THOMMANDRA VENKATA SIDDAYYA Vs. EDIGA SANJAPPA

JUDGEMENT

(1.) This appeal involves a question of the applicability of what is commonly known as the damdupat rule in Sub-sections (2) and (3) of Section 8 of Madras Act IV of 1938 to a debt which is the result of the clubbing together of pre-existing debts due to the same creditor by the same debtor when payments have been made towards the separate debts before the clubbing took place. We are not aware of any decision of this Court which has laid down the correct method of dealing with such cases under these provisions.

(2.) The facts, established are that on 15 April, 1914, the appellant who is the creditor advanced Rs. 300 on a mortgage bearing interest at 18 per cent. under Ex. B. On 22nd May, 1916, he made a further advance of Rs. 200 on a mortgage Ex. C bearing interest at 24 per cent. On 1 November, 1925, he advanced a sum of Rs. 50 on a promissory note which has not been exhibited. The rate of interest according to the defendants evidence was either 12 or 15 per cent. On 16 February, 1926, these three advances were consolidated into a single mortgage Ex. A, a further advance of Rs. 450 being made in cash at the time of the consolidation. Having regard to the state of accounts between the parties on the three transactions, the total consideration for the consolidated mortgage was Rs. 1,000, that is to say, the sum of Rs. 450 together with the principal only of each of the three antecedent transactions. Plaintiff's case was that at the time of this consolidated mortgage he gave up all the interest on the earlier transactions none of which had been paid. As the plaintiff did not produce his accounts, this not very probable story has been quite rightly rejected. Both the Courts below have accepted the defence version that the reason why only the principal amount of these antecedent debts came to be included in the consolidated mortgage was that all the interest on these earlier debts had been regularly paid. The Courts below have however, rejected the defence assertion that payments were all made towards the consolidated mortgage.

(3.) On these facts the learned District Judge has applied, the damdupat rule in a manner which seems hardly to be warranted by the terms of Section 8. He has taken the three antecedent documents, added together the principal, multiplied it by two, added together all the payments made towards these three antecedent documents, and finding that more than twice the principal of these three documents had been paid at the time of the consolidation, has treated these documents as if they were discharged and as leaving a mortgage for the fresh cash advance of Rs. 450 towards which no payment had been made, and for this amount a decree has been given with interest at the statutory rate. What in effect the learned District Judge has done has been not to scale down the debt as it stood at the time of the commencement of the Act having regard to the principal sum originally advanced and any further advances made thereafter, but to scale down the consolidated debt as it stood on 16th February, 1926, and treat the fresh advance as one in respect of which the interest was cancelled under the first clause of Section 8. That is not in our opinion the procedure which the section contemplates.