1. The plaintiff applies to vary a report made by the Registrar, dated 24th April 1942. That report was made on a reference in a mortgage suit. The mortgage was dated 14th April 1931, the principal sum secured was Rs. 1,35,000, and the rate of interest agreed upon was 10 per cent, reducible to 9 tier cent, on regular quarterly payments. On 16th July 1934 there was a further charge of Rs. 35,000 with similar provisions. The mortgagors paid the interest regularly up till July 1936. The suit in which this reference was made, was filed by the mortgagee in 1937. On 3rd June 1938 a preliminary mortgage decree was passed and the matter was referred to the Registrar for taking accounts. On 1st December 1941, on an application under the Bengal Money-Lenders Act, the decree was reopened and the Registrar was directed to take a fresh account in accordance with the provisions of the Bengal Money-lenders Act, interest to be computed at the rate of 8 per cent, per annum simple, from the dates of the respective mortgages until 1st day of December 1941.
2. Both the mortgagee and the mortgagors filed affidavits as to accounts. The mortgagee in his account showed a sum of Rs. 1,86,000 as being due for principal and interest. The mortgagors in their account calculated the sum dues as Rs. 1,81,000. The difference in the figures is due to the method of calculation. The mortgagee has set out the amount of principal, namely Rs. 1,35,000 and has calculated interest at the rate of 8 per cent, simple interest up to the date of the reopened decree, amounting to Rs. 1,14,840. Prom the total he has deducted the amount of interest actually paid. With regard to the further charge, he has made his calculation in the same manner. The mortgagors have set out in their account the amount of interest paid quarterly at the rate of 9 per cent, as provided by the mortgage. They have then shown the amount of interest payable each quarter calculated at 8 per cent, and have deducted from the principal sum the difference between the interest paid at 9 per cent, and the interest payable at 8 per cent.
3. After the first quarterly payment, the principal is then shown at the reduced sum obtained by deducting the difference between the interest paid at 9 per cent, and the interest calculated at 8 per cent. The interest is therefore calculated on the reduced principal. The learned Registrar has accepted the mortgagors' figures and held that the excess amount of interest, beyond that calculated at the rate of 8 per cent, must be appropriated towards principal. The mortgagee contests the learned Registrar's finding and seeks to have his report varied by having the accounts taken on the basis which he has adopted during the reference. The Bengal Money-Lenders Act, Section 30(1)(c) provides a maximum rate of interest, on a secured loan of 8 per cent. Section 30(2) provides in effect that no borrower shall after the commencement of the Act be deemed to have been liable to pay interest in excess of 8 per cent. Turning to Section 36(1)(d) of the Act, we find the provision that any interest in excess of 8 per cent, paid or allowed in account, must be repaid or allowed.
4. As I construe these provisions, the intention of the Legislature seems to be that any interest paid in excess of the rate permitted should be brought into account and credited at any rate in the first instance against interest due. The first payment of interest was made at the rate of 9 per cent., three months after the mortgage. There is no doubt that the payment then made was made by way of interest, it was accepted as such by the mortgagee, and credited as interest in the accounts. Neither borrower nor lender could anticipate the provisions of the Bengal Money-Lenders Act, and they were both, paying and receiving the money tendered as and by way of interest. It is true that the practice of the Courts is to appropriate payments made upon a bond, first to the interest due thereon, and thereafter, if any balance remain, to the principal; but that is the general rule which is inapplicable where there is appropriation of the sum tendered by either party. The money in my view was paid as interest and retains its character of interest.
5. Under the provisions of the Act to which I have referred, the intention seems to be that the excess payment which may have been made by way of interest, should be either repaid or credited to the borrower by way of interest. All that the borrower is allowed under Section 36(1)(d), is a refund of the excess paid. If the excess is allocated to principal, there would be a refund in effect of an additional rebate of interest. By allocating the excess payment to a reduction of principal, the interest payable on that reduced principal is similarly reduced and the mortgagor would, in my opinion, obtain a greater advantage than seems to have been intended by Section 36. It is further argued that the method of accounting adopted by the mortgagors is incorrect because the excess payment of interest was paid as interest and accepted as such and cannot be allocated to principal. The mortgage deed provides that the principal does not become due until January 1933 or 1935 if interest is paid regularly; and there are similar provisions in the deed of further charge. In neither deed do the parties contemplate repayment of the principal by instalments before the due date. As was said by Warrington J. in Wrigley v. Gill (1905) 1 Ch. 241, at page 254
a mortgagee is not bound to accept payment by driblets, but is entitled to have the account taken as a whole, and not to be treated as repaid until that account has been so taken.
6. Those remarks of the learned Judge were made with reference to the question whether rests should be ordered in the accounts or not. On behalf of the applicant in this case it is argued that the Registrar has taken the account on the basis of quarterly rests, a method which he is not entitled to adopt unless so directed by the order. This argument is based on the fact that the interest was paid regularly for a number of years, every quarter, and in the method adopted by the mortgagors and approved by the Registrar, the accounts have in effect been taken with quarterly rests. The arguments on behalf of the applicant must prevail; and in my opinion the method of accounting which he has adopted is the method intended by the Bengal Money-Lenders Act. The report will be varied accordingly. The plaintiff is entitled to the costs of the reference and of this application. Certified for counsel.