Sundara Boyi Ammal vs Sama Rayer alias Rama Rayer

Muthusami Aiyar, J

This was a suit on a hypothecation bond for Rs. 200, dated the 14th September 1883. It provided for repayment with interest at 12 per cent

per annum on or before the 30th June 1885, but contained no express provision for interest after the due date. Two payments were made on

account of the bond, Rs. 48 on the 5th June 1885 and Rs. 48 on the 9th September 1887. The first payment is endorsed on the bond as made for

interest due for two years up to the 5th January 1885 and the 2nd payment is endorsed as made on account of interest due from September 1885

to September 1887.

The plaintiff claimed interest up to date of suit. The defence was that there was no provision in the hypothecation bond for post diem interest,

that it should not be charged on the property under hypothecation and that the payments should be credited to interest due up to due date and the

balance to the principal. The District Munsif decreed post diem interest on the ground that the payments evidenced an intention or implied contract

to pay interest after the due date. On appeal, the Judge held that post diem interest could only be allowed as damages for breach of contract and

that as more than 6 years had elapsed after the due date, it could not be allowed even as damages. He refused to credit Defendant with Rupees

48, as it was a payment made for post diem interest when such interest was allowed by the Courts.

Hence this Second Appeal.

It is urged that there is evidence of an intention to pay interest after the due date. Payments endorsed on the hypothecation bond disclose such

intention and show that interest was actually paid up to September 1887, whilst the due date was the 30th June 1885, The District Munsif was

right in inferring from this a contract to pay interest after the due date and the question whether post aiem interest awardable under Act XXXII of

1839 is to be treated as contractual interest, awardable by the courts or as damages for breach of contract does not arise. It can only arise in the

absence of a contract in regard to post diem interest express or implied. On this ground, I would reverse the decree of the District Judge and

restore that of the District Munsif. Respondent will pay Appellant''s costs both in this and the Lower Appellate Court.

Shephard, J

By the hypothecation instrument of September 1883, the defendant''s predecessor in title covenanted to pay the principal together, with interest

at 1 per cent per mensem within the 30th June 1885. It is admitted that two sums were paid by way of interest in 1885 and September 1887. The

suit was brought in February 1893. The District Judge has given the plaintiff a decree for the principal sum only, disallowing the claim for interest

subsequent to the 30th June 1885 on the ground that such interest cannot be allowed except as damages and that a claim for such damages is

barred by limitation. In the appeal before us against this decree it was argued that the plaintiff was independently of contract, entitled under the

statute to interest post diem and that the money so payable was assimilated to interest and as such chargeable on the hypothecated property so as

to bring the case within the operation of Article 132 of the second schedule to the Limitation Act. A recent case Bikramjit Tewari v Durga Dyal

Tewari, I. L. R 21 C 276 was cited in support of this contention. In the present case, however, it is not necessary to consider the question whether

a secured creditor claiming interest under the statute is entitled to add such interest to the security. Here there is no occasion for the creditor to

have recourse to the statute, for there is evidence of an implied contract to pay interest after the date fixed for payment of the principal. The District

Munsif finds that there was such a contract and I think he was right. The District Judge seems to think that owing to some change in the law there

must be an express stipulation for interest and that otherwise interest can only be allowed under the Act, The judge has fallen into an error for there

has been no change of the law and here as in England in the absence of an express stipulation a contractual obligation to pay interest may be

established by proof of circumstances showing the intention of the parties that interest post diem shall be paid (see Price v. Great Western Railway

Company, 22 L, J, Ex, p. 232), The decree of the District Judge should be reversed and that of the District Munsif restored.