Chatargoon Sao and Others vs Babu Ramlal and Another

Harries, C.J.

1.This is a defendants'' appeal from a decree of the learned Sub-ordinate Judge of Palamau decreeing the plaintiffs'' claim in a mortgage suit. The plaintiffs brought the suit out of which this appeal arises for the enforcement of a mortgage dated 19th March 1932. The learned Subordinate Judge held that consideration had passed and that the mortgage had been duly executed according to law. He accordingly decreed the claim. The defendants were, the members of a family which carried on a business in selling cloth, yarn etc. The plaintiffs had from time to time sold to the defendants cloth and yarn, and according to the plaintiffs an account was struck in March 1932 which showed that there was due from the defendants to the plaintiffs a sum of Rs. 6000 in respect of cloth and Rs. 2700 in respect of yarn etc. This statement of account was actually signed by defendant 2.

On 19th March 1932, defendants 1, 2, 3 and Hussaini executed the mortgage deed now sued upon. Defendant 2 executed the deed on behalf of himself and as guardian of defendant 8, and Hussaini, now dead, executed the document on behalf of himself and as guardian of defendants 4 and 5. Defendants 6 and 7 apparently were born after this mortgage deed was executed. The deed was to secure the sum of Rs. 8700 which was the balance due upon the cloth and yarn transactions between the parties.

The bond was an instalment bond and interest was at the rate of six per cent, per annum. It was provided however that in case of default of two instalments interest should be payable at the rate of twelve annas per cent, per month compoundable yearly. Nothing was paid by the defendants in respect of the principal and interest due under this mortgage, and on 21st May 1935 the present suit was brought. In the lower Court the defendants denied that any sum was due from them to the plaintiffs at the date of the mortgage, and suggested that they had been coerced into executing the mortgage.

The lower Court has rejected these pleas, and in my view rightly. Mr. Rai Gurusaran Prasad who appears on behalf of the appellants has not challenged this part of the case. He has confined his argument to the question of interest.

On behalf of the appellants it is said that the amount stated to be due from the defendants to the plaintiffs on 19th March 1932, namely Rs. 8700 includes a good deal of interest. It is said that the plaintiffs charged compound interest at the rate of twelve annas per cent, per month upon all balances due to them. Accordingly, it is urged that Rs. 8700 which formed the principal sum in this mortgage must consist largely of sums due by way of interest.

The appellants claimed the benefit of Section 8, Bihar Money-Lenders (Regulation of Transactions) Act, 1939. That Section provides that in any suit brought by a moneylender before or after the commencement of the Act in respect of a loan advanced before the commencement of the Act or in any appeal or proceedings in revision arising out of such suit, the Court may exercise a number of powers. The Court may reopen a transaction, take an account between the parties and relieve the debtor of all liability in respect of any interest in excess of nine per cent, per annum simple in the case of a secured loan. It has further provided that notwithstanding any agreement purporting to close previous dealings and to create a new obligation, the Court may re-open any account already taken between them and relieve the debtor of all liability in respect of any interest in excess of nine per cent, simple per annum in the case of secured loan and twelve per cent, simple per annum in the case of unsecured loans.

It is urged that the evidence in this case makes it clear that when this balance of Rs. 8700 was agreed a part of the sum undoubtedly consisted of interest. The defendants could easily have established this fact by production of their books; but no books were produced. Reliance has been placed upon the plaintiffs'' books and the evidence of one of the plaintiffs'' witnesses. Relevant portions of the plaintiffs'' books are printed at pp. 15, 16 and 17 of part 3 of the paper-book. The account opens with a balance due under previous transactions amounting to Rs. 5509-12-3. According to the appellants, this amount included interest; but how much interest the appellants are wholly unable to say. All that they can point to is the statement made by plaintiffs'' witness Sheonandan Prasad (P.W. 4). In cross-examination he said:

Rupees 5609-12-3 was brought forward from preceding year in the bahi of Nimak khata in 1987-88. Rs. 7677-5-9 was brought forward in 1987-88 from preceding year in Kapra khata shop, I can''t say how much of these is principal and how much is interest.

Earlier the witness said:

Bahis are changed on Ratik Badi 15. Interest accrued at Katik Badi 15 forms principal and it carries future interest.

And earlier he had said, that the plaintiffs had charged interest at twelve annas per cent, per annum from all customers and that interest ran on both sides of the account. It is clear that the account from 1930 onwards included little, if any, interest as the amounts shown as received by the plaintiffs are obviously amounts in respect of goods sold and delivered. If any interest is included in the sum of Rs. 5509-12-3, which was brought forward in the account printed at p. 15, part 3, of the paper-book, it would appear as if this interest was paid off very soon afterwards.

It is to be observed that there is a proviso to Section 8, Bihar Moneylenders (Regulations of Transactions) Act, 1939, which provides that if anything has been paid or allowed in respect of any liability for interest in excess of nine per cent, simple per annum in the case of a secured loan and twelve per cent, simple per annum in the case of an unsecured loan, nothing in Clause (a) or (b) shall be deemed to require the creditor to repay any amount so paid or allowed in excess or to reduce the amount of the principal of the loan.

In my judgment the appellants in this case have wholly failed to establish that when the account was stated in March 1932 there was included in the amount due sums by way of interest in excess of the rate permitted by the Bihar Money-lenders Act. It was clearly for the appellants to show this, and they have failed to do so. The evidence relied upon is most meagre, and does not establish a state of facts which would require this Court to re-open the transaction. Further, the Court is not bound to re-open a transaction u/s 8, Bihar Money-lenders Act, though, of course, it should do so in a proper case.

Even if the appellants had established that interest at the mercantile rate slightly in excess of the rates permissible in the Bihar Moneylenders Act had been charged, I would have been reluctant in this case to order the whole transaction to be reopened. However as I have stated, the plaintiffs here failed to show facts which bring the case within Section 8, Clauses (a) and (b), and accordingly they have no right to have the transaction reopened. No other point has been taken on behalf of the appellants and accordingly this appeal must fail. I would therefore dismiss the appeal with costs. Two months'' time is allowed for payment of the sum under the mortgage.

Manohar Lall, J.

I agree.