AVATHANI MUTHUKRISHNIER Vs. SANKARALINGAM PILLAI

JUDGEMENT

(1.) The facts of the case are fully and clearly set forth in the judgment of my learned brother, which I have had the advantage of perusing. The only point with which we are concerned is whether the Subordinate Judge was entitled to reduce the rate of interest specified in the suit bond.

(2.) As regards the preliminary objection that the matter is covered by the oath taken by the plaintiff and that the defendant is thereby precluded from asking for relief against the high rate of interest, I have no hesitation in agreeing with the learned Judge who disposed of the revision petition. Apart from this, the question whether the decree of the Subordinate Judge, in so far as it modified the terms of the contract as regards interest, should be upheld, is one of some difficulty; and, with all diffidence, I may say that it seems to me of the utmost importance to observe the distinction between what a court may do and what a court should do. The matter is considered from both points of view by the learned Judges in Sankaranarayana Vadhyar v Sankaranarayana Aiyar (1901) I.L.R. 25 M. 343 and while setting forth cogent reasons for refusing to modify the contract terms as to interest merely because of the high rate provided for, they further lay down that section 74 of the Contract Act does not authorize a court to interfere in cases where no interest at all is provided for except in case of default of payment. If this latter view is correct, there can be no doubt that the Subordinate Judge in the present case was wrong; the facts of the present case are practically identical with those of the reported cases. But, with all deference, I agree with my learned brother in doubting whether any distinction should be drawn between such cases of enhancement of interest in default. I do not understand their Lordships to mean that a case of the latter description could not come within the purview of Section 74 of the Contract Act, however inexpedient it might be to grant relief; and, looking to the very wide wording of the body of the section, I cannot see why an agreement to pay a high rate of interest in default of payment of a specified sum on a specified date should not be regarded as a stipulation by way of penalty merely because no interest would have been payable except in case of default.

(3.) In this view, I agree to the reference proposed by my learned brother. Whether relief should have been granted is a very different matter. I am fully alive to the reasoning of the learned Chief Justice and Dairies, J. in the case referred to, and to the dangers of holding a rate of interest to be unreasonable merely because it seems to the court (possibly in ignorance of all the facts of the case) to be unduly high. Very similar views are expressed by two benches of the Calcutta High Court-Satish Chunder Giri v. Hem Chunder Mookhopadhya (1902) I.L.R. 29 C. 823. and Umesh Chandra Khasnavis v. Golap Lal Mustafi (1903) I.L.R. 31 C. 233, though in neither case was the applicability of Section 74 of the Contract Act considered, but only the question of whether relief should be given on general principles of equity. To what extent weight should be given to these views or to the doctrines laid down in English cases referred to by my learned brother is a matter, which must, in my opinion, be decided with primary reference to the facts of each-individual case in order to determine whether the discretion vested in the court by Section 74 (if it be so vested) should be exercised, and, if so, to what extent. Sadasiva Aiyar, J. 1. The plaintiff sued on an instalment bond dated the 24th April 1907 for Es. 71-0- 0 payable at i a rupee per month in 142 monthly instalments. (Even from the monthly instalment of 8 annas, the defendant seems to have been entitled to deduct the profits on the defendant s two shares in the auction chit conducted by the plaintiff and to have been bound to pay only the balance). The defendant paid up 29 instalments of the 142 instalments regularly. He made default in paying the 30th instalment of 8 annas (due on the 5th January 1908) after deducting 1 anna 4 pies due as profits. The instalment bond provides that on such default, the defendant should pay interest at 3 pies per diem on the 8 annas for the 7 days of grace allowed to him to pay up the defaulted instalment. As he did not so pay up the defaulted instalment, the total amount of all the remaining instalments became at once payable according to the terms of the bond with the exorbitant interest of 1 pie per rupee per day which is a little more than 190 per cent, per annum. The plaintiff accordingly sued for recovery of the Rs. 51-8-0 due for the 103 defaulted instalments plus Rs. 153-12-0 as interest for about 19 months. 2. The defendant seems to have raised two defences. (a) that he had made further payments than were admitted by the plaintiff, and, (b) that the rate of interest was penal and should be relieved against. 3. The defendant challenged the plaintiff to take oath, evidently on the first head of the defence and the plaintiff took oath accordingly. The Subordinate Judge had therefore to find that the defendant did make default from the 30th instalment of the bond (58th from the beginning of the chit), but on the question of the rate of interest the Subordinate Judge evidently held that the rate of 190 per cent, per annum was a penal provision and reduced it to 24 per cent, and decreed for the amount arrived at on such calculation.