1. This is an appeal by the defendant against the decree of the lower appellate Court on a promissory note passed by him in the plaintiff's favour. The note was passed on September 3, 1930, for Rs. 386. It was stated in the plaint that although the suit was brought on August 15, 1939, more than three years after the promissory note, limitation was saved because of two payments of Rs, 5 and Rs. 45 having been made by the defendant and endorsed on the promissory note under his thumb-marks. The payments were on August 22, 1933, and August 15, 1936, and it was alleged that as the suit was within three years from the date of the last payment under the defendant's thumb-mark, it was within time. The defendant's answer was that the promissory note was not supported by any consideration, and that in any case the suit was time-barred, inasmuch as the two alleged payments, even if proved, were not sufficient to save limitation.
2. The trial Court held on the evidence that the consideration as well as the alleged repayments were not proved and that it was not also proved that the thumb-marks were put by the defendant. The burden of proof was on the plaintiff as the defendant was an agriculturist. On both the grounds, therefore, the suit was dismissed.
3. On appeal the learned District Judge held on the evidence that the promissory note was supported by consideration and that the thumb-marks on the two endorsements were made by the defendant. It was contended on behalf of the defendant that even though the consideration and the repayments were proved, the endorsements were not sufficient to bring them under Section 20 of the Indian Limitation Act as the amounts were not credited either for interest as such or as part payment of the principal nor were such instructions given by the defendant at the time of payment. The plaintiff had) also nothing to show that he appropriated the debt as part payment of the principal within the period of limitation. Reliance was placed on behalf of the defendant upon the recent decision of the Privy Council in Rama Shah v. Lal Chand : (1940)42BOMLR640 , P.C.. It is there held that under Section 20 of the Indian Limitation Act where a debtor pays interest on, or part payment of, principal, the fact must not) only appear in the handwriting of, or signed by, the debtor or his authorised agent, but the debtor must make it clear that the payment was towards interest as such or in part payment of the principal. If he fails to indicate it, it is open to the creditor to appropriate the amount towards the principal; but he must do so within the prescribed period, though such appropriation need not necessarily be communicated to the debtor within the time limited. The learned Judge held that there was no intimation given by the defendant to appropriate the payments to interest as such or to part payment of the principal, nor has the creditor done anything to appropriate them in any particular manner. But he has distinguished this decision on the ground that in the present case the defendant is admittedly an agriculturist, and that therefore all the dealings between the parties are governed by the provisions of Section 13 of the Dekkhan Agriculturists' Relief Act, Under Clause (f) of that section when the Court inquires into the history and merits of a case, it shall, notwithstanding any agreement between the parties determining the manner of taking the account, open the account between the parties from the commencement of the transactions and take account on the basis that all money paid by or on account of the debtor to the creditor or on his account shall be credited first in the account of interest; and when any payment is more than sufficient to discharge the balance of interest due at the time it is made, the residue of such payment shall be credited to the debtor in the account of principal. According to these provisions whenever any payment is made by an agriculturist-debtor to his creditor, the account between the parties is to be taken, in spite of any agreement to the contrary, on the basis that the payment is to be appropriated first towards the interest then due and the surplus towards the principal. The learned Judge has held that neither of the parties in the present case had exercised or could exercise any option when the payments were made, and under the provisions of the law they must be credited towards interest as such, and that the decision of their Lordships of the Privy Council in Rama, Shah's case would not apply where there was no choice of appropriation left to any party. I think the learned Judge was right in holding that the present case is not governed by the decision in Rama Shah's case. The manner of appropriation under Section 20 depends upon the instructions of the debtor and failing them on the choice of the creditor. But where there is no option to any party at all, and under the provisions of the law the payment must be first appropriated to interest, it must, in my opinion, be taken as having been made towards interest as such, and therefore, a good payment to save limitation under Section 20 of the Indian Limitation Act. Even if the defendant had asked the plaintiff to appropriate the payment towards principal or in absence of any direction, the creditor had appropriated it towards the principal, it would not have been recognised in law, and the account would have been taken only in the manner laid down in Section 13. I think, therefore, the learned Judge was right in distinguishing the case of Rama Shah v. Lakhand, and in holding that the two payments in the present case were sufficient to save limitation.
4. The decree of the lower appellate Court is confirmed and the appeal is dismissed with costs.