President vs. Michael Builders And Developers Private Limited

Facts

This appeal concerns an order passed by the Principal District Judge, Kanyakumari District, in an execution proceeding. An arbitral award was passed in O.P.No.934 of 2017, and the decree holder filed an execution petition (E.P.No.13 of 2023) to enforce it. Following a revision petition (C.R.P.(MD)No.1080 of 2024), this Court directed both parties to file calculation memos and the Executing Court to conduct an enquiry and pass orders. The Executing Court passed final orders on 08.04.2025. The decree holder then filed a review petition (E.A.No.16 of 2025) alleging errors apparent on the face of the record, and the judgment debtor filed a petition (E.A.No.17 of 2025) under Section 152 C.P.C. for clerical and arithmetical mistakes. The Executing Court allowed both petitions via a common order dated 25.07.2025. The judgment debtor has appealed against the order allowing the review petition.

Held

The Court held that the contention of the judgment debtor that the decree holder is estopped from seeking correction of the mode of appropriation, merely because a different calculation was furnished earlier, cannot be sustained. The Court reasoned that calculations made in an execution petition cannot override legal principles, nor can they preclude the Court from correcting apparent errors. The Court affirmed that when an agreement and award are silent regarding the mode of appropriation, the Executing Court must apply settled principles. Citing the Constitution Bench decision in Gurpreet Singh Vs. Union of India, the Court found that the Executing Court's direction for appropriation of payments first towards interest and then towards principal was in order. However, the Court agreed with the judgment debtor that the Executing Court had calculated interest on accrued interest, which is not permissible in the absence of a specific provision in the award. The Court accepted the calculation method adopted by the decree holder, which calculates interest only on the outstanding principal amount and accounts for payments made on respective dates. Consequently, the amount payable was fixed at Rs.2,41,05,084/-. The appeal was partly allowed, directing the Judgment Debtor to pay Rs.2,41,05,084/- as of 08.04.2026, plus Rs.1,00,00,528/- towards service tax paid to GST, totaling Rs.3,41,05,612/-, within two weeks.

Key Issues

1. Whether the decree holder is estopped from claiming appropriation of payments towards interest when they had previously calculated amounts by appropriating payments towards principal, and whether the Executing Court ought to have entertained the review petition for altering the mode of appropriation (under Order 47 Rule 1 C.P.C.)? Petitioner's arguments: The learned Counsel for the appellant/Judgment debtor argued that the decree holder, having previously calculated amounts by appropriating payments towards principal, is estopped from later claiming appropriation towards interest. They contended that the Executing Court, having accepted the initial calculation and determined the payable amount, should not have entertained the review petition to alter the appropriation mode. Furthermore, they argued that the Executing Court erroneously calculated interest on interest, as the award did not contain such a clause, making the review order liable for setting aside. Respondent's arguments: The learned Counsel for the respondent/decree holder submitted that this Court, in a prior order, directed both parties to file fresh calculation memos and for the Executing Court to determine the payable amount. They argued that the earlier calculations in the execution petition did not attain finality and could not operate as an estoppel, especially when the Court was required to determine the amount as per the arbitral award and applicable legal principles.