Pappu Reddiar vs P.S.V. Rm. Ramanatha Iyer

Ramachandra Iyer, C.J.—This appeal arises from the judgment of Ganapatia Pillai, J. and involves the determination of a question relating to

award of interest while directing restitution. Muthuswami Reddiar, since deceased, whose estate is now represented by the appellant, had certain

monetary dealings with the respondent, in respect of which he filed a suit and obtained a decree in the Sub-Court at Tirunelveli for a sum of Rs.

10643-12-0 towards principal and interest and Rs. 1473-10-0 as for costs. Against that decree the respondent filed an appeal to this Court, A. S.

No. 121 of 1951. Along with the appeal he filed an application for stay of execution of the decree. By order dated 9-4-1951 this Court granted

conditional relief by directing stay of execution of the trial Court''s decree, if the respondent were to deposit the entire amount in the lower court

within a specified time. It was also provided that the decree-holder could draw the amount deposited on furnishing security for repayment in case

the appeal in this Court should succeed. There was however no restriction regarding the decree for costs which was paid over. In due compliance

of the order of this Court, the respondent deposited the balance of the decree amount in the trial court. The decree-holder did not draw that

amount by furnishing security therefor, with the result that the amount desposited continued to remain with the Court.

The respondent succeeded in the appeal to a large extent; this Court found that on a proper taking of the accounts after applying the provisions

of Madras Act IV of 1938, only a sum of Rs. 562 would be payable by the respondent to the creditor. The decree of the lower Court was varied

by making that amount alone payable; the costs payable by the respondent was reduced to Rs. 108-9-5. The respondent thus became entitled to

restitution to the extent the decree of the lower Court was set aside. The money that was lying in court was paid back to the extent he was entitled.

But his application for restitution comprised two further claims, namely, (1) the excess amount of costs that had to be paid to the decree-holder;

(2) the interest on the amount deposited in court on 13-6-1951. There was and indeed could be no opposition to the former of the two claims; but

the latter was resisted on the ground that the appellant could not be held liable for interest on a sum of money which he did not draw from Court

and utilise it for his benefit. The learned Subordinate Judge accepted the contention and directed the appellant to pay back the excess amount of

costs only.

The respondent appealed to this Court against the order disallowing interest on the amount that was lying in court. That appeal has been allowed

by Ganapatia Pillai, J. who held that the Court in granting restitution was concerned only with repairing the injury done to the party who suffered

detriment by reason of the erroneous order of Court and that it was immaterial whether the other party had secured an advantage by reason of

such order. The judgment in the appeal has been reported in P.Sv.Rm. Ramanatha Aiyar Vs. M. Pappu Reddiar, . This Letters Patent Appeal

arises from that judgment. The learned Judge has reiterated the view taken in a later judgment of his in Madras, Madras Kanthimathi Mills Ltd. Vs.

Special Land Acquisition Officer for Co-operative Housing Schemes, Madras, . Both the cases referred to above are in accord with the decision

of a Bench of this court in Shanmugasundara Mudaliar and Others Vs. S. Ratnavelu Mudaliar, . Wadsworth, J. has followed that decision in Sri

Chelikani Sitaramayya Vs. Koppula Pedda Venkanna, . The correctness of the view that a party to an erroneous money decree who had to put

the money into court would on its reversal be entitled to collect interest from the other party although the latter might not have had use of the money

has been challenged before us.

Before we refer to the decisions on the subject, it will be appropriate to refer to the principle which underlies the granting of restitution. It is one

of the highest duties of the Court to see that no party suffers by any erroneous act done by it. On the reversal of a judgment law places an

obligation on the party who received a benefit under that erroneous judgment to make restitution to the other party of what he had lost. The Court

possesses the power, a power which is both inherent and statutory to enforce that obligation. But the mere restoration of what a party lost under a

decree of order which is later set aside might not secure to him complete justice. Restitution properly so called is restoration to the original state

which would include reparation for the injury done. Section 144, C. P. C., recognises this when it says that for the purpose of placing the parties in

the position which they would have occupied but for the decree that had been set aside, the Court would have powers to direct payment of

interest, damages, mesne profits etc. Essentially therefore restitution is doing justice between the two parties.

It will be appropriate in this context to refer to the following passage in the judgment of Subramama Iyer, J. in Doraiswami Iyer v. Annasami Iyer

ILR 23 Mad 306.

The principle of the doctrine of restitution is that on the reversal of a judgment, the law raises an obligation in the party who received the benefit of

the erroneous judgment to make restitution to the other party for what he had lost. This obligation, it is the duty of the Court to enforce unless it is

shown that restitution would be clearly contrary to the real justice of the case.

The principle has been laid down in the same terms by the Supreme Court in Lal Bhagwant Singh Vs. Rai Sahib Lala Sri Kishen Das, . Restitution

conceived in that light namely doing justice between the parties, will necessarily have to depend on the facts and circumstances of each case and

cannot be reduced to the form of an in flexible rule that Court should have regard only to the detriment suffered by one party and not to the

position of the other. Indeed the very statement of the principle above there is a correlation of the injury to the benefit secured under the erroneous

judgment.

Where a decree has been executed according to its terms, there will be really no scope for any distinction between the decree holder getting the

benefit and the other party suffering an injury, for the latter is consequent on the former. But different considerations will arise if there is an

impediment placed by an order of Court to the execution ot the decree according to its terms. In such a case the benefit, if any, secured by the

decree-holder or the detriment suffered by the other party would be referable not merely to the decree, but to the subsequent order as well. The

present case will illustrate what we mean. Although the decree of the trial Court directed the respondent to pay unconditionally the sum of Rs.

10643-12-0, the operation of that decree was stayed by this Court. As a part of that order the respondent was directed to deposit the sum in

court; the appellant was entitled to draw the same only on furnishing security. He was not however bound to do so. In certain cases a party situate

in his position may not even be able to find the security. If under those circumstances the appellant did not draw the money, it could not really be a

case of restitution against him.

The respondent for his own reasons, justified or unjustified, put an obstacle against the appellants from drawing the money, an obstacle which the

appellant did not or could not surmount. It cannot be said that under those circumstances there was a payment to or benefit derived by the

appellant, though it may be that the amount is secured by the deposit in Court. There was no doubt a detriment to the respondent in that he had no

use ot the money; that was the result of a safeguard of his own making. He could have applied to the Court to invest the deposited amount in

interest bearing securities, once the appellant did not withdraw the amount. In such a case, that is where a decree has not been allowed to be

executed according to its terms but a condition or restriction is placed in relation thereto, the question of compensation to the injured party should

in our opinion be decided according to the circumstances of each case.

In Shanmugasundara Mudaliar and Others Vs. S. Ratnavelu Mudaliar, , ths learned Judges held that the word ""restitution"" only implied

restoration to the injured party of what he had lost in the consideration of which no question of benefit secured by the other party would arise and

as it was imperative on the Court to restore him to the position which the former would have occupied but for the wrong decree, the latter should

be made liable to pay interest on the money which he could not have drawn except on furnishing security. If the principle of restitution is that of

doing real justice between parties it is difficult to understand how the party could be compelled to pay interest on the money Which was not really

available to him, he being not compellable to furnish security and draw the amount. In the leading case on the question of restitution Rodger v.

Comptoir D''escompte De Paris, (1869) LR 3 PC 465 money had actually been paid by the defendants under a decree to the plaintiff which was

later reversed on appeal. Referring to the obligation of the plaintiff to pay interest on the amount drawn by him under an erroneous decree, Lord

Cairns observed (at p. 475):

It is contended on the part of the respondents here that the principal sum being restored to the present petitioners they have no right to recover

from them any interest. It is obvious that if that is so, injury and very grave injury will be done to the petitioners. They will by reason of an act of the

court have paid a sum which it is now ascertained was ordered to be paid by mistake and wrongfully. They will recover that sum after the lapse of

a considerable time but they will recover it without the ordinary fruits which are derived from enjoyment of the money. On the other hand those will

have to be enjoyed or may have been enjoyed by the person who by mistake and by a wrong, obtained possession of the money under a judgment

which has been reversed. So far, therefore, as the principle is concerned, their Lordships have no doubt or hesitation in saying that injustice will be

done to the petitioners and that judicial determination which it must be the object of all courts to arrive at, will not have been arrived at unless

persons who have had their money improperly taken from them have the money restored to them with interest from the time that the money had

been withheld.

The foregoing observations concern a case where money had been drawn and utilised by the successful party under an erroneous judgment which

was later set aside. Their Lordships of the Privy Council significantly enough have emphasised that the obligation of the Court is to take care that

the act of the Court does no injury to any of the suitors and that it should make every order which is fairly and properly consequential upon the

reversal of the original judgment. We have earlier pointed out on the authority of ILR 23 Mad 306 that the granting of restitution should be

consistent with justice to both the parties. Where a sum of money is deposited in court to answer a decree but a restriction is placed to the

unconditional withdrawal of the same, in terms of the decree, by reason of which the decree-holder is either unable or unwilling to obtain the use of

the money, the position will be this: (1) the judgment debtor suffers a detriment in that he had to deposit the money which he would have utilised

but for the erroneous decree: (2) the decree-holder by reason of the impediment placed on his drawing the amount, is unable to utilise the money

which in the interests of the judgment-debtor or of both the parties is allowed to remain in court. In such a case can it be taken as an invariable rule

that the decree-holder should pay interest on the amount lying in court? From the point of view of the debtor he should: but justice between the

parties may not always lie in that direction.

On behalf of the respondents reliance is placed on the decisions in Collector of Ahmedabad v. Lavji Mulji, ILR 35 Bom 255, Ashutosh

Goswani v. Upendra Prasad Mitra, 24 CLJ 467 : AIR 1917 Cal 188 and Hirabhai Dahyabhai Vs. Maneklal Ranchhod, . In none of those cases

was there any obstacle placed on the decree-holder getting the money from Court He could have obtained the money deposited in Court and there

was undoubtedly an injury to the judgment-debtor by his not drawing the money. The decision in Dalu Ram Gobardhan Das Vs. Ramanand

Jurimull, , however, supports the respondent. In that case execution of the trial court''s decree was stayed on the judgment-debtor furnishing a

security for the decree amount. He made the necessary deposit on the 14th of March, 1924, and the decree-bolder withdrew that amount from

Court after furnishing security on the 11th of December, 1924. On the decree being subsequently set aside, the judgment-debtor became entitled

to restitution. There was no controversy in the case about his being entitled to interest on the amount drawn and utilised by the decree-holder. But

a question arose as to whether the decree-holder would be liable to pay interest from the date of the deposit of the amount by the judgment-debtor

upto the date of the actual withdrawal by the former, that is during the period when the money was lying in Court deposit, not withdrawn by the

decree-holder. The learned Judges answered the question in the affirmative. That view however did not find acceptance in a later decision of the

same High Court Vide Gauridutt Ganesh Lal Vs. Madho Prasad and Others, . After discussing the relevant principles, the learned Judges

concluded that there could be no hard and fast rule that interest should be allowed from the date of the deposit but what it should do was to pass a

just order having regard to all the circumstances of the case and that it would be in conformity with justice if the decree-holder were directed to

pay interest from the date on which there was no longer any obstacle to his withdrawing the money. We are in respectful agreement. The rule as

enunciated in the above decision does justice to both parties. Interest will not be payable on the amount deposited so long as the obstacle to its

withdrawal subsists. So long as there is no obstacle or the obstacle if any is removed by act of the decree-holder himself e.g., by furnishing

security; interest will run in favour of the injured party. The decision cited above has been accepted and followed by Balakrishna Aiyar, J. in

Lokambal Achi Vs. P. Srinivasa Pillai and Others, . The learned Judge while stating the principles observes:

The principle of restitution requires that the judgment-debtor should be placed in the position which he would have occupied if the original decree

had not been passed. If the decree had not been passed he would have had use of the money which he deposited into court or paid over to the

decree-holder and that use he has lost. That loss must be made good to him and that can be done only by requiring the decree-holder to pay

interest on the money. This principle has been applied without qualification where either the money has been actually paid over to the decree-

holder or has been deposited in Court and no conditions have been imposed or difficulties placed in the way df the decree-holder drawing out that

amount. If the money has really been made available to the decree-holder he would be bound to pay interest if the decree is reversed.

The other principle is this. ""Even though the money has been deposited into Court, but the deposit has been made subject to a condition like

furnishing security which the decree-holder may be unable or unwilling to comply with or other difficulties are placed in the way of the decree-

holder with the result that the money was really not available to him at all then he would not be required to pay interest; and the reason of the rule is

that to do so would be to require him to pay for an advantage which he never really enjoyed through no fault of his own."" That the existence of an

obstacle placed at the instance of one party (e.g. a condition like furnishing security) would disentitle that party from claiming interest is based on a

well recognised principle.

Let us for example consider a case converse to the present one, namely, whether payment into Court of the decree amount but with a condition

attached as to its withdrawal would stop the running of interest under the decree. The South Indian Railway Company, Limited Vs. M.C.

Mayilvahanan, , recognised that it could not; but it was held that the principle would not apply, in the particular circumstances of that case. The

railway company against whom a decree has been passed filed an appeal to the High Court and obtained an order for stay of execution of the

decree on condition of its depositing the decree amount in Court. The respondent who was a minor was permitted to withdraw the decree amount

on furnishing security. The railway company''s appeal was ultimately dismissed and the respondent claimed interest on the decree amount even

after the same had been deposited into court on the ground that he was prevented by reason of the condition as to security from drawing the

amount. The learned Judges held that security was imposed on the ground that the respondent was a minor and no obstacle except what the law

itself had imposed, existed in that case. Interest was held to be payable.

Periakaruppan Chettiar Vs. A.L.V.R.S.T. Veerappa Chettiar, , was a case where the judgment-debtor obtained stay of execution of the decree

on his depositing the amount into court; decree-holder was however prevented from withdrawing the money without furnishing security. It was held

that notwithstanding the deposit, interest would continue to run in favour of the decree holder.

These cases show that the imposition of an obligation on the decree-holder to furnish security (an obligation which did not exist independent of

the order) before drawing the amount deposited will not make the deposit equivalent to payment. But it must also be realised that if the decree-

holder furnishes security and draws the amount the position will be different.

We may now briefly classify the case in which a question of payment of interest as a part of restitution might arise: 1. Where money is paid

under the erroneous decree to the decree-holder; 2. Where money is deposited in court in satisfaction of the decree and no restriction is placed on

the decree-holder drawing the amount; 3. Where money is deposited towards the decree and there is an obstacle to the withdrawal of the amount

like furnishing of security, but the decree-holder furnishes such security and draws the amount. (Really in such a case the obstacle must be held to

have been removed albeit by the act of the decree-holder who thereafter will have the benefit of the money); 4. Where money is deposited

towards the decree and there is an obstacle placed like furnishing of, security but the decree-holder either because he is unwilling to or unable to

furnish the required security, allows the money if} remain in Court and does not use it. In the first two of the four cases, the decree-holder would

be bound to pay interest on the amount which he is obliged Co repay from the date of payment or deposit. In the third class of case he will be

bound to pay interest on such amount from the date when the .obstacle is removed as laid down in AIR 1943 Paf 427. In all the above cases,

there is a correlation between the benefit to the decree-holder and the detriment to the other party.

The fourth class of cases presents a difficulty. Normally speaking the decree-holder would not be liable for interest on moneys which he could

not take on account of the conditions imposed as to its withdrawal. This is the case contemplated by Balakrishna Aiyar, J. in Lokambal Achi Vs.

P. Srinivasa Pillai and Others, . But even this cannot ba laid down as an invariable rule. There may be circumstances in which the Court might

come to the conclusion that notwithstanding the fact that the money was not withdrawn, the decree-holdei should be directed to pay the interest.

Those however are exceptional and indeed extraordinary cases. For example suppose the decree-holder wants the debtor to deposit the amount

offering to furnish security and to take the same, but he wilfully abstains from doing so, the Court may consider whether the conduct of the decree-

holder is such that he should be directed to pay interest. Even so, there will be discretion in Court as to rate of interest because the party depositing

might minimise the loss by asking for an investment of the money in deposit in interest-bearing securities. While the normal rule''in this type of cases

is as stated by Balakrishna lyer, J. it is impossible to lay down a fixed rule to cover all possible cases beyond stating that the Court should pass an

order consistent with justice to both the parties.

Mr. T. P. Gopalakrishnan for the respondent contended that the deposit made by the respondent was not a voluntary one but made in

response to an offer of the decree-holder to take it on furnishing security which he failed to do with the object of causing loss to the respondent.

While the first part of the contention can be accepted, there is no factual basis for the second. In the counter affidavit filed in the stay petition the

decree-bolder had merely stated that he should be allowed to execute the decree or alternatively the judgment-debtor should be directed to

deposit the entire decree amount into Court. There was no offer on his part to withdraw the amount from court deposit on furnishing security. That

condition was imposed by the Court presumably at the request of the respondent.

That the decree-holder had sufficient means to furnish security and draw the money if he wanted to do so is hardly relevant in the consideration

of the question. There are therefore no special circumstances in the present case to award interest on the amount deposited. We are unable to

accept the decision in Shanmugasundara Mudaliar and Others Vs. S. Ratnavelu Mudaliar, and the cases that followed it, in so far as they laid

down as an inflexible rule that regardless of circumstances, a party who succeeded in the trial Court in obtaining a money decree which was

subsequently set aside would be bound to pay interest as a part of restitution to the other party who was obliged to deposit the decree amount

albeit such amount could not be drawn without furnishing security, a condition which the decree-holder did not choose to comply with.

The appeal is allowed. But there will be no order as to costs either before us or before the learned judge.