Case: Bhrigunandan Prasad And Ors Vs. The Appellate Officer &amp; Ors

is no longer a liability. This conclusion based on the words of S. 9 (1) 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. 11. 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 S. 9 (1) do not give him power to reopen the accounts and whatever has been paid towards interest, if it is not in excess of the contractual rate or 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 principal amount advanced. We may illustrate this by an example. 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 for what is still due. 12. The second case which may arise before the Competent Officer would be a case where a decree has been passed on the mortgage 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 S. 9 (1), 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 S. 9 (1), 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 9 (1) 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 S. 9 (1) 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. 13. 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 S. 9 (1) 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 i.e., 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, i.e., April 25, 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 S. 8 (3), to S. 9 (1). Further from the date of the final decree also to 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 there mortgage. Thereafter it will be for the Competent Officer to deal with the matter as provided under s. 10 (b) or (c).

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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 S. 9 (1) and for crediting anything paid as interest over and above the rate provided in S. 9 (1) towards principal. Prime 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 S. 9 (1) which leads to this result in the absence of specific provision to that effect in the ActSimilarly 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 S. 9 (1) clearly shows that it applies only where the liability is still due and there is nothing in the words of S. 9 (1) 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. S. 9 (1) in our opinion only deals with liability still due and does not contemplate that any payments (sic) mortgaged property it can only take in liability still due, for whatever has interest and partly towards principal if they are above five per cent per annum simple interest. As S. 9(1) 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 S. 9 (1) 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 sum11. 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 S. 9 (1) do not give him power to reopen the accounts and whatever has been paid towards interest, if it is not in excess of the contractual rate or 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 principal amount advanced. We may illustrate this by an example. 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 for what is still due12. The second case which may arise before the Competent Officer would be a case where a decree has been passed on the mortgage 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 S. 9 (1), 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 S. 9 (1), 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 9 (1) 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 S. 9 (1) 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 rate13. 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 S. 9 (1) 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 i.e., 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, i.e., April 25, 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 S. 8 (3), to S. 9 (1). Further from the date of the final decree also to 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 there mortgage. Thereafter it will be for the Competent Officer to deal with the matter as provided under s. 10 (b) or (c)S. 9 (1) of the Evacuee Interest (Separation) Act, No. LXIV of 195110. Section 9(1) begin with a non obstanate 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. Further as the non obstanate clause includes any decree of a civil Court and as such decree is subject to S. 9 (1) in view of the proviso to S 8 (3), the Competent Officer would not be bound by the calculation of interest made by the civil Court and would have to determine the 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 S. 9 (1) clearly shows that it applies only where the liability is still due and there is nothing in the words of S. 9 (1) 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. S. 9 (1) in our opinion only deals with liability still due and does not contemplate that any payments (sic) mortgaged property it can only take in liability still due, for whatever has interest and partly towards principal if they are above five per cent per annum simple interest. As S. 9(1) 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 S. 9 (1) 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