1. The respondent brought a suit on a mortgage bond against the petitioner; and a compromise decree was obtained on 17th October, 1936. A final decree was passed on 14th August, 1937 and three days later, on 17th August, 1937, the petitioner paid Rs. 1,400 in part discharge of the debt. On 14th December, 1937, the respondent filed E.P. No. 77 of 1938 in which he stated that he had appropriated Rs. 1,400 first towards interest and costs and the balance towards principal. The petitioner has since put in an application to scale down the debt under Section 8 of the Madras Act IV of 1938; and the only; question that arises in this petition is whether the respondent can be allowed to appropriate that sum of Rs. 1,400 first towards costs and interest and afterwards towards principal. Both the Courts below have held that he could.
2. The argument of the petitioner is that the appropriation took place only on 14th December, 1937, the date on which E. P. No. 77 of 1938 was filed; but it does not follow that because that was the first mention of the appropriation, it took place only on that date. The payment of Rs. 1,400 was presumably immediately applied in reduction of the debt. It is not as if (taking the figures in paragraph 7 of the first Court's judgment) that Rs. 2,139-15-5 remained outstanding after the date of payment and on the other side there was a credit of Rs. 1,400. That payment of Rs. 1,400 was not carried on in anamath to be credited at some future date : the money was at once applied to the reduction of the debt. So, it cannot be said that the interest due on 17th August, 1937, remained outstanding after the payment was made. In a Privy Council case Luchmeswar Sing Bahadur v. Syad Lutf Ali Khan (1871) 8 B. L.R. 110 it was held that if the debtor did not himself make a specific appropriation when he made the payment, the creditor had a right to consider it as a payment towards interest. So that on the date of the payment it must be deemed to have gone in discharge firstly of interest and secondly of principal.
3. Mr. Raghava Rao has put forward a rather ingenious alternative argument that we must consider the debt to have arisen on 17th October, 1936, the date of the compromise decree, so that it is Section 9 of the Act and not Section 8, that has to be applied. It seems clear that the Legislature intended to draw a definite distinction between the treatment of debts that first arose before the 1st of October, 1932 and those that arose after that date; and although in some ways the compromise decree may be considered to have given rise to a new debt, yet I think it would be contrary to the spirit of the Act and even to the literal meaning of these two sections to interpret this as meaning that, for purposes of Sections 8 and 9, the debt was incurred after the 1st of October, 1932. The decision of Pandrang Row, J., in C.R.P. No. 86 of 1939 is quoted as an authority for the contention that a debt was incurred on the date of the compromise decree; but I do not find that Pandrang Row, J., went so far. There seems to have been an argument before him in which an attempt was made to split up the compromise decree and to say that a certain part must be deemed to be interest and a certain part principal. Pandrang Row, J., repelled that argument and held that a compromise decree must be taken as a whole, that it is not permissible to split up a compromise decree in the manner suggested, and that the amount due under the compromise decree must be taken as principal.
4. I agree with the finding of the Courts below and accordingly dismiss this petition with costs.