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Rao Saheb Kotlaa Sanyasayya Naidu Vs. Penumaatcha Visweswara Kumara Appala Sundera Ramaraju and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberA.A.O. No. 549 of 1959
Judge
Reported inAIR1962AP233
ActsDebt Laws; Madras Agriculturists Relief Act, 1938 - Sections 7 and 8
AppellantRao Saheb Kotlaa Sanyasayya Naidu
RespondentPenumaatcha Visweswara Kumara Appala Sundera Ramaraju and ors.
Appellant AdvocateP. Ramachandra Reddy and ;S. Ramachandra Reddy, Advs.
Respondent AdvocateM. Bhujanga Rao and ;P. Sitarama Raju, Advs.
Excerpt:
.....the lower court allowed the interlocutory application in question and held that the entire decree debt as been satisfied and entered up satisfaction of the decree. it is true that under the contract act, when a debtor makes a payment towards a debt and does not ear-mark it as towards principal or towards interest, the creditor has an option to appropriate it either to the principal or to the interest as he thinks best, and it is this law that is sought to be set at naught by sec. that would constitute a contract between the parties and it is that contract that is sought to be defeated by the provision contained in sec. it is true that under the contract act, when a debtor makes a payment towards a debt and does not ear-mark it as towards principal or towards interest the creditor..........in other words, no appropriation by him had been made prior to 1st october 1937, and as this is a debt contracted prior to 1st october 1932, section 8 of the act would have to be applied to it for purposes of scaling down . in view of the fact that the payments had not been appropriated by the appellant towards interest prior to 1st october,1937, section 8 would come into operation and wipe out all the interest on the debt outstanding on 1st october 1937, and thereafter, there could be no question of appropriating the payment towards interest, which did not exist. there is therefore no force in this contention of mr. ramachandra reddy. (5) as regards the second point, in the view i have taken, and on the evidence in the case, it may not be strictly necessary to examine the same at any.....
Judgment:

(1) This appeals directed against the judgment and order of the subordinate Judge, amaklapuram, in I. A. No. 1004 of 1950 in O. S. No. 8 of 1944 on the file of the said court, allowing the application and declaring that the debt in question had been completely discharged.

(2) The appellant had taken a mortgage from the respondents on 20-2-1927, of the respondents properties for a consideration of Rs. 35,000/-. A number of payments had apparently been made towards the mortgage debt, but not specifically earmarked by the mortgagors as payments either towards principal or towards interest as such. The suit was brought for a sums of Rs. 26,000/- after giving credit to the payments according to the wish of the plaintiff. The trial court dismissed the suit on the ground that applying the provisions of the Madras Agriculturists Relief Act (IV of 1938), hereinafter referred to as the Act, no amount is due and payable under the mortgage, and that the entire amount had been paid off. Against this decision, an appeal was taken to the High Court of Judicature, Madras in A.S.213/45, wherein it was help that the principal amount of Rs. 5,000/- was outstanding, and accordingly, decreed the suit for that amount together with interest at 6 14 per center annum form 1-10-1937. subsequently in pursuance of the decree of the High Court, the plaintiff- appellant filed I.A. 561/47. in the court below for passing a final decree.

At that stage, I.A. 1004/50 was filed by the 1st defendant in the suit, and his sons, defendants 2 and 3, for scaling down the debt, applying the provisions of the Act, contending that as the Act has been amended by Act X XIII of 1948 and that secs. 8 and 19 thereof which have been amended by the said Amending Act conferred additional benefits on the defendants; and prayed that the benefits of these provisions should be given to them. This I.A.1004/50 was dismissed on the ground that the High Court's A. S. 213/45 operated as roes judicata,and the trial court accordingly, passed the final decree in the matter. Against this order, the defendants, preferred to appeals to the madras High Court, A. S. 172/52 against the judgment and final decree and C. M. A. 208/52 against the judgment and order of the Court refusing the prayer in I. A. .1004/50.

Both the appeals were heard together by this Court which held that the judgment in A. S. 213/45 did not operate as res judicata and therefore the matter should be enquired into, and accordingly remanded I. A. 1004/50 to the Court below, to consider the sealing down of the decree, applying the amended Secs. 8 and 19 of the Act.

Thereupon, the lower Court allowed the Interlocutory Application in question and held that the entire decree debt as been satisfied and entered up satisfaction of the decree. It was therein held that the three payments evidenced by Exs. P-15, D-1 and D-2 in the case must be regarded as payments to be credited to the principal of the mortgage, as the debtor has not started in writing that such payments shall be in reduction of interest, and consequently, the learned Subordinate Judge invited memos of calculation from either side and declared that the three payments in question exceeded the principal amount of the outstanding debt, and therefore, held that nothing was due and outstanding in respect of that debt. Hence the present appeal.

(3) Two points have been urged in this appeal by Mr. Ramachandra Reddy, the learned counsel for the appellant : Firstly, that the three payments evidenced by Exs. P-15, D-1 and D-2 have been appropriated by the decree-holder towards interest due on the mortgage bond, and a decree originally obtained on that footing and that the appropriated payments could not be reopened, taking advantage of Explanation I; secondly, Explanation Ionly related to payments made after the Act came into force i.e., after 22nd march 1938, and that in any case it did not apply to payment already appropriated by the creditor.

(4) As regards the first point, it is clear from the material available on record that the appellant did not appropriate these payments until he filed the suit in 1944. In other words, no appropriation by him had been made prior to 1st October 1937, and as this is a debt contracted prior to 1st October 1932, section 8 of the Act would have to be applied to it for purposes of scaling down . In View of the fact that the payments had not been appropriated by the appellant towards interest prior to 1st October,1937, section 8 would come into operation and wipe out all the interest on the debt outstanding on 1st October 1937, and thereafter, there could be no question of appropriating the payment towards interest, which did not exist. There is therefore no force in this contention of Mr. Ramachandra Reddy.

(5) As regards the second point, in the view I have taken, and on the evidence in the case, it may not be strictly necessary to examine the same at any great length. But as the question has been raised and argued at some length, I shall deal with it. section 8 of the Act is in the following terms:

'Debts incurred before the 1st October, 1932, shall be scaled down in the manner mentioned hereunder namely:

(1) All interest outstanding on the 1st October, 1937, in favour of any creditor of an agriculturist, whether the same be payable under law, custom or contract or under a decree of court and whether the debt or other obligation has ripened into a decree or not, shall be deemed to be discharged, and only the principal or such portion thereof as may be outstanding shall be deemed to be discharged, and only the principal or such portion thereof as may be outstanding shall be deemed to be the amount repayable by the agriculturist on that date.

(2) When an agriculturist has paid to any creditor twice the amount of the principal, whether by way of principal or interest or both, such debt, including the principal, shall be deemed to be wholly discharged.

(3) Where the sums repaid by way of principal or interest or both fall short of twice the amount of the principal, such amount only as would make up this shortage or the principal amount or such portion of the principal amount as is outstanding whichever is smaller, shall be repayable.

(4) subject to the provisions of secs. 22 to 25, nothing contained in sub-sections (1), (2) and (3) shall be deemed to require the creditor to refund any sum which has been paid to him, or to increase the liability of a debtor to pay any sum in excess of the amount which would have been payable by him if this Act had not been passed.'

The wording of the Explanation is so framed as to cover every payment made towards or in respect of the debt and how it should be dealt with. the only payment , that is allowed to be credited towards interest is a payment made by the debtor which had been expressly stated by him in writing, that the payment shall go in reduction of the interest accruing on the debt. From this, it follows that in all cases of payments made by the debtor under the debt in question. which are not expressed, in writing by him, that it shall go in reduction of interest shall be credited towards principal. This having regard to sec. 7, shall be done notwithstanding any law, custom, contract or decree of court to the contrary.

(6) I experience no difficulty whatsoever in coming to the conclusion that the legislature advisedly intended Explanation I to apply to every payment recognised as payment under law, and under the Act. If the scope of Explanation 1were to be limited either to payments made generally towards the debt and not specifically appropriated by the creditor towards interest, the legislature would have stated so, instead of using the all-com- prehensive expression every payment.'

(7) It is generally argued by counsel interested in restricting the scope of the Explanation that appropriations once effected cannot be reopened, and where the document itself provided that payments shall go towards interest first, those terms must be given effect to, notwithstanding the explanation. This implies that the legislature was not serious either in enacting the explanation I as an amendment or in enacting section 7, which is in the following words:

'Notwithstanding any law, custom, contract or decree of court to the contrary, all debts payable by an agriculturist at the commencement of this Act, shall be scaled down in accordance with the provisions of this Chapter.

No sum in excess of the amount as so scaled down shall be recoverable from him or from any land or interest in land belonging to him; nor shall or interest in land belonging to him; nor shall his property be liable to be attached and sold or proceeded against him in so far as such decree against him in so far as such decree is for an amount in excess of the sum as scaled down under this Chapter.'

(8) A reading of the above section makes it clear that the legislature wanted to set at naught any existing law, any custom, any contract or any decree of court to the contrary. It is true that under the Contract Act, when a debtor makes a payment towards a debt and does not ear-mark it as towards principal or towards interest, the creditor has an option to appropriate it either to the principal or to the interest as he thinks best, and it is this law that is sought to be set at naught by Sec. 7 of the Act. Similarly, a creditor and a debtor may agree in a mortage or other document creating a debt that any payment should go towards principal. That would constitute a contract between the parties and it is that contract that is sought to be defeated by the provision contained in Sec. 7.

Hence, a reading of Sec. 7, together with Sec. 8 and Explanation I, leave the matter beyond doubt that whether there I any law to the contrary or a contract or a decree of court or any custom the provision of the Act alone would prevail and the scaling down shall be adopted in accordance with the terms of the Act. Hence, the scope of Explanation III to Sec. 8 of the Act empowers the court to trace a debt to the inception and treat the principal of the original debt alone as the principal of the debt, coupled with such other principal advances that might be made this would be only practicable by re-opening the entire account between the parties which involves, necessarily, a reconsideration and re-appropriation of the payments made from time to time. If the arguments were to be accepted, once a documents is renewed and a payment made under the earlier document is treated as appropriated towards interest under that, and it cannot for that reason be reopened, and where the document itself provided that payable shall go towards interest first, those terms must be given effect to, notwithstanding the explanation. This implies that the legislature was not serious either in enacting the explanation I as an amendment or in enacting section 7, which is in the following words:

Notwithstanding any law, custom, contract or decree of court to the contrary, all debts payable by an agriculturist at the commencement of this Act, shall be scaled down in accordance with the provisions of this Chapter.

(8) A reading of the above section makes it clear that the legislature wanted to set at naught any existing law, any custom any contract or any decree of court to the contrary. It is true that under the Contract Act, when a debtor makes a payment towards a debt and does not ear-mark it as towards Principal or towards interest the creditor has an option to appropriate it either to the principal or to the interest as he thinks best, and it is this law that is sought to be set at naught by Sec. 7 of the Act. Similarly, a creditor and a debtor may agree in a moortage or other document creating a debt that any payment shall first be credited towards interest, and it is only after the interest is cleared that the payment should go towards principal. That would constitute a contract between the parties and it is that contract that is sought to be defeated by the provisions contained in Sec. 7.

Hence, a reading of Sec. 7, together with Sec. 8 and Explanation I, leaves the matter beyond doubt that whether there is any law to the contrary or a contract or a decree of court or any custom the provision of the Act alone would prevail and the scaling down shall be adopted in accordance with the terms of the Act. Hence, the scope of Explanation I is wide enough to take in every payment under the debt, and as Explanation III of Sec. 8 of the Act empowers the court to trace a debt alone as the principal advances that might be made, this would be only practicable by re-opening the entire account between the parties which involves necessarily, a reconsideration and, re-appropriation of the payments made from time to time.

If the argument were to be accepted, once a document is renewed and a payment made under the earlier document is treated as appropriated towards interest under that, and it cannot for that reason be reopened then the whole scheme and purpose of the Act will be defeated, and if every renewal document is accepted as involving appropriation, which cannot be touched, then there will be very little or no benefit conferred on the debtors. It is an open fact, that the legislature in enacting this Act was out to help the agricultural debtors to the maximum extent possible, and every provision is designed to carry out this underlying purpose.

(9) Hence, whether we look at the language of Explanation I or sec. 7 or study the scheme of the Act or examine the provisions in the light of the object of the legislature in enacting them, only one conclusion could be reached and that is that, under the Act, as it stands to-day, the entire account between the parties could be reopened, re-examined and payments re-credited, except payments made by the debtor expressed in writing to be towards interest under the debt.

(10) It is true that in a Full Bench decision of the Madras High Court reported in Suryanarayana v. Venkataraman Rao, : AIR1953Mad458 (FB), there are some observations which would seem to indicate the contrary . But I am afraid those observations must be regarded as merely obiter, in view of the fact that on the facts before the learned judges in that case, the debtor himself, as part of a settlement executed in writing a document expressly indicating that the payments made by him under the earlier document were towards interest. The case before the learned Judges in that Full Bench decision is obviously a direct case which fell within the four corners of the exception in Explanation I; and it is not necessary to reach a decision in this case to examine the scope of explanation I in respect of other cases and in other matters and in regard to other sets of facts.

(11) Hence, in my opinion, no exception could be taken to the judgment of the learned Subordinate Judge, and this appeal therefore, fails and is dismissed with costs.

(12) Appeal dismissed.


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