MUSLIM BANK OF INDIA LTD Vs. MOHAMMAD ATEEQ

JUDGEMENT

(1.) This is an application in revision under Section 25, Small Cause Courts Act. The applicant here was the plaintiff in the Court below. The suit was brought by the liquidators of the Muslim Bank of India Ltd., to recover a certain amount on the basis of a pronote from the opposite party, Mohammad Ateeq. This pronote was executed on 25 November 1937. Under this agreement, Mohammad Ateeq obtained a loan of Rs. 800. It appears that one Syed Husain stood as surety for Mohammad Ateeq and gave a letter of guarantee to the plaintiff bank. On 17th February 1938, Mohammad Ateeq paid a sum of Rupees 125 to the bank. This payment is proved by a voucher which is signed by Mohammad Ateeq himself. It was not specifically stated in this voucher that the payment was either towards interest as such or towards principal. It has, however, to be borne in mind that the total amount of interest due upon the loan was only Rs. 10-11-6 on 17 February 1938. It is evident, therefore, that even after deducting that amount from the sum of Rs. 125 paid by Mohammad Ateeq the rest must be deemed to have been paid towards the principal. The fact, however, remains that Mohammad Ateeq did not state anything in the voucher to indicate his intention as to whether the payment was to be appropriated towards interest as such or towards the principal amount. On 24 January 1941, the plaintiff filed the suit out of which the present application in revision arises. It was resisted on two grounds by the opposite party: firstly, that the suit was barred by time and secondly, that the whole amount due under the pro-note had been paid off by the opposite party to Syed Husain who had stood surety for him. It was also pleaded that Syed Husain was a necessary party to the suit. The learned Small Cause Court Judge found that Syed Husain was not a necessary party to the suit but held that the plea of limitation raised by the defendant was sound and on that basis he dismissed the suit; hence the present application in revision.

(2.) The date of the pronote in suit, as stated above, is 25 November 1937, and the date of the institution of the suit is 24 January 1941. It is evident that if the payment of 17 February 1938, did not save limitation the suit is barred by time. The real question for consideration, therefore, is whether the payment of Rs. 125 by Mohammad Ateeq in his own handwriting comes within the purview of Section 20, Limitation Act, as part payment of the principal debt and thus saves limitation. The learned Small Cause Court Judge has answered that question in the negative and has based his decision upon the case of Rama Shah V/s. Lal Chand, decided by their Lordships of the Privy Council, which is reported in 1940 A. L. J. 639. The reasoning of the learned Small Cause Court Judge is that the payment of Rupees 125 by Mohammad Ateeq on 17 February 1938, was an open payment without any indication as to whether it was to be credited towards interest as such or towards principal and hence it was a payment neither towards interest nor towards the principal debt. He has further found that the creditor, that is, the plaintiff bank made no appropriation of the amount towards the principal debt on the date on which it was paid and that at the end of June 1938, the accounts were adjusted in which the amount paid by the opposite party was shown to his credit in the accounts. The learned Judge has expressed an opinion to the effect that the account books of the plaintiff bank are evidence only of an adjustment of account and not of any appropriation by the plaintiff of the amount paid by the opposite party towards the principal debt.

(3.) Upon a careful consideration of the admitted facts of the case, I find that the learned Small Cause Court Judge has fallen into an error in interpreting the decision of their Lordships of the Privy Council in . The principal points decided by that case may briefly be stated as follows: (a) That where an open payment is made by a debtor without any indication of his intention as to whether the amount is to be treated as a payment of interest as such or as payment of principal, it cannot be deemed to be a payment either towards interest as such or towards the principal debt. (b) That if the debtor does not indicate his intention that the amount paid by him is to be treated as a payment of interest as such, it is still open to the creditor to appropriate the amount towards interest; but even if the creditor does so, the payment cannot be treated to be a payment by the debtor of interest as such within the meaning of Section 20, Limitation Act. (c) That if the debtor does not indicate his intention that the payment made by him is to be appropriated towards the principal debt, still it is open to the creditor to exercise his option and to appropriate it towards the principal debt. (d) That it is not incumbent upon the creditor to make the appropriation towards the principal debt as soon as the payment is made, but he must make the appropriation within the period of limitation. If the period of limitation has already expired, he cannot be allowed to extend it by making an appropriation towards the principal debt at a subsequent stage. (e) That "to evidence a definite appropriation to the principal debt made by the creditor within the period prescribed the manner in which the payment has been dealt with by the creditor in his own books of account will ordinarily be sufficient."