Gudivada Suryanarayana vs Tadikonda Alavandararao and Others

Wadsworth, J.—The appellant was the first defendant in a suit on a promissory note Ex. P-1 executed on the 18th February, 1939, by

defendants 1 and 2 in favour of the deceased first plaintiff for Rs. 17,195-2-0. This promissory note was executed after the commencement of the

Madras Act IV of 1938 in discharge of an earlier promissory note Ex. P-2 dated the 19th February, 1936, for Rs. 12,240-10-0 which except for

Rs. 35 cash was a renewal of a still earlier promissory note of 1930 the principal of which was Rs. 6,000. The appellant is admittedly an

agriculturist. He claimed that the suit promissory note was executed in circumstances which give a basis for various pleas, one being failure of

consideration and another being coercion. He also advanced a plea under the Usurious Loans Act.

It is well settled that a debt incurred after the commencement of Madras Act IV of 1938 cannot be scaled down except in accordance with

Section 13 of that Act. But it is also well settled that in a suit on such a debt the defendant may plead that the document executed after the

commencement of the Act was a mere voucher acknowledging a debt incurred prior to the commencement of the Act to which Section 8 or

Section 9 of that Act would apply. If so much is pleaded and established, the excess over the amount due under the prior document on applying

Sections 8 and 9 of the Act may be treated as an amount in respect of which there is a failure of consideration; that is to say, with reference to a

debt incurred after the commencement of the Act, the debtor if he seeks relief directly under the Act must rely only on Section 13; but if he can

rely on a plea under the general law, he may in a proper case indirectly get a benefit which would not be available to him in the absence of such a

special plea and evidence to support it.

Turning to the circumstances in which the suit promissory note was executed, we find evidence that the first plaintiff came to the debtors on the

last day of limitation for the preceding note and persuaded them to execute the fresh note for the lull amount due without taking into account the

relief due under the Act, because the first plaintiff undertook to collect only the amount due under the Act and because there was some talk about

a credit being due by reason of the profits of a contract. There is also some evidence that the first plaintiff brought pressure upon the first defendant

by threatening to sue and by threatening also to execute other decrees which he had obtained against the first defendant. It is well established that

on the date when the first defendant executed this renewed promissory note, he had established his right in other proceedings between himself and

the first plaintiff to the relief given under Madras Act IV of 1938 to agriculturists. The learned Subordinate Judge has rejected all this evidence

about the circumstances in which the promissory note came to be executed. But it seems to us most probable that the evidence is true. The

witnesses who support the first defendant are the two surviving attestors to the promissory note one being the local postmaster and the other the

village munsiff. They do not appear to be witnesses anxious to favour the first defendant. Seeing that the first defendant knew that he was entitled

to relief under the Act, it is not very likely that he would have signed this promissory note for a sum of Rs. 17,195-2-0 when the principal would be

reduced by the application of the Act to Rs. 6,035-4-0, unless there had been some understanding between the parties that the relief to which he

was entitled would in any case be given to him. There is no evidence of any such forbearance to sue on the part of the plaintiff as would amount to

a consideration for the excess amount stipulated in the promissory note. Prima facie therefore we have a promissory note executed for more than

Rs. 17,000 when both parties must have been fully aware that the amount due on a proper application of the law was something slightly in excess

of Rs. 6,000. It seems most probable that, this being the last day of limitation, the creditor was in a position to insist on his debtor executing this

promissory note as a voucher or acknowledgment with a view to the precise amount being settled at some future date. If that is so there is a failure

of consideration to the extent to which the promissory note amount exceeds the amount due on a proper scaling down of the debt.

There is no appeal on behalf of the second defendant and no evidence of the circumstances under which he came to sign the promissory note. In

view of our conclusion on this plea, the further plea under the Usurious Loans Act becomes of minor importance, but we must state that we do not

agree with the conclusion of the learned Subordinate Judge on this issue. Clearly, the suit promissory note provides for the payment of compound

interest and though the plaintiff has had, the wisdom not to claim compound interest in his plaint that fact will not remove the contract from the

purview of Section 3 of the Usurious Loans Act as amended in Madras. It is also quite clear that the first defendant is an agriculturist by. calling

and the contract would therefore have to be deemed to be an usurious contract liable to be reopened with reference to its antecedent history. As a

result of our finding that there has been a failure of consideration it is Unnecessary to consider the question of relief under the Usurious Loans Act

any further. The amount which would have been due on a proper scaling down of the debt as on the date of the execution of the suit promissry

note is Rs. 6,035-4-0 with interest at 6 1/4 per cent, from 1st October, 1937. There is a failure of consideration for the excess amount. The

appeal is allowed and the plaintiff will have a decree so far as the first defendant is concerned for the above amount, the appellant being entitled to

full costs in appeal and the parties paying and receiving proportionate costs in the trial Court.