C VAIDYANATHA RAO Vs. KANDAPPA CHETTY

JUDGEMENT

(1.) This appeal arises out of an award in a land acquisition case. The immediate point before the Lower Court was what proportion of the amount awarded should go to certain mortgagees of the appellant in discharge of their mortgage for Rs. 10,000, dated 11 July, 1912. The mortgage bore interest at 7 1/2 per cent. per annum, but on default of payment of principal or interest, the rate of interest was to be increased to 9 per cent. It is admitted that there was default. In dealing with the point the Lower Court has shut out evidence of an agreement alleged by the appellant whereby his mortgagees agreed "to waive the default in the payment of interest and to waive their right in future also to claim enhanced rate of interest at 9 per cent. per annum and to receive payment of interest throughout only at 7 1/2 per cent. per annum". It was further alleged that in pursuance of this agreement certain renderings of account, Exs. I and II in C.M.P. No. 5514 of 1929, had been submitted by the mortgagees to the mortgagor calculating interest at the 7 1/2 per cent. rate only. The District Judge held that proof of such an agreement was inadmissible under Section 92 of the Indian Evidence Act, rejected such proof, and refused to admit Exs. I and II or any other evidence on the point. It is against this refusal that the appellant now comes up here.

(2.) We think the District Judge has not sufficiently considered the legal aspect of the problem and the particular that he has overlooked the provisions of section (sik) the Indian Contract Act. The application of Section 92 of the Evidence Act is only called for in so far as the alleged agreement is put forward in variation of the original contract of mortgage. So far as the alleged arrangement is advanced as imposing any legal obligation on the mortgagee to accept a lower rate of interest than that specified in the contract, it tantamounts to a binding agreement that the penalty clause is inoperative and therefore is a variation of the contract, and proof of it is in- admissible: but in so far as it is put forward merely as a promise of grace imposing no legal obligation, Section 92 cannot; be any bar and evidence of it is relevant, so far as may be, to probabilise the alleged acceptance of a lesser rate of interest. Since no legal obligation to accept the less amount can be proved, the only value as evidence of such an arrangement would be to support other independent evidence that such less amount was actually accepted, not on account or in part payment, but in satisfaction of a larger amount due; and the crucial evidence in the case would not be evidence of the arrangement, but evidence of such actual acceptances in satisfaction. To state the proposition of law in another form, if the evidence of such acceptance cannot be understood or will not prove the acceptance without evidence that the mortgagee was under a legal obligation so to accept, the evidence is inadmissible; but if it can be understood and proved without proof that the mortgagee was under such legal obligation, there is nothing in Section 92 to prevent the admission of such evidence. By way of example we may cite illustration (e) to Section 63 of the Contract Act that evidence of a composition arrangement made with creditors, by which they agree to receive less than the sums due to them, can be admitted to explain receipt of a less sum in full discharge of a debt due.

(3.) Section 63 of the Indian Contract Act is clearly in point. It is obviously intended to apply not to cases where the whole contract has been supplanted by a new one because then it will be superfluous, but to cases where the old contract subsists, but there is a voluntary remission of performance of some promise in it, for example, a remission of part of the debt at the time when it becomes payable. Section 63 will not be extended to cover a case of a binding promise to dispense with or remit performance in the future unless that waiver is made the subject of a fresh contract, because then Section 92, Indian Evidence Act, will stand in the way.