Venkiteswara Iyer Harihara Iyer vs Mathoo George and Others

Govinda Pillai, J.—This appeal is filed by counter Petitioner 4 creditor in the lower Court against an order under Sections 8, 9 & 15. Travancore Debt Relief Act, fixing the amount of debt payable by the Petitioner in the lower Court. On 23-7-1101 a hypothecation bond for Rs. 25,000 had been executed by the Petitioner''s deceased father & uncle in favour of counter-Petitioner who is the Appellant''s father. After this it was alleged that Rs. 12,000 was paid in Meenom 1103, & Rs. 6,000 in Mithunam 1104 to the creditor. Ex. I is that hypothecation bond. There had been a renewal of this bond on 3-1-1113. It was stated in the petition that though this bond which is Ex. II in the case was for the consolidated principal & interest due till then, the provisions of the Debt Relief Acts enabled the Court to reopen the account & to direct the Petitioner to pay the original principal amount together with interest not exceeding a moiety of the same, less payments already made, According to the Petitioner, the balance thus due under Ex. I was only Rs. 19,500 & the Petitioner wanted permission to discharge this under Sections 8 & 9, Debt Relief Act. He had also stated that his deceased father had on 6-9-1094 executed another hypothecation bond viz , Ex. IV to counter-Petitioner 1 for Rs. 3600. For interest due thereon, two puravaippa had been executed & a portion of the interest had been paid in cash in 1096, 1099 & 1101. The total amount, according to him, due under that bond including a moiety of the principal as interest, less payments already made, would come only to Rs. 3824. He wanted to discharge that debt also under the Debt Relief Act. Since the creditor did not accept the figures 7n by the Petitioner he wanted to have the accounts settled u/s 15, Debt Relief Act.

The creditor, who is counter Petitioner objected to the calculation made by the Petitioner. He contended that the amounts due under the hypothecation bond of 1101 were calculated & the total sum due on 3-1-1113 was arrived at, that a new hypothecation bond Ex. II, had been executed that day, & that it was not open to the Petitioner to agitate for the re-opening of the accounts already settled. According to Ex. II, the amount due on 3-1-1113 was Rs. 41,250. The interest due thereon had to be treated as principal at the end of each year, as agreed to in Ex. II, & the total debt due on that bond on 31-3-1116 was Travancore Rupees 40,358 Chucrams 18 & cash 15. He also stated, that besides Ex. IV hypothecation bond of 1091, another document for Rs. 10,800 bad been executed on 20-10-1108, that this bond was Ex. v. that on 3-1-1113 a renewal was executed consolidating both the bonds & fixing the principal amount at Rs. 14,400 & the interest till that date at Rs 8206. There was provision in that document also to treat the accrued interest as principal at the end of each year. The total amount thus due on 31-1-1116 would be Rs. 27,357-12-9. In order that the Petitioner might get the benefit of the Debt Relief Act, it was contended that 6 percent, of the two amounts mentioned above had to be deposited towards the first installment

The Court below found, that though two renewal bonds had come into existence in 1113 it was competent for that Court to re-open the accounts by virtue of the Explanation to Section 3, Debt Relief Act. It, therefore, ignored the two bonds of 1113, that is, Exs. II & VI. With the reopening of such accounts it was found that money was due to counter-Petitioner 1 under four transactions, that is under Ex. IV dated 6-9-1094 for Rs. 3600, Ex. I dated 23-7-1101 for Rs. 25000, Ex. v. dated 20-10-1108 for Rs. 10,800 & Ex. III, dated 15-1-1109 for Rs. 17121/2. By a series of calculations, which shall be referred to presently, the Court below came to the conclusion that the amount due, under these four documents on 31-1-21116 would be Indian Rs. 63,773 9-4 The debtor has submitted to the finding recorded by the lower Court, whereas, the creditors'' legal representative has come up in appeal, & according to him, the amount found by the Court below is less than what is actually due, by Travancore Rupees 11803 chuckrams 18 cash 4.

Exhibit IV dated 4-9 1094 is a hypothecation bond executed by the father of the Petitioner in the lower Court to counter-Petitioner 1 for Rs. 3500. It provides for 12 per cent interest being paid once a year. There was the further stipulation that if interest was left in arrears, that would also carry future interest at 12 per cent. On account of interest due on this, certain promissory notes had been executed in favour of the creditor. On 20-10-1108 all these notes were consolidated & a puravaippa deed, Ex. v, executed by the Petitioner''s father for the interest due on Ex. IV till that date, & also for Rs. 600 on account of interest due under Ex. I. Ex. v. which was for Rs. 10,800 provided 12 per cent interest. There was a further stipulation in it that interest, if left in arrears would be added on to the principal & interest on the aggregate amount should be paid by the debtor. There was also Ex. I dated 23-7-1101 for Rs. 25,000 executed by the Petitioner''s father & uncle. That too provided 12 per cent interest per annum, with the stipulation, that if interest was not paid every year interest on that interest at the rate mentioned in the document would have to be paid. Some interest on this had been paid, & on 18-1-1109 the balance of interest due was calculated & a promissory note Ex. III for Rs. 17121/2. executed by the hypothecatees. 12 percent interest had also been agreed to be paid on this promissory note amount. It was seen, that on 3-1-1113, the amount due under Exs. I & III had been settled & fresh bond Ex. II had been executed on that day for Rs. 41,250. This amount covers only the principal & interest due under Exs. I & III. Similarly, another document Ex. VI had been executed the same day in regard to the principal sum & interest due till then under Exs. IV & v. The first question that has to be considered is whether these Exs. II & VI are to be ignored in calculating the amount due from the debtors to the creditor on 31 1-1116 The Debt Relief Act could apply only to debts which were subsisting on 23-5-1112 When the Travancore Agriculturists Belief Act III [3] of 1112 was passed. But the Explanation to Section 3, Debt Relief Act, provides that where a debt incurred before 23 5-1112 has been renewed included or merged in a fresh document in favour of the creditor, on or after 23 5-1112, such a debt shall notwithstanding anything contained in any law, contract, decree or order of the Court to the contrary, be deemed to be a debt to which the Debt Relief Act applies. It was contended on behalf of the Appellant, that by virtue of this explanatory clause, the Courts could apply the provisions of Sections 8 & 9 of the Debt Relief Act to debts which had their origin before 23-5-1112, but could not re-open any settlement of accounts that had been agreed to between the parties after 23-5-1112. This would be putting too narrow a construction on the Explanation to Section 3. The Explanation allows the Court to ignore renewals of debts after 23 6 1112 in respect of any agreement entered into between the parties. As regards payment of the debt or interest thereon, the direction given by the Legislature is specific. The Court is to ignore all intermediate arrangements between the parties & to treat the debt as a debt subsisting on 23 5-1112 & to apply the provisions of the Debt Relief Act. The renewals Exs. II & III, as well as the arrangements that were agreed to between the parties as to the payment of interest therein have therefore to be ignored. This would necessarily indicate, that the amounts settled or renewals made before 23-5-1112 were to be taken to be binding on the parties. Thus, in settling the accounts between the parties, the calculations have to be based on the amounts due under Exs. IV, I, V. & III.

Ex. v. would show that interest on Ex. IV till 20-10-1108 had been paid, & that the interest on Ex. IV amount after 20-10-1098 alone had to be calculated. Similarly, the interest due on Ex. I bond had been adjusted till 18-01-1109 when Ex. III promissory note had been executed. Exs I & IV do not provide for the adding of accrued interest to the principal & then calculating interest thereon. The document only provides that interest at 12 per cent should be paid once a year, & that if there was default in the payment of accrued interest on the due date interest at 12 percent would have to be paid on such interest also. It was agreed to by both sides, that the accrued interest regarding which default had been committed, would carry only simple interest from the due date. There would therefore be no difficulty in calculating the amounts due under Exs. IV & I. Mr. T.K. Joseph for the Appellant contended that the accrued interest on which simple interest had been agreed to be calculated was not to be taken into account in finding out the maximum interest allowable under each transaction. So long as the interest is not added on to the principal & future interest calculated thereon, accrued interest does not lose its characteristic as interest. So, even if simple interest is allowed on accrued interest, the interest with such accrued interest is not to exceed a moiety of the principal. When calculation is made on the above basis it would be seen that interest at 12 per cent, simple interest on accrued interest every year till 23-5-1112, & at 6 per cent, thereafter till 31-1-1116 would exceed a moiety of the principal, so that, till 31-1-1116, interest on Exs. I & IV would be allowed only to the extent of a moiety of the principal. Thus, the amount due under Ex. IV, on 31-1-1116 would be Rs. 3600-(principal)-plus Rs. 1800 (interest) & under Ex. I, Rs. 25,000-(Principal) plus Rs. 12,500 -(interest).

There is no difficulty as regards the amount due under Ex. III promissory note. It provides only 12 per cent, interest. Since the interest on that at 12 per cent from 15-1-1109 till 23-5-1112, & thereafter at 6 per cent till 31-1-1116, would exceed a moiety of the principal, Rs. 1712-8 0 towards principal & Rs. 856 4-0 towards interest need alone be allowed till 31-1-1116.

The only other amount about which there was some difficulty was that covered by Ex. V. Unlike Exs I & IV, the provision here is that if the interest is not paid at the end of each year it will be added on to the principal, & the future interest has to be calculated on such aggregate amount. Such claim has been allowed by a series of Pull Bench Rulings of the erstwhile Travancore High Court. The amount due under this has therefore to be calculated on that basis till 23-5-1112. Section 34 of Act III [3] of 1112 allowed interest thereafter only at 6 per cent, on all debts due from an agriculturist. The lower Court has found that the debtor was an agriculturist & this position was not disputed before us. So, the amount found due on 23 5-1112 would be calculated, & would be taken to be the principal amount due on that date. Interest at 6 per cent, on the same would be allowed thereafter till 31-1-1116. The amount due under Ex. v. when calculated would be as follows:

I. Rs.

Principal amount on 20-10-1108 10800

Interest at 12% for one year 1296

Amount on 20-10 1109 12096

Interest at 12% for one year 1451.52

Amount on 20-10-1110 13547.52

Interest at 12% from 20 101110 to 23-5-1112 2587.5724

Total amount 16135.0924

i.e. 16135

Interest on I. Rs. 16135 from 23-6 1112. to 31-1-1116 at 6% simple interest 3571.2

Total amount 19706.2

Rs. 19706 - as 3.ps.2

Thus the total amount due on 31-1-1116 under the four transactions would be as follows:

Under Ex. IV Rs. 5400 0 0

I 37500.0.2

III 2568 12.0

V 10706 3.0

Total Rs. 56174.15.2

The debtor is to make the necessary deposits under Sections 8 & 9, & if there is any deficit in the amount deposited he would make good the same by depositing that in the lower Court within two months from this date. The parties will have proportionate costs here & in the Court below.

Kunhi Raman, C.J.

I agree

Subramania Iyer, J.

I also agree.