Chapter 5.1 - The Laws Relating to Debts (ṛṇādāna)

Ṛṇādāna, i.e. payment and recovery of debts is one of the important vyavahārpadas described in the Smṛtis. It occupies the top of the list of titles of lawsuit. The concept of debt and the liability to pay of one’s debts have a very ancient origin in India, which can be traced from the time of the Ṛgveda.^[1] Yājñavalkya has treated the laws on repayment of debts [i.e., ṛṇādāna] while dealing with substantive law after expounding the rules of procedure in general and particular cases.

Yājñavalkya has devoted twenty-eight verses to discuss the laws on this topic. The Mitākṣarā commentary explains that this title of law, viz. the laws on recovery of debt is of seven kinds, that means it contains seven points for consideration.

These points are as follows:-

1. the kind of debt which should be paid,
2. the kind of debt which should not be paid,
3. who are having authority to pay or by whom it should be paid,
4. the time when it is to be paid,
5. by what way it is to be paid,
6. the mode of advancing a loan and
7. the mode of recovering it.

Here the first five points are concerned to the adhamarṇa, which means a debtor and last two points are subjects of consideration for the uttamarṇa, referring to a creditor.^[2] It seems to be well settled during the time of Yājñavalkya that the debt or loan is advanced by the creditor charging interest on it as a means to earn profit from the debtor. The things so lent may be money or any other kind. Yājñavalkya, at first, gives the laws or rules regarding rate of interest to be charged on debts. The rate of interests allowed by Yājñavalkya, differs depending on various factors, such as nature of debt, debtors, purpose, the things lent, etc. Loans are described to be of secured or unsecured as it happens now a days. Yājñavalkya prescribes the rate of interest to be an eightieth part of the principal, per month, in case of a debt, which is secured by pledging or mortgaging something. Otherwise two, three, four or five per cent may be charged as rate of interest every month respectively in order of the varṇas (classes). ^[3] The Mitākṣarā commentary explains that these rates of interest, i.e. two, three, four and five percent are referred to loans without pledge or mortgage.^[4]

There is provision for special rate of interest in some particular cases. Yājñavalkya enumerates that borrowers, who go through a dreary forest should pay ten per cent interest every month and those, who travel by sea, twenty per cent per month.^[5] The Mitākṣarā delineates the reasons, for high rate of interest in such cases very well. Those debtors, who have to traverse risky path involves danger to life and property. Therefore, the creditor is allowed to take these exorbitant rates of interest, for advancing loan to such trader, as there is great danger of loss of the principal amount also.^[6] Yājñavalkya also permits stipulated interest, between debtor and creditor, under the laws on recovery of debt. As a rule, all may pay the rate of interest settled by mutual agreement among all classes.^[7] Special kinds of interest are declared on some chattels. In case of female cattle, being loaned the interest is their progeny. The interest on loans of liquid substances, (such as, oil, clarified butter, etc.) should be eightfold and the interest on loans of cloth, grain and gold should be fourfold, threefold and twofold respectively.^[8] When a debtor of inferior class becomes insolvent and he is unable to pay his debt, then he should be made to work for the satisfaction of his debt. However, a Brāhmaṇa in such situation should be made to pay, as his means permit.^[9]

Both Manu^[10] and Nārada^[11] have mentioned interest to be of four types, viz. kālikā, kāritā, kāyikā and cakravṛddhi. The interest payable by the month is called kālikā. Kāritā interest is stipulated interest, which is promised or fixed willingly by the parties. Interest upon interest is termed as cakravṛddhi. Kāyikā interest is in the form of bodily labour i.e. corporal interest.^[12] According to Nārada, kāyikā interest is different. It is an interest at the rate of one paṇa or quarter of a paṇa payable regularly without diminishing the principal.^[13] It appears that Yājñavalkya’s laws on rate of interest have reference with above-mentioned three kinds of interest, i.e. periodical, stipulated and corporal.

Regarding the process of recovery of debt, Yājñavalkya states that the king should not prevent or blame one, while trying to recover a debt, which is acknowledged, i.e. either admitted by the debtor or proved by means of witnesses etc. If the debtor, while demanding repayment of an admitted debt, goes to the king for complaining against the creditor, then he should be punished and should be compelled to pay the amount to the creditor.^[14] The debtor should be made to pay by the king to himself a tenth portion, recovered from the acknowledged amount. The creditor is also under the obligation to pay five per cent of the amount after recovering his debt.^[15] This law is intended to apply in case of an admitted debt, when the creditor being unable to recover himself, secures through the king. Yājñavalkya seems to have granted free hand immunity to the creditor to recover and acknowledge debt from the debtor.

When a debtor has number of creditors, then according to Yājñavalkya two rules are to be followed, while recovering their debt. If the creditors are of same caste, the debtor should pay according to the order of the receipt. Among the creditors of different castes, the debtor should be ordered to pay the Brāhmaṇa first and then in order of castes.^[16] An interesting law is laid down to safeguard the interest of the debtor from being exploited by a greedy creditor. Where the debt amount has been tendered to the creditor by the debtor, but the former does not accept back, or refuses to accept and the latter deposits the same with a middleman, then the interest stops from that time of deposit.^[17] It is worth mentioning here that the principle incorporated in section 84 of the Transfer of Property Act, 1882, having force at present in India, is almost similar with this provision of Yājñavalkya regarding cessation of interest. Section 84 provides that interest on mortgaged money ceases from the date, on which principal was tendered to the creditor and after his refusal, deposited in the court.^[18]

Yājñavalkya has exhaustively discussed the law, relating to the persons to whom the liability of repayment of debt lays and when such liability arises. A debt, that is incurred by the undivided members for the purpose of the family, generally the head of the family should repay it. In absence of him, i.e. on his death or departure to abroad, the coparceners or members inheriting the property must repay it.^[19] It implies that when the debt is taken for the welfare of family, the liability to repay exists irrespective of the fact whether they remain united or divided. The general rule is that a woman is not liable to repay husband’s or son’s debt, likewise a man is not held responsible to pay the debt of his son or wife, except when that loan is made for the necessities of the family.^[20] In such situation, when the debt is contracted for the benefit or necessities of the family, then the liability arises from the inference of agency or authority. Under section 187 of Indian Contract Act, an example of implied authority is presumed, in favour of wife, to pledge the credit of her husband for domestic matters when certain conditions are satisfied.^[21]

However, an exception to the rule of non-liability of husband for wife’s debt is provided in of the Yājñavalkyasmṛti (2.48), that in case of the debt contracted by the wives of herdsman, liquor manufacturer, dancer, washerman or hunter, their husbands are under obligation to repay it. Another exception holds a woman responsible to pay the debt of her husband, which has been promised by her, which has been incurred by the wife jointly with her husband or which is contracted by herself alone.^[22] Moreover, Yājñavalkya puts forward that in three situations liability to pay the debt of father is binding upon the son and in case of their inability to repay, it should be discharged by the grandsons.

These three conditions when the son and the grandson must pay the debt of father are-

1. after the death of the father,
2. when the father has gone to a distant country,
3. if the father is immersed in difficulties such as by an incurable disease or the like.

When the son or the grandson sets up a denial or there is any dispute about the veracity of the debt that should be established by witnesses, i.e. by any means of proof. ^[23] There arises a doubt regarding the liability of the great-grandson. The Mitākṣarā in two places makes it clear that the liability of the great-grandson is restricted to the ancestral property. The great-grandson is liable to pay his greatgrandfather’s debt, if he has received ancestral property and he is not liable to pay if he does not inherit ancestral property.^[24] Yājñavalkya’s view seems to support that a debt remains payable, till the third generation, which is specifically mentioned in 2.90. Moreover, if there are several sons, who are divided, then the rule is that they should pay father’s debt according to their respective shares. In case of living jointly, the responsibility falls on the manager.^[25]

Even though, sons are under pious obligation to pay the debts of father, one important aspect based on equitable and moral principle is included by Yājñavalkya to this law. The sons cannot be held responsible for illegal and immoral debts of father. The debt incurred by father for the purpose of liquor, lust, gambling, balance of an unpaid fine, toll or gift without consideration, etc., are not binding on his sons.^[26] Thus, Yājñavalkya supports taking and repayments of loan only for moral and legal purpose. Yājñavalkya, as a whole, gives the order of persons, who are made liable to pay the debt of the deceased. The prime responsibility rests on one, who takes or inherits the property. In absence of anyone belonging to such category, the liability is vested on the taker of (debtor’s) wife. Then the son, if the paternal estate has not gone to another is liable. In case of a sonless man, those who take the heritage should be made to pay the debt.^[27]

The laws of debt given by Yājñavalkya have reference to surety. A standard definition of suretyship is given by the Mitākṣarā that it is a contract with another person, with the object of creating confidence or assurance.^[28] Yājñavalkya keeps the provisions of furnishing surety, i.e. the guarantee of a third party to create confidence in the creditor to advance loan. Thus, suretyship requires presence of three parties, viz. the surety, the debtor and the creditor. Yājñavalkya sanctions three kinds of surety, according to the purpose, in case of loan transactions. These are surety for appearance, assurance and for payments. All the three kinds of surety are liable to make good the loss arising from the default. In case of the third kind of surity, the liability to repay even extends to his sons also.^[29] Surety for appearance guarantees to produce the person whenever necessary. Surety for assurance insists to rely on, or believe the person saying that he will not deceive. Surety for payment undertakes to pay the whole amount himself in default of the debtor.^[30] The sons of the first and second kinds of sureties are not bound to repay the money after the death of their father.^[31] If there are several sureties and their share is determined, then they have to repay an amount to the extent of their respective shares. On the contrary, if they have undertaken the liability jointly and severally, then the creditor may recover according to his choice.^[32] The right of a surety is protected in that case when a surety publicly pays on behalf of the debtor to the creditor then the debtor is liable to pay the double the amount that surety has paid.^[33] In case of grain, cloth, liquid substances the surety is entitled to recover from the original debtor threefold, fourfold, and eight-fold, respectively. In case of a female animal, a progeny also becomes payable.^[34] These provisions are in the form of punishment for a debtor so that he does not become negligent, for which the surety has to suffer. Yājñavalkya expressly prohibits or disqualifies suretyship among brothers, between husband and wife, and between son and father. They also cannot give and take loans, appear as witnesses according to law as long as they are undivided.^[35]

A close resemblance is found between the laws regulating surety in the Yājñavalkyasmṛti, and the laws dealing with contracts of guarantee or suretyship in the Indian Contract Act. Section 126 defines surety as the person, who gives the guarantee. Section 128 makes the liability of surety co-extensive with that of the principal debtor. Section 140 and 145 provide that when surety makes the payment of debtor, he gets all legal rights of the creditor for payment against the debtor. Section 146 contains the rules of liability of the sureties when there is more than one.^[36]

Yājñavalkya discusses ādhi and surety as two means to secure a loan from the creditor. The Mitākṣarā defines ādhi to be debt which is deposited i.e. hypothecated by the debtor with the creditor for the purpose of creating confidence in lending the debt.^[37] Yājñavalkya has not differently stated the types of ādhi on the basis of movable or immovable property, and so his rules seem to have included both the classes. He proclaims that if ādhi is not redeemed, that means the property or thing furnished by the debtor to the creditor as surety for repayment of loan is not recovered or get back by making the payment of loan until the principal amount becomes double in course of time with the addition of interest, then it lapses, i.e. the right of the debtor, who is original owner is forfeited. In case of ādhi, with specific time limit, i.e. when a time is fixed for payment of loan, if the time so fixed or appointed passes, failing to do so, then it is lost to the debtor. However, the ādhi with possession for the enjoyment of fruit never lapses.^[38] Here three kinds of ādhi with their right of redemption are set forth. The principle of ādhi is present under modern law as to distinct set of laws, viz. pledge and mortgage. The Indian Contract Act and the Transfer of Property Act govern the laws on pledge and mortgage, respectively. Section 172 of the Indian Contract Act defines pledge to be the bailment of goods as surety for payment of debt or performance of a promise. Section 173 declares pledge is the security for repayment of debt, interest and other necessary expenses incurred on the goods pledged. ^[39] Likewise, mortgage is defined under section 58 of the Transfer of Property Act. When loan is secured against some immovable property of the debtor then it is called mortgage. Ādhi described by Yājñavalkya with specific time limit and one with enjoyment correspond to the English mortgage and usufructuary mortgage defined under section 58(e) and 58(d).^[40]

Yājñavalkya also dwells upon the right of the debtor, which imposes liability on the creditor regarding the thing given as ādhi. Here he refers two kinds of ādhi, one for custody only called gopyādhi and another for possession and use, known as bhogyādhi. When the ādhi, which to be kept only, is used or enjoyed by the creditor then the rule is that he will not be entitled to any interest. Similarly, there will be no interest if ādhi, to be used, is damaged or rendered useless. If the ādhi is destroyed or deteriorated, that means, renders unfit for any transaction then the creditor has to restore it. He will not be liable to restore in case the loss is not caused by the act or negligence of creditor, but due to the act of god or the king.^[41] The gopyādhi, mentioned here, bears similarity with the simple mortgage of Transfer of Property Act. One important point may be observed here that Yājñavalkya, at an early stage, recognized the act of god or the king as valid defence, which are considered important defence under law of torts in India even today as act of god i.e. working of natural forces and act of state.^[42]

The rights of the creditor, which, in turn, disclose the liabilities of debtor over the ādhi, have been given that if it suffers deterioration or injury to become insufficient as security, even though the proper care is taken, then another adequate must be substituted or the creditor should get back the amount due to him. A new rule is given in addition that ādhi can be established only when its acceptance is proved.^[43] Yājñavalkya describes the existence of two special kinds of ādhi called caritrabandhaka and satyaṅkāra respectively. In case of the first kind, the debtor should be caused to pay the loan with interest and in case of second kind, he has to pay double the amount.^[44] This rule purports that there is no loss or forfeiture of ādhi in any case even though the amount is double.^[45] The creditor remains under obligation to restore the ādhi to the debtor when latter comes to redeem it, otherwise, he will be deemed to commit the offence of theft. It is further laid down that when the creditor is not present, either dead or gone abroad, the debtor is entitled to take back it by paying the amount to his family. The ascertained amount being tendered by the debtor with a view to redeeming the ādhi, the creditor will not receive any interest from that time though it remains with him.^[46] Moreover, in case of a debt secured through ādhi, when double the principal amount has been received from the profits, then ādhi is to be released or returned.^[47] These rules are based on equity. The main purpose is to protect the interest of debtors, so that the lender taking advantage of the depressed position of him cannot hold on the property absolutely after the repayment of the loan. These provisions of Yājñavalkyasmṛti, concerning the right and liabilities of the debtor and creditor, show marking similarities with those conditions, conferred on the mortgagor and mortgagee under sections 60 to 66, and sections 67 to 77, of the Transfer of Property Act.^[48]

Footnotes and references:

[1]:

cf., Kane, P.V., History of Dharmaśāstra, Volume3, page414

[2]:

tacca ṛṇādānaṃ saptavidham/ īdṛśamṛṇaṃ deyaṃ, īdṛśamṛṇadeyaṃ, anenādhikāriṇā deyaṃ, asmin samaye deyaṃ, anena prakāreṇa deyamityadhamarṇe pañcavidham/ uttamarṇe dānavidhiḥ ādānavidhiśceti dvividhamiti/ Mitākṣarā on Yājñavalkyasmṛti, 2.37

[3]:

aśītibhāgo vṛddhiḥ syānmāsi māsi sabandhake/ varṇakramācchataṃ dvitricatuḥpañcakamanyathā// Yājñavalkyasmṛti, 2.37

[4]:

anyathā bandhakarahite prayoge…/ Mitākṣarā, Ibid.

[5]:

kāntāragāstu daśakaṃ sāmudrā viṃśakaṃ śatam/ Yājñavalkyasmṛti, 2.38

[6]:

ye vṛddhyā dhanaṃ gṛhītvādhikalābhārthamatigahanaṃ prāṇadhanavināśaśaṅkāsthānaṃ praviśati te daśakaṃ śataṃ dadyuḥ/…ādadyānmūlavināśasyāpi śaṅkitatvāditi/ Mitākṣarā, Ibid

[7]:

dadyurvā svakṛtaṃ vṛddhiṃ sarve sarvāsu jātiṣu/ Yājñavalkyasmṛti, 2.38

[8]:

santatistu paśustrīṇāṃ rasasyāṣtaguṇā parā/ vastradhānyahiraṇyānāṃ catustridviguṇā parā// Ibid., 2.39

[9]:

hīnajātiṃ parikṣīṇamṛṇāthaṃ karma kārayet/ brāhmaṇastu parikṣīṇaḥ śanirdāpyo yathodayam// Ibid., 2.43

[10]:

nātisāṃvatsarīṃ vṛddhiṃ na cādṛṣṭāṃ vinirharet// cakravṛddhiḥ kālavṛddhiḥ kāritā kāyikā ca yā// Manusmṛti, 8.153

[11]:

kālikā kāritā caivaṃ kāyikā ca tathā parā/ cakravṛddhiśca śaste’smin vṛddhidṛṣṭā caturvidhā// Nāradasmṛti, 4.1.102

[12]:

Vide, Mitākṣarā on Yājñavalkyasmṛti, 2.37; Medhātithi on Manusmṛti, 8.153

[13]:

Nāradasmṛti, 4.1. 104

[14]:

prapannaṃ sādhayannarthaṃ na vācyo nṛpaterbhavet/ sādhyamāno nṛpaṃ gaccheddaṇḍyo dāpyaśca taddhanam// Yājñavalkyasmṛti, 2.40

[15]:

rājñādhamarṇiko dāpyaḥ sādhitāddaśakaṃ śatam/ pañcakaṃ ca śataṃ dāpyaḥ prāptārtho hyuttamarṇikaḥ// Ibid., 2.42

[16]:

Ibid., 2.41

[17]:

dīyamānaṃ tu gṛhṇāti prayuktaṃ yaḥ svakaṃ dhanam/ madhyasthasthāpitaṃ cetsyādvardhate na tataḥ param// Ibid., 2.44

[18]:

Vide., Sinha, R. K., The Transfer of Property Act, P. 385

[19]:

avibhaktaiḥ kuṭumbārthe yadṛṇaṃ tu kṛtaṃ bhavet/ dadyustadrikthinaḥ prete proṣite vā kutumvini// Yājñavalkyasmṛti, 2.45

[20]:

na yoṣitpatiputrābhyāṃ na putreṇa kṛtaṃ pitā/ dadyādṛte kutumbārthānna patiḥ strīkṛtaṃ yathā// Ibid., 2.46

[21]:

Kapoor, S.K., Contract-II, page96

[22]:

pratipannaṃ strīyā deyaṃ patyā vā saha yatkṛtam/ svayaṃ kṛtaṃ vā yadṛṇaṃ nānyatstrī dātumarhati// Yājñavalkyasmṛti, 2.49

[23]:

pitari proṣite prete vyasanābhiplute’pi vā/ putrapautrairṛṇaṃ deyaṃ nihnave sākṣibhāvitam// Ibid., 2.50

[24]:

Mitākṣarā, Ibid., 2.50, 51

[25]:

putraputrerti bahuvacananirdeśādbahahavaḥ putrā yadi vibhaktāḥ svāṃśānurūpeṇa ṛṇaṃ dadyuḥ/ avibhaktāścetsaṃbhūyasamutthānena guṇapradhānabhāvena vartamānānāṃ pradhānabhūta vā dadyāditi gamyate/ Ibid., 2.50

[26]:

surākāmadyūtakṛtaṃ daṇḍaśulkāvaśiṣṭakam/ vṛthādānaṃ tathaiveha putro dadyānna paitṛkam// Yājñavalkyasmṛti, 2.47

[27]:

rikthagrāha ṛṇaṃ dāpyo yoṣidgrāhastathaiva ca/ putro’nanyāśritadravyaḥ putrahīnasya rikthinaḥ// Ibid.,2.51

[28]:

prātibhāvyaṃnāma viśvāsārthaṃ puruṣāntareṇa saha samayaḥ/ Mitākṣarā,Ibid.,2.53

[29]:

darśane pratyaye dāne prātibhāvyaṃ vidhīyate/ ādyau tu vitathe dāpyāvitarasya sutā api// Yājñavalkyasmṛti,2.53

[30]:

Mitākṣarā, Ibid.

[31]:

darśanaprītabhūryatra mṛtaḥ prātyayiko’pi vā/ na tatputrā ṛṇaṃ dadyurdadyurdānāya yaḥ sthitaḥ// Yājñavalkyasmṛti,2.54

[32]:

bahavaḥ syuryadi svāṃśairdadyuḥ pratibhuvo dhanam/ ekacchāyāśritaṣveṣu dhanikasya yathāruci// Ibid.,2.55

[33]:

pratibhūrdāpito yattu prakāśaṃ dhanino dhanam/ dviguṇaṃ pratidātavyamṛṇikaistasya tadbhavet// Ibid.,2.56

[34]:

saṃtatiḥ strīpaśuṣveva dhānyaṃ triguṇameva ca/ vastraṃ caturguṇaṃ proktaṃ rasaścāṣṭaguṇastathā// Ibid.,2.57

[35]:

bhrātṛṇāmatha dampatyoḥ pituḥ putrasya caiva hi/ prātibhāvyamṛṇaṃ sākṣyamavibhakte na tu smṛtam// Ibid.,2.52

[36]:

Vide, Kapoor, S.K., Op.cit., page7, 14, 36, 38, 39

[37]:

ādhirnāma gṛhītasya dravyasyopari viśvāsārthamadhamarṇenottamarṇo’dhikriyate ādhīyata ityādhiḥ/ Mitākṣarā,Yājñavalkyasmṛti,2.58

[38]:

ādhiḥ praṇaśyeddviguṇe dhane yadi na mokṣyate/ kāle kālakṛto naśyetphalabhogyo na naśyati// Yājñavalkyasmṛti,2.58

[39]:

Kapoor, S.K., Op.cit., pages 70,75

[40]:

Sinha, R.K., Op.cit., page 63-64

[41]:

gopyādhibhoge no vṛddhiḥ sopakāre a hāpite/ naṣṭo deyo vinaṣṭaśca daivarājakṛtādṛte// Yājñavalkyasmṛti,2.59

[42]:

Vide, Bangia, R, K., Law of Torts, p 54, 62

[43]:

ādheḥ svīkaraṇātsiddhī rakṣyamāṇo’pyasāratām/ yātaścedanya ādheyo dhanabhāgvā dhanī bhavet// Yājñavalkyasmṛti,2.60

[44]:

caritravendhakakṛtaṃ sabṛddhyā dāpayeddhanam/ satyaṃkārakṛtaṃ dravyaṃ driguṇaṃ pratidāpayet// Ibid.,2.61

[45]:

ayamāśayaḥ-evaṃrūpaṃ bandhakaṃ dviguṇībhūte’pi dravye na naśyati kiṃtu dravyameva dviguṇaṃ dātavyamiti/ Mitākṣarā,Ibid.

[46]:

Yājñavalkyasmṛti,2.62-63

[47]:

yadā tu dviguṇībhūtamṛṇamādhau tadā khalu/ macya ādhistadutpanne praviṣṭe dviguṇe dhane// Ibid.,2.64

[48]:

Vide, Sinha R. K., Op.cit., p293-369