Appeal No 102 of 1964
Appeal by special leave from the judgment and order dated July 30 1962 of the Punjab High Court Circuit Bench at Delhi in Civil Writ No 402 D of 1962
D Goburdhan for the appellants
section G Patwardhan and B R G K Achar for the respondents
The Judgment of the Court was delivered by Wanchoo J
The only question raised in this appeal by special leave from the judgment of the Punjab High Court is the interpretation of section 9 1 of the Evacuee Interest Separation Act No LXIV of 1951 hereinafter referred to as the Act
The question arises in this way
The appellants were mortgagees of certain properties including a house on the basis of a mortgage bond dated July 19 1928
The consideration of the bond was Rs 25000 and interest was provided at nine per cent per annum compoundable annually
Out of the properties covered by the bond one of the properties was sold to Bibi Chand Tara on October 23 1937 subject to the earlier mortgage of 1928
In October 1949 Bibi Chand Tara was declared an evacuee
In 1939 the appellant filed a suit against the orignal mortgagors and others including Bibi Chand Tara for the amount due under the mortgage
A preliminary decree was passed in their favour in March 1942 and the final decree followed in April 1945
It appears that certain sums were received by the appellants before they had filed the suit
Certain other sums were also received after the preliminary and final decrees
It further appears that certain Zamindari properties which were also included in the mortgage had been sold after the final decree and the money appropriated towards the decree
Another house which was also included in the mortgage bond was sold later and the sale money was again appropriated towards the decree
Eventually the appellants put the decree in execution in November 1952 against the house in dispute for a sum of Rs 60000 and odd
There was a sale in that execution proceeding but it was set aside on the application of the Assistant Custodian Patna
Thereafter the appellants made an application before the Assistant Custodian for the recovery of the mortgage money claimed by them
and in this application their claim was for Rs 40000 and
This application was also dismissed as it was filed before a wrong authority
Eventually the
appellants filed a claim for the same
amount before the Competent Officer under the Act inasmuch As the property in dispute was composite property in Which the evacuee had mortgagor s interest while the appellants who are non evacuee s had mortgagees  interest which had ripened into a decree for sale
This application was resisted by the Custodian on a number of grounds
In the present appeal we are only
57 concerned with one ground based on section 9 1 of the Act
 The contention of the Custodian was that the appellants were not entitled to any interest higher than five per cent per annum simple from the date of the mortgage under section 9 1 of the Act
Therefore the Custodian claimed that the entire transaction should be reopened from the date of the mortgage and the amounts already received by the appellants should be taken into account after allowing interest at five per cent per annum simple to them and if more interest had been paid that should be credited towards the principal and after such accounting the sum if any due on the mortgage could be claimed by the appellants
The Competent Officer held that though the provisions of section 9 1 were retrospective to a certain extent they could not be stretched to mean that if a mortgagee had already realised interest at a rate exceeding five per centum Per annum simple even before the Act came into force the excess would go to liquidate the principal amount proportionately
He therefore held that in the absence of special provision to the effect that past accounts should be reopened the amount received as interest prior to the decree could not be taken into account
The Competent Officer further held that the principal money could not be reduced on account of any excess realisation of interest when such excess was realised before the Act came into force
He therefore ordered that 1 the amount of interest exceeding five per cent per annum before the institution of the suit would not reduce the principal amount 2 the appellants would be entitled to simple interest at six Per cent per annum ie the rate at which interest was decreed in their favour in the mortgage suit from the date of the institution of the suit till November 26 1952 on the principal sum only 3 the appellants would be entitled to interest at five per cent per annum simple from November 27 1952 and 4 the appellants would also be entitled to costs of the suit decreed in their favour
The actual amount due was ordered to be worked out on these principles
The Custodian took the matter in appeal to the Appellate Officer
The Appellate Officer held that on the words of section 9 1 the entire account must be made afresh on the basis of interest being allowed at five per cent per annum simple on the principal amount from   the date of the
mortgage and that any sums received over above this would go to reduce the principal
He therefore allowed the appeal and set aside the order of the Competent Officer and ordered account to be taken in the manner indicated by him
The appellantsthen applied to the punjab High Court by a writ petition which was dismissed in limine
Their application for a leave to Appeal to this Court was also dismissed
Thereafter they obtained special leave from this Court and that is how the matter has come before us LS5SCI 6 58 The Act deals with separation of the interest of an evacuee from the interest of a non evacuee in composite properties
Under section 2 d composite property inter alia means any property which or any property in which an interest has been declared to be evacuee property and in which the interest of the evacuee is subject to mortgage in any form in favour of a person not being an evacuee
Under section 2 h principal money in relation to a mortgage deed executed by an evacuee inter alia means in the case of mort gage deed which has not been executed by way of renewal of a prior mortgage deed the sum of money advanced by way of loan at the time of the execution of the mortgage deed
Under section 3 the Act and the rules and orders made thereunder have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any such law save as otherwise expressly provided in the Act
Sections 4 to 8 provide for machinery for separation of the claims of evacuees and non evacuees in composite properties
Then we come to section 91 which is in these terms 1 Notwithstanding anything to the contrary in any law or contract or any decree or order of a civil court or other authority where the claim is made by a mortgagee no mortgaged property of an evacuee shall subject to the provisions of subsection 2 be liable for the payment of interest at a rate exceeding five per cent per annum simple on the principal money advanced or deemed to have been advanced
 It is unnecessary to refer to section 92 for we are not concerned with that provision in the present appeal
We may however refer to section 83 which is material and in these terms 3 If there is any dispute as to whether a liability is a mortgage debt or not or whether any claim submitted under section 7 exists the Competent Officer shall decide such dispute  Provided that a decree of a civil court other than an ex parte decree passed after the 14th day of August 1947 shall subject to the provisions of sections 9 and 10 be binding on the Competent Officer in respect of any matter which has been finally decided by such decree  and where any matter was decided by an ex parte decree passed by a civil court after the 14th day of August 1947 the Competent Officer may decide such matter afresh and on such decision being made the ex parte decree shall be deemed to have no effect 59 Section 10 provides for separation of the interest of evacuee from the interest of claimants in composite properties and lays down how that will be done
Clause b specially provides for the manner in which the claim of a mortgagee will be dealt with by the Competent Officer but we are not concerned with the details of that provision
It will be seen from a consideration of these provisions that the Competent Officer is bound by the decree of a civil court except an ex parte decree passed after August 14 1947 in respect of a mortgage subject to the provisions of sections 9 and 10
Section 10 indicates how the Competent Officer is to separate the interest of an evacuee from the interest of a non evacuee even in the case of a decree except an ex parte decree passed after August 14 1947
Section 91 provides for interest at five per cent per annum simple and the decree in a mortgage suit except an ex parte decree passed after August 14 1947 which is otherwise binding on the Competent Officer is subject to the provisions of section 91 as to interest
It will also be noticed that there is no provision in the Act which specifically provides for reopening of transactions relating to mortgage and taking accounts from the date of the mortgage on the basis of interest provided in section 91 and for crediting anything paid as interest over and above the rate provided in section 91 to wards principal
Prima facie therefore in the absence of such a provision it cannot be assumed that the legislature intended that a mortgage transaction should be reopened from the date of the mortgage and accounts taken afresh and anything paid in excess of five per cent per annum simple interest applied towards reduction of the principal amount
We have therefore to see whether there is anything in the words of section 91 which leads to this result in the absence of a specific provision to that effect in the Act
Section 91 begins with a non obstante clause and lays down that it will apply notwithstanding anything to the contrary in any law or contract or any decree or order of a civil court or other authority
It then provides that where a claim is made by a mortgagee as in the present case no mortgaged property of an evacuee shall be liable for the payment of interest at a rate exceeding five per cent per annum simple on the principal money advanced
The key words in the provision are no mortgaged property shall be liable
These words indicate that the Competent Officer when he comes to deal with a liability under a mortgage must calculate this liability on the basis that interest should be allowed only on the principal amount and only at the rate of five per cent per annum simple
 The liability which the Competent Officer has to determine is with respect to the amount still due to the non evacuee
Further as the non obstante clause includes any decree of a civil court and as such decree is subject to section 91 in view of the proviso to section 83 the Competent Officer would not be bound by the calculation of interest made by the civil court and would have to determine the 60 liability still due on the mortgage himself on the basis of simple interest at the rate of five per cent per annum on the principal sum advanced
Any calculation made by the civil court in arriving at the sum decreed by it on the basis of interest at more than five per cent per annum so far as the liability still due is concerned would not be binding on the Competent Officer and he will have to make his own calculations on the basis of simple interest at the rate of five per cent per annum
Similarly in a case where there is no decree and there is still some liability on the mortgage the Competent Officer would not be bound by the rate of interest mentioned in the mortgage deed and will calculate the liability still due on the basis of simple interest at the rate of five per cent per annum on the principal amount advanced
But section 91 clearly shows that it applies only where the liability is still due and there is nothing in the words of section 91 which gives power to the Competent Officer to reopen the account under the mortgage from the date of the mortgage and for that purpose treat anything paid as interest under the contract over and above five per cent per annum simple interest as payment towards reduction of the principal amount Section 91 in our opinion only deals with liability still due and does not contemplate that any payments made already under the contract as interest should be taken partly towards interest and partly towards principal if they are above five per cent per annum simple interest
As section 91 speaks only of the liability of the mortgaged property it can only take in liability still due for whatever has been paid in accordance with the contract towards interest is no longer a liability
This conclusion based on the words of section 91 is enforced by the fact that there is no specific provision in the Act for reopening all accounts under the mortgage from the date of the mortgage treating any interest paid already at a rate higher than five per cent per annum simple as going towards reduction of the principal sum
Two situations may arise before the Competent Officer in such circumstances when calculating the liability under a mortgage
In one case there may be no decree already passed in favour of the mortgagee
In such a case in calculating the liability still due on the mortgage the Competent Officer will calculate that liability on the basis of simple interest at the rate of five per cent per annum on the principal money advanced and may ignore the rate of interest mentioned in the contract
But even so the words of section 91 do not give him power to reopen the accounts and what ever has been paid towards interest if it is not in excess of the contractual rate of interest though it may be in excess of the rate of five per cent per annum simple interest cannot be taken into account in reducing the principal amount
But whatever is still due under the mortgage will have to be worked out on the basis of simple interest at the rate of five per cent per annum on the prin cipal amount advanced
We may illustrate this by an example 61 Suppose a mortgage was entered into on January 1 1949 and the interest therein is nine per cent per annum
Suppose that interest for the years 1949 and 1950 has been paid at the contractual rate but nothing has been paid thereafter
in such a case the amount paid in excess of five per cent per annum for 1949 and 1950 will not go to reduce the principal but thereafter interest will be calculated at five per cent per annum to arrive at the liability on the mortgaged property or what is still due
The second case which may arise before the Competent Officer would be a case where a decree has been passed on the mort gage bond except an ex parte decree passed after August 14 1947
In such a case also the Competent Officer cannot take into account anything paid in excess of five per cent per annum simple interest before the date of the suit provided it is not at more than the contractual rate but as the decree is subject to section 91 the Competent Officer will have to calculate interest at five per cent per annum simple from the date of the suit and cannot award more interest in calculating the liability still due under the mortgage
Of course in both the cases if before the suit nothing has been paid towards interest or if something has been paid but it is less than five per cent per annum simple interest on the principal amount advanced
the Competent Officer in calculating the liability still due on the mortgage will have to allow five per cent per annum simple interest from the date of the mortgage to make up the deficiency if any
As we read section 91 we find no provision in it for reopening the account from the very beginning and utilising any interest paid in excess of five per cent per annum simple but within the contractual rate towards reducing the principal amount
Section 91 only deals with the liability of the mortgaged property which may still be due when the claim is made before the Competent Officer
Though the provision is retrospective in the sense that where the liability is still there interest has to be calculated at five per cent per annum simple there is nothing in the words of section 91 which authorises the reopening of accounts and utilising the excess over five per cent per annum towards reduction of principal provided the payment of interest already made is within the contractual rate
In this view the order of the Appellate Officer by which he ordered the reopening of the accounts and which was upheld by the High Court is incorrect
At the same time we are of opinion that the order of the Competent Officer is also not quite correct though it is more in accord with the interpretation of section 91 which we have indicated above
On the view we have taken the liability will be calculated thus Any amount paid before the date of the suit ie December 11 1939 provided it is not more than the contractual rate of interest though it may be above five per cent per annum simple will not go to reduce the principal amount
From the date of the suit till the date of the final decree ie April 25
62 1945 the appellants will only be entitled to simple interest at the rate of five per cent per annum on the principal amount advanced for the decree though binding on the Competent Officer is subject under the proviso to section 8 3 to section 9 1
Further from the date of the final decree also the appellants will be entitled to simple interest at the rate of five per cent per annum on the principal amount only
Any payments made after the date of the suit will be adjusted first towards interest at the  rate of five per cent per annum simple and any payment made in excess thereof will go to reduce the principal
The appellants will also be entitled to the costs of the suit which was decreed in their favour but there will be no interest on such costs
The account will be made up accordingly to determine the liability due under the mortgage
Thereafter it will be for the Competent Officer to deal with the matter as provided under section 10b or c
We therefore allow the appeal
The writ petition is allowed and the order of the Appellate Officer is set aside and the order of the Competent Officer varied in the manner indicated above
The appellants will get their costs from the Custodian Evacuee Property
Appeal allowed


Summary:
The appellants were mortgagees of properties including a house on the basis of a mortgage bond executed in 1928
The interest provided in the bond was 9  per annum compoundable annually
In 1937 the house above referred to was sold to B subject to the earlier mortgage
In 1939 the appellants filed a suit against the original mortgagors and others including B for the amount due under the mortgage
Certain amounts towards the discharge of the liability under the mortgage were received by the appellants before as well as after the filing of the suit
A preliminary decree was passed in favour of the appellants in 1942 and the final decree in 1945
In 1949 B was declared an evacuee
When in 1952 the appellants put their decree in execution the property was treated as composite property and the Custodian of Evacuee Property contended before the Competent Officer that the appellants were not entitled to any interest higher than five per cent per annum simple from the date of the mortgage under section 91 of the Evacuee Interest Separation Act 64 of 1951
The Custodian accordingly claimed that the entire transaction should be rib opened from the date of the mortgage and if more than five per cent simple interest had been received by the appellants the excess should be credited towards the principal amount
The Competent Officer held that the limit of five per cent could not apply before the Act came into force
The Appellate Officer however upheld the contention of the Custodian
The appellants thereupon filed a writ petition in the High Court which was dismissed in limine
By special leave they appealed to this Court
HELDSection 91 only deals with the liability of the mortgaged property which may still be due when the claim is made before the competent officer
Though the provision is retrospective in the sense that where the liability is still there interest has to be calculated at five per cent per annum simple there is nothing in the Words of section 91 which authorises the reopening of the accounts and utilising the excess over five per cent per annum simple
towards reduction of principal provided the payment of interest al ready made in within the contractual rate
61 F On the above view the maximum rite of interest laid down in s1 was not applicable before the date of the suit
But under section 83 the decree of the Court was subject
to section 9 and therefore after the date of the suit the said rate was applicable
Directions given accordingly 61 H LS5SCI 6 56