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Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
<h1>Mortgage Payments Allocation Rule Upheld: Interest Paid First</h1> The High Court of Calcutta held that a mortgagee must follow the terms of the mortgage deed when applying payments, with a presumption that payments are ... Appropriation of payments between interest and principal - presumption that an open payment by debtor is first attributable to outstanding interest - contractual stipulation in a mortgage deed governing appropriation of payments - mortgagee's powers of appropriation prior to entering into possessionAppropriation of payments between interest and principal - presumption that an open payment by debtor is first attributable to outstanding interest - contractual stipulation in a mortgage deed governing appropriation of payments - Whether, before taking possession, a mortgagee can appropriate payments received from the borrower towards the principal notwithstanding a stipulation that payments shall be first credited to interest and the balance set off against principal. - HELD THAT: - The Court applied the settled presumption that where interest is outstanding and the creditor receives an open payment without any appropriation by either party, the payment is in the first instance attributable to outstanding interest (as illustrated in the case of the Maharaja of Dharbhanga ). That presumption is reinforced here by the express stipulation in the mortgage deed that payments are to be appropriated first towards interest and the balance towards principal. The mortgagee must therefore apply monies received in accordance with the deed, and the revenue is entitled to assume that the mortgagee is so applying receipts. The question was confined to the position before the mortgagee has entered into possession; the Court did not decide matters after possession or other alternatives not raised in the facts before it.The mortgagee cannot, before entering into possession, appropriate payments received towards principal in contravention of the clear appropriation clause in the mortgage deed; payments are to be applied first to interest.Final Conclusion: Reference answered: in the facts stated the mortgagee must apply payments in accordance with the mortgage deed (first to interest, then to principal); the Commissioner of Income Tax succeeds and is awarded costs. The High Court of Calcutta ruled that a mortgagee must apply payments in accordance with the provisions of the mortgage deed. The presumption is that payments are first attributed to outstanding interest. The Court answered the question in the negative, and the Commissioner of Income Tax was awarded costs. The Court also advised that questions for opinion should be asked one at a time and be based on the specific case facts. Justice Costello agreed with the decision.
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