Case: K. V. Srinivasa Ayyangar Vs. P. N. Venkatasubramania Iyer And Others

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 per cent 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 Rs. 10,6003. 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 this promissory note was executed was Rs. 4,000 and it included interest on the first advance up to that date. Narayana Iyer, 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 Iyer 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 Iyer 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 Agriculturists Relief Act IV of 1938. He claimed that under the provisions of that Act he was entitled to have the debts scaled down3. 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 this promissory note was executed was Rs. 4,000 and it included interest on the first advance up to that date. Narayana Iyer, 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 Iyer 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 Iyer 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 Agriculturists Relief Act IV of 1938. He claimed that under the provisions of that Act he was entitled to have the debts scaled down4. His plea was upheld by the learned Single Judge of the High 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 thereof at 6-1/4 per cent 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 6-1/4 per cent p.a. In coming to this conclusion the appeal court placed an interpretation on explanation III of S. 8 of the Act different from that placed by the learned Single Judge.

Reasoning: 6. 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 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 differentWe 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 BankIt 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 Iyer paid off the debt due from the appellant to the Bank at the request of the appellant for discharging the appellants 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 rightly7. 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 interestSuch a transaction will be entitled to the benefit of the Act if the renewal of 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 appellants 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 Iyer 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 Iyer and his family it would not be correct to say that there is an identity between that bank and Narayana Iyer.