VENKATACHALLAPATHI AIYAR Vs. THAVASI SERVAI (DECEASED)

JUDGEMENT

(1.) I do not think the Subordinate judge was right in treating the provision for payment of interest at 12 per cent in default of payment on the date fixed in the mortgage bond, as penal. The original rate fixed no doubt is 9 per cent. But it is to be borne in mind that the debts t6 discharge which this mortgage was executed, carried interest at 12 per cent and more. It could not therefore, be said that the mortgagees were not justified in stipulating for payment of a higher rate, if the money was not paid as promised.

(2.) The second question raised by the appeal is one of some importance. It is whether in a mortgage decree for sale interest should be computed on the aggregate amount found to be payable on the date fixed for redemption, that is, consisting of principal, interest and costs, or only on the principal, if the ascertained amount is not paid and property has to be sold in consequence. The matter is now governed by Order XXXIV, Rule 4 Civil Procedure Code, which read along with Rule 2 provides that in case of default the sale proceeds of the property sold shall be applied in payment of what is declared due to the plaintiff for principal and interest on the mortgage and for costs of the suit until the date fixed for payment together with subsequent interest and subsequent costs. This prima facie suggests that the subsequent interest is payable on the aggregate amount and not on the principal-alone. The form appended to this rule, form No. 4 of App. D to the 1st Schedule of the Code clearly proceeds upon this above interpretation. But in forms No. 7, 8 and 9 which are forms of decrees for sale in cases where there are more than one mortgage, on this property, provision is made for payment of such subsequent interest and costs as may be allowed by the court. These forms certainly suggest that the rate of such subsequent interest is left to the discretion of the court and probably also that the court may in a proper case refuse to allow any further interest.

(3.) Before the present Civil Procedure Code, the subject was dealt with in the Transfer of Property Act, and the question arose as to whether the court had the power to allow interest at all for any period subsequent to the date fixed for payment and as to the proper rate. The Privy Council held in Sundar Koer v. Rai Sham Krishen (1906) I.L.R 34 C. 150 that the Calcutta practice of allowing such interest at the court rate, also adopted in this Court, in Subbaraya Ravuthaminda Nainar v. Ponnusami Nadar (1897) I.L.R. 21 M. 864 was right, contrary to the view of the Allahabad High Court in Amolak Ram v. Lachmi Narain (1896) I.L.R. 19 A. 174. Their Lordships at page 161 also observed, "They think that the scheme and intention of the Transfer of Property Act was that a general account should be taken once for all, and an aggregate amount be stated in the decree for principal, interest and costs due on a fixed day, and that after the expiration of that day, if the property should not be redeemed, the matter should pass from the domain of contract to that of judgment, and the rights of the mortgagee should thenceforth depend, not on the contents of his bond but on the directions in the decree. It will be observed that according to the practice explained by the Registrar (that is of the Calcutta High Court), which has been followed in this case, the interest is allowed on the aggregate sum, and not merely on the principal money, and this is right if the mortgagee is treated as a decree-holder or judgment-creditor, but would be wrong if the right to the interest depended on the terms of the mortgage-bond. No doubt this reasoning intended to prove that the contract rate was not to be given, but it contains all the same a clear dictum that the practice in Calcutta of allowing interest on the aggregate sum was right.