RAJESHWAR Vs. MT. RUKHMA

JUDGEMENT

(1.) STAPLES , A.J.C. 1. The appellant brought a suit for foreclosure on a mortgage and obtained a decree in the trial Court. He however has appealed on the ground that the lower Court allowed interest at too low a rate and on the further ground that the land, which was khudkasht at the date of the mortgage, but which had subsequently become sir, should be liable to the mortgage and should not beheld to be subject to the provisions of Section 49, Tenancy Act, 1920. The mortgage in suit was executed on 1st February 1916 by Tukaram, the deceased husband of the present respondents. The principal secured on the mortgage was Rs. 4,000 and the agreement was that this amount was to be repaid in ten annual instalments of Rs. 400 each beginning from 23rd March 1917, with interest at 12 per cent per mensem. There was a condition that in default interest at Re. 1-4-0 per cent per mensem would be paid on the defaulted instalments and on the interest due until satisfaction, and there was a further condition that if three instalments were defaulted the whole amount would be payable in a lump with penal interest. The property mortgaged was the full 16 annas share of two malguzari villages, Madangad and Dongargaon Rithi, in the Warora tahsil. No repayment was made on the mortgage and after three instalments had been defaulted the appellant filed his suit on 20th December 1926. It may be noted that the third default occurred on 31st March 1919, when the third instalment was due according to the terms of the mortgage, and the appellant waited nearly eight years before filing his suit. In the plaint he has claimed simple interest on the defaulted instalments at Re. 1-4-0 per cent per mensem and at the same rate on the whole amount that he claims to have been due, including principal and interest, on 31st March 1919, the date of the third default, upto the date of suit. The claim for interest at this rate comes to Rs. 7,530-1-0.

(2.) THE only matter in dispute is: what is the rate at which interest should be allowed after the third default, when the exigibility clause came into operation? The trial Court framed the following issues: (a) Whether the mortgage deed makes any provision for the payment of interest on the Ekmust sum (b). If so, at what rate? (c), If not, what was the real intention of the parties as gathered from its terms ? (d). And what (sic) by way of compensation ought to (sic) lowed on this Ekmust amount ?

(3.) I do not however think that the Judge of the lower Court is right (sic) allowing interest at As. 8 per cent per mensem on the accumulated sum, as this is neither a term in the original contract nor a term in the secondary contract. The correct method to follow in such cases, I think, where there is a double penalty, namely, enhanced interest on defaulted instalments and then an exigibility clause in case of three defaults, is to allow the enhanced interest on the defaulted instalments up to the date when the exigibility clause comes into operation and then from that date to allow interest at the original rate on the whole principal amount till the date of suit. From the date of suit further interest may be allowed on the whole sum found due until the date fixed for payment. As noted in Asaram v. Dhanoba AIR 1923 Nag 67 Courts do not lean to compound interest and where there is no provision for interest after the whole amount becomes exigible, interest at the original rate only should be allowed. The lower Court by allowing interest at 8 annas per cent per mensem on the accumulated sum has, in fact, allowed compound interest and has introduced a new term into the contract. At the same time, no appeal has been made by the defendants-respondents, and therefore I cannot reduce the amount which has been decreed. According to the method, which I have indicated above, the amount to be decreed would be only Rs. 9,156, whereas the lower Courts decree is for Rupees 9,895-3-0. I am clear, then, that, so far from the decretal amount being increased as claimed by the appellant, by allowing interest at the enhanced rate, the amount decreed by the lower Court should really be decreassd, but, as already indicated above, as there has been no appeal by the defendants, the amount decreed will stand and the appeal will be dismissed on this point.