VENKATA HANUMANTHA BHUSHANA RAO GARU Vs. GADE SUBBAYYA

JUDGEMENT

(1.) These consolidated appeals arise out of a suit brought to recover money on a mortgage by a sale of the mortgaged property. The mortgage-deed was executed on 13 July 1911, in favour of one Nagabhushanam, the predecessor in interest of the plaintiff, by a Hindu widow Seshamma, who has inherited her husband's property, for a widow's estate. The trial Judge dismissed the suit, but on appeal the High Court at Madras has decreed the claim, but has disallowed compound interest on the ground that the stipulation for the payment of compound interest at an enhanced rate was in the nature of a penalty. Both the parties have appealed to His Majesty in Council, and after considering the arguments advanced on their behalf, their Lordships are of opinion that there is no substance in either of the appeals. The relevant facts may be shortly stated. The indebtedness of the widow Seshamma commenced in January 1883, when she entered into a compromise with the mortgagee in order to settle his claim against her husband. She promised to pay Rs. 5,000 in five years with interest thereon at the rate of 10 annas per cent. per mensem, and hypothecated a village as security for the principal sum and interest. In the event of her failure to pay the debt within the prescribed period, the creditor was entitled to take possession of the village and realise its produce, for which he was to credit her with a lump sum of Rs. 500 every year. It was agreed that after obtaining possession he should retain it until the whole of the debt was discharged.

(2.) The terms of this compromise were embodied in a decree, which was made against the widow. On behalf of the appellant, Bhushana Rao, who is the son adopted to her husband by the lady, it is conceded that this decree cannot be impeached and must be held to be binding on the estate. In 1888, when the period of five years had expired, the debt remained unpaid; and the widow had either to deliver possession of the village or to enter into a fresh contract. She did not surrender the village, as the rents and profits thereof were practically the only income available for her maintenance. It appears that the estate, inherited by her from her husband consisted of that village and a part of another property, for which she was receiving from her brother-in-law about Rs. 200 per annum as her share of the income.

(3.) In these circumstances she retained possession of the village, but satisfied the decree by granting the creditor, on 28 March 1888, a simple mortgage of the village for Rs. 5,000, which she promised to pay in five years by instalments with interest at 11 annas per cent. per mensem, to be enhanced to one rupee and four annas per cent. per mensem on arrears of instalments. It is to be observed that under the compromise decree the creditor was, as found by the High Court, entitled, in the event of default, to take possession of the village and to appropriate its income to the principal debt and interest thereon until about 1907, but this mortgage could be redeemed within a shorter period and was without the liability to deliver possession of the property.