Judgment Debtor Must Pay Interest Till Compensation Is Paid Even If Amount Deposited In Court During Appeal: Karnataka High Court

The Karnataka High Court recently held that when a judgment or award is passed in favour of a party, such party would be entitled to the principal amount and interest thereon till the date of receipt of the amounts. 

Justice Suraj Govindaraj added that merely because the judgment debtor was to deposit the amounts in a court of law while filing an appeal against the trial court order, the obligation to pay the interest amount till payment of the compensation amount would not cease.

"Whenever any judgment or award is passed in favour of a party, be it a claimant or a plaintiff such party would be entitled for the principal amount and interest thereon till the date of receipt of the amounts. Merely because, the defendant or the judgment debtor were to deposit the amounts in a Court of law or as done in this case before the Workmen's Compensation Commissioner, the obligation to pay the amounts would not cease."

One Nagraj had filed a claim petition before the Civil court in Raichur wherein the compensation of Rs.4,02,416, was awarded along with interest at the rate of 12% per annum calculated from 24.11.2011 till the date of realisation. Aggrieved by the same, the petitioner, an insurance company, filed a Miscellaneous First Appeal.

The petitioner had deposited the awarded amount and interest of Rs. 81,498 on August 1, 2013, before filing the appeal, which was eventually dismissed on April 8, 2022.

An execution petition was subsequently filed, and the Executing Court ordered the petitioner-Insurance Company to pay the balance interest of Rs. 3,37,014, calculated from August 1, 2012, to April 19, 2023. It is this order that the petitioner-Insurance Company challenged in the current proceedings.

The company argued that since the awarded amount along with interest had been deposited before the Workmen's Commissioner before filing the appeal, the obligation to pay interest ceased from that date, and thus, there is no further amount due as per the impugned order.

However, the Court rejected this argument.

It highlighted that the petitioner had opposed the claimant's application for the release of the deposited amount as far back as November 16, 2013. Additionally, the petitioner had written to the Workmen's Compensation Commissioner on November 21, 2014, requesting not to disburse the deposited amounts.

Ultimately, the amounts were released in favour of the claimant on February 17, 2023, and it was the interest accrued during this period that the Executing Court calculated and ordered payment for.

The Karnataka high court added that when a judgment or award is made in favour of a party, they are entitled to both the principal amount and interest until the date of receipt of the amounts.

Depositing the money, whether in court or through a fixed deposit, does not relieve the judgment debtor of their obligation to pay the awarded amount to the claimant. 

“What is of relevance is for the claimant or plaintiff to receive the monies which have been ordered in his or her favour, the deposit of the money either in a Court or by a fixed deposit would not enure to the benefit of the plaintiff/claimant thereby depriving him of the beneficial use of the money, such deprivation being as a result of a judgment debtor or the petitioner in the present case not releasing money in favour of the claimant/decree holder/plaintiff.”

It further held that the judgment debtor assumes the risk of interest continuing to accrue until the actual payment is made to the claimant.

“It is the Petitioner- judgment debtor who took on the risk of continued accrual of interest on the said amount, till the actual payment thereon. If at all the judgment debtor wishes for the interest to stop running, then the payment is required to be made to the decree-holder and mere deposit would not suffice, since the deposit made would not enure to the benefit of the decree holder.”

It added,

“In the event of the deposited amount being kept in Fixed deposit any interest accrued thereon would stand to the credit of the judgment debtor and the same can be utilised to make payment of the accrued interest.”

Accordingly, it dismissed the petition at the admission stage

Appearance: Advocate Mohd Abdul Quayum for Petitioner.

Citation: 2023 LiveLaw (Kar) 370

Case Title: The Divisional Manager The New India Insurance Company Ltd AND Nagaraj

Case No: Writ Petition No 201824 of 2023.

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