MUKTESWAR TRIGUNAIT Vs. SATYA CHARAN SRIMANI

JUDGEMENT

(1.) This is an appeal by the defendants against a decision of the learned Subordinate Judge, dated 17 February 1937, by which he decreed the suit of the respondent, which was instituted to recover the amount secured on a mortgage, dated 31 January 1929. The mortgage was for a sum of Rs. 5000, the interest stipulated was at the rate of Rs. 1-8-0 per cent, per mensem and the due date fixed for the payment of the principal was February 1930. There was a further stipulation that the mortgagor would pay interest at the rate stipulated every month, but in case he did not do so the amount of interest will be treated as principal at the end of six months, in other words, this was a usual term of interest to be compounded at the expiry of every six months. The suit was instituted on 15 February 1936.

(2.) The defence to the action, so far as it is relevant for the purposes of this appeal, was that the stipulation in the mortgage bond as to payment of interest was excessive and unfair and therefore came within the mischief of Section 3, Usurious Loans Act of 1918. Before us a new contention has been advanced that the stipulation for paying compound interest amounted to a stipulation by way of penalty within the meaning of Section 74, Contract Act. It was lastly argued that by virtue of Section 11, Bihar Money Lenders Act of 1938, the respondent should be prevented from recovering; any sum in excess of Rs. 5000, the principal.

(3.) No evidence whatsoever was adduced in the Court below showing the conditions under which the loan was taken in January 1929. But there are indications upon, the record; for instance, in Ex. 2 (a) an order of the Subordinate Judge of Dhanbad who gave sanction to the receiver on 30 January 1929, that the Court considered that the compound interest on the loan was quite justifiable. It appears that originally an agreement was arrived at between the mortgagor and the mortgagee that the interest should be charged at the simple rate of 18 per cent, and a draft was approved in that form by the Court, but later on the mortgagee refused to advance unless stipulation by way of compound interest was also added in the bond. The Court upon receiving a petition from the receiver who recommended that he could not secure a loan without paying at the compound rate, accepted the proposal in these terms: "In the circumstances I sanction addition of the clause of compound interest." It appears to me that this evidence is quite sufficient to shift the onus upon the defendants. The plaintiffs have discharged any onus which initially lay on them by showing that they satisfied the Court who was in a much stronger position to know whether the loan could be secured upon easier terms: see Ganga Pershad Sahu V/s. Maharani Bibi (1885) 11 Cal. 379. The Subordinate Judge of Dhanbad was the proper person to act upon the report of the receiver. No evidence is to be found in the record which would indicate in the slightest that the receiver was acting in collusion with the mortgagee or that fraud was practised by the mortgagee in obtaining the Court's sanction.