MAHAMMAD RAJA MIA Vs. NADERAJJAMA MIA

JUDGEMENT

(1.) This appeal arises out of a suit on a simple mortgage in which the plaintiff claimed Rs. 1,500 on a mortgage bond executed on 15 Falgun 1320 corresponding to about 1 March 1914 by defendant 1, and the predecessor of defendants 2 to 5. The amount borrowed was Rs. 200 payable in six instalments running over six years from .1914-1919 and it was stipulated that in default of payment of any one of these instalments the mortgagors would pay interest on the defaulted instalment at the rate of one pan of betelnut par rupee per month. The evidence on record shows that a pan of betelnut at the time when the contract was entered into was, worth from 2 annas to 4 annas. The interest accordingly chargeable on a defaulted instalment was under the bond from 150 to 300 per cent. The plaintiff however in the suit charged interest at 1 anna per rupee per month, that is 75 per cent per annum. There were various defences on the merits but we are concerned with one which relates to a question of law, that the plaintiff is not entitled to claim interest at the bond rate or even at the rate claimed in the suit, under Section 74, Contract Act. The Subordinate Judge in the trial Court hold that the stipulation was not by way of penalty and. decreed the suit in full. The learned District Judge on appeal held that it was doubtful if the stipulation about interest could be brought within the strict wording of Section 74, Contract Act, but as the rate of interest was certainly extortionate ha in the exercise of his equitable discretion, reduced it to 25 per cent per annum.

(2.) The bond shows that the mortgagors borrowed 50 maunds of paddy worth Rs. 200 at Rs. 4 a maund. One of the defences was that the paddy at the date of the bond was selling at the rate of Rs. 2 or Rs. 2-4-0 a maund and the price on the data on which the bond was executed was fixed at Rs. 4 in consideration of future interest and profit to the mortgagee. The trial Court upon the evidence on the record found that the defendant had failed to prove that the price of paddy was at the data of the bond less than Rs. 4 a maund. It accordingly held that the bond was for the proper price of the quantity of paddy lent. The defendants-were appellants in the lower appellate Court and it does not appear that this question was raised before the District Judge and therefore we have to accept the finding of the trial Court that the bond was executed for the proper price of the paddy lent.

(3.) We are thus invited to consider in this case the question as to whether the stipulation for interest is in the nature of penalty within the meaning of Section 74, Contract Act. We are not concerned with cases where there is stipulation for a double rate of interest, namely, one rate of interest if the amount lent is paid within a certain period and a higher rate if it is not paid within that period, either from the date of the bond or the date of default. On this question there was considerable divergence of opinion, some cases holding that if the increased rate of interest was payable from the date of the bond it was penalty under Section 74 as it stood before its amendment in 1899, some others holding that where the increased interest was payable from the date of default it did not coma within the wording of that section. Mackintosh V/s. G. C. Gore [1883] 9 Cal. 689. In this state of the case law the legislature intervened and in 1899, Section 74, Contract Act, was amended by insertion of certain words in the body of the section and an explanation. In the body of the section the words added ware if the contract contains any other stipulation by way of penalty." The explanation added was to the effect that a stipulation for increased interest from the data of default may be a stipulation by way of penalty." The amendment in 1899 did not touch the question before us, namely, whore originally no interest is stipulated but it is provided to run from the data of default. The question was however considered in several cases before the amendment of 1899. In my judgment the law, so far as this question is concerned, was left in the state in which it was before the amendment for it did not interfere with the law as understood before it with reference to a contract ?where interest was not chargeable for a certain period and was chargeable only on default. I cannot persuade myself to hold that the explanation added by the amending Act of 1899 covered a ease of this nature, for it clearly says that a stipulation for increased interest from the date of default may be a stipulation by way of penalty. In a case like the one before us the interest charged is not "increased" interest but it is charged for the first time from the date of default and there is only one rate of interest whereas the explanation contemplates two rates, one lower and the other higher. In the case of Najaf Ali Khan V/s. Muhammad Fazal Ali Khan A.I.R. 1828 All. 255 I find that one of the learned Judges of the Allahabad High Court took the view that the explanation covered a case like the present. But when the law speaks of a particular kind of contract it is not permissible to say that it includes other contrasts also but not of the same nature, on the principle of expressio unius est exclusio alterius.