KUSUM KUMARI v. DEBI PROSAD DHANDHANIA — 1935 DIGILAW 64 (SC)

Judgement Consolidated Cross-appeals, by special leave, from a decree of the High Court (April 9, 1930) affirming a decree of the Subordinate Judge of Bhagalpur (June 20, 1927). The suit was brought by mortgagees claiming to enforce their mortgage by sale of the mortgaged lands, situated in the Sonthal Parganas, the amount alleged to be owing being Rs.723, 538-10-8 for principal and interest up to the date of the institution of the suit, to which they prayed should be added future interest at the mortgage rate till the date of realization. The Subordinate Judge, acting in accordance with the provisions of s. 6 of the Sonthal Parganas Settlement Regulation, 1872, refused to allow interest beyond a sum equal to the principal, after deducting therefrom payments made by the mortgagor from time to time. He made a preliminary mortgage decree for sale, finding the amount due to be Rs.402, 595-6-9 with Rs. 10,067-6-3 costs, making a total of Rs.412, 662-13-0. In default of payment within six months the property was to be sold. He refused to allow any interest pendente lite, but he allowed interest at the rate of 6 per cent. per annum on the decretal amount after the expiration of the six months period of grace until the realization of the decretal amount. On appeal the High Court (Jwala Prasad and Ross JJ.) affirmed the decree of the Subordinate Judge. Special leave to appeal to His Majesty in Council was limited to " questions of interest after the date of the institution of the suit," the mortgagees contending that interest pendente lite should have been allowed, the mortgagor that interest on the decretal amount should not have been granted. 1935. Nov. 11, 12. Dunne K.C. and Pringle for the appellant (defendant No.1). These two appeals raise questions upon the construction of s. 6 of the Sonthal Parganas Settlement Regulation, 1872. The first is whether the Court, having given the interest on the mortgage at the full amount of the original principal, can afterwards give interest upon the decretal amount. Are the plaintiffs (mortgagees) precluded from getting anything more than double the actual cash advance in view of s. 6 of the Regulation? [Sect. The first is whether the Court, having given the interest on the mortgage at the full amount of the original principal, can afterwards give interest upon the decretal amount. Are the plaintiffs (mortgagees) precluded from getting anything more than double the actual cash advance in view of s. 6 of the Regulation? [Sect. 6 (a) and (b) read.] In Maha Prasad v. Ramani Mohan Singh (( 1913) L. R. 41 I. A. 197.) the Board held that they were bound to abide by the rules of usury in this Act. The question in this appeal is whether the plaintiffs are entitled to interest from the institution of the suit up to the date fixed for repayment in the decree. In our cross-appeal we complain that the 6 per cent, interest on the decreed sum should not have been allowed. The High Court decided against Rs. The first point is that interest on the decreed sum cannot be granted under the terms of s.6 (b). The decree that has been granted was for principal and interest, and it has granted the full amount of interest equaling the original advance, and therefore, once that position has been reached, no further interest can be decreed at all under the section. Secondly, the interest that has been granted at 6 per cent, on the aggregate amount is in itself interest upon interest, because in the decree itself there is interest, and it falls within the terms of the section which forbid compound interest arising from any intermediate adjustment. This decree is within the terms of that section an intermediate adjustment. That section is a statutory bar to any Court having jurisdiction in the Sonthal Parganas from giving interest except according to the terms of the section. The statute says in terms that an "intermediate adjustment" means " any adjustment of account which is not final and includes the renewal of an existing claim by….decree." The plaintiffs say that s. 34 of the Code of Civil Procedure applies because under that section there is discretion. There are two provisions in the Code of Civil Procedure which it is suggested would apply in this case, s. 34 and r. 34, sub-r. 4 (1) Sect. 34, with the discretionary power to a Court in making a decree for payment, does not apply to the case of a mortgage decree. There are two provisions in the Code of Civil Procedure which it is suggested would apply in this case, s. 34 and r. 34, sub-r. 4 (1) Sect. 34, with the discretionary power to a Court in making a decree for payment, does not apply to the case of a mortgage decree. Recourse must be had to r. 34, and there is nothing in that rule which justifies a decree giving interest on the aggregate amount. [Counsel read s. 34 and r. 34, sub-r. 4 (1.)]. With regard to what has been the established practice in allowing interest in the ordinary case on the aggregate amount, see Maharajah of Bharatpur v. Ram Kanno Dei (( 1900) L.R. 28 I. A. 35.) and Rani Sunday Koer v. Rai Sham Krishen.(( 1906) L. R. 34 I. A. 9.) The Code of Civil Procedure did not authorize the interest in the present case, and even if it did, the special local Act forbade it. [On the applicability of the statutory bar reference was made to Sourendra Mohan Sinha v. Hart Prasad (( 1925) L. R. 52 I. A. 418, 442.) and Rani Keshobati Kumri v. Kumar Satya Niranjan Chakraverty.(( 1918) Pat. 305.)] The latter case dealt with one clause of s. 6, which says that you cannot have interest on interest, but the case omits to consider the fact that you cannot by your decree interest in excess of the principal. The statutory bar imposed by the local Act remains despite the provisions of s. 34 of the Code of Civil Procedure conferring the discretion, and that discretion cannot be exercised in violation of s. 6 of the local Act. If there is a bar saying that the total amount decreed shall not in any other case exceed the principal, it is intended to be, and is, a conclusive bar. The Courts in India, in decreeing interest on the decretal amount, which already includes interest, contravened the provisions of s. 6 of the Regulation of 1872. Having regard to the large amount of interest accruing due before suit, the Courts in India were right in refusing to decree interest up to the date fixed in the decree for repayment, but exercised a wrong discretion in decreeing interest for the subsequent period and ought to have refused to decree any future interest whatsoever. Having regard to the large amount of interest accruing due before suit, the Courts in India were right in refusing to decree interest up to the date fixed in the decree for repayment, but exercised a wrong discretion in decreeing interest for the subsequent period and ought to have refused to decree any future interest whatsoever. Pringle, following, referred to Jagannath Prosad Singh Chowdhury v. Surajmal Jalal (( 1926) L. R. 54 I. A. 1.); Registered Jessore Loan Co., Ld. v. Shailajanath Ray Chaudhuri (( 1931) I. L. R. 59 C. 722.); and Monohar Das Mohanta v. Hazarimull.(( 1931) L. R. 58 I. A. 341.) De Gruyther K.C., and Hyam for the respondents (plaintiffs). The two questions are (1.) Whether in the case of a mortgage decree it is in the discretion of the Court to award interest on the aggregate amount after the decree has been made; and (2.) whether by virtue of the Sonthal Parganas Settlement Regulation the powers given to the Court by s. 34 of the Code of Civil Procedure are in any way modified. It is said that s. 34 is limited in its operation with regard to mortgages by virtue of r. 34, sub-r.4, of the Code of Civil Procedure. There was a consensus of opinion by which in every mortgage decree the Court had power under s. 34 to fix the rate of interest on the aggregate amount Umes Chunder Sircar v. Mussummat Zahoor Fatima (( 1889) L. R. 17 I. A. 201.) ; Orde v. Skinner.(( 1880) L. R. 7 I. A. 196, 209.) The mere fact of there being no provision in s. 88 of the Transfer of Property Act, 1882, for subsequen interest did not alter the power of the Court to award such subsequent interest. Some meaning must be given to the words "subsequent interest" in s. 88. On the meaning of the form of the mortgage decree in this case see Maharajah of Bharatpur v. Ram Kanno Dei.(( 1900) L. R. 28 I. A. 35, 45.) That decision is express authority for the proposition that the provisions of the Transfer of Property Act do not affect the right of the Court under s. 34 of the Code of Civil Procedure to determine the rate of interest. Sourendra Mohan Sinha v. Hari Prasad (( 1925) L.R. 52 I. A. 418.) decides that s. 34 of the Code of Civil Procedure does apply to a mortgage decree. The awarding of interest on the mortgage decree after the date fixed by the judgment is entirely in the judges discretion. In Orde v. Skinner (5) the Court came to the conclusion that whether it was or was not a mortgage suit it depended on the terms of s. 34, which gave the Court a discretion as to awarding interest on the aggregate sum at such rate as the Court decreed. The importance of Umes Chunder Sircar v. Mussummat Zahoor Fatima (( 1889) L. R. 17 I. A. 201, 213) is that it lays down that while the case is pending interest shall be at the discretion of the Court, but that it would be a proper exercise of discretion to allow interest at contract rate to date of decree. [Reference was also made to Maha Prasad v. Ramani Mohan Singh.(( 1913) L. R. 41 I. A. 197.)] Sect. 6 of the Regulation of 1872 only provides for the contractual relation between the parties, and does not touch or affect the power of the Court to exercise its discretion. If the Sonthal Parganas Regulation and the Code of Civil Procedure cannot be reconciled, the latter prevails. The point before the Board in Sourendra Mohan Sinha v. Hari Prasad (( 1925) L. R. 52 I. A. 418, 432.) was the question of interest pendente lite, and the Board held that it was within the discretion. That case affects the question under the Sonthal Parganas Regulation only indirectly. [Reference was made to Hari Lall Mullick, In re.(( 1906) I. L. R. 33 C. 1269, 1276.)] The rule of Damdupat exists only as long as contractual relationship exists. That comes to an end with the decree. The best summary is in Rani Sundar Koer v. Rai Sham Krishen.(( 1906) L. R. 34 I. A. 9.) [Lord Alness. What is the best authority for your con tention that s. 34 is unaffected by r. 34?] There is no direct authority. The first question is whether s. 34 and the Sonthal Parganas Regulation are reconcilable. Mangniram Marwari v. Dhowtal Roy (( 1886) I. L. R. 12 C. 569.) absolutely covered the case of interest pendente lite. [LORD ALNESS. What is the best authority for your con tention that s. 34 is unaffected by r. 34?] There is no direct authority. The first question is whether s. 34 and the Sonthal Parganas Regulation are reconcilable. Mangniram Marwari v. Dhowtal Roy (( 1886) I. L. R. 12 C. 569.) absolutely covered the case of interest pendente lite. [LORD ALNESS. That decision entirely rules out any question of local legislation.] I accept that entirely. The effect of the local legislation is spent at the date of the institution of the suit. Interest pendente lite is a matter within the discretion of the Court and not depending on contract Panna Lal v. Nihal Chand.(( 1922) 26 C. W. N. 737, 738.) [Reference was also made to Rameswar Koer v. Syed Nawab Mehdi Hossein Khan (( 1898) L. R. 25 I A. 179, 181.) and Maharajah of Bharatpur v. Ram Kanno Dei.(( 1900) L. R. 28 I. A. 35.)] Assuming that the Courts have a discretion, that discretion, as provided by s. 34 of the Code of Civil Procedure, is not controlled by the terms of the Regulation of 1872, and the terms of that Regulation cease to operate in both cases as fixing the limit of interest. The Court exercises its discretion on the merits of the case, and independent of the terms of the Regulation. I am entitled to double the principal sum and something more. When s. 6 (a) provides that "no compound interest arising from any intermediate adjustment of account shall be decreed.” it means where there is compound interest on compound interest. [LORD ROCHE Your argument would offend against both s. 6 (a) and (b), because it would be giving interest on interest.] Interest pendente lite and interest on the decree both lie in the domain of judgment, and not in that of contract, as erroneously held by the Courts in India. On the question of interest after the date of the decree see Gokuldas v. Seth Ghasiram.(( 1907) L. R. 35 I. A. 28, 30, 31.) So far as any interest is allowable after judgment has been delivered, that is altogether outside s. 6, because the interest is on the amount decreed and costs. On the question of interest after the date of the decree see Gokuldas v. Seth Ghasiram.(( 1907) L. R. 35 I. A. 28, 30, 31.) So far as any interest is allowable after judgment has been delivered, that is altogether outside s. 6, because the interest is on the amount decreed and costs. The amount of interest to be allowed pendente lite is also outside s. 6 because s. 6, only relates to and covers any question of the amount of interest which the Court orders to be paid under and by virtue of the contract itself. The Courts below had discretion under s. 34 of the Code of Civil Procedure to allow interest pendente lite, and they failed to exercise such discretion they properly exercised discretion under s. 34 of the Code of Civil Procedure with regard to interest on the decree after the period of grace until the realization of the decretal amount. Hyam followed. The provisions of s. 6 of the Regulation of 1872 are applicable to only one issue—namely, as to how much is legally due to the plaintiff for principal and interest at the date of the suit. The granting of interest pendente lite and of interest on the decree is a matter of ultimate relief, which the Court considers after having found, in accordance with the law applicable to a particular case that a certain sum for principal and interest was legally due to the plaintiff at the date of the institution of the suit. Such ultimate relief is granted under the Code of Civil Procedure, it is based on principles of equity, and the principle is that where a defendant during the trial of the suit wrongfully keeps the plaintiff out of moneys legally found due to him at the date of the suit, the defendant should be made to pay some interest by way of damages for the use of the plaintiffs money during the time that he uses it. That was the principle on which both s. 34 and r. 34 were based. The deduction is that the application of the provisions of s. 6 of the Regulation is exhausted when the issue is once determined as to how much was due to the plaintiff for principal and interest at the date of the suit. Interest both pendente lite and on the decree is governed by the same principle. The deduction is that the application of the provisions of s. 6 of the Regulation is exhausted when the issue is once determined as to how much was due to the plaintiff for principal and interest at the date of the suit. Interest both pendente lite and on the decree is governed by the same principle. [Reference was made to Lala Chhajmal Das v. Brijbhukan Lal. (( 1895) L. R. 22 I. A. 199.); Dunne K.C. was called upon to reply only on the plaintiffs appeal. Nov. 28. The judgment of their Lordships was delivered by SIR GEORGE LOWNDES. The suit out of which these con solidated appeals arise was filed before the Settlement Officer of the Sonthal Parganas, praying for the enforcement of a mortgage dated February 27, 1911. The plaintiffs were in effect the mortgagees, and the principal defendant the representative of the mortgagor. A number of other parties were joined as interested, or possibly interested, in the mortgage, but none of them seem to have taken part in the proceedings in India nor are they represented before the Board. The suit was duly transferred for trial to the Court of the Subordinate Judge of Bagalpur, who passed a preliminary mortgage decree dated June 20, 1927, in the usual form. He assessed the mortgage debt, including costs payable at the expiry of six months from the above date, at Rs.4,12,662-13, and allowed the mortgagees further interest on this sum at the rate of 6 per cent, per annum until realization It is not disputed that the suit fell to be determined in accordance with the provisions of s. 6 of the Sonthal Parganas Settlement Regulation (III. of 1872), which restricts the allowance of interest in such cases. The section, upon the construction of which the decision of these appeals mainly turns, is as follows— "6. All Courts having jurisdiction in the Sonthal Parganas shall observe the following rules relating to usury, namely— (a) Interest on any debt or liability for a period exceeding one year shall not be decreed at a higher rate than two per cent, per mensem, notwithstanding any agreement to the contrary, and no compound interest arising from any intermediate adjustment of account shall be decreed. (b) the total interest decreed on any loan or debt shall never exceed one-fourth of the principal sum, if the period be not more than one year, and shall not in any other case exceed the principal of the original debt or loan.” The learned Subordinate Judge, applying these provisions, found that the original advances by the mortgagees totaled Rs.3, 34,153-2-9, and that the interest recoverable must, therefore, be limited to that amount. From the resultant total he deducted repayments made from time to time by the representative of the mortgagor which left Rs.4,02,595-6-9 still due, and which, with the costs allowed, made up the sum first above stated—to be referred to hereafter for convenience as the decretal amount. This decree was confirmed on appeal by the Patna High Court. Leave to appeal to His Majesty in Council was refused, but special leave was granted in England to both parties by an Order in Council dated March 17, 1932, the appeals to be confined to questions relating to interest after the date of the institution of the suit. On this matter both parties have grievances which are embodied in the present appeals. The principal defendant in the suit, the representative of the mortgagor, complains of the allowance of interest on the decretal amount at 6 percent, until realization. The plaintiffs, the mortgagees, while seeking to uphold this part of the decree, complain that they have not been allowed interest pendente lite, i.e., between the dates of institution and final decree. These are the only points upon which their Lordships judgment is sought. The matter is dealt with by the learned Subordinate Judge in the following terms "Then there remains only one matter more for my consideration and that is—Whether this court ought to and can allow interest after the date of the decree and also pendente lite. As regards pendente lite interest the matter lies within the domain of contract and so I think s. 6 is applicable and more than double cannot be allowed in respect of all claims up to the time of grace fixed by the court. As regards pendente lite interest the matter lies within the domain of contract and so I think s. 6 is applicable and more than double cannot be allowed in respect of all claims up to the time of grace fixed by the court. But after that the matter comes to the domain of judgment and s. 6 has no application and the court has power under s. 34 of the Civil Procedure Code to allow interest on the decretal amount at 6 per cent, per annum." The High Court on appeal came to the same conclusion. Jwala Prasad J., by whom the judgment of the Court was delivered, said "It is well-settled that the rule of Damdupat “[in which term he obviously included the provisions of s. 6 of the Regulation]” 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. ....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,....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.” In their Lordships opinion the view taken by the Courts in India upon both questions is correct. Mr. Dunne, for the mortgagor appellant, contended that s. 34 of the Civil Procedure Code, upon which the Subordinate Judge relied, had no application to mortgage decrees, which were dealt with under r. 34 of the First Schedule to that Act ; and that at the date of the Subordinate Judges decree there was no provision in this rule for the granting of interest upon the decretal amount, though such a provision now appears there by a subsequent amendment of the Act. Their Lordships, however, think it clear from the judgment of the Board in Sourendra Mohan Sinha v. Hart Prasad (( 1925) L. R. 52 I. A. 418, 433) that s. 34 does apply, and that it authorizes the allowance complained of. Their Lordships, however, think it clear from the judgment of the Board in Sourendra Mohan Sinha v. Hart Prasad (( 1925) L. R. 52 I. A. 418, 433) that s. 34 does apply, and that it authorizes the allowance complained of. Nor can their Lordships agree that r. 34 in the Schedule in any way excludes the discretion of the Court to allow interest on the decree. Rule 34, sub-r.4 (1.), as in force at the date of the decree provided (inter alia) for the payment of " subsequent interest " out of the sale proceeds, and it would seem that the only " subsequent interest " could be interest on the decretal amount if awarded under s. 34. Their Lordships also agree with the note to r. 34, sub-r.1, in the latest edition of Sir Dinshah Mullas Code, which states that the present rule specifically allowing “subsequent interest up to the date of realisation" only gives effect to previous judicial decisions. This their Lordships think to be clear on reference to the judgments of the Board in Maharajah of Bharatpur v. Ram Kanno Dei (( 1900) L. R. 28 I. A. 35.) and Rani Sundar Koer v. Rai Sham Krishen and Others.(( 1906) L. R. 34 I. A. 9, 21.) It was also contended that the allowance of interest on the decretal amount contravened the provisions of the Regulation of 1872 in that by it the mortgagees got more interest than the Regulation allowed. Their Lordships cannot accept this contention. Sect. 6 of the Regulation only lays down that in a case such as the present the interest decreed on the loan or debt is not to exceed the principal. When once a decree has been passed the loan or debt as the subject of enforcement no longer exists; it is in effect merged in the decree, and the allowance of interest on the decree is not the allowance of additional interest on the loan or debt. When once a decree has been passed the loan or debt as the subject of enforcement no longer exists; it is in effect merged in the decree, and the allowance of interest on the decree is not the allowance of additional interest on the loan or debt. That this is the effect of the decree is clear on the judgment of the Board in the case last cited, where Lord Davey says (1) " [Their Lordships] think that the scheme and intention of the Transfer of Property Act [now the corresponding provisions of the Civil Procedure Code] was that a general account should be taken once for all, and an aggregate amount be stated in the decree for principal, interest, and costs due on a fixed day, and that after the expiration of that day, if the property should not be redeemed, the matter should pass from the domain of contract to that of judgment, and the rights of the mortgagee should thenceforth depend, not on the contents of his bond, but on the directions in the decree." Their Lordships also think that the passage quoted above from Lord Daveys judgment is decisive of the mortgagees appeal. Up to the date fixed for redemption the matter between the parties is one of their contract, and what the Court has to consider is how much does the law allow them to recover under it. This is determined by the Regulation, and is limited to twice the amount of the principal. If that limit had been reached before the institution of the suit no further interest could be allowed between that date and the date fixed for redemption. A number of other authorities were referred to in the argument, but their Lordships do not think that they throw any doubt on the correctness of the judgments delivered in India, and that a further discussion of them is unnecessary. For the reasons above stated their Lordships will humbly advise His Majesty that both these appeals should be dismissed. There will be no order as to costs.