1. The facts which are not in dispute in this appeal are these: The appellant borrowed Rupees 8,00,000 from the respondent by executing in his favour a mortgage bond on 12th December 1923 with interest at 8 1/2 per cent, per annum with six-monthly rests. The date fixed for repayment of the loan was 12th December 1928. One of the stipulations in the bond was that 'after the 12th day of December one thousand nine hundred and twenty-five and until all monies secured by the mortgage bond are called in by the mortgagee the mortgagor will be entitled to make part payments towards the principal sum of Rs. 8,00,000 by instalments of Rs. 10,000 or any multiple of Rs. 5000.' From 1st September 1931 the rate of interest was raised to 9 1/4 per cent, per annum with six-monthly rests-the time for repayment was extended to 30th September 1936. From 1st October 1936 the rate of interest was reduced to 7 per cent, per annum with six-monthly rests and the date of repayment was extended to 1st October 1946-The appellant paid interest regularly at the contract rate. A portion of the principal amounting to Rupees 5,60,000 was paid up to 21st May 1932. The interest on the balance was also paid regularly up to 8th June 1940 at the contract rate. The total amount of interest paid from 19th May 1924 to 8th June 1940 is Rs. 5,09,495-2-9. On 11th December 1940 the appellant filed an application under Section 38, Bengal Money-Lenders Act, 1940, for taking accounts and for declaring the amount due to the respondent and payable by the appellant whether as principal or interest or both.
2. The trial Judge has held: (1) that the appellant is not liable to pay any amount exceeding twice tine principal of the original loan i. e., Rs. 16,00,000; (2) that the appellant has already paid Rs. 5,60,000 on account of principal and Rs. 5,09,495-2-9 as interest till June 1940, making a total of Rs. 10,69,495-2-9; (3) that the liabi-lity of the appellant cannot, therefore, exceed Rupees 5,30,504-13-3. He has, accordingly, declared that the appellant is liable to pay Rs. 2,40,000 as the outstanding principal and interest on that date at the rate of 7 per cent, from 9th June 1940, till he has paid the claim or a decree for the same has been obtained against him subject to the limit of Rs. 5,30,504-13-3. Hence this appeal by the borrower. Section 38 (2), Bengal Money-Lenders Act, 1940, provides that in taking accounts under that section the Court shall follow the same procedure as it does in regard to civil suits and so far as may be the provisions of Chaps. 4, 6, and 7. Chapter 4 contains Sections 24 to 27; Chap. 6 contains Sections 30 to 33 and Chap. 7 contains Sections 34 to 45. The material portion of Section 30 is in these terms:
Notwithstanding anything contained in any law for the time being in force, or in any agreement (1) no borrower shall be liable to pay after the commencement of this Act (a) any sum in respect of principal and interest which together with any amount already paid or included in any decree in respect of a loan exceeds twice the principal of the original, loan (b) on account of interest outstanding on the date up to which such liability is computed, a sum greater than the principal outstanding on such date (c) interest at a rate per annum exceeding in the case of (i) unsecured Joans, ten per centum simple (ii) secured loans, eight per centum simple, whether such loan was advanced or such amount was paid or such decree was passed or such interest accrued before or after the commencement of this Act; (2) no borrower shall after the commencement of this Act, be deemed to have been liable to pay before the date of such commencement in respect of interest paid before such date or included in a decree passed before such date, interest at rates per annum exceeding those specified in Sub-clause (c) of Clause (1):
3. Sub-clauses (a) and (b) of Clause (1) of Section 30 do not apply to the facts of this case. The provisions of sub-Clause (c) of Clause (l)ofS. 30 are attracted to the facts of this case as the borrower contracted to pay interest at a rate per annum exceeding S per cent, simple up to 30th September 1936. He has paid interest at the contractual rate regularly up to that date. Under Section 30 (2) he was not liable to pay interest at rates per annum exceeding 8 per cent. simple. The question, therefore, is whether in taking accounts the amount of interest paid in excess of the statutory rate, i. e., 8 per cent, up to 30th September 1936, ought to be credited towards the outstanding principal on that date or towards interest accruing after that date. The contention of Mr. Gupta on behalf of the respondent lender is this: The meaning of Section 30 (2) is that no borrower is liable after the commencement of the Act to pay before the date of such commencement a sum which exceeds the amount found on calculation at rates mentioned in Clause (c) for the entire period before the commencement of the Act. In Order to determine whether there was an excess payment before the com-mencement of the Act the Court has to find out the sum which has been paid as interest for the whole period from the date of the bond up to the commencement of the Act and to see whether this amount exceeds the amount calculated at 8 per cent. simple for the same period. The amount of interest paid in excess of 8 per cent. up to 30th September 1936, should, there-fore, be credited towards interest accruing from after that date up to the commencement of the Act calculated at the rate of 8 per cent, simple.
4. Section 30 (2) releases the borrower from liability to pay interest at rates in excess of the statutory rate. The borrower paid interest at rates exceeding 8 per cent, up to 30th September 1936. Alter that date the contractual rate of interest is not in excess of the statutory rate. The interest paid up to 30th September 1936, is therefore hit by Section 30 (2) and not the interest paid alter that date. Mr. Gupta in support of his contention relied upon the decision of this Court in Romesh Chandra v. Jnanadn Prosanna : AIR1942Cal39 , The facts of that case, however, were not similar to the facts of the present case. Further the question raised in this case was not directly raised or decided in,that
5. In In re Carroll's Estate (1901) 1 Ir. Rule 78, it was held that where interest on the mortgage was paid in excess of what is due the over-payments will be treated as payments on account of principal. (See also Fisher on Mortgage, Edn. 7 p. 719.) It is true that in that case interest was paid in excess of the contractual rate but there is no reason why he same principle should not apply where interest is paid in excess of the statutory rate. The attention of McNair J. was not drawn to the principle laid down in In re Carroll's Estate (1901) 1 Ir. Rule 78, while he decided the case in Pramatha Nath Roy v. Kanakendra Nath : AIR1943Cal17 , We are, therefore, of opinion that the lnterest paid in excess of the statutory rate up to 30th September 1936, should be credited towards the outstanding principal. There is, however, a stipulation in the mortgage bond that the mortgagor will be entitled to make part-payments towards the principal by instalments of Rs. 10,000 or any multiply of Rs. 5000. We, therefore, hold that in taking accounts the excess amount of interest which was paid by the borrower up to 30th September 1936, should be credited towards the principal outstanding on that date subject to the above stipulation in the bond. Taking account on this basis we declare-(a) that Rs. 2,10,000 is payable to day as principal but not yet due; and (b) that Rs. 55,462-14-6 is payable as interest up to 10th June 1944 and is due. The result, therefore, is that the appeal is allowed and the decree of the trial Judge is varied in the manner indicated above. There will be no Order for costs in this appeal.
6. 17th May 1944. The declaration made in this case will not in any way prejudice the right of trie appellant to plead Section 27, Bengal Motley-Lenders Act of 1940 in any future litigation.