VEPA SURAMMA Vs. CHAKKA VENKAYYA

JUDGEMENT

(1.) This appeal arises out of a suit on a mortgage (Ex. A in the case) dated 16 October 1908. Only two questions were raised in the memorandum of appeal: one relating to limitation, in respect of interest accruing due between the years 1908 and 1912 and the other relating to the enforceability by way of charge on the property, or the compensation allowed by the Court in place of the provision in the bond for enhanced interest.

(2.) As regards the first point, Mr. Lakahmanna's argument is that an independent suit for the amount of interest accruing due each year, between the years 1908 and 1912, could have been brought that these claims for interest furnished separate causes of action and therefore his suit brought in 1924 is to that extent barred by limitation. We are unable to agree with this contention. The language of the document shows that interest is payable till the principal amount is paid and ordinarily there is only a single cause of action for both principal and interest as from the date when the principal becomes payable. There is no doubt a further provision in the document fixing a date for payment of interest annually, but it is not reasonable to construe this as giving an independent cause of action for the claim for interest at the end of each year. This has obviously been put in only for the purpose of entitling the mortgagee to claim interest upon interest, if the interest is not paid on the due dates. This argument therefore fails.

(3.) The other argument on behalf of the appellants was put as follows : Under the explanation to Section 74, Contract Act, the stipulation for increased interest from the date of default may be a stipulation by way of "penalty" and the lower Court has in this case in exercise of its powers under Section 74 reduced the enhanced rate of interest payable upon interest to 12 annas per annum from the agreed rate of 13 annas; the amount thus allowed by the Court is not really a claim for interest under the bond but one by way of "damages" and that in the respect of this amount no security created by the document can be available. In support of this proposition Mr. Lakshmanca referred to the case in Motan Mal V/s. Mahomed Bakhsh 1922 Lah. 254. The Full Bench there took care to point out that neither by the most liberal interpretation of the contract nor even by any kind of implication therefrom, would it be possible to say in that case that interest was payable under the contract. Therefore they treated it as a claim for damages pure and simple. In that sense, it would not really form part of what is spoken of in the Transfer of Property Act as "mortgage money" and therefore it cannot be enforced by way of charge on the property. But that is not the position here. The interest upon interest is clearly part of the contract; the fact that under Section 74, Contract Act, the Court is given power to reduce that rate under certain contingencies does not make the interest at the reduced rate any the less a claim under the Contract Act. No doubt, the word "penalty" is used under Section 74, Contract Act, when speaking of "enhanced interest" but it is not in the sense of a claim dehors the contract, because the correlative expression "liquidated damages" well known to the English law and used in the Contract Act prior to 1899, has always been understood to mean a provision made in the contract itself. Therefore the mere use of the expression penalty or damages ought not to be understood as amounting to a claim outside the contract.