1. This second appeal by a J.D. has been referred to us by our brother Takru, as in his opinion, it was desirable that this appeal should be heard by a Division Bench.
2. The facts, giving rise to this appeal are as follows: The respondent decree-holder (Firm Chhajju Mal Sumerchand, Delhi) had obtained a decree for a sum in excess of Rs. 7,000/- from the Court of the Subordinate Judge at Delhi. That decree provided for payment in instalments, subject to the condition that in the event of two consecutive instalments remaining unpaid, it would be open to the decree-holder, to realise the entire out standing balance at once. The judgment-debtor paid a sum of Rs. 2,250/- in six instalments, by 27-10-1955, after which there were no payments. The decree-holder under the impression that he was entitled to enforce the default clause, put his decree into execution for the balance of Rs. 4,143/-. He also got the decree transferred for execution from the Delhi Court to the Munsif at Gaziabad through the District Judge of Meerut, under Order 21 Rule 9 C. P. C.
3. Two objections were taken by the judgment-debtor to the execution of the decree before the Munsif, Ghaziabad.
4. Firstly that the Munsif had no jurisdiction to execute the decree as it was beyond his pecuniary jurisdiction; and
5. Secondly, that there had been no default to two consecutive instalments, and, therefore, it was not open to the decree-holder to execute the decree for the entire balance.
6. Both these objections were overruled by the executing court, namely, the Munsif of Ghaziabad, who directed the execution to proceed. Thereupon, an appeal was taken by the judgment-debtor to the court of the District Judge, Meerut. There too he was unsuccessful on both points. Hence he has come up to this Court in second appeal which, as already stated, has been referred to us by the learned single Judge before whom it was originally listed.
7. We have heard learned counsel for the parties at considerable length. For reasons to be stated shortly, we have come to the conclusion that while the court below were right in holding that the execution proceeding was within the competence of the executing court (the Munsif of Ghaziabad), nevertheless there had been no default in the payment by the judgment-debtor of two consecutive instalments, and, therefore, it was not open to the decree-holder to execute the decree for the entire balance; with the result that the appeal succeeds.
8. We take up the question of jurisdiction first. As already stated, the decree passed by the Subordinate Judge, Delhi was in excess of a sum of Rs. 7,000/-. After allowing credit for the instalments paid by the judgment-debtor, the decree-holder put the decree into execution for the balance of Rs. 4,143/-. He further got the execution transferred from Delhi to the Munsif of Ghaziabad through the District Judge of Meerut. Learned counsel for the appellant urged that the Munsif, Ghaziabad, whose pecuniary jurisdiction is limited to Rs. 5,000/- was not competent to execute the decree, which, initially was for an amount of about Rs. 7,000/-. Reliance was placed on the provisions of Sections 6 and 39 of the C.P.C. which run as follows:--
'6. Save in so far as is otherwise expressly provided, nothing herein contained shall operate to give any Court jurisdiction over suits, the amount of value of the subject-matter of which exceeds the pecuniary limits (if any) of its ordinary jurisdiction.'
'39. (1) The Court which passed a decree may, on the application of the decree-holder, send it for execution to another Court,-- .........
(2) The Court which passed a decree may, of its own motion send it for execution to any subordinate Court of competent jurisdiction.
Our attention was also invited to Sita Ram Rai v. Madho Prasad : AIR1939All57 wherein Iqbal Ahmad, J., (as he then was) observed as follows:--
'The addition of the words 'of competent jurisdiction' in Clause (2) of Section 39 unmistakably points to the conclusion, that it is not open to any and every Court to execute a decree, irrespective of its pecuniary jurisdiction and that the competence of a Court to execute a particular decree must be determined by reference to its competence to try a suit of similar valuation, in which the decree under that Section was passed;'
Since the valuation of the suit tried, and the decree passed, by the Delhi Court was for an amount in excess of Rs. 5,000/-, it was contended that the execution proceedings before the Munsif, Ghaziabad were without jurisdiction.
9. Learned counsel for the respondent, on the other hand, rightly pointed out that Section 6, C.P.C. applies only to suits while Section 39, C.P.C., consists of two parts. Sub-section (1) of Section 39 refers to those cases where a decree is transferred, at the request of the decree-holder to another court for execution, while Sub-section (2) enables a court suo motu to send a decree for execution to any subordinate court of competent jurisdiction. In the present case, the Munsif of Ghaziabad is not a court 'subordinate' to the Subordinate Judge of Delhi; nor was the decree transferred suo motu. Therefore Section 39(2) has no application to the present case. The transfer to the Munsif of Ghaziabad was obviously made under Section 39(1) read over with Order 21 Rules 5, 6, 7 and 8. It is noteworthy that, unlike a case of transfer under Section 39(2), there is no condition, laid down, in this sub-section that the transferee court should be a court of 'competent jurisdiction'.
As regards the decision in : AIR1939All57 , referred to above, learned counsel for the respondent invited our attention to Shanti Lal v. Mt. Jamnj Kuer : AIR1940All331 . This was a Division Bench case decided by Bennet and Verma JJ. Verma, J. (as he then was) expressed his inability to agree with the views expressed in the case : AIR1939All57 ; while Bennet, J., pointed out that the decision of Iqbal Ahmad, J., in that case was under Letters Patent Appeal. Bennet, J., added that;
'The interpretation which I place on Section 6 is one which applies this section to the valuation of the case actually transferred, that is, the execution case. There does not appear to be any reason whatever, why the question should go back to the valuation of the original suit. Where proceedings have terminated in a decree, the question of the execution of one decree is the same as the execution of another of the same amount and no question of the original valuation of the suit has any real bearing on the question of execution of a decree. It is the valuation of the decretal amount, which determines the importance of the case for the limits of pecuniary jurisdiction. Another matter which has to be noted is that Section 39 is intended for the convenience of parties. If there were no right of transfer of a decree execution proceedings would have to take place in Courts, sometimes very distant from the property which was attacked. This inconvenience led to the provision for the transfer of decrees to the Court which had local jurisdiction. If the rule were to be applied that the Court of local jurisdiction was not to have power to entertain execution cases, whore the original suit had been of a value beyond its pecuniary jurisdiction certain inconveniences would occasionally follow'. Bennet, J., was, further of the opinion that the views of the Patna and Calcutta High Courts recorded in Amrit Lal v. Murli Dhar, AIR 1922 Pat 188 and Sital Prasad v. Babu Lal Shukul, AIR 1932 Pat 309; Gokul Kristo Chunder v. Aukhil Chunder Chatterjee, ILR 16 Cal 457, and Shamsundar Shaha v. Anath Bandu, ILR 37 Cal 574 appeared to be founded on a straining of the language of Section 6, C.P.C., while the natural interpretation to be put thereupon was in accordance with the view of the Madras High Court reported in Narasayya v. Venkatakrishnayya ILR 7 Mad 397, Kelu v. Vikrishna, ILR 15 Mad 345, Shanmuga Pillai v. Ramanathan Chetti, ILR 17 Mad 309 and Syed Ghulam Ghouse v. Sunni Lal, 5 Ind Cas 155 (Mad)., Verma, J. also preferred the reasoning of the Madras High Court to that of the Calcutta High Court which was followed by the Patna High Court in AIR 1922 Pat 188. We may further point out that in the case, which engaged the attention of Bennet and Verma, JJ., the decree for costs, which was to be executed was for Rs. 86972/-. This sum was within the jurisdiction of the Munsif of Khurja to whose jurisdiction objection was taken by the judgment-debtor. The original suit had been decided by the Civil Judge of Budaun. Therefore, when Bennet, J., observed that it was the valuation of the decretal amount which determined the 'importance' of the case for limits of pecuniary jurisdiction, he was, we think, stressing the fact that the decretal amount, whose execution was desired by the decree holder, being well within the pecuniary limits of the transferee court, was the proper criterion.
10. The appeal preferred by the judgment-debtor was dismissed by Bennet and Verma, JJ., with respect we agree with the view that the jurisdiction of the transferee court to deal with a execution application would depend not upon the valuation of the suit is which the decree has been passed, or the amount of the original decree, but the actual amount under execution. It accordingly follows that the objection as to the jurisdiction of the Munsif of Ghaziabad was rightly overruled by the two Courts below.
11. We then come to the other objection, namely, that the judgment-debtor was not guilty of having committed default of two consecutive instalments payable under the decree, namely, the instalments payable on 1-11-55 and 1-12-1955. It would be pertinent to refer to the relevant clause of the decree which is to the following effect:
'BRSURAT WAADAH KHILAFI MUBLEGH Rs. 754/1/9 YA DO QIST MUTAWATIR FARIQ AWWAL KO HAQQ HOGA KI WOH BAQAYA ZAR-I DECREE MAE SOO-D-/13/-FISADI MAH-WAR YAKMUSHT WASUI KAR SAKEGA.'
It is common ground that the following payments were made by the judgment-debtor towards the decree:
22. 8. 55.
While sending the remittance of Rs. 250/-/- on 27-10-55, the judgment-debtor had indicated that the amount was to be treated as the instalment due for the month of November 1955. The remittance was accepted by the decree-holder, who, however, appropriated it for the instalment, due in the month of October 1955. The two courts below felt that the decree-holder was entitled to appropriate the remittance in that manner. The Munsif was of the opinion that the amount should be first adjusted towards the earliest month for which the instalments had not been paid, although no law or authority was cited for that proposition. The Lower Appellate Court held that it was open to the decree-holder, to appropriate the amount paid on 27-10-55, towards the instalment due for October 1955, and it was not obligatory for the decree-holder to earmark the payment as for November 1955 as desired by the judgment-debtor. Reference was made by the District Judge to the provision of Section 59 of the Contract Act which, he pointed out, would not apply to payment of instalments on a single debt, as in the present case.
12. Learned counsel for the appellant urged and, in cur opinion, with justification--that it was not open to the decree-holder to accept the remittance of 27-10-55, regardless of the instructions sent by the judgment-debtor along with it, i.e., that the amount be treated as the instalment due for November 1955. We find considerable force in the argument put forward by the appellants learned counsel that if the decree-holder was not prepared to appropriate the amount, as desired by the judgment debtor, the proper course for him would have been to refuse to accept the payment. It is noteworthy that before the penalty clause in the decree could be invoked, it was necessary for the decree-holder to show that the judgment-debtor had defaulted in the payment of two consecutive instalments and not in any two instalments. The emphasis obviously is on the word 'consecutive', i.e., one immediately after the other. The position is not altered merely because the provisions of Section 59 of the Contract Act are not applicable here.
13. On behalf of the appellant our attention was invited to the following authorities:
(1) Cory Brothers and Co. Ltd. v. Owners of the Turkish Steamship 'Mecca' 1897 AC 286. There, reversing the decision of a Court of Appeal, the House of Lords indicated that:
'When a debtor pays money on account to his creditor and makes no appropriation to particular items, the creditor has the right of appropriation and may exercise the right up to the last moment, by action or otherwise, the application of the money is governed, not by any rigid rule of law, but by the intention of the creditor, expressed implied or presumed. The rule in Clayton's case, (1816) 1 Mer 529 (535) does not apply to a case where there is no account current between the parties, nor where from an account rendered or other circumstances, it appears that the creditor intended, not to make any appropriation, but to reserve the right.' The right of appropriation accrued to the creditor in the above case because at the time of payment the debtor made no appropriation to pay any particular item. Since, however, in the present case, the judgment-debtor appellant, had clearly indicated that the remittance of 27-10-55 was to be ear-marked for November 1955, instalment, obviously It was not open to the decree-holder to appropriate the same as the instalment due for October 1955.
(2) Mohammad Jan v. Ganga Bishun Singh, ILR 38 Cal 537 (PC). There, the proprietor of an estate, while tendering payment of arrears of Land revenue, had indicated that it was to be credited to a particular Kist. The Treasury Officer accepted, the money accordingly but later on, without the consent of the proprietor, it was adjusted to an earlier Kist thereby creating a default in respect of the Kist for which the sum had been tendered; Their Lordships held that this could not be done.
14. This ruling, however, does not apply to the facts of the present case, where, as already stated, the instalment of Rs. 250/- sent on 27-10-55 was appropriated as for October 1955 instalment, although the judgment-debtor had indicated that it was to be treated as instalment due for November, 1955.
15. (3) T.D. Foster v. R. M. A. L. Chetty Firm, AIR 1925 Rang. 4. There, dealing with a case under Section 59 of the Contract Act a Division Bench of the Rangoon High Court held:
'Payment by joint-debtor with discretion to adjust it against joint debt extinguishes same ipso facto against all the debtors and any arrangement subsequently come to between the creditor and the person who paid, cannot revive the joint liability. The creditor has the option of refusing to accept the payment at all with the direction as to appropriation. But once he accepts the payment, he must obey the direction and even if he accepts the payments under protest, he will still be liable.'
With great respect we agree with the above and hold that it was open to the decree-holder in the present case to refuse to accept the instalment remitted to him on 27-10-55 accompanied, as it was, with the direction as to its appropriation. Since, however, he chose to accept it he was bound by the direction accompanying it, namely, that it was to be appropriated for November 1955 instalment.
16. (4) Govind Rao v. Narayan, AIR 1945 Nag 277, where Puranik, J., observed as follows.-
'No doubt where a compromise decree directs payment of the decretal amount by instalments and the judgment-debtor makes a payment the ordinary principle is that the payment goes first in satisfaction of the instalment that has fallen due and the earliest instalment is first satisfied. But this principle can have no application when the payment is sought to be appropriated by the judgment-debtor at a time when the clause of exigibility in the decree had come into operation and the judgment-debtor has lost the right of sawing the defaults. Moreover when the judgment-debtor states that the payment was to wards a particular instalment, no Court has the power to go behind that statement and hold that the payment was made towards some other instalment.'
17. The ratio decidendi of the above rullings is that if the judgment-debtor tenders payment to the decree-holder with an indication, that it should be appropriated in a particular way, then, unless the penalty clause is held to have come into operation already it will not be open to the decreeholder to accept the payment, but appropriate the amount in a different manner.
18. On behalf of the respondent, reference was made to the following three rulings:
19. (1) Fazal Husain v. Jiwan Ali, 3 All LJ 430. There an instalment decree was passed in 1900 for payment of a certain sum every year starting from 1900. The decree provided that in default of payment of two consecutive instalments, the whole decree would be executed. The judgment-debtor failed to pay in 1900 and 1904, but paid in 1901, 1902 and 1903. It was held by Banerji, J., that the decree-holder was entitled to appropriate the amount to the earlier instalment, notwithstanding any direction to the contrary by the judgment-debtor, and there being default in payment of two consecutive instalments, the decree-holder could take out execution of the decree. The contention of the judgment-debtor was that at the time of payment, he had indicated that the payments were made on account of the second, third and fourth instalments and accordingly it could not be said that the amounts of any two consecutive instalments were in arrears. Banerji, J., observed in this connection:
'If the contention of the judgment-debtor were to be accepted, he could very easily evade the operation of the last clause in the compromise by paying the amount of every other instalment, and all he had to do was to say that although a prior instalment was due, he was making payment on account of a subsequent instalment. This, certainly, was not the intention of the parties when the compromise was entered into. The judgment-debtor ought not to be allowed to resort to a device for evading the terms of the decree.'
20. With great respect, we are unable to agree with the above observations. The penalty clause, in the decree, obviously, is to be strictly and literally construed. If the judgment-debtor could evade payment of certain instalments, without invoking the operation of the penalty clause, we fail to see how he can be prevented from doing so. Therefore the above ruling, in our opinion, will not help the respondent.
21. (2) Hanmant Timaji Desai v. Raghavendra Rao Gururao Desai, AIR 1922 Bom 237. There, the facts were that the plaintiff obtained a decree on the basis of an award, whereby it was directed that the defendant should pay to the plaintiff a sum of Rs. 14,000/-/- by eleven instalments; the first ten instalments being annual instalments of Rs. 1,300/- each and the last instalment being one of Rs. 1,000/-. Each instalment was to be paid annually on the 1st of August. The first instalment was to be paid on 1st August 1916. If the defendant failed to pay any two instalments they would be paid within six months of the date of default of the second instalment and if the defendant failed to pay up the said two instalments, within the six months mentioned above, it was open to the plaintiff to recover not only such instalments, but also the future instalments, that will remain unpaid, along with costs, by the sale of the mortgaged property.
The first instalment was paid on 1st August 1916, but the second instalment was not paid. Therefore, in July 1918, the plaintiff applied for execution of the decree by selling a portion of the mortgaged property to realise the amount of the second instalment. The defendant contended that the property could not be sold unless two instalments were in arrears. The Subordinate Judge allowed the execution to proceed; but in appeal, the High Court held that the application for execution was premature. Thereupon, another execution application was put in by the plaintiff wherein he sought to recover the instalment which fell due on 1-8-1918 by attachment and sale of another property of the defendant. The executing court allowed the execution to proceed. Macleod, C. J., held that the personal remedy, on the money claimed against the mortgagor, being barred, the only way in which the mortgagee could recover his money was by sale of the mortgaged property, and, if the decree was construed strictly, the only way to recover the last instalment Would be to file a suit for the payment of that instalment, Macleod, C. J., then went on to observe:
'However, it is not necessary to decide that point at present. But it seems that although four instalments had been paid under the decree, the last three instalments had been credited to the instalments for 1918, 1919 and 1920, leaving the instalment of 1917 still unpaid. The result might be that recovery of that instalment, if the remaining instalments were paid according to due dates, would become barred entirely, and we do not think that that was the intention of the Court when the decree was drawn up. It would be the duty of the Court, when instalments are paid, to appropriate them to the earliest instalment unpaid. The debtor cannot allow such earlier instalments to remain unpaid, unless at the time, he makes the payment, the instalment was already barred by limitation.'
In the present case, as already indicated, although the debt was not one of the kind, preferred to in Section 59 of the Contract Act, nevertheless at the time of sending the remittance on 27-10-55, the judgment-debtor had indicated that it was to be appropriated in a particular way, i.e., as the instalment due in November 1955. Therefore, it was obligatory for the decree-holder, if he accepted payment, to appropriate it accordingly. The question of the Court appropriating the instalment one way or the other does not arise here. Therefore, the above case will not help the respondent.
22. (3) Harikisondas Lakhmidas Pyarathi v. Nariman Dadabhoy, AIR 1927 Born 479. There following the earlier ruling, namely, AIR 1922 Bom 237 Fawcett and Patkar, JJ., held that in a case, where the judgment-debtor paid the second, third and fourth instalments due under the decree and he was given receipts for those instalments and the decree-holder sued for the one instalment that remained due, it was the duty of the court to appropriate them to the earliest instalments unpaid. While discussing the ruling reported in AIR 1922 Bom 237, earlier we have given our reasons for not accepting the view expressed therein. Consequently this ruling also will not help the respondent.
23. A further argument, advanced by the learned counsel for the decree-holder respondent, was that the appellant judgment-debtor paid no instalment after 27-10-55 and, therefore, in any case, the penalty clause has come into operation and the objection to the contrary, raised in the courts below and before us, has become in-fructuous. We were, accordingly, requested to reject the second appeal on this very score. We are not inclined, however, to accept this submission. The point for determination before us is whether on the date the execution petition was made to the Munsif of Ghaziabad, the judgment debtor had been guilty of having committed default of two consecutive instalments thereby invoking the operation of the penalty clause. If such default was proved, execution naturally will proceed. If, on the other hand, such default was not established then the execution petition must fail on the simple ground that the penalty clause had not, at that time, become operative. In this appeal we are not concerned with the question whether subsequently, by reason of further defaults, the judgment-debtor has brought about the operation of the penalty clause.
24. In view of what has been said above, and the various authorities discussed in this judgment we are clearly of the opinion that at the time when the execution application was made to the Munsif of Ghaziabad, the judgment-debtor was not guilty of having committed default of two consecutive instalments due under the decree, and consequently the penalty clause did not come into operation, and it was not open to the decree-holder to apply for execution of the entire balance due under the decree.
25. The result is that we allow this appeal and set aside the decisions of the Courts below, in so far as they hold that the judgment-debtor has made a default of two consecutive instalments, thereby invoking the operation of the penalty clause of the decree; and accordingly we dismiss the execution application. The appellant will get his costs, here and in the courts below from the respondent.