Para 6.9 — MSO (A&E)
Original Rule Text
6.9 Nothing may be credited as repayment of principal or into the sinking fund so long as any sum is due on account of interest unpaid.
Interest for any half-year (or year) is not "due" until the end of the half-year (or year) during which it accrues.
# PERIODICAL MAKING UP OF THE ACCOUNT
What This Means
No payment can be credited as repayment of principal or into the sinking fund if any interest amount remains unpaid. This means interest takes priority over principal repayment. Additionally, interest for a half-year (or year) is not considered 'due' until the last day of that period — so mid-period, one cannot claim interest is overdue even if the final amount is foreseeable.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Interest must be fully paid before any principal repayment or sinking fund credit is accepted
- 2Interest takes absolute priority over principal repayment
- 3Interest becomes 'due' only at the end of the half-year or year in which it accrues
- 4Mid-period interest is accruing but not yet 'due' — it cannot be demanded early
- 5This protects the government's interest income from being bypassed
Practical Example
A Town Area Committee owes Rs. 2 lakh in overdue interest on a Rs. 50 lakh loan. The Committee sends Rs. 7 lakh, asking that Rs. 5 lakh be credited to principal and Rs. 2 lakh to interest. The AG rejects this allocation — under this rule, the entire Rs. 2 lakh overdue interest must be cleared first, and only then can the remaining Rs. 5 lakh be credited to the principal instalment.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Can a borrower prepay principal while interest is current (not overdue)?▼
Why does the government give interest priority over principal?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.