Patna High Court
Lakhi Chand Sahu vs Pear Chand Sahu And Ors. on 19 February, 1917
Equivalent citations: 39IND. CAS.106, AIR 1917 PATNA 594(1)
JUDGMENT Chapman, J.
1. This appeal arises out of a suit upon a mortgage bond. The bond provided that interest should be payable at 12 percent simple interest but that if the money was not paid upon the due date which was fixed at two years after the execution of the bond the interest should thereafter be compound.
2. The learned Subordinate Judge has decreed the interest at the rate of 12 per cent simple interest only. The plaintiff has appealed to this Court.
3. The contention is that having regard to the relations between the parties at the time when the bond was executed and to the high rate of interest which was agreed to, the bargain should have been treated as an unconscionable bargain. The evidence as to the relations between the parties merely amounts to the fact that the borrower's properties had been put up to sale in auction and that he had no money and could not procure money elsewhere. But having regard to the consideration that the rate of interest finally agreed upon was not unusually high, I am not of opinion that it was satisfactorily made out that the bargain was unconscionable. It is then argued that Section 74 of the Indian Contract Act provides for the case of enhancement of interest after the due date and prescribes that an increase of interest after the due date may be treated as a penalty, but it does not say that in every case an increase shall be treated as a penalty, and it would be difficult to say that the change from simple to compound interest, when the interest was only at, the rate of 12 per cent, would amount to a penalty within the meaning of Section 74 of the Indian Contract Act.
4. I would accordingly allow the appeal and direct that interest be decreed at the rate agreed upon, that is to say at 12 per cent compound interest from the due date of the bond up to the date of the decree of this Court and thereafter at the rate of 12 per cent simple interest. The decree is to be a mortgage decree in the usual terms.
Roe, J.
5. I agree.