HABIBUN NABI Vs. BALDEO NARAYAN SINGH

JUDGEMENT

(1.) The ancestors of the defendants executed in favour of the ancestor of the plaintiffs two kabuliyats in the year 1884. According to the terms of the agreements the lessees took a permanent mukarrari of two annas eight pies share from each of the lessors in mauza Sadikpur and agreed to pay Rs. 30 on account of haqazri money in three kists. It was further stipulated that in the event of three consecutive kists being in arrears the lessees would pay interest at 12 per cent per mensem. In the present suits the plaintiffs claimed rent from the Bhado kist of 1329 to the Sawan kist of 1335 F.S. with interest at the rate stipulated in the agreements. The first Court decreed the claim for rent but held that the stipulation for interest at 12 per cent per mensem was by way of penalty and therefore, declined to award interest at the rate claimed.

(2.) The Court held however that the plaintiffs were entitled to reasonable compensation and assessed the compensation at 12 par cent per annum. The plaintiffs appealed to the Subordinate Judge who confirmed the decision of the trial Court and dismissed the appeal. In second appeal it is contended on behalf of the plaintiffs that Section 74, Contract Act, which has been applied by the Courts below, has no application to the facts of the present case. It is conceded that if the agreements had provided for a certain rate of interest in case of a single default and an enhanced rate of interest in the event of consecutive defaults, the provision for enhanced interest in the event of consecutive defaults might have been a stipulation by way of penalty in view of the explanation to Section 74 of the Act. But it is argued that in this case there was no stipulation for enhanced interest, as there was no interest at all payable except in the event of default in three consecutive instalments.

(3.) I am afraid I am unable to appreciate the distinction which the learned advocate for the appellants has sought to draw between the two sets of circumstances. If an agreement for enhanced interest in the first set of circumstances may be a stipulation by way of penalty, it seems to me quite clear that a stipulation for the payment of interest on the happening of a certain event may be a penalty although interest was not otherwise provided for. It was next contended that a stipulation for interest at 144 per cent per annum is not necessarily a stipulation by way of penalty. Whether a certain stipulation is by way of penalty must depend on the circumstances of each case.