\^ HlfcrH COURT OF CHHATTISGARH AT BILASPUR APPEL ,ANT RESPONDENT F.A. No.179/2003 Harishchandra Rathore Versus Life Insurance Corporation of India O R D ER Postfor 11^-4-2010 Sd/- N.K.Agrawal Judge HIGH COURT OF CHHATTISGARH AT BILASPUR •'>!-?wa^': APPELLANT DEFENDANT RESPONDENT PLAINTIFF F.A. No.179/2003 Harishchandra Rathore, aged 64 years, S/o Shri Buturam Rathore, R/o Tendubhata, Post SarKhon, Tahsil Janjgir, Distt. Janjgir- Champa (CG) Versus Life Insurance Corporation of India through Manager (Legal and SVP), Divisional Office, Bandari, Raipur (CG) SB:- Hon. Shri N.K. Agarwal, J. PRESENT:- Shri Malay Shrivastava, counsel for the appellant. Shri Mukesh Sharma, Counsel for the respondent. ORDER (1^4-2010) 1. This is defendant's appeal under Section 96 of the Code of Civil Procedure (briefly, 'the Code') against the judgment and decree dated 19-7-2003 passed by 4ttl Additional District Judge (FTC), Janjgir in Civil Suit No. 6-B/2002 whereby and whereunder, the respondent's/Life Insurance Corporation of India's suit has been decreed. 2. Brief facts of the case are as under:- 3. The appellant (hereinafter referred to as the defendant) applied for housing loan under respondent s scheme (Ex. P- 2) [Apna Ghar Banao Yojna (M-l)]. The defendant's proposal was accepted by the plaintiff and a loan of Rs. 50,000/- was sanctioned subject to the terms and conditions enumerated in Ex. P-3. The defendant accepted above terms and conditions vide Ex. P-4, also mortgaged immovable property. 4. The amount was not repaid by the defendant in time. After issuance of notice, plaintiff instituted a suit for recovery of Rs. 1,86,022/- with a prayer in default of payment, its recovery be permitted by sale of property mortgaged. •:s-" 5. The defendant in his written statement in nutshell disputed the amount of interest claimed, also prayed for its ^. '^ dismissal as according to him, the suit was time barred. \Fj^ 6. Learned trial Court framed following issues:- 1. (31) W qrit STCT yldclliil ^t ^t il^ 'iRTir ^Tftr TR yRiciit?) 17.5 yRliild Sf^ qrfife einuT ^ ^i; ^ WTiT-Wra IR 4Rc|Rfd ^ ^ siTjT qrft pppr ^pt 'yidl-l f^T 'jTFIT •t<)1<<)l< f^T aiT ? (^) Vn TRTT ^ '{cTET-T ^t f^TO WTT ^IT Mlfd-rfl !j1P)i|1 ^t f^5(T ^ SRRpft 4' ^ ?^ w Pt^iFRd arruf ^ ^ aiRiR<w 2.5 yRiiiitf ^TPfe ^S Eirpjf 3RT ^sRT uR|c|I<0 4 •t4)«t)l< f^IT SIT ? 2. (si) WT qr^t uRi<fi<{) ^ 186022/-(t?q? dl^ f&'yi'tfl ^uIR ^I^H 'ST^ ) TTCT ^T^ W STfaiblfl t ? (^) WV qrtt T^W •tf«lRd Vt ft®^qi^ 'CTRr q^cT f^ uIT^ ^>T giRra.Tftt ? 3. ^H ^T^t q'1 ^R SraRr qTCT ?^ ^ 314ll"n<) t ? 7. Both the parties have led evidence. 8. The learned Trial Court on a close scrutiny of the evidence led, material placed and submissions made, decreed the plaintiffs suit in toto rejecting contentions raised by the defendant. Hence this appeal. 9. Shri Malay Shrivastava, learned counsel for the appellant would submit that the plaintiff has wrongly applied Rs. 20,000/- paid by the defendant on 23-3-1998 to the amount of interest whereas in law it ought to have been applied to the principEd amount of loan and thus the amount of interest claimed in fact was not due for payment. Learned trial Court did not consider this aspect of the matter and thus erred in decreeing the suit in toto. 10. On the other hand, Shri Mukesh Sharma, learned counsel for the respondent by referring para 6-A of the proposal for loan (Ex. P-3) contended that the amount of interest claimed was as per the agreeraent entered into between the parties and the same has been rightly allowed by the lower Court. The decree passed deserves to be upheld. 11. I have heard learned counsel for the parties, perused the impugned judgment and decree and record of the ta'ial Court. 12. Para 6-A of the proposal for loan (Ex. P-3 ) referred by learned counsel for the plaintiff reads as follows:- "You will be at liberty to make part payment towards the principal in multiples ofRs. 1,000/- (Rupees One thousand) at any time after expiiy of one year from the date of disbursement of the 1st installment of loan and coinciding with the date of the payment of any half-yearly instaUment of interest or interest and principal PROVIDED however that all interest due upto the date of such payment shall have been paid first and PROVIDED furfher that such payment in anticipation will not interfere with or effect the payment in the due course of the subsequent half-yearly installments ofprincipal." 13. As per above referred clause, on the date of making payment by the defendant, if payment of interest was also due then the amount of interest has to be paid first. 14. The Supreme Court in case of Industrial Credit & DevelopmentSyndicate v. Smithaben H. Patel1 has held in para 9 of its judgment as under:- 9. We are of the opinion that such a plea is far-fetched and begged only for the purpose of putting an imaginary defence to the claim of the appellant-decree-holder. Section 59 of the Indian Contract Act deals with the application of paynient where debt to be discharged is indicated and Section 60 where debt to be discharged is not indicated. The aforesaid Sections 59 and 60 are reproduced below: "59. Application ofpayment where debt to be discharged is indicated.— Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly. 60. Application ofpayment where debt to be discharged is not indicated.— Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the /•\]\ ' 1999(3)5cc 80 debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits." A perusal of Section 59 would clearly indicate that it refers to several distinct debts payable by a person and not to the various heads of one debt. The principal and interest due on a single debt or decree passed on such debt carrying subsequent interest cannot be held to be several distinct debts. A Full Bench of the Lahore High Court in Jia Ram v. Sulakhan Mal (AIR 1941 Lah 386) dealt with the scopeof Section 59 to Section 61 of the Indian Contract Act and held: "Sections 59 to 61, Contract Act, embody the general rules as to appropriation of payments in cases where a debtor owes several distinct debts to one person and voluntarily makes payment to hira. They do not deal with cases in which principal and interest are due on a single debt, or where a decree has been passed on such a debt, can-ying interest on the sum adjudged to be due on the decree. These sections are based upon the rule of English Law, well settled Since Clayton case (ATR 1922 PC 26) that where a debtor, owing several distinct debts to one person, makes a payment to him intimating that.the payment is to be applied in discharge of particular debt, the creditor, if he accepts the payment, must apply it accordingly. If, however, the debtor has omitted to intimate and there are no circumstances indicating to which debt the payment is to be applied the creditor may, at his discretion, apply it to any debt actually due and payable to him by the debtor at the time. In case neither party makes the appropriation, the payment is to be applied in discharge of the debts in order of time; and if the debts are of equal standing the payment is made in the discharge of each of them proportionately. It will be seen that these rules have no application to a case in which only one debt is due and at the time of payment, besides the principal sum secured, interest has also accrued due. In such cases, fhe rule of English Law, laid down as far back as 1702 in Chcise v. BoxfAlR 1922 PC 233) is that 1f a man is indebted to another for principal and interest and payeth the money generally, it shall be applied in the Erst place to sink the interest before any part of the principal should be sunk'. In Parr's Banking Co. Ltd. v. Yates (1898) 2 QB 460) Lord Rigby, J. described it as 'the old and well-settled rule' that where both 'principal and interest are due the sums paid oh account must be applied first to interest. That rule, where it is "applicable is only common justice. To apply the sums paiH to principal where interesfhas accrued upon tHe deBt, and is not paid, would be depnving the creditor of the benefit tp which he is entitled under his contract, and would be most unreasonable as against him. Fisher in his standard work on the Law of Mortgages (Edn. 7), p. 620, while dealing with the question of appropriation of payments towards a mortgage debt, states the law as follows: Where the debtor claims to be discharged by reason of payments which were not specially made in'respect eifher of the princip^al or the interest of fhe mortgage, the rule is that a general payment shatl T?e applied in the first place to sink the inferest, befqre any part of the principal is discharged.'" The judgment of the Lahore High Court is based upori sound principle and hasTcept in mind the uitentiqn of fhe legislature in enacting Sections 59 to 61 of the Act. We do npt agree with the learned counsel for the respondent^ that Section 60 of the Contract Act has to be read independenUy excluding the provisions of Section 59. Accepting such an arguinent would amount to dping violence to the language employed in the section-and the purpqse soughf to be achieved by it. Besides, it wpuld also T>e contradictqry ih terms. Sectiqn 60, if applied independehtly, cannot be held to be confen'ing any nght upon the judginent-debtpr as it confers a discretion in favour of the creditqr to apply such deposited amount to any lawful debt actually due and payable by fhe debtor when such debtpr omits to Intimate the discharge pf the debt in the manner enyisaged under Sectipn 59. We are of the opinion that Sections 59 and 60, Contract Act, would be applicable only in pre-decretal stage and not thereafter. Post-decretal payments have to be made either in terms of tHe "decree or in accordance with the agreement arrived at between the parties though on the general principles as mentioned in Sections 59 and 60 of the Contract Act. As and when such an agreement either express or implied is relied upon, the burden pf'proving it would always be upon its propoynder." The Judgment-debtprs^ m the instant case, are proved lo have failed in discharging such an onus. There does not appear to be any obligation on the decree-holder to intimate the judgment-debtor that the amount paid to him had riot been accepted in the manner specifled by him in fhe letter^ accompanying the payment. Insisting upon such a co'urse would result in unnecessary" burden upon fhe financial institutions and confennent" of unwanted unilateral discretion in favour of the defaulters. Acceptance of the plea that the amount paid first should be adjusfed in the principal\amount would not only be against the provisidnof law but against the public" policy as well. To provide security, continuity 'and' certainty in business transaction, the legislature has' been making specific provisions in that regard which may be found in various prpvisions" of the Negotiable Instruments Act, 1881 or Order 37 Code'of Civil Procedure and other statutoiy provisions. K) l:-^:::7: •Vvvt . f Liiul.uuw .^f 15. In view of above legal position and in view of Clause 6-A of Ex. P-3, the plaintiff has rightly appUed the sum paid by the defendant towards the amount of interest accrued upon the principal sum. 16. For the foregoing, it cannot be said that the plaintiff has erroneously applied the amount deposited towards the amount of interest accrued. 17. No other points have been raised. 18. In view of the above, I do not find any substance in the appeal preferred by the appeUant. 19. The appeal being devoid of substance deserves to be and is hereby dismissed. Sd/- N.K.Agrawal Judge ^