MOHAMMAD MEHDI Vs. PAMMA LAL

JUDGEMENT

(1.) This is a defendants's appeal arising out of a suit brought by the respondents against him for recovery of Rs. 21,000 principal and Rs. 7,546-0 6 interest, total Rs. 28,546-0-6, on the basis of five hundis, dated 15 Kartik Sudi, 1996 Sambat (equivalent to 26 November 1939). The suit has been decreed in full with costs and future interest at 6 per cent. per annum.

(2.) The only point raised in appeal is that the learned Subordinate Judge was wrong in refusing to re-open the transactions between the parties under Section 8, Money-lenders Act, and relieve the debtor of the whole liability for interest in excess of 12 per cent. per annum simple. It is pointed out that the transactions between the parties date back at least as far as the year 1930 when three hundis were executed for a total sum of as. 10,500. The balance of the amount represents interest at 12 per cent. per annum in part compound with yearly rests. Thus, the major portion of the amount claimed represents interest.

(3.) What actually happened was that roughly every three years an accounting was made between the parties, and interest at 12 per cent. was added to the amount found due, and fresh hundis were executed for the total. Thus, the first accounting was in Asin, 1990 Sambat, when three fresh hundis were executed for us. 5000 each, the total of Rs. 15,000 representing Rs. 10,500 with interest. Again on 5- 101936 (1993 Sambat) there was a fresh accounting, and the total dues with interest were found to amount to Rs. 21,042. On this occasion, however, the appellant paid up the interest of Rs. 6.42 in cash, and executed three hundis for the principal Rs. 15,000. Then came the last accounting when the hundis in suit were executed on 26-11-1939, for a sum of Rs. 21,000. It is not disputed, however, that on that occasion some of the consideration, probably a few hundred rupees, was actually advanced in cash. 4 The learned Subordinate Judge held that Section 8, Money-lenders Act, was not applicable, because it relates only to loans advanced before the commencement of the Act in May, 1939. The hundis of November, 1939, must be deemed to be the loan advanced, and as they were after the commencement of the Money-lenders Act, Section 8 could not apply. The learned Subordinate Judge, however, is no doubt thinking of the rulings which relate to Section 7 of the Act, in which the wording is different. In the Pull Bench case of this Court, Deo Nandan Prasad Vs. Ram Prasad A.I.R. 1944 Pat. 303, where it was held that for the purposes of Section 7, "the amount of loan mentioned in or evidenced by such document" must be the amount mentioned in the document upon which the suit is brought. It was further pointed out, at page 681, that having regard to the nature of the provisions in Section 8, the word "loan" in the section must be used with respect to the original loan, and not the final transaction. Section 8 speaks only of the loan advanced, whereas Section 7 says "the amount of loan advanced, or, if the loan is based on a document the amount of loan mentioned in, or evidenced by such document," the amount of loan evidenced by the document thereby being carefully distinguished from the amount of loan advanced. Moreover, Clause (b) of Section 8 clearly shows that the Legislature contemplates that the transaction can be reopened notwithstanding any agreement purporting to close previous dealings and to create a new obligation. There can be no doubt, therefore, in my judgment, that it was open to the learned Subordinate Judge to apply Section 8 had he thought it proper. 5. It is another matter, however, whether Section 8 should be applied. That must depend upon the circumstances of the particular case. As has been frequently pointed out, Section 8 is discretionary. That suggests that the Legislature never contemplated that it should be applied in every case simply because the amount of interest charged might be in excess of 9 per cent. simple in the case of a secured loan, or 12 per cent. simple in the case of an unsecured loan. There must clearly be, in the opinion of the Court, something in the particular transaction, beyond this, to justify the application, of the section Such circumstances might be anything unconscionable in the terms of the loan, or evidence that the interest was seriously in excess of the current commercial rate; any unfairness in the transactions, or harshness or unreasonableness on the part of the money-lender; possibly even poverty, humble circumstances, or the simplicity of the debtor. Where none of these features is present, the Court has had no hesitation in the past to refuse to apply Section 8, even when the interest has been in excess of 12 per cent, simple, or has been compound. Such cases are, for example, Thakur Prasad V/s. Ajodhya Prasad Chaudhury A.I.R. 1939 Pat. 490, where Rowland, J. said: In conclusion, we were asked to take into consideration the provisions of the Bihar Money-lenders Act, 1938, and to reduce the amount of interest. But the rate of interest which is 12 per cent. simple does not contravene the Act. It is said that successive renewals of handnotes have had the effect of charging compound interest and that in such a case Section 12 (now Section 8) empowers the Court to re-open the transactions. The Court is not, however, bound to do this, and we are not disposed to do so in this case in which the lender firm appears to have behaved reasonably and forbearingly towards their debtors. 6 Again, in Jai Gobind Singh V/s. Pachkauri Ram A.I.R. 1939 Pat. 555, which was a case of secured debt, namely, simple mortgages carrying compound interest at Re. 1-1-0 per cent. per mensem and one per cent per mensem with yearly rests, Harries, C.J. said: Section 12 (now Section 8), Bihar Money Lenders Act, gives a complete discretion to the Court in the matter. Upon the facts of this case there is nothing which would justify the Court in the exercise of its discretion in re-opening the accounts. Harihar Gir V/s. Musammat Dulhin A.I.R. 1940 Pat. 432 was another case of the same type. 7. In Sunder Mull V/s. Satya Kinker Sahana A.I.R. 1928 P.C. 64 the Privy Council had before it a case of a suit brought to enforce a mortgage executed to secure a loan with compound interest at 1 per cent. per mensem with yearly rests, that is to say, 15 per cent. per annum compound interest. Their Lordships, after remarking on the fact that there was no evidence to show that this was in excess of the prevalent commercial rate, said: There is no rule, which their Lordships can discover, which binds them, when the terms of a loan are challenged, to lean to their reduction, or to presume that simple interest must always be judicially preferable to compound interest, or that rates, because they might seem high here, must be unreasonable in India. Compound interest is common and may often be necessary and proper in India under the circumstances of that country. They add with regard to the finding of the Subordinate Judge: For the purposes of the point in question there is no substantial difference between his finding--that the terms are not hard, unconscionable or penal--and a finding that they were reasonable commercial terms. 8. In the Patna Full Bench case to which I have already referred, Deo Nandan Prasad V/s. Ram Prasad A.I.R. 1944 Pat. 303 it was pointed out that before applying Section 8 the Judge should first consider whether the circumstances of the case are such as to justify its application, and should give his reasons for applying the section. It should not be applied arbitrarily, and need not be applied in all cases. 9. Let us apply these principles to the circumstances of the present case. There is certainly no evidence that 12 per cent. compound interest was in any way in excess of the prevalent commercial rates. The greater part of the interest had accumulated before 1939 when the Bihar Money- lenders Act came into force. Mr. Sarju Prasad for the appellant concedes that at least before the enactment of the Money-lenders Act 13 per cent. compound was a quite normal rate of interest between money-lenders and their clients. 10. The debtor in the present case is a man of substance. He is no simple villager. It can hardly be contended that he could not have paid off the loan at any time had be wanted to do so. He was given extensions of credit at his own request and to suit his convenience, the creditors thereby being kept out of their money for a long period of years, including the war years when the holders of money were in a position to make large profits out of it. 11. The circumstances of the present case show that the creditors have been quite reasonable and fair throughout. Our attention has been drawn to an item in the accounts for 1936, showing that on at least one occasion money due was remitted, namely, a sum of Rs. 400. More important still, a letter, dated 26-11-1989, hag been put in, and it shows that at that time the parties came to an agreement very favourable to the debtor. It was agreed that should the appellant within two months choose to execute in favour of his creditors a deed of sale in respect of any mauza in the district of Patna which might be selected by them, then in that case a sale deed would be executed fixing Rs. 14,500, as the consideration money and the creditors would remit the entire balance of Rs. 6500. The creditors further agreed that if they did not like any mauza they would grant a remission of Rs. 6500, in any case should the debtor pay down the remainder of Rs. 14,500, in cash within two months. If neither the sale deed was executed nor the cash payment was made, then it was provided that the creditors would be competent to put forward a claim for all the hundis for Rs. 21,000, and realise the same. It is admitted that the debtor did not take advantage of this very fair offer. Consequently, he has only himself to thank if he has not obtained that remission and has been sued for the entire sum of Rs. 21,000, covered by the hundis. 12. In my view, having regard to the decisions which I have cited and the principles which have been applied in such cases, there is nothing in the circumstances of the present case which would justify an order for reopening the entire transaction under Section 8 and remitting the compound interest. There is, of course, no question of remitting any other interest, as the interest charged is 12 per cent. the rate specified in Section 8. Having regard to the conduct of the respondents in the past, which is evidenced by the record, I myself feel little doubt that if the appellant even now makes them a fair and reasonable offer in cash it will not be regarded unsympathetically, especially as it is well-known that the path of a decree-holder in this country, who has to realise his dues through execution proceedings, is no easy one. Though I drop this hint to the respondents, I am afraid that the appeal must be dismissed with costs. Ray, J. 13. I agree.