GRANDHI HANUMANTHA RAO Vs. YEDUVAKA CHINA RAMU NAIDU

JUDGEMENT

(1.) The appellant was the plaintiff in a suit on a mortgage bond, Ex. A, executed on 22nd November, 1924, for a sum of Rs. 6,000. At the time of the execution of the mortgage the respondents were indebted to the appellant under a previous promissory note (Ex. B) on which a sum of Rs. 6,566 was due. On the date of Ex. A an endorsement of discharge was written on this earlier promissory note which recites that the promissory note amount of Rs. 6,566 has been paid by the execution of two documents, one the mortgage Ex. A for Rs. 6,000 and the other, a promissory note (Ex. I) for Rs. 631 of which Rs. 566 was part of the amount due under Ex. B. The lower Court applying Madras Act IV of 1938 to the debt has treated the mortgage Ex. A as a renewal of the promissory note Ex. B and has scaled down the debt with reference to the antecedent history of the promissory note.

(2.) It is objected in appeal that this cannot be done for the reason that the liability under the promissory note (Ex. B) was split into two separate debts, one the debt under the mortgage (Ex. A) and the other the debt under the later promissory note (Ex. I). It is argued that the integrity of the debt was thus broken and that on the authority of Our decisions in Ramasubbier V/s. Rama Iyer and Venkateswaraluv. Venkataraju there can be no renewal when the whole debt is divided up into two separate debts. This contention is met by Mr. Govindarajachari for the respondent by relying upon the decision in Sankara Iyer V/s. Yegappa Servai . That was a case in which there was a mortgage on which a considerable sum was due by way of interest and the mortgagee got the mortgagor to execute a promissory note for the amount of interest, an endorsement being made on the mortgage bond that this amount was received for interest. A suit was subsequently filed on the promissory note and a decree obtained and an application was made to scale down that decree under Section 19 of Act IV of 1938. We held that the promissory note having admittedly been taken for the interest due on the mortgage bond, it must be taken to be a renewal of the previous liability to pay that interest and must be scaled down under Section 8 as a debt for interest. The reason for that decision was that it was open to the creditor before he took this promissory note to file a suit separately for the interest on the mortgage bond and if instead of doing so, he follows the course of taking a promissory note by way of a voucher or additional security for the debt for interest, there is no real payment of interest and fresh advance such as was contended for. All that happens is that the creditor takes a fresh document for a separable portion of the debt due under the mortgage. We pointed out that if this promissory note in the circumstances of the case were to be treated as an entirely fresh contract, creditors would be enabled to defeat the provisions of the Act by getting their debtors to execute promissory notes for the interest due on mortgages.

(3.) Mr. Govindarajachari has argued that it follows from the decision in Sankara Iyer's case that in any case where a fresh document is executed for a part of a preexisting debt, that fresh document can be treated as a renewal of the part of the debt in which it originates; at any rate, unless there is any change in the parties to the transaction. We do not regard the decision as laying down any such sweeping proposition. Ordinarily a renewal is a fresh contract between the same parties with reference to the same debt with the addition of interest accrued on that debt. If the total liability due on a pre-existing contract is split into two fresh liabilities differing from each other and from the original in their terms and a fresh contract is executed with reference to each of those parts, it seems to us improper in the absence of special circumstances such as existed in the case of Sankara Iyer V/s. Yegappa Servai , to treat either of the fresh contracts as a renewal of a part of the pre-existing liability. The explanation to Section 8 contemplates the renewal or inclusion in a fresh document of a debt. We have gone so far as to read this provision as covering a case where a separable portion of the original debt--is included in a fresh document, the main debt subsisting. But we do not consider that this extension of the rule, if extension it be, can be treated as an authority for regarding as a renewal a partial inclusion of any portion of a pre-existing debt in one of several new contracts with different terms.