Ramachandra by next friend K.L. Bhandary, Vakil vs Shantarama by mother and guardian Rukmini Amma and Another

Patanjali Sastri, J.—This is a petition to revise the decree of the Court of the District Munsif of Kundapur dismissing the petitioner''s small

cause suit No. 381 of 1936 as barred by limitation.

The suit was brought to recover the amount due on a promissory note executed by the first respondent''s father on 30th September, 1926. After

his- death in 1932, the first respondent''s guardian executed a mortgage on 20th December, 1932, in favour of the second respondent''s husband

who was directed to discharge the suit debt as part of the consideration for the mortgage. The mortgagee made payments for interest on 29th

May, 1933, and 16th July, 1934, which were duly endorsed on the promissory note, but failed to pay the balance of the debt. The suit was

instituted in 1936 for the recovery of such balance and it was not disputed that it would be in time if the second payment of interest referred to

above satisfied the requirements of Section 20 of the Limitation Act. The Court below held that it did not, on the ground that the mortgagee was

neither the person liable to pay the debt nor his agent duly authorised to make such payment within the meaning of Section 20. An attempt was

made in the Court below to show that there was a novation by petitioner accepting the liability of the mortgagee but the Court held that it was not

proved and that finding could not be and was not attacked before me in revision.

The view taken by the lower Court on both points is supported by a recent decision of a Division Bench of this Court reported in T.S.P.L.S.

Tinnappa Chettiar, by his authorised agent, A.S. Arunachalam Chettiar Vs. Putti Krishna Rao by guardian and mother Padmavati Ammal and

Others, and this would ordinarily have concluded the case in favour of the respondents but for the submission of the learned Counsel for the

petitioner with which I am inclined to agree that the decision requires reconsideration on the question of authority to pay in view of the Privy

Council ruling reported in AIR 1929 297 (Privy Council) . The facts of that case so far as they are material here are as follows; One Bishambar

who was a director of a bank obtained an unauthorised loan from it, but wishing to conceal from the Bank his indebtedness persuaded one

Bansidhar, the first respondent before their Lordships, to execute a promissory note for the amount due on the understanding that he (Bishambar)

himself would discharge the debt. The amount of the note was accordingly credited to Bishambar, and Bansidhar was shown in the books as the

bank''s debtor in respect of that sum. Bishambar made a payment for interest, and within three years from such payment but beyond three years

from the note, the Bank sued Bansidhar to recover the balance due. In holding that Bishambar''s payment of interest saved the suit from the bar of

limitation, their Lordships observed at page 9:

Upon what they have already held to be the true meaning and effect of the transaction of the 22nd of December 1917, it was agreed between

Bishambar and the first respondent that the former would discharge the latter''s debt to the bank in respect of both principal and interest, and it is

clear from the first respondent''s evidence that he left it to Bishambar to do so. Under these circumstances, it being admitted that no formal

authorization of the agent is required under this section, their Lordships find no difficulty in implying authority from the first respondent to Bishambar

to pay the interest on his behalf as it became due.

As pointed out already, the position under the mortgage transaction in the present case is, to my mind, essentially the same as the mortgagee had

undertaken, and the mortgagor had left it to him, to discharge the petitioner''s debt, and there is nothing to show that it was required to be

discharged by a single payment. The same conclusion must therefore follow.

In taking the opposite view, the learned Judges in T.S.P.L.S. Tinnappa Chettiar, by his authorised agent, A.S. Arunachalam Chettiar Vs. Putti

Krishna Rao by guardian and mother Padmavati Ammal and Others, , followed the earlier decision in Alagappa Chettiar Vs. Subramania Pandia

Thevar and Others, , where the learned Judges purported to base their decision on the English case Linsell v. Bensor (1835) 2 Bing. 241 : 132

E.R. 95, The defendant in that case entered into a composition deed and instructed one of his trustees to tender to the plaintiff a part of the debt in

discharge of the whole. The plaintiff having refused to accept it on those terms, the trustee paid it as a part payment. It was held that such payment

in part was without authority and did not take the case out of the statute of limitations. With all respect, it seems to me that this case does not lend

support for the broad proposition that authorization to discharge a debt can confer no authority to pay interest or part of the principal due on the

debt. It will be observed that all that Section 20 requires is that the payment should be made by a person paying for the debtor and on. his account

what he is bound to pay and not by a stranger to the debtor (see per Lord Cranworth in Chinnery v. Evans (1864) 11 H.L.C. 115 : 11 E.R. 1274)

and such authority can be irrespective of the volition of the debtor (see Govinda Pillai Vs. Dasai Goundan and Another, ). It is therefore difficult to

see why the mortgagee whom the debtor had asked to pay off the petitioner''s debt should not be considered to be duly authorised to pay interest

or part of the principal of the debt.

The other cases to which reference is made in T.S.P.L.S. Tinnappa Chettiar, by his authorised agent, A.S. Arunachalam Chettiar Vs. Putti

Krishna Rao by guardian and mother Padmavati Ammal and Others, have merely followed the decision in Alagappa Chettiar Vs. Subramania

Pandia Thevar and Others, . Of these cases only Subbakka v. Venkata Setti (1932) M.W.N. 1193 and T.S.P.L.S. Tinnappa Chettiar, by his

authorised agent, A.S. Arunachalam Chettiar Vs. Putti Krishna Rao by guardian and mother Padmavati Ammal and Others, , are later than the

Privy Council decision in AIR 1929 297 (Privy Council) . No reference was, however, made to this decision in the former, and though it was

noticed in passing by the learned Judges in the latter in discussing the other question whether the mortgagee in that case was a person liable to pay

the debt within the meaning of Section 20, its bearing on the question of implied agency was apparently overlooked, for no reference is made to it

in the discussion of .that point at pages 456 and 457 of the report.

For the reasons indicated above, I consider that the question whether the mortgagee who undertakes as a part of the consideration for the

mortgage to discharge a debt of the mortgagor not charged on the properties mortgaged, and pays a certain sum for interest on the debt is a

person duly authorised to make such payment within the meaning of Section 20 of the Limitation Act requires reconsideration in the light of the

decision of the Privy Council in AIR 1929 297 (Privy Council) and I therefore direct that the case be placed before my Lord the Chief Justice to

be posted before a Full Bench for disposal.

This petition coming on for hearing this day before the Full Bench,

Alfred Henry Lionel Leach, C.J.

This petition appeared originally in the list of Patanjali Sastri, J., but he adjourned the hearing under the provisions of Rule 1 of the Appellate

Side Rules of this Court in order that the petition might be determined by a Bench. The learned Judge was of the opinion that the judgment of the

Privy Council in AIR 1929 297 (Privy Council) , called for the reconsideration of the decision of this Court in T.S.P.L.S. Tinnappa Chettiar, by his

authorised agent, A.S. Arunachalam Chettiar Vs. Putti Krishna Rao by guardian and mother Padmavati Ammal and Others, and of a number of

earlier decisions to the effect that a power to pay off a debt does not carry with it a power to keep the debt alive by a payment of interest or part

payment of principal. The petition has been placed before a Full Bench at my direction under Rule 6 in order that there may be greater freedom of

action if necessary.

Section 20 of the Limitation Act provides that a payment of interest or a payment in part of principal by the person liable to pay the debt or by

an agent duly authorised in this behalf starts a fresh period of limitation from the date of payment, provided that the acknowledgment appears in the

handwriting of or in a writing signed by the person making the payment. In T.S.P.L.S. Tinnappa Chettiar, by his authorised agent, A.S.

Arunachalam Chettiar Vs. Putti Krishna Rao by guardian and mother Padmavati Ammal and Others, , Venkataramana Rao, J., pointed out that

under this section the agent whose payment would keep alive the debt must be one who is duly authorized to make the part payment of interest or

principal and that this Court has consistently taken the view that a direction to discharge a debt does not make the donee of the power an agent

authorized to make a part payment so as to keep the debt alive. In this connection Venkataramana Rao, J., referred to Chidambaram Pillai v.

Veerappa Chettiar (1917) 6 L.W. 640, Alagappa Chettiar Vs. Subramania Pandia Thevar and Others, , Balaguruswami Naicken v. Guruswami

Naicken (1924) 48 M.L.J. 506, Ramaswami Pillai v. Kasinatha Aiyar (1927) M.W.N. 356 and Subbakka v. Venkata Setti (1932) M.W.N.

1193.

It is not necessary to discuss all the decisions of this Court. I consider that it will be sufficient to state the position in Alagappa Chettiar Vs.

Subramania Pandia Thevar and Others, , where the facts were very like the facts in the present case. There, a mortgagee undertook to discharge a

debt due by the mortgagor and retained in his hands sufficient of the mortgage consideration to discharge the debt. Instead of paying off the

mortgage he retained the whole of the money for nearly two years and then only paid the interest due on the debt. The question was whether in

these circumstances, it could be said that he was authorized to pay the interest on the bond so as to keep alive the mortgagor''s liability to the

creditor. It was held that he had authority to pay the debt in full, but no authority to make a payment of interest so as to bring the case within

Section 20 of the Indian Limitation Act. The learned Judges (Wallis and Sadasiva Aiyar, JJ.) relied on Linsell v. Bonsor (1835) 2 Bing. (N.C.) 241

: 132 E.R. 95, where the defendant, a trustee under a deed of composition, was instructed to tender to the plaintiff a part of the debt in discharge

of the whole. The plaintiff refused to accept the money on this basis and it was then tendered and accepted as a payment in part. It was held that

there was no authority for this and the part payment did not prevent the law of limitation operating.

In the AIR 1929 297 (Privy Council) , the facts were these. A director of the bank, Bishambar Nath by name, induced the manager of the

bank to allow him a large overdraft, but as the half-yearly audit was approaching it was deemed advisable to eliminate this debt from the books.

With this object in view the director persuaded the first respondent in the appeal to execute in favour of the bank a promissory note for the amount

and the bank manager to accept it in discharge of the overdraft. The arrangement between the director and the maker of the promissory note was

that the director should himself pay the principal and interest. Twelve months after this arrangement was entered into, the director paid to the bank

a sum out of which the bank allocated Rs. 908 to the payment of interest then due upon the promissory note. The director had notice of the

allocation and made an appropriate entry in his own books. The question which arose for decision was whether this payment of interest saved

limitation as against the maker of the note and it was held that it did. The director,, was authorized to discharge the debt due by the maker of the

promissory note to the bank in respect of both principal and interest and the director was left to do this as it best suited him. He had not the money

to do it there and then. Under these circumstances, the Judicial Committee had no difficulty in finding an authority from the maker of the promissory

note to the director to pay the interest on his behalf as it became due.

This decision of the Privy Council does not travel beyond the particular facts of the case, and in my opinion it cannot be read as an authority

for the proposition that where a mortgagee undertakes as part of the consideration for the mortgage to discharge a debt due by the mortgagor he

must be deemed to have authority to make a payment of interest or a part payment of principal. I consider that the judgment of the Judicial

Committee leaves entirely unaffected the decision in Alagappa Chettiar Vs. Subramania Pandia Thevar and Others, and the earlier decisions of this

Court on the point. Whether there is authority to make a part payment is a question of fact and the decision in .each case must depend upon the

particular facts. Of course, where the person who is to make the payment is left a discretion in the matter his principal will have to suffer the

consequences of a payment to account, if the conditions of Section 20 for the saving of limitation are also complied with.

Turning to the facts of the case now before us, on the 30th September, 1926, the first respondent''s father executed a promissory note in

favour of the mother of the petitioner for a sum of Rs. 100. In 1930, the mother died and as the petitioner was a minor a guardian of his property

was appointed. On the 20th December, 1932, the first respondent''s mother as his guardian, his father being dead, executed a usufructuary

mortgage of certain lands in favour of the husband of the second respondent. The consideration for this mortgage was the sum of Rs. 475. The

mortgage deed provided that the mortgagee should discharge the promissory note executed in favour of the petitioner''s mother. The direction to

the mortgagee was that he was to make payment in full and the District Munsif who tried the suit out of which this petition arises has held that the

mortgagee had no authority to make a part payment on behalf of the promisor so as to keep the debt alive. On the 29th May, 1933, the mortgagee

made a payment of Rs. 8-10-0 on account of interest and an acknowledgment of the payment was endorsed on the promissory note. On the 16th

July, 1934, he made a payment of one rupee on account of principal and Rs. 7-1-0 on account of interest and acknowledgments of these

payments were also endorsed on the promissory note. A suit was filed on the instrument on the 18th June, 1936, but by then it was time barred,

unless the payment made on the 16th July, 1934, could be regarded as having been made by the mortgagee as the agent of the maker of the

promissory note duly authorized in that behalf. The District Munsif held that the mortgagee could not be so regarded and I have no hesitation in

concurring in his decision. There was no discretion given to the mortgagee in the matter at all. His duty was to discharge the promissory note in full

and he had no authority to do anything else. He did not carry out the duty of his agency but did something quite beyond what he was expected to

do. Therefore the maker of the promissory note was not bound by his action and the suit was rightly dismissed.

It follows that in my opinion the petition should be dismissed with costs.

King, J.

I agree with my Lord that for the reasons which he has given this Revision Petition should be dismissed and I wish to add just a few words.

Whether an agent has been duly authorised within the meaning of Section 20 to make a particular payment is a question of fact. Here, I take it, the

facts are simple. There was an authorisation in general terms to the mortgagee to pay off the promissory note debt. No time limit was set. The

District Munsif held that the meaning of this authorisation was that the mortgagee should pay off the debt in full and with reasonable promptitude.

The petitioner here can succeed in my opinion only if he can show that on these facts no other interpretation of the mortgagor''s instructions is in

law possible than that the mortgagee was given full discretion to pay off the debt as and when he pleased. As my Lord has said, I do not think that

the Privy Council in AIR 1929 297 (Privy Council) lays down any such general proposition. On the facts in that case the conclusion that

Bishambhar was authorised to discharge Bansidhar''s debt as and when he could was inevitable. But in the absence of unusual facts it appears to

me that the plain and ordinary meaning of a direction as part of the consideration for a mortgage to discharge a debt is a direction to discharge it in

full and to discharge it quickly. What are the facts here? The mortgagor is in need of money and applies to the mortgagee who presumably has

money to lend him. He borrows Rs. 475. About Rs. 100 of this sum is not to be paid in cash, but is to be paid to the creditor under the promissory

note. How can it be presumed in law that when in these circumstances the mortgagor directs the mortgagee to pay off this comparatively

insignificant debt, he has impliedly authorised him to spend eighteen months in paying off the paltry sum of Rs. 15-11-0? Such a conclusion seems

to me to be repugnant to common sense. I am accordingly of opinion that the District Munsif was entitled on the evidence to hold that the

authorisation to the mortgagee was for the complete and speedy discharge of the debt; and with such a finding of fact there can be no interference

in revision.

Patanjali Sastri, J.

In this case I have the misfortune to be of a different opinion from my Lord whose judgment I have had the advantage of reading. As the facts

of the case are all set out in that judgment I will content myself with briefly stating the position as I conceive it in the light of the Privy Council

decision in AIR 1929 297 (Privy Council) on the question of authority to pay for purposes of Section 20 of the Limitation Act.

It will be observed that the section does not require ''authority to keep the debt alive'', an expression sometimes used in the discussion of this

question. The authorisation must relate to the payment of interest on the debt or to the part payment of the principal as the case may be, and the

debt is kept alive as the legal consequence of such payment, irrespective of the intention of the debtor or his agent. It is therefore not strictly

relevant, and may, indeed, be somewhat misleading, to enquire whether the person paying was authorized to keep alive the debt. The question of

limitation hardly enters into the minds of the parties at the time of the transaction from which Courts are subsequently called upon to imply authority

in cases of the kind now before us. I refer to this because I cannot kelp thinking that the decision of the question has sometimes been allowed to be

coloured by the supposed hardship to the debtor of implying authority to pay in such cases.

Where a debtor transfers his property in consideration either in whole or in part of the transferee undertaking to discharge the former''s liability

to a creditor, I agree that if the stipulation is that the transferee should pay off the debt all at once with no discretion left to him as to paying it in

parts, as if'' he were a messenger sent with the amount required to make the payment, no authority to make a payment of either interest or part of

the principal can be implied. But, if all that appears from the transaction is that the party paying has bound himself to the debtor to discharge the

latter''s liability, I find it difficult to see, with all respect, why the case is not governed by the; Privy Council ruling in AIR 1929 297 (Privy Council)

In that case in setting out the true legal effect of'' the transaction, their Lordships observe at page 7 that:

As between Bishambhar and the first respondent (the debtor) the former undertook to discharge the liability to the bank

and, again at page 9:

Upon what they have already held to be the true meaning and effect of the transaction of the 22nd of December, 1917, it was agreed between

Bishambhar and the first respondent that the former would discharge the latter''s debt to the bank in respect of both principal and interest and it is

clear from the first respondent''s evidence that he left it to Bishambhar to do so.

(Italics mine.)

No doubt, it would appear from the facts in that case that Bishambar was not in a position to pay off the debt immediately, for, that indeed

occasioned the transaction there in question, and that therefore the parties must have contemplated payment at sometime in future. But is the

position essentially different when a transferee of the debtor''s property agrees, in consideration of the transfer, to discharge a debt of the

transferor? The arrangement, as in that case, imposes on the transferee, as between himself and the debtor, an obligation to pay the principal of the

debt as well as the interest due upon it as long as it remains unpaid. This obligation continues whether the debtor thought the debt subsisted or not,

and the payment by the transferee under the contract reduces the liability of the debtor. In such circumstances, I can see no reason why the

payment should not be regarded as having been made with the authority of the debtor who gets the benefit of it by virtue of the stipulation. And,

viewed as a question of ''authority to keep alive the debt'', there would seem to be as much ground in the case before the Privy Council as in this

for saying that the contract or mandate to discharge the debt did not imply a ''power to keep alive the debt'', for it is only reasonable to suppose

that the debtor there also would naturally have refused to allow the debt to be kept alive beyond the period of limitation. The true principle would

seem to be what Farwell, L.J., deduced from Bradshaw v. Widdringtori (1902) 2 Ch. 430 in Lacey, In re : Howard v. Light-foot (1907) 1 Ch.

330 . The learned Judge observed:

I read it as a decision on the words ''or agent'', and as shewing that a man can be an ''agent'' within the meaning of the Act, not only when he acts

for a principal properly so called but also when he makes the payment on behalf of the debtor, because he has bound himself by deed for value so

to do.

(Italics mine.)

That, I venture to think, is the principle which their Lordships of the Privy Council applied in AIR 1929 297 (Privy Council) , where they also

refer to Farwell L. J.''s view of the matter.

It seems to me, therefore, that the broad view expressed without any qualification in T.S.P.L.S. Tinnappa Chettiar, by his authorised agent,

A.S. Arunachalam Chettiar Vs. Putti Krishna Rao by guardian and mother Padmavati Ammal and Others, . that:

A power to extinguish the debt would not, in our opinion, carry with it a power to keep alive the debt. Our High Court has consistently taken the

view that a direction or power to discharge a debt does not make the donee of the power an agent authorized to make a part payment so as to

keep alive the debt.

referring to the earlier decisions of this Court to the same effect, cannot be accepted as correct in view of the Privy Council decision in AIR 1929

297 (Privy Council) I may also observe, in this connection, that the decision in Linsell v. Bonsor (1835) 2 Bing. (N.C.) 241 : 132 E.R. 95. does

not, as it seems to me with all respect, lend support for the above broad proposition as was supposed in Alagappa Chettiar Vs. Subramania

Pandia Thevar and Others, , which has been followed in the later cases. There was a clear prohibition in the English case to make any part

payment towards the debt.

Turning now to the facts of the present case, the mortgage deed has not been produced and all that appears about its terms from the judgment

of the lower Court is that the mortgagee was directed thereunder to pay the amount due under the suit promissory note. Nearly two months after

the mortgage, both the debtor and the mortgagee sent a notice (Exhibit B) to the petitioner informing him of the mortgage and suggesting a novation

to which the petitioner, however, did not agree. These facts indicate to my mind that the mortgagee was not required or expected to discharge the

debt all at once, but to pay it off as it suited him. The Privy Council ruling therefore applies and the finding of the Court below which, relying on the

decisions of this Court, refused to imply authority in such circumstances cannot stand.

I would allow the Civil Revision Petition with costs throughout.