Ch. Hanuman Singh and Others vs Ch. Gaya Singh and Others

Manohar Lall, J.—This is an appeal by the defendants third party, who have purchased the equity of redemption from the mortgagors after the mortgage bond in suit, against the decision of the learned subordinate Judge of Arrah by which he decreed the suit instituted by the respondents to enforce their dues on the mortgage bond executed on 27th May 1923.

The sole question for determination in this appeal is the extent to which the appellants can obtain relief under the Bihar Money-lenders (Regulation of Transactions) Act, 1939. It is sufficient to state that the mortgage bond in suit was executed on 27th May 1923 to secure a sum of Rs. 3000 which carried interest at 12 per cent, per annum to be compounded annually. On 21st June 1930 the appellants obtained a transfer of the equity of redemption from the mortgagors for a sum of Rs. 13,000. Out of the consideration a sum of Rs. 6685 was left with the appellants to pay off the amount of principal and interest which then fell due on the mortgage calculated at the bond rate. The appellants paid a sum of Rs. 1261-10-0 in August 1931 and a further sum of Rs. 1350 in June 1938 to the mortgagee, that is to say, a total of Rupees 2611-10-0. The present suit was filed on 30th April 1937.

The learned subordinate Judge has decreed the suit for a sum of Rs. 11,748-9-0 with interest pendente lite up to the expiry of the period of grace at 12 per cent, simple per annum besides costs. It is not denied by the respondents and indeed it is obvious that the provisions of Section 7, Bihar Moneylenders (Regulation of Transactions) Act, forbid the Court from passing a decree for an amount of interest for the period preceding the institution of the suit which together with any amount already realised as interest through the Court or otherwise, is greater than the amount of loan advanced upon the mortgage bond in suit. Applying the rule laid down by this section, the plaintiffs would be entitled to a decree for a sum of Rs. 3000 being the principal together with a sum of Rs. 388-6-0 on account of interest, they having already realized Rs. 2611-10-0 from the hands of the appellants.

But it was suggested relying upon Section 9 of the Act that as a sum of Rs. 1073-6-0 was still in deposit with the appellants in respect of interest for the period preceding the date of transfer for payment to the mortgagee, the portion of this amount so left in deposit which is in excess of the amount which would have been payable as interest at the rate of 9 per cent, per annum simple for such period is available to the plaintiffs-mortgagees in addition to any amount which may be awarded to them.

In my opinion, this argument is fallacious. The scheme of the Act is perfectly clear and shows that the provisions of Section 7 govern all the provisions of this Act, that is to say, in no case can a Court pass a decree for an amount of interest greater than the amount of the principal less any sum which has been paid Or recovered on account of interest for the period preceding the institution of the suit. Again if Section 9 is carefully read, it will be obvious that this only comes into operation where the Court exercises the discretion vested in it by Section 8. When the Court does not choose to reopen the transaction the provisions of Section 9 will never come into operation.

If the argument of the learned advocate for the respondents was accepted it would lead to startling results; for instance, if the Court chose to reopen the transaction u/s 8 then notwithstanding that it relieved the debtor of all liability in respect of interest in excess of 9 per cent, per annum in the case of a secured loan as in the present case the amount due on account of interest may still be large (owing to the long time that elapsed between the date of the mortgage and the date of the institution of the suit) so that the debtor would still be liable to pay an amount of interest which would be greater than the principal so that instead of getting any relief the debtor is actually worse off by having to pay more than what would be recoverable by the mortgagee by the operation of Section 7. There is no difficulty in understanding the concluding sentence of Section 9 which was also relied upon on behalf of the respondents.

These words, on a proper construction, mean that where the Court has exercised the discretion u/s 8 and reduced the rate of interest to 9 per cent, thereby relieving the debtor of all liability in respect of interest in excess of 9 per cent, per annum simple in the case of a secured loan or in excess of 12 per cent, per annum simple in the case of an unsecured loan, and if the limit provided by Section 7 has not been reached and there is still an excess out of the amount left in deposit with the transferee of the equity of redemption then the mortgagee shall he entitled to recover that excess in addition to the amount which he may otherwise be entitled to recover, but always within the limit fixed by Section 7.

The result is that the plaintiff will be entitled to a mortgage decree for the amount of Rs. 3388-6-0. The plaintiff is also entitled to interest pendente lite on the sum of Rs. 3000. In the circumstances I think it would be fair that the plaintiff should recover interest at the rate of 12 per cent, per annum simple as was decreed by the learned subordinate Judge himself in the present case. The interest at the rate of 12 per cent, simple will run pendente lite, and during the period of grace which is fixed at two months from today. The decretal amount will carry interest at 6 per cent., thereafter till the date of realization.

As regards costs, the plaintiff will be entitled to the amount of court-fee which he has paid upon his plaint but the other costs of the Court below will be calculated on the amount to which the plaintiff is now being held entitled. As regards the costs of the appeal, the appellant has succeeded in getting the decree reduced by about Rs. 7000.

In these circumstances the appellant will be entitled to costs in proportion to his success in this Court. Let a usual mortgage decree be prepared in the terms indicated above.

Harries C. J.

I agree.