Patna High Court
Rai Dalip Narayan Singh Bahadur And Anr. vs Musammat Bibi Sharfunissa And Ors. on 20 March, 1929
Equivalent citations: 119IND. CAS.410, AIR 1929 PATNA 383
JUDGMENT Courtney-Terrell, C.J.
1. This is an appeal from a decision of the subordinate Judge of Monghyr in which he decreed a suit based upon a mortgage bond dated the 23rd April, 1922, by which the defendant No. 1 mortgaged her interest in certain property to the appellant. The Subordinate Judge has decreed the appellant's suit on the mortgage bond but has reduced the rate of interest from the stipulated rate of 15 per cent. compound interest with yearly rests to 12 per cent. compound interest with yearly rests and the only point raised on this appeal is the question as to whether in the circumstances the Subordinate Judge was justified in so reducing the rate of interest. To the suit a subsequent mortgagee of the equity of redemption of the mortgage sued upon has been made a party and he also appears as a respondent in this appeal and asks that the decision of the Subordinate Judge reducing the rate of interest be maintained.
2. The circumstances are governed by Section 3 of the Usurious Loans Act of 1918 and in order for the Subordinate Judge to apply the section and reduce the amount of the interest stipulated in the bond it was necessary for him to find that the interest stipulated for was excessive and further that the transaction was as between the parties substantially unfair. In dealing with this question of the reduction of the interest the Subordinate Judge first said "In my opinion the plaintiff's claim for interest for such a large sum appears to be excessive and I allow interest at 1 per cent. per mensem compounded yearly."
3. Now it would appear that certain books of the plaintiff were produced in the course of the trial which showed that on other occasions and to other persons he had lent money at rates of interest lower than that stipulated for in this bond but the circumstances of these loans have not been described in the course of the evidence and their nature is not revealed. It is further said that the capital sum secured by the mortgage bond was for the purpose of re-paying to the appellant debts which had been incurred by the defendant to the appellant upon former loan transactions which transactions appear to have been unsecured and in which the rate of interest was substantially higher than the rate of interest charged under the mortgage bond. It may well be that in the earlier transactions where the loans where unsecured that even a higher rate of interest than that provided by the mortgage bond may have been justified and the fact that the loan in respect of which this suit was brought was secured by mortgage accounts for an actual reduction in the rate of interest charged. Now it is a common thing in India for rates of interest to be charged upon secured loan amounting to 1 per cent. per month and in some circumstances even going as high as 2 per cent. per month. What rate of interest is charged depends upon the circumstances, the security offered and so on, and no fixed rate of interest can be specified as being reasonable or fair in all cases, The burden is on the defendants to show that the rate of interest is excessive and I have some difficulty in seeing that as between 12 per cent. and 15 per cent. that the rate of interest alone can indicate that it was excessive and there is no evidence which can be referred to by the respondent which would justify any finding even if it had been come to by the Subordinate Judge, that the nature of the transaction was unfair either as an inference from the rate of interest or from other circumstances in the case. Therefore, in my view the action of the Subordinate Judge in reducing the rate of interest cannot be justified, Moreover, he appears to have justified his reduction to himself by stating that the estate of which the mortgaged property formed part was notoriously heavily involved in debt that, therefore, he was justified in giving relief to the other creditors of the estate and that by reducing the rate of interest he would affect beneficially other creditors of the estate. To my mind that was a criterion which should not have been applied and which had nothing to do with the case. Accordingly in my view the decree of the Subordinate Judge should be modified and the rate of interest should be restord to 15 per cent. The appellant will be granted a decree for Rs. 21, 625 with the bond rate of interest, that is, 15 per cent. compound interest with yearly rests up to the 6th June, 1927, and thereafter the principal together with the interest which has accrued up to that date will as a lump sum bear interest at 6 per cent, per annum up to the date of re-payment. The only one of the defendants who has substantially contested this appeal is the Maharaja of Gidhaur, defendant No. 3, and he will pay the costs of this appeal with interest at 6 per cent. up to the date of realisation and Rs. 147 as the costs of the lower Court.
Macpherson, J.
4. I agree.