1. The respondent executed on the 9th of November, 1938, in favour of one Subbamma a promissory note for Rs. 240 agreeing to pay interest at the rate of 12 per cent. per annum. There were two payments made to Subbamma, one of Rs. 100 on 4th November, 1941, and the other of Rs. 150 on 22nd July, 1943. The promissory note was transferred by Subbamma to the petitioner on 22nd July, 1945. In his plaint the petitioner gave credit to both the payments but he calculated interest at the contract rate and adjusting the payments made on that basis he claimed Rs. 160 as due to him on 7th March, 1946. The suit was filed four days later on nth March, 1946.
2. The defendant-respondent alleged other payments but these were not made out and nothing was said about these payments at the hearing of the civil revision petition. The lower Court dismissed the petitioner's suit on the ground that the two payments were open payments and that they should therefore be adjusted towards the principal and as taken together they were in excess of the amount of principal there was nothing due to the petitioner. It may be observed in passing that the two payments were endorsed by the respondent on the promissory note on their respective dates as made towards the principal and interest due on the promissory note.
3. Mr. Raghunathan, counsel for the petitioner, pointed out that under Section 13 of the Madras Agriculturists' Relief Act, which, according to both sides, is the relevant provision governing this case, there is no question of open payment, and that the manner in which the case was dealt with by the lower Court, is quite inappropriate to a promissory note which is executed after the coming into force of Madras Act IV of 1938, and which is not therefore governed by Sections 7, 8 and 9.
4. Mr. Srinivasan, counsel for the respondent, frankly conceded that he cannot support the reasons given by the lower Court for the dismissal of the suit.
5. Both the learned Counsel agreed that if the case is dealt with in accordance with the provisions of Section 13, there would be some amount due to the petitioner, but as to how that amount is to be calculated and as regards the provisions of law governing such calculation there was considerable divergence.
6. The relevant portion of Section 13 of Madras Act IV of 1938, is in the following terms:
In any proceeding for recovery of a debt, the Court shall scale down all interest due on any debt incurred by an agriculturist after the commencement of this Act, so as not to exceed a sum calculated at 6 1/4 per cent. per annum simple interest, that is to say, one pie per rupee per mensem simple interest, or one anna per rupee per annum simple interest:Provided that the Provincial Government may, by notification in the Official Gazette, alter and fix any other rate of interest from time to time.
7. In the Fort St. George Gazette, dated 29th July, 1947, was published the following notification which may be quoted in extenso:
(G.O. Ms. No. 2919, Development, 7th July, 1947). In exercise of the powers conferred by the proviso to Section 13 of the Madras Agriculturists' Relief Act, 1938 (Madras Act IV of 1938), His Excellency the Governor of Madras hereby alters the rate of 6 1/4 per cent, per annum simple interest specified in the said and fixes in lieu thereof 5 1/2 per cent. per annum simple interest.
8. One of the points discussed before me was whether by reason of the notification the rate of 5 1/2 per cent. per annum therein provided should be calculated from the date of the promissory note or from the date when the notification came into operation. Subsidiarily, the question was raised whether the notification can be said to have come into effect on 7th July, 1947, when the Government order was passed or on 29th July, 1947, when the order was published in the Gazette.
9. The respondent's counsel contended that the notification operates as if there is a substitution of the figure of 5 1/2 per cent. per annum for the figure of 6 1/4 per cent. per annum found in Section 13 and as if the new figure had always been there. He argued that in view of the dismissal of the suit by the lower Court, the Civil Revision Petition can be properly described as a proceeding for recovery of a debt. I may say that this last position was not contested by the petitioner's counsel. If this is such a proceeding, Mr. Srinivasan's argument went on, the Court in dealing with the civil revision petition is bound to direct a calculation to be made on the basis of 5 1/2 per cent. per annum as that rate has been substituted for the larger rate by the notification. The argument is attractive, but it seems to me that this would give retrospective operation to the notification which, in the absence of clear and unambiguous language, a Court of law can neither presume nor infer. It would be noticed that the proviso to Section 13 says that the Provincial Government may alter and fix any other rate of interest from time to time. The alteration may as a question of legal possibility include a raising of the rate of interest though it must be conceded that this is most unlikely. And the rate of interest is also to be fixed from time to time. This language seems to me to indicate that having regard to the state of the money market at the time and such other considerations as may be germane, the Provincial Government should have the power to regulate the rate of interest which in its opinion is legitimately chargeable from an agriculturist. The words ' from time to time ' indicate that a certain state of things may exist for some time and then there may be a change calling for a corresponding adjustment in the rights and liabilities of the parties in regard to the rate of interest which an agriculturist may be called upon to pay. The language of the proviso would not, in my opinion, enable the Provincial Government to issue a notification so as to deal with a period which has gone by. So far as the language of the notification on which some emphasis has been laid by Mr. Srinivasan is concerned, it recites first that it is framed in exercise of the powers conferred by the proviso to Section 13. Then it 'alters the rate of 6 1/4 per cent. per annum simple interest'' specified in that section and finally fixes in lieu thereof 5 1/2 per cent, per annum, simple interest. The idea of a fixation of a different rate of interest in lieu of the rate of interest that is specified in the section may no doubt suggest an intention to give the notification retrospective effect but notwithstanding that circumstance, which seems to me to be of no great weight if the notification is read as a whole, there is not sufficiently clear language compelling a Court to give retrospective effect in the sense contended for by the counsel for the respondent. It is quite possible to read the notification as applying to the rate of interest which accrues as between a creditor and an agriculturist debtor after its date. The result of this construction would be that the petitioner will be entitled to 6 1/4 per cent, per annum simple interest up to the coming into operation of the notification and 5 1/2 per cent., thereafter.
10. It also seems to me that, having regard to the wording of the proviso to Section 13 that the alteration of the rate of interest and its fixation from time to time should be by a notification in the official Gazette there is an indication that such notification should operate as from the date of its appearance in the Gazette which as already stated was 29th July, 1947. The material date for this purpose, in my opinion, is that date and not the date on which the Government passed the order.
11. Mr. Raghunathan raised another interesting point. He said that the previous payments made by the respondent though unappropriated at the time when they were made were appropriated on the date of the plaint and according to Section 60 of the Indian Contract Act and the law governing the appropriation of debts, he argued, that any relief which the respondent may be entitled to can only be given subject to that appropriation being maintained. In support of his argument he cited Munuswami Mudali v. Perumal Mudaly : (1919)37MLJ367 , Gajram Singh v. Kalyan Mal (1935) I.L.R. 58 All. 791 (F.B.), Corry Bros. & Co. v. Owners of Turkish Steamship 'Mecca' (1897) A.C. 286, Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj of Dharbanga (1933) 64 M.L.J. 612 : L.R. 60 I.A. 146 : I.L.R. 12 Pat. 318 at 337 (P.C.). In the first of these cases it was held that
under Section 60 of the Contract Act a creditor is entitled to exercise his right of appropriation in the manner most advantageous to himself and at any time before the filing of the suit.
In Gajram Singh v. Kalyan Mal (1935) I.L.R. 58 All. 791 (F.B.), the matter was taken a little further and it was held that a creditor can appropriate the payment made to any debt until the judgment is pronounced by the trial Court though not thereafter. In Cony Bros. & Co. v. Owners of Turkish Steamship ''Mecca' (1897) A.C. 286, Lordsection McNaghton enunciated the fundamental principles governing appropriation in the following well-known passage:
When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor....It has long been held and it is now quite settled that the creditor has the right of election...'sup to the very last moment', and he is not bound to declare his election in express terms. He may declare it by bringing an action or in any other way that makes his meaning and intention plain.
What Lord McNaghton said is the law of England has been applied without question in this country. (See Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj of Dharbanga (1933) 64 M.L.J. 612 : L.R. 60 I.A. 146 : I.L.R. 12 Pat. 318 at 337 (P.C.).
12. The question however is whether the principle established by this and other cases, which is part of the general law of appropriation, has not been departed from in Section 13 of Madras Act IV of 1938. It is true that Sections 7, 8 and 9 of the Act deal with one subject, namely, debts incurred by agriculturists before 22nd March, 1938, on which date the Act came into operation, while Section 13 statedly deals with debts incurred by an agriculturist after the commencement of the Act. It cannot, however, be forgotten that all the provisions were meant for the relief of agriculturists and that the Legislature was in giving relief to agriculturists overriding several provisions of the general law. If Mr. Raghunathan's argument is to be accepted the result would be that in a large number of cases where the debtor makes no appropriation at the time when he makes his- payment and where he does not take the additional precaution of stating that his payment should be applied towards the interest due on the debt calculated at the rate specified in Section 13 of the Act and not at the contract rate, he will be deprived of the benefit of the relief intended by Section 13, and by a unilateral act the creditor can get round the provisions of Section 13. While a departure from the law of the country is not to be easily inferred it is, in my opinion, sufficiently clear from the wording as well as the object of Section 13 that the Legislature clearly intended to protect an agriculturist notwithstanding his own contract, and that it could not have intended to make his right to the benefit contemplated by the Act liable either to be defeated or materially curtailed by an act of the creditor to which the debtor is no consenting party.
13. Mr. Srinivasan does not quarrel with the proposition of law for which the petitioner's counsel cited Ramalakshmi v. Gopalakrishna Rao (1944) 2 M.L.J. 285, namely, that if a debtor consents to waive the benefit of the Act which he clearly does when he makes an endorsement evidencing an appropriation of a payment at the contract rate of interest, he is bound by such consent notwithstanding the provisions of the Act making interest at that rate not enforceable.
14. In this case, it is not suggested that there is anything from which the respondent can be said to have consented to an appropriation of the payments made by him towards interest at the contract rate and thereby to have waived the benefit of the Act.
15. The result is that the decree of the lower Court dismissing the suit will have to be set aside, and a decree passed in favour of the petitioner on the lines, laid down in Thiruvengadatha v. Sannappan : AIR1941Mad799(2) . Counsel are agreed that on the above basis the petitioner will be entitled to a decree for Rs. 71 with further interest thereon from this date at 5 1/2 per cent. per annum. Each party will bear his own costs throughout.