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Pay interest first, then principal - SC

The Supreme Court ruled that when a court passes a money decree against an insurance company, the amounts paid will go first to satisfy the interest part and then towards the principal amount. It set aside the judgment of the Andhra Pradesh High Court which had put the priority in reverse order.

In this case, V Kala Bharathi vs Oriental Insurance Co, the motor vehicle accident claims tribunal had awarded Rs 98 lakh as compensation for the death of an engineering graduate in a road accident. Both the legal heirs and the insurance company carried appeals, first to the single judge and then to the division bench.

Meanwhile, the insurer was ordered to pay amounts pending the final decision. When the case was finally disposed of, the dispute arose over payment of interest. The executing court took the view that the amount deposited by the insurer from time to time during the litigation should be adjusted first towards the interest component and thereafter towards the amount decreed. On appeal, the high court ordered that the payments made by the insurance company shall go first to satisfy the principal amount and then the interest. The Supreme Court said that the high court was wrong and the executing court was right.

 Article referred: http://smartinvestor.business-standard.com/market/Econnews-235293-Econnewsdet-Tenants_stall_Sarfaesi_action.htm#.U1AxlPmSzl9

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