Maharashtra State Power Loom Corporation Thr Its Managing Director vs. Kontak Comforts PVT LTD

Held

The Court held that the learned Civil Judge erred in declining to certify the payment. Firstly, regarding the certification of payment, the Court found that Order XXI Rule 1(1)(b) allows payment out of court by any evidenced mode without requiring the Decree Holder's concurrence or prior court permission. Rule 2(2) of Order XXI mandates certification if the Decree Holder fails to show cause. Since the payment was made during execution proceedings and no other transaction was demonstrated, the executing court was wrong in refusing certification. Secondly, on the issue of appropriation, the Court noted that the Petitioner had not specified the component of the award towards which the payment was made. In such a scenario, where the payment falls short of the decretal debt, the general rule of appropriation, as enunciated by the Supreme Court in Bharat Heavy Electricals Ltd (Supra), applies. This rule dictates that the payment should be appropriated first towards interest, then towards costs, and finally towards the principal amount due under the decree.

Facts

The Petitioner, Maharashtra State Power Loom Corporation, a Judgment Debtor, challenged an order dated 3rd May 2025 by the Civil Judge, Belapur. The order declined to certify a payment of Rs.77,03,791/- made by the Petitioner to the Respondent-Decree Holder. This payment was made via RTGS on 8th August 2024, during the pendency of execution proceedings for an award passed under Section 18 of the MSME Development Act, 2006. The Petitioner sought adjustment of this payment towards the award amount. The Respondent-Decree Holder contended that the payment was towards GST and was made without their concurrence or court permission, leading the Civil Judge to reject the adjustment application.

Key Issues

1. Whether the learned Civil Judge was justified in declining to certify the payment of Rs.77,03,791/- made by the Petitioner-Judgment Debtor towards the satisfaction of the award, under Order XXI Rule 1(1)(b) and Rule 2(2) of the Code of Civil Procedure, 1908. 2. If not, towards which component of the decretal amount should the said payment be appropriated? Petitioner's Arguments: The Petitioner argued that under Order XXI Rule 1(1)(b) of the Code, a Judgment Debtor can pay the Decree Holder out of court through various evidenced modes without needing the Decree Holder's concurrence or prior court permission. They contended that Order XXI Rule 2(2) also supports certifying such payments when the Decree Holder fails to show cause against it. Respondent's Arguments: The Respondent conceded that the payment was made but argued that the appropriation of the amount towards a specific component of the decretal amount warranted consideration. They contended that the amount could not be adjusted against the principal component of the award and relied on the Supreme Court judgment in Bharat Heavy Electricals Ltd Vs R.S. Avtar Singh & Co.