ORDER This reference arises out of a suit instituted by the petitioner Mohanlal for recovery of Rs. 104 as the balance of principal and Rs. 19-8-0 as interest on the basis of a bond. The question referred to by the learned single Judge for decision is :- Whether a debtor is entitled to invoke benefit of section 3 of the Madhya Bharat Interest Act, 1956, so as to claim a readjustment of interest already paid by him or appropriated by the creditor at a rate higher than the maximum permissible under that section ? The material facts are that on 16th February 1953 the defendant-opponent Kallu borrowed Rs. 200 from the petitioner and executed a bond for the repayment of the amount in twelve monthly instalments of Rs. 20 each. The agreed rate of interest was thus twenty per cent, per annum. The bond also mentioned that the defendant would serve the plaintiff on a monthly salary of Rs. 120 for a period of one year and that the amount of monthly instalments payable towards the loan amount would be deducted from his salary. After giving to the defendant credit for Rs. 136 paid by him, the plaintiff sued for recovery of Rs. 104 as balance of the principal amount and Rs. 19-8-0 as interest. The defendant admitted having borrowed Rs, 200 from the plaintiff and having executed the bond. He, however, made a counter-claim for Rs, 186 said to be due to him from the plaintiff on account of his Salary. The Small Causes Court, Lashkar, took the view that under the Madhya Bharat Interest Act, 1956, the plaintiff could not get interest at a rate higher than nine per cent. per annum. He, therefore, allowed the plaintiff interest at nine per cent, per annum and on this basis determined that the plaintiff was entitled to a sum of Rs. 98-9-0 only. He further found that the defendant was entitled to get Rs. 106-4-6 from the plaintiff on account of his salary. In the result, he passed a decree for Rs. 7-10-6 in favour of the defendant. In the context of these facts, the real question that arises for determination is whether the lower Court was justified in scaling down the interest under Section 3 of the M. B. Interest Act, 1956. 106-4-6 from the plaintiff on account of his salary. In the result, he passed a decree for Rs. 7-10-6 in favour of the defendant. In the context of these facts, the real question that arises for determination is whether the lower Court was justified in scaling down the interest under Section 3 of the M. B. Interest Act, 1956. If the reduction of the rate of interest is justified, then clearly in order to give effect to the reduction it would be open to the Court to make a readjustment of the interest amount already paid by the debtor or appropriated by the creditor so as to make the payment of interest in conformity with section 3 of the Act. If a redaction of the rate of interest under section 3 is not permissible in a particular case, then obviously no question of readjustment of interest amount already paid at the stipulated rate can arise. Now, section 3 of the Act empowers the Court to adjudge the rates of interest on a principal sum at a rate not exceeding those specified in that section and also says that the Court shall in no case adjudge compound interest. Section 3 gives to the Court power to adjudge the rate of interest only. It does not give to the Court power to adjudge the principal amount. The adjudication under section 3 is of the interest and not of the principal sum. Section 2 (4) of the Act defines 'Principal Sum' as "a Sum adjudged as such by a Court". Thus the principal sum defined in section 2 (4) is the sum which is adjudged by the Court in accordance with any agreement between the parties or with the provisions of any law. Section 2 (4) does not give to the Court power to adjudicate upon a principal sum when parties have agreed to accept a certain sum as principal sum. Therefore, when accounts are settled or a particular sum has been accepted and acknowledged as principal sum, then under the general law, the settled account or the acknowledged principal sum cannot be reopened except on grounds of fraud or mistake. The M. B. Interest Act nowhere gives to the Court the power to reopen settled accounts on the ground that the amount acknowledged includes excess interest and compound interest. The M. B. Interest Act nowhere gives to the Court the power to reopen settled accounts on the ground that the amount acknowledged includes excess interest and compound interest. Such a drastic power cannot be inferred merely from the definition of the expression "principal sum". This is the view which has been taken in The Munhat Cloth Stores, Ratlam v. Shivratan 1968 MPLJ 609 : l958 MPC 441 : AIR 1958 MP 320 . The question, therefore, that really arises for determination in the present case is as to what is the principal sum payable by the debtor to the petitioner. Here there is really no dispute as to the amount of principal sum. The bond itself Bays that Rs. 200 were advanced as loan and that this principal amount would be repaid together with interest amounting to Rs. 40. The defendant has admitted that this was the amount which was advanced to him. There is thus no dispute as to the principal amount which the defendant undertook to repay and there is no question of reopening of any accounts for purposes of determining the principal sum. The matter is thus reduced simply to this whether under section 3 of the Act the plaintiff can get interest on this principal sum at a rate higher than nine per cent, per annum. It has been held by this Court in Dhannalal v. Ramkishan 1967 MPLJ 121 : 1957 MPC 625 : AIR 1968 MP 88 that section 3 applies to all contracts of loans, whether made before or after the coming into force of the Act and prohibits the Court from awarding interest on the principal sum adjudged by it at a rate higher than that specified in the section. The learned trial Judge was, therefore, right in allowing the plaintiff interest only at the rate of nine per cent. per annum on the principal sum of Rs. 200 from the date of the advance. The payments made by the defendant to the plaintiff must, therefore, be adjusted in accordance with the interest which the plaintiff can recover under section 3. The fact that the debtor had paid interest on the admitted principal amount originally at the stipulated rate does not prevent him from invoking the benefit of section 3 of the Act. The payments made by the defendant to the plaintiff must, therefore, be adjusted in accordance with the interest which the plaintiff can recover under section 3. The fact that the debtor had paid interest on the admitted principal amount originally at the stipulated rate does not prevent him from invoking the benefit of section 3 of the Act. We would, therefore, answer the question referred to for decision by saying that in a case where scaling down of interest is permissible under section 3 of the Act, it is open to the Court to make re-appropriation of interest amount already paid by the debtor so as to bring it in conformity with the permissible rate of interest and that the debtor is not prevented from taking advantage of the provisions of section 3 of the Act merely because he had in the past paid interest at the stipulated rate on the principal amount adjudged by the Court. Appeal allowed