed of by this common judgment.
For sake of convenience, the Credit Societies are referred to as
“Sahyadari” and “Navhind” or collectively as “credit societies”, the
Petitioner in Writ Petition Nos. 5742 of 2023 and 5743 of 2023 are
referred to as “Sugar Factory” and Petitioners in Writ Petition No. 5874
of 2023 are referred to as “Sugarcane Growers”.
FACTUAL MATRIX:
5. In December 2010, a lease came to be executed by the Sugar
Factory in favor of Respondent No. 5 for conducting the Petitioner’s
business of sugar factory. In March, 2011, the Respondent No. 5
obtained short term credit of Rs.7,00,00,000/- against pledge of 35,000
quintals of sugar stored in Godown No.6 from Sahyadari and
Rs.12,20,00,000/- against pledge of 80,392 quintals of sugar stored in
Godown Nos.7-I and 7-II from Navhind, the Petitioner being the
Sairaj 7 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
consenting party to the loan transaction.
6. The default by Respondent No.5 towards the dues of
Rs.36,22,66,591/- of the sugarcane growers led to issuance of Recovery
Certificate by the Respondent No. 2 on 28 th May, 2011, and attachment
of the sugar stored in various godowns including the pledged sugar.
Vide auction notice dated 16th June, 2011, the auction of the attached
sugar was scheduled on 22nd June, 2011 in office of Respondent No. 3.
7. Navhind and Sahyadri challenged the auction sale by filing Writ
Petition Nos. 4533 of 2011 and 4539 of 2011 respectively objecting to
the auction of the pledged sugar and claiming priority over the dues of
the sugarcane growers and the workers. Vide Order dated 22 nd June,
2011, this Court permitted the Tahsildar to proceed with the auction
after fixing the upset price with further direction to deposit the
auction proceeds of the pledged sugar in this Court with the Registrar
(Judicial) to be invested in nationalized bank in fixed deposit.
8. The auction conducted fetched proceeds of Rs.52,95,36,483/-
and included proceeds from sale of pledged sugar of Rs.27,94,27,910/-.
As per the directions in order dated 22 nd June, 2011, the auction
proceeds of pledged sugar was deposited with the Registrar (Judicial)
and invested in nationalized bank. The balance amount of
Rs.25,01,08,573/- remained with the Collector out of which Rs.
20,00,00,000/- was disbursed to the workers and the sugarcane
Sairaj 8 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
growers.
9. Writ Petition Nos. 4533 of 2011 and 4539 of 2011 of Navhind and
Sahyadari came to be disposed of vide order dated 12 th August, 2011 in
light of the statement made by Assistant Government Pleader that
the amounts will be disbursed as per hierarchy keeping in view the
settled position of law within a period of four weeks.
10. Vide order dated 20th September, 2011, the Collector decided
the entitlement and priority in disbursement of the auction proceeds in
the following manner:
(a) Rs 4,66,40,511/ towards payment of Provident
fund dues on first priority;
(b) Rs. 36,22,66,591/- plus interest at the rate of 15%
p.a. to the sugarcane growers;
(c) Balance amount to be paid to the workers of the
Petitioner-sugar factory.
11. As the debt of Sahyadri and Navhind remained unsatisfied, Writ
Petition No.8452 of 2011 and Writ Petition No.8453 of 2011 were filed
by them, which was disposed of vide common order dated 10 th
February, 2012, relegating the parties to avail the alternate statutory
remedy of civil suit under section 218(2) of Maharashtra Land Revenue
Code, 1966 and directing the amount of Rs.27,94,27,910/- invested in
this Court to continue to remain invested in fixed deposit till 30 th June,
2012.
12. Against order dated 10th February, 2012, Sahyadri and Navhind
Sairaj 9 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
filed Civil Appeal No.1840 of 2013 and Civil Appeal No.1841 of 2013
before the Apex Court, which was allowed by the Apex Court vide
order dated 28th March, 2016 setting aside order dated 10 th February,
2012 and directing the concerned authorities to disburse the amount
in light of the observations made in the order in respect of the
entitlement of the Credit Societies in precedence over the dues
payable to the workers and sugarcane farmers, under Sugarcane
(Control) Order, 1966 with the clarification that the amount already
disbursed shall not recovered from the workers and the sugarcane
farmers.
13. Civil Applications Nos. 2604 of 2016 and 2567 of 2016 were filed
by Navhind and Sahyadari in the disposed of Writ Petition Nos.8452 of
2011 and 8453 of 2011 for direction to the Registry to make the
payment of the dues payable along with contractual rate of interest
payable on the principal sum from the deposited amount. The
Additional Commissioner of Sales Tax also filed Civil Application
Nos.1487 of 2017 and 1476 of 2017 in the civil applications filed by
Navhind and Sahyadari seeking withdrawal of its dues from the
deposited amount.
14. Vide order dated 22nd February, 2017, this Court directed the
Collector to determine the amount payable to Navhind and Sahyadari
and detailed report was submitted in April, 2017 stating that Sahyadri
Sairaj 10 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
would be entitled to Rs.15,18,35,000/- and Navhind would be entitled
to Rs.25,80,76,000/- comprising of principal plus interest at the
contractual rate plus penal interest. Civil Application (Stamp)
No.33923 of 2017 was filed by the Respondent No.5, i.e., Tasgaonkar
Sugar Mills Ltd. questioning the report of Collector computing the dues
payable by applying contractual rate of interest.
15. By common interim order dated 23 rd January 2018 passed in all
the civil applications, this Court observed that there was no direction
issued by the Apex Court in the judgment dated 28 th March, 2016
permitting the High Court to adjudicate the rival claims of the Sales Tax
Department and Respondent No.5, Tasgaonkar Sugar Mills Ltd. and
recorded the consent of the counsels appearing for the Sales Tax
Department and Respondent No.5 that they would apply to the Apex
Court for appropriate clarification. The Sales Tax Department
submitted that they would not seek clarification of the order, whereas
Respondent No. 5 submitted that the application was filed before the
Apex Court for appropriate directions/clarification. It appears that
subsequently the application filed by Respondent No.5 for clarification
came to be dismissed for non-removal of office objections.
16. Vide common order dated 11th July 2022, all civil applications
came to be disposed of by relegating the parties to the concerned
authorities for disbursement of amount as directed by the Apex Court
Sairaj 11 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
and vide order dated 27th February, 2023, this Court directed the
transfer of amounts deposited in this Court to the office of Collector,
Kolhapur for disbursement in accordance with the directions given by
the Apex Court vide order dated 28th March, 2016.
17. Pursuant thereto, hearing was conducted by Respondent No.3-
Collector and vide impugned order dated 31 st March 2023 held that
Sahyadri was entitled to Rs.19,60,00,000/- and Navhind was entitled to
Rs.34,16,00,000/- by applying contractual rate of interest of 15% p.a.
on the principal amount, which amounts were disbursed on the same
day.
SUBMISSIONS:
18. Mr. Kumbhakoni, learned Senior Advocate appearing for the
Sugar Factory does not dispute that interest is payable to the credit
societies, but would emphasize that the interest would be the interest
accrued on the fixed deposit from date of deposit in this Court in the
year 2011. He submits that the debt stands discharged upon deposit
of auction proceeds in the Court and therefore, the contractual rate of
interest will be payable only from the date of disbursal of loan amount,
i.e. 28th March, 2011 till the date of deposit in this Court, i.e. on 26 th
June, 2011 and thereafter, only the interest actually accrued on the
fixed deposits with the nationalized bank is payable.
19. He submits that the Apex Court by judgment dated 28 th March,
Sairaj 12 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
2016 decided the issue of priority and has not upheld the entitlement
of Credit Societies to contractual rate of interest which was required
to be considered by Respondent No.3-Collector, who has not rendered
any finding on the issue whether contractual rate of interest would be
applicable or the actual interest accrued on the fixed deposits. He
submits that grant of contractual rate of interest @ 15% has resulted
in unjust enrichment to the Credit Societies. He submits that it is
settled position across all branches of law whether it be the Arbitration
Act or Civil Procedure Code or Land Acquisition Act that upon the
deposit into the Court, the interest shall cease to run. He submits that
the principles analogous to Order XXI, Rule 1 of Code of Civil
Procedure, 1908 [for short, “the CPC“] have to be applied in the
present case and sub-rule (4) of Order XXI, Rule 1 of the CPC provides
where the amount has been deposited in the Court, the liability to pay
interest shall cease. He draws support from the following decisions:-
Union of India vs. M.P. Trading and Investment RAC
Corpn. Ltd.1
H.P. Housing and Urban Development Authority vs.
Ranjit Singh Rana2
Prem Nath Kapur vs. National Fertilizers Corpn of
India Ltd.3
Gurpreet Singh vs. Union of India4
Ramacivil India Constructions Pvt. Ltd. vs. Union of
India5
1 (2016) 16 SCC 699.
2 (2012) 4 SCC 505.
3 (1996) 2 SCC 71.
4 (2006) 8 SCC 457.
5 2024 SCC OnLine Del 4899.
Sairaj 13 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
20. Mr. Patil, learned counsel appearing for sugarcane growers
would adopt the submissions of Mr. Kumbhakoni and would
supplement the arguments by attributing delay to the credit societies
as they filed civil applications before this Court instead of approaching
the Collector for disbursal of amounts. He submits that while
challenging order dated 10th February, 2012 before the Apex Court, it
was the Credit Society themselves, who requested for the amount to
remain invested, and therefore, there cannot be any grievance raised
by the Credit Societies. He submits that the impugned order of the
Respondent No.3-Collector does not deal with the issue of
disbursement to the sugarcane growers and entire amount is
disbursed to the credit societies. He submits that within the period of
4 months, the debt due to the Credit Society came to be deposited in
this Court in excess of the debt amount. He submits that the orders
passed by this Court were adverse to the Credit Societies and it was
only in 2016, that the Apex Court had upheld the precedence of the
dues of the Credit Societies dues over other dues.
21. Per contra Mr. Patwardhan appearing for the Credit Societies
would counter the submissions of Mr. Patil by contending that it cannot
be said that no orders were passed in his favour as ultimately all orders
were overturned by the Apex Court. He submits that it was
Respondent No.5, M/s. Tasgaonkar Sugar Mills Limited who was the
Sairaj 14 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doclessee of the Sugar Factory and had taken loan and defaulted in
payment to the sugarcane growers which led to the issuance of
recovery certificate and subsequent auction. He submits that it is only
the amount realised from the sale of hypothecated sugar which came
to the High Court and the balance amount was paid to the sugarcane
growers and workers, therefore, the sugarcane growers have no cause
for grievance. He submits that the Collector had, pursuant to the order,
submitted a report in the civil applications filed by the Credit Society
and had applied the contractual rate of interest, which report had not
been challenged by any of the parties. He submits that the present
petitions are also hit by principle of res judicata as Respondent No.5
M/s. Tasgaonkar Sugar Mills Ltd had filed a Civil application (Stamp)
No.33923 of 2017 challenging the entitlement of the Credit Society to
the contractual rate of interest. He submits that in the said Civil
Applications, this Court by order of 23rd January, 2018 directed the
parties to approach Supreme Court for clarification which was not done
by the Sales Tax Department and though the Civil Application were
filed by Respondent No.5, the same came to be dismissed for non-
prosecution. He submits that the entitlement of the credit societies to
the contractual rate of interest stands settled by the admission of
Respondent No.5 in the communication dated 12 th June, 2017
admitting that the Credit Societies are entitled to contractual rate of
Sairaj 15 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
interest and seeking satisfaction of the debt amount. He submits that
as per the Lease Deed executed between the Sugar Factory and
Respondent No.5, the sugar manufactured by Respondent No.5 was
under the ownership of Respondent No.5 who was entitled to dispose
of the sugar and would question locus of Petitioner to challenge the
order of the Collector. He would further submit that proviso to Section
34 of the CPC provides for payment of interest at contractual rate.
22. He would further submit that the reliance placed on the
provisions of Order XXI, Rule 1 of the CPC is misplaced as the amount
was not a deposit in discharge of the decree drawing support from
decision of the Apex Court in the case of P.S.L. Ramanathan Chettiar
vs. O.R.M.P.R.M Ramanathan Chettiar6 which was followed by Delhi
High Court in the case of DDA vs. Paragon Construction (India) Pvt.
Ltd7 and this Court in Walter Bau- AG (IL) vs. Municipal Corporation of
Greater Mumbai8
23. In rejoinder, Mr. Kumbhakoni would submit that the decision of
the Constitution Bench of the Apex Court in the case of Gurpreet Singh
(supra) passed in the Land Acquisition matter approves the view taken
by the Allahabad High Court in Amtul Habib vs. Mohd. Yusuf9 holding
that where money was paid into court by judgment debtor in
6 AIR 1968 SC 1047.
7 2015 SCC Online Del 6610.
8 2021 SCC Online Bom 10384.
9 ILR (1918) 40 ALL 125.
Sairaj 16 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
satisfaction of decree, interest on the decree would cease from the
date of payment in proportion to the amount paid even if the whole
amount is not deposited. He submits that the decision relied upon in
the case of Chettiar (supra) was in the context of Tamil Nadu
Agriculturists Relief Act, 1938 and is therefore, distinguishable.
24. Mr. Patil, in his rejoinder would submit that there is no question
of application of the principle of res judicata as order of 23rd January,
2018 passed in Civil Application directing the parties to seek
clarification from the Apex Court dated 23 rd January, 2018 was an
interim order.
25. Mr. Kapadia, learned counsel appearing for Respondent No.5
would support the Petitioner and would deny any admission on part of
Respondent No.5 to the Credit Societies entitlement to the contractual
rate of interest.
REASONS AND ANALYSIS:
26. The answer to the issue under consideration depends on
whether the deposit of auction proceeds in this Court constitutes
payment in discharge of debt of the credit societies. If the answer is in
the affirmative, the principles analogous to sub-rule (4) of Rule 1 of
Order XXI of CPC will apply and interest at contractual rate would stop
running from date of deposit.
27. Order XXI of CPC governs the execution of decrees and orders
Sairaj 17 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
and Rule 1 sets out the various modes of paying money under the
decree and one of the modes is by deposit into the Court. Sub-Rule (4)
of Rule 1 of Order XXI provides for cessation of interest on the amount
deposited in Court from the date of service of notice referred to in sub-
rule (2). Rule 1 of Order XXI, reads thus:
1. Modes of paying money under decree.–(1) All money,
payable under a decree shall be paid as follows, namely:–
(a) by deposit into the court whose duty it is to execute the
decree, or sent to that Court by postal money order or
through a bank; or
(b) out of Court, to the decree-holder by postal money
order or through a bank or by any other mode wherein
payment is evidenced in writing; or
(c) otherwise, as the Court which made the decree, directs.
(2) Where any payments is made under clause (a) or clause (c)
of sub-rule (1), the judgment-debtor shall give notice thereof
to the decree-holder either through the Court or directly to
him by registered post, acknowledgment due.
(3) Where money is paid by postal money order or through a
bank under clause (a) or clause (b) of sub-rule (1), the money
order or payment through bank, as the case may be, shall
accurately state the following particulars, namely:–
(a) the number of the original suit;
(b) the names of the parties or where there are more than
two plaintiffs or more than two defendants, as the case may
be, the names of the first two plaintiffs and the first two
defendants;
(c) how the money remitted is to be adjusted, that is to say,
whether it is towards the principal, interest or costs;
(d) the number of the execution case of the Court, where
such case is pending; and
(e) the name and address of the payer.
(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 runSairaj 18 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.docfrom 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.
28. Following sub-rule (4), the liability to pay interest on the amount
due under the decree ceases upon the deposit of money by the
judgment debtor in the Court, which is one of the modes of paying
money under decree. The issuance of notice under Sub-Rule (2) is with
the intent to enable the decree-holder to withdraw the amount
deposited. For the deposit in Court to qualify as a payment in discharge
of debt, there must be a duly adjudicated debt, in discharge whereof,
the deposit is made, even if the proceedings challenge the entitlement
of the decree-holder to the amount adjudicated. In such an eventuality
as the money is deposited in discharge of the debt and made available
for withdrawal to the decree-holder, the interest would stop running
from date of deposit.
29. Contrast this, in the present case, the auction of the pledged
sugar was not at the instance of the credit societies for recovery of its
debt, but was the consequence of execution of Recovery Certificate
issued by the Commissioner of Sugar for recovery of the dues of the
sugarcane growers. The amount due to the Navhind and Sahyadri was
not adjudicated in any Forum and there was no decree or Award
crystallising the amount due and payable. The credit societies in order
to pre-empt eroding of their security by reason of auction challenged
Sairaj 19 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
the auction of the pledged sugar in this Court. The circumstances in
which the deposit of auction proceeds of pledged sugar was ordered
was that the auction was scheduled to which objection and to tide over
the obstruction raised to the auction proceedings, this Court by order
dated 22nd June, 2011 permitted the auction to proceed by directing
the deposit of auction proceeds in this Court.
30. The Petitions came to be disposed of vide order dated 12 th
August, 2011 with direction to decide the entitlement of the credit
societies. The deposit following the auction was not released to the
credit societies and on the contrary, the entitlement of the credit
societies to the auction proceeds was left to the determination of the
Collector. When the entitlement of the credit societies to the auction
proceeds itself was still at pre-decretal stage and remained to be
adjudicated, and not acknowledged by the defaulters, in my view, the
deposit of the auction proceeds in this Court was evidently with the
intent to secure the money, in event the entitlement was established,
and to ensure that the auction proceeds seamlessly.
31. The claim of credit societies came to be rejected by the
Collector’s order dated 20th September, 2011 and it is only after a lapse
of about five years by reason of the Apex Court’s decision dated 28 th
March, 2016, that the precedence of the credit societies dues over the
dues of sugarcane growers and workers was upheld. The Apex Court
Sairaj 20 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
by order dated 28th March, 2016 held in Paragraph No.14 as under:
“14. For the reasons, as discussed above, both the appeals
deserve to be allowed. Accordingly, the appeals are allowed.
The impugned judgment and order dated 10.2.2012, passed in
Writ Petition No 8452 of 2011 and 8453 of 2011 is set aside.
We direct the authorities concerned to disburse the amount in
light of the observations made above regarding entitlement
of the appellants with precedence over the dues payable to
workers and sugarcane farmers under Sugarcane (Control)
Order, 1966. However, we clarify that the amount already
distributed shall not be recovered from the workers and the
sugarcane farmers. There shall be no order as to costs.”
32. Despite the Apex Court directing to the authorities to disburse
the amount, there was no disbursement and the credit societies were
once again constrained to approach this Court by filing civil
applications seeking relief of disbursement, which was justified as the
amounts were lying deposited in this Court. The applications for
withdrawal were resisted by the statutory authorities and Respondent
No 5, who raised an objection to the application of contractual rate of
interest by way of Civil Application No.1476 of 2017. No order of
withdrawal, even conditional, in view of the rival claims raised, was
permitted and by order dated 11th July, 2022, the applications were
disposed of by relegating the parties to approach the authority
concerned for disbursement of the amount, which led to passing of the
impugned order only on 31st March, 2023. The net result was that from
the date of deposit of the auction proceeds in this Court i.e. from 22 nd
June, 2011 till order of Collector dated 31 st March, 2023, the credit
societies were deprived of the benefit of their due amounts.
Sairaj 21 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
33. In P.S.L. Ramanathan Chettiar (supra), the Apex Court held in
Paragraph Nos. 12 and 13 as under:
“12. On principle, it appears to us that the facts of
a judgment-debtor’s depositing a sum in court to
purchase peace by way of stay of execution of the
decree on terms that the decree-holder can draw it
out on furnishing security, does not pass title to
the money to the decree-holder. He can if he likes
take the money out in terms of the order, but so
long as he does not do it, there is nothing to
prevent the judgment-debtor from taking it out by
furnishing other security, say, of immovable
property, if the court allows him to do so and on
his losing the appeal putting the decretal amount
in court in terms of Order 21 Rule 1 of CPC in
satisfaction of the decree.
13. The real effect of deposit of money in court as
was done in this case is to put the money beyond
the reach of the parties pending the disposal of
the appeal. The decree-holder could only take it
out on furnishing security which means that the
payment was not in satisfaction of the decree and
the security could be proceeded against by the
judgment-debtor in case of his success in the
appeal. Pending The determination of the same, it
was beyond the reach of the judgment-debtor.”
34. The judgment though rendered in context of whether there
could be scaling down of decree under the provisions of Tamil Nadu
Agriculturist Relief Act, 1938 and the judgment being prior to
amendment of 1976 to CPC, the principles are squarely applicable for
considering whether the payment was payment under Rule 1 of Order
XXI. The principle laid down in Chettiar (supra) was followed by the
Apex Court in Delhi Development Authority v. Bhai Sardar Singh and
Sons10,where the Arbitration Award granted interest @ 18% on the
10 2020 SCC Online SC 1450.
Sairaj 22 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
principal sum and during hearing before the Appellate Court, the
judgment-debtor was directed to deposit the entire awarded amount
along with interest, which was deposited. The application for
withdrawal after dismissal of the objections was allowed. The Apex
Court held that the deposit by the judgment-debtor cannot be treated
as payment in terms of Rule 1 of Order XXI of CPC and held in
paragraph 20 as under:
“20. When we turn to the facts of the present case, we have
no doubt in our mind that the payment of Rs 58,80,380/- made
by the appellant, as recorded in the order dated 20th May,
2002 cannot be treated as payment in terms of Rule 1 of
Order XXI of the Code as this amount was deposited in the
Court, but the respondent was not permitted and allowed to
withdraw in spite of their application. To this extent, the High
Court is right in relying upon the decision of this Court in P.S.L.
Ramanathan Chettiar (supra) wherein it has been held as
under:
“12. On principle, it appears to us that the facts of
a judgment-debtor’s depositing a sum in court to
purchase peace by way of stay of execution of the
decree on terms that the decree-holder can draw it
out on furnishing security, does not pass title to
the money to the decree-holder. He can if he likes
take the money out in terms of the order; but so
long as he does not do it, there is nothing to
prevent the judgment debtor from taking it out by
furnishing other security, say, of immovable
property, if the court allows him to do so and on
his losing the appeal putting the decretal amount
in court in terms of Order 21 Rule 1 CPC in
satisfaction of the decree.
13. The real effect of deposit of money in court as
was done in this case is to put the money beyond
the reach of the parties pending the disposal of
the appeal. The decree-holder could only take it
out on furnishing security which means that the
payment was not in satisfaction of the decree and
the security could be proceeded against by the
judgment-debtor in case of his success in theSairaj 23 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.docappeal. Pending The determination of the same, it
was beyond the reach of the judgment-debtor.”
35. In Nepa Limited through its Senior Manager (Legal) v. Manoj
Kumar Agrawal11 , the dispute was as regards the payment of interest
as per award till decision of appeal or interest on net principal amount
after setting off the interest due from the amount withdrawn by the
decree-holder. The Apex Court noted in paragraph 14 that when the
deposited amount is withdrawn and gets credited in account of decree-
holder, he is not entitled to interest on deposited amount, even when
there is failure on part of judgment-debtor to issue notice. The Apex
Court supported the reasoning by the factual position in that case and
held in paragraph 24 as under:
24. The respondent submits that the payment of Rs. 7,78,280/-
being conditional, the respondent would have been under an
obligation to refund the said amount in case the appellant had
succeeded in the appeal under Section 37 of the Act, 1996.
This argument does not impress, as in the event the appellant
had succeeded in their appeal, the entire amount paid would
have been refundable. The undertaking was not onerous, and
was to operate only if the amount of Rs. 7,78,280/- was not
refunded by the respondent. The respondent had obviously
used and utilized the money. The appellant did not have any
right on the money paid to the respondent, who could use it in
a manner and way he wanted. There was no charge. Money is
fungible and would have gotten mixed up with the other
amounts available with the respondent. Right to restitution
would not make the payment conditional. Interest has been
jurisprudentially defined as the price paid for money
borrowed, or retained, or not paid to the person to whom it is
due, generally expressed as a percentage of amount in one
year. It is in the nature of the compensation allowed by law or
fixed by parties, for use or forbearance or damage for its
detention.8 In the context of the present case, interest would
be the compensation payable by the appellant to the
11 2022 SCC Online SC 1736.
Sairaj 24 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
respondent, for the retention or deprivation of use of money.
Therefore, once the money was paid to the respondent,
interest as compensation for deprivation of use of money will
not arise.
36. The absence of any fetters on right of the decree-holder to the
amount deposited in discharge of the debt and making it available to
the decree-holder, makes the difference. It defies principles of equity
that though the amounts deposited in this Court were beyond the
reach of the credit societies by resisting their claim itself, the
contractual obligations should be considered as fulfilled by treating
the debt as extinguished. There is debt due to the credit societies,
which debt carries interest at the rate as per the contractual
arrangement. The auction proceeds of the pledged sugar was out of
reach of the credit societies from the date of deposit in the year 2011
and the title in the deposited auction proceeds did not pass to the
credit societies at any point of time. The deposit in this Court was not
with the intent to extinguish the debt, but by reason of order passed
by this Court to secure the debt pursuant to an auction which has been
conducted by a third party and not by the credit societies. In the
present case, it cannot be said that the distinction between the deposit
made in Court and deposit under Order XXI, Rule 1 of CPC is more of
form than of substance, as there were fetters placed on the right of
withdrawal and the deposit was not an unconditional deposit.
37. As inaction on part of credit societies for withdrawal of their due
Sairaj 25 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
amounts is not demonstrated from the facts, interest as per the
contract would continue to run throughout. Even if the amounts came
to be deposited within the time for repayment, the same was not
disbursed to the credit societies. The contractual obligations remaining
unfulfilled, the credit societies are entitled to the contractual rate of
interest till the date of receipt of payment.
38. The Collector vide impugned order dated 31 st March, 2023
directed the payment to be made to the credit societies by computing
contractual rate of interest. Although it is sought to be contended that
there was no consideration by the Collector to the objection raised for
application of contractual rate of interest, in ordinary course, remand
would have been appropriate. However, as the parties were heard at
length by this Court, the issue is decided by this Court as in peculiar
facts of this case, the litigation should not be amplified by remanding
the matter to the Collector to consider afresh.
39. Coming to the decisions cited by Mr. Kumbhakoni in Union of
India v. M.P. Trading and Investment RAC Corpn. Ltd. (supra), two-
judge bench of the Apex Court followed the decision in the case of H.P.
Housing and Urban Development Authority v. Ranjit Singh Rana
(supra) which held that in context of Section 31(7)(b) of Arbitration
and Conciliation Act, 1996, the expression “payment” occurring in sub-
clause (b) of Section 31 of the Arbitration Act would mean the
Sairaj 26 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
extinguishment of liability arising out of award and signifies the
satisfaction of the award as the deposit of the award amount in the
Court is nothing but payment to the credit of the decree-holder. The
Apex Court was considering whether the deposit of the amount in the
Court can be equated with the date of the payment. Pertinently, the
Apex Court has held that the word “payment” may have different
meaning in different context, however, in the context of Section 37 of
the Arbitration Act, the Apex Court held the same to mean
extinguishment of liability. In facts of that case, the amount was
deposited in the Court in satisfaction of the award amount and
therefore, the Apex Court held that the same amounts to “payment” as
envisaged under Section 31(7)(b) of the Arbitration Act.
40. In the case of Prem Nath Kapur and Another vs National
Fertilizers Corpn. Of India Ltd and Others (supra), the Apex Court was
considering the issue as to when the liability of the State to pay
interest ceases under the Land Acquisition Act, 1894 [for short, “the
Land Acquisition Act“]. The Apex Court considered various provisions
of Land Acquisition Act and after noting Section 34 of Land Acquisition
Act, held that the said provision fastens the liability to pay interest on
the amount of compensation determined under Section 23 of the Land
Acquisition Act with the interest under Section 34 from the date of
taking possession till the date of payment or deposit into the Bank to
Sairaj 27 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
which reference under Section 18 has been made. The decision does
not assist the case of Petitioners, as the deposit in this case was not
with intent to extinguish the liability.
41. In Gurpreet Singh vs Union of India (supra), the Constitution
Bench of the Apex Court was considering the issue of rules of
appropriation in execution of money decree and whether the rule is
same in the case in the decree under the Land Acquisition Act. It is in
that context, that the Constitution Bench considered the provisions of
Order XXI, Rule 1 of the CPC and held that if the money is paid in the
Court by the judgment-debtor in satisfaction of the decree, interest on
the decree would cease from the date of payment. As I have already
held that the deposit of auction proceeds in the Court was not a
deposit by judgment-debtor under Order XXI, Rule 1 of the CPC, the
Petitioners do not derive any benefit from the said decision.
42. The decision of the Delhi High Court in the case Ramacivil India
Constructions Pvt. Ltd. (supra) which dealt with the issue of
entitlement to the interest after the decree-holder under the
Arbitration Act had received the amount, considered the decisions
noted above. The distinguishing fact in that case is that the decree-
holder was permitted to withdraw the said amount after noting that
the deposit was an unconditional deposit and the decree-holder was
not prevented from withdrawing the amount by placing any condition
Sairaj 28 of 29
::: Uploaded on – 13/01/2025 ::: Downloaded on – 14/01/2025 22:01:28 :::
WP 5742-23 final.doc
on the withdrawal of the deposited amount. In the present case, as the
Credit Societies have been resisted from withdrawal of the amount,
the said decision does not assist the case of the Petitioners.
CONCLUSION:
43. The principles of Order XXI, Rule 1(4) of CPC are inapplicable in
the present case, as the deposit of the auction proceeds of the
pledged sugar in this Court was pursuant to order passed by this Court,
evidently with the intent to secure the debt in event of entitlement of
the credit societies and to tide over the obstruction in conducting the
auction sale. The auction of the entire stock of sugar including the
pledged sugar was at the instance of the Collector and not the credit
societies and the proceeds were out of reach of the credit societies
from the year 2011 till the year 2023. The deposit of the auction
proceeds cannot be treated as payment in term of Rule 1 of Order XXI
of CPC as though the amounts were deposited, the credit societies
were not permitted to withdraw the amount as their claim was resisted
throughout. The interest would therefore, not stop running from date
of deposit and would apply at the contractual rate.
44. Resultantly, all three Petitions stand dismissed. Rule is
discharged.
[Sharmila U. Deshmukh, J.]
Sairaj 29 of 29
::: Uploaded on - 13/01/2025 ::: Downloaded on - 14/01/2025 22:01:28 :::
[ad_1]
Source link