Allahabad High Court
Chaudhri Raghubir Singh vs Mulchand And Anr. on 29 April, 1937
Equivalent citations: AIR1937ALL598, AIR 1937 ALLAHABAD 598
ORDER Thom and Harries, JJ. 1. This is a first appeal from the order of the learned civil Judge of Meerut in an application under Sections 5 and 30, Agriculturists' Belief Act. The decree-holder had obtained final decree for sale on the footing of his mortgage. The applicant thereafter presented an application under the Agriculturists' Relief Act praying that the rate of interest be reduced to 51/2 per cent, from 1st January 1930, onwards and for the conversion of the decree into an instalment decree extending over a period of 15 years. The learned civil Judge has reduced the rate of interest to 301/2 per cent, per annum simple until such date as this rate is superseded by new rate under the orders of the Local Government and directed that amount due under the decree be paid in ten annual instalments. The judgment-debtor has appealed against the order of the civil Judge. Learned Counsel for the respondents took the preliminary objection that so far as the order of the Court below related to the payment of the debt by instalments, it was not appealable to this Court. Learned Counsel maintained that this was plain from the terms of Section 5(2) of the Act. Sub-section 2 is in the following terms: If, on the application of the judgment-debtor, the Court refuses to grant instalments, or grants a number or period of instalments which the judgment-debtor considers inadequate, its order shall be appealable to the Court to which the Court passing the order is immediately subordinate, and the decision of the appellate Court shall be final. 2. Learned Counsel for the respondents contended that, the' Court of the civil Judge of Meerut, was immediately subordinate to the Court of the District Judge and that therefore if the judgment-debtor desired to challenge the order of the civil Judge his remedy was by way of an appeal in the Court of the District Judge. It was contended for the judgment-debtor on the other hand that in virtue of the fact that the valuation of the suit was over a lakh of rupees, an appeal against the order of the civil Judge was competent in this Court. This question was considered in Bireshwar Das v. Umakant Pande A.I.R. 1937 All. 297 by a Bench of this Court. In the decision of that appeal it was held that the appeal from the order of the Court of the civil Judge lay in the Court of the District Judge and not in the High Court. We find ourselves in agreement with this conclusion. It appears to us to be plain from the provisions of the section that the Legislature intended that all appeals challenging the decision of the civil Judge under Section 5 should be in the Court of the District Judge alone. It is true, as learned Counsel for the appellant contended, that in suits where the valuation is above Rs. 5,000 the Court of the civil Judge is subordinate to the High Court, but the words of the section are 'immediately subordinate' and we are of the opinion that the intention of the Legislature was to confine the appeal to the Court of the District Judge in every case, no matter what the valuation of the original suit was. We are supported in our decision on this point by the terms of Section 3, Civil P.C. We therefore hold that so far as the order of the learned civil Judge relates to the payment of the decree by instalments, no appeal lies in this Court. 3. The appellant in these proceedings appeals also against the order of the learned civil Judge so far as it relates to the question of interest. It was conceded during the hearing by learned Counsel for the appellant that no appeal lies in this Court against the decision of the learned civil Judge upon the question of interest. Learned Counsel, however, invited us to treat his appeal against the Judge's order in relation to the question of interest as a revision. He maintained that under the provisions of Section 30 of the Act the Court below had no jurisdiction to award interest from 1st January 1930, upon the accumulated sum due on that date. Learned Counsel maintained that the intention of the Legislature was that interest from 1st January 1930, in oases where the rate of interest is reduced under the provisions of Section 30 should be calculated upon the amount originally advanced on loan. 4. The question raised in this argument is one which is not unattended with difficulty. The difficulty is due to a large extent to faulty draftsmanship. The point was considered in Kailash Kuar v. Amar Nath A.I.R. 1936 Oudh 334. It was held in that case that the reduced rate of interest under Section 30, Agriculturists' relief Act, was intended by the Legislature to be calculated on the accumulated amount due by the debtor as at 31st of December 1929. The terms of Section 30 were also considered in a single Judge decision of this Court Ramman Lal v. Kamala Dat A.I.R. 1936 All. 864 It is not clear from the report in that case whether the contractual rate of interest was simple or compound. The decision, however, was that the reduced rate of interest under Section 30 should be calculated on the original amount of loan and not on the accumulated amount due on 31st of December 1929. 5. The question is one of general importance and the decision of the Court will affect the rights of the parties in a large number of cases. We are accordingly of the opinion that the point in issue should be authoritatively decided by a Full Bench of this Court. Learned Counsel for the respondents contended further that no revision lay against the order of the learned civil Judge upon the question of interest. His argument was that the learned Judge had jurisdiction to interpret Section 30, Agriculturists' Relief Act, and even if his interpretation be wrong it cannot be said that he acted without jurisdiction or with material irregularity. We consider that this is a point which also might appropriately be decided by the Pull Bench. In the result we direct that the record be laid before the learned Chief Justice for the constitution of a Full Bench, to decide these questions: (1) Whether the rate of interest to be fixed by the Court in an application under Section 30, Agriculturists' Relief Act, is to be calculated on the accumulated amount due under the loan as at 31st of December 1929, or upon the original amount advanced on loan? (2) Is an application, in civil revision against an order of the civil Judge directing that future interest shall be calculated on the accumulated amount due under a loan as at 31st December 1929, in an application under Section 30, Agriculturists' Relief Act, maintainable? JUDGMENT Sulaiman, C.J.
6. This case raises two questions of law which have been referred to a Full Bench by a Division Bench before which a first appeal which was converted into a revision came up for hearing. On 11th October 1923, a mortgage deed for Rs. 4,500, and on 24th October 1923, another mortgage deed for Rs. 40,500 were executed by the same mortgagor in favour of the predecessor of the respondents, both carrying interest at Re. 0-11.6 per cent, per mensem compoundable every six months. It appears that the judgment-debtor from time to time paid Rs. 22,000 towards the discharge of this loan. A suit was brought for recovery of the consolidated amount due and a decree was passed on 24th November 1934 for a sum of Rs. 1,34,921-13-0, which included interest at the contractual rate up to the date of the decree, that is, pendente lite interest, and carried future interest at 6 per cent, per annum. It may be mentioned that under the documents a higher rate of interest, namely, 1 per cent, per mensem, was chargeable on unpaid interest after the expiry of every period of six months. It was on this account that the amount decreed was much more than the-amount originally advanced.
7. The judgment-debtor applied to the Court below under Section 5 and Section 30, U.P. Agriculturists' Relief Act (Act 27 of 1934) for a direction that the amount should be ordered to be payable by instalments, and for a reduction of the rate of interest fixed under the decree. The decree-holder was satisfied with the order of the Court-below but the judgment-debtor preferred a first appeal, and as no appeal lay it was. treated as a revision. No question now remains before us as regards the fixing of the instalments ordered by the Court below. The only questions are:
(1) Where the rate of interest to be fixed by the Court in an application under Section SO, Agriculturists' Relief Act, is to be calculated on the accumulated amount due under the loan as at 31st December 1929, or upon the original amount advanced on loan?
(2) Is an application, in civil revision against an order of the civil Judge directing that future interest shall be calculated on the accumulated amount due under a loan as at 31st December 1929, in an application under Section 30, Agriculturists' Relief Act, maintainable?
8. The matter has been referred to a Full Bench because of the importance of the question on which there are two decisions of a learned Judge of this Court in conflict with the opinion expressed by a Division Bench of the Oudh Chief Court. In Kailash Kuar v. Amar Nath A.I.R. 1936 Oudh 334 it was observed that Section 30 provides only for a reduction of the rate of interest, and the Court cannot interfere with the term of contract in any other way, and was then held that in view of the use of the word 'on a loan' which was paraphrased as 'in respect of a loan', and in view of the fact that in Section 31 the words used are 'the sum originally borrowed', there was no justification for any interference with the amount found due under the terms of the contract or decree up to 31st December 1929. It was accordingly held that the compound interest would continue to run even after 31st December 1929. On the other hand Bennet, J. in Ramman Lal v. Kamala Dat A.I.R. 1936 All. 864, and Kamala Dat v. Ramman Lal A.I.R. 1937 All. 114, held that the Court was empowered to reduce not merely the rate of interest in accordance with the provision of Sub-section (1) but also "the amount decreed on acccunt of interest". Stress was laid on the fact that in Sub-section (2) of Section 30 the word 'amount' has been intentionally used. The expression 'interest on a loan' was taken to be different from the expression "interest on the loan plus the amount of interest accruing by the date of the suit". It was held that the Legislature intended to empower the Court to reduce the pendente lite rate of interest not merely as a rate but also to reduce the amount by providing that that interest should only be on the loan, that is the principal of the loan, and not on accrued interest.
9. Now fortunately the Agriculturists' Relief Act defines both the terms 'loan' and 'interest'. Section 2(10)(a) lays down that loan' means an advance to an agriculturist, whether of money or in kind, and shall include any transaction which is in substance a loan, but shall not include three things excepted therein. The Explanation to the definition also shows that a loan advanced as one transaction is to be deemed to be one loan even though it is evidenced by several documents or by separate entries in a document. On the other hand Section 2(8) lays down that 'interest' includes the return to be made over and above what was actually lent, whether the same is charged or sought to be recovered specifically by way of interest or in the form of service or otherwise. It is therefore obvious that there is a sharp distinction between the word 'loan', which means advance of money or in kind and which would embrace one transaction consisting of separate loans given at one time, and the word 'interest' which means the return to be made over and above what had been actually lent. Taking these two definitions together it is difficult to see how it can be argued that the word 'loan' includes some interest on the sum actually lent as well, when the definition of interest' talks of it as a return made over and above what had been actually lent. Unfortunately the attention of the Oudh Chief Court was apparently not drawn by the learned Counsel who appeared for the parties to the definition of the word 'interest' as given in the Act, for there is no reference to it in the judgment.
10. Coming to Section 30 we find that the primary object of that provision is that the rule laid down there should prevail as against any contract to the contrary that may be in existence. It provides that no debtor shall be liable to pay interest on a loan taken before this Act comes into force at a rate higher than that specified in Schedule 3 ('2' is a misprint for '3') for the period from 1st January 1930, till such date as may be fixed by the Local Government in the Gazette in this behalf. It may be noted that this sub-section contains both the words 'interest' and 'loan' which has been expressly defined in Section 2, and therefore it must be given the meanings which have been ascribed to them by the Legislature. It is not open to a Court to try to construe the section by giving a different meaning to the word 'loan' from what has been given to it in the definition.
11. The very idea of a loan as defined is "the advance of money or in kind", which obviously means a consideration which has passed from the creditor to the debtor, i.e." the cash or the property which has passed from the one to the other. It cannot include any interest that may accrue as a result of the contractual liability of the debtor after the advance had been made. The interest that accrues is not an advanxe made by the creditor to the debtor at all, but is a return to be made over and above the advance which under the contract between the parties the debtor is liable to make. The Legislature has thought it necessary to make it clear that 'interest' includes every kind of return which is in excess of the amount actually lent. The word 'lent' is of course derived from the word 'loan' and therefore Section 2(8) means that an interest will include any return that is made over and above the amount which had been advanced actually as a loan. Taking these two definitions together, there can be no doubt that the 'loan' as meaning 'an advance made' means the principal amount, whereas the interest is the excess amount which has become payable as a result of the contract. It follows that the expression "pay interest on a loan taken" must refer to the whole of the excess return which the debtor is liable to pay on the principal sum which had been advanced by the creditor, and must include interest payable on the principal plus interest on interest which has accrued. The learned Judges of the Oudh Chief Court have, after considering the definition of the word 'loan' emphasized that the section was intended to make a provision for an equitable rate of interest being charged and that there was nothing in the terms of the section to suggest any intention on the part of the Legislature to interfere with the terms of the contract except as regards the rate of interest. That is perfectly true. It is the rate of interest which has to be altered and reduced to the maximum figure prescribed in Schedule 3, but that of course necessarily involves a reduction of the total amount due.
12. The only other argument which found favour with the Oudh Bench was that the Legislature has thought fit to use the words "the sum originally borrowed" in Section 31 instead of the word "loan" as used in Section 30. But it is quite obvious that no other expression would have been appropriate for Section 31. The "loan", so far as Section 30 is concerned, is the principal amount remaining due, after deducting any repayment of the principal that has been made in the past, whereas Section 31 speaks of two sums, one the sum originally borrowed, and secondly such part of it as has not already been repaid by a sum equal to the sum originally borrowed. It was therefore absolutely necessary to use the expression "the sum originally borrowed" in Section 31 in contradistinction to the expression "such part of it as has not already been repaid." But the mere fact, even if it were so, that the word loan" has not been used in Section 31 and that another expression has been used by the Legislature would not justify the giving to that word "loan" in Section 30, a meaning different from the definition of it. We would then still have to give to it in Section 30 the same meaning as the Legislature has given to it by Section 2. Section 30 specifically refers to Schedule 3. Schedule 3 has been added to the Act for the express and the exclusive purpose of Section 30 and for no other purpose. Schedule 3 must therefore be read as part of Section 30. In Schedule 3, we have four columns, two of which refer to simple interest and two to compound interest, and maximum rates for these two kinds of interest have been fixed and they both come under the general heading : "Rates of interest for Section 30." It is thus obvious that the word "interest" used in Section 30 coupled with the Schedule must, mean both simple and compound interest, and that therefore the word "loan," even quite apart from its definition, must mean the principal sum on which the simple and compound interest have become due. We also find a note (a) added to Schedule 3, that a certain period has to run from the date on which the loan was taken. Obviously it means the date on which the principal sum was advanced.
13. The learned Counsel for the respondents has argued before us that once interest has accrued, it becomes a loan and must be treated as an advance made by the creditor to the debtor. According to this argument interest accrues from day today and therefore there would be advances made by the creditor from day to day and there would not be any particular date on which the loan was taken, but all the dates from the time of the original advance until the date of repayment will be the dates of the loan. This would not be in harmony with the provisions of the notes added to Schedule 3. It may also be pointed out that stamp duty has to be charged on documents evidencing such a loan and that duty has been fixed any the principal sum advanced on the date and not according to the interest that would accumulate thereafter. Had the Legislature intended that in Section 30 the word "loan" should mean the principal and interest, there was no reason why it would not have used the words "money due" instead of the word "loan" which has been previously defined. Let us consider for a moment the consequences of the interpretation put upon the section by the Court below. The rate of interest on the loan will have to be reduced from 1st January 1930, so that the total amount of interest will also be reduced, and yet the compound interest will have to be charged at the imaginary and unreduced amount of interest regardless of the fact that that interest itself has been disallowed.
14. It seems that the Legislature has thought fit to curtail the total amount of interest which should be payable; that is to say, it has thought fit to curtail the return which would be made to the creditor over and above the amount actually lent. It has accordingly prescribed certain maximum rates beyond which the Courts have no power to go. If we were to allow the maximum rate of interest prescribed to a creditor and on the top of that we were to allow interest on the accumulated amount of interest even after the 1st January 1930, the net result would be that the creditor would have an amount of return over and above the amount actually lent far in excess of the prescribed maximum which has been fixed in the Schedule. This would be contrary to the express provisions of the Act. It may also be noted that the rates of interest prescribed in Schedule 3 are the maximum rates beyond which the interest cannot be allowed. They are not necessarily the rates which should be allowed in every ¦case by the Courts. There may therefore well be a case where a lower rate may be allowed.
15. It may also be mentioned that there are various sections in the Act where a distinction has been drawn between the principal and interest. For instance, Section 30 itself. In Sub-section 2, Section 31, it is laid down that any amount already received by the creditor on account of interest in excess of that due under the provisions of this section shall be credited towards principal, but that a debtor cannot claim a refund of any part of the interest already paid by him. Bearing in mind the definitions of the two words used in the section, there seems to be no doubt that the word "interest" in Section 30 must include both the simple and the compound interest and the word 'loan' in that section must mean the principal sum advanced which remains outstanding, at the time when the application was made.
16. The second question referred to us is whether the High Court can in this case interfere in revision. In the application that was made by the debtor, it was prayed that the rate of interest should be reduced. Para. 4 of the application was in these terms:
The rate of interest is excessive and penal. Moreover the opposite party can under the new Agriculturists' Relief Act get interest on the amount of principal from the 1st January 1930, at the rate of Rs. 5-8-0 per cent, per mensem although the interest has been calculated in the decree at the rate of more than Rs. 10-8-0 per cent. At any rate, the interest is fit to be reduced under Section 30.
17. There was therefore a clear and express objection taken that the interest in the decree should be recalculated on the amount of the principal from 1st January 1930 and not on the accumulated amount of the decree. In the reply which was filed on behalf of the decree-holder the plea was taken that Section 30 had no application whatsoever, but there was no suggestion that if Section 30 applied then the interest should not be calculated on the principal sum from 1st January 1930. Accordingly the Court took up only two points for consideration, namely, whether the applicant was an agriculturist and whether the decree in question being a preliminary decree was not liable to amendment. Both these points were decided by the Court below in favour of the judgment-debtor. There is not a word in the judgment itself, as distinct from the operative portion of the 'order', to show that the Court ever considered the question whether interest should be allowed on the principal sum or on the consolidated sum. There is no reference to it and there is no expression of any opinion upon it at all, but when the Court came to pass the order it said:
Ordered : Let the decree No. 97 of 1932 be revised as follows: Under the head (b) the Court directed that "interest from 1st January 1930 to 8th May 1935 shall be calculated at the rate of 51/2 p.c. compoundable yearly on the aggregate amount due on 31st December 1929 under (a).
18. Thus although the judgment itself gave no indication of the point having been considered at all, the order actually passed was adverse to the interest of the judgment-debtor. It has been laid down by their Lordships of the Privy Council in several cases that where a Court below comes to an erroneous view of the law or decides a case erroneously, it does not act with material irregularity in the exercise of its jurisdiction, nor does it act without jurisdiction and that therefore the High Court has no power in revision at all. But where there is not merely a question of error of law or an erroneous decision, but there has been a material irregularity in the acting of the Court below while exercising its jurisdiction, it is well settled that a High Court can interfere. In the present case there is not a question of any error of law made by the Court below, but it is a material irregularity in the exercise of jurisdiction because the Court did not at all apply its mind to the objection raised by the applicant, which had been either conceded or at any rate not disputed on behalf of the decree-holder. The point had certainly been made that interest should be calculated on the principal sum and it does not appear to have been expressly disputed on behalf of the decree-holder. The Court, without any reference to the provision of Section 30 of the Act and the definitions of the words 'loan' and 'interest' as given in the Act, has, in the operative portion of its order, but not by its main judgment, directed that the interest should be calculated on the aggregate amount. This has resulted in giving to the decree-holder a large sum exceeding Rs. 10,000 which has grossly prejudiced the judgment-debtor. Had the Court borne in mind that the point was really not in controversy or even had the Court paused to consider the relevant sections of the Act, it is possible that the Court would itself have come to a different conclusion. The Court below without considering the matter has taken it for granted that the decree should be in the form given in the operative portion of the order. It has not given any reasons in support of that direction. The case therefore is not merely one of an erroneous decision, but is one in which there has been a material irregularity in the exercise of jurisdiction because there has been no consideration of the point at all. As in view of the provisions of Section 30(3) no appeal lies, the High Court has power to interfere on the revisional side. This was held in Bireshwar Das v. Umakant Pande A.I.R. 1937 All. 297. The order has been passed by a Court subordinate to this Court in the execution department and that Court therefore is subject to the revisional jurisdiction of this Court. The answer to the second question is in the affirmative.
Bennet, J.
19. I agree.
Thom, J.
20. I agree. Any doubt which I may have entertained as to the meaning of Section 30, United Provinces Agriculturists' Relief Act, has been resolved by a consideration of the definitions of 'interest' and 'loan' included in Section 2. 'Interest' is defined in Section 2 in the following terms:
Interest includes the return to be made over and above what was actually lent, whether the same is charged or sought to be recovered specifically by way of interest or in the form of service or otherwise.
21. 'Interest' it will be observed, includes the return not upon what is actually lent, but the return over and above what was actually lent, i.e. what is due as interest on what is lent and interest upon accumulated interest. In the present case therefore the accumulated interest as at 31st December 1929 must be regarded as a return over and above what was actually lent. Now it is clear that what was actually lent is what is advanced to the agriculturist. In other words, what is actually lent is a loan, defined in Sub-section (10), of Section 2 as "an advance to the agriculturist whether of money or in kind". If, therefore, it is held that the rate of interest to be fixed in accordance with the terms of Section 30 of the Act is to be calculated upon the accumulated amount as at 31st December 1929, the liability of the debtor would be for interest not merely upon the loan but upon the return on the loan. If one of the rates of interest set forth in Schedule 3 of the Act is allowed upon the accumulated amount and not merely on the amount actually lent, then the liability of the debtor would be greater than the restricted burden defined in Section 30 : the amount due as interest, i.e. due over and above the amount lent, would represent a higher rate of interest on that sum that Schedule 3 permits. Taking into consideration the definitions of 'interest' and 'loan' in Section 2 of the Act and the other provisions of the Act to which the learned Chief Justice has referred, I am satisfied that the intention of the Legislature was to restrict the operation of the rate of interest to be fixed under Section 30 of the Act to the amount actually advanced to the debtor. For the reasons given by the learned Chief Justice I am also in agreement that in this particular case it is open to the Court to interfere in an application in civil revision challenging the order of the Court below inasmuch as the learned civil Judge has committed a material irregularity in failing to consider and give effect to material and relevant provisions of the Act.
22. The answer to the first question is that the rate of interest to be fixed by the Court in an application under Section 30, United Provinces Agriculturists' Relief Act, is to be calculated not on the accumulated amount due under the loan as at 31st December 1929, but upon the principal amount advanced as loan. The answer to the second question is that no application in civil revision would lie if the Court below has merely decided a case wrongly, but that an application in revision would lie where it has acted with material irregularity in the exercise of its jurisdiction, which it has done' in the present case by not applying its mind at all to the mandatory provisions of the law.