1. The only question in this case is whether the debt under a mortgage executed on 8-7-1921 by defendants 1 and 2 and their father in favour of the plaintiff's predecessors was liable to be scaled down under the provisions of the Madas Agriculturists Relief Act. Defendants 10 and 11 in the suit are the appellants before us. They are the purchasers of items 3 and 7 of the mortgaged properties.
2. The facts necessary for a decision of this question are as follows: On 26-11-1913 one Srinivasahi Chetti and his two sons, the present defendants 1 and 2, executed a promissory note in favour of one Adinarayanayya and his son Admoorthayya, the plaintiffs' predecessors-in-title tor a sum of RS. 5000 carrying interest at 7 1/2 per cent, per annum.
On 8-1-1920 the same debtors executed another promissory note for a sum or Rs. 5000 in favour of the same creditors. The sum represented the principal due under the prior promissory note of 1913, the outstanding interest having been paid off by that date. On 8-7-1921 the same debtors executed two documents in favour of the same creditors. One was the suit, mortgage for Rs. 2705 and the other was a promissory note for Rs. 2500.
From the recitals in the mortgage deed, the basis of the splitting of the amount due under the promissory note of 1920 is apparent. The amount due on the date of the execution or the two documents in question was Rs. 5000 for principal and Rs. 205 for interest. What the partias did was to include half the principal amount, namely, Rs. 2500 and the outstanding interest Rs. 205 in one document, via., the mortgage, and the other half of the principal amount, Its. 2500. in the cromissory note. Both the mortgage deed and the promissory note carried the same rate of interest, 9 per cent.
3. The contention on behalf of the appellants is that in effect by the execution of the two documents, viz.. the suit mortgage and the promissory note, there was a renewal of the debt which could be traced to the debt due under the promissory note of 1913. The fact that the debt was included in two documents need not affect the application of the Explanation to Section 8 So the argument ran, On the other hand, the plaintiffs-respondents' contention was that there had been a splitting up of the previous debt and neither the original explanation to Section 8 nor explanation III as substituted by Act 23 of 1948 nor Explanation III as amended by Act 24 of 1950 nor Explanation 4 introduced by the said Act has any application to the facts of this case. Explanation 4 specifically provides for the case of splitting up of debts among the heirs, legal representatives or assigns of a debtor or a creditor and the execution of fresh documents in respect of different portions of such debt. Obviously, the Explanation does not apply to the present case.
4. No direct authority on the question which falls for decision in this case has been brought to our notice. Decisions of this Court likely to throw some light on the question were cited before us. We shall briefly refer to them.
Learned counsel for the plaintiffs-respondents cited the decision in -- 'Ramsubbier v. Rama Iyer', AIR 1941 Mad 356 (A). In so far as it is material, the facts in that case were as follows: There was a promissory note dated 14-8-1922 executed by P and his sons to one S. S died and subsequently there was a partition between the two sons of S. viz.. X and Y. After division, the debtors/ the sons of P, executed on 19-8-1925. two promissory notes, one to X for a part of the amount due under the original debt and another to Y for the balance. The question was whether the original debt could be said to be renewed or included in the two fresh documents which were executed in 1925 within the meaning of explanation to Section 8 as it stood then. The sums for which the two later promissory notes were executed aggregated to the original debt. Nevertheless, it was held that the Explanation did not apply.
Patanjali Sastri J., as he then was, delivering the judgment of the Bench, observed thus:
'It has been argued that in view of the definition of 'creditor' as including 'his heirs, legal representatives and assigns', the promissory notes taken by the sons of Srinivasa Aiyar though for distinct portions of the debt due under the original note executed in his favour must be regarded as a renewal of that debt or at all events as its inclusion in fresh documents. But it seems to us that the Explanation to Section 8 requires that the debt must continue in substance to be the same though the amount and the parties under the various documents given as vouchers for it need not be strictly identical. This requirement cannot be regarded as satisfied when the debt is divided among the heirs of the creditor and the debtor executes a separate instrument for a part of the debt in favour of each of such heirs.'
This decision certainly does not cover the present case. But, in our opinion, the principle embodied in the above observations appears to govern this case.
That principle is this, namely, that if the debt in substance continues to be the same, the fact that there are two documents where there was originally one as evidence of the debt and acknowledgment of the liability would not prevent the application of the explanation to Section 8. There may be two vouchers in respect of the same debt which originally was covered by only one voucher. That was exactly what happened in the present case. The debt, that is, the liability of the debtors to the creditors continued in substance to be the same. The same debtors were liable to the same creditors under the two documents, namely, the mortgage and the promissory note, and the total amount of that liability was the liability under the prior promissory note of 1920.
5. The next case cited by learned counsel for the plaintiffs was -- 'Tirupatirayoln v. Venkatasubba Rao' : AIR1950Mad287 . In that case, there were originally three debtors. Under a subsequent arrangement between the creditor and the debtors, one of the debtors undertook liability for half the amount due under the note and for that, amount executed a mortgage in favour of the creditor. The other two debtors executed a separate promissory note for the other moiety. The question was whether the splitting up of the old debt in that manner was a creation of two new debts or whether the two should be regarded as a renewal of the original debt.
Horwill and Balakrishna Aiyar JJ. considered that the question was settled by the authority or -- 'AIR 1941 Mad 356 (A)'. Some reliance was sought to be placed on the new explanation 3 added by the amendment in 1948. But the learned Judges pointed out that it had no material bearing on the question. They agreed that 'document' includes 'documents', but there should be in essence a renewal of the old debt. On account of the splitting of the debt between the debtors, there was no renewal within the meaning of the Explanation, because the continuity of the debt had been lost.
Our above remarks with reference to the case in --- 'AIR 1941 Mad 356 (A)' equally apply to this decision. Unlike in that case, in the present case, the continuity of the debt is not lost when the suit mortgage and the contemporaneous promissory note were executed by the same debtors in favour of the same creditors.
Learned counsel for the appellants brought to our notice the decision of Wadsworth and Patanjali Sastri JJ. in -- 'Hanumantha Rao v. Ramu Naidu', AIR 1943 Mad 338 (C). In that case there was a splitting of the liability under a promissory note, and two documents were executed for the making up of the total liability. But the contracts evidenced by the two documents differed from each other and from the original in their terms. It was held that neither of the fresh contracts could be treated as a renewal of a part of the preexisting liability. The learned Judges held that a partial inclusion of a portion of a pre-existing debt in one of several new contracts with different terms could not be regarded as a renewal of the previous debt. In their opinion, it was neither practicable nor desirable to treat the two separate contracts as if they formed together a single debt renewing the previous liability.
This case can be distinguished from the present on the ground that here we have two contracts with identical terms though in respect of one of them there is also security for the repayment of the amount covered by that contract. The learned Judges in -- 'AIR 1943 Mad 338 (C)' distinguished a prior decision of theirs in -- 'Sankara Aiyar v. Yagappan Servaj', AIR 1941 Mad 193 (D). In that case, a promissory note was executed by a mortgagor for the amount of interest due. A suit was subsequently filed on the promissory note and an application was made to scale down the decree. It was held that the promissory note must be taken to be a renewal of the previous liability to pay interest and must be scaled down under Section 8 as a debt for interest. The creditor in effect took a fresh document for a separable portion of the debt due under the document.
The principle of this decision, we think, should apply to this case as well. The mortgage was in renewal of one half of the liability in respect of the principal and the entire liability for the outstanding interest. The promissory note was for the balance of the principal money. The effect of the two documents was in substance a renewal of the previous debt covered by the promissory note of 1920, The continuity of the debt was not broken in any manner.
6. In this view, the second appeal is allowed and the appeal will be remanded to the lower appellate Court for disposal in accordance with this judgment. Costs of this appeal shall be fixed by the lower appellate Court on the relief granted to them and shall be paid to the appellants by the plaintiffs-respondents. Court-fee paid on the memorandum or second appeal will be refunded to the appellants.