2017 (12) TMI 1882 - HC - Companies Law

Deposits for stay of execution don't constitute payment under Order 21 Rule 1 CPC for decree satisfaction

The Bombay HC ruled that deposits made by judgment debtor for stay of execution do not constitute payment under Order 21 Rule 1 CPC, which prescribes ... Classification of Execution Application and Chamber Summons - directions is sought to the registry to classify this application as an application in its commercial division - Payment of the decretal amount in US dollars and the calculation of the shortfall - requirement for decuction of TDS - HELD THAT:- The amounts deposited by respondent under the orders of this Court cannot, by any stretch of imagination, be termed as payments as envisaged in Order 21 Rule 1 of CPC and as such the judgment debt. As per Order 21 Rule 1 of CPC, the modes of payment of a money decree are : (a) by depositing into the Court whose duty it is to execute the decree, or send 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; and (c) otherwise as the Court, which made the decree, directs. A deposit of any amount by a judgment debtor in the Court to purchase peace by way of stay of execution or to show bonafides for preventing an order of winding up is not a payment of decretal amount in terms of Order 21 Rule 1 of CPC which prescribes specific modes for the satisfaction of a money decree. The payment made by the decree holder under Rule 1 of Order 21 of CPC and a deposit made by the judgment debtor in Court for obtaining stay of execution of decree are altogether different courses adopted by the judgment debtor. Payment under Order 21 Rule 1 of CPC satisfies a decree holder whereas, a deposit in the Court to avoid execution keeps the amount beyond the reach of the decree holder and leaves him waiting for its release - claimant is well within its right to claim the difference in the amounts payable as on date of payment/realization and the amounts received, which works out to US $ 319,816/- as on 23rd November 2017 increasing at US $ 144 per day. The question of deduction of any income tax at source by respondent also does not arise. This amount of Rs. 10,00,000/- plus accumulated interest also should be remitted by the Prothonotary and Senior Master into the same account of claimant as was done earlier. Of course, credit will be given to respondent for this amount remitted based on the exchange rate prevailing on the date of remittance. It is open to respondent also to write to the Prothonotary and Senior Master to immediately remit to claimant amount in US dollars equivalent to Rs. 10,00,000/- plus accumulated interest. The respondent is directed to pay to claimant balance of the decretal amount, i.e., US $ 319,816/- increasing at the rate of US $ 144 per day from 24th November 2017 until payment and/or realization together with Rs. 8 lakhs being costs payable under the arbitration award. Respondent to also pay interest at 8% p.a. on the amount of Rs. 8,00,000/- from the date it became due as per award (6 weeks from 21st February 2011-date of award). Chamber summons disposed accordingly. Issues Involved:1. Classification of the Execution Application under the Commercial Division.2. Payment of the decretal amount in US dollars and the calculation of the shortfall.3. Attachment and detention orders against the respondent for non-compliance.4. Payment of interest and costs as per the arbitration award.5. Deduction of income tax at source on the judgment debt.Issue-wise Detailed Analysis:1. Classification of the Execution Application under the Commercial Division:The counsel for the respondent stated that the Execution Application and Chamber Summons should be listed under the Commercial Division of the Court due to the nature of the dispute. The registry was directed to reclassify the application accordingly. It was clarified that the matter was specifically assigned to the current Court.2. Payment of the Decretal Amount in US Dollars and Calculation of the Shortfall:The claimant sought the payment of US $657,850 together with interest from 13th April 2009 to 5th July 2010 and further interest until payment. Despite a payment of US $662,362 on 31st July 2013, the claimant argued that the amount due had increased to US $900,107, leaving a shortfall of US $237,475, which further increased to US $319,816 by 23rd November 2017, accruing at US $144 per day. The Court agreed with the claimant's calculation and directed the respondent to pay the balance amount.3. Attachment and Detention Orders Against the Respondent for Non-Compliance:The claimant sought various reliefs in prayer clause (f), including the attachment of the respondent's assets and the detention of its directors in civil prison for non-payment of the balance decretal amount. The Court agreed to mold prayer clause (f) to account for the shortfall and directed that the reliefs would be triggered if the respondent failed to pay the balance amount.4. Payment of Interest and Costs as per the Arbitration Award:The Arbitrator's award directed the respondent to pay US $658,150 with interest and Rs. 8,00,000 as costs of arbitration. The respondent challenged the award, but the challenge was dismissed at various judicial levels, including the Supreme Court. The Court noted that the respondent's deposits were not in satisfaction of the decree but to avoid execution. The Court directed the respondent to pay the balance decretal amount of US $319,816 and the arbitration costs with interest.5. Deduction of Income Tax at Source on the Judgment Debt:The respondent argued for the deduction of income tax at source on the interest component of the judgment debt. The Court, relying on the judgment in Islamic Investment Company vs. Union of India, held that once an amount becomes part of a judgment debt, it loses its original character, and no tax deduction at source is permissible. The Court directed that the remaining Rs. 10,00,000 plus accumulated interest held for TDS should be remitted to the claimant's account, with credit given to the respondent based on the exchange rate on the date of remittance.Conclusion:The Court directed the respondent to pay the balance decretal amount of US $319,816, increasing at US $144 per day from 24th November 2017, and the arbitration costs of Rs. 8,00,000 with interest. The respondent was also directed to pay Rs. 1,00,000 as costs for the application within four weeks. If the amounts were not paid, the reliefs sought in prayer clause (f) would be triggered. The Chamber Summons was disposed of accordingly.