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Maghraj Vs. Mst. Bayabai - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai High Court
Decided On
Case Number Civil Appeal No. 608 of 1966
Judge
Reported in(1970)72BOMLR434
AppellantMaghraj
RespondentMst. Bayabai
Excerpt:
.....in the case of a mortgage debt, it is for the mortgagors to plead and prove an agreement that the amounts deposited by the mortgagor in court were accepted by the mortgagee subject to a condition imposed by the mortgagor. therefore unless the mortgagee is informed that the mortgagor had deposited the amount only towards the principal and not towards the interest, and the mortgagee agrees to withdraw the money from the court accepting the conditional deposit, the normal rule would apply. venkatadri appa row v. parthasarathi appa row (1921) l.r. 48 i.a. 150 : s.c. 23 bom. l.r. 644 referred to. - - 3. counsel for the mortgagors contended that on a proper account of the monies paid by them in satisfaction of the dues under the mortgage decree, the mortgage was satisfied and the mortgagees..........that from time to time payments were made by the mortgagors with specific directions that the amounts paid were to be credited towards the principal and not towards interest and if the amounts so paid were in the first instance credited towards the principal, it would be found that the mortgage dues had been overpaid. now, the learned trial judge observed that exhs. 44 to 55 relied upon by the mortgagors were silent as to any specific directions that the amounts paid in court were to be appropriated only towards the principal. counsel for the appellant has invited our attention to certain applications made at the time of making deposits in court, in which it was recited that the amounts were being deposited towards the principal. relying upon these recitals it was urged that the.....
Judgment:

J.C. Shah, J.

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 plaintiff No. 6 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 contentions 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.

3. Counsel for the mortgagors contended that on a proper account of the monies paid by them in satisfaction of the dues under the mortgage decree, the mortgage was satisfied and the mortgagees were overpaid. Counsel contended that from time to time payments were made by the mortgagors with specific directions that the amounts paid were to be credited towards the principal and not towards interest and if the amounts so paid were in the first instance credited towards the principal, it would be found that the mortgage dues had been overpaid. Now, the learned trial Judge observed that exhs. 44 to 55 relied upon by the mortgagors were silent as to any specific directions that the amounts paid in Court were to be appropriated only towards the principal. Counsel for the appellant has invited our attention to certain applications made at the time of making deposits in Court, in which it was recited that the amounts were being deposited towards the principal. Relying upon these recitals it was urged that the trial Court was in error in holding that there were no directions for appropriation of payments towards the principal. We have not thought it necessary to ascertain the total number of applications in which recitals were made by the mortgagors at the time of making part payments towards the principal, because on the view we take, these recitals, without more, do not assist the claim of the mortgagors.

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 O.XXI, 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 would apply.

5. In Venhatadri Appa Row v. Parthasarathi Appa Row the Judicial Committee of the Privy Council observed that upon taking an account of principal and interest due, the ordinary rule with regard to payments by the debtor unappropriated either to principal or interest is that they are first to be applied to the discharge of interest. Lord Buckmaster delivering the judgment of the Board observed (p. 153) :.There is a debt due that carries interest. There are moneys that are received without a definite appropriation on the one side or on the other, and the rule which is well established in ordinary cases is that in those circumstances the money is first applied in payment of interest and then when that is satisfied in payment of the capital. That rule is referred to by Rigby L.J. in the case of Parr's Banking Co. v. Yates [1898] 2 Q.B. 460 in these words : 'The defendant's counsel relied on the old rule that does, no doubt, apply to many cases, namely, that, where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable, is only common justice. To apply the sums paid to principal where interest has accrued upon the debt, and is not paid, would be depriving the creditor of the benefit to which he is entitled under his contract.

6. Counsel for the appellant contended that in Venhatadri Appa Row's case there was no specific appropriation by the debtor, whereas in the present case there is specific direction by the debtor. But the 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 the appellant.

7. Counsel urged that, in any event, when an account was finally submitted by the mortgagees they were aware of the fact that certain amounts were paid in Court and they knew that those amounts were paid conditionally and when the mortgagees withdrew the amounts deposited in Court they must be deemed to have accepted the conditions subject to which the amounts were deposited. But the 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 the mortgagors.

8. An argument somewhat faintly suggested before us that it is the privilege of the debtor to impose conditions subject to which any payment is to be made by the mortgagor, and the mortgagee is bound to accept the condition needs no serious consideration.

9. [The rest of the judgment is not material to this report.]


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