Ajodhya Prasad Bhagat vs Gobind Missir and Another

Manohar Lall, J.—This is an appeal by the plaintiff whose suit for recovery of a sum due on the basis of an instalment mortgage bond has been dismissed by the appellate Court on the ground of limitation. The facts are no longer in controversy and must be stated in order to appreciate the strenuous contention raised by Mr. Misra on behalf of the appellant. On 4th June 1924, the defendant executed a Kstbandi mortgage bond for Rs. 408-4-0 in lieu of a previous debt in plaintiff''s favour. The bond provided that

Should there be default in payment of any instalment, the said creditors shall have the right to realise the expired and unexpired instalment at a time by instituting suit in Court.... In case of default of interest the said creditors shall have the right to realise the money of all the instalments with interest from the date of this bond till realisation at the rate of one percent, per mensem.

The defendants paid Rs. 286-8-0 towards principal and interest in four instalments during 1925 to 1927. On 23rd June 1930 a sum of Rs. 11 was paid. The endorsement on the back of the bond regarding this item is "egareh rupeya adai kia," that is to say, Rs. 11 has been paid. The plaintiff''s case was that this amount of Rs. 11 was paid towards interest, but the defendants'' case was that they never made any payment of Rs. 11 as alleged by the plaintiff but that they made a payment of Rs. 125, and that the writing of that payment has been removed by the plaintiff and in lieu thereof he has forged the entry of payment of Rs. 11. The Courts below have concurrently found that the defendant''s case is false, and that on the evidence it must be held that the sum of Rs. 11 was paid in the nature of a general payment by the defendants and that the factum of that payment appears in the handwriting of the defendant. The trial Court erroneously thought that the plaintiff had stated in the plaint that the payment of Rs. 11 had been made towards principal and interest. The plaint has been read out to us, and we are satisfied that the learned Subordinate Judge is right when he stated in appeal that the plaintiff''s case was that Rs. 11 has been paid towards interest. It may be that the learned Munsif fell into the error because be was thinking of the other payments which were made towards interest and principal. It is true that the plaintiff did not state in his evidence that Rs. 11 was paid towards interest, but after the close of the evidence of P.W. 2 he was recalled and made to say that the payment of Rs. 11 was made towards interest. But the learned Subordinate Judge has disbelieved this evidence of the witness and having disbelieved him he comes to the conclusion that there was nothing in the record to show that the intention of defendant 1 was that the payment of Rs. 11 should go towards interest. It must, therefore, be held that the payment of Rs. 11 was not made towards interest ''as such''. The situation is thus covered by the Full Bench decision of the Allahabad High Court in B. Udeypal Singh Vs. Lakshmi Chand and the majority view was accepted as correct by their Lordships of the Judicial Committee in AIR 1940 63 (Privy Council) . The suit of the plaintiff, therefore, which was instituted on 10th June 1942, was barred by limitation.

The learned advocate for the appellant, however, seeks to escape from the difficulty by arguing in the first place that the debt in the present case was not an interest bearing debt. He has referred elaborately to the commentary by Pollock and Mulla u/s 74, Contract Act, where it is stated that where interest is payable as default it is really damages by way of interest. Having perused the Kistbandi bond, which we got translated by the office, I am satisfied that in the present case the debt is an interest bearing debt. It is true that no interest was payable if all the instalments were paid within time, but the parties contracted that if the instalments were in arrears, the creditor would have the right to realise interest at a stipulated rate, It may be that in a proper case, the Court may come to the conclusion that the stipulation to pay this rate of interest was by way of penalty, but that would only affect the question as to the rate upon which interest would be payable by the debtors. It would not mean that the debt was not an interest bearing debt.

In the present case, moreover, it has not been found that this stipulation to pay interest was by way of any penalty or that the interest can only be decreed at a reduced rate. I would, therefore, hold, overruling the first contention, that this is an interest bearing bond or debt. It was then argued that as the amount of Rs. 11 which has been found to have been paid on 23rd June 1980, exceeded the interest due on that date, it must necessarily be held that a part of the amount went to pay off the principal, and that a part was necessarily paid as interest. This argument is equally untenable. It has now been authoritatively determined by their Lordships of the Judicial Committee that in the case of an open payment, it can only be treated to have been paid towards interest if; from the circumstances it can be found as a fact that it has been paid towards interest "as such". It is not necessary that the writing itself should contain the indication that it is being paid towards interest "as such"; the plaintiff is entitled to show from the evidence and the circumstances in the case that the payment was made towards interest "as such". In the present case, however, there is a clear finding of fact that the amount was not paid towards interest "as such". How then can it be held that a portion of the amount was paid towards the principal? The plaintiff does not say that he appropriated a portion of this amount towards the principal within the period of limitation, but on the other hand he says in the plaint that he received the amount towards interest. For this reason, it must be held that the plaintiff cannot take advantage of any part of the provisions of Section 20, Limitation Act. This view is supported by two recent decisions of this Court Sarabdeva Prasad Missir v. Dwarka Prasad AIR 1946 Pat. 59 and 1945 Ramchand Kesardeo v. Shaikh Shitu Shaikh Rahmat AIR 1945 Pat. 271

It is interesting to observe that the Privy Council case in AIR 1940 63 (Privy Council) which has been relied upon by both the parties before us itself contains a consideration as an illustration of the very situation which has arisen in this case. At page 169 their Lordships referred to the case in Firm Rai Bahadur Het Ram Bodh Raj v. Aya Ram-Tola Ram 42 C.W.N. 509 in which the judgment of the Board was delivered by Lord Russel of Killowen. In that case the judgment-debt was payable by instalment as a result of a compromise. The first instalment was Rs. 13,000 together with a year''s interest from 27th January 1928 to 26th January 1929 and was payable on the last-mentioned date. The payment of Rs. 825 was made on 15th February 1929. Lord Russel observed:

The last payment made in respect of the first instalment and interest was a sum of Rs. 825 paid, as admitted by the parties on 15th February 1929. The payment was made, and 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. Further in a letter addressed to the decree-holders, and signed by Bodh Raj, he says, referring to the Rs. 825, ''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 by registered post''. These facts are sufficient to show that Section 20 has come into play, and that accordingly the period of limitation must be computed from 15th February 1929.

The situation in the present case is different as there are no circumstances from which it can be held that a part of Rs. 11 was paid towards interest ''as such''; nor can it be held that the whole or a part of it has been paid towards principal because in the first place the debtor does not say so; indeed he says he never made this payment but paid another sum of Rs. 125 and in the second place the plaintiff does not say so as in his plaint he says he received the money towards interest, and in the third place no appropriation towards principal has ever been made by the present plaintiff Reference may be made here to the observations of Sir George Rankin at page 174:

What, then, in the case of an ''open'' payment, is required in order that it may be said in the words of Section 20 that before the expiration of the prescribed period part of the principal of the debt has been paid by the debtor?... While not of opinion that it need be shown that the creditor''s appropriation has within the time limited been communicated to the debtor, they are unable to regard the language of the section as satisfied unless within the prescribed period the creditor has in exercise of his right done something which treats the payment as made on account of principal. 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.

When I apply this principle to the facts of the present case, I find that it has not been established that the plaintiff has shown that he appropriated the whole or any part of this sum of Rs. 11 towards the principal with the result that this contention of the appellant must also be overruled.

The learned advocate then argued that the endorsement of the payment of Rs. 11 should be held to constitute acknowledgment of the debt within the meaning of Section 19, Limitation Act, and he relied upon the case in Ramayya v. Anjayya AIR 1942 Mad. 146 It may be stated that this decision was approved by a Full Bench decision of the Madras High Court in Venkata Chelampiah Sastri v. Annapurnamma AIR 1942 Mad. 353 But the facts in the case relied are entirely different. In the former case the endorsement on a pronote was in these words: "Paid on 15th September 1938 towards this promissory note Rs. 2." In the circumstances it was correctly held that the endorsement although not valid u/s 20 saved limitation u/s 19. The endorsement was expressly pleaded in the plaint as an acknowledgment saving limitation. The Full Bench decision at p. 353 on the other hand decided that the endorsement on the back of the promissory note "paid Rs. 10" cannot be construed as being anything more than a statement of the payment and it could not save limitation. But on the other hand if the endorsement had been "paid Rs. towards this promissory note and endorsed the payment thereon" it would constitute an acknowledgment of the liability within the meaning of Section 19 as the use of the word ''towards'' in itself implies that more remains to be paid so that the payment is made on account of a larger sum due under the instrument. The present case exactly falls within the principle laid down in the Full Bench case at p. 853 towards the end of the right hand column. In the present case instead of Rs. 10 the words are ''Rs. 11.''

For these reasons, I am of opinion that none of the contentions so ably advanced by the learned advocate is entitled to succeed.

I would dismiss this appeal. But in the circumstances I will direct each party to bear his own costs of this litigation in all the Courts.

Reuben, J.

I agree.