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PETITIONER: K.   V. SRINIVASA AYYANGAR

       Vs.

RESPONDENT: P.   N. VENKATASUBRAMANIA IYER AND OTHERS

DATE OF JUDGMENT: 06/01/1966

BENCH: MUDHOLKAR, J.R. BENCH: MUDHOLKAR, J.R. SARKAR, A.K. BACHAWAT, R.S.

CITATION:  1966 AIR 1247            1966 SCR  (3) 203

ACT: Madras  Agriculturists’  Relief  Act  (4  of  1938),  s.   8 Explanation III-Scope of.

HEADNOTE: In 1932, the appellant renewed a promissory note executed in 1930  by  his  brother in favour of N, the  -father  of  the respondents, for Rs. 1,000.  The promissory note was renewed in  1937,  1940 and 1944 for the principal  amount  together with  interest.  The last 3 promissory notes were  taken  in the name of a Bank which was admittedly under the control of N. In 1946, at the instance of the appellant, N paid off the debt  due  from  the appellant to the Bank  and  obtained  a promissory note in his own favour for Rs. 10,600, the amount then due.  As no repayment was made, N instituted a suit  on the  original side of the High Court which was decided by  a judge  sitting singly.  Applying Explanation III to s. 8  of the  Madras  Agriculturists’  Relief Act, 1938,  he  gave  a decree only for Rs. 1,350 together with interest at 6 1/4  % from  the  date of the Act.  In appeal therefrom  under  the Letters  Patent,  the High Court held that  the  respondents were  entitled  to  a decree for the entire  amount  of  Rs. 10,600 with interest at 6 1/4-%. Before  this  Court,  it  wag  contended  that,  under   the Explanation as amended by Act 24 of 1950, once it was  found that  a  document  was in renewal of  a  previous  debt  the benefit of s. 8 would be available was promisor even if  the creditor  in whose name the debt was renewed  was  different from  the one who had originally advanced the loan and  also even  where the original debtor was different from  the  one who executed the document under which the debt was renewed. HELD : Though the requirement of the Explanation  pertaining to  the  debtor  was satisfied in the sense  that  the  same person had been the debtor, the requirement with respect  to the  creditor  was not satisfied.  The benefit  of  the  Act would be available to a debtor if the renewal was in  favour of: (a)   the same creditor; or (b) any other person  acting in his behalf; or (c)    any  other  person  acting  in  his interest.  Since the Bank has an independent existence, even though the controlling interest herein was with N, it  would not  be correct to say that there was identity  between  him

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and  the Bank.  Neither was there any material to show  that the Bank acted on N’s behalf when the appellant executed the promissory  notes  in favour of the Bank; and, even  if  the words  "in  the interest of" mean "for the  benefit  of"  it cannot  be said that the Bank, in obtaining  the  promissory notes  in  renewal of the original debt was  acting  in  N’s interest.   Therefore, the Explanation was not available  to the appellant. [212 D-G; 213 A-E]

JUDGMENT: CIVIL   APPELLATE   JURISDICTION:  Civil  Appeal   No.   543 of 1963. Appeal from the judgment and decree, dated October 10, 1958 of the Madras High Court in O.S. Appeal No. 1 of 1954.  209 T.   V. R. Tatachari, for the appellant. M.   Sundaram, K. Jayaram and R. Thiagarajan, for respondent No. 1. The Judgment of the Court was delivered by Mudholkar,  J.  This  is an appeal from a  judgment  of  the Madras  High Court modifying the decree passed by  a  single Judge of that High Court in a suit for recovery of money. Admittedly  the appellant had executed a promissory note  at Madras  for  a sum of Rs. 10,600 in favour of  one  Narayana Iyer, since deceased, on January 28, 1946 and agreed to  pay interest on that amount at 12% p.a. It is also admitted that no  repayment  was made by the  appellant.   Narayana  Iyer, therefore,  instituted a suit against him for recovery of  a sum of Rs. 14,402-5-0, which includes interest upon the  sum of Rg. 10,600. The appellant contended that the promissory note was only  a renewal  of a previous promissory note which itself as  well as  three  earlier promissory notes were in renewal  of  the original promissory note for Rs. 1,000 executed in the  year 1930.   According to the appellant that promissory note  was executed  by  his brother but was renewed by  the  appellant himself  in  the year 1932; that this  promissory  note  was renewed  on  January 11, 1937 by him and that at  that  time Narayana  Iyer had given an additional amount of Rs. 350  to him.  The amount for which his promissory note was  executed was Rs. 4,000 and it included interest on the first  advance up to that date.  Narayana lyer, however, instead of  taking a  promissory  note in his own name took it in the  name  of General  Bank  which  is a  private  limited  company  which admittedly  was under his control.  The debt was renewed  in favour of the General Bank on January 3, 1940 by executing a fresh  promissory note for Rs. 5,650 on that date and  again on  September  13, 1944 when it was renewed by  obtaining  a promissory note for Rs. 9,275.  According to the respondents Narayana  lyer paid off the dues to the General Bank at  the instance of the appellant and obtained a promissory note  in his  favour  for Rs. 10,600.  As the amount  was  not  paid, Narayana  lyer instituted the suit out of which this  appeal arises.   He, however, died during the pendency of the  suit and  is now represented by his sons, the respondents.   Upon the aforesaid facts and the further fact that the  appellant is  an agriculturist he claimed that he was entitled to  the benefits of the Madras Agricul- 210 turists  Relief Act IV of 1938.  He claimed that  under  the provisions  of  that Act he was entitled to have  the  debts scaled down. His plea was upheld by the learned single Judge of the  High

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Court  who held that the respondents after scaling down  the interest  as provided in the Act were entitled to a  sum  of Rs.  1,350  together with interest thereon at  6  1/4%  from March 22, 1938 up to the date of the decree.  In the  appeal preferred  by the respondents under the Letters  Patent  the appeal  court held that the respondents were entitled  to  a decree  for the entire amount for which the promissory  note was  executed,  that is, Rs. 10,600 together  with  interest thereon at 61% p.a. In coming to this conclusion the  appeal court placed an interpretation on explanation III to s. 8 of the  Act  different from that placed by the  learned  single Judge. Section  7 of the Act provides that all debts payable by  an agriculturist at the commencement of the Act shall be scaled down  in accordance with the provisions of Chapter II.   The Act  received  assent of the Governor General on  March  11, 1938  and  was first published in the  Official  Gazette  on March 22, 1938 and must be deemed to have come into force as from  the former date.  Section 8 provides for  the  scaling down of debts incurred before December 1, 1932.  Sub-section (1) thereof says that all interest outstanding on the 1st of October, 1937 against an agriculturist shall be deemed to be discharged  and only the principal outstanding on that  date shall   be  deemed  to  be  the  amount  repayable  by   the agriculturist debtor.  Sub-sections (2), (3) and (4) of that Act  deal with classes of cases in which payments have  been made from time to time by the debtor to the creditor.  It is not necessary to refer to them because even according to the appellant  he  had  not  made  any  repayments  before   the execution of the promissory note in the suit.  It is  common ground that explanations 1, II and IV have no application to the present case.  The only explanation which is relevant is explanation  III.  This explanation has been twice  amended. The original explanation was 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." 211    The  amending  Act  23 of 1948  substituted  for  it  the following               "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." This was amended by Madras Act 24 of 1950 and now runs     thus :               "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               debtor or by his heirs, legal  representatives               or  assigns or by any other person  acting  on               his behalf or in his interest and   whether in               favour  of the same creditor or of  any  other               person   acting  on  his  behalf  or  in   his

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             interest,  the principal  originally  advanced               together with such items, if any, as have been               subsequently advanced as principal shall alone               be  treated  as the  principal  sum  repayable               under this section." It  is  common ground that it is the explanation  which  was amended  by Act 24 of 1950 which applies to the case  before us.  It will be seen that under the original explanation the benefit  of sub-s. (1) of s. 8 was available only  in  cases where  the  debt  had been renewed in favour  of  the  same, creditor as the one from whom      it     was     originally obtained.  It is contended on the appellant’s behalf that by virtue of the amendment of 1948 the benefit of the provision was  available even if the creditor in whose name  the  debt was  renewed was different from the one who  had  originally advanced  the loan and also even where the  original  debtor was  different from the one who executed the document  under which     the debt was renewed. It is pointed out that the second amendment was necessitated by  reason  of certain decisions of the  Madras  High  Court holding  that the words "different creditor" in  Explanation III  to s. 8 did not include a third party in  whose  favour the debtor had executed a document renewing an earlier debt. According  to learned counsel this  interpretation  defeated the  object  which the Legislature had in view  in  amending Explanation   III   in  1948  and  that,   therefore,   that explanation was amended a second time to make it 212 clear  that once it is found that a document was in  renewal of a previous debt the benefit of S. 8 would be available to the promisor whether the person renewing it or the person in whose favour it is renewed is different. It  is  unnecessary for us to consider what the  reason  for amending Explanation III by Act 23 of 1948 was.  All that we are  concerned with is the explanation as amended by Act  24 of  1950.  By virtue of this explanation the benefit  of  s. 8(1) would be available in a case where (a) a debt has  been renewed  or included in a fresh document; and where that  is done (b) (i) by the same debtor, or     (ii)by his heirs, legal representatives or assigns; or     (iii)by any other person acting on his behalf; or     (iv)  by any other person acting in his interest. Such  a transaction will be entitled to the benefit  of  the Act  if the  renewal or fresh agreement is in favour of  (a) the same creditor; or (b) of any other person acting in  his behalf  or (c) any other person acting in his interest.   In the  instant  case though the debtor in the  transaction  of 1930  was  stated  to be the  appellant’s  brother,  in  all subsequent transactions it was the appellant who  was    the debtor It would follow, therefore, that the requirements  of the  explanation pertaining to the debtor are  satisfied  in the sense      that  the  same person has been  the  debtor. The second requirement of the explanation is with respect to the creditor.  As already     stated, after 1940 it was  not Narayana lyer but the General Bank which was the creditor up to January 28, 1946 on which date the   promissory  note  in suit was executed by the appellant in his    favour.     The General  Bank has an independent existence and  even  though the controlling interest therein was with Narayana lyer  and his  family it would not be correct to say that there is  an identity between that bank and Narayana lyer. Mr. Tatachari, however,  contended  that it was Narayana lyer who  was  the original  creditor  and  that  as  he  had  full  power   of management and control   with respect to the General Bank he

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went on obtaining promissory  notes  from  the   appellants, sometimes in his own favour and some    times  in favour  of the  Bank. For all practical purposes, therefore,  according to the appellant, the creditor has been the same throughout. We cannot accept this argument in the absence of         any material to show that the Bank acted on his behalf when  the appellant  executed the promissory notes, dated  January  3, 1940  ,and  September 30, 1944 in favour of  the  Bank.  The contention 213      of  Mr.  Tatachari then is that the Bank  in  obtaining those  promissory notes in renewal of the original debt  was acting in his interest and that, therefore, the  explanation was  available to the appellant.  In the High Court  it  was urged  that when the appellant executed the promissory  note dated  January 28, 1946 Narayana lyer acted in the  interest of the Bank.  The ground      on which the argument advanced before  the High Court and the argument advanced  before  us is,  however,  the  same.   It is that  the  words  "in  the interest of" mean "for the benefit of".  Even assuming  that that is the meaning to be given to these words the  argument of learned counsel cannot be sustained on the facts of  this case.  It has been found as a fact by the appeal court  that Narayana  Iyer actually paid Rs. 10,600 by cheque in  favour of  the General Bank Ltd., to the credit of  the  appellant. It has also been found by the High Court that Narayana  lyer paid off the debt due from the appellant to the Bank at  the request  of  the appellant for discharging  the  appellant’s liability upon the promissory note executed by him in favour of the Bank.  These findings of the High Court have not been seriously  challenged  before us and in  our  opinion  quite rightly.   In  view  of these  findings  the  contention  of learned  counsel that the payment was made "in the  interest of the creditor" cannot be sustained.  In the circumstances, therefore,  we  uphold the decree of the appeal   court  and dismiss the appeal with costs. Appeal dismissed. 214