Ram Sarup Sah and Others vs Mukhi Singh and Others

Agarwal, J.—This is an appeal by the plaintiffs from a decision of the Subordinate Judge of Chapra modifying a decision of the Munsif. The facts were as follows : Defendants first party executed a mortgage in favour of the plaintiffs on 21st July 1923, to secure redemption of a loan of Rs. 500. The rate of interest prescribed by the bond was 2 per cent, per mensem with six-monthly rests. At the date of. the institution of the suit, on 20th January 1936, the amount outstanding for principal and interest was Rs. 8492-2-6. The plaintiff abandoned his claim as to Rs. 4992-2-6 and sued for a recovery of the remaining Rs. 3500. Defendants 4 to 29 were subsequent transferees or mortgagees of the hypothecated property Defendants 8, 9 and 15 claimed priority over the plaintiff''s mortgage. In 1917, there had been a zarpeshgi bond to defendants 8 and 9 for Rs. 175 and in 1922 another zarpeshgi in favour of the same defendants for Rs. 200. On 7th April 1924, defendants 8 and 9 advanced Rs. 768 to redeem a previous-mortgage in favour of one Rambharosa and Ramkalar, the brothers of the present plaintiff.

On 27th May 1925, there was a mort-gage to defendants 8 and 9 for Rs. 1200 to pay off all these previous encumbrances. The claim of defendant 15 was that on 4th July 1925, he had advanced Rs. 800 on a mortgage to pay off a previous mortgage of 7th April 1923. The first Court disallowed the claim of defendant 15 to priority and as to the claim of defendants 8 and & allowed it only to the extent of Rs, 375, that is to say, in respect of the previous-zarpeshgis of 1917 and 1922. Against the decision of the first Court an appeal was preferred by defendants 8, 9 and 15, defendants 8 and 9 challenging the decision of the trial Court with respect to the sum of Rs. 768 and defendant 15 with respect to Rs. 800.

The appeal was dismissed so. far as the claims of defendants 8, 9 and 15 to priority were concerned, but the Appellate Court gave effect to Section 11, Money-lenders Act, 1938, which prohibits a Court, in a suit brought by a money-lender, in respect of a loan, to pass a decree for the amount of interest for the period preceding the institution of the suit which, together with any; amount already realized as interest through" the Court or, otherwise, is greater than the amount of the loan advanced, that is to say, the plaintiff''s claim was reduced to Rs. 500 principal and Rs. 500 interest. The Appellate Court in its judgment made no provision for interest after the date of the institution of the suit up to the date of grace nor for interest subsequent to the date of grace, although the trial Court had-awarded interest at the bond rate up to the date of grace and interest at 6 per cent, per annum for the later period.

The order of the Appellate Court with regard to costs was that the judgment and decree of the lower Court were modified and the "plaintiff''s suit decreed modifiedly with costs corresponding to success." The decree that has been drawn up in pursuance of the Appellate Court''s judgment has awarded to defendants 8, 9 and 15 the costs of the appeal based on the amount of reduction in the decretal amount.

In second appeal it is contended on behalf of the plaintiffs-appellants that as there had been no appeal by any of the parties concerned with respect to the amount decreed by the first Court as principal and interest, it was not open to the Appellate Court to reduce that amount. Even if the matter were to be decided solely with reference to the provisions of 0, 41, Rule 33, Civil P.C., I should not be prepared to hold that the power of the Appellate Court to modify the decree with regard to the amount decreed by the trial Court was barred. But, in the present case, the matter is put beyond controversy by the provisions of Section 11, Money-lenders Act. That Section enjoins a duty on the Court, in the class of cases to which it refers to restrict the amount of interest awarded to a sum not in excess of the principal advanced. The only conditions necessary to attract the operation of that Section to an Appellate Court are that there shall be a suit by a money-lender, that the suit shall be in res. peot of a loan and that the appeal shall arise out of such a suit. When these conditions are satisfied the duty of an Appellate Court is plain that it must give effect to the Section

notwithstanding anything to the contrary contained in any other law or in anything having the force of law or in any agreement, which is the opening phrase of the Section.

I would therefore overrule the first objection of the learned advocate for the plaintiffs-appellants.

With regard to interest from the date of the institution of the suit to the date of grace, the learned advocate for the plaintiffs-appellants contends that he should be awarded interest at the bond rate as decreed by the trial Court. Section 8, Money-lenders Act, empowers either the original Court or the Court of Appeal or revision to re-open a transaction between a money-lender and his debtor, to take an account between the parties and to relieve the debtor of all liability in respect of any interest in excess of nine per cent, simple per annum in the case of a secured loan and 12 per cent, simple per annum in the case of an unsecured loan. The learned advocate for the respondents contends that this Court should not interfere with the decision of the Court below with regard to the interest subsequent to the date of the institution of the suit, inasmuch as that would be interfering with the discretion conferred on the Court by Section 8. There is no indication in the judgment of the Court below however that it has exercised any discretion with regard to interest subsequent to the date of the institution of the suit. What does appear from the judgment of the Appellate Court is that it proceeded on the assumption that the rule of damdupat introduced by Section 7 of the Act in respect to a claim for interest for the period preceding the institution of the suit applies also to the period subsequent to the institution of the suit. The language of Section 7 itself however is clearly against this view.

The language of Section 7, Money-lenders Act, differs completely from that of Section 6 of the Sonthal Parganas Regulation, III of 1872, which prohibits a Court in the Sonthal Parganas from decreeing interest on any loan or debt in excess of the one-fourth of the principal sum if the period be not more than one year or in excess of the principal of the original debt or loan in other cases. In the regulation there are no words of limitation as there are in Section 7, Money lenders Act, restricting the rule to the period preceding the institution of the suit. The Court of Appeal below having failed to exercise its statutory discretion in the matter it is open to us to pass an order in respect to interest subsequent to the date of the institution of the suit.

It was suggested by the learned advocate for the respondent that this was not a case in which we should exercise this discretion in view of the absence of circumstances justifying re-opening of the transaction between the mortgagee and the mortgagor. The terms of the bond however themselves invite such interference. It is a secured loan and it may be assumed that the mortgagee was satisfied that the security which he accepted was sufficient to ensure repayment of the debt. In spite of this security, the interest which he demanded was 2 per cent, per mensem with six-monthly rests which is considerably in excess of the commercial rate even for unsecured loans. In these circumstances, in my opinion, we are justified in exercising the discretion conferred upon the Court by Section 8 and I would therefore direct that in the decree, that is to be prepared the rate of interest for the period from the date of the institution of the suit till the expiry of the period of grace shall be 12 per cent, simple per annum and after the date o� grace at 6 per cent, per annum simple on the amount due at the date of grace.

The last point raised by the plaintiffs-appellants is with regard to the decree for costs. With regard to this the order will be that the plaintiffs will have their costs throughout on the amount decreed and the defendants will bear their own costs. The decree of the Appellate Court is set aside and a decree will now be prepared in accordance with Rule 2 and 4 of Order 34, with interest at the rate stated above. Period of grace three months from today.

Rowland J.

I agree.