1. This Civil Revision Petition raises the question of the power of a Court to scale down a compromise decree under Section 8 of the Madras Agriculturists' Relief Act, IV of 1938.
2. The relevant facts may be briefly stated. The petitioner is the judgment-debtor. He and the respondent had dealings on account starting in 1922. On 26th March, 1928, the petitioner executed a promissory note in settlement of that account. On 3rd April, 1928, he executed a second promissory note for a fresh advance. On 20th July, 1929, he executed a promissory note for Rs. 4,600 comprising the amounts due on the two previous notes and a small amount in cash advanced at that time. It was alleged that on the 27th September, 1930, there was an arrangement whereby the petitioner undertook to pay the amount due on this promissory note within a, given time or to execute a mortgage over certain properties. No payment having been made and no mortgage having been executed, the respondent filed a suit O.S. No. 44 of 1931 on the promissory note of 1929, claiming a charge over the properties' covered by the alleged agreement to mortgage. He also obtained an attachment before judgment of the properties in respect of which the charge was claimed. On 8th August, 1932, a decree was passed in terms of a compromise. The compromise recited that the transactions between the parties had been examined by mediators who had decided that the whole of the debt claimed should be recovered from the family properties of the defendants, and that the defendants had agreed that the suit debt, costs and subsequent interest calculated at Rs. 7,150 in all should be a charge on the properties mentioned in the plaint and it was agreed that the defendants were to be given time till 1st October, 1932, to pay the amount so settled. It is to be noted that this compromise does not appear to have dealt with matters extraneous to the suit and that it provided for the payment of the full amount claimed by the plaintiff with interest. The lower court following the decision of Pandrang Row, J., in C.R.P. No. 86 of 1939 held that in scaling down the decree, the starting point must be the decree itself and that it was not open to the Court to go behind the compromise and treat the original debt as the debt which is to be scaled down.
3. Now, we have held in a very, recent decision, Ramaseshayya v. Kutumba Rao : AIR1940Mad793 that in the simple case of a decree on a debt, the Court must, with reference to the terms of Section 8(1) of Act IV of 1938 look to the debt upon which the decree is passed and not regard the decree itself as the debt which has to be scaled down. A decree embodying a compromise is in one respect different from a decree merely directing payment of the debt which forms the subject-matter of the suit. The effect of the compromise is the substitution of a new contract for the contract sued on, which new contract itself forms the basis of the decree. When we come to apply Sections 8 and 9 to such a decree, we must have regard to the provisions of Section 7 which lays down that
Notwithstanding any 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 Chapter II of the Act.
4. The decree in terms of the compromise is in fact a decree on a contract superseding the original debt upon which the suit is laid. To the extent to which that contract can be proved to be in whole or in part a renewal of the debt upon which the suit was laid, clearly Sections 8 and 9 of the Act provide that the principal of the debt liable to be, sealed down must be the principal sum originally advanced together with any sums subsequently advanced. On the facts of the present case, it is clear that we are concerned with a very simple compromise dealing only with the suit debt and agreeing that the said debt with interest at the contract rate and costs shall be payable by the defendants and shall be charged in a particular way. There can therefore be no doubt that the compromise agreement upon which the decree was based is substantially a renewal of the suit debt together with an agreement to pay the costs and to submit to the charge. It seems to us that clearly this debt is liable to be scaled down under Section 8 having regard to the principal originally advanced by the creditor together with such sums as have been subsequently advanced as principal.
5. It is not necessary for the purpose of this case to decide what would be the position in a more complicated case when the compromise is the result of mutual concessions and advantages which together make up an agreement from which it would be extremely difficult to disentangle that part which is a renewal of the original debt. We may, however, observe that the question whether the compromise forming the subject of the decree is or is no a renewal of a pre-existing liability must, to a large extent, be a question of fact in every case.
6. We have been referred to the decision of Horwill, J., in Narayanaswami Naidu v. Rajamanikkam Pillai : AIR1940Mad419 , which on the facts of the particular case decided that when there was a decree on a compromise, the date on which the debt was incurred must with reference to Section 8 or Section 9 of the Act be the date of the original debt and not the date of the compromise decree. It is not necessary for the purpose of this case to consider the correctness of our learned brother's decision on the facts before him. We confine ourselves to holding that when, as in the present case, there is a decree passed before the 1st October, 1932, in terms of a compromise, which itself is demonstrably a renewal of an anterior debt, the Court must scale down the debt under Section 8 of Madras Act IV of 1938, treating as the principal the amount originally advanced together with the amount of any sums subsequently advanced.
7. A further question has been raised with reference to the terms of Section 19 of Act IV of 1938, whether the petitioner in applying for the scaling down of the decree can prove uncertified payments made towards that decree, having regard to the terms of Order 21, Rule 2, (Civil Procedure Code. Section 19 lays down that on the application of the judgment-debtor or the decree-holder, the Court which passed the decree shall apply the provisions of the Act to that decree and notwithstanding anything contained in the Code of Civil Procedure shall amend the decree accordingly or enter satisfaction as the case may be. Then follows*a proviso with which we will deal separately. So far the section is concerned merely with the amendment of the decree in accordance with the terms of Act IV of 1938 and with the addition of a power to the Court to enter satisfaction, presumably when the scaling down process under the Act itself results in the extinction of the decree. So far, the section is not concerned with execution, nor is it concerned with payments made in execution or payments made subsequent to the decree. Then follows the proviso that all payments made or amounts recovered, whether before or after the commencement of the Act, in respect of any such decree shall first be applied in payment of all costs as originally decreed. This proviso expressly contemplates the appropriation of payments made after the decree by the Court which passed the decree. We find it difficult to hold that in making these appropriations, the trial Court is acting as an executing Court. If the Court is not a Court executing the decree, then the provisions of Order 21, Rule 2(m) would not bar the petitioner from proving payments which have not been certified in the manner necessary for establishing them in an executing Court. If this view is correct, it follows that when a judgment-debtor applies under Section 19 to scale down a decree, he can prove payments which have not been certified, for the purpose of satisfying the decree regarding costs. For any other purpose, there is no express provision allowing the petitioner to prove payments made after the decree and not re corded by the Court and it seems to follow that he would have to establish those payments in the ordinary way by getting them certified in Court, if he wants them to be taken into consideration as payments towards the decree.
8. In the result, therefore, we hold that this decree is liable to be scaled down under Section 8 treating as the principal of the debt the amount originally advanced and any subsequent sums lent to the extent to which the original debt can be said to have been renewed by the agreement of compromise embodied in the decree and that the petitioner is entitled under the proviso to Section 19 to prove uncertified payments for the purpose of appropriating those payments if established towards costs of the decree. The petition is therefore remitted to the trial Court for disposal in the light of this judgment and the petitioner is entitled to his costs in this Court.