SETH AJODHYAPRASAD Vs. SHIVPRASAD

JUDGEMENT

(1.) In the mortgage bond for Rs. 1150 executed on the 11th of October 1907 the mortgagors promised to repay that sum in five years and at the end of each of those five years to pay the interest on it calculated at 12 per cent. per annum. They further promised that if they failed to pay any of those sums of interest punctually, it should be added to the principal and should carry interest at the same rate " till repayment ". No payment was ever made, either of principal or interest. In the lower Court it has been held that the agreement to pay compound interest is " a provision to secure performance of the primary contract ", and not a part of it. That is perhaps correct, but it really makes no difference. On that finding the learned Additional District Judge, acting apparently under Section 74 of the Contract Act, has allowed simple interest at 13 1/2 per cent. per annum on the principal.

(2.) THE decision has no basis in fact or law and is entirely arbitrary. In the first place, it has frequently been pointed out that the only difference between simple interest and compound interest is that the former is interest on money willingly lent and the latter on money not willingly lent. The mortgagees in this case lent the mortgagors Rs. 1,150. At the end of a year the latter had a further sum of Rs. 138 in their hands belonging to the former. If they chose to retain it wrongfully, or did so with the tacit or express consent of their creditors, they are surely just as much bound to pay interest on it as on the Rs. 1,150, if not more so, even if they never made any express agreement to that effect. The same considerations apply to all other amounts of interest that fell due later.

(3.) IN this case the proper rate of interest is undoubtedly 12 per cent. per annum. It is a matter of common knowledge that much higher rates are usual in these provinces, even on loans secured by mortgage, and that was the rate at which the parties themselves agreed interest was to run in the original contract, which was broken.