Kali Nath Sen and Another vs Trailokhya Nath Roy

Banerjee, J.—This appeal arises out of a suit for arrears of rent with interest based on a kalmliat, and the suit was brought not against the person who had executed the kalmliat but against the purchaser of his holding at a sale for arrears of rent. The defence, so far as it is necessary to consider it for the purposes of this appeal, was that the claim for interest was illegal and that the Plaintiff was not entitled to any interest as the rent had been tendered.

The first Court found for the Defendant upon most of the points raised and decreed the claim of the Plaintiff only in part.

On appeal the lower Appellate Court has modified that decree and allowed interest in accordance with the terms of sec. 67 of the Bengal Tenancy Act, holding that the rate of rent (interest?) specified in the kalmliat was not recoverable as against the Defendant.

In second appeal the only question raised is whether the decision of the lower Appellate Court as regards interest is correct.

The learned vakil for the Plaintiff''s, Appellants, contends that the interest claimed in this suit is perfectly legal and that the Defendant is bound to pay that interest notwithstanding that ho is the purchaser of the holding at a sale for arrears of rent due from the former tenant who had executed a kabuliat, inasmuch as the stipulation as regards interest was an incident of the tenure.

On the other hand it has been argued on behalf of the Defendant, Respondent, that the Plaintiff is entitled to interest only in accordance with the provisions of sec. 67 of the Bengal Tenancy Act,-- firstly, because the kabuliat relied upon by the Plaintiffs created a tenancy from year to year only, so that at the commencement of each year of the tenancy, a fresh contract, as to the terms of the tenancy, is to be implied, and the contract as regards payment of interest, which was in contravention of the provisions of see. 67 of the Bengal Tenancy Act, became operative (inoperative?) by sec. 178, sub-sec. 3, cl. (h) from the year after that Act was passed; secondly, because even if the stipulation in the kabuliat could be binding after the passing of the Tenancy Act as against the former tenant by whom the kabuliat was executed, it cannot be operative as against the purchaser of the holding at a sale for arrears of rent, the stipulation to pay interest at an exorbitant rate not being an ordinary incident of a tenancy, and that a fresh contract is to be implied as between the landlord and the tenant upon the transfer of the holding at a sale for arrears of revenue; and thirdly, because the stipulation for the payment of the exorbitant interest claimed by the Plaintiffs is such a hard and unconscionable contract that Courts of Equity ought not to enforce it.

I am of opinion that the stipulation for the payment of interest upon arrears of rent is an ordinary incident of a tenancy in this country unless there is something unusual in the stipulation, and that, rule, it would attach to the tenancy, not only so long as it remains in the possession of the tenant who enters into the stipulation but would continue to attach to it notwithstanding a sale for arrears of rent. But, though that is so, if there is anything unusual in the stipulation, it would not be an ordinary incident of a tenancy and would not continue to be attached to the tenancy after a sale for arrears of rent.

Let us then see whether the stipulation for the payment of interest in the present case ceases to be binding on account of any of the reasons specified in the argument of the learned vakil for the Respondent.

With reference to the first reason assigned, I am of opinion that, having regard to the terms of the kabuliat, it cannot be said that a fresh contract is to be implied at the commencement of each year of the tenancy. The kabuliat does not specify any term. It stipulates for the payment of interest from year to year, and it further stipulates that in case there be any default in the payment of any instalment, the tenant will pay interest for the over-due instalment at a certain rate. That, in my opinion, is a contract entered into, once for all, and would continue in force so long as the tenancy is not determined; and I sec no reason for holding that at the commencement of each year there must be implied the making of a fresh contract.

It was argued that the case of Ali Mamud Pramanick 2 C. W. N. 525 (1897-98) favours the Respondent''s contention. On the other hand, it is argued, that the case of Kishore Lal Dey v. The Administrator-General of Bengal 2 C. W. N. 303 (1897-98) supports the opposite view.

I am of opinion that neither of the two cases cited touches in any way the present question. In the case of Kishore Lal Dey 2 C. W. N. 303 (1897-98) what was held was this, that where a tenant holds over after the expiry of his term, the correct view to take is that he enters into an implied contract, once for all, at the beginning of the holding over, and there is no rule of law in support of the view that he enters into an implied contract at the beginning of each year of the holding-over. The correctness of that view is questioned by one of the learned Judges who decided the case of Ali Mamud Pramanick 2 C. W. N. 525 (1897-98), while the other learned Judge thought it unnecessary to consider the point, as the ease before the Court did not require the point to be determined, But in neither of the two cases had the Court to determine whether, where a lease was for a term uncertain, any implied contract had to be presumed at the commencement of each year of the tenancy.

The second reason relied upon is a valid reason for holding that the stipulation for the payments of interest is not binding. Although, as I have said, a stipulation regarding the payment of interest is ordinarily one of the incidents of tenancy, a stipulation for the payment of interest at an unusual and an exorbitant rate cannot be supposed to be an incident of tenancy, which would attach to it even after a sale for arrears of rent. No doubt the line between what rate of interest would be within the limits of an usual rate of interest, and what would exceed those limits is not always easy to draw. But there can be little difficulty in saying that whereas the law, sec. 21, Act VIII (B.C.) of 1869, and sec. 67 of the Bengal Tenancy Act provides that 12 per cent, per annum shall be the ordinary rate of interest, Bs. 225 per cent, per annum (for that is the rate of interest in the present case) falls outside the limits of ordinary interest for arrears of rent.

The distinction between usual and unusual terms of a contract of tenancy is a distinction which should be taken into consideration for determining whether the incident in question continues to attach to the tenancy notwithstanding its sale for arrears of rent, and it is a distinction which has been given effect to by this Court in certain cases, of which I may refer to the following, namely, Deendyal Paramanick v. Jaggeshur Roy (Marshall''s Reports, p. 252 (1864)), and Alim v. Satis Chandra Chowdhury ILR 24 Cal. 37 (1897).

Following the principle laid down in these cases, I must hold that the stipulation for interest in the present case was not such an incident of tenancy as would continue to be attached to it notwithstanding the sale of the holding for arrears of revenue.

In this view of the case it becomes unnecessary to consider the question whether the sale of a tenancy for arrears of rents involves a new contract between the auction-purchaser and the landlord at the date of the sale, such as would bring into operation the provisions of sec. 67 of the Bengal Tenancy Act.

I am also of opinion that the third reason put forward by the learned vakil for the Respondent for holding that the stipulation for the payment of interest is not enforceable is a valid reason. The rate of interest, as I have already said, is the exorbitant rate of Bs. 225 per cent, per annum, and the contract was entered into between the landlord and a cultivating raiyat, that is, a person belonging to a section of the community that has been considered entitled to some special protection hot only by the Legislature, as is evident from the provisions of the Bengal Tenancy Act, secs. 67 and 178, sub-sec. 3, cl. (h), but also by Courts of Justice, as will be seen from the observations of Mr. Justico Mahmood in the case of Lalli v. Ramprasad ILR 9 All. 74 (1887).

Having regard then to the exorbitant nature of the interest claimed and the parties to the stipulation, I am of opinion that the ease is one to which the sale of law relating to hard and unconscionable bargains enunciated by their Lordships of the Privy Council in Kamini Sundari Chaodhrani v. Kali Prossunno Ghose ILR 12 Cal. 225 (1886)) should apply. Applying that principle, I think that the stipulation for interest in this case is one that a Court of Justice ought not to enforce.

For all these reasons I am of opinion that the judgment of the Court below is right and ought to be affirmed, and this appeal dismissed with costs.

Rampini, J.

The only point for determination in this appeal is whether the Defendant is liable to pay interest: at the rate specified in the kabuliat given by the former tenant, Batan Mundol, or not.

This kabuliat was executed in favour of the Plaintiffs by Ratan Mundol on the 26th Falgoon 1286 which corresponds with some date in March 1880, that is, before the passing of the Bengal Tenancy Act. The kabuliat is one executed by an ordinary raiyat. The tenancy is from year to year, and the rate of interest stipulated for in it is 3 annas per rupee per mensem or 225 per cent, per annum. The Courts below have held that the Defendant is not liable to pay interest at that rate. But the learned vakil for the Plaintiffs, Appellants, contends that he is liable.

I am of opinion that the appeal fails, and that we cannot decree interest at this rate. I fully concur in what has been said by my learned brother as to the rate stipulated for being exorbitant and unconscionable and, as to its being a rate, at which no Court of Equity should give a decree. I further concur in what my learned brother has said as to the incident of paying interest on arrears being an ordinary incident of a tenancy in this country, and agree that a purchaser of a holding at a rate for arrears of rent must be liable to pay interest on arrears. But I do not think that it is one of the ordinary incidents of a raiyati tenancy in this country that interest at a higher rate than 12 per cent. should be paid. Sec. 67 of the Bengal Tenancy Act read with sec. 178, sub-sec. (3), clause (A), shows that the payment of interest at a higher rate than 12 per cent, per annum is not now one of the ordinary incidents of a raiyati tenancy. In support of this view, 1 would cite a passage from the judgment in the case of Alim v. Satish Chunder Chowdhury ILR 24 Cal. 37 (1897), which runs as follows:- "We will assume in the absence of anything to denote the contrary that the original holder, while holding over, held under all the terms of the kabuliat which he had given. When, however, the landlord put up the holding to sale for its arrears, he must be taken to have put it up subject to all the ordinary incidents of such a holding. It was not an ordinary incident that interest on arrears should be payable at the very high rate claimed. On the contrary, there was no such incident, and if the landlord had put up the holding subject to an express condition that the higher rate should be paid, the condition would not bind the purchaser in so far as it purported to create a new contract between himself and the landlord. If there was no such condition attached to the sale, the purchaser must be taken to have purchased subject to all ordinary incidents of the holding. If there was such a condition, and it was for the Respondent to show it, which he has not done, the condition was, we consider contrary to the provisions of the Act and not binding on the purchaser. An agreement by a tenant of a holding for a term to pay interest at a certain rate may, if made before the passing of the Act, bind him so long as he continues to hold, but it does not attach to the land when the term has expired and the holding by the Act of the landlord passes into other hands; and if the landlord after the expiry of the term puts up the holding to sale under the Act, he puts it up subject to the express provisions of the Act in connection with it."

The learned Judges in the case quoted above appear to me to lay down that it is not an ordinary incident of a raiyati holding in this country that interest on arrears should be paid at a higher rate than 12 per cent., and they further hold that even if the landlord had put the holding of the Defendant in that case up to sale subject to the terms of the kabuliat executed by him before the passing of the Bengal Tenancy Act, the stipulation for the payment of higher rate of interest than 12 per cent, would not have been binding, as the Defendant''s lease was for a term which had expired, and the Defendant who was holding over, was to be regarded as holding the land under a new contract impliedly entered into on the expiration of the term of his lease.

Now, in this case, it seems to be clear that the tenancy was not put up for sale subject to the terms of the kabuliat executed by the former tenant. The Defendant has expressly pleaded this in paragraph 2 of his written statement. Ho says : " He was not aware of the contract to pay such interest, nor did the Plaintiffs cause the fact of the contract to pay such interest to be mentioned in the sale istahar." There is no evidence or even contention on the part of the Plaintiffs to the contrary. I am therefore of opinion that the Defendant in this case is not bound to pay the higher rate of interest claimed by the Plaintiff, (1) because the payment of more than 12 per cent. interest on arrears is not one of the ordinary incidents of a raiyati holding, and (2) because the holding was not put up for sale with notice that it was being sold subject to the terms of Ratan Mundol''s kabuliat.

But I go further, and consider that even it had been put up for sale under the express terms of Ratan Mundol''s kabuliat, the Defendant would not be liable to pay the higher rate, because a fresh contract must be regarded as having been entered into between him and the landlord, when the latter put the holding up to sale and the former purchased it, which he did on the 20th November 1891. The holding is an ordinary raiyati tenancy, not transferable except by custom or with the consent of the landlord. That being so, when the landlord put the holding up to sale, ho offered to accept the purchaser as a now tenant. The Defendant when he purchased accepted his offer, and must now, I think, be regarded as holding under a new contract made after the passing of the Tenancy Act and not under the terms of the old kabuliat. Therefore the provisions of sec. 67 of the Bengal Tenancy Act, read with sec. 178, sub-sec. (3), cl. (A), must apply.

For these reasons I concur in dismissing this appeal.

I would add that to give effect to the contention of the Appellant would, in my opinion, be contrary to the policy of the Tenancy Act. Sec. 67 lays down that an arrear of rent shall bear simple interest at 12 per cent., and cl. (h), sub-sec. (3), sec. 178, enacts that no contract made after the passing of the Tenancy Act is valid, which contravenes the provisions of sec. 67. If the contention of the learned vakil for the Appellant were given effect to, and if a landlord could enforce stipulations in contracts made before the passing of the Tenancy Act, with former tenants for the payment of such exorbitant rates of interest on arrears as 225 per cent, per annum, the policy of the Tenancy Act as embodied in secs. 67 and 178, (3), (A), would, in my opinion, be completely set at naught.