# GA MINI KRISHNA YY A AND OTHERS v. CURZA SESHACHALAM AND OTHERS

- **Citation:** [1965] 1 S.C.R. 195
- **Court:** Supreme Court of India
- **Decided:** 1964-08-31
- **Case number:** CIVIL APPJ:LLATE JURISDICTION : Civil App~al No. 618 of 1961
- **Bench:** Raghubar Dayal, J. R. Mudholkar, S. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ga-mini-krishna-yy-a-and-others-v-curza-seshachalam-and-others-3343
- **Pages:** 16

## Headnote

c
I)
£
F
G
Madras Agriculturists' Relief Act (4 of 1938), ss. 9(1) and B--
Debt incurred after 1st October 1932 but before commencernent of ActRenewal after com1nencement of Act-Provision applicable.
Dealings between the family of the appellants (creditors) and the
family of the respondents (debtors) commenced in 1934.
In September
1938, after the Madras Agriculturists' Relief Act (4 of 1938) came in!o
force in March 1938, a promissory note was executed by the debtors (who
are agriculturists) in favour of the creditors for the amount then found
due. The debtors also agreed to pay interest at the rate of 9 i per cent
per annum on that amount. In arriving at the amount due to the creditoN
in 1951, the debtors contended that the debt should be scaled down under
•· 9(1) of the Act, whereas the creditors contended, on the basis that it
was a debt incurred after the commencement of the Act, that the only
relief to which the debtors were entitled, . was calculation of interest under
s. 13 of the Act.
HELD : Though the transaction was entered into after the commencement of the Act, since the original indebtedness arose before the commencement of the Act but after October I, 1932, s. 9(1) of the Act would
be applicahlc. [210 D]
Under s. 7 of the Act every debt'payable by an agriculturist at the
commencement of the Act shall be scaled down and nothing in excess
L<tf the amount scaled do\vn will be recoverable; and this \\'Ould in effect
operate as a discharge of the rest of the liability.
Where, therefore,
~
suit is instituted for recovery of a debt f PDm an agriculturist. the court
\\ill have to SCiJ.lc down the debt as provided in s. 8 if the de.:it was
iocurred before 1st October, 1932.
1f the <lebt \Vas incurred afte:"" that
date, the Court will have to apply the provisions of s. 9.
Jn such a case,
the debt incurred after the commencement of the Act will not cease to
be a debt incurred after October 1, 1932, \vhcn it is a transaction in renewal
of ~ liability which arose prior to the commencement of the Act.
As to
future interest, transactions prior to the commencement of the Act covered by ss. 8 and 9, are governed by s. 12, and transactions after the
commencement of the Act, by s. 13.
The object o! the Legislature in
enactiq.g s. 13 is only to provide for a maximum rate of interest payable
by agricuUurisLc;, on dehts incurred for the fir-;t time after the corn1neaccmcm of the Act.
[200 F-G; 201 C-E: 204 C'-F].
Case law revicv.·cd.
Nagabh1tslta11am v. Seetharamaiah. I.LR. [1961] I A.P. 485. approved.
Thiruvengadatha Ayyangar v. Sa111Jappatf Ser~·ai, I.L.R. [19~:!1 tvfad. 57,
H
overruled.
CIVIL APPJ:LLATE JURISDICTION : Civil App~al No. 618 of
1961.
195
SUPREME COURT REPORTS
(1965) l S.C.R:
Appeal by special leave from the judgment and deem; dated A
Dece.mber 23, 1960 of the Andhra Pradesh High Court in Second
Appeal No. 653 of 1956.
,
K; Bhimasankaram, C. M. Rao and K. R. Sharma, for the
appelfant.
A. V. V. Nair and P. Ram Reddy, for respondents Nos. 2 n
and 4. ·
:::-
·

## Text

A
GA MINI KRISHNA YY A AND OTHERS
v.
CURZA SESHACHALAM AND OTHERS
August 31, 1964
I.I
(RAGHUBAR DAYAL, J. R. MUDHOLKAR AND S. M. SIKRI JJ.)
c
I)
£
F
G
Madras Agriculturists' Relief Act (4 of 1938), ss. 9(1) and B--
Debt incurred after 1st October 1932 but before commencernent of ActRenewal after com1nencement of Act-Provision applicable.
Dealings between the family of the appellants (creditors) and the
family of the respondents (debtors) commenced in 1934.
In September
1938, after the Madras Agriculturists' Relief Act (4 of 1938) came in!o
force in March 1938, a promissory note was executed by the debtors (who
are agriculturists) in favour of the creditors for the amount then found
due. The debtors also agreed to pay interest at the rate of 9 i per cent
per annum on that amount. In arriving at the amount due to the creditoN
in 1951, the debtors contended that the debt should be scaled down under
•· 9(1) of the Act, whereas the creditors contended, on the basis that it
was a debt incurred after the commencement of the Act, that the only
relief to which the debtors were entitled, . was calculation of interest under
s. 13 of the Act.
HELD : Though the transaction was entered into after the commencement of the Act, since the original indebtedness arose before the commencement of the Act but after October I, 1932, s. 9(1) of the Act would
be applicahlc. [210 D]
Under s. 7 of the Act every debt'payable by an agriculturist at the
commencement of the Act shall be scaled down and nothing in excess
L<tf the amount scaled do\vn will be recoverable; and this \\'Ould in effect
operate as a discharge of the rest of the liability.
Where, therefore,
~
suit is instituted for recovery of a debt f PDm an agriculturist. the court
\\ill have to SCiJ.lc down the debt as provided in s. 8 if the de.:it was
iocurred before 1st October, 1932.
1f the <lebt \Vas incurred afte:"" that
date, the Court will have to apply the provisions of s. 9.
Jn such a case,
the debt incurred after the commencement of the Act will not cease to
be a debt incurred after October 1, 1932, \vhcn it is a transaction in renewal
of ~ liability which arose prior to the commencement of the Act.
As to
future interest, transactions prior to the commencement of the Act covered by ss. 8 and 9, are governed by s. 12, and transactions after the
commencement of the Act, by s. 13.
The object o! the Legislature in
enactiq.g s. 13 is only to provide for a maximum rate of interest payable
by agricuUurisLc;, on dehts incurred for the fir-;t time after the corn1neaccmcm of the Act.
[200 F-G; 201 C-E: 204 C'-F].
Case law revicv.·cd.
Nagabh1tslta11am v. Seetharamaiah. I.LR. [1961] I A.P. 485. approved.
Thiruvengadatha Ayyangar v. Sa111Jappatf Ser~·ai, I.L.R. [19~:!1 tvfad. 57,
H
overruled.
CIVIL APPJ:LLATE JURISDICTION : Civil App~al No. 618 of
1961.
195
SUPREME COURT REPORTS
(1965) l S.C.R:
Appeal by special leave from the judgment and deem; dated A
Dece.mber 23, 1960 of the Andhra Pradesh High Court in Second
Appeal No. 653 of 1956.
,
K; Bhimasankaram, C. M. Rao and K. R. Sharma, for the
appelfant.
A. V. V. Nair and P. Ram Reddy, for respondents Nos. 2 n
and 4. ·
:::-
·
The Judgment of the Court was delivered by
Mudholkar J.
The question that falls for decision in this
appeal by special leave from the judgment of the High Court of
Andhra Pradesh is whether a debtor who has executed a prom.isC
sory note after the coming into force of the Madras Agriculturists'
Relief Act, 1938 (Madras Act 4 of 1938) (hereafter referred
to as the Act) in renewal of a debt incurred prior to the ·commencement of the Act is entitled to Claim the benefit of s. 9 of
the Act. The trial court upheld the debtor's contention but in
appeal the Subordinate Judge rejected it and decreed the appellants'
D
suit in full.
The High Court held that tlie interpretation placed
on the relevant provisions of the Act by the Subordinate Judge
was erroneous, allowed the appeal and restored the decree passed
by the trial court.
· Certain facts have to be stated in order to appreciate the
contention! of the parties.
The plaintiffs who are tlie appellants
before us and tlie fourth defendant constituted a Hindu joint
family of which the first plaintiff was tlie ·manager till tlie year
1944 when tlie fourth defendant separated from the rest and the
remaining members continued to remain joint.
On September
E
14, 1938 the first defendant .as mana~r of tlie joint family
F
consisting of himself, the second· and tlie third defendants execued a· promissory note in favour of tlie first plaintiff as manager
of tlie joint family consisting of tlie plaintiffs and tlie fourth
. defendant for a sum of Rs. 9,620-2-9 and agreed to pay interest
at the rate of 9 and 3/8% per annum.
This amount was found
due to the family of the. plaintiffs and defendant No. 4 on foot of
dealings between that family and tlie family of defendants 1 to 3
_which commenced in the year 1934.
In Original Suit No. 84 of 1949 brought by tlie fourth defendant against tlie plaiiltiffs for partition of tlie family property the
first deJendant deposited a sum of Rs. 13,576-0-0 on March 17,
1951 alleging that tliat was the amount due to tlie family of the
plaintiffs and defendant No. 4 from tlie famiJy of defendants l
to 3 on foot of tlie promissory note of September 14, 1938. In
G
H
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A
B
c
D
KRISHNAYYA v. SESHACHALAM (Mudho/kar J.)
197
arriving at this amount the defendants 1 to 3 took into account
the provisions of the Act and scaled down the interest as petmitted by s. 9 ( 1) of !he Act.
The plaintiffs disputed the correctness
of the calculation whereupon the defendants 1 to 3 withdrew
their application but all the same the plaintiffs withdrew
the
amount eventually.
The plaintiffs thereafter instituted the suit
out of which this appeal arises in which they claimed
Rs. 3,858-13-3 and costs on the basis of the calculations made
·by them and set out in the memo accompanying ·the plaint.
Defendants 1 to 3 denied the plaintiffs' claim and stated that
the amount deposited by them in the partition suit having been
withd~wn by the plaintiffs nothing more is dur. to them from
these defendants on the foot of the promissory note dated September 14, 1938.
The trial court, as
already stated, substantially upheld the
contention of the defendants 1 to 3
and passed a decree for
Rs. 92-2-2 in favour of the plaintiffs and the fourth defendant
and dismissed the suit with respect to the rest of the amount.
1}iis decree which was set aside by the appellate court has been
restored by the High Court.
On behalf of the plaintiffs who are the appellants before us
it is strenuously contended by Mr. Bhimasankaram thac the
E relevant provision of the Act with reference to which a debt like
the one evidenced by the promissory note in suit can be scabi
down would be s. 13 and not s. 9 as held by the High C'Ollrt.
F
G
H
The relevant portion of s. 13 reads thus :
·
··Jn any proceeding for recovery nf n debt, the court
shall scale down all interest due on any debt ini:t:rred
by an agriculturist after the commencement of th is
Act, so as not to exceed a sum calculated at 6t per
cent per annwn simple interest, that is to say, one
pie per rupee per mensem simple interest, or one
anna p~r rupee per Qnnum simple inl~rest :
Provided that the State Government may, hy
notification in the Official Gazette. alter and fix any
other rate of interest from time to time."
According llJ learned counsel the execution of the. promissory
note itself brought into existence a debt and since the pronote
was executed 01~ September 14, 1938, the debt evidenced by it
must be regarded as having been incurred after the commence·
ment of the Act and consequently s. 13 alone will have to be
borne in mind for the purpose of calculating interest.
Learned
198
SUPREME COURT REPORTS
[1965) S.C.R.
counsel did riot dispute the fact that ·the original indebtedn~ A
of the respondents 1 to 3 commenced in the year 1934. But
according to him the liability which was sought to be enforced
a::ainst them was the one arising
from the promissory note
dated' September 14, 1938 and, therefore, the debt must be
deemed to have been incurred on the date of the execution of ·
the promissory note in suit. Relying ui:ion certain decisions· of
the High Courts of M •dras and ~ndhra Pradesh he contended ·
that the Act places debts incurred by agriculturists into three
classes: (1) those incurred before the 1st of October, 1932; (2)
B
. those incurred on or after the 1st of October, 1932· but before
the coming into force of the. Act and (3) those incurred after
the coming into force of the Act.
Section 8 applies to
the . C
first cate?ory of debt . •. 9 to the second category. of debts and
s. 13 to the third category of debts. Since, the argument proceeds, all these provisions have reference. to the date on which
a debt is incurred and since a debt can be incurred only once, ·
i~ would follow that for. the purposes of these provisions the
D
date on which the last transaction with reference to a debt .took
place can ~·one be
,~,- ~·J as the da'.e on which the debt was
incurred.
The result of this, according to him, would be that
the provisions of s. 8 would apply only when the last transaction
was entered into before the 1st of October, 1 ~32 subject to the
provisions of the proviso to sub. s. (1 ) of s. 9; the provisions of
E .
s. 9 would apply only to a case where the last transaction was
entered into after October .1, 1932 but before the commencement of the Act; and the provisions of s. 13 would apply where
the last transaction was entered into after the commencement
of the Act. It is desirable to set out fully the provisions of
both ss. 8 and 9. They are as' follows :
.
"Debts incurred before the 1st October 1932 shall be
scliled down in. the manner mentioned hereunder,
namely:-
F
. ( 1) All interest outstanding on the 1st October,
1937 in favour of any creditor. of an agriculturist
whether the same be payable under Jaw, custom or G
contract or under a decree of court and whether the
debt or other obligation has ripened into a decree··
or not, shall be deemed to be discharged, and only
·the principal or such J:l<lI'tion thereof a~ may be
outstanding shall; 'be deemed to be the . amount
repayable by the agriculturist on that date.
(2) Where an agricultu·ist has. paid to any
creditor twice the amount of the principal whether
H.
A
B
[)
f
G
H
KRISHNAYYA v. SESHACHALAM (Mudholkar J.)
199
by way of principal or interest or both, such debt
including the principal, shall be deemed to be wholly
discharged.
( 3) Where the sums repaid by way of principal or
in'terest or both fall short of twice the amount of
the principal, such amount only as would make up
this shortage, or the principal amount or such portion
of the principal amount as is outstanding whichever is smaller, shall be repayable.
( 4) Subject to the provisions of sections 22 to 25
nothing contained in sub-sections (1), (2) and (3)
shall be deemed to require the creditor to refund
any sum which has been paid to him, or to increase
the liability of a debtor to pay any sum in excess
of the amount which would have been payable by
him if this Act had not been passed.
E'<planalion l : In determining the amount repayable by a debtor under this section, every payment
made by him shall be debited towards the principal,
unless he has expressly stated in writing that such
payment shall be in reduction of interest.
Explanation ll : Where the principal was borrowcu in cash with an agreement to repay it in kind,
the debtor shall, notwithstanding such
agreement,
be entitled to repay the debt in cash, after deducting the value of all payments made by him in kind,
at the rate, if any, stipulated in such agreement, or
if there is no such stipulation, at the market rate
prevailing at the time of each payment.
Exvlanation lll : Where a debt has been renewed
or included in a fresh documem executed before or
after the commencement of this Act, whether by
the same or a different debtor and whethe~ in favour
of the same or a different creditor, ~he principal
originally advanced together with
such
sums, if
any,
as
have been
subsequently advanced as
principal shall alone be treated as the principal
sum rcpnyablc under this section.
Section 9: Debts incurred on or after the 1st October 1932 shall be scaled down in the manner mentioned hereunder, namely:-
(! ) Interest shall be calculated up to the commencement of this Act at the rate applicable to the
200
SUPREME COURT REPORTS
[ 1965) I S.C.R.·
debt under the law, custom, contract or decree of
Court under which it arises or at five per cent per
annum simple interest, whichever' is less and credit
· shall be given for all sums paid towards interest, and
only such amount as is found qutstanding, if any, for
interest thus claculated shall be deemed
payable
together with the principal amount or such portion
of it as is due:
·
Provided that any part of the debt which is found
to -be a renewal of a prior debt (whether by the
A
B
same or a different debtor and whether in favour
,._
of the same or a different creditor) shall be deemed· C
to be a debt contrac'ted on the date on which such
prior debt was incurred, and if such debt had been
contracted prior to the 1st October 1932 shall be ·
dealt With Under the provisions of S.c 8;
(2) Subject to the provisions of sections 22 to 25,
D
nothing herein contained shall be deemed to require
the creditor to refund any sum which has been paid
to him or to ·increase the liability of the debtor to
pay any sum in excess of· the amount which would
have been payable by him if. this Act had not been
passed."
E
·we will proceed to examine these provisions and the other relevant provisions of the Act before we refer to the decisions upon
·which reliance has been placed on behalf of each of the parties
to the appeal.
Chapter II of the Act deals with "Scaling down of debts and
future rate of interest". Section 7 appears to be the most important provision therein because it is here that the legislature has
given a mandate that every debt payable by ari agriculturist at
·the commencement of the Act shall be scaled down and that
cnothing in excess of the amount so scaled down will be recover-
:able from such debtor.
That section runs as follows:
"Notwithstanding any law, custom, contract or decree of
court to the contrary, all debts payable by an agriculturist at the co=encement of this ·Act, shall be
scaled down in accordance with the provisions of
this chapter.
No sum in excess of the amount as so scaled down shall
be recoverable from him or from any land or interest
F
G
H
KRISHNAYYA v. SESHACHALAM (Mudholkar J.)
20 l
A
in land belonging to him; nor shall his property be
liable to be attached and sold or proceeded against
in any manner in the execution of any decree against
him in so far as such decree is for an amount in
excess of the sum as scaled down under this. Chapter."
B
We will have to bear in mind the provisions of this section
c
while construing the other provisions in Chapter II, including
those of sections 8, 9 and 13.
Where a suit is instituted before a court of ta w for recovery
of a debt from an agriculturist the court, having regard to the
document on foot of which the creditor has instituted a suit was
executed, finds that that document was executed before October
l, 1932 it will have to pr~eed to scale down the debt as provided in section 8. If it finds that the debt was incurred after
October I, 1932 it will have to apply the provisions of s. 9 of
the Act. It is these two broad categories into which debts have
D been divided under the Act.
But. Mr. Bhimasankaram argued.
there is also a third category and that is where a debt is incurred
rnbseque.nt to the commencement of the Act.
In one sense he
is right because s. 13 also provides for the scaling down of
interest due on a debt incurred after the comm~nccment of the
Ac!.
But it ha' to be borne in mind that a debt incurred after
E the commenccrncnl of the Act will not cease to be a debt incurred
after October
L
J 932.
It · i>
common place that every
provision of a statute has to be given full effect and wherever
possible the court should not place that construction upon a
provision which would tend to make it redundant or to overlap
f
G
.II
;mother provision or to limit its application in disregard of its
general applicability unless, of course, that is the only construction which could be reasonably placed upon it.
If Mr. Bhimasankaram·s contention is accepted we will have to limit
the
applieation of s. 9 only to such of the debts incurred after October I, 1932 as were incurred prior t0· the commencement of the
Act.
There is nothing in the language of the section which
would justify so limiting its provisions.
Nor again is there anything in section 13 which would preclude the application of s. 9
to any case whatsoever of a debt incurred.after the commencement
of the Act.
For, a debt may have been incurred after the commencement of the Act in the sense that the last transaction with
respect to indebtedness may have been entered into, after the
commencement of the Act.
But that transaction may be
in
renewal of a liability which arose prior to the commencement
gf the Act.
Where such is the case it is difficult to exclude the
202
SUPREME COURT REPORTS
(1965] I S.C.R.
applicability of s. 9 of the Act.
As to how interest is to be
A
ca:culated with respect to a debt incurred after October I, 1932
the court cannot ignore the provisions of sub-s. ( I ) of s. 9.
It
was, however, contend~d that where the last transaction was
subsequent to the commencement of the Act the court has no
power to go behind it and find out what interest has been charged
by the creditor up to the date of the last transaction.
No doubt,
where the accounts have been senled between the parties and
on the basis of settled accounts a new transaction is entered into
between them, normally speaking, the court has no power to
enquire further, except in the circumstances envisaged in some
of the provisiom of he Contract Act.
But then there are
special provisions like the Usurious Loans Act and the Act in
question which clothe the courts with the requisite power. Here
such a power is specifically given to the courts under Chapter
II.
Now, the proviso to sub-s. (I) of s. 9 clearly states that any
part of the debt which is found to be a renewai of a prior debt
shall be deemed to be a deht contracted on the date on which
such prior debt was incurred.
Therefore, though a promi<;SOry
note may have been executed after the commencement of the
Act if it was in fact in renewal of a prior debt, it will have to be
treated as if it was a debt incurred when the prior debt was
incurred.
This appears to be the true meaning of the proviso,
though according to Mr. Bhimasankaram it deals with a debt
originally incurred prior to October 1, 1932.
In support of hi,
contention Mr.
Bhimasankaram relies upon the
concluding
portions of the proviso which read thus: " ........ and if such
debt had been contracted prior to the 1st October 1932. shall be
dealt with under the provisions of section 8." It is sufficie~t to
say that the use of the co'liunction 'and' clearly shows that the
proviso applies as much to debts contracted prior to October I st
1932 as to debts com-acted after October I, 1932 even though
they may have been incurred after the commencement of the Act.
JI
c
I)
If indeed it was the intention of the legislature to limit the application of the proviso in the manner suggested by Mr. Bhimasankaram it would have been easy for the legislature to say "provided. G
that any debt or anv oort of a debt which is found to be the
renewal of a debt contracted prior to 1st October, 1932" instead
of using the exprc>Sio- "prior debt" i., •h•t Mrt of the proviso
and then in the concludirig oortion say "if such debt has been
contracted orior to I st October, 1932".
Then Mr. Bhimasankaram argued that the nroviso is to sub-s. (I) of s. 9 and should,
therefore, not be extended to embrace a debt renewed after the
commencement of the Act.
To accc:ot this argument would give
II
KRISHNAYYA v. SBSHACHALAM (Mudho/kar J.) ,. ,
203
A rise to this curious position that a debt renewed after the commencement of the Act would for the purposes of the Act not be a
debt incurred afte- October l, 1932.
Another argument advanced by Mr. Bhimasankaram is that
unless a statute makes a provision to the effect that a debt would
8
in certain circumstances be deemed to be discharged, the liabi ity
to pay it would still remain on the debtor and that merely providing for the scaling down of interest is not enough.
In this connection he refers to the provision in sub;s, ( 1) of s. 8.
Under
that provision interest outstanding on October 1, 1937 in favour
c
of any creditor of an agriculturist shall be deemed to be discharged
and only the principal or such portion thereof as may be outstanding shall be deemed to be the amount repayable by the agriculturist on that date.
Sub-section ( 2) of s. 8 further provides
that where an agriculturist has paid to the creditor twice the
amount whether by way of principal, interest or both, the entire
debt shall be deemed to be wholly discharged.
It is true that
D sub-s. ( 1) of s. 9 which provides for scaling down of debts incurred
on or after October l, 1932 does not use similar language.
But
it seems to us that the difference in language would not make any
difference in the result b~cause readin~ sub-s. (I) of s. 9 along
with the provisions of s. 7 it is abundantly clear that what the creditor would be entitled to obtain from the court and what the
E
court ~ill have to do would be to award interest only to the extent
permissible by sub-s. ( 1) of s. 9 and this would in effect op~rate
as a discharge of the rest of the liability for interest under the
con•ract between the parties.
Learned counsel further said that
by applying the provisions of sub-s. ( 1) of s. 9 to a debt renewed
after the cornmencemerit of the Act would result in an anoma!v in
F
that with respect to renewals of certain old debts the entire liability
for interest after October 1, 1932 will be wiped
out whereas
with regard to others the liability would exist to the extent of
5% per annum. simole interest.
Tn our judgment no anomaly
re•ults because the complete discharge of interest up to Oct0ber
G
H
1. 1937 is provided for only with respect to debts fir<t incurred
p•ior to October l, 1932 and this would be the position whatever be the date of renewal of such debts.
This would be the
consequence of the exores~ terms of the proviso to sub-s. ( 1) of
s. 9 which makes the provisions of s. 8 applicable to d~bls contracted prior to October l, 1932 but renewed after October I,
1932 but not to debts ;ncu·red subsequent to that date.
The last contention of Mr. Bhirnasankaram is that there is
no .,-ovision fo- fmure interest corresponding to that in sub-a.
/
-.
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- --------
204
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~·
· · : SUPREME COURT REPORTS
: .(1965] 1 S.C.R, ·
'
( I ) of s. ·· 13 of the Act and, therefore, in so far as the interest A
after the co=encement of the Act is concerned, s. 13 alone
will, have to be i:esorted to.
As already stated, Chapter IV
divides debts into two broad categories and .in. so far as debts
.incurred prior to O,ctober 1, 1932 ru:e concerned transactions in
renewal of older ones have been brought within the. purview of
s. 8 · by· adding thereto Explanation III and ·transactions subseB
quent to October l, 1932 within the purview of Jl,. 9 by the
proviso to sub~s .. (I). Having made these. provisions; there was
nothing further that the legiSlature need. have ~6rie in so far as
transactions in renewal 'of ·debts ·contracted· prior. to the com- ·
mencement of the Act were concerned. As to future . intereSt,
in so far. as transactioris prior to the. co~eticement of the Act
were concerned, the legislature· has· made a provision. in s. 12
c
and in so far as transactiom after the co=encement of the Act
are concerned it has made a provision in 5: 13. · Indeed, · the
object of the legislature in enacting s. 13 does ricit appear to be
any other than to provide for the maximum rate of interest payable D
on debts incurred after the commencement of the Act and since it
follows s. 12 it seems that just as the legisiature divided debts into
two categories it also divided rates of interest payable after the
co=encement of the Act into two categories. In section 12 it
has prescribed the maximum rate of intere5t payable on debts scaled down under ss .. 8 and 9 and in s. 13 has provided for an identiE
cal maximum rate with resoect to debts which could not be scaled
down under ss. 8 and 9 subject to the power of the State Government to alter it from time to time.
There does not appear to be
any other object such as creating a separate or independent category of debts while enacting s. 13. Upon a plain construction
of these. provisions, therefore, we see no difficulty in upholding
the ultimate decision of the High . Court.
·
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Coming now to_ the decisions which were referred to at the
bar, the earliest in point of time is Thiruvengadatha Ayyangat
v. Sannappan Servai(
1 )~ This incidentally is the only decision
which completely supports the appellants' contention:· In that
case th_e debt was due on a promissory. note dated October 2,
1938 which discharged the prior promissory. note dated Octo·
' bcr l, 193 l. The District }1:unsifi had applied the proviso to
sub-s. ( l) of s. 9 and treated the debt as renewal of an earlier
debt upon which interest upto March 22; 1938 had to be reducecl to 5%. The High Court pointed out that the scaling
down machinery under that section has the effect of only reducing interest up to the da_te of the commencement of the Act and
(I) I.LR. (1942) Mad. 57,
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KRISHNAYYA v. SESHACHALAM (Mudholkqr J.)
205
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saidr that it may reasonably be inferred from this that the legislature did not intend the section to apply to those debts which had
no• existence before the last point of time up to which the scaling
down under the Act could be effected.
The High Court had
not IOii! sight of the provisions of s. 12 which empower the
court to award future interest after the commencement of the
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Act but it pointed out that that section would not apply to a
debt which was incurred for the first time after March 22, 1938
and. tb!ll"efore s. 9 would not be applicable to an earlier debt
renewed after March 22, 1938.
The High Court then observed:
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"It seems to us that, having regard to the scheme _of the
Act, if it had been the intention of the Legislature
to introduce the theory of renewals into the scaling
down operations in respect of debts incurred after
the commencement of the Act, some specific provisions would have been made in this behalf.
We
are of opinion that all debts incurred after
the
commo!1 man of the Act, whether they be in discharge of prior debts or not, will fall only under
sectii:;n I 3. ,.
The answer to the view of the High Court would be that in
th~ first place every provision in the statute must be given effect
to unless by doing so any conflict with any other provision of
th~ Act would arise.
In the second place we cannot ignore the
object of the legislature in enacting this law which wa~ to grant
relief to the agriculturists and that any beneficial measure of this
kind should, as far as permissible, be interpreted in such a way
ag to carry out the main object which the Legislature had in view.
F ?.'hat we have said earlier in our judgment is in consonance with
th~se principles and by interpreting ss. 9 and 13 in the way we
have done no violence will be done to the language of either of
the-;e provisions.
The basis of the decision of the High Court
appears to be that unless every transaction entered into after the
commencement of the Act can be brought within the purview of
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s. 9, sub-s. ( l) that provision could not apply to it at all whatever
may be the date on which the original indebtedness arose.
With
respect, we do not see any reason for so construing the two provisions i.e .• ss .• 9(1) and 13.
In our judgment it is sufficient to
say that full effect has to be given to both the provisions and they
are to be construed harmoniously.
H
The next decision fa Arunagiri Chettiar v. Kuppu.nvami ChettillT( 1). This is a judgment by one of the two Judges wh-0 was
(t) [1942] 2 M.LJ. 275.
L!Sup./64--14
206
SUPREME COURT RF.PORTS
[1965) I S.C.R.
a party to the earlier dccisiO!J. That was a case in which a claim
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wa.~ made on behalf of a debtor for refund of excess interest
which was paid by the debtor to the creditor after the commencemem of the Act.
Negativing the claim the learned Ju<lge
ob,erved:
\
"The two payments in 1938 and 1939 were definitely
appropriated towards interest at the time when they
were made.
Neither the debtor nor the creditor has
the right to tear up these appropriations by an unilateral act.
The Court has no power to reappropriate the payments to principal unless the Act contains a provision for such re-appropriation.
I am
not aware of any such provision in Act IV of 1938."
Then the learned Judge observed that the only way in which a
debtor might get back money which he has paid after the Act
G1111c into force in ex.ccss of the amount properly due under the
provisions of the Act would be by establishing a right to a refund
under the ordinary law on the ground that the payment was made
under a mistake.
It will thus be seen that the matter involved
in this case is different from the one before us.
The next decision is Me//acheruvu Pundarikakshudu v. Kuppa
V enkata Krishna Shastri ( 1). That was a suit based upon a promissory note dated August 18, 1948 which was in renewal of a
rromissory note executed on August 14, 1945. It was thus a
c:ise which was covered by s. 13 alone.
The learned Judges
rightly held that under s. 13 a debtor cannot trace back his debt
to the original debt which itself was incurred after the Act came
into force.
In this connection they relied on Thiruvengadaiha
Avyangar's case(') as well as on the decision in Krishanayya v.
Venka111 S11bbarayudu(').
ln the latter case it was held: "It is
"ell settled that a debt incurred after the commencement of MadB
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ras Act 4 of 1938. cannot be scaled down except in accordance
with section 13 of that Act." The words 'a debt incurred' were
meant to include a transaction in renewal of a debt actually contracted prior to the commencement of the Act.
This is, theTefore,
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a statement which supports the appellants 'Jut in point of fact the
le?med Judges were not concerned with a pre-1932 debt and so
thev did not have to decide the kind of point which arises in the
case before us.
While we agree that s. 13 by itself does not
enable a debtor to trace back the debt to the original debt a
further question can arise whether upon the facts the provisions
H
11·1 !LR. {1957] A.P. 532.
(2) I.LR. 1942 Mad. 57.
(l) {1952] I M.L.J. 638.
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KRISHNAYYA v. SESHACHALAM (Mudho/kar. J.)
207
A of s. 9 are attracted to a debt incurred after the commencement
of the Act (in the sense that the last transaotion pertaining to it
was subsequent to the commencement of the Act) because the
original liability arose prior to the commencem~nt of the Act. If
s. 9 is attracted the proviso to sub-s. ( 1 ) thereof which permits
the tracing back of certain debts can be resorted to if the facts
B permit that to be done.
Then there is the decision in Mallikharjw:ia Rao v. Tripura
Sundari('). That was a decision of a single Judge, Rajamannar
C. J., who held that where a promissory note is executed for an
amount in excess of what was due on the basis of Madras AgriC culturists' Relief Act there is failure of consideration in so far as
the excess amount is concerned and the plaintiff would not be
entitled to more than what would be due to him after applying
the provisions of that Act to the original debt and its renewals.
The next decision relied on is Nainamul v. B. Subba Rao(').
D The point which was referred to the Full Bench for its opinion
was as follows:.
"Whether in the case of a debt incurred after the Act
came into force a payment made expressly towards
interest at the contract rate .can be reopened and reappropriated towards interest payable under the
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provisions of s. 13 of the Act."
The question was answered by the F:ull Bench in the affirmative.
This decision thus substantially goes against the contentions of
Mr. Bhimasankaram. The following observations of Subba .Rao
C. J. (as he then was) may be quoted in support of the view
F which. we have taken:
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"Unhampered by decided cases, I shall proceed to consider the scope of the section having regard to the aforesaid declared object of the Act and the express words
used in the section. The object of s. 13 is to give
relief to agriculturists in the matter of interest in
respect of a debt incurred after the Act. If such a
debt is sought to be enforced, it is caught in the net
of the scaling down process.
At that stage, all. the interest due on the debt
is
reduced to the statutory level or, to put it differently,
whatever may be the contract rate of interest, it is
replaced by the S'tatutory rate. If the appropriations
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(1) A.!.R. 1953 Madras 975 .
' (2) A.I.R. 1957 A.P. 546 F.B
208
sur~EME COURT REPORTS
(1965] I S.CR.
made earl'ier are not reopened, Ille rntention of the
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statute woald be defeated' for tile contract rate prevails over the sta!utory rate up to a stage.
Doubrfess the courts are concerned' with the expressed intention of the legistat11re. The cruciat words
in s. lJ ,are 'all interest due on any debt'. The word
'interest' is qualified by two words 'all' and 'due'.
If interest outstanding al~me is
scaled down
the
emphatic word 'all' becomes otiose. · If that
was
8
the intemion, the words 'interest outstanding' would
serve the parpose as weU.
The word 'all', therefore,
cannot be ignored and must be given a meaning. It c
indicates that the entire interest,
which a debt
earned, is scaled down."
The n~t decision referred to i1I thal in Mansoor v. Sank11Tapandia(1).
That was a decision of the Full Bench of the High
Court and the points which arose for consideration and the
decision of the Court are correctly summarised in the following
head note:
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"Section 13 of the Madras Agriculturists' Relief Act (IV
of 1933) deals with debts incurred after the-Act.
Under that section there is no provision for any
automatic discharge af interest stipulated at a rate
higher than that prescribed therein.
Such
excess
interest is only made irrecoverable if the creditor
sought to enforce it in a court of law.
There being
neither a prohibition again9t a stipttlatioa for payment nor an automatic discharge of higher rates of
interest agreed to be paid by an agric11lturi~t debtor,
it cannot he said that, when a creditor in regard to
a debt contracted after the Act with the assent of his
debtor added to the principal loan the interest accrued
in terms of the contract and the debtor entered into
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a fresh contract treating the consolidated amount as
principal for the fresh loan, there would be anything
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illegal or even a failure of consideration in regard
to tfle new loan. Such a new loan would constitute
the debt
incurred on the date af renewal and if
a suit is based on that debt, the provisions of section 13 could be attracted to that debt alone and
not to the earticr debt of which it wa9 a renewal or u
substitution.
!ll I.LR. [19S9] Mad. 97.
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KIUSHNAYYA v. SESHACHALAM (Mudholkar J.)
209
The power to go behind a suit debt and to apply
the provisions of the Act for the original liability
is confined only to cases falling under sections 8
and 9 of the Act. 'But even in cases corning under
section 13 it would be open to the defendants to
plead and prove that the debt sued on could not
form the basis of an action or that 1;here was a failure
of consideration in respect of it.
Suoh a defence
is not by virtue of 'anything in or peculiar to the
Act, but one under the general
law.
In · cases
where a debt was contracted prior to the Act, but
renewed after the Act by one or series of successive
documents, such renewals including interest at the
contract rate, which had been statutorily discharged
by reason· of the provisions of sections 8 and 9 of
the Act, there would be a failure of consideration
to the extent to which. the interest was so discharged.
This principle will or can have no application ·in
the case of a debt incur.red after the Act and renewed thereafter. In ,those ~
there would be
no failure
of
consideration, for no portion
of
interest has been .discharged _by section 13, it
being open to the debtor to
agree to pay
the
higher stipulated rate of interest."
That again was a case where the original indebtedn~ss was subsequent to the commencement of the Act and, therefore, stands
on a footing different from the one before us.
The observations
made by the court in the. case upon which reliance is placed on
behalf of the appellants appear to have been limited by the learned
Judges to cases which . fall under s. 13 alone.
Since, however,
the learned Judges seem to have accepted the view taken
in
Thiravengadatha Ayyangat's case(') it is necessary for us to say
that to that extent we do not concur in the view taken by them.
It has to be remembered that where the plaintiff sues upon a document executed after the commencement of the Act the Court has
G to bear in mind also the provisions of s. 9 inasmuch as the document is one executed after October 1, 1932. If the pleadings
show that the original indebtedness commenced before the coming into force of the Act the court will first have to deal with
the document with reference to the provisions which precede s. 13
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of the Act.
l't is not as if the Court has to shut its eyes to
everything except the fact that the .document sued upon was
executed subsequent to the commencement of the Act. There-
(I) I.L.R. [1942] Mad. 57.
210
SUPREME COURT REPORTS
[1965] I S.C.K.
fore, if the court finds that the original indebtedness arose prior
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to the commencement of the Act either s. 8 or s. 9 will apply and
it would not be relevant for it to consider whether by executing a renewal after the commencement of the Act the parties agreed
to treat the. interest accrued up to the date of renewal as principal
from the date of the renewal of the debt.
That consideration may
b~ relevant in cases which completely exclude the applicability
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of ss. 8 and 9.
We were also referred to the decision in Punyavatamma. v.
Satyanarayana('); Nagabushanam
v.
Seetharamaiah(2)
and
Chellamma/ v. Abdul Ga/Joor Sahib(1 ).
In the first and
Uie
third of these cases the original liability arose after the commencement of the Act but in ·the second one it arose before the
commencement of the Act..
We agree with the view taken in the
biter case that relief can be given to an agriculturist in such a
c:ise under s. 8 or s. 9. as the case may be.
,
Thus it would appear that wherever a transaction was entered
into after the commencement of the Act but the original indebtedness arose before the commencement of the Act, the preponderant view is that ss. 8 and 9 would not be inapplicable. That,
as already stated, is also our view.
In the result we dismiss the
appeal with costs.
Appeal dismis.<ed.
(I) I.LR. 11960} 2 A. P. ll I.
(2) I.LR. 119611 t A. P. 485.
(3) l.L.R. 11961} Mad. t061.
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