Patna High Court
Debi Prasad Dhundhania And Ors. vs Kusum Kumari And Ors. on 9 April, 1930
Equivalent citations: 128IND. CAS.133, AIR 1930 PATNA 442
JUDGMENT
1. This is an appeal by the plaintiffs against a decree of the Subordinate Judge of Bhagalpur in a suit on a mortgage. The appeal is contested by the defendant first party, the widow of Thakur Partap Narayan Deo of Lachmipur. The defendants second party are subsequent mortgagees. The defendants third party are three other widows of Thakur Pratap Narayan Deo. And the defendants fourth and fifth parties represent another and separated branch of the plaintiffs' family. The allegations in the plaint are that the Lachmipur estate which was owned by Thakur Pratap Narayan Deo is an impartible estate to which the defendant first party has succeeded. Thakur Pratap Narayan Deo had dealings with the father of plaintiffs Nos. 1 and 2 now deceased; and on 27th February 1911, a sum of Rs. 3,64,845-12-3 was found due under different hand notes executed by him, and in satisfaction of these debts the mortgage-bond in suit was executed on that date for Rs. 4,00,000. The claim on this bond amounted to Rs. 7,23,538-10-6.
2. Various defences were raised. The only defence with which this appeal is concerned is that raised on Section 6, Regulation III of l872, and the rule of damdupat. Eleven issues were framed all of which (except issue No. 9 which did not call for decision) were decided in favour of the plaintiffs except issue No. 10 which ran as follows:
Are the plaintiffs precluded from getting anything more than double the actual cash advanced, if any, minus all payments in view of Section 6, Regulation III of 1872? Does Section 6, Regulation III of 1872 apply to this case? Is the plaintiffs' claim against its provisions?
3. The learned Subordinate Judge held on the authority of Maha Prasad Singh v. Ramani Mohan Singh 25 Ind. Cas. 451 : A.I.R. 1914 P.C. 140 : 41 I.A. 197 : 42 C. 116 at p. 135 : 18 C.W.N. 994 : 16 M.L.T. 105 : (1914) M.W.N. 565 : 1 L.W. 619 : 20 C.L.J. 231 : 27 M L.J. 459 : 16 Bom. L.R. 824 (P.C.), that Section 6 Regulation III of 1872, governed the case and that the Court was bound to refuse to decree com-pound interest arising from any intermediate adjustment of account or a total amount of interest exceeding the principal of the original debt or loan. He also relied on the decision of this Court in Hari Prasad Singh v. Sourendra Mohan Singh 66 Ind. Cas. 915 : A.I.R. 1922 Pat. 450 : 3 P.L.T. 709 : 1 Pat. 506 affirmed by the Judicial Committee in Sourendra Mohan Sinha v. Hari Prasad 91 Ind. Cas. 1033 : A.I.R. 1925 P.C. 280 : 52 I.A. 418 : 5 Pat. 135 at p. 139 : 42 C.L.J. 592 : 24 A.L.J. 33 : (1926) M.W.N. 49 : 7 P.L.T. 97 : 50 M.L.J. 1 : 30 C.W.N. 482 : 28 Bom. L.R. 1126 (P.C.), and held that in determining the amount of interest to be decreed the Court must allow credit for any sum which had already been paid on account of interest. After examining the various transactions the Subordinate Judge came to the conclusion that the original loan within the meaning of Section 6, Regulation III of 1872 was Rs. 3,34,153-2-9 and that out of the total amount of interest payable on this loan which up to the date of the suit would have amounted to Rs. 3,91,915-7-9, only an amount equivalent to the original loan could be allowed. He further found that the payments made from time to time by the defendant amounted to Rs. 2,65,710 14-9 and, giving credit for this, found that the plaintiffs were entitled to a decree for Rs. 4,02,797-6-9 at the date of the suit. He further held that the plaintiffs were not entitled to interest pendente lite; but he allowed the amount of the decree to bear future interest at the Court rate from the date of the expiry of the period of grace.
4. Before dealing with the arguments that have been advanced in appeal, it will be convenient to refer to the mortgage-bond itself (Ex. 1). The bond recites the fact that Thakur Pratap Narayan Deo, the mortgagor had to pay to the mortgagee Rs. 3,64,845 12-3, being the principal and interest due up to the date of the bond under two rukkas, one dated 27th April, 1910, for Rs. 2,13,061 and the other dated 13th June, 1910, for Rs. 1,27,914 both of which rukkas had been executed in renewal of earlier rukkas. The mortgage-bond was executed for Rs. 4,00,000, which was made up of the aforesaid Rs. 3,65,845-12 3, Rs. 6,000 on account of commission and costs of the mortgagees and a cash advance of Rs. 29,154 3 9 made upon the mortgage. It was stipulated that interest should run on the mortgage-debt at the rate of 7 per cent. per annum compoundable every six months. Seven properties were mortgaged of which Nos. 2, 4, 6 and 7 were situated in the District of Bhagalpur, Nos. 3 and 5 in the Santal Parganas, and No. 1, which consisted of several parganas, taluqas and mauzas, was situated as to four of these in Bhagalpur and as to the other two in the Santal Parganas. The deed contained the following clause: -
That out of the mortgaged properties some were in the District of Bhagalpur and some in the District of the Santal Parganas. The passing of consideration and the execution of this bond had taken place in the District of Bhagalpur and I do declare that should the mahajans be under the necessity of bringing the suit for realization of this money due under this bond, they shall be competent to institute the suit in the District of Bhagalpur to realize the money by the auction sale of the properties of Bhagalpur and the Santal Parganas Districts by the Court of Bhagalpur and I or my heirs and representatives shall not directly or indirectly raise any objection on the ground of the suit being instituted in the District of Bhagalpur or on the ground of auction sale of the mortgaged properties by the Court of Bhagalpur, nor shall I apply for transfer of the case at any time during the pendency of the suit.
5. Under Sections 5 and 10, Regulation III of 1872, suits in the Santal Parganas have to be instituted before the Settlement Officer during the pendency of a settlement of the area in which the land in suit is situated; and, as such a settlement was in progress at the date of the institution of this suit, it was instituted before the Settlement Officer, and he by an order dated 8th July, 1924, with the consent of the Deputy Commissioner accorded on 10th July,1924, directed that the suit be sent to the Subordinate Judge of Bhagalpur for disposal, The suit was accordingly tried and decided by that Court.
6. The main contention on behalf of the appellants is that the suit is not governed by Section 6, Regulation III of 1872. The argument is apparently against the decisions of the Judicial Committee in Maha Prasad Singh v. Ramani Mohan Singh (I) and Sourendra Mohan Sinha v. Hari Prasad 91 Ind. Cas. 1033 : A.I.R. 1925 P.C. 280 : 52 I.A. 418 : 5 Pat. 135 at p. 139 : 42 C.L.J. 592 : 24 A.L.J. 33 : (1926) M.W.N. 49 : 7 P.L.T. 97 : 50 M.L.J. 1 : 30 C.W.N. 482 : 28 Bom. L.R. 1126 (P.C.). Learned Counsel contended that there was an aspect of this case which had not been argued and which in record was not present in the cases before the Judicial Committee. He referred to 33 and 34 Vic. Chap. 3 Sections 1 and 2. By Section 1 power is given to the Governor of a Presidency in Council, Lieutenant Governor or Chief Commissioner to propose to the Governor - General - in - Council drafts of any regulations for the peace and Government of any part or parts of the territories in his Government or administration, to which the Secretary of State for India shall from time to time by resolution in Council declare the provisions of this section to be applicable, and it is provided that the Governor - General in Council shall take such drafts into consideration, and when any such drafts shall have been approved and shall have received his assent, it shall be published in the Gazette and thereupon have like force of law and be subject to the like disallowances as if it had been made by the Governor-General of India in Council at a meeting for the purpose of making laws and regulations. Section 2 provides that all laws and regulations hereafter made by the Governor-General of India in Council, whether at a meeting for the purpose of making laws and regulations or under the said provisions, shall control and supersede any regulation in any wise repugnant there to which shall have been made under the same provisions. Act XII of 1887 (the Bengal, Agra and Assam Civil Courts Act) is such a law thereafter made by the Governor General of India in Council; and Section 37 of that Act provides in sub - Section (1) that certain suits shall be governed by the Muhammadan Law where the parties are Muhammadans and by the Hindu Law where the parties are Hindus; and sub - Section (2) provides that: "in cases not covered by sub - Section (1) or by any other law for the time being in force the Court shall act according to justice, equity and good conscience."
7. The argument is twofold: (1) that the power to frame regulations is subject to an express provision in favour of the ordinary powers of the legislation and if a subsequent act of the Legislature is repugnant to the regulation the former will prevail; and (2) that the regulations have a strictly local application by virtue of Section 1 and that their operation cannot be extended, Thus it is contended that Section 37, Act XII of 1887, is repugnant to Regulation III of 1872 and must prevail and the Court must act according to justice, equity and good conscience and that so acting, it will decide according to the general law and not according to the restricted rule of the regulation in the matter of interest. It is also argued that if the whole case be held to be governed by Section 6, Regulation III as the Subordinate Judge has held, the result is that the provisions of that Regulation operate beyond the local area, namely the Santal Parganas, to which they are restricted, and affect property in Bhagalpur. As to the first branch of this argument Section 37 only empowers the Court to act according to justice, equity and good conscience in cases not provided for by any other law for the time being in force. Regulation III of 1872 is, such another law and effect must be given to that law if possible before the Court can have recourse to the rules of justice, equity and good conscience. Strictly there does not seem to be any repugnancy between the general law and the Regulation.
8. Section 2 of 33 Vic., contemplates a conflict between regulation and regulation or between regulation and legislative enactment. In such a case the rule is that the later is to prevail, But here there is no such conflict. The different laws prevail in different territories and cannot conflict. The question that arises on this argument rather is: What is the proper law of this contract, i. e. by what law is to be governed. So far as the lands situated in Bhagalpur are concerned, the contract is a lawful contract. So far as the lands situated in the Santal Parganas are concerned, it is not an enforceable contract in its stipulation as to compound interest. The term of the mortgage-deed which has been quoted in an earlier part of this judgment shows that the intention of the parties was that the case should be governed by the lex loci contractus, i, e., by the general law. This agreement in itself would not give jurisdiction to a Court which otherwise had no jurisdiction as was decided in Maha Prasad Singh's case (1), But the question that was there decided does not arise here. There is in the present suit no question of jurisdiction. The suit was properly instituted before the Settlement Officer and was validly transferred to the Subordinate Judge of Bhagalpur who would otherwise have had no jurisdiction over the Santal Parganas property by reason of Section 5, Regulation III of 1872. The real question would seem to be whether this is a contract which in the contemplation of the parties was primarily to be governed by the general law prevailing in Bhagalpur or by the special law prevailing in the Santal Parganas. It is argued that Maha Prasad Singh's case 25 Iad. Cas. 451 : A.I.R. 1914 P.C. 140 : 41 I.A. 197 : 42 C. 116 at p. 135 : 18 C.W.N. 994 : 16 M.L.T. 105 : (1914) M.W.N. 565 : 1 L.W. 619 : 20 C.L.J. 231 : 27 M L.J. 459 : 16 Bom. L.R. 824 (P.C.) or Sourenara Mohan Singh's case 66 Ind. Cas. 915 : A.I.R. 1922 Pat. 450 : 3 P.L.T. 709 : 1 Pat. 506 (these are the same case under different names) was a case of a contract which (not -withstanding a clause similar to the clause quoted above in the present mortgage) the parties must be taken to have contemplated, should be governed by the law prevailing in the Santal Parganas for the reason that the mortgagor resided, and two-thirds of the mortgaged property was situated in that district. The mortgage there in suit was a renewal of earlier mortgages of the same kind. Thus in Maha Prasad Singh's case 25 Iad. Cas. 451 : A.I.R. 1914 P.C. 140 : 41 I.A. 197 : 42 C. 116 at p. 135 : 18 C.W.N. 994 : 16 M.L.T. 105 : (1914) M.W.N. 565 : 1 L.W. 619 : 20 C.L.J. 231 : 27 M L.J. 459 : 16 Bom. L.R. 824 (P.C.) at page 135 Page of 42 C.--[Ed.] Lord Moulton observed:
By far the greater portion of the mortgaged properties was situated in the District of the Santal Parganas and the mortgagor resided in that district. The remainder of the mortgaged properties was situated within the local jurisdiction of the Bhagalpur Court.... The only issues that remain for their Lordships' decision in this appeal turn on the fact that the mortgagors reside and the chief part of the property is situate in the Santal Parganas so that it is not necessary further to refer to the other issues.
9. In Hari Prasad Singh v. Sourendra Mohan Singh 66 Ind. Cas. 915 : A.I.R. 1922 Pat. 450 : 3 P.L.T. 709 : 1 Pat. 506 (at page 511 Page of 1 Pat.--[Ed.]) the Chief Justice of this Court explained the decision of the Judicial Committee in the following way:
The reason for that decision was that the greater portion of the land included in the bond was situated within the Santal Parganas and although some portion of it had been settled and a notification to that effect made as provided in the section, the other portion was still under settlement, their completion not having been notified when the suit was instituted.
10. Similarly Bucknill, J., in his judgment observed:
The properties which were mortgaged by the plaintiff's predecessor to the defendant were largely situated in the Santal Parganas district and only a small portion lay within the District of Bhagalpur.
11. So in Sourendra Mohan Singh v. Hari Prasad 91 Ind. Cas. 1033 : A.I.R. 1925 P.C. 280 : 52 I.A. 418 : 5 Pat. 135 at p. 139 : 42 C.L.J. 592 : 24 A.L.J. 33 : (1926) M.W.N. 49 : 7 P.L.T. 97 : 50 M.L.J. 1 : 30 C.W.N. 482 : 28 Bom. L.R. 1126 (P.C.) their Lordships of the Judicial Committee observed at page 139 Page of 5 Pat.--[Ed.]:
The property mortgaged was the joint property of the joint family, the greater part of which was situate within the Santal Parganas. The joint property extended from the Santal Parganas into the District of Bhagalpur and the smaller part of the joint property thus happened to be situate within the local limits of the ordinary jurisdiction of the Subordinate Judge of Bhagalpur.
12. In the present case, it is argued, the contract is what might be called a Bhagalpur contract. The parties are resident and the greater portion of the property, or at least the larger number of properties, is situated in that district. The mortgage, though it included land in the Santal Parganas, was executed to pay off earlier rukkas which had been executed in Bhagalpur and were in no way amenable to the law of damdupat. There is nothing, therefore, to displace the conclusion as to intention to be drawn from the clause quoted, and the conclusion to be drawn from the contract read as a whole and from the surrounding circumstances is that the parties intended that the contract should be governed by the general law as far as possible: Hamlyn & Co. v. Talisker Distillery . Company (1894) A.C. 202 : 6 R. 188 : 71 L.T. 1 : 58 J.P. 540, But even if it be possible, in view of the decisions referred to above to treat the contract in this way a question which will be considered later, it does not seem possible to give effect to all its provisions. Two sets of property are in suit and these are governed by different laws; but that does not seem to entitle the Court to override the regulation and apply the rule of justice, equity and good conscience. The effect would rather be to put the plaintiffs to their election as to the property with regard to which they are to pursue their remedy.
13. The second branch of the argument, it is contended, bears out this view. The effect of the decree of the Subordinate Judge is to control the contract so far as it affects the lands in Bhagalpur by a regulation which has no force there. It is true that the control extends only to the amount of interest that can be decreed; and if the bulk of the property was in the Santal Parganas, as in Maha Prasad Singh's case 25 Iad. Cas. 451 : A.I.R. 1914 P.C. 140 : 41 I.A. 197 : 42 C. 116 at p. 135 : 18 C.W.N. 994 : 16 M.L.T. 105 : (1914) M.W.N. 565 : 1 L.W. 619 : 20 C.L.J. 231 : 27 M L.J. 459 : 16 Bom. L.R. 824 (P.C.) it might well be to the advantage of the plaintiff to have a decree limited on this way which he could execute against all the property in suit. But in the present case the appellant contends that as a full decree, unlimited as to interest by the provisions of the regulation could be realized from the Bhagalpur property alone, it is to his advantage to pursue his remedy against the Bhagalpur property only and if necessary to give up his (sic) so far as the Santal Parganas property is concerned. It is contended for the respondent that to allow the plaintiff to take this course would be to go against the decision in Maha Prasad Singh v. Ramani Mohan Singh 25 Iad. Cas. 451 : A.I.R. 1914 P.C. 140 : 41 I.A. 197 : 42 C. 116 at p. 135 : 18 C.W.N. 994 : 16 M.L.T. 105 : (1914) M.W.N. 565 : 1 L.W. 619 : 20 C.L.J. 231 : 27 M L.J. 459 : 16 Bom. L.R. 824 (P.C.). This point will be considered later. Learned Counsel for the appellant referred to the decision of the Judicial Committee in Rambhadra, Raju v. Maharaja of Jeypore, 51 Ind. Cas. 185 : A.I.E. 1919 P.C. 150 : 46 I.A. 151 : 42 M 813 : 17 A.L.J. 694 : 37 M.L.J. 11 : (1913) M.W.N. 502 : 26 M.L.T. 127 : 21 Bom. L.R. 914 : 30 C.L.J. 209 : 23 C.W.N. 1033 : 10 L.W. 362 (P.C.). That decision, however, is not strictly on all fours with the present case. There two sets of properly were mortgaged, one in Vizagapatam, a district subject to the general law, and the other in the Agency Tracts, a scheduled district where the Code of Civil Procedure was not in force. The decree which their Lordships passed was a decree for the full amount of the claim, but limited as to its enforcement by sale to the properties which were within the jurisdiction of the Court to which the Code of Civil Procedure applied. But in the present case the real question is as to the amount of the decree which the Court can pass.
14. A farther objection was taken on behalf of the respondent that to allow the appellant to elect in this way would amount to a release of part of the mortgaged property and that that can only be done when there is no prejudice to a third party or to the mortgagor. Among the cases cited in support of this proposition were the following: Dina Nath Mahesh v. Naba Kumar Hajra 70 Ind. Cas. 542 : A.I.R. 1921 Cal. 792 : 35 C.L.J. 332, Hakim Lal v. Ram Lal 6 C.L.J. 46 and Huthasanan Nambudri v. Prameswaran Nambudri 22 M. 209. None of these cases, in our opinion, supports the proposition as stated. The first case was a case dealing with a question of partial redemption. The second case merely decided that a mortgagor who has realised part of the mortgaged property cannot obtain a personal decree against the mortgagor under Order XXXIV, Rule 6, because he has not exhausted the mortgage security. The third case decided that the purchaser of the equity of redemption of one of several mortgaged properties was entitled to redeem the whole of the mortgage. The rule is thus stated by Fry, J., in Kettlewll v. Watson (1882) 21 Ch. D. 685 (at page 714 Pages of (1882) 21 Ch. D.--[Ed.]):
I can conceive that if a person who was entitled to a lien on properties which he knew to belong to A, B, C and D released the lien to A he could not afterwards insist upon it as against B, C and D because he would without their privity and consent be increasing the burden on them. But it appears to me that in order to raise such an equity you must show that he knew that the estate which had originally been in one person had got into the hands of various persons.
15. This is the principle which is laid down in a case quoted as the basis of the decision in one of the authorities relied upon by the respondent, Budhumal Kevalchand v. Rama Yesu Sangle 55 Ind. Cas. 327 : 44 B. 223 : 22 Bom. L.R. 68. The case is Imam Ali v. Baijnath Ram Sahu 33 C.613 : 3 C.L.J. 576 : 10 C.W.N.551 where it was said at p. 622 Page of 33 C.--[Ed] that: "a mortgagee who has a security upon two or more properties, which he knows to belong to different persons, cannot release his lien upon one so as to increase the burden upon the others without the privity or consent of the persons affected: see also Sheo Prasad v. Behari Lal 25 A. 79 : A.W.N. 1902, 203 and Sheo Tahal Ojha v. Sheodan Rai 28 A. 174 : 2 A.L.J. 630 : A.W.N. (1905), 244."
16. In the present case the only third parties affected are the second mortgagees who claim to redeem and this objection is not raised on their behalf. The rights of second mortgagees are defined in Section 81, Transfer of Property Act, which provides:
If the owner of the two properties mortgages them both to one person, and then mortgages one of the properties' to another person who has no notice of the former mortgage, the second mortgagee is, in the absence of a contract to the contrary, entitled to have the debt of the first mortgagee satisfied out of the property not mortgaged to the second mortgagee, so far as such property will extend, but not so as to prejudice the rights of the first mortgagee, or of any other person having acquired for valuable consideration and interest in either property.
17. Such right as the second mortgagee has depends on the absence of notice. It is not suggested in the present case that there was any want of notice. Under the mortgage each property is liable for the debt. If the mortgagee decides to realize his debt from any one or more of the properties to the exclusion of the others, we knew of no principle or authority to prevent him from doing so.
18. It is contended for the respondent that if the Santal Parganas property is released, this will affect his right to limit the amount of interest; that the contract as it stands is obnoxious to Section 6, Regulation III of 1872 and that this entitles the respondent to a privilege which cannot be taken from him. In our opinion this is not so. Under the terms of the contract the plaintiff is entitled to a full decree for the amount of money due to him at the agreed rate of interest. It is only a Court having jurisdiction in the Santal Parganas that has to limit the amount of interest for which it will pass a decree; but if the Court is not exercising jurisdiction in the Santal Parganas, there is no limit to the interest that can be decreed. It cannot be contended that if the plaintiff had surrendered his security altogether and had sued on the personal covenant he could not have obtained a decree in full.
19. Another objection on this head was taken that if the Santal Parganas property is eliminated, the Settlement Officer had no jurisdiction and consequently the Subordinate Judge to whom he transferred the case had no jurisdiction either, because the order transferring the case was void. There seems to us to be no substance in this objection. The Subordinate Judge had jurisdiction over the property so far as it was situated in Bhagalpur without any authority from the Settlement Officer; and the fact that the plaint came before him from the Settlement Officer would not affect his jurisdiction to deal with the case so far as the Bhagalpur property is concerned.
20. On this general argument, the appellants claim a decree in one or other of the following forms: (1) a full decree against both the Bhagalpur and the Santal Parganas property. (2) A decree for the full amount, to be realized by sale of the Bhagalpur property and if that is insufficient, then by sale of the Santal Parganas property up to the limit of a decree which would be governed by Section 6, Regulation III of 1872. (3) A decree for the full amount to be realized from the Bhagalpur properties only on the precedent of the case in Rambhadra Raju v. Maharaja of Jeypore 51 Ind. Cas. 185 : A.I.E. 1919 P.C. 150 : 46 I.A. 151 : 42 M 813 : 17 A.L.J. 694 : 37 M.L.J. 11 : (1913) M.W.N. 502 : 26 M.L.T. 127 : 21 Bom. L.R. 914 : 30 C.L.J. 209 : 23 C.W.N. 1033 : 10 L.W. 362 (P.C.).
21. Now, if by "Courts having jurisdiction in the Santal Parganas" in Section 6, Regulation III of 1872 had been meant the Santal Courts, i. e, Courts constituted under Act XXXVII of 1855 and under Regulation V of 1893 then there would have been no obstacle to a full decree against all the property. But this view is no longer possible since the decision in Maha Prasad Singh's case 25 Iad. Cas. 451 : A.I.R. 1914 P.C. 140 : 41 I.A. 197 : 42 C. 116 at p. 135 : 18 C.W.N. 994 : 16 M.L.T. 105 : (1914) M.W.N. 565 : 1 L.W. 619 : 20 C.L.J. 231 : 27 M L.J. 459 : 16 Bom. L.R. 824 (P.C.). Nor can a decree in either of the other two proposed forms be given in view of that decision and the decision in Sourendra Mohan Sinha v. Hari Prasad 91 Ind. Cas. 1033 : A.I.R. 1925 P.C. 280 : 52 I.A. 418 : 5 Pat. 135 at p. 139 : 42 C.L.J. 592 : 24 A.L.J. 33 : (1926) M.W.N. 49 : 7 P.L.T. 97 : 50 M.L.J. 1 : 30 C.W.N. 482 : 28 Bom. L.R. 1126 (P.C.). In these cases there was land mortgaged both in the Bhagalpur district and in the Santal Parganas and it was not suggested in either case that the plaintiff might elect or that a decree could be passed in full against the Bhagalpur property and limited as to the amount of interest so far as it was to be enforced against the property in the Santal Parganas. In other words the decrees proposed by the appellant are, in our opinion, negatived by implication by these decisions of the Judicial Committee and it is not open to this Court to pass a decree in any of the forms suggested. So far as this argument is concerned, therefore, it must be held that the case is concluded by the decisions in Maha Prasad Singh v. Ramani Mohan Singh 25 Iad. Cas. 451 : A.I.R. 1914 P.C. 140 : 41 I.A. 197 : 42 C. 116 at p. 135 : 18 C.W.N. 994 : 16 M.L.T. 105 : (1914) M.W.N. 565 : 1 L.W. 619 : 20 C.L.J. 231 : 27 M L.J. 459 : 16 Bom. L.R. 824 (P.C.) and Sourendra Mohan Sinha v. Hari Prasad 91 Ind. Cas. 1033 : A.I.R. 1925 P.C. 280 : 52 I.A. 418 : 5 Pat. 135 at p. 139 : 42 C.L.J. 592 : 24 A.L.J. 33 : (1926) M.W.N. 49 : 7 P.L.T. 97 : 50 M.L.J. 1 : 30 C.W.N. 482 : 28 Bom. L.R. 1126 (P.C.) and that the decree passed by the Subordinate Judge is correct on the authorities.
22. The next question to be discussed is whether interest already paid should be deducted in calculating the total interest to be decreed. The ordinary rule of damdupat is that it prohibits the accumulation of interest. Any amount of interest can be taken if it is taken by degrees, but a creditor cannot recover at any one time more interest than is equal to the principal. The law was laid down in this sense in Dhondo Jugonath v. Narayan Ramchunder 1 B.H.C.E. 47. There the texts of Manu, Mayukha and Vachaspati Misra as well as the commentators Steel, Colebrooke and Strange were quoted and the rule of Hindu Law was stated thus: "No greater arrear of interest can be recovered at any one time, than what will amount to the principal sum, but if the principal remain outstanding, and the interest be paid in smaller sums than the amount of the principal money, there is no limit to the amount of interest which may be thus received from time to time,"
23. The authorities in Calcutta where the rule of damdupat is law were considered in Nobin Chunder Bannerjee v. Ramesh Chunder Ghose 14 C. 781, where the statement of law quoted above from the Bombay decision was accepted as the law in Calcutta also. And Ghose, J., in Ramchunder Marwari v. Rani Keshobati Kuari 1 C.L.J. 182 refers to the practice on the original side by which when mortgage decrees are drawn up no deduction is made under the rule of damdupat on account of previous payments of interest. We are not, however, in this case concerned with the strict rule of damdupat but with the statement of that rule contained in Section 6, Regulation III of 1872.The decision of the majority of the Judges in Ramchunder Marwari's case 1 C.L.J. 182 was that, the total interest recoverable on a loan was not to exceed the principal and that, therefore, sums paid on account of interest must be given credit for when the amount of interest to be decreed is calculated. This case went to the Judicial Committee and the question was argued as to the true construction of the section, but as the case fell to be decided on another point, this question was not decided or discussed by their Lordships in Ram Chandra Marwari v. Keshobati Kumari 2 Ind. Cas. 935 : 36 C. 840 : 36 I.A. 85 : 10 C.I.J.I. 6 A.L.J. 617 : 6 M.L.T. 1 : 11 Bom. L.R. 765 : 13 C.W.N. 1102 : 19 M.L.J. 419 (P.C.). It might, therefore, be considered that the view taken by the majority, of the Judges in Ramchandra Marwari's case 2 Ind. Cas. 935 : 36 C. 840 : 36 I.A. 85 : 10 C.I.J.I. 6 A.L.J. 617 : 6 M.L.T. 1 : 11 Bom. L.R. 765 : 13 C.W.N. 1102 : 19 M.L.J. 419 (P.C.) is obiter dictum. But that decision has been followed by this Court in Hari Prasad Singh v. Sourendra Mohan Sinha 66 Ind. Cas. 915 : A.I.R. 1922 Pat. 450 : 3 P.L.T. 709 : 1 Pat. 506, and the decision was referred to apparently with approval, by the Judicial Committee in Sourendra Mohan Sinha v. Hari Prasad 91 Ind. Cas. 1033 : A.I.R. 1925 P.C. 280 : 52 I.A. 418 : 5 Pat. 135 at p. 139 : 42 C.L.J. 592 : 24 A.L.J. 33 : (1926) M.W.N. 49 : 7 P.L.T. 97 : 50 M.L.J. 1 : 30 C.W.N. 482 : 28 Bom. L.R. 1126 (P.C.), and the decision of this Court based upon that ruling was affirmed. Therefore whatever may be said on the strict language of Section 6(b), it must be held that the interest to be decreed is not to exceed the principal and that in taking the account credit must be given for earlier payments on account of interest. In this respect, therefore, the judgment of the Subordinate Judge is in accordance with the authorities.
24. The next point is as to interest pendente lite and interest after the decree. It is well-settled that the rule of damdupat applies only during the contractual relation of debtor and creditor. It does not apply when the contractual relation has come to an end by reason of a decree: see In the matter of Hari Lal Mullick 33 C.1269 : 10 C.W.N. 884 and Nanda Lal Roy v. Dhirendra Nath 21 Ind. Cas. 974 : 40 C. 710. In mortgage suits the contract is effective until the expiry of the period of grace and it is only after that date that the matter passes from the domain of contract to the domain of judgment, as was held by the Judicial Committee in Sundar Koer v. Rai Sham Krishna 34 C. 150 : 34 I.A. 9 : 5 C.L.J. 106 : 11 C.W.N. 249 : 4 A.L.J. 109 : 9 Bom. L.R. 304 : 17 M.L.J. 43 : 2 M.L.T. 75 (P.C.). Now the period of grace has been fixed by the mortgage-decree in this suit and that extends after the date of the decree. The appellants contend that as the effect of Section 6, Regulation III of 1872, is to stop interest running before the suit was instituted, they are entitled to interest pendente lite. But it seems to me that this is not so. The contract being a mortgage contract continues to be effective until the date of grace and it is as from that date that the account of what is due under the mortgage is settled. Consequently the appellants are not entitled to interest pendente lite. It is otherwise however with subsequent interest. In Rani Keshobati Kueri v. Satyaniranjan Chakravarty 47 Ind. Cas. 179 : (1918) Pat. 305 it was held that interest after the decree should run only on the principal amount. The authority of that decision has been shaken by the fact that both the Chief Justice and Bucknill, J., in Hari Prasad Singh v. Sourendra Mohan Sinha 66 Ind. Cas. 915 : A.I.R. 1922 Pat. 450 : 3 P.L.T. 709 : 1 Pat. 506, doubted its correctness although they did not actually decline to follow it. It appears to us to be wrong in principle because the effect of the rule of damdupat is exhausted when the matter passes into the domain of judgment; and there is no reason why interest at the Court rate should not be decreed on the amount due under the mortgage from the expiry of the date of grace. When this question came before, the Judicial Committee in Sourendra Mohan Sinha v. Hari Prasad 91 Ind. Cas. 1033 : A.I.R. 1925 P.C. 280 : 52 I.A. 418 : 5 Pat. 135 at p. 139 : 42 C.L.J. 592 : 24 A.L.J. 33 : (1926) M.W.N. 49 : 7 P.L.T. 97 : 50 M.L.J. 1 : 30 C.W.N. 482 : 28 Bom. L.R. 1126 (P.C.), it was treated as a question of the discretion of the Court. In the present case the learned Subordinate Judge has exercised his discretion in favour of the plaintiffs and there is no reason for this Court to interfere with his decision.
25. Two other points were argued by Counsel for the appellants. The first was that under Section 62, Contract Act, when there is novation of a contract the earlier agreement need not be performed. The mortgage in suit, therefore, extinguished the rukkas and the Court is not entitled to go behind the new contract. This argument seems to put Section 62 to a use for which it was never intended. Section 62 relieves the promissor from his obligation under a contract which has been superseded. This argument seeks to deprive him of a benefit to which he is entitled under Section 6 by reason of these earlier contracts. Section 1, Contract Act, provides that: "Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby repealed;" and consequently Section 62 cannot affect the operation of Section 6 of the Regulation.
26. Another point argued was that the mortgage in suit was not an intermediate adjustment and that in any case, as fresh consideration passed, it is not within Clause (b), Section 6. We are unable to assent to this argument. The mortgage plainly represents an intermediate adjustment, as was held in Hari Prasad Singh v. Sourendra Mohan Sinha 66 Ind. Cas. 915 : A.I.R. 1922 Pat. 450 : 3 P.L.T. 709 : 1 Pat. 506. It evidently is not a final adjustment of account as it merely starts a fresh liability on express terms as to interest. The fact that fresh consideration passed is immaterial. The original liability, was increased by this mortgage, independently altogether of the fresh consideration by adding to the original principal interest which had then accrued due and this is precisely what is aimed at by the clause in question.
27. Counsel for the respondent contended that the contract itself is illegal and void and referred to Sections 23 and 24, Contract Act, and argued that nothing is recoverable on it. He quoted the stipulation for compound interest and also the following clause in the deed:
28. "The rate of interest and the stipulation as regards payment of interest and compound interest shall never and on no account be reduced or altered," and argued that the object of this agreement is of such a nature that if permitted it would defeat the provisions of Regulation III. The question is merely the question of the legality of compound interest. The clause quoted adds nothing to the contract. Various cases were cited to show that the Court will not give effect to a contract which has the object of defeating a Statute: Waugh v. Morris (1873) 8 Q.B. 202 : 42 L.J.Q.B. 57 : 28 L.T. 265 : 21 W.E. 438, Bartlett v. Vinor Carthered 252, Saleh Abraham v. Manekji Cowasji 75 Ind. Cas. 521 : A.I.R. 1921 Cal. 57 : 50 C, Kristodhone Ghose v. Brojo Govindo Roy 24 C. 595 : 1 C.W.N. 442, Moti Chand v. Ikramullah Khan 39 Ind. Cas. 454; A.I.E. 1916 P.C. 59 : 44 I.A. 54 : 39 A. 173 : 15 A.L.J. 150 : 5 L.W. 388 : 21 M.L.T. 267 : 32 M.L.J. 383 : 21 C.W.N. 616 : 19 Bom. L.E. 433 : 26 C.L.J. 24 : (1917) M.W.N. 453 (P.C.) and Cope v. Rowlands (1836) 2 M. & W. 149 : 2 Gale 231 : 6 L.J. (N.S.) Ex. 63 : 46 R.R. 532. It is not necessary to examine these cases in detail, because none of them, in our opinion, has any bearing on the present question. The argument rests on a misunderstanding of Section 6, Regulation III. This section does not prohibit such a contract as the present mortgage, but merely provides that in certain circumstances compound interest is not to be decreed. Compound interest is not illegal in the Santal Parganas: see Shama Charan Misser v. Chuni Lal Marwari 26 C. 238 where this very argument was raised and considered and it was held that there is no law or Regulation laying down that an agreement between any two persons living in the Santal Parganas to pay compound interest upon the amount borrowed is unlawful within the meaning of Section 23, Contract Act. All that the law provides is that compound interest will not be decreed by any Court. And it is obvious that a contract which is good until the interest has reached the damdupat level cannot change its character when that level has been passed, though interest may cease to run. The argument is, in our opinion, wholly without substance.
29. The accuracy of the figures arrived at by the Subordinate Judge was not questioned by the appellants and they have been shown by the respondent to be correct. It follows, therefore, from the conclusions arrived at above that the appeal must be dismissed with costs.