Code of Civil Procedure, 1908 (CPC)
Order XXIV CPC: Payment into Court by the Defendant
A defendant who admits that he owes something, but not as much as is claimed, is in an awkward position: he must defend the whole suit, and interest and costs run against him while he does it. Order XXIV of the Code of Civil Procedure, 1908 gives him a way out. He may deposit in court the sum he admits to be due, in satisfaction of the claim; the plaintiff may take it out; and if the plaintiff presses on and recovers no more, the costs of continuing fall on him. These notes cover the deposit, its effect on the claim, its effect on interest, and the costs consequences that give the Order its force.
1. The Deposit: Rules 1 and 2
§ Order XXIV Rules 1 and 2, CPC 1908 Rule 1. The defendant in any suit to recover a debt or damages may, at any stage of the suit, deposit in Court such sum of money as he considers a satisfaction in full of the claim. Rule 2. Notice of the deposit shall be given through the Court by the defendant to the plaintiff, and the amount of the deposit shall (unless the Court otherwise directs) be paid to the plaintiff on his application. |
§ Four features of the deposit Each matters in practice: • The suit must be one to recover a debt or damages. The Order does not apply to a suit for possession, for an injunction or for a declaration, since there is no money claim to satisfy. • At any stage. The deposit may be made at any point in the suit, so a defendant may make it after the pleadings, after discovery, or even during the trial when the shape of the evidence becomes clear. • Such sum as he considers a satisfaction in full. The defendant fixes the amount, and does so at his own risk: if it proves insufficient, the protection in Rule 4 is lost. • Notice, and payment out. Notice is given through the court, and the amount is paid to the plaintiff on his application, unless the court otherwise directs. The plaintiff is not obliged to take it, but he cannot complain of the deposit. |
2. The Effect of the Deposit: Rules 3 and 4
§ Order XXIV Rules 3 and 4, CPC 1908 (in substance) Rule 3. No interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of such deposit, whether the sum deposited is in full of the claim or falls short of it, if the plaintiff accepts the sum in satisfaction. Rule 4(1). Where the plaintiff accepts such amount as satisfaction in part only of his claim, he may prosecute his suit for the balance; and if the Court decides that the deposit by the defendant was a full satisfaction of the plaintiff's claim, the plaintiff shall pay the costs of the suit incurred after the deposit and the costs incurred previous thereto, so far as they were caused by excess in the plaintiff's claim. Rule 4(2). Where the plaintiff accepts such amount as satisfaction in part of his claim and the Court decides that the deposit was not a full satisfaction, and that the plaintiff is entitled to recover a further sum, the plaintiff is entitled to his costs in the ordinary way. |
§ The costs rule is the point of the Order The deposit does not compel the plaintiff to settle. What it does is shift the risk of continuing. If the plaintiff takes the money as part satisfaction and fails to recover more, the court holds the deposit to have been full satisfaction, and the plaintiff pays the costs of the suit incurred after the deposit, together with the earlier costs so far as they were caused by the excess in his own claim. If he takes the money and does recover more, the deposit was not full satisfaction, and he gets his costs in the ordinary way. The effect is therefore to make a defendant's realistic offer expensive to refuse, and an inflated claim expensive to pursue. It is the Code's counterpart to the payment-in practice familiar from other systems. |
3. Interest After the Deposit
i. Rule 3: interest stops on the deposited sum. No interest is allowed to the plaintiff on any sum deposited from the date of the deposit, whether the sum is in full of the claim or falls short of it, where the plaintiff accepts it in satisfaction.
ii. Why. Interest under Section 34 compensates the plaintiff for being kept out of his money. Once the money is in court and available to him on application, he is no longer kept out of it, and the justification for interest ceases as to that sum.
iii. The balance continues to carry interest. Where the deposit falls short and the plaintiff recovers a further sum, interest on the balance is governed by the ordinary rules in Section 34; only the deposited sum is taken out of the reckoning.
iv. Order XXI Rule 1 compared. A similar principle operates after decree: where a judgment-debtor deposits the decretal amount in court and gives notice to the decree-holder, interest ceases to run on the sum so deposited from the date of the notice.
4. The Position of the Plaintiff
The plaintiff's choice | What follows | Provision |
|---|---|---|
He accepts the deposit in full satisfaction | The suit is at an end as to the claim; no interest runs on the deposited sum from the date of the deposit | Rules 2 and 3 |
He accepts it in part satisfaction and continues the suit, and recovers more | The deposit was not full satisfaction; he is entitled to his costs in the ordinary way | Rule 4(2) |
He accepts it in part satisfaction and continues, but recovers no more | The deposit is held to have been full satisfaction; he pays the costs incurred after the deposit, and earlier costs caused by the excess in his claim | Rule 4(1) |
He declines to take the deposit and continues | The deposit stands in court; the same costs logic applies if the court finds it was a full satisfaction of the claim | Rules 1 and 4 |
5. Related Provisions
i. Order XXIV Rule 1 and Section 34. Interest is governed by Section 34, and Rule 3 operates as an exception to it for the deposited sum.
ii. Section 35 and Section 35B. The general costs powers work alongside Rule 4; the court may take a deposit and its refusal into account in awarding costs, and in commercial suits the recast Section 35 expressly requires the court to consider whether a reasonable offer to settle was made and refused.
iii. Order XXI Rule 1. After decree, money payable may be paid by deposit in court, and interest ceases on the sum so deposited from the date the decree-holder has notice.
iv. Order XXIII Rule 3. Where the defendant satisfies the plaintiff in respect of the whole or part of the subject matter, that satisfaction is recorded and a decree passed accordingly, which is the route where the parties reach an agreement rather than a unilateral deposit.
6. Landmark Points
- Order XXIV Rule 1. A defendant in a suit to recover a debt or damages may at any stage deposit in court such sum as he considers a satisfaction in full of the claim.
- Order XXIV Rule 2. Notice of the deposit is given through the court, and the amount is paid to the plaintiff on his application unless the court otherwise directs.
- Order XXIV Rule 3. No interest is allowed to the plaintiff on the deposited sum from the date of the deposit where he accepts it in satisfaction.
- Order XXIV Rule 4. Where the plaintiff continues the suit and the court holds the deposit to have been full satisfaction, he bears the costs incurred after the deposit and the earlier costs caused by the excess in his claim.
- Order XXI Rule 1 and Section 35 as recast for commercial suits. The same policy after decree, and the express relevance of a refused settlement offer to costs.
7. Frequently Asked Questions
Who may make a payment into court under Order XXIV?
The defendant, in any suit to recover a debt or damages, at any stage of the suit. He deposits such sum of money as he considers a satisfaction in full of the claim, and notice is given to the plaintiff through the court.
Must the plaintiff accept the deposit?
No. The amount is paid to him on his application, unless the court otherwise directs, but he is free to decline it and prosecute the suit. What he cannot avoid is the costs consequence in Rule 4 if the court later holds the deposit to have been a full satisfaction.
Does interest continue to run after a deposit?
Not on the deposited sum. Order XXIV Rule 3 provides that no interest shall be allowed to the plaintiff on any sum deposited from the date of the deposit, whether it is in full of the claim or falls short of it, where he accepts it in satisfaction. Interest on any balance is governed by Section 34.
What are the costs consequences of a deposit?
If the plaintiff accepts the deposit in part satisfaction and the court decides it was a full satisfaction of the claim, he pays the costs of the suit incurred after the deposit and the earlier costs so far as they were caused by the excess in his claim. If the court decides he is entitled to recover more, he gets his costs in the ordinary way.
Does Order XXIV apply to every kind of suit?
No. Rule 1 confines it to a suit to recover a debt or damages, so it has no application to a suit for possession, for an injunction, or for a declaration, where there is no money claim capable of being satisfied by a deposit.
What is the purpose of Order XXIV?
To encourage realistic settlement by shifting the risk of continuing. A defendant who deposits what he genuinely owes protects himself against interest on that sum and against the costs of a suit pursued for an inflated claim, while the plaintiff remains free to press on at his own risk as to costs.
8. Related Topics in This CPC Series
- Order XXV: Security for Costs
- Section 34: Interest on Decrees
- Costs under Sections 35, 35A, 35B and Order XX-A
- Compromise of a Suit under Order XXIII Rule 3