Supreme Court sets aside Division Bench judgment, restores Single Judge's order on interest payment.

The Supreme Court allowed the appeal, setting aside the Division Bench's judgment and restoring the Single Judge's order. It held that the payment of Rs. 89.78 crores should be appropriated towards the interest due, following legal principles. The Court confirmed that no compound interest was payable, as agreed by both parties. Each party was directed to bear its own costs.

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Issues Involved:
1. Appropriation of payments towards principal or interest.
2. Charging of compound interest.

Detailed Analysis:

Issue 1: Appropriation of Payments Towards Principal or Interest
The primary issue was whether the payments made by HUDCO were to be appropriated first towards the interest due or towards the principal amount. The Appellant argued that the sum of Rs. 89.78 crores should be appropriated towards the interest, following the decision in Smithaben H. Patel and Ors.: (1999) 3 SCC 80, which states that post-decretal payments should first be applied to the interest and costs, and then to the principal amount. The Division Bench of the Delhi High Court had ruled that the payment should be appropriated towards the principal amount, based on the implied acceptance by the Appellant since no objection was raised at the time of the deposit. The Supreme Court, however, disagreed with the Division Bench's reasoning, stating that the Appellant had accepted the payment on protest and without prejudice to its rights. The Court emphasized that in the absence of a specific agreement, the creditor is entitled to appropriate payments first towards interest, as established in previous rulings by the Privy Council and the Supreme Court.

Issue 2: Charging of Compound Interest
The second issue was whether compound interest was chargeable. Both parties agreed that no compound interest would be payable in terms of the Award. The Appellant had initially calculated interest on the basis of yearly rests but later limited its claim to simple interest. The Supreme Court noted that this issue did not survive since both parties had agreed on the matter.

Conclusion:
The Supreme Court set aside the judgment of the Division Bench and restored the order of the learned Single Judge. The Court held that the Appellant was entitled to appropriate the payment of Rs. 89.78 crores towards the interest due, in accordance with the established legal principles. The Court also confirmed that no compound interest was payable, as agreed by both parties. The appeal was allowed, and each party was directed to bear its own costs.

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