AVUDAYAMMAL Vs. AMBASANKAR

JUDGEMENT

(1.) The appellants in this second appeal were defendants 10 and 11 in a suit brought by respondent 1 to enforce a mortgage. The mortgage was executed by defendants 1 to 3 on 25 June 1915, but. the mortgage money became due on 23 June 1916. The appellants purchased some of the items comprised in the mortgage on 17 January 1923. Respondent 1 obtained an assignment of the mortgage from the original mortgagee, defendant 12 and brought the suit on 24th June 1940. The first Court dismissed the suit as against the appellants holding that the claim on the mortgage against the items purchased by them was time barred. On appeal by respondent 1 the lower appellate Court passed a decree even as against them, and hence this second appeal. The only questions argued in the second appeal related to the plea of limitation raised by the appellants. In answer to that plea respondent 1 relied on a payment of Rs. 10 made on 26 June 1928 on behalf of the mortgagors and endorsed by them on the bond. This sum was less than the principal or interest due on that date. The endorsement runs as follows : "Paid Rs. 10 this day towards the principal and interest accrued due under this deed through Sankaranayakar on behalf of Sbanmugham Pillai Yagairai in the presence of Shanmugham Pillai," and is signed by defendants 1 to 3 the mortgagors. The Court below took the view that on the language of this endorsement, the amount must be taken to have been paid partly towards principal and partly towards interest, and that as the payment towards the principal satisfies the requirements of Section 20 (1), Limitation Act, the suit was in time against all the defendants.

(2.) Mr. Rangaswami Ayyangar, the learned Counsel for the appellants, contests this view pointing out that respondent 1 himself alleged in his plaint that the payment was made towards interest due under the bond, and that it could not be regarded as a part payment of principal in the absence of any appropriation proved to have been made by the mortgagee before the expiry of the period of limitation. His contention was that a payment in such terms could only be regarded as a payment on general account, which, according to the decision of the Privy Council in Ramashah V/s. Lalchand , was by itself, ineffectual to save limitation. This decision clearly lays down that a payment made towards a debt cannot be regarded as a payment towards the principal of the debt for purposes of limitation unless such payment was appropriated by the creditor within the period of limitation so as to make it a part payment of principal. Their Lordships definitely indicated their view that the decisions of the Courts in India holding that a payment on general account must necessarily have been made either towards interest or towards principal and in either case would save limitation provided the other requirements of Section 20 were satisfied did not correctly lay down the law. Here, no appropriation of the payment or any part of it to principal was put forward or proved and in fact the plaint, as already observed, alleged that the payment was made towards interest. In such circumstances, it is difficult to uphold the conclusion of the lower Court that the payment in question was a part payment of principal for purposes of the Limitation Act. Indeed, Mr. Viswanatha Sastri for the respondents did not attempt to support this view. He urged, however, that the payment having been made in express terms towards "the principal and the interest accrued due under the bond" it should be regarded as payment of interest as such within the meaning of Section 20. Apart from the terms of the endorsement Mr. Viswanatha Sastri did not rely upon any other evidence tending to show that the debtor paid the amount specifically towards the interest. That no doubt was the allegation in the plaint, but there is no evidence in support of it. The question therefore has to be decided solely with reference to the language of the endorsement. Notwithstanding the existence of some authority in support of the contention of Mr. Viswanatha Sastri, it seems to me that a payment made merely towards principal and interest without the debtor specifying what part of it was to go towards principal and what part towards interest is no more than a payment generally on account of the debt or an "open payment" as it is called by their Lordships, and cannot be regarded as a payment towards interest as such within the meaning of the section. Any payment made on account of a debt must be a payment made towards the principal and accrued interest, unless the whole of principal or the whole of interest has already been paid, in which case no difficulty can arise as the payment must be taken to have been made towards interest or principal as the case may be. The mere fact, therefore, that the payment is said to have been made towards principal and interest where both are due and the sum paid does not exceed the one or the other, cannot involve the implication that any part of the payment was intended by the debtor to go towards interest. Payment of interest as such by the debtor clearly implies a payment made either with express intimation or under circumstances indicating that the payment is to be applied in reduction of the interest or in other words, it implies an appropriation of the payment to interest by the debtor himself and excludes the creditor's right of appropriation. Can it be said in this case that the mortgagee was bound to apply any part of the sum of Rs. 10 towards interest? I think not, as no part was specified by the mortgagors as applicable in reduction of interest. He could have appropriated the whole of it to principal. In such circumstances, the payment must be regarded as an open payment notwithstanding that it was in terms made towards principal and interest as evidenced by the endorsement and it cannot operate to save the bar of limitation.

(3.) Mr. Viswanatha Sastri relied in support of his contention on the decision of their Lordships of the Judicial Committee in Het Rambodh V/s. Aya Ram (36) 42 C.W.N. 509. That was a case where a debt had to be paid in certain instalments, the first of which, namely, Rs. 13,000 had to be paid with a year's interest to that date on 27 January 1929. After various payments had been made, the debtor sent a sum of Rs. 825 on 15 February 1929 with an intimation that the creditor should, "deduct from this the amount that is due to you for my first instalment according to accounts and keep the rest in my name.... Send me a formal receipt of the amount of the first instalment together with interest." This clearly showed that the payment made was in excess of what was due in respect of the first instalment including interest, and this necessarily implied that a part of the sum was paid for interest as such. It was with reference to a payment: made in such circumstances that their Lordships said : "The payment was made and was necessarily made in, respect of principal and interest. It was therefore a payment of interest on a debt as such by the person liable to pay the debt." This passage on which Mr. Viswanatha Sastri placed strong reliance must be understood with reference to the facts stated above which clearly implied payment of interest as such. It would be misleading if it were taken out of its context and read as applicable to all payments made "in respect of principal and interest" as Mr. Viswanatha Sastri attempted to do. The other decisions cited by Mr. Viswanatha Sastri, namely, Subraya V/s. Pakayya ( 02) 4 Bom. L.R. 231, Mohan V/s. Lakshu ( 10) 6 I.C. 16 and Ramkrishna V/s. Pichandi ( 24) 74 I.C. 777 do, however, support his contention. In 4 Bom. L.R. 2313 Jenkins C. J, held that a payment of "Rs. 4 out of the entire amount payable on account of principal and interest due under this bond" was a payment of interest as such by the person liable so as to attract the provisions of Section 20. This decision was followed by the Calcutta High Court in Mohan V/s. Lakshu ( 10) 6 I.C. 16 and by Phillips J. of this Court in Ramkrishna v. Pichandi ( 24) 74 I.C. 777. These cases, however, were all decided before the exposition of the true meaning and effect of Section 20, Limitation Act, by their Lordships of the Judicial Committee in Ramashah V/s. Lalchand . No decision on the point after Ramashah V/s. Lalchand was brought to my notice except Ramswarup v. Harihar ( 42) 29 A.I.R. 1942 Pat. 363 where Dhavle J. in deciding the case on another point, made the following observations after referring to the earlier decisions. The difference between what is called a general or an open payment and a payment towards principal, interest and costs, such as we have in the present, case, is no doubt rather fine, but lies in the fact that unlike the former the latter negatives the last of the four possibilities (regarding the intention of the debtor who makes the payment) pointed out by Sir George Raukin in Ramashah V/s. Lalchand namely, the possibility (common enough in the former) that there was no intention of appropriation as between interest and principal. The mortgagor in the present case appears clearly to have contemplated payment not merely on account of principal with or without costs but also on account of interest, though he left the exact appropriation to the decree-holder.