NILMONEY SINHA Vs. HARDHAN DAS

JUDGEMENT

(1.) This is an appeal on behalf of the defendant in an action for enforcement of a mortgage security executed by him in favour of the plaintiff-respondent on the 17 September 1893. The mortgage bond recited that the mortgagor borrowed Rs. 100 and covenanted to give five maps and six shaleys of good paddy as interest in the month of Pous every year. He further agreed that if there was default in payment of paddy in the shape of interest he would pay 3 shaleys of paddy as interest per map per annum. There was also a covenant that the principal amount would be repaid on the 12 April 1894. The deed recited that certain properties were mortgaged to secure payment of the principal, interest in kind, as well as interest on such interest. The first instalment of interest fell due in Pous 1300, that is, on the 12 January 1894. The substantial points in controversy between the parties are three in number: (1) whether the claim for interest which accrued more than six years before the suit is barred by limitation, (2) whether the claim for the first instalment of interest which accrued on the 12th January 1894 is barred by limitation, (3) whether the agreement to pay interest on interest at a rate higher than the original rate of interest is in the nature of a penalty and consequently unenforceable. The Courts below have concurrently decided the first question against the defendant, but upon the second and third questions the Subordinate Judge and District Judge have disagreed. The former decided both the second and third questions in favour of the defendant; the District Judge has answered them in favour of the plaintiff. On behalf of the defendant it has been urged before me that all these three objections ought to have been allowed in his favour.

(2.) In support of the first ground it has been urged that article 132 of the second schedule of the Limitation Act is not applicable and that the suit is governed so far as the claim for interest is concerned by article 116 or article 120. The learned vakil for the appellant has contended that this is not a suit to enforce payment of money charged upon immovable property because the interest was payable not in cash but in kind. In substance his contention is that as interest was payable in kind it cannot be said to be money charged upon immovable property. In my opinion this contention is founded upon a narrow construction of article 132. The mortgage bond shows that the interest payable upon the debt was charged upon immovable property, though the interest was described as payable in paddy. There can be no question that upon default of delivery of paddy the mortgagee would be entitled to the market-value thereof. The only effect of the covenant was to make the amount of interest vary with the price of paddy. When the deed recited that the land was given to secure payment of interest in kind, the substance of the transaction was that the land was made security for the value of the paddy, because upon failure to deliver the paddy the mortgagee would be entitled not to claim specific paddy but merely to recover the price thereof; in other words, the parties contemplated that should it be necessary for the mortgagee to enforce his security the land would be liable for the value of the paddy payable as interest. In my opinion, it is a reasonable construction of article 132 to hold that in a case like this the interest which was the value of the paddy, though variable from time to time was charged upon the mortgaged premises. The view taken by the Courts below concurrently upon this point is correct and the first ground cannot be supported.

(3.) The second ground raises the question whether the chum for the first instalment of interest as also the interest thereupon is barred by limitation. The mortgage bond shows that although the interest was payable every year in Pous and consequently the first instalment became due on the 12 January 1894, the principal did not become repayable till 12 April 1894. So far, therefore, as the first instalment was concerned it became payable independently of the principal anterior to the date fixed for repayment thereof. As this interest was expressly charged upon the mortgaged premises article 132 is applicable and the suit to enforce payment thereof ought to have been brought within 12 years from the date when it became due. As the suit was not commenced till the 12 April 1906, the claim for the first instalment of interest is obviously barred by limitation. The learned District Judge proceeded on the ground, that as the claim for principal was not barred by limitation at the date of the suit, no portion of the claim for interest could be so barred. No doubt this may be so in the case of ordinary bonds where no distinction is made between principal and interest and different dates are not fixed for their payment. But where, as here, the repayment of the principal is postponed and the interest is made payable on an earlier date than the principal and both are expressly charged upon the mortgaged premises the mortgagee would obviously be entitled to sue for interest as soon as it fell due though the principal amount had not yet become recoverable. In this view it is quite conceivable that the claim for one instalment of interest may be barred although the claim for the principal itself is not barred. Cases are not unknown in which it has been held that the principal amount may be recovered though recovery of the interest for more than six years is barred by limitation, [see In Re: Walker L.R. 7 Ch. App. 120]. I must hold, therefore, that the claim for interest in respect of the first instalment which accrued on the 12 January 1894 is barred by limitation. It is obvious, that no interest can be recovered upon this first instalment of interest, for it is well settled that no interest can be recovered if the suit for the principal amount is barred by limitation. Hajee Syud Mahomed V/s. Mussamat Ashrutffoonnissa 5 C. 759 at p. 765. The doctrine that when the principal right is extinguished by limitation the extinction of accessory rights follows as a matter of course has been applied in other cases : see for instance, Tammirazu Ramazogi v. Pantina Narsiah 6 M.H.C.R. 301. The reason for the rule is thus stated by Savigny in a passage in his System Vol. V, Section 311, quoted by Mr. Justice Holloway in Valia Tamburatti V/s. Vira Rayan 1 M. 228: "When the principal demand is lost by prescription, action for all sums of interest in arrears are barred with the principal, even when these would primarily arise at a very recent time. The ground of this apparent anomaly is to be found in the accessory nature of these liabilities which would render the pursuit of them after the loss of the main action a contradiction in terms." The same view was taken by Tindul, C.J. in Hollis V/s. Palmer 2 Bing. N.C. 713. In answer to the contention that the remedy for the principal may be barred without affecting the remedy for interest which accrues de die is diem and is a continuing or constantly renewing cause of action, the learned Chief Justice ruled that interest has always been deemed a mere accessory of the loan and when the demand for principal is barred the accessory falls along with it. The learned Chief Justice further observed that in cases where there is an express contract to pay interest independently of the principal, there may be room for the argument that you may sever the contract to pay interest from the contract to pay the principal. I refer to this last observation in support of the view that the first instalment of interest due on the 12 January 1894 may very well be barred by limitation though the claim for the principal, which was not repayable till the 12 April 1894, may not yet be barred by limitation. On this ground [ must hold that the second point urged on behalf of the appellant must be decided in his favour.