BADRILAL Vs. BADRILAL

JUDGEMENT

(1.) THIS is an application in revision by the defendant -debtor from the judgment of the first appellate Court varying the decree of the trial Court to the advantage of the plaintiff, on the ground that in the circumstances of the case, it was not open to the trial Court to go behind the balance struck in the books of the plaintiff, as the verified total of the amounts outstanding against the defendant was really an acknowledgement and amounted to a fresh cause of action. The defendant has come up to this Court in view of Section 102, Civil Procedure Code, with an application in revision. This involves an important question of law as to extent of the Courts power under Section 3 of the Madhya Bharat Interest Act, to go back to the original cause of action, and adjust towards the principal the interest payment in excess of that allowed by the Act. In this connection the parties have cited different rulings of this High Court which, they urge, are mutually conflicting. If the rulings of this High Court in regard to the application of Section 3 of the Madhya Bharat Interest Act are self -contradictory, it will be necessary that a reference should be made to a Full Bench; but studying them, with reference to the facts of each case, I note that they are easily reconcilable.

(2.) THE tactual findings necessary for the purpose of this case are the following: -As a result of different transactions in kind as well as in cash, certain sums were shown in the books of the plaintiff as outstanding against the defendant. Each entry was signed by the defendant as evidence of its arithmetical correctness. From time to time arithmetical totals were struck and verified by the defendant, but in no verification is there any word to indicate that the verified total was being treated as a fresh loan or a "settled account" in other words, a fresh cause of action. It also appears that the interest added was at a rate higher than that provided by the Interest Act. These additions had the effect of compound interest with annual rests, because during each year the total balance of the previous year began to bear interest which was added on at the end of the year, verified by the debtor, and charged to interest in the next year, and so on. The trial Court was of the view that in application of the retrospective effect of Section 3 of the Madhya Bharat Interest Act, it could scale down and simplify the interest, and apply the surplus towards the principal. By this method, it brought down the claim from a total of Rs. 437 to Rs. 41/12/6.

(3.) ALL these rulings accept the basic principle that Section 3 of the Vadhya Bharat Interest Act should be applied retrospectively going back to the point when the cause of action. i. e., the subject -matter of the suit, originated; and that any payment of interest in excels of that permitted by statute should be applied towards the reduction of the principal. However, the point of real difficulty and apparent - -and in my opinion only apparent conflict is in regard to what in each case, was the initial liability, which could not be further analysed for the purposes of the case. If at any particular point in a succession of transactions, the parties create a fresh cause of action, either by an acknowledgement noted in the books, or by a fresh pro -note, then it is the starting point of the liability for the purpose of the suit, though behind it there might have been other transactions. In other words, the new agreement would be one creating the liability. If that agreement provides for a rate of interest higher than the one permitted by the statute, the accounts can be worked out backwards up to that point, but not any further behind. Anything earlier than the cause of action may not be re -opened.