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Pana Ana Rana Arunachallam Pillai v. Govindaswami Naicker
Analytical Summary of the Opinion
Factual and Procedural Background
This is an appeal by the Defendant in a suit for money raising two points relating to interest. The amount sued for comprised (a) the price of cloth sold by the Plaintiff (a trader) to the Defendant (also a cloth trader), and (b) Rs. 500 advanced to the Defendant on a pledge of a Kasumalai.
The Defendant's defence was twofold: first, in respect of interest on the price of the cloth, that there was no contract for interest either express or implied from the usage of trade; and second, in respect of the Rs. 500 loan on pledge, that he had tendered the amount with interest (at Re. 1-2-0 per cent per mensem) on 20 September 1923 (about 25 days before the suit) and that the Plaintiff improperly refused to accept the tender and return the pledged jewel, so that no further interest or costs should be recoverable on that head after the date of tender.
Procedurally, both lower courts made findings relevant to these issues. As to the cloth-price interest, both lower courts found that the usage of trade required interest to be payable. As to the pledge (Rs. 500), the District Munsif disallowed interest after tender and proportionate costs, whereas the Subordinate Judge held that because the Defendant had not deposited the money in Court when sued, the prior tender (though improperly refused) was ineffective to stop interest from running; the Subordinate Judge therefore awarded interest at the contract rate up to the date of decree and costs disallowed by the first court. The appeal challenges that latter conclusion and the treatment of interest generally.
Legal Issues Presented
- Whether interest was payable on the price of the cloth under an implied usage of trade (i.e., whether a contract or trade usage obligated payment of interest).
- Whether a defendant's tender of the debt (here Rs. 500 plus interest), made before suit but refused by the creditor, stops the running of subsequent interest where the tender was not followed by payment (deposit) into Court once the creditor sues.
Arguments of the Parties
Appellant's (Defendant's) Arguments
- There was no contract for interest on the price of the cloth, neither expressly nor by usage of trade.
- As to the Rs. 500 advanced on pledge, the Defendant tendered the borrowed amount with interest on 20 September 1923; the Plaintiff wrongfully refused the tender and did not return the pledged jewel; therefore the Plaintiff was not entitled to interest accruing after that date nor to costs on that head.
- The Appellant's advocate also relied on authorities (including Pedda Veeranna v. Gondimalla Veeranna and Gajendra Narain Maity v. Sita Nath Das) to contend that a tender wrongfully refused before suit can, in certain circumstances, stop the running of interest even without deposit into Court.
Respondent's (Plaintiff's / Lower Courts') Position
- Both lower courts found as a matter of fact that, in respect of the price of cloth, the usage of trade required interest to be payable; that finding was supported by evidence (including the Defendant's admission of charging interest in similar transactions).
- The Subordinate Judge (whose view the Appellant challenged) relied on earlier authorities (ultimately tracing to Haji Abdul Rahman v. Haji Noor Mahomed and English practice) to hold that where a creditor sues after refusing a tender, a defendant who wishes to keep the tender good must, when sued, deposit the money in Court; absent such deposit the tender does not stop interest from running.
- The Plaintiff implicitly relied on that rule to claim interest at the contract rate up to decree and associated costs, given no deposit in Court by the Defendant after the refused tender.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sophia Orde v. Alexander Skinner | Illustrates application of Section 34 Civil Procedure Code: rate of interest and court's discretion; where contract rate is not inequitable that rate will be adopted. | Cited to show that Section 34 gives the Court discretion as to awarding interest and rate; only 25 days' interest was materially at issue in this appeal. |
| Sabapathy Pillai v. Vanmahalinga Pillai | Contains an observation (followed the decision in Haji Abdul Rahman) that to stop running of interest a pre-suit tender must be followed by payment into Court when creditor sues. | The Subordinate Judge relied on this case for the proposition; the court here notes the observation in Sabapathy Pillai was obiter but grounded in Haji Abdul Rahman. |
| Haji Abdul Rahman v. Haji Noor Mahomed | Expressly decided the point that a tender before suit must be followed by deposit into Court to stop interest running when the creditor sues (rule based on English authorities). | Regarded as the authoritative decision on which the rule relied on by the Subordinate Judge is based; the court accepted this as decisive authority for ordinary (non-mortgage) money claims. |
| Bolye Chund Singh v. Moulard | Refers to the general rule (as stated in English authorities) regarding effect of tender and requirement to deposit in Court to keep tender good. | Used to support the historical/authoritative basis for the rule requiring deposit into Court to stop interest. |
| Rakhal Chandra Chakladar v. Baikuntha Nath Barai | Applied the general rule in the context of Bengal Tenancy Act (Sect. 150) requiring deposit of admitted rent into Court before certain pleas are entertained. | Used as an example (and supportive precedent) of the rule that deposit into Court is required to keep a tender effective when the matter proceeds in Court. |
| Jugat Tarini Dasi v. Naba Gopal Chaki (et seq.) | Provides extended explanation of the principle on which a valid tender must be kept good to stop running of interest. | Cited as a detailed exposition of the principle that a defendant should deposit into Court when sued to keep a tender effective. |
| Pedda Veeranna v. Gondimalla Veeranna | Held (in context of an award converted to decree) that tenders wrongfully refused before decree could stop interest even without payment into Court; relied on Section 84 T.P. Act and mortgage authorities in argument. | The court here rejected the reasoning relied upon in part because the case was not a mortgage matter and because the procedural posture (debtor seeking decree) differed; the court expressed inability to follow the grounds of that decision though accepted the result on other grounds. |
| Gajendra Narain Maity v. Sita Nath Das | Held (1925) that absence of any statutory or procedural provision meant it could not be laid down as a binding rule that a tender not followed by deposit into Court is ineffectual to stop interest. | Discussed as an authority in direct conflict with later Rakhal Chandra (1928); the court preferred the later decision as more in accord with precedent and reason, and therefore did not follow the broad proposition in Gajendra Narain Maity. |
| Velayuda Naicker v. Hyder Hussan Khan Sahib | Mortgage case relied upon in discussions about Section 84 Transfer of Property Act and tender in mortgage transactions. | Cited to illustrate that in mortgages, under Section 84 T.P. Act, tender alone stops interest; distinguishes mortgage rule from ordinary debt rule. |
| Krishnasami Chettiar v. Ramasami Chettiar; Thevaraya Reddy v. Venkatachalam Pandithan; Ramabhadra Thevar v. Arunachalam Pillai; Venkatarama Ayyar v. Gopalakrishna Pillai; Pandurang v. Dadabhoy | Group of cases cited in connection with the law and practice concerning tender and mortgage (Section 84 T.P. Act) or related interest principles. | Listed to support the proposition that Section 84 gives tenders a distinct effect in mortgage transactions and to show the breadth of authority on mortgage tender rules. |
Court's Reasoning and Analysis
The court's analysis proceeded in two main parts corresponding to the two issues.
1. Interest on the price of the cloth
Both lower courts had found, as a matter of fact, that usage of trade required interest to be payable on the price of the cloth. The appellate court observed that there is considerable evidence supporting that factual finding — including the Defendant's own admission that he had charged interest against other traders in similar transactions. Because this was a finding of fact supported by evidence, the appellant's objection to interest on the cloth-price was held unsustainable.
2. Effect of the Defendant's pre-suit tender of Rs. 500 (pledge) on subsequent interest
The court framed the discrete legal question as whether a tender made on 20 September 1923 and wrongfully refused by the Plaintiff, but not followed by deposit into Court when suit was brought (suit commenced 15 October 1923), prevented accrual of interest after the date of tender.
The court noted the procedural provision: Section 34 of the Civil Procedure Code gives the court discretion to award interest and to fix the rate from date of suit to date of decree; where the contract rate is not inequitable that rate will ordinarily be adopted (citing Sophia Orde v. Alexander Skinner). Given that principle, the appellate contest relevantly concerned only the 25-day period between tender and suit (a small sum in issue).
On the legal rule governing tenders, the court analyzed competing authorities and practice. The Subordinate Judge had relied on Sabapathy Pillai v. Vanmahalinga Pillai, and ultimately on Haji Abdul Rahman v. Haji Noor Mahomed, for the proposition that when a creditor sues after improperly refusing a tender, the defendant must deposit the tendered money in Court to keep the tender effective and stop the running of interest. The appellate court agreed that while the observation in Sabapathy Pillai was obiter, it derived from the expressly decided principle in Haji Abdul Rahman, which itself rests upon English authorities and long-standing practice.
The court considered the contrary line of reasoning in Pedda Veeranna and Gajendra Narain Maity. Pedda Veeranna was distinguished on its facts and posture (an award made into a decree and the debtor having applied for such conversion), and the court expressed inability to follow the reasoning relied upon in that case for general application to ordinary money claims. Gajendra Narain Maity (1925) had held that in the absence of statutory or procedural provision it could not be laid down as a binding rule that a tender not followed by deposit into Court is ineffectual. The present court regarded this as in conflict with the later Calcutta decision Rakhal Chandra Chakladar (1928), and preferred the later decision as more consistent with precedent and the reason of the thing.
The court's pragmatic justification for requiring deposit into Court when sued was explained: once the creditor sues, the defendant must be able to demonstrate continued ability and willingness to pay "on demand" — and the simple, conclusive way to show that in the context of Court proceedings is by bringing the money into Court. Accepting alternative proofs of readiness would introduce uncertainty into a long-accepted, simple test. The court also acknowledged an important statutory distinction: mortgage transactions are governed by Section 84 of the Transfer of Property Act, under which tender alone may stop interest; that rule and its rationale (drawn from Chancery practice as opposed to common law) justify a different approach for mortgages than for ordinary debts.
On these grounds — adherence to the established rule traced to Haji Abdul Rahman and English practice, the persuasive force of Rakhal Chandra Chakladar, and the practical need for certainty in Court proceedings — the court concluded that the Subordinate Judge's view (that the pre-suit tender not followed by deposit into Court did not halt interest) was correct.
Holding and Implications
Holding: APPEAL DISMISSED. The court upheld the Subordinate Judge's conclusion that the Defendant's pre-suit tender of Rs. 500 (which was wrongfully refused by the Plaintiff) did not stop the running of interest because the Defendant did not deposit the money into Court when sued. The court also upheld the lower courts' factual finding that usage of trade required interest on the price of the cloth, so the appellant's objection on that point failed.
Implications:
- Direct effect on the parties: The Plaintiff was entitled to interest at the contract rate up to the date of decree on the Rs. 500 loan (the period in dispute included the 25 days between the tender and the date of suit), and the Subordinate Judge's award of interest and related costs was sustained.
- The opinion distinguishes mortgage claims (governed by Section 84 of the Transfer of Property Act, where tender alone may stop interest) from ordinary money claims (where, when the creditor sues after refusing a tender, deposit into Court is the accepted means of keeping a tender good).
- The court did not purport to establish a novel general rule beyond applying and preferring existing decisions and long-standing English practice; the decision affirms the application of the established rule to the facts before it.
Disposition: The second appeal is dismissed with costs.
This appeal is by the Defendant in a suit for money and raises two points as to interest. The amount sued for consisted partly of the price of cloth sold by the Plaintiff, a trader, to the Defendant who is also a trader in cloth and partly of an amount of Rs. 500 advanced to the Defendant on a pledge of a Kasumalai. The defence as to interest on the price of the cloth was that there was no contract for interest either express or to be implied from the usage of trade and as to interest on the loan on the pledge that the Defendant had tendered the amount borrowed (Rs. 500) with interest at Re. 1-2-0 per cent per mensem on 20th September 1923, i.e, about 25 days before the suit, that the Plaintiff had improperly refused to accept the amount and return the pledged jewel and that therefore the Plaintiff was not entitled to further interest from the date of tender or to costs of suit on that head of the claim.
As to interest on the price of cloth it has been found by both the lower Courts that according to the usage of trade interest was payable. There is considerable evidence to support this finding including the Defendant's own admission that he has charged interest against other traders on similar transactions and in view of this finding which is one of fact, the Appellant's objection is not sustainable.
As to interest on the pledge the question is whether on the findings of both Courts that the Defendant did tender the money on 20th September 1923 and that the Plaintiff improperly refused to accept the tender on the allegation that the pledge covered the price of the cloth also, subsequent interest on that amount of Rs. 500 was allowable. The District Munsif disallowed subsequent interest and proportionate costs. But the learned Subordinate Judge held that as Defendant had not deposited the money in Court when sued for it, the tender prior to suit though improperly refused was ineffective to stop running of interest. He awarded Plaintiff interest at the contract rate up to the date of decree and also the costs disallowed by the first Court. This is the question which was strenuously argued before us for the appellant. Before going into the question it may be pointed out that in this case the tender was made on 20th September 1923 and the suit was brought on 15th October, 1923. By Sect. 34 of the Civil Procedure Code the award of interest as well as the rate at which it is to be awarded from the date of suit to date of decree is in the discretion of the Court though where the contract rate is not inequitable that rate will be adopted: Sophia Orde v. Alexander Skinner . Therefore the only interest to which the Appellant's objection, if successful, can apply is that for the period of 25 days between the above two dates which amounts to Rs. 4-11-0.
The Subordinate Judge has relied on Sabapathy Pillai v. Vanmahalinga Pillai , which itself follows Haji Abdul Rahman v. Haji Noor Mahomed for the proposition that in order to stop the running of interest a tender before suit must be followed by payment into Court when the creditor sues for the money. The Appellant's advocate argues that there was no decision of the point in Sabapathy Pillai v. Vanmahalinga Pillai and that the observation to that effect at page 970 was obiter. This argument is correct. But the observation is based on Haji Abdul Rahman v. Haji Noor Mahomed where the point’ was expressly decided. The rule is based on English authorities and practice of long standing mentioned there. The general rule is referred to by Wilson, J., in Bolye Chund Singh v. Moulard and by a Bench of the Calcutta High Court in Rakhal Chandra Chakladar v. Baikuntha Nath Barai which was a case under the Bengal Tenancy Act by Sect. 150 of which the Defendant is required to deposit the admitted amount of rent into Court before the Court can take cognisance of a plea that the Plaintiff's suit is for an excessive amount. The principle on which a valid tender must be kept good in order to stop running of interest is explained at length in Jugat Tarini Dasi v. Naba Gopal Chaki et seq. In the case of ordinary money claims not based on mortgage as to which the effect of tender is laid down by Sect. 84 of the Transfer of Property Act the best way in which a defendant whose tender has been refused can show that he has kept the tender good is by depositing the money in Court when sued for it. That appears to be the reason of the rule. The rule is expressly stated in Mulla's Civil Procedure Code in the commentary on O. 24, R. 3 and is illustrated by form No. IV of written statements in Appendix A to the Code.
But the Appellant's Advocate has referred to Pedda Veeranna v. Gondimalla Veeranna and Gajendra Narain Maity v. Sita Nath Das , in addition to numerous decisions turning on Sect. 84 of the Transfer of Property Act. In Pedda Veeranna v. Gondimalla Veeranna , there was an award ordering payment of a debt in 3 instalments. After one instalment was paid the creditor refused the debtor's tender of the other two instalments though made on or before the due dates. The debtor thereupon got the award made into a decree of Court by which the instalments were made payable on the dates mentioned in the award which had already expired and apparently without providing for any interest on the sums mentioned. As this decree was passed after contest by the creditor who attacked the award as invalid one would have thought that he could not in execution claim any interest which would be held to have been refused by the decree. See Sect. 34 Civil Procedure Code. But he did make such a claim and it was refused by the District Judge. In upholding such refusal their Lordships made no mention of what appears plainest ground for the refusal that the decree did not provide for interest. But they supported the refusal by accepting the Respondent's argument that as he had made tenders which were wrongfully refused before the award decree, interest ceased to run from the date of tender even without paying the money into Court. For this, Sect. 84 of the Transfer of Property Act and the decision in Velayuda Naicker v. Hyder Hussan Khan Sahib , which was a mortgage case, were relied on. We must respectfully say that neither Sect. 84 of the Transfer of Property Act nor the decision cited governed the case as it was not a mortgage case. We may add that it was the debtor who applied to have the award made a decree of Court and that therefore there was no proceeding or suit by the creditor in answer to which the debtor could have paid the money into Court to keep the tender good. On this point therefore we are unable to follow the grounds of that decision, though the decision itself was correct on the ground mentioned above. The language of the decision in Gajendra Narain Maity v. Sita Nath Das is directly in favour of the appellant's argument. The Defendant who had borrowed Rs. 350 at 36 per cent. from the Plaintiff tendered the money with interest in July 1916. But the Plaintiff wrongfully refused it and brought a suit in 1920 for the sum with interest to date of suit. The lower Appellate Court held the tender good and the Plaintiff's refusal wrong but as the Defendant had not deposited the money in Court awarded the Plaintiff 6 per cant. interest from the date of tender. The Plaintiff appealed and it was obvious that if the tender without payment into Court did not stop the running of interest as the award of 6 par cent. showed, the Plaintiff should have got not 6 per cent. but the contract rate of 36 per cent. But if the tender stopped the running of interest the award of 6 per cent. was wrong, though in the absence of an appeal by the Defendant the Court could not interfere with that. The Court consisting of Suhrawardy and Daval, JJ., held that in the absence of any provision in the law of contract or of procedure applicable to Indian Courts it cannot be laid down as a binding rule of law that if a tender is not followed by a deposit in Court it is ineffectual to stop running of interest. The reasoning of this decision pronounced in 1925, is in direct conflict with that of Rakhal Chandra Chakladar v. Baikuntha Nath Barai , pronounced in 1928 and in both of them Suhrawardy, J., participated. We consider the later Calcutta decision more in accord with precedent and the reason of the thing. A debtor who is required to keep his tender good must when he is sued certainly understand that the debt is being demanded through the Court and as he must be able and willing at any time after tender to pay it on demand he can demonstrate his ability and willingness after the matter has come to Court only by bringing the money into Court. Although in the abstract it is possible to argue that though the defendant has not deposited the money in Court and so placed his ability and willingness beyond question, he may be able to prove by other evidence that he was always ready and willing to pay the debt; to accept that argument would be to introduce much uncertainty into a test which is simple and conclusive and which has been accepted and acted on by the Courts in England and India for a very long time.
We think it unnecessary to consider in detail the effect of tender in mortgage transactions which is governed by Sect. 84 of the Transfer of Property Act or the large number of decisions which have been cited: Velayuda Naicker v. Hyder Hussan Khan Sahib , Krishnasami Chettiar v. Ramasami Chettiar , Thevaraya Reddy v. Venkatachalam Pandithan , Ramabhadra Thevar v. Arunachalam Pillai , Venkatarama Ayyar v. Gopalakrishna Pillai , Pandurang v. Dadabhoy . It is clear from Sect. 84 that in mortgages a tender alone has the effect of stopping interest from the date of the tender. The reason of the difference between mortgages and other debts in this respect would appear to be that the rule in Chancery was different from that at Common law:
“A tender of the amount due on the mortgage at a time when the mortgagee is bound to receive it stops interest from running if the mortgagor keeps the money ready to pay over to the mortgagee:” (Hals. Vol. 21 page 229) “Refusal of a proper tender is not equal to payment, but if the money, after the refusal, has been paid into Court or kept ready for immediate payment to the mortgagee, no further interest is payable.”
The rule at law is stated to be that where the promise is to pay a sum of money, tender coupled with continued readiness to pay the debt is an answer to a subsequent action for non-payment if the amount of the debt is paid into Court and operates as a bar to any claim to subsequent interest. (Hals. Vol. 7 page 418).
For these reasons, we think that the opinion of the Subordinate Judge on this point was right.
The second appeal is dismissed with costs.
N. R. R.Appeal dismissed.
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