Manamathi Munisami Mudali v. Peruma Mudali

An interesting question was argued by Mr. K. Rajah Aiyar relating to appropriation of payments. The plaintiff had a mortgage from defendants 1 and 2. There was also a debt due to him from them on a promissory note. Defendants 1 and 2 requested the plaintiff to collect some money due to them from a third party. This was done on the 16th August 1915. Prior to that the plaintiff sued on his promissory note and obtained a decree. In his earlier execution application, he could not have asked that the money collected by him should be credited in partial discharge of the decree. On the 11th November 1915 under another money decree against defendants 1 and 2, the 3rd defendant purchased the equity of redemption in the properties mortgaged. Five days after this plaintiff entered up satisfaction of his money decree to the extent of the money collected by him. He then sued for the full amount due on the mortgage. The 3rd defendant contended that the plaintiff should have appropriated the money to the mortgage debt and that his liability pro tanto should be discharged. The Lower Appellate Court refused to accept this contention. We think the District Judge was right.

It is now well settled that the plaintiff's right of appropriation is preserved to him until the moment of his filing the plaint in court (see Lord Macnaughten in Cory Brothers & Co. v. Owners of the Turkish Steamship “Mecca”, In Seymour v. Pickatt, Lord Justice Romer pointed out that provided it will not be inequitable to do so, the plaintiff should not be deprived of this right. Mr. K. Raja Aiyar contends that when the right of third parties are likely to be prejudiced, it must be taken that it would be inequitable on the part of the plaintiff to make the appropriation in a particular way. Our reading of the learned Lord Justice's judgment is that there must be something unconscionable, something which would operate as an estoppel, before this right of the plaintiff is taken away. It was held in Simpson v. Ingham that a creditor can cacel an appropriation entered in the accounts, if the same was not communicated to the defendant. This authority shows that the question of inequity has to be looked at not only from the point of view of the third party, but also from the point of view whether the creditor should not endeavour to put himself in an advantageous position so long as there is nothing which makes it unconscionable on his part to do so. Viewed in this right, we think the District Judge has applied the proper test in giving his decision.

We may say that the decision in Kundan Lal…(Plaintiff); v. Jagannath…(Defendant).*, which seeks to go back to the principle enunciated in Clayton's case (1816 1 Mer. 572) namely that the creditor should elect as soon as the payment is made is opposed to the language of the Indian Contract Act and to (1897) A.C, 286 and to (1905) 1 K.B, 715.

The Second Appeal is dismissed with costs.

S. S.Appeal dismissed.