1. This appeal is preferred by the decree-holder. He filed the suit, O. S. No. 153 of 1969 for the recovery of a sum of Rs. 10,591.50 being the principal and interest due on a promissory note executed by the first defendant's husband and the father of the other defendants in favour of the plaintiff for a sum of Rs. 10,000 payable with interest at 12 per cent. per annum, but the claim being restricted to six per cent. per annum. The suit was filed on 11th April, 1969 and a decree was obtained on 16th February, 1970. Interest on the principal amount was paid on various dates. According to the plaintiff three amounts were paid towards his loan: a sum of Rs. 2,500 on 13th April, 1970; a sum of Rs. 1,000 on 21st November, 1970; and a sum of Rs. 2,500 on 24th July, 1971; in all a sum of Rs. 6,000. The only question is how this amount should be appropriated. According to the plaintiff the interest amounts to Rs. 2,222-83 and, therefore, giving credit to the sum of Rs. 6,000 the amount outstanding is Rupees 4,000 principal and Rs. 2,222-83 interest. According to the defendant (judgment-debtor), as a sum of Rs. 6,000 has been paid, the principal outstanding is only Rs. 4,000 and the decree-holder will be entitled to interest only from 1st May, 1972, to 21st March, 1973 at nine per cent. per annum, as provided for under the Tamil Nadu Agriculturists' Relief Act.
2. Section 7(1) of the Tamil Nadu Agriculturists' Relief Act provides that, notwithstanding any law, custom, contract or decree of Court to the contrary, all debts payable by an agriculturist on the 1st March, 1972, shall be scaled down in accordance with the provisions of Chapter II of the Act. Sub-section (2) of Section 7 provides that no sum in excess of the amount as scaled down shall be recoverable from him. Section 8 is important and it provides that debts incurred before the 1st March, 1972, shall be scaled down in the manner mentioned thereunder namely,
(2) Where 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 as is outstanding, whichever is smaller, shall be repayable....
Explanation 1: In determining the amount repayable by a debtor under this section every payment made by him shall be credited towards the principal, notwithstanding that he has expressly stated in writing that such payment shall be in reduction of interest.
Sub-section (1) of Section 8, before it was omitted by the amending Act VIII of 1973, read as follows-
(1) All interest outstanding on the 1st October, 1937, in favour of any creditor of an agriculturist, whether the sum may be payable under law, custom or contract of 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 the amount repayable by the agriculturist on that date.
Explanation 2 to Section 8, as it stood before the amendment, read as follows-
In determining the amount repayable by a debtor under this section every payment made by him shall be credited towards the principal unless he has expressly stated in writing that such payment shall be in reduction of interest.
Now in Explanation (1) after the amendment by Act VIII of 1973, instead, of the words 'unless he has expressly stated in writing', the words, 'notwithstanding that he has expressly stated in writing' have been substituted, the result being that after the amendment of Explanation (1) by Act VIII of 1973, whenever any payment is made, it should be adjusted towards the principal, even though it might be expressed to be a payment towards the interest.
3. The contention put forward on behalf of the appellant (decree-holder) is that as Sub-section (1) of Section 8 has been omitted by Act VIII of 1973, the interest outstanding is not wiped out, with the result that the liability to pay interest continues. Therefore, according to the learned Counsel for the appellant, while every payment made should be adjusted towards the principal, the interest accrued on the principal till such payment or on the principal as it stood after the payment of interest would continue and would be payable in addition to the principal. On the other hand, learned Counsel for the respondents submits that the contention of the appellant is opposed to the provisions of Sub-section (3) of Section 8 of the Act. His submission is that while Explanation (1) to Section 8 makes it compulsory that every payment made by the debtor should be credited towards the principal Sub-section (3) of Section 8 makes only the principal, after such adjustment, payable under the Act. Sub-section (2) of Section 8 provides-
Where 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.
There is no difficulty so far as Sub-section (2) of Section 8 is concerned and the controversy only centres round Sub-section (3) of Section 8. Sub-section (3) provides, firstly, that 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 the shortage shall be repayable. So far as this part of the provision is concerned, there is no problem for the amount payable is taken as twice the principal, and all amounts paid towards the principal and interest should be given credit to and the liability is confined only to the amount that would fall short of twice the principal. The controversy relates to the later Clause, "or the principal amount as is outstanding, whichever is smaller shall be repayable". Under Sub-section (2) of section. 8, the amount that falls short of twice the principal amount or the principal amount as is outstanding alone is repayable. Under Sub-section (1) of Section 8 as it stood before its amendment by Act VIII of 1973, or under Sub-section (3). of Section 8 with which we are dealing, the intention appears to be clear that what the creditor is entitled to, is only the principal amount, or, if some amount had been paid towards the principal, the amount outstanding after giving credit to such payment. Now the effect of the amendment of Explanation (1) to Section 8 is that whatever payment has been made, it is adjustable only towards the principal and therefore, the principal would automatically get reduced whenever any such payment is made. Thus only the principal outstanding is payable under Sub-section (3) of Section 8. As this section specifies the principal which is payable, the Legislature omitted Section 8(1) as there was no necessity for providing for the wiping out of the interest. Under Section 8(3) of the Act, before the amendment in 1973, the amount payable was either the amount which fell short of twice the amount of the principal or the principal as was outstanding on that day. It is therefore clear that the framers of the Act never intended that the creditor should get anything more than the principal. The refinement that has been made after the amendment is that whatever amount has been paid will be adjusted towards the principal, which will reduce the principal. The result will be that the creditor will lose the interest as all payments will have to be adjusted towards the principal and the principal will get reduced. The change that has been brought about is that, though under the Act before the amendment the interest paid under certain circumstances was not adjusted towards the principal and thus the principal still remained payable, by virtue of the amendment to the Explanation to Section 8 all payments are adjusted only towards the principal, thus reducing the principal amount payable. The result would be that even in the absence of Sub-section (1) of Section 8, the interest would stand wiped out.
4. This was the view taken by a Bench of this Court in Ramanatha Chettiar v. Omanathan Chettiar.(1974) 1 M.L.J. 221. We agree with the view taken by the learned Judges and hold that the contention put forward by the judgment-debtor is right. The appellant will be entitled to a decree for only a sum of Rs. 5,453. The result is that the appeal is dismissed, but, in the circumstances of the case, there will be no order as to costs.