V SREENIVASACHARIAR Vs. KRISHNIAH CHETTY

JUDGEMENT

(1.) This is an application under the Madras Agriculturists Relief Act (IV of 1938) and the two substantial reliefs prayed for are (1) that the sale of the property held in execution of the decree on 5 November, 1937, of lands forming Lot No. 2 of A schedule to the plaint be set aside and (2) that the mortgage debt be scaled down under the provisions of the Act and satisfaction of the debt entered up. So far as the sale is concerned, it is agreed that it should be set aside and I accordingly set it aside.

(2.) The main contest centred on the second relief to be given, to the judgment-debtors under the Act. By an order dated 22nd September, 1938, the matter was referred to the Official Referee to report on the following matters: (1) Whether the applicants are agriculturists within the meaning of the: Act; (2) The debts and the dates on which they were incurred and the amount of principal and interest agreed; (3) Amounts with dates of payments in respect of (a) principal and (b) interest; and (4) Whether any amount is still outstanding, and, if so, how much in respect of principal and how much in respect of interest.

(3.) The Official Referee has submitted his report to the effect that the applicants are agriculturists within the meaning of the Act. His finding in regard thereto is not challenged. He has annexed a statement to his report giving the details called for. His finding as to the amount due on 1 October, 1V37, is Rs. 4,490-5-0 for principal and the amount due with interest from 1 October, 1937, to 30 November, 1938, is Rs. 4,804-10-0. The decree- holder has not filed objections to the report of the Official Referee; but the judgment-debtors have. Before dealing with the contentions raised on their behalf it is necessary to state a few facts which are not in dispute. The suit was based on a mortgage dated 30 August, 1925, in favour of one M. A. Thirunarayanachariar. The principal amount secured thereunder was Rs. 7,500, the rate of interest being 9 per cent, per annum. Thirunarayanachariar assigned the deed of mortgage in favour of one Jagannadham Chettiar on the 3 May, 1932. Jagannadham Chettiar filed a suit claiming a sum of Rs. 11,608 for principal and interest thereunder. A preliminary decree was passed by my learned1 brother Lakshmana Rao, J., declaring that the sum due and payable by the judgment-debtors on the 31 January, 1935, was Rs. 11,139-6- 0 made up as follows: Rs. 7,500 the principal sum secured under the mortgage, Rs. 3,301-14- 0 the interest due up to 31 July, 1934 and Rs. 337-8-0 the interest due up to 31 January, 1935. He directed the costs to be taxed and the amount taxed was found to be Rs. 1,515-8-0. He ordered and decreed that if the defendants failed to pay the sum of Rs,. 11,139-6-0 and also the sum of Rs. 1,515-8-0 with interest at 6 per cent, per annum from the date of taxation on or before the 31 January, 1935, the plaintiff would be at liberty to apply for a final decree for the sale of the mortgaged properties and that on such application the mortgaged properties might be sold and the net proceeds applied in payment of the said sums together with subsequent interest at six per cent, per annum and such further costs as might be allowed to the plaintiff by the Court. The defendants committed default in the payment of the said amount as directed by the decree and a final decree was passed on 12 February, 1935. The plaintiff brought the properties to sale and the sale proclamation which was published on 3 May, 1935, stated that there would be due tinder the decree on 9 August, 1935, a sum of Rs. 13,077-1-11 made up as follows: Rs. 11,139-6-0 the amount decreed, Rs. 1,515-8-0 the taxed costs, Rs. 422-3-11 interest on the amount decreed and costs at six per cent, per annum up to 9 August, 1935. Before the property was actually sold, at the instance of the judgment-debtors an order was passed by the Court giving leave to raise a sum of Rs. 8,500 on the mortgage of one of the properties, namely, house and ground No. 3, Singarachari Street, Triplicane. This, order was passed on the 9 October, 1935, and in pursuance of the said order on the 14 November, the defendants executed a mortgage in favour of the United India Life Assurance Co., and thereby paid a sum of Rs. 8,500 to the plaintiff in part satisfaction of the amount due tinder the decree. On the 13 August, 1936, another sum of Rs. 500 was paid to the plaintiff under orders of Court. It was brought to the notice of the Court that on 19 June, 1936, the plaintiff herein had assigned the decree in favour of one Bysani Krishnayya Chetti and by an order dated 20 November, 1936,the said Bysani Krishnayya Chetti was brought on record as the transferee decree-holder. On the 16 April, 1937, the decree-holder entered part satisfaction of the decree and after doing so applied to bring the properties to sale for the balance still due to him. From the sale proclamation, which was published on the 16 September, 1937, it will be seen that after giving credit to the sum of Rs. 9,000 already paid as aforesaid, the decree-holder claimed Rs. 4,725-4-0 as the balance that would he due and payable to him on the 4 November, 1937. The contention of the defendants is that the sum of Rs. 9,000 paid by them should be adjusted as follows in accordance with the provisions of the Act, namely, Rs. 1,515-8-0 towards the costs of suit and the balance of Rs. 7,484-8-0 towards the principal and the debt if so scaled down will be found to be completely discharged. The contention of the decree-holder, which has been accepted by the Official Referee, is that that the sum of Rs. 9,000 has been adjusted by him first towards the costs of suit, secondly, towards all interest which accrued up to September, 1936, and the balance that remained after such appropriation was appropriated to the principal amount, and it was after making such appropriation the claim of Rs. 4,725-4-0 as being due to him in the proclamation of sale was made. He therefore contends that all interest until September, 1936, was paid off and what remained outstanding on the 1 October, 1937, was only the interest from September, 1936, to 1 October, 1937, which only could be wiped out if the provisions of the Act are applicable; and if the interest is so wiped out according to him, the balance due under the decree would be Rs. 4,500 or thereabouts. As already stated the finding of the Official Referee is that the amount of the principal due on the 1 October, 1937, is the sum of Rs. 4,490-5-0. The decree-holder has also raised an alternative contention that the provisions of Section 8 of the Act are not applicable to the case and that if at all Section 9 only would apply. Apart from the provisions of the Act it seems to me that the contention of the decree- holder in regard to the appropriation of moneys paid by the judgment-debtors in the manner alleged is well-founded and if at all what was outstanding on the 1 October, 1937, was the interest due and payable from September, 1936, to 1 October, 1937. But Mr. Panchapakesa Sastri contends that there is nothing to indicate that the decree-holder has appropriated the amounts towards interest since he credited the amounts paid towards the total amount due without indicating whether the amounts paid were appropriated towards principal or interest and the defendants are entitled now to fall back upon the provisions of the Act and contend that interest must still be deemed to be outstanding within the meaning of Section 8 of the Act and the provisions of the Act must be given effect to. The question here is whether there has been a valid appropriation by the decree-holder as contended for by him. The law as to appropriation is clear. In the case of a debt of the nature in question, it is the duty of the debtor to indicate when he makes a payment "what his intention is, namely, whether the amount paid should first be appropriated towards principal or towards interest and then the balance towards the principal. If he omits to indicate his intention and there are no circumstances from which his intention can be inferred, he loses his right to have the amount appropriated in the manner he would like to have and the creditor has got the Tight to appropriate the amount in the manner best advantageous to him; he can either appropriate the amount towards interest in the first instance and the balance towards the principal or the entire amount towards the principal. But when there is no declaration by the creditor of his intention in what manner he appropriates and an appropriation is made, the law presumes that it has been made in the manner most advantageous to himself. In Venkatadri Appa Rao V/s. Parthasarathy Appa Rao (1921) 40 M.L.J. 549 : L.R. 48 I.A. 150 : I.L.R. 44 Mad. 570 (P.C.), their Lordships of the Judicial Committee at page 573 lay down the rule thus: There is a debt due that carries interest. There are moneys that are received without a definite appropriation on the one side or on the other, and the rule which is well established in ordinary cases is that in those circumstances the money is first applied in payment of interest and then when that is satisfied, in payment of the capital.