Case: Meghraj &amp; Ors Vs. Mst. Bayabai &amp; Ors

1. Seth Haroon and Sons a firm had ten partners. The Hindu undivided family of Jethmal Ramkaran mortgaged a house belonging to it to Seth Haroon and Sons to secure repayment of Rs.40,000 due at the foot of an account. Seth Haroon and Sons filed suit No. 12-A of 1936 for recovery of their dues by sale of the mortgaged house. On December 28, 1940, a decree was passed in the suit by the Additional District Judge. The case was carried in appeal to the High Court of Nagpur. But the appeal was dismissed subject to a slight modification to be presently noticed. An appeal was carried against the decree to this Court. During the pendency of the appeal to this Court, nine out of ten members of Seth Haroon and Sons migrated to Pakistan and were declared evacuees. By an order passed by this Court on March 28, 1958, the Custodian of Evacuee Property was impleaded as a party respondent in the appeal filed by the mortgagors. This Court dismissed the appeal on August 8, 1958. Thereafter the 6th plaintiff Mohammad Ayyub - the only member of the firm who had not migrated - for himself and as agent of the evacuees under a general power of attorney applied for a decree absolute for sale. The Custodian of Evacuee Property resisted the application filed by Mohammad Ayyub. Ultimately by the order passed by the High Court of Bombay the Custodian of Evacuee Property was joined as a party to the application. The Court however observed that the respective rights of the Custodian of Evacuee Property and the partners of Seth Haroon and Sons were not decided in that proceeding.2. Diverse contentions were raised by the mortgagors; they contended, inter alia that on proper account being taken nothing was due by them on the mortgage, that interest was wrongly calculated at the rate of 4 per cent per annum, that the claim for recovery of costs was barred by the law of limitation and that interest could not be awarded on costs. The learned Trial Judge substantially rejected the contention raised by the mortgagors and passed a decree for Rs.34,612.81 being the aggregate of Rs.33,866.51 as principal and Rs.746.30 as interest. An appeal filed against that order was summarily dismissed by the High Court. With special leave, this appeal is preferred by the mortgagors.

Court's reasoning:
4. Under the preliminary decree an amount of Rs.42,430-2-6 was declared due upto June 23, 1941 towards principal and interest. The mortgagors made no payments under the decree directly to the mortgagees.But from time to time they claim to have made deposits in the Court under Order 21, Rule 1 of the Code of Civil Procedure, and in depositing some of the amounts they stated that the payments were towards the principal due. But there is no evidence on the record that the mortgagees were informed that the amounts were deposited towards the principal due, nor is there evidence that the mortgagees accepted the amounts towards the principal. For quite a long time the mortgagees did not withdraw the amount lying in Court. Unless the mortgagees were informed that the mortgagors had deposited the amount only towards the principal and not towards the interest, and the mortgagees agreed to withdraw the money from the Court accepting the conditional deposit, the normal rule that the amounts deposited in Court should first be applied towards satisfaction of the interest and costs and thereafter towards the principal wouldthe normal rule is that in the case of a debt due with interest any payment made by the debtor is in the first instance to be applied towards satisfaction of interest and thereafter to the principal. It was for the mortgagors to plead and prove an agreement - that the amounts which were deposited in Court by the mortgagors were accepted by the mortgagees subject to a condition imposed by the mortgagors In the present case there is no evidence which supports the contention raised by counsel for thethe account submitted by the mortgagees shows clearly that they had given credit for the amounts deposited towards the interest and costs in the first instance and the balance only towards the principal. The account submitted by the mortgagees clearly negatives the plea of theis no substance in that contentionthe decree drawn up by the High Court was not consistent with the directions given in the judgment, and an application was made to rectify certain mistakes in the decree. One of the grounds urged in support of the application was that interest should have been computed only on the principal out of the total of Rs.35,299-1-6. The Court rejected the application holding that the Trial Court had decreed the claim of the mortgagees and that interest was payable on Rupees 35,299-1-6 and the High Court had confirmed the decree holding that the amount of Rs.35,299-1-6 was principal. The High Court observed that it was not relevant to consider whether that decision was right, because there was no application review of judgment. They then directed that "the interest will accordingly be calculated on Rs.35,299-1-6 at 3 per cent from October 5, 1936 till August 11, 1941 and at 4 per cent from August 12, 1941 till November 10, 1946. This comes to Rs.50,810-4-6. The decree will be amended accordingly." Relying upon this direction, counsel for the appellants contended that the High Court by order dated March 31, 1947, restored for the period after November 10, 1946, the rate of interest as originally awarded by the Court of First Instance. We are unable to hold that the direction is capable of that interpretation. By directing that interest at the rate of 4 per cent from August 12, 1941 to November 10, 1946 shall be calculated on Rs.35,299-1-6, it was not, and could not be, intended by the High Court that interest after November 10, 1946, was to be awarded only at the rate of 3 per cent. No such application was made by the debtors. It was apparently contended that the amount of Rs.35,299-1-6 as claimed by the plaintiffs in the original suit included interest, and interest could be computed on the amount which formed the principal. The High Court, in view of the decree passed by the Trial Court and confirmed by it, declined to enter into that controversy and indicated the manner in which the interest was to be calculated between October 5, 1936 and November 10, 1946. The High Court did not reduce the rate of interest for the period after November 10, 1946, i. e, the date fixed for redemption of mortgage under the decree of the Highcontention is futile. The Court is concerned at this stage to pass a decree absolute for sale in a mortgage suit. It is not concerned to determine the respective rights of the mortgagees inter se. The mortgagees interest is fully represented before the Court. Whether or not the Custodian of evacuee Property is entitled to the money or that the evacuees have a subsisting interest is a matter which cannot be decided in this appeal. That was made clear by the judgment of the High Court in the application filed by the Custodian of Evacuee Property by order dated November 12, 1962,