The material facts may be stated. The first respondent for himself and as guardian of his minor sons, executed a mortgage deed dated the 10th August, 1946 in favour of the appellant for a sum of Rs. 5,000 with interest at nine per cent per annum. The consideration for the mortgage deed was made up of the following items:

(1) a sum of Rs.2,892 due on a promissory note executed by the first respondent on 8th December, 1935.

(2) a sum of Rs.70 taken for the purchase of stamps;

(3) a sum of Rs.1,000 paid for discharging the debt due on a promissory note, dated 28th December, 1925 executed by the first respondent in favour of one Vinnakota Yellamraju; and

(4) a sum of Rs.1,038 received for discharging the promissory note, dated 24th April, 1935 executed by the first respondent in favour of one Mallina Rattamma.

The promissory note, dated 8th December, 1935 was in renewal of other promissory notes, the earliest being of the year 1929. On 1st October, 1942 the first respondent paid an amount of Rs. 2,790 specifically toward interest. He filed an application in the Court of the Subordinate Judge of Ellore under section 19-A (1) of the Madras Agriculturists Relief (Amending) Act, XV of 1943 for declaring the debt due by him and the learned Subordinate Judge scaled down the debt to Rs.1,191-13-4 together with interest thereon at 6¼ per cent. per annum from 5th February, 1946 till the date of payment. The mortgagee preferred the above appeal. The question is whether out of the sum of Rs. 2,790 so paid towards interest any amount in excess of the interest payable to the creditor under the provisions of Madras Act IV of 1938 is liable to be adjusted towards principal.

The relevant provisions of Madras Act IV of 1938 may now be set out:

“Section 8. Debts incurred before the 1st October, 1932, shall be scaled down in the manner mentioned hereunder, namely:-(1) All interest outstanding on the 1st October, 1937 in favour of any creditor of an agriculturist whether the same be payable under law, custom or contract or under a decree of Court and whether the debt or other obligation has ripened into a decree or not, shall be deemed to be discharged, and only the principal or such portion thereof as may be outstanding shall be deemed to be the amount repayable by the agriculturist on that date.......(4.) Subject to the provisions of sections 22 to 25, nothing contained in sub-section (1), (2) and (3) shall be deemed to require the creditor to refund any sum which has been paid to him, or to increase the liability of a debtor to pay any sum in excess of the amount which would have been payable by him if this Act had not been passed.

Section 9. (1) Debts incurred on or after the 1st October, 1932, shall be scaled down in the manner mentioned hereunder, namely:(1) Interest shall be calculated upto the commencement of this Act at the rate applicable to the debt under the law, custom, contract or decree of Court under which it arises or at 5 per cent. per annum simple interest whichever is less, and credit shall be given for all sums paid towards interest, and only such amount as is found outstanding, if any, for interest thus calculated shall be deemed payable together with the principal amount or such portion of it as is due; provided that any part of the debt which is found to be a renewal of a prior debt (whether by the same or a different debtor and whether in favour of the same or different creditor) and shall be deemed to be a debt contracted on the date on which such prior debt was incurred and if such debt had been contracted prior to the 1st October, 1932 shall be dealt with under the provisions of section 8.

(2) Subject to the provisions of sections 22 to 25 nothing herein contained shall be deemed to require the creditor to refund any sum which has been paid to him or to increase the liability of the debtor to pay any sum in excess of the amount which would have been payable by him if this Act had not been passed.”

Under section 8 all interest outsta

Click Here to Read the rest of this document