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Namilla Rachayya Vs. Gajula Nunna Narayanappa - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 111 of 1967 and Civil Revn. Pen. No. 2121 of 1968
Judge
Reported inAIR1970AP278
ActsDebt Law; Madras Agriculturists Relief Act, 1938 - Sections 9 and 13
AppellantNamilla Rachayya
RespondentGajula Nunna Narayanappa
Appellant AdvocateE. Subrahmanyam and ;S.V. Sundarajan, Advs.
Respondent AdvocateA. Gangadhrarao and ;K. Venkataramana Reddi, Advs.
Excerpt:
commercial - tracing back of debt - debt law and sections 9 and 13 of madras agriculturists relief act, 1938 - appeal filed questioning whether debt cannot be traced back to original borrowing in view of absence of any such provisions in section 13 - as per judicial precedents and decision of supreme court under section 13 debtor cannot trace back his debt to original debt - held, appeal cannot be maintained. - - nagaiah 1962-1 andh wr 373 =(air 1962 andh pra 431) (fb) which overruled pundarikakshudu's case, 1957-1 andh wr 47 =(air 1957 andh pra 204) can no longer be held to be good law in view of the decision of the supreme court, though no reference was actually made to the full bench decision in 1962-1 andh wr 373 =(air 1962 andh pra 431). a full bench decision of the madras high.....krishnarao, j.1. the appellant who is the plaintiff, filed a suit o. s. no. 197 of 1962 in the court of the district munisf, dharmavaram for recovery of rupees 1300/- due under a simple mortgage bond dated 2-5-1957 stipulating for payment of simple interest at 12% per annum. it is common ground that the starting point of the indebtedness was 10-5-1950 when the plaintiff lent a sum of rs. 1,000/- under a promissory note executed by the defendant. on 10-6-1953, the promissory note was renewed by the execution of a simple mortgage deed for rs. 1, 400/- made up of the original principle and interest which accrued upto the said date and also the registration expenses incurred for the execution of the mortgage. on 2-5-1957, the amount due under the mortgage deed dated 10-6-1953 was calculated.....
Judgment:

Krishnarao, J.

1. The appellant who is the plaintiff, filed a suit O. S. No. 197 of 1962 in the Court of the District Munisf, Dharmavaram for recovery of Rupees 1300/- due under a simple mortgage bond dated 2-5-1957 stipulating for payment of simple interest at 12% per annum. It is common ground that the starting point of the indebtedness was 10-5-1950 when the plaintiff lent a sum of Rs. 1,000/- under a promissory note executed by the defendant. On 10-6-1953, the promissory note was renewed by the execution of a simple mortgage deed for Rs. 1, 400/- made up of the original principle and interest which accrued upto the said date and also the registration expenses incurred for the execution of the mortgage. On 2-5-1957, the amount due under the mortgage deed dated 10-6-1953 was calculated with interest at the contract rate and the total amount was found to be Rs. 2, 058/- Deducting the payments amounting to Rs. 1058/- the suit mortgage was executed for Rs. 1,000/- on 2-7-1957 stipulating for the payment of simple interest at the rate of 12% per annum. The defendant also claimed to have made a further payment of Rs. 70/- towards the suit mortgage.

The main defence to the suit was that the defendant is an agriculturist entitled to the benefit of Section 13 of the Madras Agriculturists Relief Act (IV of 1938) (hereinafter referred to as the act) and that the transaction should be reopened from 10-5-1950 and that interest should be scaled down as provided therein, that is, at the rate of 5 and 1/2 % only. The trial court disbelieved the payment of Rs. 70/- and accepting the other plea of the defendant, passed a preliminary mortgage decree for Rs. 401/- On appeal by the plaintiff in S. S. No. 120 of 1963, the learned District Judge Anatapur confirmed the decree of the trial court. Aggrieved by the said decision, the plaintiff filed the above second appeal.

2. C. R. P. No. 2121 of 1968. This Revision is filed by the plaintiff who filed a small cause suit NO. 99 of 1968 in the Court of the Dist. Munsif. Madanapalle, for recovery of Rs. 200/- due under a promissory note dated 21-2-1965. The defendant stated that the suit promissory note was only a renewal of the earlier indebtedness which started in 1948 and that the interest from the said date should be scaled down as provided in Section 13 of the Madras Act IV of 1938. The defendant also pleaded discharge of the liability by virtue of the payments made form time to time. The trial court, while accepting the plea of the defendant that the suit debt was a renewal of the earlier promissory notes and disbelieving one of the payments, namely, Rs. 50/- pleaded by the defendant, held that the debt is liable to be scaled down as from the date of the original borrowing at the rate of interest provided under the Act and accordingly passed a decree only for Rs. 32-75 paise.

3. When the present Second Appeal came up for hearing before Venkatesam J. Sri E. Subrahmanyam, the learned counsel for the appellant, contended that a recent decision of a Division Bench of this Court in Pochamma V. Surayya, (1968) 2 Andh WR 358 requires reconsideration. Hence the Learned Judge directed the Second Appeal to be posted before a Division Bench.

4. When the Civil Revision Petition came up for disposal before Parthasarathi, J. the same argument was raised and it was represented that the above Second Appeal was directed to be posted before a Division Bench. Accordingly, the C. R. P. also was directed to be posted along with the Second Appeal.

5. In support of the common plea raised in both the above cases, we have heard the arguments of Sri E. Subrahmanyam, the learned counsel for the appellant in the Second Appeal, as against the arguments of Sri A. Gangadhararao, representing the contention of the debtors.

6. The argument raised on behalf of the creditors is as follows: In giving relief under S. 13 of the Act, it is not permissible for the court to go behind the suit transaction as laid down in what is referred to as Pundarikakshudu's case (1957) 1 Andh WR 47 = (AIR 1957 Andh Pra 204) which was confirmed by a Full Bench decision in Sait Nainamul v. Subbarao 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB). In Krishnayya v. Seshchalam, : [1965]1SCR195 the Supreme Court upheld the correctness of Pundarikakshudu's case (1957) 1 Andh WR 47 = (AIR 1957 Andh Pra 204) and the Full Bench decision in 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB). A subsequent Full Bench decision of this Court in Sriramulu v. Nagaiah 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) which overruled Pundarikakshudu's case, 1957-1 Andh WR 47 = (AIR 1957 Andh pra 204) can no longer be held to be good law in view of the decision of the Supreme Court, though no reference was actually made to the Full Bench decision in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431). A Full Bench decision of the Madras high Court in Mansoor v. Sankara Pandia : AIR1959Mad96 (FB) which took the same view as in Pundarikakshudu's case (1957) 1 Andh WR 47 = (AIR 1957 Andh Pra 204) was also upheld by the Supreme Court in the said decision. It is therefore clear that the decision of the Second Full Bench of this Court in 1962 -1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) cannot be regarded as correct. Subsequent to the decision of the Supreme Court, a similar doubt was expressed as regards the correctness of the second Full bench decision in (1962) 1 Andh WR 373 = AIR 1962 Andh pra 431 (FB) and hence the said question was considered by a Division Bench in 1968-2 Andh WR 358 holding that in spite of the observations of the Supreme Court in the aforesaid case, : [1965]1SCR195 , the decision of the Second Full Bench in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) still holds the field and that its correctness is in no way shaken or affected. In spite of this decision of the Division Bench last mentioned, 1968-2 Andh WR 358 setting the matter at rest the question is once again reopened stating that the reasoning of the learned Judges in holding that the decision of the second Full Bench in 1962-1 Andh WR 373 = (AIR 1962 Andh pra 431) (FB) remained unaffected by the decision of the Supreme Court, is open to question and the matter should be referred to a Full Bench in order to consider the correctness of the said decision. Though the said decision 1968-2 Andh WR 358, of the Divisions Bench is being followed in many cases subsequently, a strenuous argument was advanced before us making a fresh attempt to demonstrate that as a result of the Supreme Court Judgment, : [1965]1SCR195 , the decision in Sriamulu v. Nagaiah 1962-1 Andh WR 373 = (AIR 1962 Andh pra 431) (FB), (Second Full Bench Case) cannot be regarded as good law. We are therefore called upon once again to perform the difficult and delicate duty of determining the scope of the Supreme Court decision : [1965]1SCR195 .

7. It is necessary to refer to the few relevant cases in order to appreciate the points of controversy. it will suffice our purpose to begin with Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204). It was a Letters Patent Appeal disposed of by Subbarao, C. J. and Qumar Hasan, J. reversing the judgment of Viswanatha Sastri, J. in a second appeal. It arose out of a suit to enforce a debt evidence by a promissory note of the year 1948 which was a renewal of an earlier promissory note of 1945 providing for payment of simple interest at 9 % per annum. it was held by the Division Bench that under S. 13 of the Act the debtor is entitled to relief only with reference to the suit promissory note of the year 1948 and that he cannot seek relief by going back to the earlier promissory note of 1945. This conclusion is based upon the following reasoning:

8. Section 13 of the act does not in express terms provide for tracing back of a debt to its origin while section 3 (1) provides for a statutory discharge of interest. In the case of a debt incurred for the first time after the commencement of the Act, the renewed promissory notes are not affected by want of consideration for there is no automatic statutory discharge of interest as under S. 8 or 9 of the Act.

9. The second case to which reference has to be made is the Full Bench case is 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) which will be referred to as Nainamul's case, decided by Subbarao, C. J., Manohar Pershad, J. and Ansari, J. The case first came up before a Division Bench consisting of Subbarao, C. J. and Srinivasachari, J. who made the reference to the Full Bench . it arose out of a suit for recovery of money due on a promissory note executed in December, 1946. it was admittedly a renewal of a prior debt starting in January 1946 and the said promissory note of December, 1946 was executed in respect of the prior indebtedness including the interest at the contract rate which accrued after that date. Subsequently in February 1947, two payments were made towards the suit promissory note of the year 1946 and one of the payments was appropriated towards principal while the other towards interest. The contention of the debtor was that he is not only entitled to relief by way of reopening of the payment made towards interest and for readjustment after calculating interest at the rate of 5.5 per cent provided in Section 13, but that he should also get relief on the basis of the Principal originally advanced prior to the suit promissory note. The trial court accepted the plea of the debtor and granted him relief taking the original principal amount into consideration as the criterion. On appeal, it was contended in the High Court that the trial court was wrong on both the points, namely, that the debtor can not go back to the original principal amount into consideration as the criterion. On appeal, it was contended in the High Court that the trial court was wrong on both the points, namely, that the debtor cannot go back to the original promissory note when the debt started and secondly, that a payment which was appropriated on the basis of contract rate of interest cannot be reappropriated and readjusted as per the statutory rate of interest. When the case first came up before the Division Bench consisting of Subbarao, C. J., and Srinivasachari J., it was held on the first point that Section 13 does not permit the tracing back of the debt to this origin and in taking the said view, they followed the earlier Division Bench case in Pundarikakshudu's case, 1957-1 Andh WR 47 = (AIR 1957 Andh pra 204) which is stated to be binding on them. On this basis, the learned Judges referred the matter to a Full Bench to consider the second question, namely, whether a payment made towards the suit promissory note and appropriated can be reappropriated giving effect to the statutory rate of interest. hence the point for decision framed for the opinion of the Full bench was as follows:

'Whether in the case of a debt incurred after the Act came into force a payment made expressly towards interest at the contract rate can be reopened and re-appropriated towards interest payable under the provision of Section 13 of the Act'.

This question was answered in the affirmative in favour of the debtor and the reasons for the said decision may be summed up as follows: Whatever may be the contract rate of interest it is replaced by the statutory rate mentioned in Section 13. The words 'all interest due on any debt' occurring in Section 13 indicate that the entire interest which a debt earned is to be scaled down. hence if appropriations made earlier are not reopened, the intention of the stature would be defeated, for the contract rate prevails over the statutory rate upto a stage. A promissory note executed by a debtor agreeing to pay higher rate of interest than the statutory rate was not invalid but under the provisions of Section 13, a creditor cannot recover in a proceedings at a rate higher than the rate prescribed thereunder. if a debtor pays more interest than what he is bound to pay under section 13, he pays by a mistake within the meaning of Section 72 of the Contract Act and therefor e he is entitled to recover it back or to set off the excess payments against the subsequent interest.

10. If appropriation is to be reopened on the ground that the debtor is under a mistake of law in thinking that the contract rate of interest is legally payable, it stands to reason that the same principle should apply equally when payments were made towards prior promissory notes or when the debtor merely renews a promissory note by including the interest at the contract rate.

11. The next stage is reached when the above principal is logically extended in Lanka Punyavathamma v. H. V. Satyanarayana, 1960-1 Andh WR 336 (hereinafter referred to as Punyavatamma's case), a decision of a Division bench, consisting of Chandra Reddi, C. J. and Narasimham J. It arose out of a suit for recovery of money due under a promissory note executed in September 1949 stipulating for payment of simple interest at the rate of 12.5 % per annum. It was found to be a renewal of a prior promissory note of September, 1946 and there were some payment made towards the said promissory note. it was contended on behalf of the debtor relying on the Full Bench Decision in Nainamal's case, 1957-2 Andh WR 53 = (AIR 1957 Andh pra 546) (FB) that the debt should be scaled down not only by reopening the payments made towards the lst promissory note, but that on the same principle, the entire interest due form the date on which the original principal, the entire interest due form the date on which the original principal amount was borrowed should be scaled down. It was argued before the learned Judges that the Full Bench decision in Nainamal's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) expressly proceeded on the footing that the principle of Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh pra 204) was correct in so far as it decided that there can be no tracing back to the original debt. But it was held by Chandra Reddi, C. J. rejecting this contention, that there can be no doubt that Pundarikakshuddu's case, 1957-1 Andh WR 47 = (AIR 1957 Andh pra 204) was not in consonance with Nainamul's case 197-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) and that the decision in Nainamul's case, 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) has undermined the authority of Pundarikakshudu's case, 1957-1 Andh WR 47= (AIR 1957 Andh Pra 204). Accordingly the debtor was given relief as from the date of the original borrowing.

12. The next case is Saraju v. Seshayya, 1961-1 Andh WR 363 in which another Division Bench consisting of Chandra Reddi C. J. and Ramachandrarao J. applied the principle in Punyavatamma's case. 1960-1 Andh WR 336 to the case of a debt renewed in favour of a different debtor who undertook the prior liability. It was observed in the course of the decision that the absence of a specific provision in Section 13 corresponding to the explanations in Section 8 of the Act, did not make any difference and that the words in Section 13 were of wide amplitude so as to enable the court to give the same measure of relief by calculating interest at the statuary rate on the principal sum originally borrowed.

13. Next in point of time is the Full bench decision in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra, 431) (FB) (hereinafter called Sriramulu's case) decided by Chandra Reddi, C. J., Jaganmohan Reddi (as he then was) and Narasimham J. It arose out of a small cause suit for recovery of money due under a promissory note of the year 1954. The debtor's contention was that it was a renewal of an earlier promissory note of the year 1951 and that the entire interest outstanding from the date of the original borrowing should be scaled down under Section 13 of the Act. The case originally came for hearing before Ramachandrarao J., and it was argued on behalf of the debtor that in view of the decision in Punyavatamma's case, 1960-1 Andh WR 336 and the principle in Nainamul's case 1957 -2 Andh WR 53 = (Air 1957 Andh Pra 546) (FB) the decision of Pundarikakshuddu's case, 1957-1 Andh WR 47 = (AIR 1957 Andh pra 204) cannot be regarded as good law. The question was therefore referred to a Division Bench consisting of Chandra Reddi C. J. and Narasimham, J. who placed the matter before the Full Bench.

It was held by the Full Bench that Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh pra 204) cannot be held to be good law in view of the principal stated in Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) and accordingly the correctness of the decision in Punyavatamma's case (1960-1 Andh WR 3360 was upheld. This conclusion of the Full Bench is based upon the following reasons: According to the decision in Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB), 'All interest which the parties had contracted to pay. The word 'all' cannot be ignored and must be given a definite meaning as indicating the entire interest which a debt earned and which is liable to be scaled down. A debt is incurred only once and its renewal does not result in a fresh incurring of the debt over again. The words of Section 13 are of such wide amplitude as to take in the original loan. The use of the words 'any debt' in Section 13 does not in any way cut down the content of Section 13. The concept underlying explanations to Section 13. But the absence of an analogous provision cannot limit the connotation of Section 13. The formula evolved by Section 13 was that the interest earned on the original principal should be computed at the rate mentioned therein and as this is a simple process, no explanations or provisos were added to the section. hence following the very reasoning in Nainamuls case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB), it was held that the decision in Pundarikakshjudu's case. 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) cannot be logically supported.

14. We will now turn to the decision of the Supreme Court in : [1965]1SCR195 on which strong reliance is placed in support of the creditors contentions. it was an appeal from a judgment of the High Court of Andhra Pradesh in Second Appeal 653 of 1956 dated 23-12-1960. It arose out of a suit for recovery of money due under a promissory note executed by way of renewal after the commencement of the Act in respect of a debt incurred after 1-10-1932. It may be recalled that Section 8 of the Act relates to scaling down of debts incurred prior to 1-10-1932 providing inter alia for statutory discharge of the interest and an automatic wiping out of the debt under certain contingencies. On the other hand, section 9 of the Act merely provides for scaling down interest with respect to the debts incurred subsequent to 1-10-1932. The third category of debts are those which are incurred for the first time after the commencement of the Act of 1938 and which are governed by the provisions of S. 13. The main argument before the Supreme Court on behalf of the appellant-creditor was that the case was governed by the provisions of Section 13, that it is not permissible to scale down the debt as from its inception. The Supreme Court rejected the contention of the creditor that the debt should be regarded as having been incurred only on the date of the renewal that is subsequent to the commencement of the Act. In this view the debtor's contention was accepted scaling down the interest under the provisions of Section 9 of the Act. before the Supreme Court several decisions of the High Court of Andhra Pradesh as well as Madras were cited bearing on sections 8 and 9 on the one hand and Section 13 of the Act on the other.

The decision of the Full Bench of this court in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) was not however cited before the Supreme Court but reference was made only to Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 2040 which was overruled in this court. Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) and Punyavatamma's case 1960-1 Andh WR 336 were also cited in the course of the arguments. A close scrutiny of the judgment of the Supreme Court makes it clear that decision as to the scope of section 13 of the Act was not invited. While negativing the contention of the appellant therein who sought to rely upon the provisions of Section 13, it was held by the Supreme Court that though the promissory note may have been executed after the commencement of the Act, if it was infact in renewal of a prior debt, it will have to be treated as a debt incurred at its inception, that is, subsequent to October 1932, falling under Section 9. The following observations of the Supreme Court in the course of the judgment are relied upon by the learned counsel for the appellant-creditor before us;

'The next decisions is Pundarikakshudu v. Venkata Krishna Shastri. That was a suit based upon a promissory note dated August, 18 1948 which was in renewal of a promissory note executed on August, 14, 1945. it was thus a case which was covered by S. 13 alone. The learned Judges rightly held that under S. 13 a debtor cannot trace back his debt to the original debt which itself was incurred after the Act came into fierce. . . While we agree that S. 13 by itself does not enable a debtor to trace back the debt to the original debt a further question can arise whether upon the facts the provisions of Section 9 are attracted to a debt incurred after the commencement of the Act (in the sense that the last transaction pertaining to it was subsequent to the commencement of the Act) because the original liability arose prior to the commencement of the Act. If section 9 is attracted the proviso to sub-section (1) thereof which permits the tracing back of certain debts can be resorted to if the facts permit that to be done'.

Referring to Nainamul's case, 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) the Supreme Court, after citing the passage explaining 'all interest due on any debt' as indicating the entire interest which the debt earned and which is liable to be scaled down, observed that the said decision substantially goes against the contentions of the appellant therein, that is to say, the Supreme Court merely observed that the extreme contention taken by the appellant as regards the question of incurring of the debts is not supported by the decision of the Full Bench in Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh pra 5460 (FB) cited by him.

The next reference made by the Supreme Court was to the decision of the Madras High Court in : AIR1959Mad96 (FB) a case which followed Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) and which is dissented form by the Full Bench of the Andhra Pradesh High Court in Sriamulu's Court merely observed as follows while extracting the headnote:

'That was a decision of the Full Bench of the High Court and the Points which arose for consideration and the decision of the Court are correctly summarised in the following headnote.'

XX XX XX

Referring to the headnote, the case was distinguished by the Supreme Court as follows:

'That again was a case where the original indebtedness was subsequent to the commencement of the Act. and therefore, stands on a footing different form the one before us'.

Again after citing Punyavatamma's case, 1960-1 Andh WR 336 and another Madras case which related to repropriation of payment made in respect of a debt renewed after the Act, no opinion was expressed as to their correctness. But it was merely observed that 'another case of the Andhra Pradesh High Court in Nagabhushanam v. Seetharamaiah, : AIR1961AP224 was directly in point' was held to be correct. In fact, the two cases which were distinguished, namely, Punyavatamma's case 1960-1 Andh WR 336 and Chellamma's case, : AIR1962Mad1 (FB) represent diametrically opposite views as regards the right of the debtor to reappropriate payment made in respect of the debts covered by Section 13.

15. Lastly, we turn to the latest decision of the Division Bench consisting of Jaganmohan Reddi, C. J. and Kumarayya J. (as their Lordships then were) in 1968-2 Andh WR 358 the correctness of which is challenged before us. In the case before the division Bench the question was whether the debtor could obtain relief under Section 13 by going back to the original promissory note which was incurred after the commencement of the Act. On a review of the above cases including the Supreme Court decision, it was held by the Division Bench that the Second Full Bench decision of this Court in Sriramulu's case 1962-1 Andh WR 373 = (Air 1962 Andh Pra 431) (FB) is still good law and that its correctness is in no way affected or impaired by the observations of the Supreme Court in the aforesaid case, : [1965]1SCR195 . The learned counsel for the creditor, Sri Subrahmanyam, takes exception to the correctness of one or two observations in the last portion of the judgment which are as follows:

'In : [1965]1SCR195 , the Supreme Court referred with approval not only the answer by the Full bench in Sait Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB), but also the observation of Subbarao C. J. (as he then was) which we have already extracted earlier, as supporting the view taken by their Lordships of the Supreme Court. There can therefore be no doubt that though the subsequent Full Bench judgment of Chandra Reddi C. J. (to which one of us, the present Chief Justice was a party) was not specifically referred to by their Lordships of the Supreme Court the Principle enunciated in Sait Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) which was the foundation of the subsequent Full Bench decision 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) was approved'.

While we quite agree that these observations of the Divisions Bench require some clarification, we are however in full agreement, on a consideration of the entire judgment with the conclusion of the learned judges that the observations of the Supreme Court do not impair the correctness of the principle of the second Full Bench of this court in Sriramulu's case 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) and in support of our conclusion, we give our reasons as follows:

16. Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) dealt with only one question, namely, that the debt cannot be traced back to the original borrowing in view of the absence of any such provision in S. 13. This decision was accepted as correct by the Division Bench in Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) in the order referring the case to a Full Bench and what was referred for the decision of the Full Bench was only the question relating to the reopening of payments which are already appropriated as per the contract. It cannot therefore be said that the Full Bench decision in Nainamul's case 1957 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) was an authority on the question whether the debt could be scaled down form its origin. In Punyavatamma's case (1960) 1 Andh WR 336 followed by the Second Full Bench case in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB), it was observed that the very reasoning and the principle enunciated in the first Full Bench decision in Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) logically undermines the correctness of Pundarikakshudu's case, 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204). In this view, so far as the question relating to tracing back is concerned, the second Full Bench decision in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) did not agree with the same and instead of expressly dissenting from the earlier Full Bench or without having the matter posted before a fuller Bench the learned Judges merely overruled Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) while applying the other principles contained in the first Full Bench decision in Nainamul's case, 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB), as to the scope of the expression 'interest due and outstanding'.

In the Second Full Bench decision in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB), the learned Chief Justice Chandra Reddi, C. J. was fully alive to the distinction between the provision of Sections 8 and 9 on one hand and section 13 on the other. But it was nevertheless held that though section 13 did not in terms provide for tracing back or an automatic statutory discharge of interest, the same result could be achieved and relief could be given to the debtor by applying the simple formula of starting from the original debt which is incurred only once and reducing all interest which we are quite aware of the fact that a decision of the Supreme Court is binding upon us even when it incidentally arises, the real question for consideration now is whether the Supreme Court decided the scope of Section 13 of the Act in the sense whether it is permissible of a debtor to go back to the original debt though not according to the express language of the section but according to the scope of the expression 'all interest outstanding on a debt'.

As we have already observed, the Second Full Bench decision in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) was not placed before the Supreme Court. It is noteworthy that Punyavatammma's case 1961-1 Andh WR 336 which was upheld in the second Full Bench decision in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) was merely cited and distinguished without expressing any opinion as to its correctness. It may therefore be taken that when the correctness of the decision in Punyavatamma's case 1960-1 Andh WR 336 was not the subject matter of any decision by the Supreme Court, it follows that the correctness of the Full Bench decision in Sriramulu's case 1962-1 Andh WR 373 = (Air 1962 Andh pra 431) (FB) was left untouched.

17. It only remains for us to explain the observations of the Supreme Court with reference to Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) on which very strong reliance was placed by the appellant namely, that 'the learned judges in Pundarikakshudu's case, 1957-1 Andh WR 47 = (AIR 1957 Andh pra 204) rightly held that under Section 13 a debtor cannot trace back his debt to the original debt'. This observation is easily explained by the subsequent observation in the judgment of the Supreme Court with reference to Pudarikakshudu's case. 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) as follows:

'While we agree that S. 13 by itself does not enable a debtor to trace back the debt to the original debt a further question can arise whether upon the facts the provisions of S. 9 are attracted to a debt incurred after the commencement of the Act.'

Having regard to the context in which this observation is made, we respectfully agree with the Supreme Court and also with Chandra Reddi C. J. in the Full Bench decision in Sriramulu's case 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB), that Section 13 of the Act does not by itself enable a debtor to trace back the debt. In other words, the Supreme Court merely pointed out the difference in the language between the two section 13 and 9 and there can be really no dispute that section 13 does not in express terms provide for any tracing back of the debt. Hence the Supreme Court approved of the observations in Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) only to the extent that the learned Judges were right in holding that there is no provision in the section itself enabling the debtor to trace back the debt. But there is no other observation in the judgment of the Supreme Court that the same result cannot be achieved by any other process of reasoning as was done in Punyavatamma's case. 1960-1 Andh WR 336 or Sriramulu's case, 1962-1 Andh WR 373= (AIR 1962 Andh Pra 431) (FB) while referring to Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) which was cited by the appellant in the Supreme Court, it was observed that the reasoning therein supported the view taken by the Supreme Court, that is to say, that the interest can be scaled down under Section 9 of the Act, though it was included in the promissory note which was renewed after the commencement of the Act.

It is therefore clear that the view expressed in the First Full Bench decision in Nainamul's case, 1957-2 Andh WR 53 =(AIR 1957 Andh Pra 546) (FB) as to the scope of the words 'interest outstanding' was approved by the Supreme Court. If that is so, the decisions Sriramulu's case 1962-1. Andh WR 373 = (AIR 1962 Andh Pra 431 (FB) which merely applied that principle as covering all interest outstanding from the date of original borrowing, should be regarded as correct. In the context of the approval of the principle stated in the first Full Bench decision in Nainamul's case, 1957-2 Andh WR 53 =(AIR 1957 Andh Pra 546) (FB) the only reasonable interpretation to be given to the Supreme Court's observation as regards the correctness of Pundarikakshudu's case 1957-1 Andh WR 47 = (AIR 1957 Andh Pra 204) is that so far as the language of section 13 is concerned, it did not provide for the tracing back of the debt. Even as regards the Full Bench of the Madras High Court ILR (1959) Mad 97= (AIR 1959 Mad 96) (FB), we do not find any expression of opinion either way by the Supreme Court as to the correctness of the said decision. But the said decision was merely distinguished on the ground that it was a case purely arising under S. 13 of the Act, standing on a different footing from the case before the Supreme Court.

18. It is therefore clear that the learned Judges who decided 1968-2 Andh WR 358 correctly understood the decision of the Supreme Court in coming to their conclusion that the Full Bench decision in 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) is still good law. The only clarification which we desire to make of the observations of Jaganmohan Reddi, C. J (as he then was) in the last mentioned case 1962-1 Andh WR 373 = (AIR 1962 Andh Pra 431) (FB) is that the Supreme Court referred to with approval only those observations touching the second question which was referred to the Full Bench and that there was no approval of the first point which according to Subbarao C. J., was already concluded by the decision in Pundarikakshudu's case, 1957-1 Andh WR 47 = AIR 1957 Andh Pra 204). The reference by Jaganmohan Reddi. C. J. (As he then was) to the Full Bench decision in Sriramulu's case, 1962 Andh Pra 431) (FB) as being found upon the Full Bench decision in Nainamul's case, 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) )FB) has to be confined to the second point in Nainamul's case 1957-2 Andh WR 53 = (AIR 1957 Andh Pra 546) (FB) which alone was referred to the Full Bench.

19. It is seen from the above discussion that our endeavor was not to decide which view of Section 13 is correct but it was only to find out the scope of the decision of the Supreme Court and whether it has been properly understood in 1968-2 Andh WR 358 as regards the precise scope of the Supreme Court decision in : [1965]1SCR195 , we do not feel called upon to refer the matter for the opinion of a Full Bench on the said question.

20. The above reasons, we confirm the judgments of the courts below. The second appeal and the Civil Revision petition are dismissed with costs in each. Six months for redemption from today.

21. Appeal and revision dismissed.


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