Kerala High Court
P.A.Rajan vs K.S. Chandran on 11 April, 2024
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE C.PRATHEEP KUMAR
THURSDAY, THE 11TH DAY OF APRIL 2024 / 22ND CHAITHRA, 1946
RSA NO. 257 OF 2018
AS NO.198 OF 2008 OF I ADDITIONAL DISTRICT COURT, THRISSUR
OS NO.461 OF 2004 OF THE PRINCIPAL SUB COURT, THRISSUR
APPELLANT/APPELLANT/PLAINTIFF
P.A.RAJAN, AGED 73 YEARS, S/O. PADUR AYYAPPAN,
'RAVI VIHAR', AYYANTHOLE VILLAGE,THRISSUR TALUK.
BY ADV SRI.P.V.CHANDRA MOHAN
RESPONDENTS/RESPONDENTS/DEFENDANTS
1 K.S. CHANDRAN, S/O. KUNNATH SANKU, AGED 73 YEARS,
KUNNATH HOUSE, UDAYA NAGAR ROAD,KAIPPILLY,
ARIMPUR, THRISSUR TALUK.
2 K.C MADHU, S/O. CHANDRAN, AGED 46 YEARS, KUNNATH
HOUSE, UDAYA NAGAR ROAD, KAIPPILLY, ARIMPUR,
THRISSUR TALUK.
BY ADV SRI.T.A.RAJAGOPALAN
THIS REGULAR SECOND APPEAL HAVING COME UP FOR
ADMISSION ON 3.4.2024, THE COURT ON 11.4.2024 DELIVERED
THE FOLLOWING:
RSA 257/2018
2
C.PRATHEEP KUMAR, J.
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R.S.A.257 of 2018
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Dated : 11th April, 2024
JUDGMENT
1. This Second Appeal has been preferred under Section 100 r/w Order XLII
rule 1 of CPC by the appellant in A.S.198/2008 on the file of the 1st Additional
District Judge, Thrissur, who is the plaintiff in O.S.461/2004 on the file of the
Principal Sub Court, Thrissur, against the judgment dated 13.11.2017
dismissing the appeal. For the purpose of convenience, the parties are hereafter
referred to as per their rank before the trial Court.
2. The brief facts necessary for the disposal of this Appeal are as follows :-
The second defendant is the son of the first defendant. According to the
plaintiff, the defendants jointly borrowed a sum of Rs.75,0000/- from him on
18.2.1999 after executing a demand promissory note, promising to repay the
amount on demand. On 16.2.2002 the defendants paid a sum of Rs.500/-
towards interest. However, the principal amount and remaining interest was
not repaid, in spite of repeated demands and a registered lawyer notice.
According to the defendants, the 1st defendant borrowed a sum of Rs.50,000/-
from the plaintiff on 18.2.1999 and executed an agreement for sale in respect
of his property as security for the repayment of the loan amount. Subsequently
when the second defendant was in need of a further sum of Rs.25,000/-, the
plaintiff insisted for executing a demand promissory note for Rs.75,000/-. He
had also obtained signed blank stamp papers and signed blank papers from
them. They regularly paid interest to the borrowed amount. On 24.12.2001
they repaid Rs.25,000/- and the remaining Rs.50,000/- was repaid on 6.5.2003,
through the account of the plaintiff. The plaintiff informed the defendants that
he had destroyed the signed blank stamp papers and blank papers given as
security and that they are not liable to repay any amount to the defendants.
3. As per the judgment dated 28.2.2008, the trial court directed the defendants
to pay an amount of Rs.25,000/- along with interest at the rate of 12% per
annum, till the date of suit and thereafter, at the rate of 6% per annum, after
crediting Rs.50,000/- paid through the plaintiff's bank account. Since the trial
court has not awarded interest for the entire principal amount of Rs.75,000/-
from the date of the loan, the plaintiff preferred the first appeal. The defendants
also filed a cross-objection. As per judgment dated 13.11.2017 the 1 st Appellate
Court dismissed the appeal as well as the cross-objection. Dissatisfied with the
above judgment of the 1st Appellate Court, the plaintiff preferred the Second
Appeal raising various contentions.
4. At the time of admission, after hearing both side, this Court formulated the
following substantial question of law for consideration :
"When a payment is made towards a debt, is not the creditor
entitled to adjust that payment towards the interest liability firstly
and thereafter towards the principal ?
5. Heard both sides.
6. The trial court as well as the 1 st Appellate Court found that the defendants
borrowed a sum of Rs.75,000/- from the plaintiff on 18.2.1999 after executing
Ext.A1 promissory note. Though the defendants pleaded complete discharge,
they could prove the repayment of only a sum of Rs.50,000/- on 6.5.2003, in
addition another Rs.500/- paid towards interest on 16.2.2002. The plaintiff
claimed interest for the loan amount at the rate of 12% per annum from the
date of the loan, for Rs.75,000/-. The trial court awarded interest at the rate of
12% per annum only for a sum of Rs.25,000/-, till the date of the suit and
thereafter, at the rate of 6% per annum till realization. The prayer for granting
interest from the date of the loan on 18.2.1999 till 6.5.2003 ( the date of
repayment of Rs.50,000/- ) was denied by the trial court, which led to the First
Appeal.
7. In the impugned judgment the 1st Appellate Court specifically found that
the plaintiff is entitled to get interest at the rate of 12% per annum for
Rs.75,000/- from 18.2.1999 to 6.5.2003. It is also stated that from 7.5.2003
plaintiff is entitled to get interest at the rate of 12% per annum till the date of
the suit and at the rate of 6% per annum till realization. In paragraph 12 of the
impugned judgment it is stated that :
"So from 18.2.1999 to 6.5.2003, the plaintiff is entitled to get interest at the
rate of 12% per annum for Rs.75,000/-. From 7.5.2003 plaintiff is entitled to
get interest at the rate of 12% per annum till the date of the suit and at the rate
of 6% per annum till realization from defendants 1 and 2 jointly and severally
and their assets." However, in the decretal portion, the 1st Appellate Court held
that, the appeal as well as the cross-objection are dismissed. The defendants
have not filed any cross-objection against the judgment of the 1 st Appellate
Court.
8. Relying upon the decision of the Hon'ble Supreme Court in Bharat Heavy
Electricals Ltd. v. R.S.Avtar Singh and Co., AIR 2013 SC 252, the learned
counsel for the plaintiff would argue that the plaintiff has got every right to
adjust the part payment effected by the defendants towards interest first and as
such the above Rs.50,000/- received is to be adjusted from the interest payable
and not from the principal amount. In paragraph 24 of the above decision, the
Hon'ble Supreme Court laid down the principles for appropriating the amount
paid by the debtor to the creditor, which is extracted below for reference :
"24. From what has been stated in the said decision, the following
principles emerge:
a) The general rule of appropriation towards a decretal amount
was that such an amount was to be adjusted strictly in accordance
with the directions contained in the decree and in the absence of
such directions adjustments be made firstly towards payment of
interest and cost and thereafter towards payment of the principal
amount subject, of course, to any agreement between the parties.
b) The legislative intent in enacting sub-rules 4 and 5 is clear to
the pointer that interest should cease to run on the deposit made
by the judgment debtor and notice given or on the amount being
tendered outside the Court in the manner provided in Order XXI
Rule 1 sub-clause (b).
c) If the payment made by the judgment debtor falls short of the
decreed amount, the decree holder will be entitled to apply the
general rule of appropriation by appropriating the amount
deposited towards the interest, then towards cost and finally
towards the principal amount due under the decree.
d) Thereafter, no further interest would run on the sum
appropriated towards the principal. In other words if a part of the
principal amount has been paid along with interest due thereon as
on the date of issuance of notice of deposit interest on that part of
the principal sum will cease to run thereafter.
e) In cases where there is a shortfall in deposit of the principal
amount, the decree holder would be entitled to adjust interest and
cost first and the balance towards the principal and beyond that
the decree holder cannot seek to reopen the entire transaction and
proceed to recalculate the interest on the whole of the principal
amount and seek for re-appropriation."
9. The above decision relates to payment made by the debtor towards the
amount covered by a decree. In the instant case, the part payment was effected
by the defendants before the plaintiff filed the suit. Section 60 of the Contract
Act states that :
"60. Application of payment 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 debtor, whether its
recovery is or is not barred by the law in force for the time being
as to the limitations of suits."
10. From the above provision it can be seen that if the debtor on payment does
not give any instruction to the creditor, it is open to the creditor to apply the
amount at his choice, first towards the satisfaction of interest and then towards
the discharge of principal amount. In the instant case, the defendants have no
case that they have intimated the plaintiff to appropriate the part payment of
Rs.50,000/- in any particular manner. In the above circumstances, the plaintiff
has the discretion to appropriate the same firstly towards interest due to him.
11. The plaintiff/appellant has specifically contended in ground (K) of the
memorandum of appeal that the amount paid by the defendants was
appropriated firstly towards interest and then towards interest. Therefore, the
part payment of Rs.50,500/- (50,000 + 500) is liable to be appropriated firstly
towards interest due to the plaintiff. Since the part payment of Rs.50,000/- was
paid to the plaintiff only on 6.5.2003, the plaintiff is entitled to realize interest
at the rate of 12% per annum for the principal sum of Rs.75,000/- from
18.2.1999 till 6.5.2003, which will come to Rs.37,975. The total amount due as
on 6.5.2003 including interest will come to Rs.112,975/-. After adjusting the
above Rs.50,500/- the balance amount due to the plaintiff as on 6.5.2003 will
come to Rs.62,475/-. For the said amount also the plaintiff is entitled to get
interest at the rate of 12% per annum from 7.5.2003 till the date of the suit and
thereafter, at the rate of 6% per annum as ordered by the 1 st Appellate Court.
Therefore, the impugned judgment and decree of the 1 st Appellate Court is
liable to be modified accordingly.
12. In the result, this second appeal is allowed as follows :
The plaintiff/appellant is allowed to realize a sum of Rs.62,475/-, along with
interest at the rate of 12% per annum from 7.5.2003 till the date of the suit on
19.5.2004 and at the rate of 6% per annum thereafter till realization with costs,
from defendants/respondents 1 and 2 and their assets.
Sd/-
C.Pratheep Kumar, Judge
Mrcs/4.4.2024
