MT RUKMINA Vs. MOHIB ALI KHAN

JUDGEMENT

(1.) This is a defendants appeal arising out of a suit to recover the sum of Rs. 57,486 on the basis of a mortgage. On 6 January 1914 one Parmeshar Rai, the predecessor-in-interest of the defendants, executed a mortgage for Bs. 2,699 in favour of Wazir Khan and others, the predecessors-in-interest of the plaintiff. The principal amount was to carry compound interest at the rate of 25 per cent, per annum with six monthly rests. The defendants pleaded inter alia that the mortgage had been executed under undue influence and that the rate of interest was excessive. The trial Court decreed the suit. The only point that has been pressed by the learned Counsel for the appellants in his arguments before us is that the rate of interest is unconscionable and is open to interference by this Court under Section 16, Contract Act.

(2.) The learned Subordinate Judge decreed the suit in full holding that the rate of interest was not excessive having regard to the rate of interest prevalent in the district of Basti. We are of opinion that a rate of interest of 25 per cent, compound is prima facie an excessive rate of interest in any district. The Usurious Loans Act of 1918 does not apply in the present case, but we are certainly entitled to look into the circumstances in which the money was borrowed in order to determine whether the contractual rate of interest should be upheld or whether the agreement to pay interest at such a high rate was the result of the lender being in a position to dominate the will of the borrower within the meaning of Section 16, Contract Act, and whether he did take advantage of that position in order to extort an unconscionable rate of interest. Learned Counsel for the appellant has referred us to the case of Dhanipal Das V/s. Maneshar Baksh Singh (1906) 28 All. 570. The circumstances of that case have certain points of similarity to the circumstances of the present case. It is really only necessary to set out the circumstances under which the money was borrowed by Parmeshar Rai for it to be apparent that the lender was in a position to dominate the will of the borrower and that he used that position to obtain the borrower's agreement to pay interest at this high rate. In the years 1909 and 1911 Parmeshar Rai made a gift of the whole of his property to his son-in-law, Rameshar Rai, and Rameshar Rai's brothers and nephews. He retained nothing for himself but depended entirely on the donees for his maintenance. The donees subsequently illtreated him. They beat him and turned him out of his house. His only possible remedy under these circumstances was to have the deed of gift cancelled. He was old and infirm and he had no means to bring a suit. In these circumstances he approached Wazir Khan who agreed to lend him the sum of Rs. 200 at 12 per cent, simple interest. This amount was borrowed on 11 June 1912 and the suit was instituted in that year. Wazir Khan was appointed by Parmeshar Rai as his mukhtar-i-am fnr the prosecution of the suit. On the 23 January of 1913 Parmeshar Rai, borrowed a further sum of Rs. 200 from Wazir Khan again at 12 per cent, per annum simple interest. On 16 July 1913 Parmeshar Rai executed another bond in favour of Wazir Khan for the sum of Rs. 1,800. This amount includes the amounts previously borrowed by him from Wazir Khan and further amounts borrowed from him for the purposes of the suit. The sum of Rs. 1,800 was to carry interest at 24 per cent, per annum simple. On 6 January 1914 the mortgage bond in suit was executed by Parmeshar Rai for the sum of Rs. 2,699. This included the amount due on the bond of 16 July 1913 and a further sum of Bs. 640 taken for the expenses of the appeal in his suit. The property mortgaged was the property that was the subject matter of the suit. It will thus be seen that the amounts lent by Wazir Khan to the appellant from time to time carried an increasing rate of interest starting at 12 per cent, simple interest and ending at 25 per cent, compound interest with half yearly rests.

(3.) These facts which are not disputed are sufficient in our opinion to show that Parmeshar Rai was compelled by his position and circumstances to accept the terms that were offered to him. He was advanced in years and infirm : he was illiterate, he had lost all his property, ho had been turned out of his house and he was in a position of utter helplessness. At first Wazir Khan lent him some money for the suit at a moderate rate of interest; but when Parmeshar Rai was involved in the case and had to borrow more money to carry it to a successful termination ha began to exact successively harsher terms. It is therefore clear that the circumstances in which Parmeshar Rai found himself were such that Wazir Khan was in a position to dominate his will. It is also clear that he used that position to exact unconscionable terms for the loan and therefore the contractual rate of interest is liable to reduction by the Court, on the principles laid down by their Lordships of the Judicial Committee. It only remains to be decided what rate of interest should be allowed on the mortgage bond. It was laid down by a Bench of this Court in the case of Gajraj Singh V/s. Muhammad Mustaq Ali 1933 All 913 that prima facie and in the absence of special circumstances to the contrary, the rate of 12 per cent, per annum simple may be taken as a fair, proper and reasonable rate in a mortgage transaction. It is true that that case was decided under the Usurious Loans] Act of 1918, but it may serve as a guidej in this case also. It was the rate at which, Wazir Khan originally lent money for the suit to Parmeshar Rai, before he felt his position strong enough to demand the higher rates. In our opinion the rate of 12 per cent, per annum simple would be a fair and proper rate of interest in the present case.