Stipulation in the contract for payment in trust at a higher rate than the prescribed limit.

What is the measure of relief which an agriculturaist debtor is entitled to under the Madras Act IV of 1938 when the debt is incurred after the Act with a stipulation to pay interest at a rate exceeding the prescribed limits of the statute and when payments towards interest are made and appropriated in terms of the contract of loan and the creditor sues to recover the balance due is the question that arises for decision in this Second Appeal. Judicial opinion in the matter is conflicting. One view is that whatever payments are made and appopriated implementing the contract between the parties, being voluntary, they cannot be ripped open to help the debtor to get the benefits of the Act. The other view is that such payments though volunary in the sense that the debtor abstained from claiming the statutory concessional rate of interest must be deemed to have been made by mistake of law warranting the readjustment of the rights of the parties in accordance with law. Much can be said in support of both the views, and it is not surprising to find a sharp cleavage of opinion on the subject between eminent Judges.

Thangavelu Pillai, the plaintiff in O.S. No. 104 of 1957, on the file of the District Munsif’s Court, Thanjavur, executed a deed of simple mortgage, Exhibit B-1, dated 13th December, 1945, in favour of Chandrasekaran Pillai, the first defendant for a sum of Rs. 1,700. The deed provided for payment of interest at 9 per cent, per annum. The plaintiff is admittedly an agriculturist entitled to the benefits of Madras Act IV of 1938 and Madras Act I of 1955. There was an endorsement of payment of a sum of Rs. 250-7-0 dated 20th July, 1947 on the mortgage document. There was a second endorsement of payment dated nth April, 1951 of a sum of Rs. 1,070-13-0 on the document. The first endorsement of payment, Exhibit B-2, recites that the amount paid was towards the interest due on the mortgage upto the date of endorsement. The second endorsement, Exhibit B-3, recites that a sum of Rs, 570-13-0 was paid towards the interest due upto the date of endorsement and that the sum of Rs. 500 was paid and appropriated for the principal. The plaintiff claimed that notwithstanding the express recitals in the endorsements, Exhibits B-2 and B-3 stating that the payments were towards interest they should be deemed to be “open” payments entitling the debtor to have the amounts readjusted in accordance with the terms of the statute which prescribe that an agriculturist debtor shall not be made liable to pay interest at any rate more than 5½ percent, per annum. The plaintiff filed O.P. No. 82 of 1956 on the file of the District Munsif’s Court, Thanjavur, under section 83 of the Transfer of Property Act depositing the sum of Rs. 1,125 stated to be the correct amount due as scaled down by the provisions of the Act. The first defendant refused to receive the amount, and the petition was acordingly dismissed on 24th December, 1956. The suit was therefore filed for redemption of the mortgage, Exhibit B-1.

The first defendant alone contested the suit. The second defendant remained absent and was set ex parte. The first defendant contended that on nth April, 1951 the date of the second endorsement, Exhibit B-3, it was settled between the parties that the balance of principal amount due to him was a sum of Rs. 1,200. There was a partition suit between the first defendant and his brother, Rajamani Pillai, O.S. No. 1 of 1951 on the file of the Subordinate Judge’s Court of Thanjavur. In the final decree in that suit accounts were taken till 22nd February, 1953 and the principal amount of Rs 1,200 due under Exhibit B-1 with interest at 6 per cent, from nth April, 1951 to 22nd February, 1953 was allotted as an asset due to the first defendant. The final decree in that suit is marked as Exhibit B-4 in the case. The first defendant pleaded that he will be entitled to the principal of Rs 1,200 as on 11th April, 1951, with subsequent interest thereon at 5½ pe