V. Ramaswami, J. - (1.) This case raised an important question relating to the interpretation of Sec. 7(2) and Explanation 1 of the Tamil Nadu Debt Relief Act, 1972 (XXXVIII of 1972) (hereinafter called the Act). Before dealing with that question, we may shortly state the relevant facts. The suit was filed by the Appellant -Plaintiff for recovery of a sum of Rs. 2,215 -40 p., due on a simple mortgage, dated 14th October, 1970. That mortgage was executed by the Defendants for a sum of Rs. 5,000 mortgaging three items of property. The interest was payable at 12 per cent per annum each month and in default, at 18 per cent per annum from the date of default. It appears that one of the items of mortgaged property was sold to one Surname on 20th March, 1974 for a sum of Rs. 6,000 and on the purchaser paying the entire sum of Rs. 6,000 towards the mortgage, the Plaintiff released that item from the mortgage. The amount claimed in the suit is arrived at on the following basis; The amount advanced Rs. 5,000 and interest from 14th October, 1970 to 20th March, 1974, Rs. 3,090 making a total of Rs. 8,090. On 20th March, 1974 a sum of Rs. 6,000 was received from the purchaser of one of the mortgaged items and after deducting this amount, the amount payable under the mortgage was determined at Rs. 2,090 as on 20th March, 1974. An interest of Rs. 125.40 P. has been claimed for the period from 20th March, 1974 to 20th July, 1974 the date of suit, making a total of Rs. 2,215 -40 P. The Defendants, relying on Sec. 7 contended that no amount was due. Though the trial Court decreed the suit it restricted it to an amount of Rs. 2,090 and did not give the interest of Rs. 125 -40 P. But an appeal, the lower appellate Court reversing the judgment of the trial court held that no amount was due in view of the provisions of Sec. 7 and dismissed the suit. Hence the second appeal.
(2.) Though we are primarily concerned with the provisions of Sec. 7(2) read with Explanation -1, it will be useful to quote the entire Sec. 7 as some of the reasoning will have a bearing on the other provisions in the same section. Accordingly that Sec. is quoted 7. Provision for debts incurred before 1st March, 1972; Debts incurred before the 1st March, 1972 shall be scaled down in the manner mentioned hereunder, namely: (1) Where any debtor has paid to any creditor twice the amount of the principal whether by way of principal or interest or both, such debt including the principal, shall be deemed to be wholly discharged. (2) Where the sums re -paid by way of principal or interest or both fall short of twice the amount of the principal, such amount only as would make up such shortage or the principal amount or such portion of the principal amount as is outstanding, whichever is smaller, shall be re -payable. (3) Subject to the provisions of Ss. 18 to 21 nothing contained in (1) and (2) 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 not been passed, - Explanation 1. In determining the amount re -payable by a debt or under the section, every payment made by him shall be credited towards the principal, notwithstanding that 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 re -pay it in kind, the debtor shall notwithstanding such agreement, be entitled to re -pay the debt in cash after deducting the value of payment 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 of included in a fresh document executed before, on or after the 1st March, 1972, whether by the same debtor 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 sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum re -payable under this section. Explanation IV. Where a debt has been split up, whether before, on or after the 1st March, 1972, among the heirs, legal representatives or assigns of a debtor, or of a creditor and fresh document have been executed in respect of the different portions of such debt the provisions of this Sec. shall continue to apply in respect of each of the different portions.
(3.) It may be seen from Explanation -1 that, if the payment of Rs. 6,000 made by, the purchaser of one of the items of mortgaged property was taken as a payment made by the debtor, the amount being in excess of the principal amount of Rs. 5,000 no amount will be due for payment. But the learned. Counsel for the Appellant contended that in order to enable a debtor to invoke the provisions of Sec. 7, especially "Explanation -1, the payment towards the mortgage money should have been made by the debtor himself and any payment made by any person, other than the debtor could be appropriated by the creditor towards any interest that, may be due and that, therefore, any balance towards principal after such appropriation is payable by the debtor. In this connection, the learned Counsel relied on certain decisions rendered under the corresponding provision in the Tamil Nadu Agriculturists, Relief Act, 1933 (IV of 1938). The earliest of the decisions which was referred to by the learned Counsel was Ramasawmi Pillai v/s. Sankara Mudaliar : (1950) 1 M.L.J. 224. That decision was concerned with the interpretation of Sec. 8 of the Agriculturists' Relief Act. The provision of Sub -section (3) of Sec. 8 is identical with Sec. 7(2) of the Act now under consideration. But explanation 1 to Sec. 8 as amended by Madras Act XXIII of 1948 was slightly different and that read as follows: In determining the amount re -payable by a debtor under this section, every payment made by him shall be credited towards the principal; unless he has expressly stated in writing that such payment shall be in reduction of interest. In that case, a first mortgagee filed a suit for recovery of the amount due under his mortgage impleading the second mortgagee also as a party. In execution of the first mortgage, the property was sold and after appropriating the amount due under the first mortgage, the executing Court directed the payment of the balance of money available to the second mortgagee. The amount was appropriated by the second mortgagee towards interest and in the subsequent suit filed by the second mortgagee for recovery of mortgage money the mortgagor relied on the payment made earlier and invoked the provisions of Explanation -1 in support of his plea for reduction of the principal due to the extent of the payment made in the earlier suit. The mortgagee contended that the amount earlier paid was not expressly stated to be a payment in reduction of interest and that, therefore Explanation 1 has no application. It was further pointed out on behalf of the creditor that in the case of receipt of money from Court it is impossible to apply the explanation as it is not expected of the Court to give a direction in the manner contemplated by the said explanation. This argument was accepted by the Division Bench and it was held therein: .... Explanation 1 obviously could not have contemplated the payment of the amount by Court as it was unreasonable to expect that the Legislature intended that the Court should give direction in regard to the mode of appropriation of the amount so paid.;