Jadunandan Prasad Pandey vs Maheswar Narain Singh and Others

Rowland, J.—This is an appeal by the defendant in a mortgage suit. The only point raised is that the liability on account of interest should be reduced. For this two grounds are advanced; first, that the plain, tiff having proved the necessity for the loan should have placed on him the burden of proving the rate of interest which it was necessary for the defendants to agree to pay in order to obtain the loan and the transaction being on behalf of a joint family, the plaintiff should have got interest at no higher rate than he actually proved it to be necessary for his borrower to promise to pay. The second point was that the transaction should have been re-opened u/s 8, Money-lenders Act of 1939 and the defendants relieved from the liability to pay interest more than 9 per cent, simple or such rate as the Court considered fair.

As to the first point, the bond rate was Re. 1-9-0 per month and the Munsif went into the question whether it was necessary to borrow at such a high rate. His opinion was that it was not necessary, but that it was fair that the defendants should pay interest at 1 per cent, simple. He, therefore, awarded interest at 1 per cent, on the amount of the mortgage bond of 7th April 1922, which was for RS. 651. I do not think that the defendants can get any further relief under this head, but it is to be seen whether they can get it under the provisions of the Money-lenders Act. The District Judge was asked to extend to them this relief, but he refused to do so because as he said:

If I re-open the transaction I must go back to 1916 and the plaintiffs will be entitled u/s 7 of the Act, only to Rs. 200 principal and Rs. 200 interest. As the loan has been outstanding for 24 years this appears inequitable.

The District Judge has not fully understood the effect of Section 7 of the Act, and the damdupat rule. Section 7 is to be read with reference to the definition of ''loan'' in Section 2(f), Bihar Money-lenders Act 1988. ''Loan'' includes a transaction on a bond bearing interest executed in respect of past liability. Now, Section 7 of the 1939 Act, says that in a suit brought by a money-lender in respect of a loan advanced before or after the commencement of this Act, no Court shall pass a decree for an amount of interest for the period preceding the institution of the suit which is greater than the amount of loan advanced or, if the loan is based on a document, the amount of loan mentioned in, or evidenced by such document. In the present 5 case, the effect of Section 7 is that the loans being on the document of 1929, the money-lender cannot get a decree for more interest than the amount of Rs. 651 mentioned in the document. This Section 7 was examined in Madho Prasad Singh Vs. Mukutdhari Singh and Others, and it was explained that the bond executed for past liability constitutes a loan within the meaning of Section 7. So much for Section 7: it is quite clear that the provisions of this section would, in no way impose, on the District Judge any obligation, if here-opened the transaction u/s 8, to limit the amount of the decree which could be passed to Rs. 400. A similar view was taken in Singheshwar Singh and Others Vs. Medni Prasad Singh and Others, . Section 7 in the circumstances of this case limited the amount of decree to Rs. 1302. It was, therefore, under a misconception of the legal position that the District Judge thought that the transaction ought not to be re-opened u/s 8, Moneylenders Act. I am entitled to re-consider the propriety of that decision.

It has been found that the only borrowing which took place between the parties was a borrowing of Bs. 200 on 1st September 1916 and that the subsequent bond of 1929, was merely by way of renewal of liability for the old debt with interest and was put in the form of a new contract secured on the same property with the addition of some other properties of the joint family. In Section 8(b) the Court is given power, notwithstanding any agreement purporting to close previous dealings and to create a new obligation, to re-open any account already taken between them and to relieve the debtor of all liability in respect of any interest in excess of 9 per cent, simple per annum in the case of a secured loan and 12 per centum simple per annum in the case of an unsecured loan. In the face of the words of the section, they clearly give the Court power to re-open the account notwithstanding the agreement of 1929 which was an agreement purporting to close previous dealings and to create a new obligation. But these powers are subject to proviso (1) which prohibits the Court from re-opening an agreement, purporting to close previous dealings and to create a new obligation, which has been entered into at a date more than 12 years before the institution of the suit. So we have to see whether the adjustment of 1929 was more than 12 years before the institution of the suit. In fact it was about six years before the institution of the suit: so the proviso does not avail the plaintiff to resist the re-opening of the account. In the circumstances of the case I think it should be borne in mind that on the findings of the Munsif there was apparently no necessity to borrow at a rate in excess of 12 per cent, per annum simple and the defendants ought to be relieved of liability to pay interest in excess of this amount.

The appeal will, therefore, be allowed in part and the lower Court''s decree modified. A fresh decree will be prepared based on Rs. 200 as principal advanced on 1st September 1916, together with interest at 1 per cent, per month simple from the date of that advance to the date of suit with simple interest on the principal amount up to date of decree of the first Court and thereafter interest at 6 per cent, per annum on the decretal sum. The plaintiff shall get his costs of the first Court in proportion to his success and the defendants shall have costs in proportion to their success in the District Judge''s Court and here. A fresh period of grace, three months from now, will be fixed. Leave to appeal under the Letters Patent is refused.