Introduction
A recurring controversy in execution proceedings of money decrees is whether a judgment-debtor’s deposit of the entire decretal amount into court — particularly when the decree-holder is restrained from withdrawing it — constitutes “payment” under the Code of Civil Procedure, 1908 (CPC), and whether such deposit halts the accrual of post-decree interest. This issue touches upon the interplay between procedural compliance and equitable compensation, often with significant financial consequences in arbitration awards and civil decrees.
The statutory framework under Order 21 Rule 1 CPC, read with judicial interpretations in P.S.L. Ramanathan Chettiar v. O.R.M.P.R.M. Chettiar and subsequent High Court and Supreme Court rulings, has led to a nuanced jurisprudence on the subject. This article critically analyzes this line of authority and synthesizes the position of law, drawing distinctions where courts have deviated from the rule and identifying the dominant legal standard.
Factual and Legal Framework
The core legal provision is Order 21 Rule 1 CPC, which prescribes three specific modes of paying money under a decree:
- Clause (a): Deposit into the executing court.
- Clause (b): Out-of-court payment to the decree-holder.
- Clause (c): As directed by the court.
Sub-rule (4) is critical — it states that interest ceases to run only from the date of notice served to the decree-holder regarding such deposit.
At the center of the legal debate is whether mere deposit into court (typically for securing a stay pending appeal) — especially without notice or without unconditional right of withdrawal by the decree-holder — constitutes “payment” that extinguishes the judgment-debtor’s liability for interest.
Legal Issues Identified
The primary legal questions are:
(i) Whether deposit of the decretal amount into court without unconditional withdrawal rights constitutes payment under Order 21 Rule 1 CPC?
(ii) Whether such deposit halts post-decree or post-award interest?
(iii) Whether the ruling in Ranjit Singh Rana overrides or deviates from the rule in Chettiar and how courts have reconciled the two?
Judicial Precedents and Doctrinal Positions
➤ The “Chettiar Rule”: Deposit ≠ Payment Unless Withdrawable
In P.S.L. Ramanathan Chettiar (SC, Three-Judge Bench), the Supreme Court held that deposit of decretal amount, made to secure a stay and withdrawable only on furnishing security, does not amount to payment under Order 21 Rule 1. The court emphasized that:
“The title to the money does not pass to the decree-holder unless and until it is withdrawn. Until then, interest continues to run.”
This decision has been consistently followed by High Courts (Delhi, Bombay, Kerala, Calcutta, Madras), reinforcing the view that:
- Conditional deposits (e.g., withdrawable on furnishing bank guarantee or subject to litigation outcome) do not stop interest.
- Notice under sub-rule (2) is essential.
- Actual, unconditional payment is required to cease interest accrual.
➤ Ranjit Singh Rana: A Limited Departure
In Himachal Pradesh Housing and Urban Development Authority v. Ranjit Singh Rana (SC, Two-Judge Bench), the Court held that:
“Deposit of the entire award amount into court satisfies the award and extinguishes liability to pay post-award interest.”
However, this case did not refer to Chettiar and concerned deposit of the full award amount, not subject to withdrawal conditions, which some High Courts (Delhi, Bombay) have treated as a distinguishable fact pattern, not a departure from settled law.
Treatment and Reconciliation by Courts
The post-Ranjit Rana landscape reveals three judicial streams:
(a) Adherence to Chettiar (Mainstream View)
Courts (Delhi HC in Hindustan Construction Corp.; Bombay HC in Sino Ocean; Karnataka HC in Nagaraj) maintain that conditional or unnotified deposits do not constitute payment. Even if deposited into court, interest continues unless:
- Notice under Order 21 Rule 1(2) is served;
- Decree-holder has unconditional right to withdraw.
(b) Qualified Acceptance of Ranjit Rana
In NTPC Ltd. v. V.U. Seemon and Union of India v. M.P. Trading, courts limited Ranjit Rana to cases where:
- Full award amount is deposited;
- No stay or condition on withdrawal;
- Award not under challenge or challenge withdrawn.
(c) Rejection or Distinction of Ranjit Rana
Courts (Bombay HC in DSL Enterprises; Delhi HC in Adidas India) have distinguished or declined to apply Ranjit Rana where:
- Deposit is conditional;
- Only part of the award amount is deposited;
- No notice is served to the decree-holder.
Conclusion
The dominant legal position remains as laid down in Chettiar and reaffirmed in Bhai Sardar Singh and Nepa Ltd.:
Mere deposit of the decretal/award amount into court, especially under stay orders and without notice to the decree-holder, does not amount to payment under Order 21 Rule 1 CPC. Therefore, interest continues to run.
Ranjit Rana does not override this rule and is confined to its peculiar facts — a full, unconditional deposit where the court deemed the award “satisfied”.
FAQs:
1. Does depositing money in court stop interest on a money decree?
No. Unless the deposit is unconditional and the decree-holder is notified and allowed to withdraw the amount freely, interest continues to accrue.
2. What is the rule under Order 21 Rule 1 CPC for stopping interest?
Interest ceases only if the decree-holder is notified under Rule 1(2) and the deposit qualifies as payment under Rule 1(1), meaning it must be unconditional and accessible.
3. Can post-award interest be denied if money is deposited with court?
Yes, but only in limited cases where the full amount is deposited unconditionally and the award is effectively satisfied — as seen in Ranjit Rana. Otherwise, interest continues.
4. What happens if the decree-holder cannot withdraw deposited money?
If the deposited amount cannot be withdrawn due to conditions (e.g., furnishing security), it is not treated as payment, and post-decree interest does not stop.
5. Is notice to the decree-holder mandatory after court deposit?
Yes. Under Order 21 Rule 1(2) CPC, the judgment-debtor must serve notice of deposit to the decree-holder. Without it, interest continues to run.
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