Basudeo Bhagat and Others vs Sheikh Kadir and Others

Das, J.—The suit out of which this appeal has arisen was instituted by the appellants for recovery of Rs. 5,364-3-9 on the foot of a mortgage-bond executed by the respondents. The learned Subordinate Judge has given a decree for Rs. 1330 as against some of the respondents and the plaintiffs appeal to this Court.

It is not disputed that transactions have been going on between the parties since 1289. On the 3rd Sawan, 1310, accounts were adjusted between the parties, and it is the plaintiffs'' case that Rs. 2,755 was found due to them on the taking of the accounts. On that day two mortgage-bonds were executed by Sheikh Naga, Sheikh Kadir (defendant No. 1) and Sheikh Magru (defendant No. 2) in favour of the plaintiffs, one for Rs. 2,755, the other for Rs. 995. Sheikh Nagu is now dead, and is represented in this suit by Sheikh Abdul (defendant No: 3), Musammat Jutnagan, (defendant No. 4) and Musummat Ankhar (defendant No. 5). The plaintiffs'' case is that the. bond for Rs. 2,755 the executed to secure the sum of money found due to the plaintiffs on the taking of the accounts and that the bond for Rs. 995 was executed to secure an advance made on that day to the executants. Thereafter transactions went on between the parties. Another adjustment of account took place on the 27th Assar, 1314, and on that adjustment Rs. 3,582 was found due to the plaintiffs. Defendants Nos. 1, 2 and 3 executed a mortgage-bond on that day in favour of the plaintiffs to secure the sum of money found due by them to the plaintiff''s, and it is this last mentioned mortgage-bond which is the Subject-matter of the present suit. I may mention that the plaintiffs case in regard to the bond for Rs. 995 is that it has been satisfied by payments from time to time made by the defendants.

The parties live in the Sonthal Parganas and are governed by the special law in force in that Pargana as contained in Regulation 111 of 1872, Regulation V of 1893 and Regulation III, of 1908. Section 6 of Regulation III of 1871 as amended by the later Regulations is as follows:

All Courts having jurisdiction in the Sonthal Parganas shall observe the following rules relating to usury, namely-

(a) interest on any debt or liability for a period exceeding one year shall not b� decreed at a higher rate than two per cent. per mensem, notwithstanding any agreement to the contrary, and no compound interest arising from any intermediate adjustment of account shall be decreed;

(b) the total interest decreed on any loan or debt shall never exceed one-fourth of the principal sum, if the period be not more than one year, and shall not in any other case exceed the principal of the original debt or loan.

Explanation.--The expression intermediate, adjustment of account in Clause (a) of this section means any adjustment of account which is not final, and includes the renewal of an existing claim by bond, decree or otherwise when, without the passing of fresh consideration, the original claim is increased by such renewal.

As may be anticipated, the defendants rest their defence on the terms of the Regulation and they claim that the accounts should be re-opened with a view to disallow the plaintiffs compound interest arising from any intermediate adjustment of accounts and they contend that the total interest to be decreed to the plaintiffs should not exceed the principal sum actually advanced to them., They admit that Rs. 2,755 was found due to the plaintiffs on the 3rd Sawan, 1310, but they allege that the Bum included interest on which the plaintiffs are not entitled to claim further interest, notwithstanding the terms of the bond. In regard to the bond, for Rs. 895, their case is that that sum represented, not a cash advance made on the 3rd Sawan, 1310, but irrecoverable" interest, that is to say, interest found due to the plaintiffs on the 3rd Sawan, 1310, in excess of the principal of the original debt or loan,. They say that towards the debt due by them, they have paid to the plaintiffs'' the sum of Rs. 1,285, and they profess their, willingness to pay the plaintiffs what is found due to them on the examination of the accounts and in conformity with the special law of Sonthal Parganas.

The problem in this suit is to ascertain the actual cash advances made by the plaintiffs to the defendants. By the terms of the Regulation we are bound to ignore all intermediate adjustment, of accounts, and we have to be on our guard to see that the plaintiffs do not get compound interest by having recourse to the simple device of procuring mortgage-bonds from the defendants. The simple issue, therefore, is, what were the actual advances made by the plaintiffs to the defendants? I may say that the "plaintiffs accept the case of the defendants that they paid Rs. 1,288 to them. They maintain, however, that they appropriated this sum (which was paid by instalments and on different dates,) towards the mortgage-bond for Rs. 995 executed by the defendants on 3rd Sawan, 1310. It will be remembered that according to the plaintiffs case, there was a cash advance in respect of this bond; whereas, according to the defendants case, Rs. 995 mentioned in the bond as having been advanced to the defendants, represented irrecoverable interest.

Having regard to the questions involved in the case, the learned Subordinate Judge appointed a Commissioner to examine the accounts and to make a report to the Court. The Commissioner made a careful investigation and reported as follows:

First, on the 3rd Sawan, 1310, the sum of Rs. 2,755 was due to the plaintiffs as principal and that um (to secure which the mortgage-bond, of 3rd Saivan, 1310, was executed) did not include interest or compound interest.

Second, Rs. 995 which is the subject-matter of the other bond; executed on 3rd Sawan, 1310, represented an actual advance made by the plaintiffs to the defendants and that the bond was satisfied by the payment of Rs. 1,285 by the defendant between 3rd Kartic, 1314 and 27th Asin, 1314.

Third, Rs. 5,036 was due to the plaintiffs for principal and simple interest on the date of the institution of the suit.

When the case came before the learned Subordinate Judge, neither party, called the Commissioner to show that his report was in any way incorrect. The learned Subordinate Judge, however, speculated to an extent which is not permissible in a judicial officer and came to the conclusion that the sum of Rs. 1,580 only was due to the plaintiffs. A very important question in the case is whether there was a cash advance of Rs. 995 on 3rd Sawan, 1310. Now the plaintiffs'' books of accounts entirely support the case made by them; but the defendants examined two witnesses to contradict the case of the plaintiffs. Now these witnesses profess to speak to an incident which happened, according to their own testimony, "17 or 18 years ago". It is, in my opinion, quite impossible for any Court to place the slightest reliance on the testimony of these witnesses; and I do not think that the learned Subordinate Judge would have placed any reliance on their testimony but for certain circumstances to which he prominently refers. In the first place, the learned Subordinate Judge does not understand why "shrewd business-men like the plaintiffs" would make an advance of Rs. 995 to the defendants when a large sum was already due to the plaintiffs. In my opinion, the question is one of sufficiency of security, and, provided the security is ample, even "shrewd business men" may be expected to lend money if they have money to invest. It is not necessary to pursue the subject; for entirely agree with the Commissioner that Rs., 995 was advanced by the plaintiffs to the defendants on the 3rd Sawan, 1310, and that the sum of Rs. 1,285 paid by the defendants to the plaintiffs between 3rd Kartic, 1314, and 27th Asmr, 1314, went to satisfy the bond for Rs. 995 executed by the defendants on 3rd Sawan, 1310.

In dealing with the question of cash advances up to the 3rd Sawan, 1310, the learned Subordinate Judge says as follows:

The only way out of the difficulty is to presume as a moral certainty that all the entries shown as cash advances to the defendants in the plaintiffs'' accounts which are not in the handwriting of any of the defendants are really calculated sums of interest and were not really cash advances to the defendants.

Proceeding on the footing of moral certainty and not of legal proof, the learned Subordinate Judge found that six entries in the plaintiffs'' account book showing an aggregate cash advance of Rs. 1,885-9-0 were not in the handwriting of any of the defendants. He accordingly disallowed these it? ins and came to the conclusion that Rs. 962-14-0-out of Rs. 2,755 for which the bond of 3rd Sawan, 1310, was executed represented actual cash advance. Having arrived at this conclusion, he had no difficulty in holding that the plaintiffs were entitled, under the special law in the Sonthai Parganas, only to, double the amount of actual cash advances, namely, to Rs. 1,935. But he allowed the plaintiffs Rs. 2,755 as his calculation might not be quite correct. From this sum he deducted Rs. 1,285 and another sum of Rs. 60 admittedly paid by the defendants to the plaintiffs; and he gave a decree to the plaintiffs for Rs. 1,530.

On the findings arrived at by the learned Subordinate Judge, the decree pronounced by him is far too favourable to the plaintiffs.'' If Rs. 1,935 was all that was due to the plaintiffs before making the deductions, he had no business to allow the plaintiffs Rs. 2,755. He had no right to fly in the face of the Statute and show generosity at the expense of the defendants. But I have no doubt whatever that the whole basis of the judgment of the Subordinate Judge is wrong. It was necessary for him to found his judgment, not on moral certainty but on legal proof. Now, on what ground has he disallowed the items showing cash advances of Rs. 1,885-9-0? On the ground that they are not in the handwriting of any of the defendants. But all those entries are signed by the defendants and are as effectual in raising a presumption in favour of the plaintiffs as if the entries were in their handwriting. There is a clear admission in writing by the defendants that they received different sums on different dates as cash advances amounting, in all to Rs. 1,885-9-0, and these admissions are binding on the defendants. This being the position, the report of the Commissioner has not been shown to be wrong except in regard to an item of Rs. 60 representing a payment made by the defendants to the plaintiffs. In my opinion, the plaintiffs are entitled to a mortgage-decree for Rs. 4,976.

The next question is whether we should allow the plaintiffs interest on the decree u/s 34 of the C.P.C. In Hari Prasad Singha v. Sourendra Mohan Sinha 66 Ind. Cas. 915 : I. Pat. 506 : 3 P.L.T. 709 : A.I.R 1922 Pat. 450 the learned Chief Justice of this Court thought that there was much, to be said for the argument, that the Sonthal Parganas Regulation applies only to the interest to be decreed under the bond and does not limit the powers of a Court u/s 34 of the C.P.C. to award interest on the decretal amount until realization; but he felt bound to follow an earlier decision of this Court which had decided that interest under the Code should not be awarded upon the decretal amount in so far as it includes interest on the principal debt or loan, but only upon the amount of the principal debt itself. The case of Hari Prasad Singha v. Sourendra Mohan Sinha 66 Ind. Cas. 915 : I. Pat. 506 : 3 P.L.T. 709 : A.I.R 1922 Pat. 450 went up to the Privy Council, and it is clear from the decision of their Lordships AIR 1925 280 (Privy Council) that the question rests on the discretion of the Court, and not, (as I read the judgment) on the Sonthal Parganas Regulations, in my opinion, the plaintiffs are entitled to interest at 6 per cent, on the decretal amount from the date thereof until realization.

The last question is whether the plaintiffs are entitled to a decree as against defendants Nos. 4 and 5. They are not parties to the bond of 27th Assar, 1314 ; but Sheikh Nagu (whom they, along with defendant No. 3, represent) was a party to the bond of 3rd Sawan, 1310. The solution of the question depends on whether the liablity under the bond of the 3rd Sawan, 1310, was extinguished by the execution of the bond of the 27th Assar, 1314. There is no indication in the latter bond that liability under the former bond ramo to an end. That being so, the plaintiffs are clearly entitled to a decree as agaiust defendants Nos. 4 and 5; but it is clear that their liability must be limited to the assets of Sheikh Nagu in their hands.

I would allow the appeal, set aside the judgment and decree passed by the Court below and give the plaintiffs the usual mortgage-decree for Rs. 4,976 as against all the defendants (the decree against defendants Nos. 4 and 5 being limited to the assets of Sheikh Nagu in their hands) with costs throughout and interest at 6 per cent, on the decree from the date thereof until realization. Period of redemption, six months.

Foster, J.

I agree in the order to be passed, but I wish to make a remark or two on one point. It is not the plaintiffs'', case nor is it our finding that the first mortgage bond of 1903 was rescinded by the second mortgage-bond of 1907. After studying the terms of Section 6 of Regulation III of 1872, I think it quite possible that the question may arise whether by that provision of law so large an inroad on the law of contract has been. made in the Sonthal Parganas as to nullify bona fide contracts of novation, where the claim or debt at the time of the novation is an adjusted'' amount comprising principal and interest, and some fresh consideration, for instance, the rescission of the previous bond or forbearance to sue, has passed from the mortgagee to his debtor. So far as Is am aware the matter has not been decided in any case; and I wish to reserve an open mind on the subject.