Merla Ramanna vs Chandru Butchamma

Chandra Reddy, J.—This appeal is directed against the Judge of the Subordinate Judge, Rajahmundry, (sic)ing a decree for Rs. 78,333-4-0. The (sic)tiff who is also dissatisfied with the decision has filed a memo of cross-objections claim-(sic)is. 1,00,000/-. The facts so far material (sic)is inquiry may be briefly stated.

One Nallapuraju Atchutaramaraju for (sic)If and as guardian of his brothers son (sic)hadra Raju created a mortgage for Rs. (sic)0/- over certain properties in favour of (sic)Merla Agastayya under Ex. A-36 dated (sic)1911. On 10-10-1922 a portion of the (sic)heca and some other properties not included in Ex. A-36 were mortgaged by the said Atchutaramaraju and his two sons Venkatapathiraju and Venkata Surya Balabhadraraju, the sons being minors and represented by their father, to one Chundru Butchamma for a sum of Rs. 22,000/-.

The first mortgage (Ex. A-36) was assigned on 20-1-1924 to the defendant under Ex. A-37. The defendant took an additional bond on 13-3-1925 in respect of the properties covered by the first mortgage. He filed O. S. No. 25 of 1927, Sub Court, Kakinada on the foot of Exs. A-36 and A-37 impleading not only the mortgagors but the present plaintiff who was in the position of a puisne mortgagee in respect of items comprised in Ex. A-36.

A preliminary decree was "passed on 31-1-1931 which was followed by a final decree on 6-10-1932. The matter was taken in appeal in A. S. No. 312 of 1931 t0 the High Court of Madras. In the appellate judgment, the priority of the plaintiff was declared over Ac. 271-83 cents out of Ac. 543-65 cents which formed the subject-matter of the first mortgage. In pursuance of the decree, the defendant brought the properties subject to his mortgage to sale and himself purchased them.

A sale certificate in regard to them was issued to him on the 26th of June, 1936. He obtained delivery of the properties purchased some time in 1938. There were some properties left in the possession of the mortgagor after the court-sale. As a result of the purchase, the right of equity of redemption in respect of several items of property embraced by the suit mortgage vested in the defendant. Out of the properties left to him, the mortgagor sold an extent of Ac. 6.61 cents lying in Kalavacherla village, East Godavari District,, and another plot of Ac. 10-15 cents situated in Dulpaturu for a sum of Rs. 1,500/-.

In respect of these properties, the plaintiff executed a release-deed Ex. A-15, receiving a sum of Rs. 100/- in favour of the vendors and the vendees on 25-3-1948. To the same vendees were conveyed Ac. 45-54 cents consisting of three bits, each measuring Ac. 30-38 cents, Ac. 3-50 cents and Ac. 11-66 cents situated in different villages by the mortgagors. The plaintiff released his mortgagee rights over those items for a consideration of Rs. 100/-evidenced by Ex. A-15(a). All the documents cited above were registered before 3 P.M. on 30-3-1948.

On the same date, the suit giving rise to this appeal was instituted for the recovery of Rs. 2,00,000/- on the mortgage, Ex. A-3. The plaintiff gave up a sum of Rs. 1,38,048/- thus confining his relief to Rs. 2,00,000/-. The plaint was presented between 4 and 5 P.M. on that date.

The suit was resisted on seven defenses: that it was barred by limitation, that the defendant was entitled to the benefits of the Madras Agriculturists Relief Act (hereinafter called the Act); and that the defendant should1 be relieved against the penalty which consisted in the agreement to pay compound interest in default of the payment of the installments provided for in the mortgage.

The trial Court overruled the objection as to limitation as the mortgage-debt was acknowledged by the defendant in the proclamation of sale. That finding is not contested before us.

also negative the claim for relief under the Act as the defendant was not agriculturist and the mortgagors had no interest in the suit properties at the relevant date.

He, however, gave effect to the last contention by allowing the plaintiff only simple interest at 12 per cent per annum. This decree is impugned both by the plaintiff and the defendant as stated above.

In support of this appeal, the contention raised by Mr. Ramachandra Rao, the learned counsel for the appellant, at the forefront of his arguments, is that the defendant could claim relief under the Act as the debt in question was due and payable at the commencement of the Act and the mortgagor was an agriculturist on 1-10-193,7 despite the fact that the defendant was not an agriculturist. According to the learned counsel, the only requisite to invoke the provisions of the Act is that the debt should be payable at the commencement of the Act, and the mortgagor should be an agriculturist on 1-10-1937 and on 22-3-1938 when the Act came into force. It was not necessary that the mortgagors should continue to have the status of an agriculturist on the date of the suit.

Support is sought for this argument from Pappammal Vs. Ramaswami Chettiar, There, Justice Wadsworth and Justice Patanjali Sastry constituting the Bench ruled that, if the debtor put forward the claim during the trial of the suit itself he would be entitled to relief if he could prove that he was an agriculturist On the two crucial dates mentioned above and the further condition that he should be an agriculturist even at the time when the matter comes before the Court is not imposed by Ss. 7 and 9 of the Act. The passage which has given rise to this contention occurs at page 499 (of Mad LJ) : (at p. 727 of AIR), of the aforesaid decision, and runs as follows:

Reading these two sections together, in the absence of any provision requiring proof that the debtor must continue to be an agriculturist also up to the time when the matter comes before the Court, we are of opinion that the debtor in cases where his claim to relief is put forward during the trial of the suit, will be entitled to relief if he can show that he was an agriculturist on 1st October, 1937, and on the commencement of the Act, 22nd March, 1938.

We are in doubt whether the learned Judges intended to lay down as an abstract proposition of law that, even when the pledge had no interest in the agricultural lands sufficient to satisfy the definition of an agriculturist, still it was open to him or her to claim the benefits of the Act. If they meant to enunciate any such proposition, it is opposed to the provision of S. 7 and the current of decisions. Section of the Act provides that notwithstanding and law, custom, contract or decree of the Court the contrary, all debts payable by an agriculturist at the commencement of the. Act shall be scaled down in accordance with the provisions of the Act,

"Agriculturist" is defined in S. 3 (ii) of the Act. Agriculturist means "a person who has a saleable interest in any agricultural or hor(sic) cultural land in the province of Madras" e(sic) It is plain that only a person answering to description in S. 3 (ii) (a) of the Act coi(sic) derive benefit under S. 7. The expression us in CI. (a) is ''has'' which connotes the existence of an interest in praesenti. The verb is us in the present tense and the clause "has a sa(sic) able interest in an agricultural land" in ordinary acceptation means one who has a s(sic) sisting interest in any agricultural or hortic(sic) tural land.

A combined reading of Ss. 3 and 7(sic) only lead to the inference that a person having the status of an agriculturist on the r(sic) vant date could claim relief in regard to de(sic) payable; at the commencement of the Act. is thus manifest that two conditions must be fulfilled before S. 7 could be called in (sic) namely, that the debt was one which was (sic) able on the date the Act came into force (sic) that the claimant fulfilled the definition in S. 3 (2) of the Act.

Mr. Ramachandra Rao attempted support his argument by a sentence in judgment of the Supreme Court in Cheruvu Nageswaraswami Vs. Rajah Vadrevu Viswasundara Rao and Others, contained page 256 (of Mad LJ) : (at p. 372 of AIR) the decision -

The liability of a purchaser of the eq(sic) of redemption to pay the mortgage-debt(sic) doubtedly arises on the date of his purchase but the debt itself which has its origin in mortgage bond did exist from before his(sic) chase and if it was payable by an agriculturist at the relevant date, the purchaser certainly claim the privileges of the Act (sic) himself was an. agriculturist at the date of application.

Emphasis is laid on the word "certainly" it is argued that the import of the wor(sic) that not only a purchaser who is an ag(sic) turist on the date of the purchase but a agriculturist could ask for relief. It is (sic) that if that word did not carry that im(sic) tion their Lordships would have cont(sic) themselves by saying that the purchaser(sic) claim the privileges of the Act. This(sic) ment is ingenious and is utterly devoid (sic) substance.

The expression "certainly" only n(sic) ''''surely" or "undoubtedly". It cannot having connotation that is attributed to it by(sic) learned counsel. All that the sentence(sic) veys is that the claim of the purchaser,(sic) is an agriculturist, to the relief does not(sic) of any doubt. In In Re: Karam Bapanna Dora, , referring to the passage in Cheruvu Nageswaraswami Vs. Rajah Vadrevu Viswasundara Rao and Others, extracted above, the learned Chief Justice speaking (sic)r the full Court remarked that it expressed (sic)e law an the subject and proceeded to say that if in that case the purchaser was an agriculturist and the mortgage-debt was payable (sic) an agriculturist at the commencement of (sic)e Act their Lordships would have had no difficulty in holding that the mortgage debt as liable to be scaled down.

This indicates how the Full Bench under-(sic)od these observations of the Supreme Court, (sic)the course of the discussion of the question referred to the Full Bench, he said that at the (sic)ae when the debt was sought to be scaled (sic)wn, the person seeking relief must be an agriculturist owing the debt within the meaning of the Act. It is no doubt true that even (sic)the original mortgagor ceased to be an agriculturist by the time the claim to scale down (sic) debt is put forward the purchaser of an (sic)ity of redemption would also be in a posi-(sic) to seek that relief if he were an agriculturist.

This is the result of the judgment of the supreme Court in 1953 2 Mad LJ 252 : (AIR 3 SC 370) (B), quoted above, where it was (sic)erved that if the debt was payable by an (sic)culturist at the relevant date the purchaser (sic)d certainly claim the privileges of the Act (sic)e himself was an agriculturist at the date (sic)the application. It follows that if neither (sic)mortgagor nor the purchaser of an equity (sic)edemption is an agriculturist they will not admitted to the benefits of the Act.

It was alternatively submitted by Mr. Ramchandra Rao that the statute had laid a (sic) on the creditor to scale down the debts (sic)and payable at the commencement of the (sic)the fact that neither of the two occupied (sic)position of an agriculturist is immaterial, (sic)foundation for this argument is P.R. Govindaswami Naicker Vs. C. Javanmull Sowcar and Another, and Alapati Ankamma Vs. Pavuluri Basava Punnayya, The first (sic)te two cases has not much of bearing, (sic)problem to be solved there was whether (sic)junction restraining the mortgagee from (sic)ising his power of scaling out the mort-(sic) properties could be granted. The basis (sic)e relief in that case was that the plaintiff was an agriculturist and was entitled to the debt scaled down in accordance with provisions of the Act and if the sale out (sic)urt was held for an amount in excess of debt as scaled down it would amount to injury which would sustain a prayer for an (sic)ition. While accepting the contention, learned Judge said that the scaling down (sic)not necessarily be an act of Court and (sic)the relevant provision implied that after (sic)assing of the Act it is the duty of the (sic)or to scale down the amounts due to him (sic) debtors and it would only be in case which the creditor did not scale down his claim in accordance with the provisions of the Act that the intervention of the Court would be necessitated.

In the second case, the question arose whether the creditor, who received by way of ratable distribution a sum in excess of what would be due to him if his debt was scaled down while the application of the debtor for relief under the provisions of the Act was pending, had to make a restitution to his debtor. The learned Judge answered it in the affirmative. In the course of the judgment it was remarked by the learned Judge thus:

The position here was that, on 30th August, 1941, when, the appellant recovered Rs. 788-13-2 by process of Court, the Act had come into force, and no more than the amount to which the decree was eventually scaled down was recoverable from the respondent under S. 7 of the Act which indeed laid a duty on creditors to scale down their debts in accordance with the provisions of the Act, provided, of course, the debts were due from agriculturists (see 1938 2 Mad LJ 920) : (AIR 1989 Mad 56) (D)). Furthermore, the respondent had actually applied for relief under the Act and the appellant had notice of the application which was pending disposal.

The first sentence should be understood in the context of that enquiry and should not be taken as a generalization that the moment the Act came into force the creditor was under a liability to receive only so much as would be due to him as a result of the Act and if he had received anything more the debtor could claim restitution.

(9-a) That this could not be is evident from S. 8(4) of the Act, which recites:

Subject to the provisions of Ss. 22 to 25, nothing contained in sub-ss. (1), (2) and (3) shall be deemed to require the creditor, to refund any sum which has been paid to him, or to increase the liability of a debtor to pay any sum in excess of the amount which would have been payable by him if this Act had not been passed.

This sub-section has stated in unambiguous terms that the creditor was under no obligation to make good any sum which was paid to him.

So, we do not derive any assistance from these two rulings. If the purchaser of equity of redemption is a non-agriculturist and the mortgagor is an agriculturist, the scaling down of the debt would endure to his benefit provided a claim is made on behalf of the agriculturist. But, if the agriculturist mortgagor abstains from putting forward any claim, the non-agriculturist debtor cannot, as of right, require the creditor to scale down the debt That the purchaser of an equity of redemption will be entitled to the relief under the Act and is not confined to the person who incurred the debt is apparent from the decision In Perianna Goundan Vs. Sellappa Goundan and Others, This doctrine which has been adopted in other cases has also been extended to the non-agriculturist purchaser of equity of redemption, the basis being that it being a property liability, that when the debt is scaled down in regard to the agriculturist mortgagor, to that extent the burden on the property is lightened and the purchaser though a non-agriculturist, could be called upon to pay the amount only in accordance with the scaled down debt and there would be no grounds to deprive him of the benefits of the "lucky purchase". The ratio of this doctrine is that as a consequence of the application of the provisions of the Act there is a statutory reduction of the debt and the purchaser would have the benefit of it, his sale turning out to be an advantageous one. But, to enable him to get this fortuitous or accidental benefit, one essential requisite is that the agriculturist debtor himself should claim the benefits of the Act.

If he does not choose to do so, the no agriculturist debtor could not invoke the Act as of right. The principle of "lucky purchase" or the accidental or incidental benefit should not be extended further to a case like that. The general scheme of the Act is to give relief to the agriculturist debtors and it did not contemplate any scaling down of the debts incurred by non-agriculturist debtors or purchasers of equity or redemption from agriculturist mortgagors.

This principle is deducible from a number of decided cases. In Sree Rajah Vadrevu Viswa Sundara Row Bahadur Vs. Vadlamannati Kusalaramayya (died) and Others, , Justice Wadsworth and Justice Patanjali Sastri laid down the proposition that unless the mortgagors claim the benefit under the Act, the non-agriculturist purchaser of equity of redemption could not claim the fortuitous benefit as of right and it is only the accidental result of a claim successfully advanced by the mortgagors that could be taken advantage of by the purchaser who is a non-agriculturist.

Mr. Rama Chandra Rao urged that this did not find favour with the Supreme Court in Cheruvu Nageswaraswami Vs. Rajah Vadrevu Viswasundara Rao and Others, (B). A reference to that report shows that there is no force in this argument. The learned Judges did not accept the theory adumbrated in 1946 2 Mad LJ 72 : Sree Rajah Vadrevu Viswa Sundara Row Bahadur Vs. Vadlamannati Kusalaramayya (died) and Others, that the applicant for relief himself should be liable on the date the Act came into force. But the other basis of that decision was not viewed by their Lordships with disfavor.

Having regard to the fact that it was not proved that the debt was payable at the commencement by an agriculturist, it was felt that it was unnecessary to enquire further into the status of the applicant, namely, whether he was an agriculturist or not, as the claim for relief would be disallowed on the first ground. Hence Cheruvu Nageswaraswami Vs. Rajah Vadrevu Viswasundara Rao and Others, , far from reversing this dictum has by implication accepted it as valid. This rule was affirmed in subsequent decisions.

Justice Wadsworth sitting singly adopted this rule in Sugannantha Mudahar v. Kuppuswamy Chetty, 1947 2 Mad LJ 273: (AIR 194 Mad 205) (H). To the same effect are the pronouncements of two other Benches of the Madras High Court, Raja Suraneni Suryaprakasa Rayanimgar and Another Vs. Dodla Balaramireddi and Others, and Velugubantla Narayya Vs. Kona Venkanna and Others, Further, (sic) the instant case, on the date the suit was brought, the mortgagor was not in a position to seek the aid of the Court, because he ceased to have any interest in the hypothec purchased by the defendant, having obtained release under Exs. A-15 and A-15 (a) prior to the f(sic) ing of the suit.

So, even if he had a desire to ask; for rel(sic) it was not competent for him to do so as t(sic) relationship of mortgagor and mortgagee regard to this property no longer existed, having been terminated by the two released. The plaintiff had no remedy against the m(sic) gagor and so the mortgagor could not adva(sic) any claim for scaling down the debt. This the principle enunciated in the cases c(sic) above.

This position is contested by I(sic) Ramachandra Rao by arguing that it was(sic) open to the mortgagee to resort to the de(sic) of giving up his claim against the mortgage and that in any event since the purchaser the equity of redemption had the right of contribution against the mortgagor under S. 82 of the Transfer of Property Act, the transaction evidenced by Exs. A-15 and A-15 (a) could(sic) have any effect on the claim of the defendant to get the debt reduced under the Act.

To substantiate this, reliance is placed a Full Bench decision in Perumal Pillai(sic) Raman Chettiar, ILR 40 Mad 968 : (AIR 3(sic) Mad 1030) (K), which was approved of by(sic) Privy Council in Shah Ram Chand v. Pra(sic) Dayal, 1942 2 Mad LJ 390 : (AIR 1942 50) (L). The first part of the argument fallacious and cons stainable, for it is open the mortgagee always to release any poetical the hypothec and claim the whole am(sic) from the rest of it unless he exhibits an i(sic) tion to break the integrity of the mortgage(sic)

That it is an unquestionable right of the mortgagee to release any item of the (sic) theca is established by the very decision of the Full Bench which is called in aid by the Ramachandra Rao. The second one is eq(sic) untenable. It may be that the defendant a right of recourse against the mortgago(sic) contribution, but that has no relevancy to present enquiry.

The fact that some claim might arise (sic) ture is not very material in considering wh(sic) the mortgagor had a legal right to call in ai(sic) Act. If any such liability subsists, that (sic) look-out of the mortgagor and that does in any way, affect the point for determi(sic) in this case.

The learned counsel for the(sic) lants then attacked the genuineness o(sic) releases by the mortgagee-plaintiff and the(sic) by the mortgagor under Exs. A-13 and(sic) support of the argument that the sale deeds (sic)ere sham transactions pur attention was in (sic)ed to a number of documents viz., adangals, (sic)tas and procurement registers for the years subsequent to the sale. In almost all these (sic)cuments entries are made showing that the mortgagors continued to be the pattadars and re also in enjoyment of these properties.

Mr. Sastry for the respondent tried to (sic)et the situation by urging that these records the into being only after the suit and were (sic)de by the Karnam who was interested in (sic)defendant who was very Influential and (sic)ilthy person.

To appreciate the probative value of above documents, it has to be borne in mind an application for mutation was made by vendee and yet the authorities concerned (sic)not effected the mutation obviously for (sic)reason that the Karnam was not interested (sic)laving it carried out. The Kamam furnish--(sic)in unconvincing explanation for not comply-(sic)the request contained in the mutation ap-(sic)tion.

The explanation given by him was that vendor had issued oral instructions to him (sic)to mutate the pattas in favour of the ven-(sic). That this is a puerile one is seen from; (sic)admission that this application was sent by (sic)vendor himself. Be that as it may, the (sic)cation for mutation was pending and that (sic)t be a reason why the purchaser''s name (sic)not entered in the ''adangals'' and why the (sic)laser did not make any payment of the (sic). Further, these are all documents which (sic)into existence subsequent to the filing (sic)e suit.

The evidence furnished by these document is inconclusive and of a slender nature (sic)loes not make out the case of the defendant that they were colorable transactions.

(sic)is no reason why the plaintiff should be executed such sales in favour of a person is not shown to be either a friend or a (sic)relation of his. Assuming that the sales (sic)be impeached as not being genuine, that (sic)lot carry the defendant very far so long, (sic)release is not attacked as a spurious one. (sic)empt was made by the defendant to ad-(sic)any evidence to show that the releases (sic)bogus transactions.

Mr. Ramachandra Rao pointed out to (sic)t the plaintiff gave up his interest in (sic)items of property for a very small con-(sic)ion and that this is an indicator to the (sic)tion that they were also sham. P.W. 7 (sic)a of the plaintiff has deposed that he (sic)i his interest in those properties for an (sic)late consideration in view of the posi-(sic) the mortgagors who were once rich and (sic)duced to penury owing to the general (sic) depression.

(sic) also testified to the properties not be-(sic)y valuable ones and to there being not (sic)possibility of his realizing much higher there from. The mere fact that the re�(sic)vere effected for insufficient consideration would not render them sham or nominal. The argument advanced by Mr. Ramachandra Rao was that the motive of the plaintiff in executing these documents was to deprive his client of the benefits of the Act. The motive underlying these actions is not quite relevant for the purpose of this decision.

Just as a non-agriculturist purchaser is anxious to have the fortuitous benefit of the Act by reason of the scaling down pursuant to the request of the agriculturist-mortgagor, the mortgagee is entitled to secure to himself the full amount due under his mortgage if he is legally entitled to do so and without infringing the provisions of law. If the appellant cannot complain of any infraction of law he cannot make a grievance of the attitude adopted by the plaintiff in the action in regard to the releases. The plaintiff cannot be expected to act in the interests of the defendant and to his own detriment.

Lastly Mr. Ramachandra Rao fell back on the contention that when the defendant had got large extents of properties worth some thousand of rupees for nominal sums he must be deemed to have invoked the benefit of the Act and got relief outside the Court just before the filing of the suit. We do not think this argument can stand scrutiny. It is not in pursuance of the provisions of the Act or by scaling down the debt that the releases were obtained by the mortgagor but they were obtained independently of it.

There is no evidence that the mortgagor demanded the scaling down of the debt and in compliance thereof the plaintiff gave release. The utmost that could be said is that this was done in order to get over the Act. That apart, in order to sustain the plea of the non-agriculturist-debtor, the mortgagor should at the time of the suit be under the liability to pay the debt. In other words, the relevant time is the date of the suit or the application for relief.

By that time the mortgagor had put him self beyond the plea of the Act and hence was not in a position legally to ask for any such prayer. Therefore, this contention also fails and is rejected.

It follows the decision of the Court below is correct and cannot be challenged. In the result, the appeal fails and is hereby dismissed with costs.

We will now take up the memorandum of objections, which involves the point whether the clause providing for payment of compound interest is penal within the meaning of S. 74 of the Contract Act and whether it should be relieved against. It would be convenient to refer to the relevant terms of the mortgage to appreciate the controversy between the parties. It was agreed between the parties that the sum of Rs. 22,000/- which accrued due on the date of the mortgage should be paid together with interest at the rate of Re, 1/- percent per mensem of thirty days in eleven yearly installments of Rs. 2,000/- each commencing from 10-11-1923 to 10-11-1933.

It was also provided that if the principal and interest due for any installment as per the above installments were not paid, then, irrespective of future installments, the entire principal and interest outstanding on that due date should be treated as principal; the sum total of such principal and interest should, from the date of default until payment bear interest at Re. 1/- per cent per mensem of 30 days; the entire principal and interest due on the 10th of November, every year, became payable with compound interest with annual rests.

It is submitted by the cross-objector that this clause for payment of compound interest is not penal in nature and it constitutes a primary stipulation; consequently, the mortgagee is entitled to enforce the stipulations embodied in the document. On the other hand, the portion taken by Mr. Ramachandra Rao is that this agreement amounts to penalty and the debtor should be given relief. We think there is force in the contention advanced on behalf of the appellant. The argument of Mr. Sastry that the agreement to pay compound interest was not by way of penalty is founded on an observation of Ramesam J. in Putraya Vs. Krishna Gota, There the questions referred to the Full Bench were -

(1) Is a stipulation for payment of compound interest at the original rate in no circumstances a penalty?

(2) Where the stipulation is to pay compound interest at an enhanced rate, is to be treated as consisting of two distinct and severable parts, namely, stipulating to pay compound interest at the same rate (this part not being penal) along with an additional or a further sum (with this part being penal), and is the latter part only that can be relieved against?

Though the first question posed is similar to the one in the present case it was not answered in view of the fact that it was thought by the Full Bench that the contract for payment of compound interest at an enhanced rate was a penalty and relieved against by reason of S. 74 of the Contract Act. The observations on the basis of which Mr. Sastry maintained that the clause in question is not in the nature of a penalty are found in page 604 of Mad WN) : (at p. 36 of AIR) and are as follows:

''Where the rate is the same as a matter of construction the Court should properly construe the stipulation as to compound interest as a primary stipulation unless such a construction is impossibly Where the rate is increased it is to be certainly regarded as penalty.

For anything these remarks must be confined to the facts of that case. There the mortgagor agreed to pay the whole amount secured under the document on a particular date and it was not a case of installments. Even if it lends color to the submission of the cross-objector that does not carry the respondent very far because that is merely obiter. Further that is not the opinion of the Full Bench.

Therefore, we cannot derive much assistance from that ruling. The question whether a particular stipulation has the character(sic) penalty or not depends, in effect, upon(sic) construction of a document and on the asc(sic) tainment of what the parties really internal by it. The test in our opinion is to see was there the debtor has to make an additional money payment and whether it throws an(sic) ditional burden on him by way of punishment for committing default.

In the present case the debtor was gi(sic) facility to pay in easy installments and if(sic) installment remained unpaid a provision(sic) made to pay compound interest at the s(sic) rate, on the installments that fell in arrears(sic) might not be tantamount to a penalty,(sic) the stipulation in this case is to pay compound interest on the whole amount in case of(sic) fault committed by him. It is therefore(sic) correct to describe it as a primary contract pay compound interest.

It is only a secondary one. This op(sic) of our is reinforced by a judgment of the Madras High Court in Ramamurti v. S(sic) Rao, 1939 1 Mad LJ 491 : (AIR 1939 481) (N). In similar circumstances Pane(sic) Raw and Venkataramana Row JJ. decided a stipulation requiring payment of comp(sic) interest at 12% per annum was not binding of the defendants being a penalty.

All doubts in this regard will be solved by a reference to the explanation S. 74 of the Contract Act which reads :

A stipulation for increased interest the date of default may be a stipulation by of penalty.

It is no doubt true that the expression is "increased interest" but there can be doubt that payment of compound inter(sic) the type of cases like the present case amount to an increased rate of interest.

Now we have to consider w(sic) we should award some money by way of(sic) pensation not exceeding the agreed rate(sic) terest. Even if the contract for payment enhanced rate is treated as penalty, (sic) have a discretion to allow reasonable constitution to the creditor not exceeding the a(sic) agreed upon between the parties. In the section, it has to be borne in mind th(sic) plaintiff gave a large sum of Rs. 1,3(sic) and restricted his claim only to Rs. 2,00(sic) In such a situation normally we(sic) have been inclined to award an addition(sic) by way of compensation. However, in (sic) the attitude adopted by the plaintiff(sic) lower Court namely, his willingness to the 12 per cent per annum we do not they will be justified in increasing the amo(sic) ready decreed to the plaintiff.

Consequently, the memorandance objections has to be dismissed but in(sic) cumstances he will not be required to p(sic) to the other side.