Full Judgment Text
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PETITIONER:
GAMINI KRISHNAYYA AND OTHERS
Vs.
RESPONDENT:
CURZA SESHACHALAM AND OTHERS
DATE OF JUDGMENT:
31/08/1964
BENCH:
MUDHOLKAR, J.R.
BENCH:
MUDHOLKAR, J.R.
DAYAL, RAGHUBAR
SIKRI, S.M.
CITATION:
1965 AIR 639 1965 SCR (1) 195
CITATOR INFO :
R 1992 SC 195 (6A)
ACT:
Madras Agriculturists’ Relief Act (4 of 1938), ss. 9(1) and
13--Debt incurred after 1st October 1932 but before
commencement of Act Renewal after commencement of Act-
Provision applicable.
HEADNOTE:
Dealings between the family of the appellants (creditors)
and the family of the respondents (debtors) commenced in
1934. In September 1938, after the Madras Agriculturists’
Relief Act (4 of 1938) came into force in March 1938, a
promissory note was executed by the debtors (who are
agriculturists) in favour of the creditors for the amount
then found due. The debtors also agreed to pay interest at
the rate of 93/8 per cent per annum on that amount. In
arriving at the amount due to the creditors in 1951, the
debtors contended that the debt should be scaled down under
s. 9(1) of the Act, whereas the creditors contended, on the
basis that it was a debt incurred after the commencement of
the Act, that the only relief to which the debtors were
entitled, was calculation of interest under s. 13 of the
Act.
HELD : Though the transaction was entered into after the
commencement of the Act, since the original indebtedness
arose before the commencement of the Act but after October
1, 1932, s. 9(1) of the Act would be applicable. [210 D]
Under s. 7 of the Act every debt payable by an agriculturist
at the commencement of the Act shall be scaled down and
nothing in excess of the amount scaled down will be
recoverable; and this would in effect operate as a discharge
of the rest of the liability. Where, therefore, a suit is
instituted for recovery of a debt from an agriculturist, the
court will have to scale down the debt as provided in s. 8
if the debt was incurred before 1st October, 1932. If the
debt was incurred after that date, the Court will have to
apply the provisions of a. 9. In such a case, the debt
incurred after the commencement of the Act will not cease to
be a debt incurred after October 1, 1932, when it is a
transaction in renewal of a liability which arose prior to
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the commencement of the Act. As to future interest,
transactions prior to the commencement of the Act covered by
ss. 8 and 9, are governed by s. 12, and transactions after
the commencement of the Act, by s. 13. The object of the
Legislature in enacting s. 13 is only to provide for a
maximum rate of interest payable by agriculturists, on debts
incurred for the first time after the commencement of the
Act. [200 F-G; 201 C-E; 204 C-F].
Case law reviewed.
Nagabhushanam v. Seetharamaiah, I.L.R. [1961] 1 ˜A.P. 485,
approved.
Thiruvengadatha Ayyangar v. Sannappan Serval, I.L.R. [1942]
Mad. 57, overruled.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 618 of 1961.
196
Appeal by special leave from the judgment and decree dated
December 23, 1960 of the Andhra Pradesh High Court in Second
Appeal No. 653 of 1956.
K.Bhimasankaram, C. M. Rao and K. R. Sharma, for the
appellant.
A.V. V. Nair and P. Ram Reddy, for respondents Nos. 2 and
4.
The Judgment of the Court was delivered by
Mudholjkar J.The question that falls for decision in this
appeal by special leave from the judgment of the High Court
of Andhra Pradesh is whether a debtor who has executed a
promissory note after the coming into force of the Madras
Agriculturists’ Relief Act, 1938 (Madras Act 4 of 1938)
(hereafter referred to as the Act) in renewal of a debt
incurred prior to the commencement of the Act is entitled to
claim the benefit of S. 9 of the Act. The trial court-
upheld the debtor’s contention but in appeal the Subordinate
Judge rejected it and decreed the appellants’ suit in full.
The High Court held that the interpretation placed on the
relevant provisions of the Act by the Subordinate Judge was
erroneous, allowed the appeal and restored the decree passed
by the trial court.
Certain facts have to be stated in order to appreciate the
contentions of the parties. The plaintiffs who are the
appellants before us and the fourth defendant constituted a
Hindu joint family of which the first plaintiff was the
manager till the year 1944 when the fourth defendant
separated from the rest and the remaining members continued
to remain joint. On, September 14, 1938 the first defendant
as manager of the joint family consisting of himself, the
second and the third defendants executed a promissory note
in favour of the first plaintiff as manager ,of the joint
family consisting of the plaintiffs and the fourth defendant
for a sum of Rs. 9,620-2-9 and agreed to pay interest at the
rate of 9 and 3/8% per annum. This amount was found due to
the family of the plaintiffs and defendant No. 4 on foot of
dealings between that family and the family of defendants 1
to 3 which commenced in the year 1934.
In Original Suit No. 84 of 1949 brought by the fourth defen-
dant against the plaintiffs for partition of the family
property the first defendant deposited a sum of Rs.
13,576-0-0 on March 17, 1951 alleging that was the amount
due to the family of the plaintiffs and defendant No. 4 from
the family of defendants 1 to 3 on foot of the promissory
note of September 14, 1938. In
197
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arriving at this amount the defendants 1 to 3 took into
account the provisions of the Act and scaled down the
interest as permitted by s. 9(1) of the Act. The plaintiffs
disputed the correctness of the calculation whereupon the
defendants 1 to 3 withdrew their application but all the
same the plaintiffs withdrew the amount eventually. The
plaintiffs thereafter instituted the suit out of which this
appeal arises in which they claimed Rs. 3,858-13-3 and costs
on the basis of the calculations made by them and set out in
the memo accompanying the plaint.
Defendants 1 to 3 denied the plaintiffs’ claim and stated
that the amount deposited by them in the partition suit
having been withdrawn by the plaintiffs nothing more is due
to them from these defendants on the foot of the promissory
note dated September 14, 1938.
The trial court, as already stated, substantially upheld the
contention of the defendants 1 to 3 and passed a decree for
Rs. 92-2-2 in favour of the plaintiffs and the fourth
defendant and dismissed the suit with respect to the rest of
the amount. This decree which was set aside by the
appellate court has been restored by the High Court.
On behalf of the plaintiffs who are the appellants before us
it is strenuously contended by Mr. Bhimasankaram that the
relevant provision of the Act with reference to which a debt
like the one evidenced by the promissory note in suit can be
scaled down would be s. 13 and not s. 9 as held by the High
Court. the relevant portion of s. 13 reads thus :
"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 61 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 State Government may, by
notification in the Official Gazette, alter
and fix any other rate of interest from time
to time."
According to learned counsel the execution of the promissory
note itself brought into existence a debt and since the
promote was executed on September 14, 1938, the debt
evidenced by it must be regarded as having been incurred
after the commencement of the Act and consequently s. 13
alone will have to be borne in mind for the purpose of
calculating interest. Learned
198
counsel did not dispute the fact that the original
indebtedness of the respondents 1 to 3 commenced in the year
1934. But according to him the liability which was sought
to be enforced against them was the one arising from the
promissory note dated September 14, 1938 and, therefore, the
debt must be deemed to have been incurred on the date of the
execution of the promissory note in suit. Relying upon
certain decisions of -the High Courts of Madras and Andhra
Pradesh he contended, that the Act places debts incurred by
agriculturists into -three classes: (1) those incurred
before the 1st of October, 1932; (2) those incurred on or
after the 1st of October, 1932 but before the coming into
force of the Act and (3) those incurred after the coming
into force of the Act. Section 8 applies to the, first
category of debts, S. 9 to the second category of debts and
s. 13 to the third category of debts. Since, the argument
proceeds, all these provisions have reference to the date on
which a debt is incurred and since a debt can be incurred
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only once, it would follow that for the purposes of these
provisions the date on which the last transaction with
reference to a debt took place can alone be regarded as the
date on which the debt was incurred. The result of this,
according to him, would be that the provisions of s. 8 would
apply only when the last transaction was entered into before
the 1st of October, 1932 subject to the provisions of the
proviso to sub. s. (1) of s. 9; the provisions of s. 9 would
apply only to a case where the last transaction was entered
into after October 1, 1932 but before the commencement of
the Act; and the provisions of s. 13 would apply where the
last transaction was entered into after the commencement of
the Act. It is desirable to set out fully the provisions of
both ss. 8 and 9. They are as follows :
"Debts incurred before the 1st October 1932
shall be scaled down in the manner mentioned
hereunder, namely:-
(1)All interest outstanding on the 1st
October, 1937 in favour of any creditor of an
agriculturist whether the same be payable
under law, custom or contract or under a
decree of court and whether the debt or other
obligation has ripened into a decree or not,
shall be deemed to be discharged, and only the
principal or such portion thereof as may be
outstanding shall be deemed to be the amount
repayable by the agriculturist on that date.
(2)Where an agriculturist has paid to any
creditor twice the amount of the principal
whether
199
by way of principal or interest or both, such
debt including the principal, shall be deemed
to be wholly discharged.
(3) Where the sums repaid by way of
principal or interest or both fall short of
twice the amount of the principal, such amount
only as would make up this shortage, or the
principal amount or such portion of the
principal amount as is outstanding which ever
is smaller, shall be repayable.
(4)Subject to the provisions of sections 22
to 25 nothing contained in sub-sections (1),
(2) and (3) shall be deemed to require the
creditor to refund any sum which has been paid
to him, or to increase the liability of a
debtor to pay any sum in excess of the amount
which would have been payable by him if this
Act had not been passed.
Explanation I : In determining the amount
repayable by a debtor under this section,
every payment made by him shall be debited
towards the principal, unless he has expressly
stated in writing that such payment shall be
in reduction of interest.
Explanation II : Where the principal was
borrowed in cash with an agreement to repay it
in kind, the debtor shall, notwithstanding
such agreement, be entitled to repay the debt
in cash, after deducting the value of all
payments made by him in kind, at the rate, if
any, stipulated in such agreement, or if there
is no such stipulation, at the market rate
prevailing at the time of each payment.
Explanation III : Where a debt has been
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renewed, or included in a fresh document
executed before or after the commencement of
this Act, whether by the same or a different
debtor and whether in favour of the same or a
different creditor, the principal originally
advanced together with such sums, if any, as
have been subsequently advanced as principal
shall alone be treated as the principal sum
repayable under this section.
Section 9: Debts incurred on or after the 1st
October 1932 shall be scaled down in the
manner mentioned hereunder, namely:-
(1) Interest shall be calculated up to the
commencement of this Act at the rate
applicable to the
200
debt under the law, custom, contract or decree
of Court under which it arises or at five per
cent per annum simple interest, whichever is
less and credit shall be given for all sums
paid towards interest, and only such amount as
is found outstanding, if any, for interest
thus calculated shall be deemed payable
together with the principal amount or such
portion of it as is due:
Provided that any part of the debt which is
found to be a renewal of a prior debt (whether
by the same or a different debtor and whether
in favour -of the same or a different
creditor) shall be deemed to be a debt
contracted on the date on which such prior
debt was incurred, and if such debt had been
contracted prior to the 1st October 1932 shall
be dealt with under the provisions of S. 8.
(2)Subject to the provisions of sections 22
to 25, nothing herein contained shall be
deemed to require the creditor to refund any
sum which has been paid to him or to increase
the liability of the debtor to pay any sum in
excess of the amount which would have been
payable by him if this Act had not been
passed."
We will proceed to examine these provisions and the other
relevant provisions of the Act before we refer to the
decisions upon which reliance has beer% placed on behalf of
each of the parties to the appeal.
Chapter II of the Act deals with "Scaling down of debts and
future rate of interest. Section 7 appears to be the most
important provision therein because it is here that the
legislature has given a mandate that every debt payable by
an agriculturist at the commencement of the Act shall be
scaled down and that nothing in excess of the amount so
scaled down will be recover,able from such debtor. That
section runs as follows:
"Notwithstanding any law, custom, contract or
decree of court to the contrary, all debts
payable by an agriculturist at the
commencement of this Act, shall be scaled down
in accordance with the provisions of this
chapter.
No sum in excess of the amount as so scaled
down shall be recoverable from him or from any
land or interest
201
in land belonging to him; nor shall his
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property be liable to be attached and sold or
proceeded against in any manner in the
execution of any decree against him in so far
as such decree is for an amount in excess of
the sum as scaled down under this Chapter."
We will have to bear in mind the provision,% of this
section while construing the other provisions in Chapter II,
including those of sections 8, 9 and 13.
Where a suit is instituted before a court of law for
recovery of a debt from an agriculturist the court, having
regard to the document on foot of which the creditor has
instituted a suit was executed, finds that that document was
executed before October 1, 1932 it will have to proceed to
scale down the debt as provided in section 8. If it finds
that the debt was incurred after October 1, 1932 it will
have to apply the provisions of s. 9 of the Act. It is
these two broad categories into which debts have been
divided under the Act. But, Mr. Bhimasankaram argued, there
is also a third category and that is where a debt is
incurred subsequent to the commencement of the Act. In one
sense he is right because s. 13 also provides for the
scaling down of interest due on a debt incurred after the
commencement of the Act. But it has to be borne in mind
that a debt incurred after the commencement of the Act will
not cease to be a debt incurred’ after October 1, 1932. It
is common place that every provision of a statute has to be
given full effect and wherever possible the court should not
place that construction upon a provision which would tend to
make it redundant or to overlap another provision or to
limit its application in disregard of its general
applicability unless, of course, that is the only construc-
tion which could be reasonably placed upon it. If Mr.
Bhimasankaram’s contention is accepted we will have to limit
the application of s. 9 only to such of the debts incurred
after October 1, 1932 as were incurred prior to the
commencement of the Act. There is nothing in the language
of the section which would justify so limiting its
provisions. Nor again is there anything in section 13 which
would preclude the application of s. 9 to any case
whatsoever of a debt incurred after the commencement of the
Act. For, a debt may have been incurred after the com-
mencement of the Act in the sense that the last transaction
with respect to indebtedness may have been entered into,
after the commencement of the Act. But that transaction may
be in renewal of a liability which arose prior to the
commencement of the Act. Where such is the case it is
difficult to exclude the
202
applicability Of s. 9 of the Act. As to how interest is to
be calculated with respect to a debt incurred after October
1, 1932 the court cannot ignore the provisions of sub-s. (1)
of s. 9. It was, however, contended that where the last
transaction was subsequent to the commencement of the Act
the court has no power to go behind it and find out what
interest has been charged by the creditor up to the date of
the last transaction. No doubt, where the accounts have
been settled between the parties and on the basis of settled
accounts a new transaction is entered into between them,
normally speaking, the court has no power to enquire further
, except in the circumstances envisaged in some of the
provisions of the Contract Act. But then there are special
provisions like the Usurious Loans Act and the Act in
question which clothe the courts with the requisite power.
Hem such a power is specifically given to the courts under
Chapter II. Now, the proviso to sub-s. (1) of s. 9 clearly
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states that any part of the debt which is found to be a
renewal of a prior debt shall be deemed to be a debt
contracted on the date on which such prior debt was
incurred. Therefore, though a promissory note may have been
executed after the, commencement of the Act if it was in
fact in renewal of a -prior debt, it will hale to be treated
as if it was a debt incurred when the prior debt was
incurred. This appears to be the true meaning of the
proviso, though according to Mr. Bhimasankararn it deals
with a debt originally incurred prior to October 1, 1932.
In support of his contention Mr. Bhimasankaram relies upon
the concluding portions of the proviso which read
thus:.......... and if such debt had been contracted prior
to the 1st October 1932, shall be say that the use of the
conjunction ’and’ clearly shows that the dealt with under
the provisions of section 8." it is sufficient to proviso
applies as much to debts contracted prior to October 1st
1932 as to debts contacted after October 1, 1932 even though
they may have been incurred after the commencement of the
Act. If indeed it was the intention of the legislature to
limit the application of the proviso in the manner suggested
by Mr. Bhimasankaram it would have been easy for the
legislature to say "provided that any debt or any part of a
debt which is found to be the renewal of a debt contracted
prior to 1st October, 1932" instead of using the expression
"prior debt" in that Part of the proviso and then in the
concluding portion say "if such debt has been contracted
prior to 1st October, 1932". Then Mr. Bhimasankaram argued
that the proviso is to sub-s. ( 1 ) of S. 9 and should,
therefore, not be extended to embrace a debt renewed after
the commencement of the Act. To accept this argument would
give
203
rise to this curious position that a debt renewed after the
commencement of the Act would for the purposes of the Act
not be a debt incurred after October 1, 1932.
Another argument advanced by Mr. Bhimasankaram is that
unless a statute makes a provision to the effect that a debt
would in certain circumstances be deemed to be discharged,
the liability to pay it would still remain on the debtor and
that merely providing for the scaling down of interest is
not enough. In this connection he refers to the provision
in sub-s. (1) of s. 8. Under that provision interest
outstanding on October 1, 1937 in favour of any creditor of
an agriculturist shall be deemed to be discharged and only
the principal or such portion thereof as may be outstanding
shall be deemed to be the amount repayable by the agri-
culturist on that date. Sub-setion (2) of s. 8 further
provides that where an agriculturist has paid to the
creditor twice the amount whether by way of principal,
interest or both, the entire debt shall be deemed to be
wholly discharged. It is true that sub-s. (1) of s. 9 which
provides for scaling down of debts incurred on or after
October 1, 1932 does not use similar language. But it seems
to us that the difference in language would not make any
difference in the result because reading sub-s. (1) of s. 9
along with the provisions of s. 7 it is abundantly clear
that what the creditor would be entitled to obtain from the
court and what the court will have to do would be to award
interest only to the extent permissible by sub-s. (1) of s.
9 and this would in effect operate as a discharge of the
rest of the liability for interest under the contract
between the parties. Learned counsel further said that by
applying the provisions of sub-s. (1) of s. 9 to a debt
renewed after the commencement of the Act would result in an
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anomaly in that with respect to renewals of certain old
debts the entire liability for interest after October 1,
1932 will be wiped out whereas with regard to others the
liability would exist to the extent of 5% per annum, simple
interest. In our judgment no anomaly results because the
complete discharge of interest up to October 1, 1937 is
provided for only with respect to debts first incurred prior
to October 1, 1932 and this would be the position whatever
be the date of renewal of such debts. This would be the
consequence of the express terms of the proviso to sub-s.(1)
of s. 9 which makes the provisions of s. 8 applicable to
debts contracted prior to October 1, 1932 but renewed after
October 1, 1932 but not to debts incurred subsequent to that
date.
The last contention of Mr. Bhimasankaram is that there is
no provision for future interest corresponding to that in
sub-s.
204
(1) of S. 13 of the Act and, therefore, in so far as the
interest after the commencement of the Act is concerned, s.
13 alone will, have to be resorted to. As already stated,
Chapter IV divides debts into two broad categories and in so
far as debts incurred prior to October 1, 1932 are concerned
transactions in renewal of older ones have been brought
within the purview of s. 8 by adding thereto Explanation III
and transactions subsequent to October 1, 1932 within the
purview of s. 9 by the proviso to sub-s. (I). Having made
these provisions, there was nothing further that the
legislature need have done in so far as transactions in
renewal of debts contracted prior to the commencement of the
Act were concerned. As to future interest, in so far as
transactions prior to the commencement of, the Act were
concerned, the legislature has made a provision in s. 12 and
in so far as transactions after the commencement of the Act
are concerned it has made a provision in S. 13 . Indeed, the
object of the legislature in enacting s. 13 does not appear
to be any other than to provide for the maximum rate of
interest payable on debts incurred after the commencement of
the Act and since it follows S. 12 it seems that just as the
legislature divided debts into two categories it also
divided rates of interest payable after the commencement of
the Act into two categories. In section 12 it has
prescribed the maximum rate of interest payable on debts
scaled down under ss. 8 and 9 and in s. 13 has provided for
an identical maximum rate with respect to debts which could
not be scaled down under ss. 8 and 9 subject to the power of
the State Government to alter it from time to time. There
does not appear to be any other object such as creating a
separate or independent category of debts while enacting S.
13. Upon a plain construction of these provisions,
therefore, we see no difficulty in upholding the ultimate
decision of the High Court.
Coming now to the decisions which were referred to at the
bar, the earliest in point of time is Thiruvengadatha
Ayyangar v. Sannappan Servai(1). This incidentally is the
only decision which completely supports the appellants’
contention. In that case the debt was due on a promissory
note dated October 2, 1938 which discharged the prior
promissory note dated October 1, 1931. The District Munsiff
had applied the proviso to sub-s. (1) of s. 9 and treated
the debt as renewal of an earlier debt upon which interest
upto March 22, 1938 bad to be reduced to 5%. The High Court
pointed out that the scaling down machinery under that
section has the effect of only reducing interest up to the
date of the commencement of the Act and
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(1) I.L.R. [1942] Mad. 57.
205
said that it may reasonably be, inferred from this that the
legislature did not intend the section to apply to those
debts which had no existence before the last point of time
up to which the scaling down under the Act could be
effected. The High Court had not lost sight of the
provisions of s. 12 which empower the court to award future
interest after the commencement of the Act but it pointed
out that that section would not apply to a debt which was
incurred for the first time after March 22, 1938 and
therefore s. 9 would not be applicable to an earlier debt
renewed after March 22, 1938. The High Court then observed:
"It seems to us that, having regard to the
scheme of the Act, if it had been the
intention of the Legislature to introduce the
theory of renewals into the scaling down
operations in respect of debts incurred after
the commencement of the Act, some specific
provisions would have been made in this
behalf. We are of opinion that all debts
incurred after the common man of the Act,
whether they be in discharge of prior debts or
not, will fall only under section 13."
The answer to the view of the High Court would be that in
the first place every provision in the statute must be given
effect to unless by doing so any conflict with any other
provision of the Act would arise. In the second place we
cannot ignore the object of the legislature in enacting this
law which was to grant relief to the agriculturists and that
any beneficial measure of this kind should, as far as
permissible, be, interpreted in such a way as to carry out
the main object which the Legislature had in view. What we
have said earlier in our judgment is in consonance with
these principles and by interpreting ss. 9 and 13 in the way
we have done no violence will be done to the language of
either of these provisions. The basis of the decision of
the High Court appears to be that unless every transaction
entered into after the commencement of the Act can be
brought within the purview of s. 9, sub-s. ( 1 ) that
provision could not apply to it at all whatever may be the
date on which the original indebtedness arose. With
respect, we do not see any reason for so construing the two
provisions i.e., ss. 9(1) and 13. In our judgment it is
sufficient to say that full effect has to be given to both
the provisions and they are to be construed harmoniously.
The next decision is Arunagiri Chettiar v. Kuppuswami
Chettiar(1). This is a judgment by one of the two Judges
who was
(1) [1942] 2 M.I.J. 275.
supp.164-14
206
,a party to the earlier decision. That was a case in which
a claim -was made on behalf of a debtor for refund of excess
interest which was paid by the debtor to the creditor after
the commencement of the Act. Negativing the claim the
learned Judge ,observed:
"The two payments in 1938 and 1939 were
definitely appropriated towards interest at
the time when they were made. Neither the
debtor nor the creditor has the right to tear
up these appropriations by an unilateral act.
The Court has no power to re-appropriate the
payments to principal unless the Act contains
a provision for such re-appropriation. I am
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not aware of any such provision in Act IV of
1938."
Then the learned Judge observed that the only way in
which a debtor might get back money which he has paid after
the Act came into force in excess of the amount properly due
under the provisions of the Act would be by establishing a
right to a refund under the ordinary law on the ground that
the payment was made under a mistake. It will thus be seen
that the matter involved in this case is different from the
one before us.
The next decision is Mellacheruvu Pundarikakshudu v.
Kuppa Venkata Krishna Shastri(1). That was a suit based
upon a promissory note dated August 18, 1948 which was in
renewal of a -promissory note executed on August 14, 1945.
It was thus a case which was covered by S. 13 alone. The
learned Judges rightly held that under S. 13 a debtor cannot
trace back his debt to the, original debt which itself was
incurred after the Act came into force. In this connection
they relied on Thiruvengadatha Ayyangar’s case(2) as well as
on the decision in Krishanayya v. Venkata Subbarayudu(3).
In the latter case it was held: "It is we,]] settled that a
debt incurred after the commencement of Madras Act 4 of
1938, cannot be scaled down except in accordance with
section 13 of that Act." The words ’a debt incurred’ were
meant to include a transaction in renewal of a debt actually
contracted prior to the commencement of the Act. This is,
therefore, a statement which supports the appellants but in
point of fact the learned Judges were not concerned with a
pre-1932 debt and so they did not have to decide the kind of
point which arises in the case before us. While we agree
that s. 13 by itself does not enable a debtor to trace back
the debt to the original debt a further question can arise
whether upon the facts the provisions
(1) I.L.R. [1957] A.P. 532.
(2) I.L.R. 1942 Mad. 57.
(3) [1952] 1 M.L.J. 638.
207
of s. 9 are attracted to a debt incurred after the
commencement of the Act (in the sense that the last
transaction pertaining to it was subsequent to the
commencement of the Act) because the original liability
arose prior to the commencement of the Act. If s. 9 is
attracted the proviso to subs.(1) thereof which permits the
tracing back of certain debts can be resorted to if the
facts permit that to be done.
Then there is the decision in Mallikharjuna Rao v.
Tripura Sundari(1). That was a decision of a single Judge,
Rajamannar C. J., who held that where a promissory note is
executed for an amount in excess of what was due on the
basis of Madras Agriculturists’ Relief Act there is failure
of consideration in so far as the excess amount is concerned
and the plaintiff would not be entitled to more than what
would be due to him after applying the provisions of that
Act to the original debt and its renewals.
The next decision relied on is Nainamul v. B. Subba Rao
(2) The point which was referred to the Full Bench for its
opinion was as follows:
"Whether in the case of a debt incurred after
the Act came into force a payment made
expressly towards interest at the contract
rate,can be reopened and reappropriated
towards interest payable under the provisions
of s. 13 of the Act."
The question was answered by the Full Bench in the
affirmative. This decision thus substantially goes against
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the contentions of Mr. Bhimasankaram. The following
observations of Subba Rao C. J. (as he then was) may be
quoted in support of the view which we have taken:
"Unhampered by decided cases, I shall proceed
to consider the scope of the section having
regard to the aforesaid declared object of the
Act and the express words used in the section.
The object of s. 13 is to give relief to
agriculturists in the matter of interest in
respect of a debt incurred after the Act. If
such a debt is sought to be enforced, it is
caught in the net of the scaling down process.
At that stage, all the interest due on the
debt is reduced to the statutory level or, to
put it differently, whatever may be the
contract rate of interest, it is rep
laced by
the statutory rate. If the appropriations
(1) A.I.R. 1953 Madras 975.
(2) A.I.R. 1957 A.P. 546 F.B
208
made earlier are not reopened, the intention
of the statute would be defeated for the
contract rate prevails over the statutory rate
up to a stage.
Doubtless the courts are concerned with the
expressed intention of the legislature. The
crucial words in s. 13 are ’all interest due
on any debt’. The word ’interest’ is
qualified by two words ’all’ and ’due. If
interest outstanding alone is scaled down the
emphatic word ’all’ becomes otiose. If that
was the intention, the words ’interest
outstanding’ would serve, the purpose as well.
The word ’all’, therefore, cannot be ignored
and must be given a meaning. It indicates
that the entire interest, which a debt earned,
is scaled down."
The next decision referred to is that in Mansoor v. Sankara-
pandia(1). That was a decision of the Full Bench of the
High Court and the points which arose for consideration and
the decision of the Court are correctly summarised in the
following head note:
"Section 13 of the Madras Agriculturists’
Relief Act (IV of 1938) deals with debts
incurred after the Act. Under that section
there is no provision for any automatic
discharge of interest stipulated at a rate
higher than that prescribed therein. Such
excess interest is only made irrecoverable if
the creditor sought to enforce it in a court
of law. ’Mere being neither a prohibition
against a stipulation for payment nor an
automatic discharge of higher rates of
interest agreed to be paid by an agriculturist
debtor, it cannot be said that, when a
creditor in regard to a debt contracted after
the Act with the assent of his debtor added to
the principal loan the interest accrued in
terms of the contract and the debtor entered
into a fresh contract treating the
consolidated amount as principal for the fresh
loan, there would be anything illegal or even
a failure of consideration in regard to the
new loan. Such a new loan would constitute
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the debt incurred on the date of renewal and
if a suit is based on that debt, the
provisions of section 13 could be attracted to
that debt alone and not to the earlier debt of
which it was a renewal or substitution.
(1) I.L.R. [1959] Mad. 97.
209
The power to go behind a suit debt and to
apply the provisions of the Act for the
original liability is confined only to cases
falling under sections 8 and 9 of the Act.
But even in cases coming under section 13 it
would be open to the defendants to plead and
prove that the debt sued on could not form the
basis of an action or that there was a failure
of consideration in respect of it. Such a
defence is not by virtue of anything in or
peculiar to the Act, but one under the general
law. In cases where a debt was contracted
prior to the Act, but renewed after the Act by
one or series of successive documents, such
renewals including interest at the contract
rate, which had been statutorily discharged by
reason of the provisions of sections 8 and 9
of the Act, there would be a failure of
consideration to the extent to which the
interest was so discharged. This principle
will or can have no application in the case of
a debt incurred after the Act and renewed
thereafter. In those cases there would be no
failure of consideration, for no portion of
interest has been discharged by section 13, it
being open to the debtor to agree to pay the
higher stipulated rate of interest."
That again was a case where the original indebtedness was
subsequent to the commencement of the Act and, therefore,
stands on a footing different from the one before us. The
observations made by the court in the case upon which
reliance is placed on behalf of the appellants appear to
have been limited by the learned Judges to cases which fall
under s. 13 alone. Since, however, the learned Judges seem
to have accepted the view taken in Thiravengadatha
Ayyangar’s case(1) it is necessary for us to say that to
that extent we do not concur in the view taken by them. It
has to be remembered that where the plaintiff sues upon a
document executed after the commencement of the Act the
Court has to bear in mind also the provisions of s. 9
inasmuch as the document is one executed after October 1,
1932. If the pleadings show that the original indebtedness
commenced before the coming into force of the Act the court
will first have to deal with the document with reference to
the provisions which precede s. 13 of the Act. It is not as
if the Court has to shut its eyes to everything except the
fact that the document sued upon was executed subsequent to
the commencement of the Act. There-
I.L.R. [1942] Mad. 57.
210
fore, if the court finds that the original indebtedness
arose prior to the commencement of the Act either s. 8 or s.
9 will apply and it would not be relevant for it to consider
whether by executing a renewal after the commencement of the
Act the parties agreed to treat the interest accrued up to
the date of renewal as principal from the date of the
renewal of the debt. That consideration may be relevant in
cases which completely exclude the applicability of ss. 8
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and 9.
We were also referred to the decision in Punyavatamma. v.
Satyanarayana(l); Nagabushanam v. Seetharamaiah(2) and
Chellammal v. Abdul Gaffoor Sahib(3). In the first and the
third of these cases the original liability arose after the
commencement of the Act but in the second one it arose
before the commencement of the Act. We agree with the view
taken in the latter case that relief can be given to an
agriculturist in such a case under s. 8 or S. 9 as the case
may be.
Thus it would appear that wherever a transaction was
entered into after the commencement of the Act but the
original indebtedness arose before the commencement of the
Act, the preponderant view is that ss. 8 and 9 would not be
inapplicable. That, as already stated, is also our view.
In the result we dismiss the appeal with costs.
Appeal dismissed
(1) I.L.R. [1960] 2 A. P. 111.
(2) I.L.R. [1961] 1 A. P. 485.
(3) I.L.R. [1961] Mad. 1061.
211