JUDGMENT Rajive Bhalla, J. (Oral) - The present Regular Second Appeal arises out of a judgment and decree passed by the District Judge, Ferozepur, dated 13.1.1984, whereby the judgment and decree passed by the trial Court, dated 17.4.1974 was reversed. 2. Brief facts of the case are that the appellant was sanctioned a loan of Rs. 10,000/- by the respondent-State in October, 1966. The amount was to be repaid in three instalments due on 10.10.1968, 10.10.1969 and 10.10.1970 with interest @ 3% per annum. By a general order, the respondent-State permitted the extension of one year for the repayment of the three instalments, and consequently, the same became payable on 10.10.1969, 10.10.1970 and d10.10.1971. As the appellant delayed the payment of the first instalment, which was paid on 15.12.1969 and as the payment of the balance amount of Rs. 7,000/- was also delayed (paid on 9.1.1973), he paid interest of Rs. 318/- on 11.12.1968, Rs. 300/- on 27.12.1969 and Rs. 356/- on 15.12.1969. Thus, a total sum of Rs. 974/- was paid on account of interest. Before the appellant made the payment of Rs. 7,000/- on 19.1.1973, the respondent-State served upon him a notice of demand, dated 10.11.1972, directing him to make payment of Rs. 9935/- towards the outstanding instalments as also the interest @ 9% per annum. 3. The appellant challenged the aforementioned notice, by way of a suit for permanent injunction. The trial Court, vide its judgment and decree dated 17.4.1974, decreed the suit and restrained the respondent-State from recovering any amount beyond Rs. 1692.75 with interest @ 7-1/2% from 9.1.1973 till the date of its realisation. 4. The State of Punjab referred an appeal before the District Judge, Ferozepur, vide judgment and decree dated 13.1.1984, the District Judge, Ferozepur reversed the judgment of the trial Court, accepting the appeal and dismissed the suit. Thus, in essence, the first appellate Court upheld that notice of demand, which required the appellant to pay interest @ 9% per annum. 5. In the present appeal, challenge is to the judgment of the first appellate Court upholding the notice demanding interest @ 9% per annum on delayed payment. Counsel for the appellant has framed the following questions of law :- 1. Whether the first appellate Court has not committed serious error of law in reversing the judgment of the trial Court ? 2. Counsel for the appellant has framed the following questions of law :- 1. Whether the first appellate Court has not committed serious error of law in reversing the judgment of the trial Court ? 2. Whether the judgment of the first appellate Court is liable to be set aside on the ground that it has misread the mortgage deed, Ex. P5 ?" 6. Counsel for the appellant contends that a perusal of the judgment and decree of the first appellate Court reveals that the said Court has returned a positive finding that the respondent could not charge interest beyond the rate of 7-1/2% per annum. Despite arriving at this finding, the first appellate Court has accepted the appeal, reversed the judgment and decree of the trial Court and dismissed the suit. In essence, the first appellate Court has upheld the notice of demand, dated 10.11.1972, wherein the respondent demanded interest @ 9% per annum. It is further argued that the first appellate Court lost sight of the fact that it had itself held that the maximum rate of interest payable by the appellant was 7-1/2% and, therefore, while upholding the aforementioned rate of interest, it lost sight of the notice of demand, which required the appellant to pay interest @ 9% per annum. Counsel for the appellant contended that in view of the above, it is apparent that the first appellate Court has committed a serious error of law. 7. Counsel for the respondent, on the other hand, contended that it is no doubt true that the maximum rate of interest is 7-1/2% per annum. However, the Government was not debarred from charging interest @ 9% per annum. It is further argued that as the Courts below had found the appellant as defaulter, the Government was free to charge interest @ 9% per annum and, therefore, the first appellate Court had not committed error, much less, an error of law. 8. I have heard the counsel for the parties and perused the record. 9. As held by both the Courts below, as also from a perusal of the mortgage deed, in the eventuality of a default, the respondent was entitled to charge interest @ 7-1/2% per annum. Both the parties were bound by the terms and conditions of the mortgage deed and could not have charged interest beyond the rate of 7-1/2% per annum. As held by both the Courts below, as also from a perusal of the mortgage deed, in the eventuality of a default, the respondent was entitled to charge interest @ 7-1/2% per annum. Both the parties were bound by the terms and conditions of the mortgage deed and could not have charged interest beyond the rate of 7-1/2% per annum. The trial Court, as also the first appellate Court, have held that the respondent could not charge interest beyond a rate of 7- 1/2% per annum. The relevant extract from the judgment of the first appellate Court reads as follows :- "I conclude that he had been getting the factory insured only for the period between October to March and not for the entire period. The failure to insure the factory for the entire period is a clear contravention of term 5 as contained in the mortgage deed Exh. P.5 Clause I, sub-clause (VI) gives a right to the defendant to claim a higher interest at the rate of 7- 1/2% per annum whenever a default of any of the terms or conditions of the mortgage deed was committed. The State was also entitled to claim higher interest if the instalments were not paid in time. On commission of default, the entire loan amount was to become recoverable and the defendant became entitled to claim interest at higher rate of 7-1/2% per annum." A perusal of the above extract makes it abundantly clear that the first appellate Court upheld the finding of the trial Court that the appellant was liable to pay, and the respondent was entitled to charge interest @ 7-1/2% per annum. Once the first appellate Court had arrived at this conclusion, it belies the comprehension as to how it accepted the appeal, set aside the judgment and decree of the trial Court and dismissed the suit. The first appellate Court was apparently labouring under an error of fact that the notice of demand, dated 10.11.1972, required the appellant to pay interest @ 7-1/2% per annum. A perusal of the said notice of demand reveals that the appellant was required to pay interest @ 9% per annum. It appears that the first appellate Court misread the notice of demand and did not care to peruse the same with care. A perusal of the said notice of demand reveals that the appellant was required to pay interest @ 9% per annum. It appears that the first appellate Court misread the notice of demand and did not care to peruse the same with care. Even a cursory reading of the notice reveals that the Government sought to charge interest @ 9% per annum i.e. beyond the agreed rate of 7-1/2% per annum. In view of what has been stated above, it is apparent that the first appellate Court committed a serious error of law in upholding the notice of demand, dated 10.11.1972, reversing the judgment of the trial Court, as also dismissing the suit. The dispute in the present case was only confined to the rate of interest i.e. 7-1/2% or 9% per annum. The parties are bound by the terms and conditions of the mortgage deed, which required the appellant, in the eventuality of a default, to pay interest @ 7-1/2%. It is, thus, apparent that the first appellate Court has erred in dismissing the suit, reversing the judgment and decree of the trial Court and accepting the appeal. Consequently, the present Regular Second Appeal is accepted, judgment and decree of the first appellate Court set aside and that of the trial Court restored. No order as to costs. Appeal accepted.