1. This second appeal raises a question in regard to the applicability of Section 9 of the Madras Agriculturists' Relief Act (hereinafter referred to as the Act) to debts incurred after the Act came into force.
2. The facts are simple and are not in dispute. The defendant executed a promissory note Ex. P. 1 dated 5-1-1943 in favour of the plaintiff for a sum of Rs. 1024-6-0. The prior promissory notes, which culminated in Ex. P. 1, are as follows :
Ex. P. 2, dated 7-1-1940.
Ex. P. 3, dated 9-1-1937.
Ex. P. 4, dated 11-1-1934.
3. The consideration for the earliest promissory note was Rs. 500. It will be seen from the aforesaid dates that the original debt was contracted after 1st October 1932 and that ,Exs. P. 1 and P. 2 were executed subsequent to the Act, i.e., 22-3-1938. The plaintiff filed O. S. No. 22 of 1946 on the file of the Court of the District Munsif, Ongole, for recovery of a sum of Rs. 1024-6-0 due under the promissory note Ex. P. 1 with subsequent interest at 9 per cent per annum. The defendant pleaded that he is an agriculturist and that the debt should be scaled down under the Act. He also contended that though Exs. P. 1 and P. 2 were executed subsequent to the Act, they were so executed under an arrangement between the parties that at the time of the settlement of the suit, the debt should be ascertained according to the Act and that the renewals were made only for the purpose of acknowledgment of the debt. The learned District Munsif held that the agreement pleaded was not true but that the promissory notes executed subsequent to the Act were not supported by consideration. Ho found, after giving credit to the amounts paid, that the plaintiff would be entitled to a decree for a sum of Rs. 333 and subsequent interest from 9-9-1944 at 6 1/4 per cent per annum. In appeal, the learned Subordinate Judge held that the plaintiff would be entitled to a decree on the basis of Ex. P. 1 and, after giving credit to the amounts paid, he gave a decree for a sum of Rs. 656-13-8 with subsequent interest at the rate of 6i per cent per annum. The defendant preferred the above second appeal.
4. The learned counsel for the appellant contended that, in view of the provisions introduced by Amending Act, 23 of 1948, the debt is liable to be scaled down under the provisions of the Act. To appreciate the contention of the learned counsel, the relevant provisions of the Act, as amended by Act 23 of 1948, may be read :
"8. Debts incurred before 1st October 1932, shall be scaled down in the manner mentioned hereunder, namely : (I) 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.
Explanation III: Where a debt has been renewed or included in a fresh document executed before or after the commencement of this Act, whether by the same or a different debtor and whether in favour of the same or a different creditor, the principal originally advanced together with such sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable under this section."
5. This Explanation has been substituted by Amending Act 23 of 1948 for the explanation, which reads as follows :
"Where a debt has been renewed or included in a fresh document in favour of the same creditor, the principal originally advanced by the creditor together with such sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable by the agriculturist under this section."
9(1) Debts incurred on or after the 1st October 1932, shall be scaled down in the manner mentioned hereunder, namely : Interest shall be calculated up to 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 five 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) 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."
6. The words
"whether by the same or a different debtor, and whether in favour of the same or different creditor"
were inserted in the proviso by the Amending Act XXIII of 1948.
"13. In any proceeding for recovery of a debt, the court shall scale down all interest, due on any debt incurred by an agriculturist after the commencement of this Act, so as not to exceed a sum calculated at 61/4 per cent per annum, simple interest, that is to say, one pie per rupee per mensem simple interest, or one anna per rupee per annum simple interest."
7. The law in regard to the interpretation of the aforesaid provisions in their unamended form was well settled and the decisions cited before me afford illustrations to the principles accepted by the Court. The applicability of Section 8 of the Act to a promissory note executed after the commencement of the Act was considered in -- 'Suryanarayana v. Ala-vandararao', 1945-2 Mad LJ 565.
8. The learned Judges observed at page 566 that :
"It is well settled that a debt incurred after the commencement of
Madras Act IV of 1938 cannot be scaled down except in accordance with
section 13 of that act."
The same rule was applied in -- 'Thiruvengadatha Aiyangar v. Sannappan Servai'. 1941-2 Mad. L.J. 307 to a debt incurred after 1st October 1932 and renewed after the Act came into force. The learned Judges observed at page 309 :
"Section 13 seems to provide a complete machinery for dealing with debts incurred after the commencement of the Act, and it appears to have been designed as part of a regular scheme whereby debts of agriculturists are divided into three categories: first, those incurred before 1st October 1932, which fall under Section 8; secondly, those incurred from 1st October 1932 to 22nd March 1938, which fall under Section 9 and thirdly, those incurred after 22nd March 1938. The only point in seeking to apply Section 9 to the last class of debts is to get the advantage of the proviso to Section 9(1). It seems to us that having regard to the scheme of the Act, if it had been the intention of the legislature to include the theory of renewals into the scaling down operations in respect of debts incurred after the commencement of the Act, some specific provisions would have been made in this behalf. We are of opinion that all debts incurred after the commencement of the Act, whether they be in discharge of prior debts or not, will fall only under Section 13."
9. In -- 'Sarveswararao v. Venkatasubbayya & Sons', 1943-1 Mad. L.J. 231 the learned Judges further pointed out the scope of the proviso to Section 9. They stated
"the obvious intention of the Legislature in enacting this proviso was merely to give a rule for the classification of debts into those to which Section 8 will apply and those to which Section 9 will apply. The latter class of debts has to be scaled down with reference to the actual contract modified to the extent indicated by the reduction of the rate of interest."
In an unreported judgment by another Bench of this court of which I was also a member, this view was not accepted. There the suit promissory note was executed on 10-10-1936. The prior promissory note was dated 10-11-1933. We held that even in the case of a debt covered by Section 9, the debt can be traced back to the earlier debt. That judgment was delivered on 10-3-1949, i.e., subsequent to the enactment of the Amending Act XXIII of 1948. The law therefore at the time when the Amending Act came into force was that neither Section 8 nor Section 9 would apply to a debt incurred after 22-3-1938. The debt under Section 9 could not be traced back to the earlier debt but should be scaled down with reference to the actual contract with the reduction of interest indicated in that section. Section 13 governed all debts whether incurred for the first time or renewed in respect of earlier debts, if they were incurred or renewed after the Act came into force. At that stage, the Legislature intervened and substituted Explanation III to the pre-existing Explanation. Under the substituted Explanation, a debt, which has been renewed or included in a fresh document executed after the commencement of the Act, is also liable to be scaled down under Section 8 of the Act. But, designedly, no similar explanation was added to Section 9. I state "designedly" because the proviso to Section 9 was also amended. Though the words found in the substituted explanation III to Section 8 viz., "whether by the same or a different debtor and whether in favour of the same or a different creditor" were inserted in the proviso, the other part of that explanation in regard to debts renewed after the Act came into force was not added to Section 9 by an explanation or otherwise. The Legislature presumably had knowledge of the decision in --'Sarveswararao v. Venkata Subbayya', 1943-1 Mad. L.J. 231 wherein it was held that where no portion of the debt has been incurred before 1-10-1932, the debt cannot be traced back and the debtor is only entitled to get under Section 9 in respect of that debt the relief of reducing the rate of interest as provided therein. In view of that decision, as no question of tracing back the debt under Section 9 arises, the Legislature did not think fit to add a similar Explanation to Section 9 also. It follows that the suit promissory note, which was executed after the Act came into force and to which the provisions of section 9 apply, cannot be traced back to the earliest debt Ex. P. 4.
10. The principal of Ex. P. 1 must be taken to be the principal for applying the provisions of section 9. The learned Subordinate Judge's calculation is correct and is consistent with the provisions of section 9.
11. It is then contended by the learned counsel that the learned Subordinate Judge should have held that Exs. P. 1 and P. 2 were only taken as vouchers acknowledging the debt incurred prior to the commencement of the Act. The defendant pleaded in the written statement that there was an arrangement between the parties that at the time of the settlement of the suit debt, the amounts shall be ascertained according to the Act and, that the renewals were made for the purpose of acknowledging the debt. The learned District Munsif held against the said agreement, though, curiously notwithstanding that finding, he held that the suit promissory note was not supported by consideration. In appeal, the learned Subordinate Judge accepted that finding. The argument of Mr. Ramachandra Rao that the learned District Munsif's finding that the promissory notes were taken as vouchers was not disturbed by the appellate court is without any basis whatsoever as a perusal of the District Munsif's judgment shows that the Munsif did not accept the defendant's case that they were given as vouchers.
12. In the result, the appeal fails and is dismissed with costs. No leave.