1. This appeal arises out of an application under Section 19, Madras Agriculturists' Relief Act, 4 of 1938 for ascertaining the amount due to the petitioner as scaled down according to the new provisions, inserted by Section 25A of the Act. The learned Subordinate Judge has found that though the amount has to be ascertained in accordance with the provisions of the Act, the payment of Rs. 3740 on 6-12-1941 should not be taken into consideration only as payment towards interest due. Hence this appeal.
2. On 26-5-1935, the appellant executed a simple mortgage in favour of respondent 1 for Rs. 6000 with interest at ten annas per mensem compoundable once in three years. While the mortgage was subsisting, on 6-12-1941 the appellant paid a sum of Rs. 3740 and made an endorsement of that payment on the document which is marked as Ex. B. I(a), and it is in following terms :
'6-12-1941. Towards the interest due under this deed of mortgage without possession the amount paid in cash this day through Dasari Kotayya in the office of the Sub Registrar is Rs. 3740 (three thousand seven, hundred and lorty rupees).'
3. The question is how this amount, is to be appropriated. According to Section 9, Madras Agriculturists' Relief Act, the interest on all debts contracted 'by an agriculturist subsequent to 1932 can only be at the rate of five per cent upto 22-3-1938, and thereafter at the rate of 6 1/4- per cent. Calculated on that basis, the interest on Rs. 6000 till 22-3-1938 will be Rs. 846-10-8. Thereafter interest on the principal sum at 6 1/4 per cent till 6-12-1941 will be Rs; 1389-9-3. The total amount of interest due on 6-12-1941 would be Rs. 2236-3-11. If the sum of Rs. 3740 is appropriated towards interest due, then there will be a balance of Rs. 1503-12-1 in the hands of mortgagee and this ought to be appropriated towards the principal. But the learned Subordinate Judge, following certain decisions of this Court, namely, -- 'Laxmi-venkayamma v. Venkatapathi Raju, AIR 1941 Mad 382 (A); -- 'Arunagiri Chettiar v. Kuppu-swami Chettiar', AIR 1942 Mad 655 (B) and -- 'Ramalaxmi v. Gopalakrishna Rao' : AIR1945Mad12 has come to the conclusion that when there has been an appropriation of interest, even if a larger sum than was due on that date towards interest has been paid over, the balance cannot be credited towards principal.
These decisions have been held to be wrong law in a recent Full Bench decision -- 'Veerraju v. Balakoteswara Rao' : AIR1951Mad67 , where it is held that under the Madras Agriculturists' Relief Act, a creditor is not entitled to retain payments made after 1-10-1937 towards interest in excess of the interest payable under the provisions of the Act, without adjusting them towards the principil. The learned Judges, however, held that in regard to this matter, there is no distinction in principle between a debt io which the provisions of Section 8 apply and that governed by the provisions of Section 9, as in the present case. But Mr. M. V. Srinivasa Rao for the mortgagee respondent invited cur attention to a more recent Full Bench decision in -- 'G. Suryanarayana v. Venkatta-ramana Rao', AIR 1933 Mad 458 (E) and to the observations of the learned Judge, Venkatarama Aiyar J. at pp. 460 and 461 therein. In that decision, it was held that where there has been in fact a settlement of accounts and a fresh document executed by the debtor, that must necessarily have the effect of discharging the interest on the one hand and of appropriating the payment on the other. Such a transaction is outside Expln. I to Section 8 of Madras Act 4 of 1938.
Appropriations made by a creditor as part of a settlement are not liable to be reopened under Expln. I to Section 8. The learned Judge was considering a case where there has in fact been an appropriation according to the terms of the deed and over payment. In this case, there is no substantial evidence that the appellant, at the time he paid Rs. 3740, intended to pay inte-1 rest in accordance with the rate mentioned in' the document and not according to the statutory rate of interest laid down by the provisions of the Madras Act 4 of 1938. When there is a conflict between two such matters, we have to take that the. debtor must have intended to act according to the provisions of law rather than against it. In these circumstances, we are of opinion that when on 6-12-1941, the sura of Rs. 3740 was paid, the appellant intended that AS much of that sum as would satisfy the interest should be appropriated towards that amount, and that the balance must remain in the hands of mortgages for the purpose of be-ing appropriated towards the principal amount due. If that is so, the sum of Rs. 1503-12-1 Should have been appropriated on 6-12-1941 towards the principal sum of Rs. 6000. The interest on the balance amount thereafter only I will be due to the creditor.
4. The appeal is, therefore, allowed and theorder of the lower Court is modified in themanner mentioned above. The appellant willhave his costs of this appeal from respondent 1.