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Report No. 89

32.61. State Acts for the relief of indebtedness.- With the increased solicitude for the welfare of the oppressed villagers and landless labourers, the Legislature has stepped in to relieve the borrower of the hardship inherent in the unpleasant prospect of facing a decree, when, owing to natural calamities or failure of crops, he is unable to discharge his obligations. One such Act is the Madras indebted Agriculturist (Repayment of Debts) Act, 1955, which defines a "debt" as including even a decree or order of a court.

Section 3 of the Act provides that no suit for the recovery of a debt shall be instituted, and no application for execution of a decree in respect of a debt shall be made, against any agriculturist in any civil or revenue court before the expiry of four months from the commencement of the Act. Section 4 prescribes a mode of payment of debt in instalments, while section 8 excludes the time during which the institution of the suit was barred from computation of the period of limitation.

Similar provisions exist in other State laws, like the Bengal Agricultural Debtors Act, 1936 and C.P. & Berar Relief of Indebtedness Act, 1939.

32.62. Instalments by statute.- There was previously some difference of opinion as to whether Article 36 of the Limitation Act could apply to cases where the debt had been made payable in instalments as a result of statute. This controversy was resolved, as regards the Madras High Court, by the case of Bichal Naidu v. Muthuramanlingam. ILR 1962 Mad 114. As was observed in another case1:

"It is ordinarily not open to the parties to plead that the debt was divisible, unless the contract had expressly stipulated therefor. But where a special enactment, which is invested with a overriding power with regard to any other law, creates this effect of liability to pay the debt only in instalments, it is reasonable interpretation to hold that each instalment will furnish a distinct cause of action. At least for the purpose of limitation, and the right to sue, the integrality of the debt must thus be held severed into distinct parts."

1. Gopal Udayar v. Mangala Udayar, (1961) 74 LW 601.

32.63. No change needed.- It is axiomatic that where a contract undergoes a change owing to statutory intervention, the original contract is not the only document to be scanned for on identification of the cause of action. In determining the nature of the cause of action, one will have to take into account the statute also. Having taken all these aspects into consideration, we do not think that the article needs any change.

32.64. Article.-Introductory.- Article 37 reads as under:

"On a promissory note or bond payable by instalments, which provides that, if default be made in payment of one or more instalments, the whole shall be due.

Three years.

When the default is made, unless where the payee or obligee waives the benefit of the provision and then when fresh default is made in respect of which there is no such waiver."

It is identical with Article 75 of the Act of 1908. In the Act of 1877, in Article 75 the wording was slightly different. Article 75 of the Act of 1871 reads as under:

"On a promissory note or bond payable by instalments, which provides that, if default be made in payment of one instalment , the whole shall be due.

Three years.

The time is first default unless where the first default unless where the payee or obligee waives the benefit of the provision, and then when fresh default is made."

The law under the earlier Acts, is discussed in three cases of different High Courts.1-3

No change in the relevant article was recommended by the Law Commission in its Report on the Limitation Act, 1908.4

1. Sarat Lakshi v. Narendra, (1928) 33 CWN 250: AIR 1929 Cal 292.

2. Hurropath v. Maheroolab Moolih, 1876 ILR 1 Born 125.

3. Ahmed Ali v. Hafiza, 1881 ILR 2 All 514.

4. Law Commission of India, 3rd Report (Limitation Act, 1908), para. 92.

32.65. Conflict as to instalment bonds.- In spite of the changes effected in the first and third columns of the article as detailed above, certain amount of conflict did arise in the application of this article to practical situations. It has been held by the Patna High Court1 that in the case of an ordinary money instalment bond with a default clause which provides that if any instalment is not paid the whole sum would be due, the limitation for a claim to recover money due under the bond runs from the date of the first default that is not waived.

The creditor cannot stop the period of limitation from running by waiting till the whole of the sum becomes due. Therefore, in such cases, it was no longer at the option of the creditor (unless he had waived the default) to stop the period of limitation from running.

1. Gokul Mahton v. Sheoprasad, AIR 1939 Pat 433 (442): ILR 18 Pat 459 (FB).

32.66. However, a different view has been taken by a single Judge of the Madras High Court,1 holding that the creditor in such a case may sue (at his option) either for the instalments that have become overdue or for the whole amount. Article 75 (of the Act of 1908), it was held, was no bar to a suit on the instalment bond itself filed after or before the expiry of the instalment period, for the recovery of the instalments which the debtor had contracted to pay and which had not become themselves time-barred under Article 74 of the Act of 1908 (now Article 36).

The two remedies are co-existent, and both are open to the creditor. The creditor has his choice either to wait and sue for the instalments in default under Article 74, or to enforce the default clause in a suit contemplated by Article 75 (both of the Act of 1908). A suit filed under Article 75 may be dismissed on the debtor proving waiver by the creditor of the default that entitled the creditor to file such a suit, in which case the creditor can, of course, still fall back on his right to sue for instalments within the time limits prescribed by Article 74.

The creditor has also the other alternative of suing to enforce the default clause for a subsequent default which he has not waived within the period prescribed by Article 75. Reading the two articles together, the contention that because the whole amount becomes payable on default, the creditor must sue on the whole bond within three years of such a default could not be accepted. Thus the plaintiff has the option of enforcing the default clause in Article 75, and if he does not do so, he must be deemed to have waived the benefit of the provision and he then can fall back on his ordinary right of suit on the covenant to pay by instalments under Article 74 (present Article 36).

1. Ayyathurai v. Ibramsa Rowthar, AIR 1949 Mad 592, paras..-5.

32.67. In one case before the Kerala High Court,1 an argument was addressed that once a default has taken place in the payment of instalments, time starts running from the date of default and a suit filed three years after the first default is also barred by time. But the High Court held that default in each instalment creates a separate cause of action and causes of action within three years before the suit are not barred.

1. Kochappan v. Palmland Corporation, AIR 1977 Ker 201.

32.68. No change needed.- It seems that the applicability of Article 37 to a particular case depends largely on the terms of the bond and on any statute which may govern or modify the terms of the bond as a matter of substantive law. The words "creditor shall have liberty" may, for example, create an option, while more stringent words may rule out an option. Waiver, again, is a mixed question of law and fact, and whether the waiver was express or implied will have to be discerned from the facts of each case1. This is evident from numerous rulings of High Courts, involving different facts situations.2-4

In this position, no amendment is recommended in the article.

1. Deviddas v. Parma Gokalia, AIR 1959 M1' 413 (414).

2. Ajudhia v. Kunjal, ILR 30 All 123 (125).

3. Mohan La! v. Tika Ram, ILR 41 All 104 (106).

4. Lalta Prasad v. Gajadhar, AIR 235 (241).

32.69. Article 38.- This takes us to Article 38. Article 38 reads as under:

On a promissory note given by the maker to a third person to be delivered to the payee after a certain event should happen.

Three years.

The date of the delivery to the payee."

It is identical with Article 76 of Acts of 1908 and 1877.

Article 76 of the Act of 1871 read as unde.-

"On a promissory note given by the maker to a third person to be delivered to the payee after a certain event should happen.

Three years.

The time of the delivery to the payee."

No change is needed in the article.

32.70. Article 39.- Article 39 reads as unde.-

"On a dishonoured foreign bill where protest has been made and notice given.

Three years.

When the notice is given."

It corresponds to Article 77 of the Act of 1908, which was as under:

"On a dishonoured foreign bill where protest has been made and notice given.

Three years.

When the notice is given."

Article 77 of the Act of 1877 was in the same terms. So was Article 77 of the Act of 1871.

The article needs no change.



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