1. This appeal arises out of a suit filed by the first respondent, a Nidhi, on foot of two mortgages executed in its favour, one by the first defendant Natesa Chetti and his younger brother Thangavelu Chetti since deceased, on 25th July, 1929, for Rs. 1,000 (Ex. P-1) and the other by Natesa Chettiar for himself and as guardian of his son the second defendant then 8 months old and Thangavelu Chetti on 30th March, 1931, for Rs. 2,000 (Ex. P-2). The plaintiff prayed for a mortgage decree for Rs. 5,755-12-0 in the aggregate. The first defendant's principal contention was that the suit debts must be taken to have been completely discharged by an order passed under Section 10(2) of the Madras Debt Conciliation Act, 1936, by the Debt Conciliation Board, Chingleput, on 18th April, 1940. He also claimed a deduction of Rs. 480 being the principal amount of 30 shares held by him in the plaintiff Nidhi and relief under Madras Act IV of 1938. The first defendant's written statement was adopted on behalf of defendants 2 and 3, the minor sons of the first defendant by their mother and guardian ad litem. The third defendant was born some time in 1942. On 14th December, 1933, Thangavelu Chettiar executed in favour of Natesa Chetti what is termed a release deed, but what is in substance a deed of partition whereby the properties covered by the suit mortgages except suit items 1 and 2 were allotted to the first defendant while those two items were taken by Thangavelu Chetti. It was provided that the suit mortgages were to be discharged by the first defendant. Thangavelu Chetti died in July or August, 1942. Defendants 4 to 6 are his daughters who were obviously impleaded by the Nidhi to protect itself against a possible contention that the release deed was not real or not acted upon. The seventh defendant took a mortgage of items 1 and 2 from Thangavelu Chetti and after the latter's adjudication as an insolvent purchased the equity of redemption in them from the Official Receiver of Bangalore. The eighth defendant is a subsequent mortgagee from defendants 1 and 2 under a mortgage of 20th June, 1934 and defendants 9 to 11 are lessees of portions of the hypotheca.
2. The lower Court upheld the contention based upon the provisions of the Madras Debt Conciliation Act to the extent of the first defendant's share which it fixed at 1/6 but rejected it so far as the remaining 5/6th share is concerned. It refused to give credit in respect of the amount of Rs. 480 as claimed on behalf of defendants 2 and 3 but scaled down the debt to a certain extent under Madras Act IV of 1938. In the result it passed a mortgage decree for Rs. 3,702-8-0 and proportionate costs, interest on Rs. 3,000 at 6 1/4 per cent. per annum from date of suit to date of decree and interest at 6 per cent. per annum subsequent to decree against a 5/6th share in the hypotheca which according to it represents the interests of defendants 2 and 3 and of Thangavelu Chetti.
3. It is argued before us on behalf of the appellants (defendants 1 to 3 and 7) that the debts are discharged as against all the defendants and not merely as against the first defendant's share by the operation of Section 10(2) of the Debt Conciliation Act. Before dealing with this contention it is convenient to state a few more facts. On 24th June, 1939, the first defendant, who, it would be remembered, had become divided from his brother Thangavelu Chetti but, who, it cannot be doubted, was undivided from his minor son, the second defendant, who alone was born by that time, filed O. P. No. 29 of 1939 before the Debt Conciliation Board, Chingleput, , under Section 4 (1) of the Madras Debt Conciliation Act for a settlement of his debts. Creditor No. 7 of the creditors mentioned in the petition was the plaintiff Nidhi. The debt was stated to be a secured debt and the amount due was set down at Rs. 1,450. It is unnecessary to refer to the earlier stages of the petition. Notice under Section 10(1) of the Act was served on the Nidhi on 6th February, 1940, calling upon it to submit a statement of debts owed to it by the debtor. No statement, however, was filed by the Nidhi as required by Section 10(1) of the I Act within the period of two months prescribed for the purpose with the result that on 18th April, 1940, the Debt Conciliation Board passed an order that the suit debts were discharged under Section 10(2) of the Act. The petition was finally withdrawn on nth June, 1940, as no agreement was possible between the debtor and the creditors who had filed statements as required by Section 10(1) and whose debts were consequently not discharged. Nothing however turns on this later withdraw, the question for consideration being as to the effect of the order passed on 18th April, 1940. Sub-section (2) of Section 10 as it stood before it was amended by Madras Act IX of 1943 was as follows:
Subject to the provisions of Sub-section (3) every debt of which a statement is not submitted to the Board in compliance with the provisions of Sub-section (1) shall be deemed for all purposes and all occasions to have been duly discharged.
Sub-section (3) which it is unnecessary to set out provides that a creditor may apply to the Board or a Civil Court in certain circumstances for the revival of the debt discharged under Sub-section (2). It may be stated in passing that the plaintiff Nidhi did, as a matter of fact, apply for a revival of the suit debts to the Court below in O. P. No. 39 of 1943. The lower Court dismissed the petition and the order of dismissal is not challenged before us.
4. The plain effect of Section 10(2) consequent upon the admitted failure of the plaintiff to file the required statement would seem to be to discharge the debt so far as the applicant or those represented by him are concerned. But this is sought to be denied by the respondent by two lines of arguments. The first is that Section 10(2) was amended by Madras Act IX of 1943 with retrospective effect. By Madras Act IX of 1943 the following sub-section was substituted for the original Sub-section (2) of Section 10:
(2) If no statement is submitted by a creditor in compliance with the provisions of Sub-section (1) in respect of debts owed to him by the debtor, then, subject to the provisions of Sub-section (3)(a) in the case of any debt included in the particulars furnished by the debtor under Sub-section (1) of Section 6 or Sub-section (3) of Section 8, the creditor shall not be entitled, in any proceeding before a Board or Civil Court or any other occasion, to dispute the accuracy of the said particulars in regard to suit debt;
(b) every other debt shall be deemed for all purposes and on all occasions to have been duly discharged.
The amendment of Section 10(2) and the differentiation between the debts dealt with in Clause (a) and those dealt with in Clause (b) of the new Sub-section (2) are traceable to and were suggested by two decisions, Veeraraghava Rao v. Debt Conciliation Board, Bezwada : AIR1941Mad873 and Siddhappa Chettiar In re : AIR1942Mad738 . It was observed in the former 'that it is difficult to see why a Debt Conciliation Board should be given a power to cancel a debt which the debtor himself admits to be due simply because the creditor has not filed a statement confirming the particulars set out in the debtor's application' and that ' while one can well understand that when a creditor fails to file a statement under Section 10(1) he should be precluded from disputing the debtor's figures there can be no justification for depriving him of what the debtor has acknowledged to be due to him.' In the later decision it was pointed out that when notice of a petition by a debtor for conciliation of his debts is issued to a creditor under Section 10(1) of the Madras Debt Conciliation Act the duty devolves upon such creditor of submitting a statement of all debts owing to him by the debtor, that such a statement is not to be limited to the debts given by the debtor himself in his application and that the effect of Section 10(2) is that any debt not included in the creditor's statement is for all purposes deemed to have been discharged whether it is mentioned in the debtor's application or not.
5. That the amendment of Section 10(2) by Madras Act IX of 1943 is not retrospective seems to us to admit of little doubt. Section 5 of the Amending Act which is described as a transitional provision was relied upon on behalf of the respondent as indicating that the amendment of Section 10(2) is retrospective. It runs as follows:
Any debt deemed to have been duly discharged before the commencement of this Act under Sub-section (2) of Section 10 of the said Act shall, for the purpose of applying the said Act as amended by this Act to such debt, be deemed to have been duly discharged under Clause (b) of Sub-section (a) of Section 10 of the said Act as amended by this Act.
In our opinion not only does Section 5 not make the amendment of Section 10(2) retrospective, but seems on the other hand to have been enacted for the purpose of refuting a possible argument that the amendment of Section 10(2) by way of a substitution is retrospective. Because of the differentiation newly introduced between debts coming under Clause (a) and those coming under Clause (b) of the substituted Sub-section (2) of Section 10, it was apparently thought desirable that it should be expressly provided as has been done by Section 5 of the amending Act that debts which must be deemed to have been discharged by the operation of Section 10(2) before amendment must be deemed to have been discharged under Clause (b) of the new Sub-section (2). This appears to us to be the obvious result of Section 5 of the amending Act. That section could perhaps have been expressed in simpler language, but its meaning however is sufficiently clear and we have therefore no hesitation in holding that the amendment in 1943 of Section 10(2) has no retrospective effect and that the debts which must be deemed to have been discharged before the commencement of the amending Act cannot be. revived by reason of the amendment.
6. The second argument on behalf of the respondent is that the debts covered by the mortgages were in fact for family necessity, that the other members of the family were themselves debtors as much as Natesa Chetty, that their liability is not derivative, that the application which Natesa Chetty made under the Madras Debt Conciliation Act was one made on his own behalf and that the discharge by the operation of Section 10(2) of the Act can only have reference to his liability leaving the liability of the other members of the family unaffected. This argument found favour with the lower Court which relied principally upon the decision in Ramaswami Sastrigal v. Subramania Aiyar : AIR1943Mad588 and exonerated the first defendant's share which as already stated it fixed at one-sixth. This fixation is obviously erroneous. Natesa Chetty had no sons on the date of the 1st mortgage and he and his brother Thangavelu Chetti were each entitled to a half share. By the time of the second mortgage the 2nd defendant alone was born and hence Natesa Chetti had a one-fourth share, the 2nd defendant a one-fourth share and Thangavelu Chetti a half share in the suit properties on the date of that mortgage. By the partition of 1933 Natesa Chetty and the 2nd defendant became wholly entitled to most of the hypothecated properties while Thangavelu became wholly entitled to suit items 1 and 2. It has been argued for the appellants that if the shares are worked out in the light of these facts the result would be materially different from that reached by the lower Court. But it is unnecessary to pursue this aspect as we agree, so far as defendants 2 and 3 are concerned with the main point argued on their behalf, namely, that Natesa Chetti must be taken to have applied under the Madras Debt Conciliation Act, as the manager of the undivided family, which then consisted of himself and his son the 2nd defendant and that therefore the discharge will enure to the benefit of defendants 1 to 3, the 3rd defendant having been born subsequent to the discharge. The learned Subordinate Judge seems to have overlooked one material aspect of the case in Ramaswami Sastrigal v. Subramania Aiyar : AIR1943Mad588 . There the manager of the joint family who was also the father evidently became divided from his sons who were the other members of the family after the debt was created but before the application under the Debt Conciliation Act was made and there was therefore no possibility of the application being made on behalf of the family which had by that time ceased to exist. Where however the applicant is the manager of a joint Hindu family the question becomes material whether the application was or was not made on behalf of the family and not merely in his individual capacity. It is true that in both the suit mortgages all the members of the family then in existence joined as executants and Natesa Chetti cannot therefore be said to have executed those mortgages in his capacity as manager. But this however does not prevent his a plying to the Debt Conciliation Board in his capacity as manager of the joint family then in existence. When we put it to Mr. Desikan, counsel for the respondent whether there was any legal impediment in the way of Natesa Chetti applying as manager of his then joint family for conciliation of these debts by reason of the fart that the other members of the family figured as debtors eo nomine in the suit mortgages he rightly conceded that there was no such impediment.
7. The question then remains whether Natesa Chetti did make the application as manager of the joint family consisting of himself and his minor son the 2nd defendant. There is a passing observation of the learned Subordinate Judge that there is no evidence that Natesa Chetti applied as manager. It is not however possible to suggest that Natesa Chetti desired that his own liability under the suit mortgages should be the subject of conciliation and that his sons' liability should be left unaffected. There is no reason to think that Natesa Chetti failed to discharge his duty to the second defendant and did not seek for the latter the benefit of the procedure laid down in the Madras Debt Conciliation Act which he was certainly seeking for himself. In our opinion there is every probability that the application was made by Natesa Chetti as the manager of his family. No doubt he did not describe himself as manager but it is well settled law that a manager of a joint Hindu family need not describe himself or be described as such in a plaint filed or a decree obtained by him and there is no reason to refuse to apply the same rule to the petition filed by the 1st defendant or the order passed in his favour. We have therefore come to the conclusion, differing from the lower Court, that the properties held by defendants 1 to 3 are discharged from the mortgage liability by reason of Section 10(2) of the Madras Debt Conciliation Act, though we agree with it that the mortgages were executed for family necessity, its finding in this regard not having been challenged by the appellant's counsel.
8. The case of the 7th defendant however stands on a different footing. The 1st defendant and Thangavelu Chetti the predecessor in title of the 7th defendant having become divided in 1933, the 1st defendant could not in 1939 possibly represent his separated brother or his successor in interest. The benefit of the order of discharge passed under Section 10(2) on the 1st defendant's petition cannot therefore be had by the 7th defendant. But it is argued on his behalf that the 7th defendant's portion of the hypotheca also is discharged from liability. It is claimed that this is the effect of Section 10(2) of the Madras Debt Conciliation Act relying principally upon its language that ' the debt shall be deemed for all purposes and all occasions to have been duly discharged' The suggestion is that the debt is thus cancelled in toto no matter who may be bound by it. It seems to us difficult to conceive of a debt in the abstract as something having an existence apart from the debtor. In its ordinary connotation a debt is a known or ascertainable liability of one named person to another. Further the argument overlooks the language of Sub-section (1) which refers to a settlement between the debtor who applies and his creditor, which prescribes notice to every creditor of the debtor to submit a statement of debts owed to such creditor by the debtor and which in our opinion indicates fairly clearly that persons who are not parties to or represented by the parties to a proceeding under Section 10 can neither be bound nor benefited by it.
9. It has next been argued on behalf of the 7th defendant that he can share in the benefit of the discharge obtained by defendants 1 to 3 on the analogy of the decisions in Marina Ammayi v. Mirza Bakhar Beg Saheb : AIR1941Mad557 Arunachalam Pillai v. Seetharama Naidu (1941) 1 M.L.J. 561 : I.L.R. (1941) Mad. 930 Satyanarayanamurthi v. Sathiraju : AIR1942Mad525 Nachiappa Chettiar v. Ramachandra Reddiar : AIR1942Mad527 and Subramanian Chettiar v. Ramachandra Reddiar (1946) 2 M.L.J. 439 given under Madras Act IV of 1938. It was held in those cases that where a mortgagor is an agriculturist and there is by the application of Madras Act IV of 1938 a reduction or discharge of his liability, a non-agriculturist purchaser from him of a portion of the hypthotheca cannot be refused the benefit which incidentally accrues to his land from such discharge or reduction provided in the latter case that the reduced amount is paid by the mortgagor. We do not see any analogy between those cases and the case before us in which the 7th defendant is not claiming through the defendants whose debt is discharged but through their co-mortgagor and in our opinion the principle underlying those decisions has no application here. Under Section 44 of the Indian Contract Act a release of one joint promisor does not discharge the other joint promisor or joint promisors and if as we consider the object of the proceedings under the Madras Debt Conciliation Act is only to benefit the applicant or those whom he represents and can in law represent, there is no reason or principle for holding that a statutory discharge obtained by a mortgagor under Section 10(2) of that Act would also discharge his co-mortgagor.
10. As to the amount chargeable upon items 1 and 2, the benefit of Madras Act IV of 1938 has next been claimed on behalf of the 7th defendant. There is no positive evidence that the 7th defendant is an agriculturist but in view of the curious way in which this matter has been dealt with in the pleadings and having regard particularly to the frame of issue (2) we think that the agriculturist status of the several defendants who claimed the benefit of the Act was conceded and that the plaintiff Nidhi claimed exemption only under Section 10(2)(iii) which claim has not been supported before us. It is admitted that Rs. 510 was paid towards the principal of Ex. P-1 and Rs. 560 towards the principal of Ex. P-2 and that some small payments were made from time to time towards the interest on the mortgages.
11. On this basis therefore the plaintiff is entitled to a mortgage decree against the 7th defendant and items 1 and 2 for Rs. 1,930 being the balance of the principal amount due under the mortgages together with interest thereon at 6 1 /4th per cent. per annum from 1st October, 1937, till the date fixed for redemption which is three months from now and subsequent interest on the aggregate amount at 6 per cent. The plaintiff and the 7th defendant will pay and receive throughout costs proportionate to their failure and success. The appeal of defendants 1, 2 and 3 is allowed with costs throughout. For purposes of calculation of costs defendants 1, 2 and 3 will be treated as entitled to 2/3 of the total costs.