1. This case belongs to the now disappearing category of litigation under the Madras Agriculturists Relief Act (hereinafter referred to as the ‘Act’). The amount actually in dispute and involved in the second appeal is also very small and in fact negligible, None-the-less the second appeal raises some point of interest as to the scope of the application of Section 13 of the Act.

2. This second appeal brought by the defendant arises out of a suit of the respondent for recovery of Rs. 3783-51, which is the amount due on a promissory note dated 9-5-1962. The promissory note was executed on that day for Rs. 5200/- payable with interest at 9% per annum. An open payment of Rs. 1545/- was made on it on 1-3-1965. The promissory note was renewed on 9-5-1965. A further payment of Rs. 1500/- was made on 22nd March 1967. While filing the suit, the plaintiff claimed interest only at the statutory rate of 5½% per annum as prescribed by Section 13 of the Act. What he has however done is that he has appropriated, at the time of filing the suit, the payments made first towards the interest accrued on the debt till the respective dates of payments and then the balances of the two payments towards principal. That is, bow he arrived at the figure of Rs. 3783-51 as still due to him on the date of the suit. The defence was that the debt had in fact commenced even earlier than 9-5-1962 and interest from the date of the origin of the date should be scaled down as per the provisions of Section 13. Further, the method of calculation adopted by the plaintiff is not permitted by Section 13. What should be done is that the interest at 5½% per annum should be calculated from the date of the debt to the date of suit and then from the total of the principal and interest thus calculated the payments made by the defendant with counter interest should be deducted.

3. The courts below held against the defendant on the first contention. They repelled his case that the promissory note of 9-5-1962 was a renewal of an old debt. Thus the only question that survived for their decision is whether the plaintiff has correctly calculated the amount due to him on the basis of the promissory note of 9-5-1962 and its renewal in accordance with the provisions of Section 13 of the Act. On this aspect of the matter the Court differed. The court of first instance took the view that Section 13 permits only simple interest and the plaintiff's calculation of the amount due to him resulted in adding of interest to the principal and consequently the principle of Section 13 is violated. The lower appellate court look the view that the method adopted by the plaintiff did not imply adding of interest with the principal and is therefore in accordance with section 13 of the Act. Thus while the trial court passed a decree for Rs. 3568-33 with future interest, the lower appellate court passed a decree as prayed for by the plaintiff viz., for Rs. 3783-91 with future interest. The defendant questions this decision in this second appeal.

4. The question that arises for consideration is whether the calculation adopted by the plaintiff and approved by the lower appellate court is in accordance with Section 13 of the Act. To put it in other words, the problem is that when a debt is incurred after the commencement of the Act and an open payment is made thereon without specifying the manner of its appropriation, whether the creditor can apply part of the payment towards the interest that accrued upto the date of payment and the balance alone towards partial discharge of the principal amount.

5. In order to resolve this problem, I would like to understand the scope and nature of relief provided by section 13 of the Act, on a reading of that provision in conjunction with the material provisions of the Act. The Act was made to provide for the relief of indebted agriculturists. Section 7 lays down that notwithstanding any law, custom, contract or decree of court to the contrary, all debts payable by an agriculturist at the commencement of the Act, shall be scaled down in accordance with the provisions of Chapter II. Than Section 8 provides for the scaling down of the debts incurred before the 1st October 1932, Section 9, in its turn, lays down the machinery for scaling down the debts incurred on or after 1st October 1932 Section 12 states that all debt which have been scaled down under the Act shall carry, from the date upto which they have been scaled down, interest on the principal amount due on that date at the rate previously applicable under law, custom contract or otherwise, provided that, it shall not in any case exceed 6¼% per annum simple interest. Then section 13 occurs which according to its marginal note prescribes the ??? of interest payable by agriculturists on new loans”.

6. It is useful to read the section here.

“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 calculate at 6¼ per annum, simple interest, that is to say, one pie per rupee per mensum simple interest, or one anna per rupee per annum simple interest.”

Provided that the State Government may by notification in the official Gazette, alter and fix any other rate of interest from time to time”

7. In exercise of the power conferred on them, the State Government later reduced the rate of interest from 6¼% per annum to 5½% per annum.

8. The difference between Section 13 on one hand and Sections 8 and 9 on the other is patent Sections 8 and 9 provide for scaling down all debts incurred before the Act while Section 13 deals with debts incurred after the commencement of the Act. That is why the two former seniors provide for scaling down all debts as such, while Sec. 13 provides for scaling down the interest. Since these debts are incurred only after the commencement of the Act, the legislature thought it necessary only to prescribe the rate of interest and even if the contract rate of interest is higher than the one indicated in it, that interest shall be scaled down in accordance with that provision. Another important feature that should be noticed in Section 13 is what is scaled down is “all interest due on any debt incurred.” That necessarily brings all interest accrued on the debt incurred after the Art. The necessary corollary to this is that whatever may be the number of renewals a debt may pass through, a debt is incurred only once and fill interest thereon should be scaled down in accordance with sec. 13 of the Art. Another important rule is that the prescribed rate of interest viz., originally 6¼% per annum, subsequently reduced to 5½% per annum should be simple interest. If anything more than the pimple interest is provided for in the promissory note or claimed in a proceeding for recovery of a debt only simple interest at the prescribed rate should be granted by the Court.

9. In the context of the present case this later feature of Section 13 is of material importance. It is necessary to understand the meaning of the word ‘simple interest’. The concise Oxford Dictionary gives the meaning of ‘simple interest’ as the one ‘reckoned on principal only and paid at field intervals’ in contradistinction with ‘compound interest’ as meaning ‘reckoned on principal and on accumulations of (interest)’. It is therefore reasonable to understand ‘simple interest’ as meaning interest reckoned or calculated on the principal only, without adding anything to it. If, on the other hand, anything is added to the principal while reckoning the interest due and payable, it ceases to be simple interest. If, taking as an illustration, it is agreed between the parties that at stated interval like one year, the interest is added upto the principal and the total will become the principal for the next year, that is a straight case of compound interest. That is not permissible under Section 13. If, however, whenever a payment is made, without appropriating it specifically either towards interest or principal and if the option is given to the creditor to first appropriate the amount to interest due upto the date of payment and to credit the remaining balance only to the principal, it necessarily results in the increase in the amount of interest that is ultimately payable by the debtor. I will try to demonstrate this by giving a simple illustration. Suppose an amount of Rs. 1000/- is advanced and the debtor makes an open payment of Rs. 100/- on the expiry of one year from the date of incurring of the debt. If the interest is reckoned simply from the date of incurring of the debt for three years, which is the period of limitation at 5½% per annum it comes to Rs. 165/-. Thus the total of principal and interest that is due on the expiry of three years from the date of incurring of the debt, reckoning on the basis of simple interest at 5½ per annum, is Rs. 1165/-. But the debtor has paid Rs. 100/- as an open payment. If that is also allowed straight and simple interest at the same rate from the date of payment for two years, it gathers an interest of Rs. 11/-. The total of Rs. 100/- plus interest for two years is Rs. 111/-. If this payment which comes to Rs. 111/- at the permissible rate of interest is deducted from the total principal and interest that accrued by the end of the term of three years viz., Rs. 1165/- the balance that is found due and payable by the debtor is Rs. 1054/-. If, on the other hand, when the payment of Rs. 100/- is made on the expiry of one year, whatever interest that accrued on Rs. 1000/- up to that date is deducted from the payment, what remains out of the payment of Rs. 100/- is only Rs. 45/-, for an interest of Rs. 55/- accrues on the principal amount of Rs. 1000/- for one year. Therefore only the balance of Rs. 45/- goes towards the principal. So, on the expiry of one year, the principal amount that remains is Rs. 955/-. If interest is calculated on that amount at 5½% for the balance of two years, it cones to Rs. 105-05. Thus the balance that is found due and payable by the debtor is Rs. 1060-05. That means the debtor, according to this later method of appropriation of the payment and calculating the interest, is obliged to pay Rs. 6-05 more. This certainly results in paying more than simple interest that is provided under Section 13 of the Act. This is indeed claimed by the plaintiff in the present case. By appropriating parts of payments towards the interest that fell due by the dates of payment a further amount of slightly over Rs. 200/- is claimed from the debtor. Thus it results in claiming more than 5½% simple interest.

10. Sri Y.G Krishnamurthy, however, endeavors to point out that compound interest means the interest going and adding up with the principal, so that for the next period of calculation the total amount is taken as the principal amount; but such is not the case here, according to him. Strictly speaking, the method of calculation may not be that, but in real effect and result, the debtor is called upon to pay more than what he should pay if the debt is calculated on the basis of the simple interest. I am therefore satisfied that the claim of the plaintiff, based on the calculation adopted by him, is not in accordance with section 13 and the defendant's contention in this behalf is right.

11. Sri Y.G Krishnamurthy strongly relies in support of his contention on a single Judge's decision of this Court in Srinivasulu v. Kondappa . AIR 1960 A.P 1/4.. It is undoubted that this decision is in favour of the method adopted by the plaintiff. Ranganadham Chetty, J., in this case was dealing with a similar question. The learned Judge, while holding that the creditor is at liberty to appropriate an open payment partly towards the interest that accrued upto the time of payment and the balance towards principal rejected the analogy of Explanation 1 to Section 8 invoked by the debtor's learned counsel before him. The learned Judge observed in paragraph 3 of his judgment “but the fact is overlooked that explanation (1) relates only to the debts mentioned in Section 8, that is, debts contracted on or before 1-10-1932. The provision which has a direct application to the suit debt is Sec. 13. This debt is dated 15-6-1953 and there is no explanation under Sec. 13 similar to explanation (1) to Sec. 8 curtailing the liberty of the creditor to exercise the right under Sec. 60 of the contract Act. The plaintiff was, therefore, free to deduct the sum of Rs. 100/- in abatement of outstanding interest.” It is true that Sec. 60 of the contract Act confers the liberty on the creditor to appropriate an open payment in the manner he likes best. Section 60 of the Contract Act which forms part of the general law of contracts, and for the matter of that even the Negotiable Instruments Act which specifically deals with negotiable instruments as a whole, must yield to the provisions of this special enactment made with the intention of giving relief to agriculturist debtors. They are applicable to debts incurred by agriculturist, only to the extent that this special enactment viz. the present Act does not make any provision. If there is any specify provision made by the Act, the general law of contracts, including the Indian Contract Act and the Negotiable Instruments Act should yield to it. If any authority is necessary, Govindarajachari, J., said so as early as in the decision reported in Muthiah Thever v. Lakshmana Pandithar 1948-II M.L.J 500.. I am not here ignoring the provisions of Section 7 that all debts payable by an agriculturist at the commencement of the Act alone shall be scaled down in accordance with the provisions of Chapter II. From that it does not follow that the protection given by Section 13, in respect of debts incurred after the Act, can be subjected to the general law of contracts. If that were the intention of the legislature, Section 13 becomes otiose and ineffective. Whatever be the contract to the contrary, the provisions of Sec. 13 should be enforced in respect of all debts incurred by agriculturists after the commencement of the Act. The great emphasis which Sec. 13 puts on the words “simple interest” is very much manifest from the number of times they have been used in that section. Out of great anxiety to insist that only simple interest should be allowed on such debts, it has laid down that interest should be so calculated as not to exceed a sum calculated at 6½% (now 5½%) per annum simple interest, that is to say, one pie per rupee per annum simple, interest, or one anna per rupee per annum simple interest. This reference to “simple interest” again and again is only to emphasise that nothing more than simple interest should be charged whatever be the provisions of Section 60 of the Contract Act or other law in force for the time being.

12. For the same reason the absence of an explanation to Section 13 similar to explanation 1 to section 8 is immaterial, for in the body of the main section itself, the interest is directed to be calculated only on the basis of simple interest and nothing else. Therefore there was no need for the legislature to add another explanation to Section 13. I am therefore convinced that the creditor is not at liberty, in exercise of the right under Section 60 of the Contract Act, to appropriate a part of the open payment towards interest accrued till that date and the balance towards principal.

13. All the same, a decision of this court, though of a learned single Judge taking the contrary view exists. Such being the case there are only two courses open to me—one is to see whether that view is good law in view of the decisions of this court, and the other is to refer it to a Division Bench. The decisions of this Court, two of them being Full Bench decisions, though they do not directly deal with the question of appropriation, in my view, set at naught the opinion expressed by Ranganadham Chetty J., in the above said decision. I will now briefly refer to those decisions.

14. First of them is that of Muthiah Tevar v. Lakshmanan Pandithar. The learned Judge observed “while a departure from the law of the country is not to be easily inferred it is, in my opinion, sufficiently clear from the wording as well as the object of section 13 that the Legislature clearly intended to protect an agriculturist notwithstanding his own contract, and that it could not have intended to make his right to the benefit contemplated by the Act liable either to be defeated or materially curtailed by an act of the creditor to which the debtor is no consenting party” and held that the creditor cannot therefore claim to appropriate the payments towards interest due and the balance for principal on the date of the plaint. Then in chronological order is the decision of the full bench in Nainamul v. B. Subbarao . AIR 1957 A.P 546. on which the trial Court relied. Subbarao, Chief Justice (as he then was), speaking for the Full Bench, after referring to the words ‘interest due on any debt’ observed that they indicate that the entire interest is scaled down. Then he proceeded to lay down the object of Section 13 in the following words:

“The object of Sec. 13 is to give relief to agriculturists, in the matter of interest in respect of a debt incurred after the Act. If such a debt is sought to be enforced, it is caught in the not of the scaling down process. At that stage, all the interest due on the debt is reduced to the statutory level, or, to put it differently, whatever may be the contract rate of interest, it is replaced by the statutory rata. If the appropriations made earlier are not reopened, the intention of the statute would be defeated for the contract rate prevails over the statutory rate upto a stage Doubtless, the courts are concerned with the expressed intention of the legislature.”

15. The expressed intention of the Legislature being only to permit simple interest, the claim of the plaintiff to appropriate part of the open payment towards interest accrued until the date of payment is unauthorised by Section 13.

16. The next decision is once again a Full Bench decision of this Court in P. ??? v. Ravuri Nagaiah . 1962-I An. W.R 373. Chandra Reddy, Chief justice, after referring to the above Full Bench decision and also the passage I have extracted, observed at page 379—

“Thus the Full Bench in Sait Nainamul v. Subbarao has firmly established the proposition that under Sec. 13 the scaling down operation should be with reference to the first advance and that even appropriations of payment made towards interest could be reopened and adjustments made towards the amount determined by calculating interest on the original principal at the statutory rate.”

17. From these two Full Bench decisions, it is manifest that even appropriated payments can be reopened and they will have to be adjusted towards the amount determined by calculating interest on the original principal at the statutory rate. The present case is one of an open payment and the appropriation is sought to be made only at the time of the institution of the suit. From the view expressed by the two Full Benches, these amounts of payment should go towards the discharge of the debt calculated at the statutory rate on the original principal. Then reference was made to the decision in Muthiah Thevar v. Lakshmanan Pandithar and the learned Chief justice observed that the position would be the same even if the debtor is a consenting party to the appropriation made. The last case I would like to refer to is that of a Division Bench reported in B. Pochamma v. A. Surayya . 1965 An. W.R.S.C 86. consisting of Jaganmohan Reddy, Chief Justice (as he then was) as Kumarayya J., (as he then was). Jaganmoham Reddy, Chief Justice speaking for the Bench referred to both the aforesaid Full Bench decisions of this court and also to the decision in Krishnayya v. Seshachalam. The principle enunciated in Sait Nainamul v. Subba Rao was approved by the Supreme Court. In conclusion the learned Chief Justice observed at page 369 as follows:

“It would be illogical to hold that white under sections 8 and 9 relief can be given to debts incurred prior and subsequent to 1932, no relief was in fact intended to be conferred cases of debts incurred after the commencement of the Act, when the Legislature in section 13 enacted that all interest due on any debt incurred by an agriculturist shall be scaled down. We cannot hold that only the interest between the renewed note and the filing of the suit is liable to be scaled down irrespective of whether the original debt was incurred much earlier. The debts is incurred, as observed by Chandra Reddy. C.J, “only once, though it may be kept alive by acknowledgments and renewals”. If so the origin of the debt has significance in relation to section 13.”

18. In view of these decisions, both prior to and after Ranganadham Chetty, J., gave his construction of the scope of Section 13 in Srinivasulu v. Kondappa. I am of the opinion that the view of the learned Judge is not good law. The creditor will not be entitled to appropriate part of the open payment towards interest that accrued upto the date of payment which would be contrary to the method enunciated in Section 13. It follows that the trial Court's view upholding the defendant's contention and rejecting the plaintiffs calculation is right and that of the lower appellate Court is wrong.

19. The Second appeal is therefore allowed and the decree of the lower appellate court, to the extent of its modification, is set aside and that of the trail court is restored. In the circumstances of the case, I direct the parties to bear their costs of the second appeal. Since I am disagreeing with the view taken by Ranganadham Chetty, J., I grant leave.