Appropriation of payment if different.

This appeal arises out of an application under section 19 of the Madras Agriculturists’ Relief Act (IV of 1938) for ascertaining the amount due to the petitioner as scaled down according to the new provisions, inserted by section 25-A 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.3,740 on 6th December, 1941, should not be taken into consideration only as payment towards interest due. Hence this appeal.

On 26th May, 1935, the appellant executed a simple mortgage in favour of first respondent for Rs.6,000 with interest at 10 annas per mensem compoundable Once in three years. While the mortgage was subsisting on 6th December, 1941, the appellant paid a sum of Rs.3,740 and made an endorsement of that payment on the document which is marked as Ex. B-1 (a), and it is in the following terms:

“6th December, 1941. Towards the interest due under this deed of mortgage without possession the amount paid in cash this day through Deeari Kotayya in the office of the Sub-Registrar is Rs.3,740 (three thousand seven hundred and forty rupees).”

The question is how this amount is to be apportioned. According to section 9 of the 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. up to 22nd March, 1938, and thereafter at the rate of 6¼ per cent. calculated on that basis the interest on Rs.6,000 till 22nd March, 1938, will be Rs.846-10-8. Thereafter interest on the principal sum at 6¼ per cent. till 6th December, 1941, will be Rs.1,389-9-3. The total amount of interest due on 6th December, 1941, would be Rs.2,236-3-11. If the sum of Rs.3,740 is appropriated towards interest due, then there will be a balance of Rs.1,503-12-1 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, Lakshmivenkayamma v. Venkatapathi Raju1, Arunagiri Chettiar v. Kuppuswami Chettiar2, and Ramalakshmi v. Gopalakrishna Rao3, 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, Veeraraju v. Balakoteswara Rao4, where it is held that under the Madras Agriculturists Relief Act, a creditor is not entitled to retain payments made after 1st October, 1937, towards interest in excess of the interest payable under the provisions of the Act, without adjusting them towards the principal. The learned Judges, however, held that in regard to this matter, there is no distinction in principle between a debt to 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 our attention to a more recent Full Bench decision, G. Suryanarayana v. Venkataramana Rao5, and to the observations of the learned Judge, Venkatarama Ayyar, J., at page 270 therein. In that decision it was held 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 Explanation I to section 8 of Madras Act IV of 1938. Appropriations made by a creditor as part of a settlement are not liable to be re-opened under Explanation 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.3,740, intended to pay interest in accordance with the rate mentioned in t