POOSARLA SAMBAMURTHY AND SONS Vs. MAGANTI KRISHNA RAO

JUDGEMENT

(1.) Plaintiffs are the appellants. The only question that arises in this case is about interest awarded by the trial Court. The suit is based upon two mortgages, Exs. A-1 and A-3, dated 25-11-1964 and 4-4-1966 respectively. Under the first mortgage, a sum of Rupees 6,000/- was borrowed and, under the second mortgage a sum or Rupees 8,000/- was borrowed. The stipulations in both the mortgages are identical, except the rate of interest. The first mortgage provided that the entire loan amount shall be repaid within a period of one year with 12 per cent per annum interest simple. It, however, provided that if interest is not so paid, the mortgagor shall be liable to pay interest on interest, i.e., compound interest. Such compound interest was payable in case of default, every year. In the second mortgage, interest stipulated is Rs. 1-15 Ps. per cent per month, i. e., 13.18 per cent per annum simple interest (with identical stipulations). On the ground that the defendants have failed to repay the principal or the interest, except a small amount, the present suit was instituted for recovery of a sum of Rs. 32,462.00. The suit was instituted in the year 1974.

(2.) Among other contentions, the defendants raised the contention that the interest calimed is penal and usurious. Issue No. 3 in the suit related to this plea. It reads: "whether the interest claimed in the suit is penal and usurious". This issue was discussed by the trial Court in paragraph 11 of its judgment. No specific evidence was led by the defendants in support of their plea in this behalf. Yet, the trial Court was of the opinion that the rate stipulated is substantially unfair and penal. The reasons given by it can best be set out in its own words;--

(3.) In this appeal, the correctness of the above reasoning is attacked.