Courtney-Terrell, C.J.This is a redemption suit in which the mortgagor plaintiffs are a Mahomedan family and the mortgage is in the form of a zurpeshgi. It is dated in the year 1880. The amount secured thereby is Rs. 10,500. The mortgagees covenant to pay certain specified sums annually to the proper authorities in respect of taxes and cesses subject to the condition that if such taxes or cesses are remitted or reduced the amount by which the provided fixed payments shall exceed the new and reduced amount shall be paid to the mortgagors. A fixed annual sum of Rs. 82 is also to be paid to the mortgagors; the mortgagees are to enter into possession and are to appropriate the whole of the rents and profits of the mortgaged property until the whole advance of Rs. 10,500 shall be repaid in one lump sum.

2. In accordance with the historical custom in such cases there is expressed to be a "fixed and consolidated jama of Rs. 984-8-3" which after deducting therefrom the fixed payments above mentioned and Rs. 31-7-9 as "establishment charges is to leave a sum of Rs. 708-12-0 as the mortgagees profit on account of the peshgi money." But in spite of this form it is conceded that the contract as a whole, and, having regard to the later clauses, (subject to the matter of the cross-objection to be mentioned hereinafter) provides that the entire rent and profits of the estate are to be appropriated by the mortgagees and the mortgagees are to enter into possession of the mortgaged property and to hold it as security for the entire peshgi money. The mention of the "fixed and consolidated jama" is merely a relic of the device by which the sin of usury might be avoided, for it is curious that most religions provide means for satisfying the deity with forms while withholding substance. The phrase in general has no legal significance and in this document at any rate no significance whatever. The contract is therefore a usufructuary mortgage. It is true that it was executed before the Transfer of Property Act came into operation, but the principles of Sections 76 and 77 of that Act with regard to the liability of the mortgagee to account are applicable since they are a mere codification of the law in existence before the.

3. Now the mortgagees failed to carry out certain terms of the contract: (a) They did not pay to the mortgagors the annual payment of Rs. 82 as stipulated and the whole aggregation of those payments is in arrears. (b) One of the specified payments to be made by the mortgagee was the Dak cess payable at the time when the contract was made, but that cess was abolished in 1907 and the mortgagees should have paid the stipulated sum over annually to the mortgagors and this they failed to do. It was the contention of the mortgagor plaintiffs that as the mortgagees retained in their hands annually sums which they should have paid to the mortgagors these sums should be deemed to have been applied annually in the reduction of the capital sum advanced. They also contended that this should have brought about a corresponding reductions in the annual interest, and for this purpose (notwithstanding that the mortgagees had the right to appropriate the whole of the rents and profits) they claimed to treat the fictitious annual sum of Rupees 708-12-0 mentioned as the "profit on account of the peshgi money" as the interest on the loans and at the rate of 9 as per 100 rupees. In other words they claimed that the mortgagees must account for the moneys coming into their hands from the property (or at least, as Mr. Husnain on their behalf put it, to the extent of the fixed and consolidated jama of Rs. 984-8 3) and as to moneys which they should have handed over to the mortgagors they should account for the same with yearly rests.

4. Now the liability to account of a mortgagee in possession depends entirely upon whether under the contract he has to hand over from time to time anything of the rents and profits to the mortgagor, for of such money, he is a trustee for the plaintiff until it is paid over. In cases where only a portion, fixed or proportionate of such rents and profits is to be retained by way of interest, the liability to account is clear. Similarly where the whole of the rents and profits are to be retained in reduction of a fixed rate of interest and the mortgagor must pay the balance of the fixed rate from some other source it is clearly necessary to account because the mortgagee is in possession and the mortgagor cannot otherwise know how much excess he may have from time to time to pay. And by virtue of his liability to account from time to time he must, if on any particular occasion he retains some of the plaintiffs money, apply it to the reduction of the capital. This equitable liability takes precedence of his right under the contract to refuse piecemeal payment of the capital sum lent.

5. Where however he is entitled to retain the whole of the rents and profits and where, as in this case, his liability to make the stipulated payments to or on behalf of the mortgagor is independent of the amount of such rents and profits as he may in fact receive from the property, there can be no reason to call upon him to account. The failure to pay over the stipulated amounts to the mortgagor is the failure of a debtor and not the failure of a trustee to account satisfactorily for the property of another, and there is no reason to hold him liable to account with yearly rests or to apply the sums which he annually fails to pay in reduction of the capital of the loan. Mr. Husnains argument that in this particular case by reason of the mention of a "consolidated jama" there is a liability to account for the rents and profits limited to that jama is with all due respect to him erroneous. It is true that the mortgagee is accountable in the sense that he has to pay the money specified, but he is not accountable in the sense that he would have to disclose the sources of the money to be paid by him, for the liability to pay exists under the contract even if the rents and profits actually obtained by the mortgagee are nil. Mr. Mullick contended that in the absence of an agreement to pay interest on sums payable and overdue no interest at all could be debited against the mortgagees, but the debt which the mortgagee has incurred to the mortgagor in respect of the stipulated payments is not to be regarded as a mere series of debts arising out of failure to pay agreed sums. It arises out of a single contract of which the principal ingredient was a mortgage and must be treated on equitable principles.

6. This was conceded on behalf of the mortgagee; it was agreed for example that the overdue payments from the earliest period of the contract cannot, in taking accounts in a redemption suit, be treated as statute barred. Similarly it is clear that the Court has in such circumstances the right in equity to allow simple interest on such overdue amounts, and this the Subordinate Judge has done at the rate of 6%. It was the case of the mortgagor-plaintiffs that if the accounts were taken with the yearly rests as claimed by them the mortgage debt would be found to have been discharged and a considerable balance would be owing to them from the mortgagees but the Subordinate Judge has applied the right principles and allowing simple interest only has found that the mortgage debt had not been fully discharged and that a small balance was still due. He therefore granted a preliminary decree for redemption on payment into Court by the plaintiffs of the small sum in balance. I will now consider a cross-objection by the mortgagees to the decision of the learned Judge. It appears that the rents of certain tenants were enhanced in the course of the Revisional Settlement. This enhancement was brought about at the instance of the 16 annas maliks including mortgagors and not by the mortgagees. The mortgagors contend that they are entitled to the benefit of this enhancement, (which was clearly collected on their behalf). This contention, which succeeded before the learned Subordinate Judge, was based on a construction of a clause in the contract which has been translated as follows:

Whatever produce accrues and whatever the zarpeshgidars may bring about, that they appropriate towards the remuneration of their zarpeshgi lease;

and it was argued that this meant that if the produce increased by reason of the effort of some one other than the mortgagee, the increase was not to go to the mortgagees but to the mortgagors. Whereas the true meaning is that all the produce is to go to the mortgagees including any increase which the mortgagees may bring about. The negative proposition suggested by the mortgagors does not arise out of the affirmative provision in the document. In acceding to the mortgagors contention the learned Judge was, in my opinion, wrong. The cross-objection should succeed and this part of the mortgagors claim be disallowed They must repay the sums so collected with simple interest at six per cent. On account of certain features of the defence the learned Judge directed that the plaintiffs were entitled to costs of trial and it is not contended by the defendants that this part of his order should be disturbed. In the result the appeal fails, the cross-objection succeeds to the extent I have indicated and the respondents will have their costs in this Court.

Dhavle, J.

7. I agree. As the zarpeshgi deed was executed in 1880 prior to the passing of T.P. Act, Section 76(h), which can only be excluded u/s 77 of that Act has no direct application to the case. It is therefore unnecessary to consider the contention advanced by the learned advocate for the respondents that the zarpeshgi is only an anomalous mortgage within the spirit of Section 98 of the Act, governed by its own terms and by local usage though it is true that before the Amending Act of 1929, Section 58(d) did not include in the definition of a usufructuary mortgage a mortgage under which the mortgagee is authorised to appropriate in lieu of interest &c. a part only of the rents and profits of the mortgaged property, as the zarpeshgi before us does [excluding for the present the circumstance that the deed provides not for interest, but for munafa (gain or profit) on the peshgi money]. Even before the Transfer of Property Act mortgagees in possession were liable to account on much the same lines as we find in Section 76(h): see Ghose on the Law of Mortgage in India, Vol. 1, (Edn. 5), p. 594. The account was taken with rests, and the essential point involved in it was that while the surplus of interest, if any, over the available rents and profits in any year was not added to the principal, "for that would result in charging compound interest;" the surplus of net receipts over the receipts due in any period was applied to reduce the principal, this process being carried on from one period to another (usually a year) to the time of judgment. It will be seen presently that the process involved compound interest on such surplus in favour of the mortgagor. Such accounts of rents and profits could, however, be excluded by the terms of the contract as in cases coming within Section 77 of the. Our zarpeshgi, specifies Rs. 984-8-3 as the fixed and consolidated gross jama out of which the zarpeshgidars are to pay a fixed revenue and fixed cesses, take fixed establishment charges and a fixed munafa on account of the peshgi money, and pay the balance of Rs. 82 to the executants from year to year.

8. It proceeds to empower the zarpeshgidars to appropriate whatever produce may be obtained in excess of the fixed jama through or without the instrumentality of the zarpeshgidars. It is plain that the deed only fixes a gross jama in so far as the transaction partook of the character of a lease and that the recurring payment of Rs. 82 to the executants, usually called the haq ajiri, is formally arrived at from the fixed jama without any definite correlation to the actual rents and profits of any year. There can be no doubt that the deed excludes any account of rents and profits on the lines of Section 76(h), nor indeed do the appellants ask for such an account. I have already referred to the fact that the deed does not provide for any interest as such on the peshgi money; the zarpeshgidars are to have instead a munafa out of the fixed jama and also out of the surplus produce. This was doubtless a deliberate arrangement because, as Mr. Khurshaid Husnain has told us, the mortgagors were Shia Muhammedans. The deed does not require the zarpeshgidars to account for the payments that they were to make out of the gross jama.

9. This does not, however, entitle them at the time of redemption to insist on "payment of the entire peshgi money in cash in one lump" as provided in the deed, when on their own part they failed to observe the stipulation to pay the haq ajiri (and remission of dak cess) to the mortgagors. No doubt the mortgagors could have recovered the haq ajiri by independent suits, without interest, see Nathan Prasad Shah v. Kali Prasad Shah 1926 Pat 77, within the appropriate period of limitation from time to time. But that was not their only remedy, and in Narsingh Narain Singh v. Babu Lukputty Singh (1880) 5 Cal 333, (a case which has been repeatedly followed) it was held that in a redemption suit the mortgagee is not equitably entitled to say that:

He may keep in his own hands the money due from him to the plaintiff, and at the same time require the plaintiff to pay to him the monies due on his side.... The defendant has by his conduct altered the arrangement under which he held the property, and, as a consequence the plaintiff is entitled now to come in and claim an account from him.

10. It does not, however, appear that the account was taken with rests, while in such cases as Parasurama Pattar v. Venkatachalam Pattar 1914 Mad 661 and Ramavatar v. Tulsi Prosad Singh, (1911) 14 CriLJ 507 it is quite clear that the mortgagor was credited with the payments that the mortgagee should have periodically made to him, with simple interest. Parasuramas case 1914 Mad 661 was actually relied upon by the appellants in support of the contention that the mortgagee is liable to account for the payments in default, and it is noticeable that the learned Judges actually reduced the interest on the payments in default from 10 per cent to 6 per cent in view of the fact that the mortgagors had allowed a long time to elapse without enforcing their right to receive the purapad every year. The mortgage-deed in that case as in the present also appears to have fixed no definite rate of interest on the mortgage-money. The learned Subordinate Judge has allowed the appellants simple interest at 6 per cent per annum on the amounts due to them from the zarpeshgidars under the zarpeshgi deed. He has pointed out that the mode of accounting adopted by the appellants in the account at the end of the plaint involves compound interest on these moneys with yearly rests.

11. The learned advocate for the appellants has contested this. But if each periodical payment due from the mortgagee is deducted from the balance of the loan outstanding at the beginning of the year in which that payment falls due, an amount equal to the assumed interest on that sum is set free from the balance of the next year in addition to the reduction already effected on account of what might conveniently be called the instalment due, and in the following year the mortgagor is further relieved on account of this instalment to the extent of the interest on the instalment with one years interest added. A simple numerical example will perhaps make this clear. Take a loan of Rs. 10,000 secured on property with a fixed usufruct of Rs. 1,000, out of which the mortgagee is to appropriate Rs. 600 in lieu of munafa or interest and pay the mortgagor Rs. 400 as the haq ajiri. If the mortgagee does not pay the haq ajiri, the balance of the loan at the end of the first year will be Rs. 9,600; and as the proportionate munafa or interest on this is less than that on Rs. 10,000 by the interest on Rs. 400, the mortgagee will in effect be debited in the accounts for the second year with one years interest on the first default of Rs. 400 (besides this second years default of Rs. 400) so that proceeding on the same lines, in the accounts of the third year he will be debited with two years compound munafa or interest on the first default and one years interest on the second default, and so on. Turning now to the two cases on which the learned advocate has relied for an account with yearly rests in respect of the moneys that the zarpeshgidars should have paid to the mortgagors but did not--Jaijit Rai v. Gobind Tiwari (1884) 6 All 303 and Brij Kumar Lal v. Majlis Sahai 1917 Cal 853--it is to be observed in the first place that these were cases in which it was stipulated that the mortgagee was to have interest at a definite rate, while the zarpeshgi deed before us makes it quite clear that the zarpeshgidars were intended to take all the rents and profits subject to the payment of the haq ajiri (&c.) to the mortgagors (besides the revenue to the Government regarding which there is no dispute). In Jaijit Rais case (1884) 6 All 303, moreover, the mortgagor was held entitled to an account with yearly rests of sums that the mortgagee should have paid but had not, on the principle among others of the last paragraph of Section 76, T.P. Act, as the payments in default were payments which, apart from the mortgage bond, the mortgagee was bound under Clause (c) of the section to make.

12. In Brij Kumar Lals case 1917 Cal 853 the learned Judges proceeded on the footing that that must be taken to have been done which should have been done and that the mortgagee by withholding payment must be taken to have applied such sum towards the discharge of his own dues on the security. This was taken to be "the nature and spirit of the agreement entered into between" the parties. The decision must therefore be treated as a decision on the terms of the whole agreement which are not found in the report. The zarpeshgi bond before us contains no indication of any agreement between the parties that moneys withheld by the zarpeshgidars were to go to discharge the principal due at the time of default. The appellants get relief in respect of such moneys not on the terms of the zarpeshgi deed but on the principle that at the time of redemption when the mortgagors are required to pay the amount due by them under the zarpeshgi, the zarpeshgidars cannot equitably ask the Court to ignore the payments that they ought to have made to the mortgagors, but that the zarpeshgidars must be debited with them by way of equitable set-off. The failure of the zarpeshgidars to pay the haq ajiri (&c.) seems to me to be no reason for dealing with them as if the contract between the parties or the equities of the case required them to accept repayment of the mortgage advance in dribblers, and thus be saddled with compound interest on them, while entitled themselves to charge no more than the equivalent of simple interest.