Dhannalal vs Ramkishan

Dixit, J.—The Respondent in this case was the Plaintiff in an action against the appellants to recover Rs. 60,611-4-0. The suit was tried by the learned District Judge of Indore and judgment was given for the Respondent for an amount of Rs. 63,227-8-0 besides interest on the principal amount of Rs. 50,500 and costs. The Plaintiff''s claim related to the amounts which he had advanced to the Defendants from time to time in 1951 and which the Defendants had agreed to repay with interest at the rate of eighteen per cent per annum. The Defendants have now come up in appeal before us. The Plaintiff has also filed a cross-objection.

In the appeal filed by the Defendants, Mr. Waghmare, learned Counsel appearing for the Defendants, raised two points: first, that the Plaintiff was not entitled to interest on the sum lent by him at the rate of eighteen per cent per annum; and, secondly, that the lower Court should have granted to the appellants the facility of paying the decretal amount by instalments. In the memorandum of appeal, the appellants first rested their objection as to the rate of interest on the ground that there was no contract between the parties that interest at the rate of eighteen per cent per annum would be paid. But after the suit was decided by the learned District Judged and the appeal was filed, the Madhya Bharat Interest Act, 1956 came into force on 1st August 1956. The appellants have now presented an application for leave to take the ground that u/s 3 of the Madhya Bharat Interest Act, 1956, the Plaintiff is not entitled to get interest on the principal sum of Rs. 50,500 adjudged by the lower Court at a rate exceeding nine per cent per annum. In view of the provisions of S. 3 of the Act, the leave sought by the appellants cannot be refused and learned Counsel for the Respondent also did trot, and indeed could not, object to the appellants being allowed to base their claim for the reduction of interest on S. 3 of the Act. That section, so far as it is material here, reads as follows:-

Notwithstanding anything to the contrary contained in any law or in any agreement between the parties, the rate of interest adjudged on a principal sum or ordered in a decree by any Court save when it is so adjudged or ordered against or in favour of a Bank or Co-operative Society, shall not exceed six per cent per annum in case of secured and nine per cent per annum in case of unsecured debts...........

Learned Counsel for the appellants argued that S. 3 applied to all contracts of loan whether made before or after the enactment of the Madhya Bharat Interest Act and That in a suit for the recovery of a loan-amount of in an appeal arising therefrom, the Court had no power to award interest on the principal sum adjudged by the court at a rate higher than nine per cent per annum, if the loan was unsecured and at a rate not exceeding six per cent per annum if the loan was secured. This contention must be given effect to. The opening words of S. 3 "notwithstanding anything to the contrary contained in any law or in any agreement between the parties" undoubtedly impair the right of a creditor to get interest at the contracted rate and are wide enough to Include all contracts of loans, whether made before or after the coming into force of the Madhya Bharat Interest Act. S. 3, as St is worded, prohibits the Court from awarding interest on the principal amount adjudged by it at rates higher than those specified in that section. It gives no discretion to the Court, and as an appeal is but the continuation of the suit, a borrower can take advantage of the benefit of the provisions of S. 3 even in appeal and ask the appellate Court to reduce the rate of interest and bring it in conformity with S. 3. Mr. Sanghi, learned Counsel for the Respondent, did not dispute this clear legal position as to the permissible rate of interest u/s 3 of the Act, The Plaintiff cannot, therefore, claim to get interest at the contracted rate of eighteen percent per annum on the principal amount of Rs. 50,500- found by the trial Court. Learned Counsel for the appellants did not contend before us that the rate of interest agreed to between the parties was lower than nine per cent per annum. Nor did he suggest that it would not be proper to award interest in this case at the maximum permissible rate u/s 3 of the Act. That being so, the Plaintiff-Respondent must be held to be entitled to get interest at the rate of nine percent per annum on Rs. 50,500-. At this rate of interest, the Plaintiff is entitled to recover Rs. 56,863-12-0 and not Rs. 63,227-8-0 the amount decreed by the lower Court.

In support of his plea for the grant of the facility of payment by instalments, learned Counsel for the appellants urged that there are many other creditors of the appellants and some of them have obtained decrees against them and that appellants are hard-pressed and not in a position to pay in a lump-sum the amount that has been found due from them. The appellants made a similar prayer before the learned District Judge also. This was rejected by him on the grounds that the appellants had met the claims of their other creditors but they had scrupulously avoided making any payment to the Plaintiff; that they contested the Plaintiff''s suit on frivolous grounds, making evasive statements; and that while their liabilities were of the order of four-lakh rupees, their assets were in the neighbourhood of rupees ten lakhs.

In our judgment, the appellants'' pica for instalments must be rejected. Neither on their conduct in the case nor on their financial position can this indulgence be allowed to them. The manner in which the appellants contested the Plaintiff''s claim has been elaborately commented upon by the learned District judge while giving his finding as to the rate of interest agreed to between the parties and rejecting the prayer of the appellants for instatments. With that comment we agree. But besides the appellants'' conduct, the most important consideration in the determination of the question whether the appellants should or should not be given the convenience of paying the (amount by instalments, is their ability to pay. The appellants say that they are not in a position to pay the amount in a lump-sum. But the appellants'' own opinion about their financial position is not sufficient. The question has to be decided on the facts relating to the means and circumstances of the appellants that are, on record. Now from the appellants'' own statement it is plain that today their liabilities do not exceed rupees four lakhs; that the value of their immovable property is about rupees ten lakhs; and that they also have jewellery and other immovable property of considerable value. Such being their financial position, it cannot by any stretch of imagination be argued that the appellants are not in a position to pay the amount decree against them. It most be noted that with the rate of interest scaled down and taking into account the amount deposited by the appellants in the execution proceedings of the decree under appeal, the balance which they will have to pay now is not very large. The prayer of the appellants for the grant of instalments must, therefore, be rejected.

The Plaintiff''s cross-objections relate to the award of interest at the rate of eighteen per cent per annum on the principal sum of Rs. 30,500 from the date of the suit till the date of repayment. In the face of S. 3 of the Madhya Bharat Interest Act, learned Counsel for the Respondents did not press the cross-objection.

In the end, Mr. Waghmare, learned Counsel for the appellants, prayed that the appellants be given four months; time to pay the amount that may be decreed against them. The Respondent is willing to make this concession on the appellants'' furnishing security for the payment of that amount in the event of their making a default in paying the amount within four months from the date of our decision. The appellants are not able to find a fresh security. We, however, think that regard being had to the fact that a substantial amount has already been paid to the Respondents, this latitude should be allowed to the appellants.

In the result, we hold that the Plaintiff is entitled to recover Rs. 56,863-12-0 from the appellants, besides interest awarded by lower Court on the principal amount of Rs. 50,500 and the costs decreed by the lower Court. The appellants shall pay the amount due from them including costs within four months of this date. To this exten, the decree passed by the learned District Judge is modified. There will be no order for costs in the appeal and in the cross-objections, which are dismissed.

Nevaskar, J.

I agree.