Skip to content


N.A. Perianna Chettiar (Died) and ors. Vs. Soora Radhakrishna Chetti and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtChennai High Court
Decided On
Reported in(1979)1MLJ165
AppellantN.A. Perianna Chettiar (Died) and ors.
RespondentSoora Radhakrishna Chetti and ors.
Cases ReferredRaj Bahadur Seth Nemichand v. Seth Radha Kishen A.I.R.
Excerpt:
- v. sethuraman, j.1. the plaintiffs in o.s. no. 77 of 1970 in the court of the district judge of dharmapuri at krishnagiri are the appellants. they field a suit on a mortgage deed executed on 19th april, 1949 by one govinda chettiar whose sons are defendants 1 and 2 in the suit. the mortgage carried interest at the rate of 10 annas per cent per month. the mortgagors sold the hypotheca to the fourth defendant, who purchased the same on behalf of a joint family consisting of himself, his brother the fifth defendant and his father, the third defendant.2. the original mortgagee was n.a. subramania chettiar. he died in or about 1962 as an undivided member of a joint family consisting of himself, his brother the first plaintiff and his children, plaintiffs 2 to 6. originally the first plaintiff.....
Judgment:

V. Sethuraman, J.

1. The plaintiffs in O.S. No. 77 of 1970 in the Court of the District Judge of Dharmapuri at Krishnagiri are the appellants. They field a suit on a mortgage deed executed on 19th April, 1949 by one Govinda Chettiar whose sons are defendants 1 and 2 in the suit. The mortgage carried interest at the rate of 10 annas per cent per month. The mortgagors sold the hypotheca to the fourth defendant, who purchased the same on behalf of a joint family consisting of himself, his brother the fifth defendant and his father, the third defendant.

2. The original mortgagee was N.A. Subramania Chettiar. He died in or about 1962 as an undivided member of a joint family consisting of himself, his brother the first plaintiff and his children, plaintiffs 2 to 6. Originally the first plaintiff alone filed the suit. But later on, an objection being taken by defendants 3 to 5, who alone contested the suit, plaintiffs 2 to 6 were joined as plaintiffs.

3. Prior to the filing of the suit a sum of Rs. 5,578-2-0 had been paid by the purchasers of the hypotheca by a draft, dated 27th August, 1958. The plaintiffs claimed that there was a balance of Rs. 9,397-48 and the suit was for recovery of the said sum.

4. Defendants 3 to 5 adopted a common defence. They stated that when the fourth defendant purchased the hypotheca on 15th February, 1957, only a sum of Rs. 5,000 for principal and Rs. 578-2-0 for interest due and that this amount had been paid so that there was no further amount due to the plaintiffs. The objection was alto taken to the maintainability of the suit on the ground that there was a division in the joint family of the plaintiffs and that the first plaintiff alone could not have filed the suit without impleading the other plaintiffs. It is in response to this objection that plaintiffs 2 to 6 came on record. But by the time they were impleaded on 7th December, 1972, the claim on the mortgage would be barred by time.

5. The learned District Judge before whom the suit came up for trial held that the plea of defendants 5 to 5 that no interest was due on the mortgage bond on the date of sale apart from the sum of Rs. 578-2-0, which was paid, was not true. He further held that when the sum of Rs. 5,578-2-0 was paid on 27th February, 1958 the mortgagee was not competent to appropriate the sum first towards interest and then towards principal and in his view a sum of Rs. 4,190-73 would be due to the plaintiffs. He, however, dismissed the suit on the ground that the family of the plaintiffs became divided in status and that the first plaintiff could not by himself institute the suit. In his view, all the mortgagees should have joined in filing the suit and if any of them refused to join, they should have been impleaded as defendants and the emission to implead them within time would entail the dismissal of the suit. The result was the suit was dismissed and the plaintiffs have filed the present appeal.

6. Two contentions have been taken before me by the plaintiffs. The first is that there was no partition in the joint family of the plaintiffs in so far as the mortgage was concerned and that the first plaintiff was entitled to file a suit for recovery of the mortgage amount en behalf of the family, whose money was advanced. The second contention was that when the sum of Rs. 5,5782-0 was paid on 27th August, 1958, not only a sum of Rs. 578-2-0 was due as interest, but also further amounts and that the mortgagee was entitled to appropriate the amount of Rs. 5,578-2-0 paid first towards interest and then towards principal.

7. Thus, two questions arise for consideration. They are:

1. Whether there was a complete parition in the family of the plaintiff so that the first plaintiff could not represent the family the reafter?

2. Whether the sum of Rs. 5,578-2-0 paid by the defendants could have been first appropriated towards interest and then towards principal.

8. Order 34, Rule 1 of the Code of Civil Procedure provides that all persons having an interest either in the mortgage-security or in the right of redemption shall be joined as parties to any suit relating to the mortgage.

9. In Mohammtd Ismail Maracair and Ors. v. Doraisami Mudaliar and Ors. : (1959)2MLJ74 a Bench of this Court had to deal with a case where a mortgage had been executed in favour of one Rokia Bi. She died in 1937, leaving as her heirs four sons and one daughter One of the sons, Mohammed Sultan was adjudicated an insolvent The other heirs filed a suit to recover the mortgage debt only in regard to their 7/9th share in mortgage. Unfortunately they did not make either Mohammed Sultan or the Official Receiver, in whom his estate had vested on insolvency, as a party to the suit. On objection being taken by the defendants, the Official Receiver was brought on record at a time when the suit on the mortgage was barred by limitation. The question before this Court was whether the suit was maintainable and it was held that the persons claiming the mortgage right were the several heirs of Rokia Bi, who jointly got that right by devolution under the Jaw. As the principle is that there is indivisibility of the mortgage both in regard to the debt as well as in regard to the security, it was held that no suit could be filed to enforce a mortgage which entailed the disintegration of either of them. The addition of the Official Receiver after the period of limitation had expired would not render the suit competent on the date on which it was filed. The result was that the mortgage suit had to be dismissed. Thus, the principle is clear that if the amount of the mortgage debt is due to more than one plaintiff, then all of them would have to be parties to the suit. It is in this background that the facts of the present case have to be examined, to see if the integrity of the mortgage is affected here.

10. N.A. Subramania Chettiar, the mortgagee and N.A. Perianna Chettiar, the first plaintiff were undivided brothers. On the death of N.A. Perianna Chettiar in or about the year 1962, the family, according to the plaintiffs, continued undivided, though there was a partial partition with reference to the immovable assets belonging to the family. If so, the integrity of the mortgage would continue, and the first plaintiff could file the suit. It is well settled (hat a partition between coparceners may be partial either in respect of the property or in respect of the persons making it and it is open to the members of a joint family to make a division and severance of interest in respect of a part of the joint estate, while retaining their status as a joint family and holding the rest as the properties as a joint and undivided family. The earliest case on the point is that of Appovier v. Ram a Subba Aiyan (1866) 11 M.I.A. 75. In that ease Lord Westhury pointed out as follows:s

But when the members of an undivided family agree among themselves with regard to a particular property, that it shall thenceforth be the subject of ownership, in certain defined shares, then the character of undivided property and joint enjoyment is taken away from the subject-matter so agreed to be dealt with and in the estate each member has thenceforth a definite and certain share, which be may claim the right to receive and to enjoy in severalty, although the property itself has not been actually severed and divided.

11. In Ramalingam and Anr. v. Narayana Annavi and Anr. I.L.R.(1922) Mad. 489 : 1922 43 M.L.J. 428 : 49 I.A. 168 : I.L.R. 1922 P.C. 201 the question before the Privy Council was whether the outstandings were joint or divided, the rest of the property consisting of immovables and moveables being joist according to the concurrent findings of the Court. 1 he outstandings related to a money lending business. After extracting the above passage from Appovier alias Sitaram Iyer v. Rama Subba Iyer 11 M.I.A. 75 the Judicial Committee stated the law as follows:

It will be thus seen that, under the Hindu Law, it is open to the members of a joint family to make a division and severance of interest in respect of a part of the jointes state whilst retaining their status as a joint family and holding the rest as the properties of a joint undivided family.

12. The decision in Apposier v. Rama Subba Iyer 11 M.I.A. 75 was applied by the Supreme Court in Charandas Haridas v. Commissioner of Income-tax : [1960]39ITR202(SC) . In that case, only the interest of the family in certain managing agencies was the subject of division and it was held that after the division there was practically no undivided family in respect of those assets, the document relating to partial partition having effectively divided it. Per contra, it would follow that the family continues joint vis-a-vis other assets. It is pointed out in Mulla's Hindu Law, Fourteenth Edition at page 420, in paragraph 328(2) that where there is evidence to show that the parties intended to sever, then the joint family status is put an and to, and with regard to any portion of the property which remained undivided the presumption would be that the members of the family would hold it as tenants-in-common. When a partition is admitted or proved, the presumption is that all the properties were divided and a person alleging that family property, in the exclusive possession of one of the members after the partition, is joint and is liable to be partitioned, has to prove his case. The basis of the above principle can be explained as follows : The whole of the joint family property is owned by the joint family which can exercise its rights over any of those assets through its karta. It can alienate an item thereof without thereby affecting its status as a joint family. Just as it can alienate it to a third person, so also it can alienate to its own members. In other words, it can take it out of the class of joint family property and divide it among its members. Consequently, when a joint family divides among its members a part of the joint family assets without intending to sever the family, there is no disruption of the joint status and it remains a joint family. The only effect is that the joint family property is reduced to that extent.

13. It is in the light of these principles Exhibit A-5 may be examined. That was a family arrangement on 15th February, 1968 to which there were three parties viz., Perianna Chettiar, the first plaintiff, (2) Subramania Chettiar (the mortgagee) and (3) Pushpam Ammal, the wife of Kandaswami Chettiar, a deceased brother of Perianna and Subramania. In Exhibit A-3 it is recited that there were some misunderstandings amongst them and that with reference to the family properties they had made an arrangement as set out in the document. As regards the amounts due to the family, it is specifically mentioned that they would be the subject of division on a subsequent date, and that till then the outstandings would be looked after by Perianna Chettiar. Regarding the immovable properties it is mentioned in Exhibit A-3 that though they have been divided, the kist etc., would be paid in the same manner as before the said document. The family had house properties and shops. It is stated that there were difficulties in regard to them and that after the difficulties were removed, they would be the subject of partition. There are three schedules to the said document; but those schedules do not relate to the outstandings now under consideration. It is clear from the terms ol Exhibit A-3 that the parties did not effect a division as regards the outstandings now under consideration whatever may be the position in regard to the other immoveable proporties. It is specifically mentioned in the document that these outstandings would be subject of division on a subsequent date. The intention is thus clear that as far as these outstandings are concerned, the parties did not want to become divided.

14. There was a subsequent family arrangement under Exhibit A-8, dated 30th December, 1961 between the second plaintiff and the fifth plaintiff. It was not suggested for the respondents that the said document took us further from what follows from Exhibit A-3. The result is that there is no division between the first plaintiff and the other plaintiffs in regard to the outstandings due to the family and that, therefore, the first plaintiff could himself have maintained the suit for realisation of the mortgage as envisaged by Exhibit A-3 itself. The fact that plaintiffs 2 to 6 were subsequently impleaded in deference to the objection only on 22nd November, 1972 has absolutely no significance as far as the maintainability of the suit is concerned. The suit is thus properly filed and is in time.

15. The next question is as regards the appropriation of the amount paid on 27th August, 1958. Exhibit B-4, dated 15th February, 1957 is a registration copy of the sale deed executed by defendants 1 and 2 in favour of the fourth defendant. The sale is for a sum of Rs. 22,500. It recites various debts having to be discharged by the family of defendants 1 and 2. One of those debts is the mortgage debt now under consideration. After this purchase, the fourth defendant issued a notice on 27th August, 1958 under Exhibit A-1. It is stated therein that under the mortgage of 19th April, 1949 for Rs. 5,000 the principal amount of Rs. 5,000 was due and that as on the date of sale viz., 15th February, 1959 the interest had been paid and that there only a sum of Rs. 578-2-0 was due towards interest between 15th February, 1957 and 30th August, 1958, Even though there was some dispute as regards the interest amount, the fourth defendant stated that he was enclosing a drift for Rs. 5573-2-0, which might be accepted and the receipt therefor executed without prejudice to any objections. The relevant words in Exhibit A-1 are as follows.

16. The learned Counsel for the respondents contended that this is a clear case of payment of Rs. 5,000 for principal and Rs. 578-2-0 for interest and that the creditor was bound by this appropriation. The learned Counsel for the plaintiffs submitted that there was, in fact, no such appropriation and that the appropriation had not been accepted by or on behalf of the plaintiffs.

17. Section 59 to 61 of the Indians Contract Act deal with appropriation of payments. They run as follows:

59. Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted must be applied accordingly.

60. Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it, at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.

61. Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionately.

18. It has been held in several decisions that these provisions applied only to a case where more than one amount of debt is due from pne party to the other.

19. In Jia Ram v. Sulakhan Mal A.I.R. 1941 Lah. 386 , it was held that Section 59 to 61 embody the general rules as to appropriation of payments in cases where a debtor owes several distinct debts to one person and voluntarily makes payment to him and that they do not deal with cases in which principal and interest are due on a single debt, or where a decree has been passed on such a debt, carrying interest on the sum adjudged to be due on the decree. To a similar effect is a decision of the Bombay High Court in Harkisondas Lakshmidas v. Pyarethi : AIR1927Bom479 The present case being one of a single debt, the provisions of Section 59 to 61 have no scope for application.

20. The question has now to be considered in the light of the general principles applicable to appropriation of payments as found outside the statutory law of contracts. Parry's Banking Co. v. fates (1898) 2 Q.B.D 460 referred to the rule applicable to such cases as follows:

The defendant's counsel relied on the old rule that does no doubt apply to many cases, namely, that, where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable, is only common justice. To apply the sums paid to principal where interest has accrued upon the debt, and is not paid would be depriving the creditor of the benefit to which he is entitled under his contract.

21. This rule was applied by the Judicial Committee in Meka Venkatadri Appa Raja Bahadur Zamindar Garu and Ors. v. Raja Parthasarathy Appa Rao Bahadur Zamindar Garu (1921) 48 I.A. 150 : I.L.R. Mad. 570 : 40 M.L.J. 549 : 14 L.W. 25 : A.I.R. 1922 P.C. 233. In that case a partition was claimed in respect of two estates. The trial Court decreed the claim in regard to one and rejected it in regard to another. On appeal, the High Court granted a decree for partition in respect of both the estates. A receiver was appointed to be in charge of the estates, who made deposits of the income which were withdrawn as if the income from both the estates was divisible-There was an appeal to the Privy Council against the judgment of the High Court decreeing the claim for partition in both the estates. The Privy Council reversed the High Court's decision and restored the judgment of the District Judge. The result was that the claim for partition in regard to one of the estates stood negatived. However, during the pendency of the appeal before the Privy Council, the amounts realised by the Receiver had as stated earlier been withdrawn by the plaintiffs. The amounts so withdrawn had to be returned along with interest under orders of Court. On 15th December, 1916 the High Court directed that the whole amount should carry interest from the date of the order and that the monies received should be treated as though they had been received in respect of the principal and not in respect of the interest. It is this appropriation that was the subject of the appeal to the Privy Council. The Privy Council held that there was a debt due that carried interest and that the rule which was well-established in ordinary cases was that the money was first applied in payment of interest and then when the interest was satisfied in payment of the capital. It is in this connection that the decision of the Court of Appeal in Parrys Banking Co. v. Yates (1898) 2 Q.B.D 460 was referred to with opproval.

22. In Raj Bahadur Seth Nemichand v. Seth Radha Kishen AI.R. 1922 PC. 26 the same question arose on the following facts. There as a mortgage of 12th December, 1890 for Rs 30,000 carrying interest at 7 1/2 per cent. Upto 11th August, 1893 a sum of Rs. 11334-6-6 bad been paid. On of it Rs. 4,62-6-6 was credited to interest which was due upto that date, and the balance of Rs. 6,682 to principal. The result was that the principal of Rs. 30 000 was got reduced by Rs. 6,682 to Rs 23,318. There ,were subsequent payments. The plaintiff sued for realisation of the amount due under the mortgage and he contended that the payments made subsequently should be appropriated only towards interest. The defendant's point was that they should be credited only to the principal and the interest calculated on the balance alone. The Privy Council referred to the decision in Meka Venkatadri Appa Rao Bahadur Zamindar Garu and Ors. v. Raja Parthasarathy Appa Rao Bahadur Zamindar Garu (1921) 48 I.A. 150 : 40 M.L.J. 549 : A.I.R. 1922 P.C. 233 which had been rendered earlier, though reported later in A.I.R. Even before the Privy Council the reported drcision was available in Appa Rao Bahadur Zamindar Garu v. Raja Parthasarathy Appa Rao Bahadur Garu 26 C.W.N. 33. The legal position was stated as follows:

A creditor to whom principal and interest are owed is entitled to appropriate any indefinite payment which he gets from a debtor to the payment of interest. A debtor might in making a payment stipulate that it was to be applied only to...principal. If he did so, the creditor, need not accept the payment on those terms, but then he mutt give back the money or the cheque by which the money is preferred. If he accepts it, he would then be bound by the appropriation proposed by the debtor.

(Italic supplied).

23. On the strength of the above passage it was contended for the defendants that if the plaintiffs did not accept the draft for Rs. 5.578-2-0 by appropriating the sum of Rs. 5 000 to the principal and Rs. 578-2-0 to interest, then they must have returned the draft and that if they did not do so, the appropriation as suggested by the defendants would be binding on the plaintiffs. According to the defendants the plaintiffs would only be entitled to the balance of interest and as far as the principal sum was concerned, no interest would run after the said date.

24. The Supreme Court in Meghrqj and Ors. v. Mst. Btybai and Ors. : [1970]1SCR523 examined the problem relating to the rule of appropriation in context to the following facts : There was a firm of 10 partners in whose favour there was a mortgage for a sum of Rs 40,000. A suit was filed by the mortgagee and a decree was obtained There was an appeal against the suit to the High Court, which dismissed it subject to a slight modification There was a further appeal to the Supreme Court. During the pendency of that appeal 9 out of 10 partners of the firm migrated to Pakistan and were declared evacuees. The Custodian of Evacuee Property was impleaded as a party to the appeal filed by the mortgagors. The appeal itself was dismissed in August, 1958. Thereafter the sole partner, who remaned in India, applied for sale of the property. The Custodian of Evacuee Property resisted the application. The rights of the partners inter se were not decided in the said proceedings. In those proceedings diverse contentions were raised by the mortgagers to the effect that on proper account being taken, nothing was duo by them on the mortgage. The learned trial Judge passed a decree for Rs. 33,866-51 as principal and Rs. 746-30 as interest. The appeal to the High Court was unsuccessful, and on further appeal to the Supreme Court it was contended that certain payments had been made by the mortgagors with special directions that the amounts paid ware to be credited towards the principal and that if it was so done, then nothing would remain for payment. There was, however, no evidence on record to show that the mortgagees were informed that the amounts were deposited towards the principal amount due nor was there evidence that the mortgagees accepted the amount towards the principal. The amounts werelying in Court without being withdrawn for a long time. In considering the questions whether the stipulation that the amounts were paid towards the principal and the applications made to the Court were binding on the mortgagees in that case, the Supreme Court pointed out at page 163 as follows:

Unless the mortgagees were informed that the mortgagors had deposited the amount only towards the principal and not towards the interest, and the mortgagees agreed to withdraw the money from the Court accepting the conditional deposit, the normal rule that the amounts deposited in Court should first ha applied towards satisfaction of the interest and costs and thereafter towards the principal would apply.

(Italics added).

Reference was also made to the decision in Meka Venkatadri Appa Rao Bahadur Zamindar Garu and Ors. v. Raja Parthatarathy Appa Rao Bahadur Zamindar Garu A.I.R. 1922 P.C. 26.

25. This decision of the Supreme Court envisages that there must be an agreement on the part of the recipient or creditor in regard to the debtor's proposal for appropriation towards the principal. If there was no agreement, then it would follow that the debtor's directions or proposals would not be binding on the creditor. The decision of the Privy Council in Raj Bahadur Seth Nemichand v. Seth Radha Kishen A.I.R. 1922 P.C. has net been noticed, apparently because it was not cited. In the above-mentioned case it does not appear that their Lordships of the Privy Council were intending to lay down a law different from what had been laid down earlier in the case reported in Mkea Venkatadri Appa Rao Bahadur Zamindar Garu and Ors. v. Raja Parthatarathy Appa Rao Bahadur Zamindar Garu (1921) 48 I.A. 150 : I.L.R. Mad. 570 : M.L.J. 549 : 14 L.W. 25 : A.I.R. 1922 P.C. 233. The obligation to return the cheque or the draft, as the case may be, cannot be insisted upon as a matter of course in all eases, without involving an injustice to the creditor. For instance, if a large amount of simple interest along with principal was due from the debtor, then it would, if this view were correct, be open to the debtor to say that he paid only the principal so that further interest does not accumulate. Patent injustice would follow from this. Sections 39 to 61 are based on the rule of English Law enunciated in Clayton's case : [1970]1SCR523 . It is well-known that Clayton's case (1921) 48 I.A. 150 : I.L.R. Mad. 570 : M.L.J. 549 : 14 L.W. 25 : A.I.R. 1922 P.C. 233 is a case on multiple debts. In the ease of single debts, the rule that has been followed even under the English Law is that if a man indebted to another for principal and interest pays the money generally, it shall be applied in the first place to discharge the interest before any part of the principal is discharged. Sea Chaee v. Box 22 E.R. 1197. That ease was followed in Parry's Banking Co. Limited v. Yates (1898) 2 Q.B.D. 460. If the debtor pays the amount with any stipulation as if it is to be applied only towards the principal, than as pointed out by the Supreme Court in Meghraj and Ors. v. Mst. Bayabai and Ors. : [1970]1SCR523 , it should be a matter for agreement. In the absence of any agreement, as such, the unilateral assertion of the one side cannot deprive the other of his right to appropriate it for interest. The principle laid down by the Supreme Court has a greater binding force, being a constitutional obligation east on Courts and others. The stray observation of the Privy Council in Raj Bahadur Seth Nemichand v. Seth Radha Kishan A.I.R. 1922 P.C. 26 in so far as it is eat of step with the law laid down by the Supreme Court cannot be followed. Appropriation in the case of a single debt would be governed by agreement and not by the unilateral choice of the debtor. If there was no agreement the general rule of appropriation, first for interest and then towards principal would apply.

26. Even assuming that the decision of the Privy Council in Raj Bahadur Seth Nemichand v. Seth Radha Kishen A.I.R. 1922 P.C. 26 is to be literally applied the factual position here does not appear to be such as to involve the consequences of returning the draft, failure to do so resulting in the appropriation as made by the debtor having to be given effect to. I have already referred to Exhibit A-1. That merely records the assertions of the defendants that the interest had been discharged upto 15th February, 1957, and that only the balance of principal and interest after that date was due. It is only on that basis that the defendants despatched a draft for Rs. 5,578-2-0. Though it is stated that out of the sum of Rs. 5,578-2-0 Rs. 5,000 towards principal and the balance towards interest was to be appropriated, the facts show that the amount sent under the draft was only disintegrated for purposes of showing how the amount was calculated. I am unable to construe Exhibit A-1 as effecting an appropriation, as such of Rs. 5,000 towards principal and only the balance towards interest. Even as early as 10th October, 1978 the plaintiffs had rejected the assertions made in Exhibit A-4 and it was also made clear that the amount was being appropriated towards the interest and the balance towards the principal. The defendants left the matter there. It follows that Exhibit A-1 did not stipulate the kind of appropriation that is now envisaged in the contention taken for the defendants. In these circumstances, the conclusion of the Court below as if there was a valid appropriation binding on the plaintiffs is not correct.

27. There will be a preliminary decree as prayed for. Time to pay six months from this date. The appeal is allowed with costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //