1. The respondents who are owners of a firm Chironjilal Ramdayal of Dhar obtained a decree against the appellant from the Court of the District Judge, Dhar. This decree was confirmed in appeal by the High Court but the decretal amount was made payable by annual instalments of Rs. 300/-. The decree was for Rs. 2901/3/6 which consisted of the following amounts:
Rs.
As.
Ps.
Principal sum
1621
11
9
Interest up to the date of the suit
960
4
0
Notice charges
0
10
0
Costs of the suit
318
9
9
Total
2901
3
6
2. Future interest at 6 per cent P.A was allowed on Rs. 1621-11-9 from the date of the decree until realisation according to Kat Mitti. The judgment-debtor has paid some instalments and after adjusting the money received the decree-holder filed an execution for a sum of Rs. 1240/9/0 on 16-6-1950. The judgment-debtor objected to the sum claimed and submitted that the decree-holder had appropriated the payments towards costs and interest before applying them towards the principal sum. The contention was overruled by the District Judge, Dhar and the debtor has therefore this appeal.
3. Mr. Nandlal Datta, the counsel for the appellant reiterated the objections raised by the debtor before the trial Court. He submitted that the costs awarded were not a “lawful debt for the purposes of Section 59 of the Contract Act and relied on a decision reported in — ‘Dwarkanath v. Sreegobinda’, AIR 1927 Cal 906 (A) to support his contention. He also submitted that the payments could be appropriated only in the order in which the various items were mentioned in the decree and that the application of the payment towards interest was contrary to the terms of the decree which provided that interest should be paid according to Kat Mitti.
4. The decree does not mention that the costa or interest should be paid after the principal sum is wiped out. It is also not suggested on behalf of the judgment-debtor that he had made the payments specifically towards the principal sum. The law gives the power to the decree-holder to appropriate payments made by the debtor towards any debt lawfully due in the absence of an indication by the debtor as to how the payment is to be appropriated. The contention of Mr. Nandlal Datta that the costs awarded by the Court is not a lawful debt is not supported by the decision of the Calcutta High Court on which he has placed reliance. In that case the learned Judges came to the conclusion that, the costs of the trial Court were not awarded to the defendant in the previous litigation and therefore the payment by the plaintiff could not be adjusted by him towards those costs.
5. Sections 59 to 61 of the Indian Contract Act contain the various provisions relating to application of payment made by a debtor when more debts than one are owing to a creditor. The debtor has at the time of making payment a right to intimate that the payment is to be applied towards the liquidation of a particular debt. Whenever the debtor omits to do so and there are no circumstances indicating to which debt the payment is to be applied the creditor is entitled to appropriate it towards any lawful debt. The amount due in the present case for costs, interest and principal as awarded by the decree however constitute only one debt and technically the provisions of Secs. 59 to 61 do not apply. But the principle underlying has been applied to a claim like this and there is a “general rule” well established by the decision of the Privy Council and the various High Courts according to which “the payments should be applied in the first instance to interest and to the principal the balance only so far as those payments exceed the interest due.”
6. In the case of — ‘M.V Apparao v. Parthasarathy Apparao’, AIR 1922 P.C 233 (B), their Lordships have observed as under:
“There is a debt that carries interest. There are monies that are received without a definite appropriation on one side or the other and the rule which is well recognised in the ordinary cases is that in those circumstances the money is applied first, in payment of interest and when it is satisfied in payment of the capital.’
7. This principle was again reiterated by their Lordships in — ‘Benison v. Shiber’, AIR 1946 P.C 145 at p. 150 (C), and their Lordships observed:
“In the absence of any application by the debtor at the time of payment it is no doubt true as a general rule that payments should be attributed in the first instance to interest.”
8. The general principle which applies to voluntary payments is also extended to money recovered in execution of a decree. In — ‘Jiaram v. Sulakhanmal’, AIR 1941 Lah. 336 (FB) (D) this principle was applied to proceeds realised in execution. The Full Bench in that case held that the general rule of appropriation of payments towards debt is that in the absence of specific indication to the contrary by the debtor, the money is first applied towards interest and costs and when these claims are satisfied the balance if any has to be adjusted towards the capital. This was a case where in execution of a mortgage decree the creditor had got the mortgaged property sold. The Full Bench allowed the claim of the creditor that the sale proceeds should be appropriated towards the interest and costs first and there after the balance to discharge the principal sum declared as payable in the decree. The learned Judges approved the view expressed by Bhide J. in— ‘Ramchand v. Bank of Upper India Ltd. Simla’, AIR 1928 Lah 901 (E), where the learned Judge has held that:
“When a debt is due which carries interest and monies are received without definite appropriation on one side or the other the ordinary rule is that money is first applied in payment of interest and then when that is satisfied in payment of capital.”
9. That was also a case where there was a mortgage decree for sale obtained by the creditor and given effect to by putting the property to sale. The decree provided for payment of interest on the principal amount. The decree holder appropriated the money received towards interest and after that was satisfied the balance was adjusted towards the capital. The judgment debtor objected to this method of appropriation but the claim of the decree holder to do so was upheld by the High Court. The same view is taken by the High Court of Calcutta in — ‘Biswanath Bhattacharjee v. Sameswar Sarma’, AIR 1918 Cal 605 (2) (F). It was also a case of an instalment decree and certain payments were received from the debtor without any direction as to how the money paid was to be adjusted. The decree holder applied the payments towards interest first. The judgment debtor objected but the objections were overruled and it was held:
“In the absence of appropriation by the debtor, it is open to the creditor to apply the payments made by the debtor in the first instance towards interest and the balance only towards the principal.”
10. The order passed by the trial court is in conformity with the general principle and there is no reason to interfere with it. The appeal is dismissed with costs.
B/D.R.R
11. Appeal dismissed.