Chulliyat Govindan Nair vs Moozhiyut Imbichi Mammad

Wadsworth, J.—The petitioner here was the plaintiff in the lower Court and he filed a small cause suit for rent, The petitioner demised the

land to the respondent in 1924 under a kanom document whereby he received Rs. 300 and the respondent undertook to pay annually Rs. 36 as

rent or michavaram together with certain sundry charges. On 14th October, 1927, the petitioner borrowed a further sum. of Rs. 200 on what is

known as a puramkadam which is embodied in a document the terms of which are that a further charge to the extent of Rs. 200 should be created

over the jenm interest in favour of the kanomdar and that in consideration of this further advance, the petitioner jenmi agrees to pay Rs. 20 annually

as labham and it is further provided that the respondent the kanomdar is entitled to adjust this sum of Rs. 20 annually towards the rent which he has

to pay to the petitioner and pay only the balance. Now the petitioner in suing for rent claimed that this amount of labham which he was entitled to

set off against the rent, was nothing more than interest payable on the second advance and that he was entitled to scale down that interest u/s 8 of

Act IV of 1938 so as to reduce the interest to 6 1|4 per cent. and he therefore adjusted interest at this scaled down rate and claimed the balance

of rent under the original demise. The lower Court has held that the effect of the puramkadam document is really nothing more than to provide for a

lower rate of rent in consideration for an increase of the kanom amount and that there is really no interest payable and that the transaction is

protected u/s 10(2)(i) of Act IV as being a possessory mortgage where no rate of interest is stipulated as due to the mortgagee. No doubt the

practical effect of these two transactions may be something similar to that which the learned District Mun-siff assumes. But the way in which the

puramkadam document has been drawn seems to me to make it clear that the second mortgage advance is not to be treated as a mere accretion to

the first advance with a reduction in the rate of rent payable under the demise. There is a clear covenant by the mortgagor in respect of the second

advance of Rs. 200 to pay annually a sum of Rs. 20 as labham. Labham apparently is not a technical term at all but a general word meaning profit,

compensation or interest as the case may be. But if we translate this word labham by a colourless word like ''compensation'' we have an advance

of Rs. 200 on security of immovable property the mortgagee being entitled to an annual payment or compensation of Rs, 20 the property being

already in his possession under a previous mortgage-cum- leasehold arrangement. An annual compensation paid by a borrower to a lender for the

use of the lender''s money is interest, by whatever name we call it and although Section 10(2)(i) of Act IV uses the words ''rate of interest'', I do

not think that those words necessarily imply that a particular percentage need be stipulated in the document, provided that the actual amount of the

interest is fixed by the terms of the document. Here clearly, there is a contract whereby a mortgage is created for a sum of Rs. 200 with an annual

interest of Rs. 20. That is another way of saying that the loan carries interest at ten per cent. It is, in my opinion, not protected by Section 10(2)(i)

of the Act and the plaintiff in claiming the rent is entitled to have his debt for interest scaled down before it is adjusted to the rent.

I therefore allow the civil revision petition with costs and give the plaintiff a decree for the amount claimed as prayed for with full cost in the trial

Court.