Chellammal vs Abdul Gaffoor Sahib and Another

Srinivasan, J.

(1) The correctness of the decision in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, is the question that is raised in these two appeals. We

shall briefly set out the facts leading thereto.

(2) S. A. No. 1048 of 1957 arises out of a suit on a mortgage executed on 26-10-1949. The principal sum was Rs. 2000/- and the contract rate

of interest 18 per cent. A sum of Rs. 900/- had been paid by the mortgagors towards interest upto 1-4-1952. It has been duly appropriated. In

the suit, the mortgagors contended that the payment of Rs. 900/- should be credited towards the principal. Relying on Patnala Ramalakshmi and

Others Vs. Dowlatabad Gopalakrishnarao, the trial Court rejected this contention; but in appeal, the learned Subordinate Judge held that N.S.

Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, , applied to the facts of the case. He accordingly reopened the appropriation already made. By the

time the matter came up in second appeal before Somasundaram, J., the decision in V.S.T. Sheik Mansoor Theraganar and Another Vs. S.V.S.

Sankarapandia Mudaliar, , had been rendered by a Full Bench of this Court. The learned Judge was inclined to take the view that the Full Bench

decision in effect overruled the decision in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, , and directed the papers to be placed before the

Hon''ble the Chief Justice for reference to a Full Bench.

(3) L. P. A. No. 55 of 1959 arising out of an application O. P. No. 77 of 1955 under Sec. 19-A of the Madras Agriculturists Relief Act. That

dealt with a mortgage executed on 24-5-1947, carrying interest at 12 per cent per annum. The petitioners mortagagors claimed relief under the

Act and contended that though they had paid certin amounts towards interest, these appropriations should now be reopened and that the payments

made by them should be applied towards the principal and interest thereon calculated at 6 1/4 per cent uptil 28-7-1947 and at 5 1/2 per cent

thereafter. The learned Subordinate Judge accepted this contention in view of the decision in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, :

(AIR view of the decision in 1956 Mad 618). This decision was the subject-matter of an appeal A. A. O. No. 2 of 1957-before Ganapatia Pillai,

J. The learned Judge interpreted V.S.T. Sheik Mansoor Theraganar and Another Vs. S.V.S. Sankarapandia Mudaliar, to mean that this mode of

reappropriation would not be applicable to a case governed by section 13 of Act IV of 1938. Though the learned Judge does not in specific terms

say so, he appears to have held that the Full Bench decision in V.S.T. Sheik Mansoor Theraganar and Another Vs. S.V.S. Sankarapandia

Mudaliar, overruled the decision in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, . The appeal was accordingly allowed. In the Letters

Patent Appeal, the Bench before whom it came up for hearing made an order that the papers should be placed before the Hon''ble the Chief

Justice for disposal of the appeal by a Full Bench in order that the correctness of the decision in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim

Sahib, may be finally settled.

(4) It will be noticed from what has been stated above that the debts in the above two cases came into existence after the commencement of Act

IV of 1938. It is common ground that the scaling down of such debts is dealt with by S. 13 of the Act, and the question that accordingly arises is

an to the correct mode of scaling down to be adopted in such cases. In the light of the decision in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim

Sahib, , the question that pointedly arises is whether in the case of debt incurred after the commencement of the Act, it is open to the Court to

reopen the appropriation made towards the interest, such appropriations having been made with the consent of the debtor, and to award interest

only at the rates specified in Sec. 13 of the Act from the date of the comencement of the debt. We may state at the outset that besides the line of

cases rendered by the Madras High Court dealing with this point, there are a few recent decisions of the Andhra Pradesh High Court which have

followed the principle laid down in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, . Not only is there a conflict between a decision of a

Bench of this Court and a later Full Bench decision which however, dealt with the point only indirectly, but we have also to consider a few

decisions of the High Court of Andhra Pradesh directly bearing on the point which differ from the Full Bench decision of this Court in V.S.T. Sheik

Mansoor Theraganar and Another Vs. S.V.S. Sankarapandia Mudaliar, .

(5) The earliest decision directly bearing on the point is Patnala Ramalakshmi and Others Vs. Dowlatabad Gopalakrishnarao, . That was also a

case where the debt was incurred after the commencement of Madras Act IV of 1938. The debt carried interest at 12 per cent and there was a

series of payments of interest expressly appropriated by endorsements so that all the interest upto the 11th August 1941, had been paid at the

contract rate. In a suit on the note for the principal together with interest at the contract rate, the trial Court scaled down the debt calculating the

total amount of principal and interest at the statutory rate of 6 1/4 per cent and deducting therefrom all the payments made. It was held by this

Court that such a mode of reappropriation was not permitted by the Act, there being no provision under Sec. 13 for the scaling down of interest

already paid and appropriated. The learned Judges besides basing their decision on this view of the scope of Sec. 13 of the Act, went on to say

that even if there had been an over payment of interest, such payment had been made under a mistake of law which could not be recovered

through Courts.

(6) In N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, , also the case of a debt which was incurred after the commencement of Act IV of

1938 was in question. The learned Judges examined the ratio of the decision in Patnala Ramalakshmi and Others Vs. Dowlatabad

Gopalakrishnarao, , and took the view that subsequent to the decision of the Privy Council in AIR 1949 297 (Privy Council) , the foundation on

which Patnala Ramalakshmi and Others Vs. Dowlatabad Gopalakrishnarao, was rested was somewhat shaky. In the Privy Council decision it was

decided that Sec. 72 of the Indian Contract Act did not exclude payments made under a mistake of law. While it may be conceded that to the

extent to which the learned Judges who decided Patnala Ramalakshmi and Others Vs. Dowlatabad Gopalakrishnarao, , depended upon the then

accepted position in law that payments made under a mistake in law could not be recovered, that decision was not rested upon that ground alone.

The view that they took about the scope of Sec. 13 of Act IV of 1938 was not specifically examined by the learned Judges who decided N.S.

Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, . We do not find anywhere in this judgment an examination of the scope of this provision of the

Act.

(7) In V.S.T. Sheik Mansoor Theraganar and Another Vs. S.V.S. Sankarapandia Mudaliar, , the question arose whether it was permissible under

Sec. 13 of the Act to reopen debts incurred after the Act. What happened in that case was that there was a series of borrowings at 10 1/2 per

cent per annum. At the end of each year of account, interest at the contract rate was debited against the borrower. There were periodical

settlements of accounts at which the amount due to the creditor was ascertained, and an acknowledgment as to the correctness of the amount and

a promise to pay it with future interest then stipulated were recorded. There fresh agreements entered into on each settlement of account were in

the form of promissory notes and stamped as such. On the last of such settlements of account which was on the 17th August, 1951, the suit was

laid. The claim to relief under Act IV of 1938 was advanced, the debtors contending that the entire account should be reopened and that they

should not be made liable to pay any interest in excess of 5 1/2 per cent per annum. It may be mentioned that the borrowings commenced in

December 1943 so that the debt was case which had been incurred after the commencement of the Act. The contention was advanced that the

reopening of the transaction would be merely giving effect to the intention of the legislature which was enacted to protect the agriculturist debtor

against his own contract. The learned Judges repelled this contention and proceeded to examine the sections. They observed that

where an old liability is merged or renewed by a fresh contract, the old debt is extinguished and could not longer be termed a debt unless the later

debt has under the law been allowed to be ignored and their transaction reopened. The legislature, when it intends that particular debts should be

traced back to their origin, provides for such reopening of debts specifically (vide Ss. 8 and 9)"".

Proceeding further they observed,

The Act does not render the payment of or a contract to pay interest on a debt at a rate higher then that prescribed for each of the various

categories, illegal. Nor is there any question of public policy involved when a higher rate of interest on a loan is agreed to by an agriculturist. Under

the provisions of the Act, relief to agriculturist debtors was granted by the Act itself discharging the whole or a portion of the interest on debts

incurred prior to the Act. Section 8 discharged all outstanding interest on a debt incurred prior to 1st October, 1932, while in regard to debts

incurred after that date but before the Act, Sec. 9 discharged that portion of the interest which was above simple interest at 5 per cent per annum.

Future interest on those debts were regulated by S. 12. S. 13 dealt with debts incurred after the Act. Under that section, here is no provision for

any statutory or automatic discharge of interest stipulated at a rate higher than prescribed therein; such excess interest was only made irrecoverable

if the creditor sought to enforce the debt in a Court of law. There being thus neither a prohibition against a stipulation for payment nor an automatic

discharge of higher rates of interest agreed to be paid by an agriculturist debtor, it cannot be said that when a creditor with the assent of his debtor

added to the principal loan the interest accrued in terms of the contract, and the debtor entered into a fresh contract treating the consolidated

amount as principal for the fresh loan, there would be anything illegal or even a failure of consideration in regard to the new loan. Such a new loan

would constitute a debt incurred on the date of renewal and if a suit is based on that debt, the provisions of S. 13 could be attracted to that debt

and not to the earlier debts of which it was a renewal or substitution. Under the ordinary law, where parties enter into a new contract in substitution

of an earlier one, the later contract alone would govern the rights of the parties. The court would itself have no power to go behind that contract

except in cases where the latter contract fails for some reason known to law or where a statute gives an express power to reopen the

same.........Sections 8 and 9 of Act IV of 1938 confer jurisdiction on Courts to reopen a transaction in cases or renewals of debts incurred prior to

the Act. But Sec. 13 confers no such power and prima facie the scaling down of interest contemplated by it could only be in relation to the debt

sued on........

The decision was accordingly to the effect that it was not open to the Court to go behind a particular transaction which was the subject-matter of

the claim before Court.

(8) The logical result of this decision would appear to be that, it is not open to the debtor to demand that the entire series of transactions should be

reopened in a case where interest computed at the contract rate had been included in a subsequent promissory note, that is to say, where the

debtor had merely made a promise to pay interest at that rate, it would equally be not open to him to ask for reappropriation in a case where he

had paid interest at the contract rate and agreed to its appropriation towards the interest due on the bond. The subsequent execution of a later

promissory note or bond for a sum inclusive of the principal and the outstanding interest on an earlier bond at the contract rate amounts only to a

promise to pay in future all interest that had accrued at the contract rate on the original sum advanced. It, according to the Full Bench decision

referred to, the debtor cannot demand reopening of the transaction and recalculation of the interest on the basis of the earlier bond, it must

necessarily follow that in a case where he has in fact paid the interest at the contract rate and discharged his obligations in respect of interest, he

cannot equally have the transaction reopened, and the amount paid as interest at the contract rate reappropriated in a different manner. As the

learned Judges pointed out, Act IV of 1938 did not render the contract to pay interest at any figure higher than that prescribed, if any, illegal. Nor

does Sec. 13 of the Act give any power to the Court to go behind the contract in the manner in which such power has been expressly granted

under Secs. 8 and 9. It should therefore follow that the decision in N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, , is totally inconsistent with

the principle laid down in V.S.T. Sheik Mansoor Theraganar and Another Vs. S.V.S. Sankarapandia Mudaliar, .

(9) On behalf of the respondents, it has been claimed that in the decision in V.S.T. Sheik Mansoor Theraganar and Another Vs. S.V.S.

Sankarapandia Mudaliar, the question of reappropriation of interest did not arise, the principle of that decision cannot be possibly explained in any

other manner. It is contended, however, that the policy of the Act was that the debtor should be given benefit, and any interpretation which curtails

the scope of Sec. 13 of the Act would be detrimental to the interests of the agriculturist debtor and would accordingly be out of tune with the

policy of the Act. Reliance has also been placed upon a decision of the Full Bench of the AndhraAIR 1957 Pradesh High Court in Nainamul v.

Subba Rao, (S) Andh Pra 546 where the Full Bench came to the conclusion that even in a case coming under Sec. 13 of the Act, appropriation

towards interest made at the contract rate is liable to be reopened and the payments adjusted differently. Among other reasons given by the

learned Judges for reaching this conclusion, one was that any other view would not give effect to the intention of the statute. Though we are not

bound by this decision, in view of the reliance placed upon it on behalf of the debtors, it is necessary to examine the reasoning which led to this

conclusion.

(10) The learned Judges set out the relevant provisions of Secs. 7, 8, 9, 12 and 13. They no doubt pointed out that the Act provides for relief of

indebtedness, the extent of the relief varying with the date of the indebtedness. Under the Act, the debts in respect of which relief have been

differently provided are debts incurred prior to the 1st october, 1932, covered by Sec. 8 of the Act, debts incurred on and after the 1st October,

1932, and before the commencement of the Act, covered by Sec. 9 and debts incurred after the commencement of the Act which are covered by

Sec. 13. After noting that the extent of relief varies with the date of indebtedness they proceeded to observe :

It is therefore clear that though the extent of the relief varies, the nature of the relief is the same so far as interest is concerned. It is not relevant for

the present enquiry to notice the other differences in the nature and the extent of the relief provided by the Act between three debts. Bearing in

mind, therefore, the object of the Act, viz., the reduction of interest on debts incurred by agriculturist, we shall proceed to scrutinise the respective

contentions of the parties.

It seems to us however that while the learned Judges were justified, if we may say so with respect, in relying upon the intention of the statute to

provide relief to indebted agriculturist debtors as the underlying policy of the Act, it is undoubtedly the equally declared policy of the Act to classify

the various classes of debts and to measure the relief to be granted in respect of these classes of debts differently. That appears to be no less a

policy which is a prominent feature of the Act which to our minds cannot be ignored.

(11) The Full Bench of the Andhra Pradesh High Court was clearly aware of the fact that Sec. 13 in terms did not arm the Court with any power

to reopen transactions. They observed, after dealing with the differences between Secs. 8, 9, and 13 :

Why then did the legislature make express provision in Sec. 9 for reopening the appropriations made whereas no such provision was made in

section 13, but left us to infer from the cryptic words used therein? The only answer I can find, though not satisfactory, is that the scaling down

process under Sec. 9 is more complicated than that under Sec. 13, and, therefore, the provision was drafted with better detail.

But, Sec. 13 affects future transactions entered into by the parties presumably with knowledge of the provisions of the Act. A single provision like

Sec. 13, therefore, was considered sufficient to give the limited relief prescribed thereunder. Be that as it may, the fact that in one provision the

legislature gives a detailed treatment to a subject is not ground for ignoring the express provisions of another section, if the Scheme of scaling down

described in the former gives effect to the expressed intention of the legislature in the latter.

It will be apparent therefore that while the learned Judges were fully conscious of the fact that section 13 did not in terms give a power similar in its

amplitude to that contained in Secs. 8 and 9 they purported to infer the existence of such a power; they did so, as far as we can see, relying not

upon the specific words found in the section but on what they held to be the intention of the legislature. As we have pointed out, in the scheme of

the Act, the feature that is brought into sharp relief is the equally declared policy of the statute to differentiate between the different classes of debts

according to the date of indebtedness. We cannot ignore this feature any more than we can ignore the policy underlying the Act, viz., that it is to

give benefit to indebted agriculturits.

(12) The same arguments which seem to have prevailed with the Full Bench of the Andhra Pradesh High Court have been pressed before us for

our acceptance. It is argued that in the application of Sec. 13 of the At, the Court is bound to scale down all interest due on any debt incurred by

an agriculturist after the commencement of the Act. Emphasis has been laid down upon the word ""all"" and we are invited to interpret it, as did the

Andhra Pradesh High Court, to mean the totally of the interest from the dateon which the debt was incurred, notwithstanding any part of that

interest might have been paid willingly by the debtor before the matter came to Court by way of a proceeding for recovery of the debt. The learned

Chief Justice of the Andhra Pradesh High Court was of the opinion; that the use of the word ""all"" was significant and must be taken to mean the

entire interest which the debt had earned. As he pointed out, the word interest used in Sec. 13 is qualified by two words ""all"" and ""due"". He was

also inclined to accept the meaning of the word ""due"" as ""payable"" as not being inappropriate in the context. Nevertheless, the conclusion was that

the expression ''all interest due'' must be taken to mean the totality of the interest earned by the debt from the date it was incurred notwithstanding

that any part of it might have been discharged.

(13) We are not inclined to agree with the view that the expression ""all"" has any particular or precise significance in the context. In Sec. 8(1) also it

is provided that ''all interest outstanding on the 1st October, 1937"" shall be deemed to be discharged. The content of this sub-section would not

alter in the slightest degree if the word ""all"" were dropped from the section. ""Interest outstanding on the 1st October, 1937, shall be deemed to be

discharged"" cannot possibly mean anything different from ""all interest outstanding etc"". In the body of Sec. 9 again, we find ""credit shall be given to

all sums paid towards interest"". In these two instances also, the word ""all"" seems to have no particular significance attached to it. On the other

hand, we find in Sec. 9-A, which contains special provisions in respect of usufructuary mortgages, the word ""all"" used in the following context : ""all

other sums payable to the mortgagee by the mortgagor in his capacity as such.........."" occurring in S. 9-A (3) (iii), & in sub-sec. (4) (iv) of this S.

9-A, the word ''all'' is obviously used to indicate the various sums which the mortgagor might be bound to pay to the mortgagee. But in the

expressions ""all interest due"" and ""all interest outstanding on the 1st October, 1937,"" it is impossible to attach any particular meaning to the word

all"". The redundancy of this word ""all"" is particularly noticeable in the expression ""all interest outstanding on the 1st October, 1937."" For when any

interest is ""outstanding"" on a particular date, it is obviously the totality of the interest that would be o outstanding and the qualifying word ""all"" in this

instance does not appear to add anything to the meaning of the remaining words. We are unable to agree with the learned Judges of the Andhra

Pradesh High Court in holding that all interest due in the context of Sec. 13 means the amount of total interest which the debt earned since its

inception.

(14) Learned counsel for the creditors invited our attention to the definition of interest in section 3 (iii)(a) of the Act which runs :

''Interest'' means any amount or other thing paid or payable..........

According to the learned counsel in interpreting Sec. 13, the word ""interest"" appearing therein should be given this extended meaning, that is to say,

that interest paid should also be taken note of by the Court is scaling down the interest. We are not satisfied that this argument is well founded. The

word ""interest"" is qualified by the further expression ""due"" and in the context of the provision, it seems to us that i5t is only interest that it still

payable that is brought within the scope of Sec. 13. The expression ""interest"" has been defined in an inclusive manner to mean any amount paid

only for the purpose of Ss. 8 and 9 which provide for the reappropriation of interest already paid. In the light of the pronounced differences

between the modes of dealing with debts covered by Secs. 8, 9 and 13 of the Act, the words ""interest due"" appearing in Sec. 13 must necessarily

be interpreted in the context in which they appear; to do otherwise would destroy the differences between debts whatever be the date of their

origin. We are strongly of the view that that was not the intention of the statue.

(15) A Division Bench of the Andhra Pradesh High Court, to which Subha Rao, C. J., was a party, decided in pundarikakshudu v.

Venkatakrishna AIR 1957 AP204, that Sec. 13 of the Act does not enable a debtor to trace back his debt to the original debt incurred after the

Act came into force. This decision was referred to and approved by the Full Bench decision of the Andhra Pradesh High Court, (S) AIR 1957 AP

546 Andh Pra 204 was referred to in the referring judgment but the inplications to that decision were not examined in the Full Bench judgment. We

much, However, mention that in another decision of the Andhra Pradesh High Court Punyavatamma v. Satyanarayana, 1960 1 AWR 336 a

Division Bench consisting of Chandra Reddi C. J. And Narashmham J. Had to examine whether the decision in AIR 1957 AP 204 could still be

regarded as embodying the correct rule of law in view of the Full Bench decision in (S) AIR 1957 AP 546. This Bench came to the conclusion that

the decision in AIR 1957 AP204 could not be reconciled with the principle laid down in the Full Bench decision.

(16) One other aspect of the matter which we must refer to at some length is the correct connotation to the expression ""interest due"". We are not

prepared to accept to the interpretation of this expression give en to it by the Andhra Pradesh High Clourt as the interest which the parties have

contracted to pay. The word ""due"" has undoubtedly a sense of something to be performed in the future as distinct form something which ha

happened in the past. In re Moss, Ex parte Hallett, 1905 2 KB 307 the proper meaning of the expression came up for consideration, and Darling,

J. Observed:

The convenant of the appellant was to pay interest on the principal sum ''so long after'' the day fixed for payment ''as any principal money remains

due under these presents''. It is clear, therefore that it no principal money remains due, the appellant is under no liability to pay interest to Cooke,

and the question therefore is whether after the bankruptcy any principal money did in fact remaindue. It is admitted that no action would lie against

the bankrupt, but it is argued that the principal money nevertheless remains, due even after he has obtained his discharge. Due from whom? It

could only be due from the bankrupt, and ex hypothesi he has been discharged form all liability to pay the principal money. In my opinion, money

can only be said to be due in a legal sense when it can be recovered in an action, and it is impossible to say that there can be anyth8inhg due under

this security when no money can be recovered by any legal process. If there is no principal money due, it follows that there is no interest payable.

(17) If therefore the meaning of the word ""due"" is that it is something which can be recovered by legal process, that is obviously not be case here in

relation to an amount of interest which had been paid and discharged by the debtor. Both from the above decision and from the context in which

this expression appears in the section, it seems to us that the ''interest due'' means interest still remaining payable by the debtor and cannot be

equated to interest both paid and still remaining to be paid.

(18) Once again we must emphasise that S. 13 must receive its interpretation not isolated from the several provisions contained in the Act. While

we agree that the intention of the Legislature was to provide a measure of relief to indebted agriculturists, the Legislature designedly classified the

debts in accordance with the dates of their origin. They granted the quantum of relief which they decided to grant to the agriculturists according as

the debt was incurred prior to the 1st October 1932, during the period of acute depression, or between the 1st October, 1932, and before the

commencement of the Act or after the commencement of the Act. The three classes of cases were differently dealt with and the question of relief

which the legislature granted to each class of cases was different. It is further undeniable that the law did not render invalid many contract

containing a stipulation for the payment of interest above any particular figure. Nor was it the intention of the legislature to interfere with contracts

entered into after the commencement of the Act. If these premises are granted, it seems to us that where a debtor voluntarily makes a payment of

interest at the contract rate, the legislature did not intend to step in an interfere with that payment in nay manner. In the light of the decision of the

Full Bench in V.S.T. Sheik Mansoor Theraganar and Another Vs. S.V.S. Sankarapandia Mudaliar, , also, which we accept as correctly laying

down the law, notwithstanding that the Andhra down the law, notwithstanding that the Andhra Pradesh High Court has differed therefrom, we are

of the view that S. 13 does not permit the reopening of a transaction and reappropriation of any interest payment made with the consent of the

debtor.

(19) A great deal of argument ahs been advanced on the basis of S. 72 of the Contract Act. According to the counsel for the debtors, any

payment over and above 6 1/4 or 5 1/2 per cent, as the case may be, is a payment made as a result of a mistake in law, and which, s the

interpretation of S. 72 of the Contarct Act stands at present, would enable the person making the payment to recover from the payee. This

argument to our minds begs the question. Unless we can postulate from the wording of S. 13 that the charging of or the acceptance of interest at a

rate higher than 6 1/4 or 5 1/2 per cent, as the case may be, it is prohibited by the law, no question of payment made under a mistake in law can

possibly arise. In the view that we have taken that the legislature did not purport to interfere with contracts entered into subsequent to the

commencement of Act IV of 1938 but only denied the suing creditor the right to recover interest at the contract rate, if it exceeded the rates

provided in that section, the contract was not illegal; nor was the payment at a rate higher than 6 1/4 per cent illegal. There could thus be no

mistake in law of such a payment voluntarily made by the debtor. Obviously S. 72 of the Contract Act will not apply. If this is the correct view of

the legal position, then it follows that the reopening of the transaction and reappropriation of the interest payment already made, which can only be

rested on the right of the debtors to recover payments made under any mistake of law, is not warranted when no mistake in law can possibly be

postulated.

(20) Our attention has been drawn to Chandrasekharan Pillai v. Thangavelu Pillai, 1961 1 MLJ 172 , where Jagadisan J., following N.S.

Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, , held that the words in S. 13 of the Act that the court shall scale down all interest are of sufficiently

wide amplitude to give jurisdiction to the court to re-appropriate amounts paid by the debtor in excess of the statutory rate of interest so as to

bring the transaction between the parties in conformity with the statute. The learned Judge referred to V.S.T. Sheik Mansoor Theraganar and

Another Vs. S.V.S. Sankarapandia Mudaliar, , the Full Bench decision, and proceeded to explain it on the ground that in that case only a

settlement of accounts which involved an acknowledgment of liability by the debtor to pay interest at a higher rate that the statutory rate was in

question. He observed referring to the Full Bench decision :

The creditor founded himself on the last settlement of accounts. But the debtor wanted to have that settlement reopened. Their Lordships pointed

out, rightly, if I may say so with respect, that there was no machinery provided for under S. 13 of the Act to have settled accounts reopened and to

trace back the debt to its inception. The actual decision of the Full Bench does not, in any way conflict, with the decision in N.S. Sreenivasa Rao

Vs. G.M. Abdul Rahim Sahib, .

On this reasoning the learned Judge reached the conclusion set out above.

(21) But in another case Subbaraya Chettiar v. Vythianatha Mudaliar 1961 1 MLJ 240, the same learned Judge accepted the principle laid down

in the Full Bench decision as indicating that under S. 13 of the Act, there was no provision to scale down the debts as in the case of Ss. 8 and 9 of

the Act. At page 241, he observed :

It is not open to the court to dissect the principal amount covered by the last promissory note and find out to what extent it comprised interest due

on the earlier transactions in excess of the statutory rate prescribed under the Act. There is nothing unlawful or opposed to public policy in the act

or conduct of a debtor foregoing the benefit of the statutory reduction of his liability in order to perform his contractual obligations. Voluntary

payments and settlement of accounts by the debtor without availing himself of the statutory benefits knowingly or unknowingly, cannot ipso facto,

become illegal.

The above passage appears to indicate that the learned Judge was of the view that in a case where a debtor had made a voluntary payment of

interest on the basis of the contract rate stipulated for, notwithstanding that that rate exceeded the statutory rate, such a payment would not

become illegal; the learned Judge clearly appears to have accepted the position that such a voluntary payment by the debtor would not be open to

reappropriation.

(22) We are of the view, as we have also earlier expressed, that the Full Bench decision in V.S.T. Sheik Mansoor Theraganar and Another Vs.

S.V.S. Sankarapandia Mudaliar, , must in principle apply not only to settlement of account involving promises to pay but equally to actual

payments of interest made voluntarily by the debtor and appropriated as such by the creditor. The machinery provided for by S. 13 of the Act

does not extend to reopening of such payments. It may not be out of place to mention that in interpreting a statute, which undoubtedly is

expropriatory in its nature, the scope of the Act cannot be widened beyond what its terms expressly warrant. The interpretation of its terms must

be in favour of the person whose rights are being expropriated and not in favour of the person who would benefit by such expropriation. In the light

of this general principle also, it seems to us that it is impossible to read into the words of S. 13 of the existence of a power to reopen past

transsaction analogous to the power specifically granted under Ss. 8 and 9 of the Act.

(23) Our conclusion is that N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, is inconsistent with the principle laid down in V.S.T. Sheik

Mansoor Theraganar and Another Vs. S.V.S. Sankarapandia Mudaliar, . From the alter Full Bench decision, it should inevitably follow that in the

case of debts incurred after the commencement of the Act, the debtor is not entitled to reopen a transaction and demand reappropraition of

interest payments voluntarily made by him. In our opinion, Ganapatia Pillai J., rightly applied the principle of the Full Bench decision in the appeal

before him, as N.S. Sreenivasa Rao Vs. G.M. Abdul Rahim Sahib, is no longer good law in view of the Full Bench decision referred to.

(24) In result, S. A. No. 1048 of 1957 will be allowed with costs and L. P. A. No. 55 of 1959 will stand dismissed with costs.

(24) Order accordingly.