Gamini Krishnayya & Ors Vs. Curza
Seshachalam & Ors  INSC 188 (31 August 1964)
31/08/1964 MUDHOLKAR, J.R.
DAYAL, RAGHUBAR SIKRI, S.M.
CITATION: 1965 AIR 639 1965 SCR (1) 195
R 1992 SC 195 (6A)
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 ActProvision applicable.
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 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. 
1 ~A.P. 485, approved.
Thiruvengadatha Ayyangar v. Sannappan Serval,
I.L.R.  Mad. 57, overruled.
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 courtupheld 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
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 defendant 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 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 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
(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
(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
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 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
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
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 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 construction which could be reasonably placed upon it.
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 commencement
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
Hem such a power is specifically given to the
courts under Chapter II. Now, the proviso to sub-s. (1) of s. 9 clearly 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
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 agriculturist 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 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
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 (1) I.L.R.  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
The next decision is Arunagiri Chettiar v.
Kuppuswami Chettiar(1). This is a judgment by one of the two Judges who was (1)
 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 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.  A.P. 532.
(2) I.L.R. 1942 Mad. 57.
(3)  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 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. Sankarapandia(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 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.  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.
ThereI.L.R.  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 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
In the result we dismiss the appeal with
Appeal dismissed (1) I.L.R.  2 A. P.
(2) I.L.R.  1 A. P. 485.
(3) I.L.R.  Mad. 1061.