Vadlamannati Srinivasadikshitulu and Others vs Damera Rangayya and Others

In this case the mortgage-deed provided in the first instance for interest at 10 annas 6 pies per cent, per mensem, and for annual instalmetits of

Rs. 800 to cover principal and interest, that, on default in one instalment interest, on it should run at 14 annas per cent, per mensem from the date

of default, and that in default of payment of two instalments (the event which happened) interest should be at 1 per cent, per mensem compound

interest. The District Judge treated these stipulations as penal and awarded compound interest at 10 1/2 annas from the date of the second default.

For the appellants it is not disputed that he was justified in treating these stipulations as penal, but it is contended that he was bound to allow as

reasonable compensation something more than the original rate, citing Annamalai Chetty v. Veerabadrarn Chetty 26 M. 111. It was also

contended that he has misunderstood the decision of the Privy Council in Sunder Koer v. Rai Sham Krishen 34 C. 150 : 34 I.A. 9 : 4 A.L.J. 109 :

11 C.W.N. 249 : 5 Cri.L.J. 106 : 17 M.L.J. 43 : 9 Bom.L.R. 304 : 2 M.L.T. 75. The report in Sunder Koer v. Rai Sham Krishen 34 C. 150 : 34

I.A. 9 : 4 A.L.J. 109 : 11 C.W.N. 249 : 5 Cri.L.J. 106 : 17 M.L.J. 43 : 9 Bom.L.R. 304 : 2 M.L.T. 75. makes it clear that the High Court and the

Privy Council awarded not the original rate of interest but a higher rate of 12 per cent, compound interest. u/s 74 of the Indian Contract Act, the

Court is to award either reasonable compensation or the penalty. When the alleged penal rate is a common rate of interest in everyday

transactions, as 12 per cent, is here, we do not think there is any sufficient reason for departing from it. The decree of the lower Court must be

modified by allowing 12 per cent, perannum compound interest from the date of the second default as provided in the agreement. The respondent

sought also to support the decision on the ground that the plea in paragraph 2 of his written statement had been wrongly overruled. It was that

when he asked for particulars of the amount due and offered to pay it, the creditors omitted to send the particulars. No authority has been cited in

support of this novel plea which must be disallowed. The appellant does not press the contention that the amount should be calculated according to

the Gregorian calendar. The appeal is allowed with proportionate costs. Time for payment is extended to six months from this date.