Ramanathan Chetty vs Nur Muhamad Marakayar

Subrahmania Aiyar, J.—The Subordinate Judge was clearly wrong in disallowing Rs. 1,652-14-0 out of the principal amount mentioned in

the mortgage instrument; sued upon. Exhibits IVa and IV show that out of the sixteen hundred rupees a sum of one thousand rupees was retained

by the mortgagee as ""Labham"" or discount and that the whole of the remaining amount inclusive of six hundred rupees and odd was paid to the

mortgagor or on his account from time to time as set forth in Exhibit IV a The respondent who received IV and IVa in 1888 never took any

exception to what was stated therein and, in the face of such conduct on his part, his present statement that he did not agree to the discount and

that the sum of 600 and odd rupees was not paid to him, is entitled to no weight. As regards the question of compound interest also claimed by the

plaintiff, the Subordinate Judge has, in my opinion, taken a wrong view. In the case Ghantayya v. Papayya, reported in ILR 23 M. 534 reference

was made to the principles and considerations to be borne in mind in construing provisions bearing upon the question of post diem, interest. Having

regard to what was stated there the provision in Exhibit A, in the present case that compound interest was to be paid by the mortgagor to the

mortgagee cannot be held to be confined to the period of three years allowed for the repayment of the mortgage money, but should betaken to

extend to the subsequent period also during which the debt remains undischarged. Now, unquestionably the provision which follows the one

relating to compound interest referred to above and which entitles the mortgagee to claim, interest after the due date at 15 instead of at 12 per cent

is one introduced for the benefit of the mortg0agee. How then could it be interpreted to curtail his right to compound interest to which he is entitled

under the previous provision? The meaning of the two provisions in question, they being taken together, clearly is that the mortgagee can claim

interest for the throe years only at the rate of 12 per cent; that if the mortgagor fails to pay within that period the mortgagee can thereafter claim,

interest at the higher rate of 1 5 per cent; but that so far as compound interest is concerned, he is entitled to charge such interest not only for the

three years, but also for any further period during-which the debt OR any portion thereof remains unpaid. This view is strongly confirmed by the

concluding provisions of the instrument. I cannot agree with the contention that the plaintiff is entitled to compound interest up to the date of

realization, following the order of the Judicial Committee in Mathura Dan v. Raja Narindar Bahadur ILR 19. A. 39. I would allow the plaintiff

compound interest up to the date of the decree of the Subordinate Judge and subsequent interest up to the date of realization at 6 per cent, on the

aggregate amount. 1 would modify the decree of the Subordinate Judge accordingly. The respondent should pay the appellant''s costs upon the

amount allowed. The memorandum of objections should be dismissed with costs.

Shephard, J.

I agree in the decree proposed by Mr. Justice Subrahmania Aiyar. I think the most reasonable construction to put on the instrument of mortgage

is to hold that compound interest was intended to be paid as well during the three years as subsequently.

It is as though the parties had agreed that after three years the rate of interest should be raised, but that otherwise they should remain as they

were. The account which is to be settled once in twelve months with reference to the proceeds of the brig and. which would have to be taken

during as well as after the three years would according to this construction include compound interest. According to the defendant''s contention the

clause must be read as referring to compound interest at one time and simple interest at another.

Davie, J.

I also agree with my learned colleagues except in respect to the plaintiff''s claim for compound interest throughout. The loan of Rs. 16,000, was

made for three years certain during which the terms of interest were 1 per cent, per mensem with annual rests which implies compound interest

even if it had not been expressed in words as it is in the document. After the three years'' term the agreement is that the money then due shall, be

payable on demand, and the rate of interest during default of payment should be 11/4 per cent, per mensem. Nothing is said about annual rests,

and the term indicating compound interest used before is omitted here. It seems to me clear that the parties made a fresh agreement in regard to the

terms of interest after the three years'' period was up, as after that date the money was payable on demand. The loss of compound interest on the

one hand was made up by an increase in the rate of interest on the. other. There is, therefore, in my opinion, no ground for our importing ''the word

compound"" before interest, when there are no words expressing or implying it as there were in the first part of the agreement.