Decided on June 05,1963


Referred Judgements :-



- (1.)THE short question arising for decision in this appeal is whether S. 5 (1) (a) (i) of the Kerala Agriculturists Debt Relief Act, 1958 (XXXI of 1958 as amended by Act II of 1961) is attracted to the facts of this case. THE court below has held that it is not attracted. THE matter is covered by a decision of a Division Bench of this Court reported in Chacko Pyli v. Madhavi Amma 1963 KLT. 332. If we follow that decision, as we normally should, this appeal has to be allowed.
(2.)IT is, however, contended by counsel for the respondent that the decision has to be reconsidered. Reliance was placed on a decision of a Single Judge of this Court reported in Eapen Philipose v. Neelakantan Raman 1963 KLT. 317 and certain other points were raised by counsel for the respondent which according to him were not considered by the Division bench ruling.
It is, therefore, necessary to advert to these arguments and before doing so, the relevant parts of the sections concerned, s. 5 (1) (a) (i) and S. 11 (6) will have to be extracted: "5. Interest payable on debts and rents. (II (a) For determining the amount of a debt other than a debt due to a banking company as defined in the Banking Companies Act, 1949, for the purpose of payment under this Act, notwithstanding anything contained in any law-contract or decree or order of court, (i) interest shall be calculated at the rate applicable to the debt under the law, custom contract or decree or order 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 or credited towards interest and only such amount as is found outstanding, if any. as interest thus calculated, shall be deemed payable together with the principal amount or such portion of it as is due;" 11. (6) Nothing contained in sub-S. (2) to (5) shall apply to mortgages where the property mortgaged has been leased back to the mortgagor by the mortgagee and to such mortgages the following provisions shall apply: (a) the mortgage shall be deemed to be a simple mortgage from the date of the lease-back and the provisions of this Act shall apply to the debt covered by the mortgage; (b) the interest payable on the mortgage amount after the commencement of this Act shall be at five per cent per annum. "

The appellants had executed a mortgage, Ex. BI dated 30th June 1941 , for Rs. 16,500. They took back the properties mortgaged on lease on the same day on an annual rental of Rs. 1,0414 0 by Ex B2. They had paid Rs. 11,79299 before 1954 towards rent and it is contended by them that this amount must be adjusted towards the interest on the mortgage sum of Rs. 16,500 and that by virtue of S. 5 [lj [a] [i] the excess of a moiety of the principal should be credited towards the principal and only the balance and future interest should be allowed to be recovered under the Act. This contention is raised because of the provisions of s. 11 [6j. There can be no doubt that Exts. B-1 and B-2 will have to be treated as a simple mortgage in view of clause [a] of sub-S. (6) of S. Hand further that the provisions of the Act will have to be applied to the debt covered by the mortgage. Primafacie, therefore S. 5 must also apply.

(3.)HOWEVER, it is urged that no sums have been paid or credited towards interest as required by S. 5 [1] [a] I i I and, therefore, S. 5 cannot be attracted. It is said that there is no provision in the Act for treating rent that has been paid as interest and for re-opening such payments. There must be, according to counsel for the respondent, specific provision in the Act that rent paid before the commencement of the Act should be treated as interest. Our attention was drawn to S. H (6) (b) and it was pointed out that there is no provision in the Act for any rate of interest for this debt for the period before the commencement of the Act and there being no contract between the parties for payment of any interest for the period before the commencement of the Act, it will not be possible to postulate that any amount has been paid towards interest.
It appears to us that the effect of S. 11 (6) (a) is to convert the transactions, Exts, B-1 and B-2, into a simple mortgage. This is by introducing a legal fiction and the court has, there fore, to proceed on the basis that there was only a simple mortgage from the date of the lease. In this case, the date of the lease is the date of the mortgage. There could, therefore, have been no payment of rent under that transaction. But actually there had been payments. The question is whether those payments should be treated only as payments of rent notwithstanding the legat fiction introduced by S. 11 (6) (a ). It appears to us that by the legal fiction introduced by S. 11 (6) (a), the payments made though towards rent, will have to be treated as payments towards interest. This is a corollary, which we think, must necessarily follow from the legal fiction.


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