Nathuni Sahu vs Baijnath Prasad and Others

Mullick, J.—The plaintiff is a moneylender. The defendant No. 1 is the head of a joint Mitakshara family; defendant No, 3 is his adult son while defendants Nos. 4, 5 and 6 are his minor sons. Defendant No. 2, Musammat Hira Bib, is his wife.

It is admitted that defendant No. 1. borrowed from the plaintiff various sums of money amounting to a total of Rs. 2,800 between the 20th of September 1908 and the 14th of April 1909. The defendant No. 3 was a party to the contract as regards the debts of Rs. 315 dated the 2nd of October 1908; of Rs. 150 dated the 23rd of No. vember 1908; of Rs. 250 dated the 28th of January 1909; of Rs. 900 dated the 9th of February 1,909 and of Rs. 900 and Rs. 200 dated the 14th of April 1909.

The defendant No. 2 was a party to the contract in respect of the two sums of Rs. 900 borrowed respectively on the 9th of February 1909 and 14th of April 1909.

Defendants Nos. 4 to 6 are not parties to any contract between the plaintiff and the other defendants.

The rate of interest stipulated was one anna in the rupee per month, which is 75 per cent, per annum. There was also an agreement between the plaintiff and the borrower by which the plaintiff deducted from the principal a sum representing one month''s interest. This sum has been in the Courts below called "batta", and the Subordinate Judge who tried the suit has rightly declined to give the plaintiff any credit for it and has calculated the principal at the amount actually handed over by the plaintiff to the debtors. The result of the trial was that a decree was made against defendants Nos. 1 and 3 only for a total sum of Rs. 2,245-3-0 on account of principal and Rs. 1,405-14 0 on account of interest. The Subordinate Judge considered 75 per cent. unconscionable and without assigning any other reason reduced it to 24 per cent. per annum. He held that it had not been established that defendant No. 2 joined in the loans or at any rate that if she did join, she did so under the influence of her husband, the defendant No. 1.

As regards the defendants Nos. 4 to 6, the minors, the Subordinate Judge held that no decree could be made against them because it had not been shown that the money was borrowed for their benefit.

The present appeal before us is preferred by the plaintiff.

The first prayer made is that defendants Nos. 4 to 6 should be included within the decree. It is contended that unless the respondents can show that defendant No. 1, the father of the joint family, borrowed the money for immoral purposes all the sons are liable to discharge his debts as a pious duty. In our opinion this contention must prevail and it is immaterial whether the money was or was not spent for the benefit of the minors. An authority for this proposition, if authority is needed, is supplied by the Full Bench decision of the Madras High Court in Ramasami Nadan v. Ulaganatha Goundan 22 M. 49 ; 8 M.L.J. 312 ; 8 Ind. Dec. 36. There the learned Judges went fully into the law and came to the conclusion that it was not necessary for the creditor to prove that the money was borrowed for the benefit of the sons. The decree to which the creditor is entitled should be one against the father or manager, with a direction that it was payable by him in the ordinary way and by the sons out of the ancestral co-parcenary property. It is contended by Mr. Fakhruddin on behalf of the appellant that he ought not to be restricted in his claim to the co-parcenary property alone but that he is entitled to proceed also against the separate property of the sons. There is no authority for this proposition in Hindu Law. All the authorities are unanimous that the coparcenary property alone is liable for the payment of the debts of the father. This, therefore, disposes of the first point raised by the appellant.

The appellant''s second point is that he is entitled to a decree against defendant No. 2, Hira Bibi. Now this is a matter of evidence.

[His Lordship after discussing the evidence continued:]

No decree, therefore, can be made against her.

Coming now to the 3rd point we are in some difficulty. The learned Vakil for the appellant contends that he is entitled to the full rate of interest at 75 per cent, per annum. On the other hand reliance is placed by the respondents on various authorities, the last of which appears to be the case of Krishna Charan Barman v. Sanat Kumar Das 34 Ind. Cas. 609 ; 25 C.L.J. 21 ; 44 C. 162, in which a Bench of the Calcutta High Court sitting in Letters Patent Appeal held that in view of the particular facts of that particular case interest at 75 per cent. was a penalty within the meaning of Section 74 of the Indian Contract Act. On the other hand, it has been held by a Bench of this Court that the Court is not competent to rip up a contract merely because it considers the rate of interest hard and unconscionable; and that a debtor cannot be relieved except by showing that he comes within the four corners of Section 16 of the Indian Contract Act. For my part I am strongly of opinion that the latter is the correct view and in my judgment this is also the view which their Lordships of the Privy Council have in several cases laid down.

Ordinarily when a creditor stipulates for a high rate of interest, his object is to secure the continuance of the loan rather than its early repayment. How then can the interest be called a penalty? When the contract provides a special condition for a change in the rate or mode of calculation of interest as a punishment for some default, that special condition may operate as a penalty; but ordinarily it is in my view not possible to consider a high rate per se objectionable as a penalty within the meaning of Section 74 of the Contract Act.

In the present case although undue influence was pleaded no evidence was given to establish undue influence or coercion, nor does the learned Subordinate Judge find that there was any such undue influence or coercion as would vitiate the contract. Therefore in my opinion the plaintiff is entitled to interest at 75 per cent. upon the principal money actually found by the learned Subordinate Judge to have been advanced to the debtors.

The order, therefore, of this Court will be that the decree of the lower Court will be modified and instead of calculating interest at 24 per cent. it will be calculated at the contract rate of 75 per cent. The amount so found due on calculation will be recoverable in the first instance from defendants Nos. 1 and 3; in default the plaintiff will be entitled to recover the whole or any part of it from defendants Nos. 4 to 6 by proceeding against the ancestral or co-parcenary properties in the hands of those defendants. The appeal as against defendant No. 2 will be dismissed with costs, which are assessed at Rs. 80. The appeal as regards the other defendants is decreed in this modified form, with costs which are assessed at Rs. 300. But here a proposal is made by the learned Vakil appearing for defendant No. 3 to the effect that he will pay a thousand rupees in cash to the plaintiff within one week from this day and the plaintiff on the tender of this offer agrees that if the money is so paid on that day, he will reduce the rate of interest to the rate which has been allowed by the learned Subordinate Judge namely, 24 per cent. The decree, therefore, will be modified upon such payment only as regards the rate of interest, its other provisions will stand.

Jwala Prasad, J.

I agree in the order proposed by my learned brother. Defendants Nos. 4 to 6 are liable lor the debt incurred by their father, defendant No. 1, whether they were benefited by the loan or not, as it has not been shown that it was incurred for immoral purposes. Defendant No. 2, Hira Bibi, wife of defendant No. 1, is not liable for the debt as it has not been proved that she took the loan or executed the hand-notes. Interest at the rate of 75 per cent. per annum is very exorbitant, but it has not been proved that the contract as to the rate of interest was induced by undue influence brought to bear upon the mind of the debtor by the creditor within the meaning of Section 16 of the Contract Act. It has not also been shown in this case that agreement as to the interest was a stipulation by way of penalty u/s 74 of the Indian Contract Act. I do not feel called upon to review the authorities on the subject. Suffice it to say that the ruling in Krishna Charan Barman v. Sanat Kumar Das 34 Ind. Cas. 609 ; 25 C.L.J. 21 ; 44 C. 162 relied upon by the appellants applies to the facts and circumstances of that particular case. The learned Chief Justice at page 31 page of 25 C.L.J.--Ed. says as follows:

But I wish to make it quite clear that I am deciding that this agreement is a stipulation by way of penalty having regard to the circumstances of this case only, because it may well be that in other cases 75 per cent. is a perfectly proper rate, or at any rate, it may not be a stipulation by way of penalty.

The principle enunciated in Satish Chunder Giri v. Hem Chunder Mookhopadhya 29 C. 823 seems to apply to the facts of this case. The plaintiff is entitled to the rate of interest agreed upon.