K. V. Srinivasa Ayyangar Vs. P. N.
Venkatasubramania Iyer & Ors  INSC 4 (6 January 1966)
06/01/1966 MUDHOLKAR, J.R.
CITATION: 1966 AIR 1247 1966 SCR (3) 203
Madras Agriculturists' Relief Act (4 of
1938), s. 8 Explanation III-Scope of.
In 1932, the appellant renewed a promissory
note executed in 1930 by his brother in favour of N, the -father of the
respondents, for Rs. 1,000. The promissory note was renewed in 1937, 1940 and
1944 for the principal amount together with interest. The last 3 promissory
notes were taken in the name of a Bank which was admittedly under the control
of N. In 1946, at the instance of the appellant, N paid off the debt due from
the appellant to the Bank and obtained a promissory note in his own favour for
Rs. 10,600, the amount then due. As no repayment was made, N instituted a suit
on the original side of the High Court which was decided by a judge sitting
singly. Applying Explanation III to s. 8 of the Madras Agriculturists' Relief
Act, 1938, he gave a decree only for Rs. 1,350 together with interest at 6 1/4
% from the date of the Act. In appeal therefrom under the Letters Patent, the
High Court held that the respondents were entitled to a decree for the entire
amount of Rs.
10,600 with interest at 6 1/4-%.
Before this Court, it wag contended that,
under the Explanation as amended by Act 24 of 1950, once it was found that a
document was in renewal of a previous debt the benefit of s. 8 would be
available was promisor even if the creditor in whose name the debt was renewed
was different from the one who had originally advanced the loan and also even
where the original debtor was different from the one who executed the document
under which the debt was renewed.
HELD : Though the requirement of the
Explanation pertaining to the debtor was satisfied in the sense that the same
person had been the debtor, the requirement with respect to the creditor was
not satisfied. The benefit of the Act would be available to a debtor if the
renewal was in favour of: (a) the same creditor; or (b) any other person acting
in his behalf; or (c) any other person acting in his interest. Since the Bank
has an independent existence, even though the controlling interest herein was
with N, it would not be correct to say that there was identity between him and
the Bank. Neither was there any material to show that the Bank acted on N's
behalf when the appellant executed the promissory notes in favour of the Bank;
and, even if the words "in the interest of" mean "for the
benefit of" it cannot be said that the Bank, in obtaining the promissory
notes in renewal of the original debt was acting in N's interest. Therefore,
the Explanation was not available to the appellant. [212 D-G; 213 A-E]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 543 of 1963.
Appeal from the judgment and decree, dated
October 10, 1958 of the Madras High Court in O.S. Appeal No. 1 of 1954.
209 T. V. R. Tatachari, for the appellant.
M. Sundaram, K. Jayaram and R. Thiagarajan,
for respondent No. 1.
The Judgment of the Court was delivered by
Mudholkar, J. This is an appeal from a judgment of the Madras High Court
modifying the decree passed by a single Judge of that High Court in a suit for
recovery of money.
Admittedly the appellant had executed a
promissory note at Madras for a sum of Rs. 10,600 in favour of one Narayana
Iyer, since deceased, on January 28, 1946 and agreed to pay interest on that
amount at 12% p.a. It is also admitted that no repayment was made by the appellant.
Narayana Iyer, therefore, instituted a suit against him for recovery of a sum
of Rs. 14,402-5-0, which includes interest upon the sum of Rg. 10,600.
The appellant contended that the promissory
note was only a renewal of a previous promissory note which itself as well as
three earlier promissory notes were in renewal of the original promissory note
for Rs. 1,000 executed in the year 1930. According to the appellant that
promissory note was executed by his brother but was renewed by the appellant
himself in the year 1932; that this promissory note was renewed on January 11,
1937 by him and that at that time Narayana Iyer had given an additional amount
of Rs. 350 to him. The amount for which his promissory note was executed was
Rs. 4,000 and it included interest on the first advance up to that date.
Narayana lyer, however, instead of taking a promissory note in his own name
took it in the name of General Bank which is a private limited company which
admittedly was under his control. The debt was renewed in favour of the General
Bank on January 3, 1940 by executing a fresh promissory note for Rs. 5,650 on
that date and again on September 13, 1944 when it was renewed by obtaining a
promissory note for Rs. 9,275. According to the respondents Narayana lyer paid
off the dues to the General Bank at the instance of the appellant and obtained
a promissory note in his favour for Rs. 10,600. As the amount was not paid,
Narayana lyer instituted the suit out of which this appeal arises. He, however,
died during the pendency of the suit and is now represented by his sons, the
respondents. Upon the aforesaid facts and the further fact that the appellant
is an agriculturist he claimed that he was entitled to the benefits of the
Madras Agricul- 210 turists Relief Act IV of 1938. He claimed that under the
provisions of that Act he was entitled to have the debts scaled down.
His plea was upheld by the learned single
Judge of the High Court who held that the respondents after scaling down the
interest as provided in the Act were entitled to a sum of Rs. 1,350 together
with interest thereon at 6 1/4% from March 22, 1938 up to the date of the
decree. In the appeal preferred by the respondents under the Letters Patent the
appeal court held that the respondents were entitled to a decree for the entire
amount for which the promissory note was executed, that is, Rs. 10,600 together
with interest thereon at 61% p.a. In coming to this conclusion the appeal court
placed an interpretation on explanation III to s. 8 of the Act different from
that placed by the learned single Judge.
Section 7 of the Act provides that all debts
payable by an agriculturist at the commencement of the Act shall be scaled down
in accordance with the provisions of Chapter II. The Act received assent of the
Governor General on March 11, 1938 and was first published in the Official
Gazette on March 22, 1938 and must be deemed to have come into force as from
the former date. Section 8 provides for the scaling down of debts incurred
before December 1, 1932. Sub-section (1) thereof says that all interest
outstanding on the 1st of October, 1937 against an agriculturist shall be
deemed to be discharged and only the principal outstanding on that date shall
be deemed to be the amount repayable by the agriculturist debtor. Sub-sections
(2), (3) and (4) of that Act deal with classes of cases in which payments have
been made from time to time by the debtor to the creditor. It is not necessary
to refer to them because even according to the appellant he had not made any
repayments before the execution of the promissory note in the suit. It is
common ground that explanations 1, II and IV have no application to the present
case. The only explanation which is relevant is explanation III. This
explanation has been twice amended.
The original explanation was as follows :
"Where a debt has been renewed or
included in a fresh document in favour of the same creditor the principal
originally advanced by the creditor together with such sums, if any, as have
been subsequently advanced as principal shall alone be treated as the principal
sum repayable by the agriculturist under this section." 211 The amending
Act 23 of 1948 substituted for it the following "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." This was amended by Madras Act 24 of 1950 and now runs thus :
"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 debtor or by his heirs, legal representatives or
assigns or by any other person acting on his behalf or in his interest and
whether in favour of the same creditor or of any other person acting on his
behalf or in his interest, the principal originally advanced together with such
items, if any, as have been subsequently advanced as principal shall alone be
treated as the principal sum repayable under this section." It is common
ground that it is the explanation which was amended by Act 24 of 1950 which
applies to the case before us. It will be seen that under the original
explanation the benefit of sub-s. (1) of s. 8 was available only in cases where
the debt had been renewed in favour of the same, creditor as the one from whom
it was originally obtained. It is contended on the appellant's behalf that by
virtue of the amendment of 1948 the benefit of the provision was available even
if the creditor in whose name the debt was renewed was different from the one
who had originally advanced the loan and also even where the original debtor
was different from the one who executed the document under which the debt was
It is pointed out that the second amendment
was necessitated by reason of certain decisions of the Madras High Court
holding that the words "different creditor" in Explanation III to s.
8 did not include a third party in whose favour the debtor had executed a
document renewing an earlier debt.
According to learned counsel this
interpretation defeated the object which the Legislature had in view in
amending Explanation III in 1948 and that, therefore, that explanation was
amended a second time to make it 212 clear that once it is found that a
document was in renewal of a previous debt the benefit of S. 8 would be
available to the promisor whether the person renewing it or the person in whose
favour it is renewed is different.
It is unnecessary for us to consider what the
reason for amending Explanation III by Act 23 of 1948 was. All that we are
concerned with is the explanation as amended by Act 24 of 1950. By virtue of
this explanation the benefit of s.
8(1) would be available in a case where (a) a
debt has been renewed or included in a fresh document; and where that is done
(b) (i) by the same debtor, or (ii)by his heirs, legal representatives or
assigns; or (iii)by any other person acting on his behalf; or (iv) by any other
person acting in his interest.
Such a transaction will be entitled to the
benefit of the Act if the renewal or fresh agreement is in favour of (a) the
same creditor; or (b) of any other person acting in his behalf or (c) any other
person acting in his interest. In the instant case though the debtor in the
transaction of 1930 was stated to be the appellant's brother, in all subsequent
transactions it was the appellant who was the debtor It would follow,
therefore, that the requirements of the explanation pertaining to the debtor
are satisfied in the sense that the same person has been the debtor.
The second requirement of the explanation is
with respect to the creditor. As already stated, after 1940 it was not Narayana
lyer but the General Bank which was the creditor up to January 28, 1946 on
which date the promissory note in suit was executed by the appellant in his
favour. The General Bank has an independent existence and even though the
controlling interest therein was with Narayana lyer and his family it would not
be correct to say that there is an identity between that bank and Narayana
lyer. Mr. Tatachari, however, contended that it was Narayana lyer who was the
original creditor and that as he had full power of management and control with
respect to the General Bank he went on obtaining promissory notes from the
appellants, sometimes in his own favour and some times in favour of the Bank.
For all practical purposes, therefore, according to the appellant, the creditor
has been the same throughout.
We cannot accept this argument in the absence
of any material to show that the Bank acted on his behalf when the appellant
executed the promissory notes, dated January 3, 1940 ,and September 30, 1944 in
favour of the Bank. The contention 213 of Mr. Tatachari then is that the Bank
in obtaining those promissory notes in renewal of the original debt was acting
in his interest and that, therefore, the explanation was available to the
appellant. In the High Court it was urged that when the appellant executed the
promissory note dated January 28, 1946 Narayana lyer acted in the interest of
the Bank. The ground on which the argument advanced before the High Court and
the argument advanced before us is, however, the same. It is that the words
"in the interest of" mean "for the benefit of". Even
assuming that that is the meaning to be given to these words the argument of
learned counsel cannot be sustained on the facts of this case. It has been
found as a fact by the appeal court that Narayana Iyer actually paid Rs. 10,600
by cheque in favour of the General Bank Ltd., to the credit of the appellant.
It has also been found by the High Court that
Narayana lyer paid off the debt due from the appellant to the Bank at the
request of the appellant for discharging the appellant's liability upon the
promissory note executed by him in favour of the Bank. These findings of the
High Court have not been seriously challenged before us and in our opinion
quite rightly. In view of these findings the contention of learned counsel that
the payment was made "in the interest of the creditor" cannot be
sustained. In the circumstances, therefore, we uphold the decree of the appeal
court and dismiss the appeal with costs.