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V. Sreenivasachariar and anr. Vs. Krishniah Chetty and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtChennai
Decided On
Reported inAIR1940Mad485; (1940)1MLJ860
AppellantV. Sreenivasachariar and anr.
RespondentKrishniah Chetty and ors.
Cases ReferredMottai Meera v. Abdul Kadhir Rowther
Excerpt:
.....also the sum of rs. apart from the provisions of the act it seems to me that the contention of the decree-holder in regard to the appropriation of moneys paid by the judgment-debtors in the manner alleged is well-founded and if at all what was outstanding on the 1st october, 1937, was the interest due and payable from september, 1936, to 1st october, 1937. but mr. if he omits to indicate his intention and there are no circumstances from which his intention can be inferred, he loses his right to have the amount appropriated in the manner he would like to have and the creditor has got the tight to appropriate the amount in the manner best advantageous to him; there are moneys that are received without a definite appropriation on the one side or on the other, and the rule which is well..........amount due with interest from 1st october, 1937, to 30th november, 1938, is rs. 4,804-10-0. the decree-holder has not filed objections to the report of the official referee; but the judgment-debtors have. before dealing with the contentions raised on their behalf it is necessary to state a few facts which are not in dispute. the suit was based on a mortgage dated 30th august, 1925, in favour of one m. a. thirunarayanachariar. the principal amount secured thereunder was rs. 7,500, the rate of interest being 9 per cent, per annum. thirunarayanachariar assigned the deed of mortgage in favour of one jagannadham chettiar on the 3rd may, 1932. jagannadham chettiar filed a suit claiming a sum of rs. 11,608 for principal and interest thereunder. a preliminary decree was passed by my learned1.....
Judgment:

Venkataramana Rao, J.

1. This is an application under the Madras Agriculturists' Relief Act (IV of 1938) and the two substantial reliefs prayed for are (1) that the sale of the property held in execution of the decree on 5th November, 1937, of lands forming Lot No. 2 of A schedule to the plaint be set aside and (2) that the mortgage debt be scaled down under the provisions' of the Act and satisfaction of the debt entered up. So far as the sale is concerned, it is agreed that it should be set aside and I accordingly set it aside.

2. The main contest centred on the second relief to be given, to the judgment-debtors under the Act. By an order dated 22nd September, 1938, the matter was referred to the Official Referee to report on the following matters:

(1) Whether the applicants are agriculturists within the meaning of the: Act;

(2) The debts and the dates on which they were incurred and the amount of principal and interest agreed;

(3) Amounts with dates of payments in respect of (a) principal and (b) interest; and

(4) Whether any amount is still outstanding, and, if so, how much in respect of principal and how much in respect of interest.

3. The Official Referee has submitted his report to the effect that the applicants are agriculturists within the meaning of the Act. His finding in regard thereto is not challenged. He has annexed a statement to his report giving the details called for. His finding as to the amount due on 1st October, 1V37, is Rs. 4,490-5-0 for principal and the amount due with interest from 1st October, 1937, to 30th November, 1938, is Rs. 4,804-10-0. The decree-holder has not filed objections to the report of the Official Referee; but the judgment-debtors have. Before dealing with the contentions raised on their behalf it is necessary to state a few facts which are not in dispute. The suit was based on a mortgage dated 30th August, 1925, in favour of one M. A. Thirunarayanachariar. The principal amount secured thereunder was Rs. 7,500, the rate of interest being 9 per cent, per annum. Thirunarayanachariar assigned the deed of mortgage in favour of one Jagannadham Chettiar on the 3rd May, 1932. Jagannadham Chettiar filed a suit claiming a sum of Rs. 11,608 for principal and interest thereunder. A preliminary decree was passed by my learned1 brother Lakshmana Rao, J., declaring that the sum due and payable by the judgment-debtors on the 31st January, 1935, was Rs. 11,139-6-0 made up as follows: Rs. 7,500 the principal sum secured under the mortgage, Rs. 3,301-14-0 the interest due up to 31st July, 1934 and Rs. 337-8-0 the interest due up to 31st January, 1935. He directed the costs to be taxed and the amount taxed was found to be Rs. 1,515-8-0. He ordered and decreed that if the defendants failed to pay the sum of Rs,. 11,139-6-0 and also the sum of Rs. 1,515-8-0 with interest at 6 per cent, per annum from the date of taxation on or before the 31st January, 1935, the plaintiff would be at liberty to apply for a final decree for the sale of the mortgaged properties and that on such application the mortgaged properties might be sold and the net proceeds applied in payment of the said sums together with subsequent interest at six per cent, per annum and such further costs as might be allowed to the plaintiff by the Court. The defendants committed default in the payment of the said amount as directed by the decree and a final decree was passed on 12th February, 1935. The plaintiff brought the properties to sale and the sale proclamation which was published on 3rd May, 1935, stated that there would be due tinder the decree on 9th August, 1935, a sum of Rs. 13,077-1-11 made up as follows: Rs. 11,139-6-0 the amount decreed, Rs. 1,515-8-0 the taxed costs, Rs. 422-3-11 interest on the amount decreed and costs at six per cent, per annum up to 9th August, 1935. Before the property was actually sold, at the instance of the judgment-debtors an order was passed by the Court giving leave to raise a sum of Rs. 8,500 on the mortgage of one of the properties, namely, house and ground No. 3, Singarachari Street, Triplicane. This, order was passed on the 9th October, 1935, and in pursuance of the said order on the 14th November, the defendants executed a mortgage in favour of the United India Life Assurance Co., and thereby paid a sum of Rs. 8,500 to the plaintiff in part satisfaction of the amount due tinder the decree. On the 13th August, 1936, another sum of Rs. 500 was paid to the plaintiff under orders of Court. It was brought to the notice of the Court that on 19th June, 1936, the plaintiff herein had assigned the decree in favour of one Bysani Krishnayya Chetti and by an order dated 20th November, 1936,the said Bysani Krishnayya Chetti was brought on record as the transferee decree-holder. On the 16th April, 1937, the decree-holder entered part satisfaction of the decree and after doing so applied to bring the properties to sale for the balance still due to him. From the sale proclamation, which was published on the 16th September, 1937, it will be seen that after giving credit to the sum of Rs. 9,000 already paid as aforesaid, the decree-holder claimed Rs. 4,725-4-0 as the balance that would he due and payable to him on the 4th November, 1937. The contention of the defendants is that the sum of Rs. 9,000 paid by them should be adjusted as follows in accordance with the provisions of the Act, namely, Rs. 1,515-8-0 towards the costs of suit and the balance of Rs. 7,484-8-0 towards the principal and the debt if so scaled down will be found to be completely discharged. The contention of the decree-holder, which has been accepted by the Official Referee, is that that the sum of Rs. 9,000 has been adjusted by him first towards the costs of suit, secondly, towards all interest which accrued up to September, 1936, and the balance that remained after such appropriation was appropriated to the principal amount, and it was after making such appropriation the claim of Rs. 4,725-4-0 as being due to him in the proclamation of sale was made. He therefore contends that all interest until September, 1936, was paid off and what remained outstanding on the 1st October, 1937, was only the interest from September, 1936, to 1st October, 1937, which only could be wiped out if the provisions of the Act are applicable; and if the interest is so wiped out according to him, the balance due under the decree would be Rs. 4,500 or thereabouts. As already stated the finding of the Official Referee is that the amount of the principal due on the 1st October, 1937, is the sum of Rs. 4,490-5-0. The decree-holder has also raised an alternative contention that the provisions of Section 8 of the Act are not applicable to the case and that if at all Section 9 only would apply. Apart from the provisions of the Act it seems to me that the contention of the decree-holder in regard to the appropriation of moneys paid by the judgment-debtors in the manner alleged is well-founded and if at all what was outstanding on the 1st October, 1937, was the interest due and payable from September, 1936, to 1st October, 1937. But Mr. Panchapakesa Sastri contends that there is nothing to indicate that the decree-holder has appropriated the amounts towards interest since he credited the amounts paid towards the total amount due without indicating whether the amounts paid were appropriated towards principal or interest and the defendants are entitled now to fall back upon the provisions of the Act and contend that interest must still be deemed to be outstanding within the meaning of Section 8 of the Act and the provisions of the Act must be given effect to. The question here is whether there has been a valid appropriation by the decree-holder as contended for by him. The law as to appropriation is clear. In the case of a debt of the nature in question, it is the duty of the debtor to indicate when he makes a payment 'what his intention is, namely, whether the amount paid should first be appropriated towards principal or towards interest and then the balance towards the principal. If he omits to indicate his intention and there are no circumstances from which his intention can be inferred, he loses his right to have the amount appropriated in the manner he would like to have and the creditor has got the Tight to appropriate the amount in the manner best advantageous to him; he can either appropriate the amount towards interest in the first instance and the balance towards the principal or the entire amount towards the principal. But when there is no declaration by the creditor of his intention in what manner he appropriates and an appropriation is made, the law presumes that it has been made in the manner most advantageous to himself. In Venkatadri Appa Rao v. Parthasarathy Appa Rao (1921) 40 M.L.J. 549 : L.R. 48 IndAp 150 : I.L.R. 44 Mad. 570 , their Lordships of the Judicial Committee at page 573 lay down the rule thus:

There is a debt due that carries interest. There are moneys that are received without a definite appropriation on the one side or on the other, and the rule which is well established in ordinary cases is that in those circumstances the money is first applied in payment of interest and then when that is satisfied, in payment of the capital.

4. As further pointed out by them citing a passage from the judgment of Lord Justice Rigby in the case of Parr's Banking Co. v. Yates (1898) 2 Q.B. 460 , 'that rule where it is applicable, is only common justice.' In Venkatadri Appa Rao v. Parthasarathy Appa Rao (1921) 40 M.L.J. 549 : L.R. 48 IndAp 150 I.L.R. 44 Mad. 570 the facts were as follows: The suit was for partition of a certain estate, the plaintiff claiming a third share therein, fie was declared entitled to that share by the High Court. There was an appeal to the Privy Council from that decree by the adverse claimants. Pending the decision of the Privy Council in pursuance of the order of the High Court the plaintiff drew various sums of money appertaining to his share from the receiver appointed by the Court. The Privy Council reversed the decree of the High Court and in consequence the plaintiff became obliged to restore the moneys he had received and there was an order for restitution with interest by the Court. Various sums were paid by the plaintiff in pursuance of the order without indicating whether it was for interest or for principal. The successful claimants who received the moneys did not expressly declare whether they were appropriating the same for interest or for the principal, but they made out an account showing how they appropriated it by crediting the sums paid with interest thereon and striking out the balance due. It was contended that as each sum paid by the plaintiff was charged with interest by the claimants it must be deemed that money was appropriated by them towards the principal and it was not open to them to Contend that they appropriated the moneys paid first towards interest and then towards the principal. The High Court acceded to the contention, but it was negatived by their Lordships of the Privy Council and the following remarks of theirs are instructive:

The reason given by the learned Judges for their judgment was that they regarded the payments already made as shown in an account filed by the defendants in the District Court on the 25th August, 1915, as payments that h5d in fact been appropriated by the defendants as against principal and that from such appropriation there was no opportunity for them to recede. The account referred to is set out in the record in these proceedings and it shows that as each sum of money was received it was charged with interest at the rate of 9 per cent, and carried forward until the end of the year, when the total amount so found was credited as against the total amount which was due. At no time did the sums so credited do more than cover the claim for interest, and it therefore seems impossible to understand why it was that the money received was regarded as definitely appropriated in respect of the principal (pages 572 and 573).

5. Where therefore at the time of the payment by a debtor there is an amount due towards interest and the creditor after appropriating the amount paid towards the total amount due to him towards interest and principal, claims the balance, he must be deemed to have appropriated the amount first in payment of interest and then in payment of the principal. A recent decision of their Lordships of the Privy Council reported in Het Rambodh Raj v. Aya Ram-Tola Ram (1937) 47 L.W. 606 lends support to this view. In that case during the course of execution of a decree there was a compromise between the decree-holder and the judgment-debtor, which was recorded under Order 21, Rule 2 and Section 47, Civil Procedure Code. Under the terms of the compromise it was found that the principal amount due and payable under the, decree was Rs. 84,000 that interest due thereon was Rs. 24,400 and costs of execution Rs. 307-6-9, in all, a total sum of Rs. 1,08,707-6-9. The judgment-debtor paid a sum of Rs. 8,000 and the balance that was found due and payable under the compromise was fixed at Rs. 1,00,707-6-9 and this sum was agreed to be paid in seven instalments with a certain rate of interest on theV principal sum. Two instalments were paid under the compromise and the third instalment with interest was not paid. Thereupon the decree-holders applied for execution. One, of the contentions raised by the judgment-debtor was that the decree was barred by limitation. In answer thereto the decree-holder relied upon a payment of Rs. 825 made on a prior date, namely, 15th February, 1929. If that payment was taken to be one for interest as such within the meaning of Section 20 of the Limitation Act, the execution application would not be barred by limitation. In dealing with this question their Lordships observed as follows:

The payment was made and necessarily made in respect of principal and interest. It was therefore a payment of interest on a debt as such by the person liable to pay the debt. There could be little doubt in view of the many subsequent payments that a fresh period of limitation could if necessary be shown to start at a much later date - but a period commencing on the 15th February, 1929, is sufficient to cover the present application.

6. The application was not therefore barred by limitation. This case is therefore an authority for the position that where principal and interest is due and a payment is made by a debtor without indicating whether it is for interest or for principal it must be deemed to be a payment towards interest as such. It follows that when appropriation in such circumstances is made by a creditor and a balance is claimed, it must be taken that he has appropriated the payment made first towards interest and then towards the principal. If this principle is applied there can be no question that the contention of the decree-holder is well founded. It cannot be denied that an appropriation has been made by the decree-holder because it is only the balance after appropriation that has been claimed; and he has also entered part satisfaction of the decree which means that the debt to the extent mentioned in the application for satisfaction has been wiped out. Mr. Panchapakesa Sastri contended that in such circumstances the amount paid should at least be appropriated proportionately towards principal and interest but he has not been able to cite any authority in support of his contention.

7. The alternative contention raised on behalf of the decree-holder relates to the non-applicability of Section 8 of the Act to the present case. His contention is that the decree having been passed after 1st October, 1937, it is governed by Section 9 of the Act and that principal sum within the meaning of the Act is the sum of Rs. 11,000 and odd. There is a good deal of force in the, contention advanced. The Act does recognise a decree debt as a species of debt and it cannot be disputed that a decree debt is in law so. A debt of record has always been considered to be the highest form of debt on which under the, old English law an action of debt was maintained. Vide Hodsoll v. Baxter (1858) Ellis, Blackburn and Ellis : 884 : 120 E.R. 739. Even now if the debt is evidenced by a foreign judgment an action is maintainable thereon. Clause (iii) of Section 3 of the Act clearly says that debt means any 'liability in cash or kind, whether secured or unsecured, due from an agriculturist, whether payable under a decree or order of a civil of revenue court'. Section 7 relates to all debts including decree debts. The word 'incurred' in Section 9 of the Act, as pointed out by Varadachariar, J., in Mottai Meera v. Abdul Kadhir Rowther : AIR1939Mad471 is not confined only to contractual liabilities but even to liabilities arising under a decree of Court. Where the Court consolidates both principal an I interest up to the date of the decree and awards interest thereon, as it usually happens in the case of mortgage decrees, it may be contended that the aggregate of the principal and interest is the principal payable under the decree but in view of the fact that the decree-holder not having objected to the finding of the learned Official Referee has accepted the figure as arrived at by him, I do not think it necessary to go into this question. I must remark that contentions like the one advanced are rendered possible by the language of the various provisions of the Act. The Act is one of the most ill-drafted enactments now existing on the statute book. Every section bristles with difficulties and it is no wonder that the Act has become a fruitful source of litigation.

8. In the result the report of the Official Referee is confirmed and the decree-holder is given leave to proceed with the execution for the amount of Rs. 4,804-10-0 as found by the Official Referee as due on 30th November, 1938 and subsequent interest. As regards costs I think the plaintiff is entitled to the costs of the proceedings before the Official Referee and before me, which I fix at Rs. 200.


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