Sm. Jagatmaya Kumri vs Munshi Ram Bahadur Prasad

Fazl Ali, J.—This second appeal arises out of a suit instituted by the appellant to recover a sum of Rs. 2100 on the basis of a mortgage bond. This bond was admittedly executed by the defendant and his father on 11th August 1928, to secure a loan of Rs. 960 which wag to bear interest at the rate of Rs. 1-4 0 per cent, per mensem with yearly rests. It is common ground that out of the sum of Rs. 960 which is stated to be the amount of the loan under this bond a sum of Rs. 203 only was paid in cash and. the balance was set off against a previous debt which was due to the plaintiff under a mortgage bond executed in 1925 for a sum of Rs. 486. The plaintiff has stated in the plaint that a sum of Rs. 100 had been paid by the defendant towards the dues under the bond in suit on 25th June 1929, and a further sum of Rs. 800 had been paid by him on 30th September 1934. The plaintiff, after giving credit as to these two amounts, claimed that a sum of Rs. 2100 was still due to him and prayed for a decree for that sum.

The defendant contested the suit mainly on the ground that the interest was excessive and he was entitled to relief under the Bihar Money-lenders Act. Both the Courts below have upheld his contention and reopened the transaction u/s 8, Bihar Money-lenders (Regulation of Transactions) Act, 1939. The first Court, after making certain calculations, came to the conclusion that the plaintiff was entitled to a decree for a sum of Rs. 472; but the lower appellate Court found that there were certain errors in this calculation and it has awarded a decree to the plaintiff for a sum of Rupees 402-12-0. That Court, after showing that for the purposes of determining the amount to which the plaintiff is entitled, it must be held that the principal amounts should be the sum of Rs. 203 paid in cash on 11th August 1928, and the sum of Rs. 486 which had been paid under the earlier bond of 1925, observed as follows:

The total amount of interest on Rs. 486 and Rs. 203 up to 30th September when the repayments amounted to Rs. 900 came to Rs. 518 (Rs. 406 + Rs. 112). The repayments exceeded the amount of interest by Rs. 382 which went towards the payment of the principal reducing it to Rs. 307. Interest on this amount up to the date of the suit came to Rs. 90-4-0. The plaintiff, therefore, was not entitled to more than Rs. 397-4-0 on the date the plaint was filed. The amount which should have been awarded according to the defendant viz., Rupees 402-12-0 exceeds the amount allowable. As the defendant himself prays for a decree for Rs. 402-12-0 the amount cannot be further reduced.

The learned advocate for the appellant conceded in this Court that the Courts below were entitled to re-open the transactions u/s 8, Bihar Money-lenders Act; but he has pointed out that the learned Subordinate Judge who heard the appeal from the judgment of the trial Court has entirely overlooked the proviso to Section 8, Money-lenders Act. That proviso runs thus:

Provided further if anything has been paid or allowed in respect of any liability for interest in excess of nine per centum simple per annum in the case of a secured loan and twelve per centum simple per annum in the case of an unsecured loan, nothing in Clause (a) or Clause (b) shall be deemed to require the creditor to repay any amount so paid or allowed in excess or to reduce the amount of the principal of the loan.

It may be stated here that Clause (a) of Section 8 enables the Court to re-open the transaction, take an account between the parties, and relieve the debtor of all liability in respect of any interest in excess of 9 per centum simple per annum in the case of a secured loan and twelve per centum simple per annum in the case of an unsecured loan. Clause (b) of that section provides that

notwithstanding any agreement purporting to close previous dealings and to create a new obligation, the Court may re-open any account already taken between them and relieve the debtor of all liability in respect of any interest in excess of 9 per centum simple per annum in the case of secured loan and twelve per centum simple per annum in the case of an unsecured loan.

Now, from the passage which I have quoted from the judgment of the learned Subordinate Judge, it will appear that, in his opinion inasmuch as the sum of Rs. 900, which has been admittedly paid by the defendant towards the loan, exceeded the interest which was payable on the principal sums (calculating interest at the rate of 9 per cent, per annum) the excess amount paid by the defendant must go to reduce the amount of the principal sums. But this is exactly what the proviso to Section 8 provides against. That proviso states that if any amount has been paid in respect of any liability for interest in excess of 9 per cent simple in the case of a secured loan, nothing in Clause (a) or Clause (b) shall be deemed to require the creditor to reduce the amount of the principal of the loan. On the dates on which the sums of Rs. 100 and Rs. 800 respectively were paid by the defendant, the Bihar Money-lenders Act was not in operation.

The creditor was, therefore, entitled to charge interest at the bond rate on that date and on calculation it appears that the interest which was due to him on those dates was far in excess of the amounts actually paid. Under the law the creditor was entitled to appropriate these payments towards interest and after the appropriation had been made those amounts could not be used to reduce the principal u/s 8 according to the proviso to Section 8, Bihar Money-lenders Act.

It was contended by the learned advocate appearing for the respondent that the proviso, if it bears the construction which is put upon it on behalf of the appellant, creates a somewhat anomalous position inasmuch as a debtor who has been making payments towards his debt is in a much worse position than one who has made no payments whatsoever. That may be so, but we have to give effect to the plain words of the proviso which clearly states that if a payment has been made in respect of any liability for interest that payment will not go to reduce the principal.

It must be remembered that the Bihar Money-lenders Act was enacted for the protection of such debtors as needed some relief on account of their poverty or inability to pay their debts. That may be the reason why this proviso excludes from the operation of Section 8 such debtors as were able to pay their interest at the agreed rate and had already paid it.

Now, if the proviso is given effect to, it seems to me that the appellant is entitled to a decree for a sum of Rs. 689 which is the total of the principal sums which were advanced by him in 1925 and 1928 respectively. It is not difficult to explain how this result is arrived at. I have already shown that the payments which have been made by the defendant cannot go to reduce the principal. These payments must be taken as payments towards interest. Now, if interest is calculated at the rate of 9 per cent, per annum as it should be u/s 8, Bihar Moneylenders Act, the amount payable as interest on the total principal sum advanced by the plaintiff is much less than the sum of Rupees 900 which has already been paid towards interest. That being so, the plaintiff is not entitled to claim any further interest in the suit. He is entitled only to recover the principal sums which amount to Rs. 689.

It was contended on behalf of the appellant that he is entitled to a decree at least for a sum of Rs. 1020. The reasoning upon which this argument is based is this. The learned advocate for the appellant points out that u/s 7, Bihar Money-lenders Act, he is entitled to a decree for at least such amount of interest for the period preceding the institution of the suit as is together with the amounts already realized by him equal to the amount of the principal sums advanced.

In the present case, it is pointed out that the loan advanced was Rs. 960, and if to this sum is added an equal sum as representing interest and from the total amount is subtracted the sum of Rs. 900 already paid by the defendant, the balance will be Rs. 1020. But that argument, however, can be accepted only if it is held that Section 7 only is applicable to the case and Section 8 does not apply to it. That once Section 8 is found to be applicable as was conceded by the learned advocate for the appellant in the course of his arguments, I think that the only mode of calculation is the mode which I have already indicated.

I would, therefore, partly allow this appeal and direct that a mortgage decree be passed in favour of the appellant for a sum of Rs. 689 instead of a sum of Rs. 402-12-0 for which decree was passed by the lower appellate Court. This sum will carry interest at the rate of 9 per cent, per annum up to the expiry of the period of grace which is fixed as three months from today and after the expiry of the period at six per cent, until realization. The defendant moved this Court at the time of the argument to fix instalments for the payment of the decretal amount. It appears that the Munsif thought that the sum decreed by him should be paid in four instalments but the learned Subordinate Judge on appeal observed that as the defendant could pay Bs. 800 in one instalment and has given no reason why he required instalments for a smaller amount, this was not a fit case for fixing instalments for the payment of the decretal amount. The defendant did not appeal from this part of the decree and we have no materials before us to enable us to pass a suitable order for making the decree payable in instalments.

It is, however, conceded on behalf of the appellants that the matter can be agitated at the time of the execution of the decree u/s 13, Money-lenders Act. That being so, no order need be passed in this respect in the present decree. The plaintiff shall get costs in all the Courts proportionate to his success but the cost incurred by him on account of the court-fee on the plaint shall be paid in full.

Harries C. J.

I agree.