1. This Rule has been granted in connection with a suit forrecovery of money due on a bond. On the 28th June 1911 the defendant borrowedfrom the plaintiffs a sum of Rs. 80 which was to carry interest at two per centper mensem with annual rests. The bond provided that "Whenever any summight be paid by the debtor to the creditor, the debtor would get an entry madeon the back of the bond, of payment against the interest, and, after theinterest had been satisfied, of payment against the principal to the extent ofthe surplus." On the 11th May 1912, the debtor paid Rs. 14-6-0, and anentry to this effect was made on the back of the bond. There were two similarpayments subsequently, namely, Rs. 16 on the 2nd February 1914 and Rs. 60 onthe 11th May 1915. This suit was instituted on the 2nd January 1917 forrecovery of Rs. 55 as then due on the bond. The defendant pleaded that theClaim had been satisfied in full and in the alternative, that if anything wasdue, the claim was barred by limitation. The Small Cause Court Judge has foundagainst the defendant on the first point, and in his favour on the secondpoint. The Period of limitation applicable is three years under Article 67 ofthe Second Schedule to the Indian Limitation Act and the question incontroversy is, whether, within three years antecedent to the institution ofthe suit, interest had been paid as such within the meaning of Section 20 ofthe Indian Limitation Act.

2. Section 20 provides that where interest on a debt is,before the expiration of the prescribed period, paid as such by the person whois liable to pay the debt, a fresh period of limitation shall be computed fromthe time when the payment was made. It is plain that some force must beattributed to the expression as such, and that consequently, something morethan mere payment of interest must be established to entitle the creditor tothe benefit of Section 20. The debtor has contended that there must be proofthat, at the time the interest was paid, the debtor expressly stated that thepayment was on account of interest, and that as, in the present case, the SmallCause Court Judge has found that nothing was said by either party when thepayments were made, Section 20 is of no avail to the creditor. In support ofthis view, reliance has been placed upon the decisions in Hanmautmal Mutichandv. Rama Bai 3B. 198 : 2 Ind. Dec (N.S.) 133 and Mohammad Abdullah Khan v. BankInstalment Co. 2 Ind. Cas. 379 [LQ/AllHC/1909/139] : 3 l A. 495 : 6 A.L.J. 611. These cases affirmthe proposition that the meaning of the section is that there must be either anexpress intimation by the debtor, or proof of the existence of circumstances,which show that the payment was on account of interest on the debt sued upon,in other words, if payments are made in reduction of a general balance ofaccount without intimation by the debtor that they are to be appropriated insatisfaction of interest, such payments are not payments of interest as suchwithin the meaning of the section. This view is also supported by theobservation in Surju Prasad Singh v. Khuahish Ali 4 A. 512 pc: A.W.N. (1882)114 : 2 Ind. Dec. (N.S.) 1089. and Nilkanth v. Dattatraya 4 B. 103 pc: 4 Ind.Jur.580 : 2 Ind. Dec. (N.S.) 578. All the cases mentioned are, however, clearlydistinguishable. In the case before us [which in this respect differs fromBiswanath Bhattacharjee v. Sameswar Sarma 41 Ind. Cas. 348 [LQ/CalHC/1917/182] : 21 C.W.N.1055]there was an express provision in the bond that whenever any paymentshould be made by the debtor to the creditor, the debtor would obtain an entrymade on the back of the bond to the effect that the payment had been made onaccount of interest, and that it was only in the event of a payment exceedingthe amount then due as interest that the surplus would be applied in reductionof the principal. If, now, we confine our attention to the payment made on the2nd February 1916, we find that at that time, a sum considerably in excess ofRs. 16 was due on account of interest. Consequently, pursuant to the agreementbetween the parties, the only payment which the debtor could make would be apayment as against the interest first. Though nothing was expressly stated byeither of the parties at the time, the inference is irresistible that thepayment of Rs. 26 on the 2nd February 1914 was a payment on account of interestas such. This view is supported by the observation in Ranchordas v. Pestonji 9Bom. L.R. 1329 at p. 1331: "The section requires something more than theEnglish Law does, namely, that interest must be paid as interest, that is, itmust be distinctly stated at the time of payment that it is paid on account ofinterest, or else there must be evidence from which the payment as interest maybe distinctly inferred, and if so, the mere proof of payment issufficient." To the same effect is the decision in Gopi Nath Singh v.Hardeo Singh 1 Ind. Cas. 137 [LQ/AllHC/1909/16] : 6 A.L.J. 207 : 31 A. 285.

3. The principle applicable to cases of this character waswidely stated by Blackburn, J., in Morgan v. Rowlands (1872) 7 Q.B. 493 : 41L.J.Q.B. 187 : 26 L T 855 : 20 W.R. 726. The principle is that any such paymentis an acknowledgment of the existing debt, from which it implies a promise topay the residue or the principal as the case may be, the payment must, however,be such that from it the promise to pay can be inferred in fact and not merelyimplied in law; in other words, the payment must be of an unambiguous characterIf the payment is of an ambiguous character and it is merely open to thecreditor to make an appropriation according to his choice, the payment cannotbe treated as a payment of interest as such. No doubt, a different view wasindicated by Knight Bruce, L.J. in the case of Nash v. Hodgson (1855) 6 De G M.& G. 474 : 25 L.J. Ch. 186 : 43 E.R. 1318 : 1 Jur. (N.S.) 946 : 3 W.R. 590: 106 R.R. 157, in which he held apparently that where no appropriation is madeby a debtor the creditor has a right to make such an appropriation as will savelimitation. The correctness of this view, however, has been doubted byStarling, L.J., in Friend v. Young (1897) 2 Ch : 421 : 66 L.J. Ch. 737 : 77L.T. 50 : 46 W.R. 130(1897) 2 Ch 421 : 66 L.J. Ch. 737 : 77 L.T. 50 : 46 W.R.130. But whatever the law in England may be, the terms of Section 20 of theIndian Limitation Act are, in our opinion, perfectly plain. We hold that inorder to bring a case within the section, it is not essential that the debtorshould, on the occasion of every payment, state explicitly that the payment ismade on account of interest as such; it is sufficient if circumstances existwhich make the conclusion inevitable that the payment must have been made onaccount of interest; and the case before us is precisely of that description.

4. The result is that this Rule is made absolute, the decreeof dismissal made by the Small Cause Court Judge set aside and the suit decreedwith costs. The petitioners are also entitled to their costs of this Rule. Weassess the hearing fee at one gold mohur.

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Charu Chandra Bhattacharjee and Ors. vs. Karam Buxa Sikdar(13.08.1917 - CALHC)