JOSEPH Vs. VARGHESE

JUDGEMENT

(1.) THE respondent had borrowed on the basis of two mortgage documents dated 8th September 1953 and 21st October 1953 for Rs. 3,000 and Rs. 2,000 respectively. THE Act came into force on 14th July 1958. THE appellant instituted a suit on the mortgages on 27th August 1959. THE suit was compromised by a compromise petition dated 5th October 1959 and on the same day a decree was passed in the case in terms of the compromise. Pursuant to the compromise a sum of Rs. 7,000 was paid by the respondent. On 8th January 1962 the respondent applied under the Act for amending the decree by applying the provisions of S. 4, 7 and 8 thereof. THE same was opposed by the appellant; but the application was allowed and hence this appeal.

(2.) COUNSEL for the appellant has raised two contentions before us. It is urged that in view of the compromise that has been reached on 5th October 1959 there has been an incurring of a new liability creating a new debt and it is said that the debt came into existence only after the date of coming into force of the Act, and so the Act cannot apply to that debt. It is not disputed that if the debt that is sought to be discharged under the provisions of the Act is one incurred after the commencement of the Act, the act would not apply. But it is contended that there has been no incurring of any fresh debt by the compromise petition after the commencement of the Act and that what has been sought to be discharged is the liability incurred long before the commencement of the Act by the borrowing evidenced by the mortgage documents dated 8th September 1953 and 21st October 1953. We are inclined to accept this argument. The definition of the term 'debt' in S. 2 (c) the relevant part of which is in these terms: "'debt' means any liability in cash or kind, whether secured or unsecured, due from or incurred by an agriculturist on or before the commencement of this Act, whether payable under a contract or under a decree or order of any Court, or otherwise, and includes any debt or balance of debt due at the commencement of this Act under the Madras Indebted Agriculturists (Repayment of Debts) Act 1955, or the Travancore-Cochin Indebted Agriculturists relief Act, 1956, but does not include ". clearly makes a distinction between a liability and the contract or the decree or the order of court under which it may be payable. The terms of the definition as well as the scheme of the Act, it appears to us, indicate that this liability which has been incurred, notwithstanding the fact that it gave rise to a contract either simultaneously or thereafter or that a decree or order of any court followed is still amenable to be scaled down under the provisions of the Act provided the incurring of the liability was before the commencement of the Act. We are therefore of the view that the compromise entered into on 5th September 1959 cannot affect the applicability of the Act. The debtor and the creditor relationship had arisen prior to the commencement of the Act. Our attention has been invited to the decision of the Madras High court in K, N. Nannier and others v. Krishnaveni Ammal AIR. 1965 Mad. 127. The learned Chief justice in dealing with the compromise decree passed in that case observed as follows in Para. 21 of that judgment: "this view however, does not appear to dispose of the present case. Although the origin of the debt was under the three mortgages referred to earlier. there was a compromise of the claim on which a decree followed. The decree in terras of the compromise is, in effect, a decree on contract superseding the original debt upon which the suit was laid. By reason of the compromise the old obligations must be held to have merged into one under the compromise, which created afresh obligations. In other words, by reason of the agreement between the parties, there has been a discharge, as it were, of the pre-existing liability by the substitution of a new liability under the compromise decree. That would amount to a fresh debt, except in cases where by statute a reopening of it is made permissible. That debt having been incurred after the coming into force of the Act, S. 13 A will apply to it. Under s. 13 A there is no question of tracing back the liability to an original debt. The section itself contemplates the application of its provisions to a decree. The decree in the instant case having been passed subsequent to the Act, the rate of interest applicable to it will be governed by that provision subject to the question of res judicata to which we shall advert later. The respondent, therefore will be liable to pay interest only at the statutory rate on the principal sum of Rs. 70,000 from 2nd October 1943". The definition of the term'debt' in the Act with which their Lordships were concerned is in the same terms as the definition of the debt in the Act. But this definition has not been adverted to and has not been discussed. Whatever may be the position as to merger or extinguishment of an anterior liability, we are of the view that in view of the definition contained in the statute, no such extinguishment can arise so as to replace the original debt by a new debt which would have the effect of non-suiting an applicant who claims the benefit of the statute, in relation to a liability that was once incurred before the commencement of the Act. We therefore reject this contention.