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Judgment
This appeal arises out of an application u/s 19, Madras Agriculturists'' Relief Act, 4 of 1938 for ascertaining the amount due to the petitioner as
scaled down according to the new provisions, inserted by Section 25A of the Act. The learned Subordinate Judge has found that though the
amount has to be ascertained in accordance with the provisions of the Act, the payment of Rs. 3740 on 6-12-1941 should not be taken into
consideration only as payment towards interest due. Hence this appeal.
On 26-5-1935, the appellant executed a simple mortgage in favour of respondent 1 for Rs. 6000 with interest at ten annas per mensem
compoundable once in three years. While the mortgage was subsisting, on 6-12-1941 the appellant paid a sum of Rs. 3740 and made an
endorsement of that payment on the document which is marked as Ex. B. I(a), and it is in following terms :
6-12-1941. Towards the interest due under this deed of mortgage without possession the amount paid in cash this day through Dasari Kotayya in
the office of the Sub Registrar is Rs. 3740 (three thousand seven, hundred and lorty rupees).
The question is how this amount, is to be appropriated. According to Section 9, Madras Agriculturists'' Relief Act, the interest on all debts
contracted ''by an agriculturist subsequent to 1932 can only be at the rate of five per cent upto 22-3-1938, and thereafter at the rate of 6 1/4- per
cent. Calculated on that basis, the interest on Rs. 6000 till 22-3-1938 will be Rs. 846-10-8. Thereafter interest on the principal sum at 6 1/4 per
cent till 6-12-1941 will be Rs; 1389-9-3. The total amount of interest due on 6-12-1941 would be Rs. 2236-3-11. If the sum of Rs. 3740 is
appropriated towards interest due, then there will be a balance of Rs. 1503-12-1 in the hands of mortgagee and this ought to be appropriated
towards the principal. But the learned Subordinate Judge, following certain decisions of this Court, namely, -- Chelikani Lakshmi Venkayamma
Vs. Mandapati Venkatapathiraju and Others, ; -- Arunagiri Chettiar Vs. Kuppuswami Chettiar, and -- Patnala Ramalakshmi and Others Vs.
Dowlatabad Gopalakrishnarao, has come to the conclusion that when there has been an appropriation of interest, even if a larger sum than was
due on that date towards interest has been paid over, the balance cannot be credited towards principal.
These decisions have been held to be wrong law in a recent Full Bench decision -- Vinnakota Veeraju Vs. Kamarsu Balakoteswara Rao and
Others, , where it is held that under the Madras Agriculturists'' Relief Act, a creditor is not entitled to retain payments made after 1-10-1937
towards interest in excess of the interest payable under the provisions of the Act, without adjusting them towards the principil. The learned Judges,
however, held that in regard to this matter, there is no distinction in principle between a debt io which the provisions of Section 8 apply and that
governed by the provisions of Section 9, as in the present case. But Mr. M. V. Srinivasa Rao for the mortgagee respondent invited cur attention to
a more recent Full Bench decision in -- ''G. Suryanarayana v. Venkatta-ramana Rao'', AIR 1933 Mad 458 (E) and to the observations of the
learned Judge, Venkatarama Aiyar J. at pp. 460 and 461 therein. In that decision, it was held that where there has been in fact a settlement of
accounts and a fresh document executed by the debtor, that must necessarily have the effect of discharging the interest on the one hand and of
appropriating the payment on the other. Such a transaction is outside Expln. I to Section 8 of Madras Act 4 of 1938.
Appropriations made by a creditor as part of a settlement are not liable to be reopened under Expln. I to Section 8. The learned Judge was
considering a case where there has in fact been an appropriation according to the terms of the deed and over payment. In this case, there is no
substantial evidence that the appellant, at the time he paid Rs. 3740, intended to pay inte-1 rest in accordance with the rate mentioned in'' the
document and not according to the statutory rate of interest laid down by the provisions of the Madras Act 4 of 1938. When there is a conflict
between two such matters, we have to take that the. debtor must have intended to act according to the provisions of law rather than against it. In
these circumstances, we are of opinion that when on 6-12-1941, the sura of Rs. 3740 was paid, the appellant intended that AS much of that sum
as would satisfy the interest should be appropriated towards that amount, and that the balance must remain in the hands of mortgages for the
purpose of be-ing appropriated towards the principal amount due. If that is so, the sum of Rs. 1503-12-1 Should have been appropriated on 6-
12-1941 towards the principal sum of Rs. 6000. The interest on the balance amount thereafter only I will be due to the creditor.
The appeal is, therefore, allowed and the order of the lower Court is modified in the manner mentioned above. The appellant will have his costs
of this appeal from respondent 1.