N PL CT MUTHIAH CHETTIAR Vs. MINOR RAMAMURTHI

JUDGEMENT

(1.) This is an appeal by a mortgagee who sued to enforce two mortgages of February 1929. The contesting respondents are purchasers of the mortgaged property. On March 4, 1927, they deposited in Court under Section 83 of the Transfer of Property Act a sum of Rs. 10,001 and odd representing the amount due on the mortgage bonds if interest should be calculated at 12 per cent, per annum simple interest, from date of default in payment of interest as per terms of the bonds. But the mortgagee claimed that he was entitled as per terms of the bond to compound interest at 12 per cent. per annum from the date of default. This difference between the parties made the proceeding under Section 83 of the Transfer of Property Act infructuous, as the mortgagee was not prepared to take the deposit amount in full discharge of his claim, Hence the present suit.

(2.) The learned Subordinate Judge has held that the provision for payment of compound interests at 12 per cent, per annum from date of default is penal as the original contract was only for payment of simple interest at 9 per cent. per annum. In this view he has also held that the amount deposited in March 1927 was the amount properly payable to the mortgagee on that date and has accordingly disallowed any further interest to the mortgagee. He has also disallowed the mortgagee's costs of his action and directed him to pay defendants Nos. 6 to 8 their costs.

(3.) In this appeal, three points were pressed before us: (1) that taking the provision for payment of compound interest at enhanced rate to be penal, a like amount should nevertheless be allowed in the circumstances as reasonable compensation; (2) it was next contended that even on the view of the learned Subordinate Judge the plaintiff is only entitled to simple interest at 12 per cent. per annum; the principle of Section 84 of the Transfer of Property Act ought not to be applied to a case like this to deprive the mortgagee of subsequent interest at that rate. Lastly, (3) it was argued that the lower Court was not justified in disallowing the plaintiff's costs of his action and directing him to pay costs to defendants Nos. 6 to 8. We are unable, to accede to any of these contentions.