Velaga Venkatappayya and Others vs Tripuramallu Punnayya (died) and Others

Subba Rao, J.—The question in this second appeal turns on the construction to be put upon Section 3 (iii-a) of Madras Act IV [4] of 1938.

Some material facts may be briefly stated. Defendants 1 and 2 for themselves and defendant 1 as guardian of defendants 3 and 4, executed a

mortgage deed dated 29-11-1940 in favour of the plaintiff. The principal sum was Rs. 1000. It was stipulated therein that the loan should be

discharged by delivery of eight annual instalments of 35 bags of paddy each, and, in default, each of the instalments should carry interest at 12 per

cent. per annum. The defendants paid four instalments. As default was made in regard to the 5th and 6th instalments, the mortgagee filed O. S. No.

267 of 1946 on the file of the District Munsif Court, Tenali, for recovery of the produce payable to him valuing the same at Rs. 11 per bag.

Though under the terms of the document, he was entitled to claim interest at 12 per cent. per annum, he was content with claiming 61/4 per cent.

per annum. The defendants contended that the debt should be scaled down under the provisions of Madras Act IV [4] of 1938. The learned

District Munsif held that Section 13 of the Act applied, and he accordingly scaled down the debt. He also found that the entire debt on scaling

down, came to Rs. 1368-6-5, and, deducting Rs. 1115, being the money value of the instalments of paddy already paid, held that the balance

payable to the mortgagee would be Rs. 263-6-5. In appeal, the learned Subordinate Judge took the view that, as no interest was payable under

the document, the debt was not liable to be scaled down u/s 13 . The defendants have preferred this second appeal.

Pending the second appeal, the Madras Agriculturists'' Relief Act was amended by Act XXIII [23] of 1948. In the amending Act, interest has

been defined in the following manner :

''Interest'' means any amount or other thing paid or payable in excess of the principal sum borrowed or pecuniary obligation incurred, or where

anything has been borrowed in kind, in excess of what has been so borrowed, by whatsoever name such amount or thing may be called, and

whether the same is paid or payable entirely in cash or entirely in kind or partly in cash and partly in kind and whether the same is expressly

mentioned or not in the document or contract if any,

Under this definition, anything paid or intended or agreed to be paid over and above the principal sum borrowed would be deemed to be ""interest

under the Act. As the produce delivered by the defendants to the plaintiff was, admittedly, of higher value than the principal amount, to the extent

of the excess, it is certainly a ""thing paid"" in excess of what has been borrowed. If so, the excess paid would be ""interest"" within the meaning of

Section 3 (iii-a) of Madras Act IV [4] of 1938.

But Mr. Krishnamurthi, learned counsel for the respondent, argued that to constitute ""interest"" within the meaning of the definition, the parties to

the agreement should be able to predicate on the date of the agreement that there would be an amount in excess of the principal advanced. This

argument is contrary to the plain meaning of the express words used. Under the terms of the section, the recitals in the document are not relevant.

Indeed, Section 8 (iii-a) clearly, says that if the other conditions are complied with it is immaterial whether ""interest"" is expressly mentioned or not

in the document or contract. The only condition is that the debtor should have paid some amount or thing which was in excess of the money

advanced.

It is then contended that if the Legislature intended to give the aforesaid connotation to the word ""interest"", they need not have added an

explanation to Section 8. The explanation relied on is Expln. II to Section 8. It reads:

Where the principal was borrowed 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.

We cannot construe Sub-clause (iii-a) of Section 3 in the light of an explanation added to another section. The counsel says that Expln. II was

added as the definition of ""interest"" would not take in a case provided by the explanation. In our view, it is not permissible to construe Section 3

(iii-a) in the way learned counsel asks us to do.

Learned counsel for the respondent relied on an unreported decision of Patanjali Sastri J. in S. A. 1141 of 1940. In that case, in regard to a

similar document, the learned Judge observed :

It seems to me clear that they did not contemplate any interest payable on the sum advanced and that all that was intended was that the quantity of

paddy fixed should be regularly delivered year by year in consideration of the Bum originally advanced no part of which was repayable apart from

the paddy delivered. I do not consider that there is any interest in such a case to be scaled down under the provisions of the Act.

We should think that the word ""interest"" was introduced by the Amending Act to get over the view expressed by the learned Judge. We, therefore,

hold that the judgment of the learned District Munsif is correct. The decree of the appellate Court is set aside and that of the District Munsif

restored. The second appeal is, therefore, allowed, but, in the circumstances of the case, without costs. Time for redemption extended by three

months from today.