YADAORAO GANPATRAO KADU Vs. RAMRAO BALASAHEB DHOTE

JUDGEMENT

(1.) THESE appeals are cross-appeals arising out of the same suit. The plaintiffs claimed to recover a sura of Rs. 24,171-10-1 on a promissory note, and the claim was decreed to the extent, of Rs. 22,516 6-1. No interest pendente lite was awarded, nor any interest from the date of the decree till realisation. The plaintiffs had asked in their plaint for interest from the date of decree till realisation, but did not claim interest pendente lite. They now claim that they should have been awarded interest on both counts. The defendant's appeal questions the correctness of the trial Court's decision in its application of the principles of the Reduction of Interest Act and contends that after 1st January 1932, interest should not have been allowed at the rate of Rs. 10 per cent. simple as has been awarded in the trial Court, but should have been awarded at the rate of Rs. 5 per cent. compound as the money was borrowed at compound interest. There was also a plea that there had not been compliance on the part of the plaintiffs with Section 8, Money-lenders Act, and that consequently interest and costs should not have been awarded.

(2.) WE may deal first with the defendant's appeal which is No. 59 of 1939. According to the plaintiffs-and this is not disputed-the money transactions began on 26th June 1931 when Rs. 8600 were advanced. On 28th September 1932 a receipt (Ex. P-1) was executed in which the defendant admitted that a sum of Rs. 9830, principal and interest, was due from him and that he had taken a further sum of Rs. 1170 in cash and was liable for Rs. 11,000. The receipt recites that he would pay interest on the above amount at the rate of Re. 1 per cent, per month. Admittedly nothing had been paid. On 17th. July 19'35 a promissory note (Ex. P-2), which is the basis of this suit, was executed. It recites that on taking accounts on the receipt Ex. P-l a sum of Rs. 15,244-2-6, principal and interest, was; due on that account and that a further sum of Rs. 685-14-8 was due on account of a hand loan which had been taken since. These are four items referred to in the plaint totalling Rs. 500, advanced between 19th November 1932 and 18th December 1982. It was also stated that Rs. 3069.15-3 ]had been taken in cash on the day of the promissory note, and thus the liability amounted to Rs. 19,000. In addition to this, the promissory note mentions that 1091/4 khandis of juar with sawai was also payable. Again the defendant intimated that he would pay interest at the rate of Re. 1 per cent, per month. The plaintiffs in suing claimed the contract rate on the loans of Rs. 8500 from the dates on which the sums were borrowed, in June 1931 up to the end of that year and afterwards from 1st January 1932 till when the interest was liable to be reduced under the provisions of the Reduction of Interest Act of 1936, interest was claimed at Rs. 10 per cent. per annum which was the maximum permissible under that Act. The Act was in force when the suit was brought. It is to be noted that the plaintiffs do not say in the plaint in para. 1, where the sums lent are set forth, whether the interest was simple or compound. In respect of the grain debt the plaint frankly claims compound interest at 25 per cent. The defendant, while claiming that the compound interest for the grain debt was extortionate, contended that the accounts of the cash transactions showed that the plaintiffs had been charging compound interest throughout, and that he was liable only to pay compound interest at Rs. 5 per cent. per annum under the terms of the Reduction of Interest Act and not Rs. 10 per cent. simple. The defendant also pleaded that the plaintiffs had not maintained or submitted annual accounts of the defendant's indebtedness to them as the Money-lenders Act requires and finally asked for instalments. The plaintiffs replied that the defendant's complaint that interest had been charged at compound rate throughout was meaningless and that they had given details of the amounts advanced from time to time, and except for a brief period of six months had charged interest only as the Seduction of Interest Act allowed. It is obvious that in their rejoinder the plaintiffs evaded the issue whether they had in fact charged compound interest on the transactions or no, and an additional statement was called for from them. In that statement dated 3rd January 1939 the plaintiffs averred: The defendant had agreed to pay compound interest on the loan advanced hence the interest accrued was included in the principal before the sum was carried forward in the next year treating the sum as principal opening balance.

(3.) THE learned Additional District Judge is incorrect in stating on the question whether the defendant can claim that interest should be charged at Rs. 5 per cent. compound that under the Reduction of Interest Act it is open to the creditor either to claim interest at 10 per cent. simple or 5 per cent, compound. In Abdul Hussain v. Ratanlal 1942 N.L.J. 42, Abdul Hussein v. Ratanlal a Divisional Bench of this Court held that the nature of interest to be awarded under the Reduction of Interest Act is to be determined according to the agreement between the parties, and that it is not permissible to change from one side of the schedule to the other because one works out at a higher amount than the other. It is true that the learned Judge did award the interest in consonance with what be found to be the agreement, and it now remains to be seen whether his finding on the agreement is correct. We may here remark that we cannot agree with the contention raised by the learned Counsel for the defendant when he says that it is permissible to arrive at a finding as to the nature of interest to be given irrespective of the agreement between the parties, and in so far as the decision of a Single Judge in Narayandas v. Amrut Waman 1941 N.L. 3. 672, Narayandas v. Amrut Waman would appear to uphold him although the remarks on which reliance is placed are obiter, we consider that the later decision of the Divisional Bench is preferable.