KALI PROSONNO BHATTACHARYYA Vs. PROTAP SINGH PATTAR

JUDGEMENT

(1.) This is an appeal on behalf of the plaintiff in a suit to enforce three mortgages executed in his favour by the first defendant. The bond, earliest in point of time, was executed on the 11th January 1904, for a sum of Rs. 3,999, which carried simple interest at the rate of 11 per cent, per annum. The second bond was executed on the 6th April 1904 for Rs. 3,001, which carried compound interest at 9 per cent, per annum with annual rests. The last bond was executed on the 14th January, 1905 for Rs. 2,650 which carried compound interest at 12 per cent, per annum with annual rests. On the 1st May 1905, the first defendant deposited in Court the sum of Rs. 7,277-8 in full satisfaction of what he considered was due to the mortgagee at that time on the three bonds. The plaintiff ignored the deposit as insufficient in amount, and on the 30th June 1909, commenced the present action to enforce the three securities. Upon the first bond, he allowed credit in the plaint for Re. 2,944-13- 3, alleged to have been paid on the 11th January 1905. The defendant resisted the claim on various grounds which need not be set out in detail at this stage. It is sufficient to state that the defence prevailed in part and a decree was made in favour of the plaintiff. In the present appeal, the plaintiff has assailed that decree on three grounds; namely, first, that the sum of Rs. 2,944-13 3 ought to have been treated as paid on the 11th January 1905 and not deducted from the principal sum of Rs. 3,999; secondly, that the compound interest payable upon the third bond has been disallowed on grounds erroneous in law; and thirdly, that interest at the contract rate should have been allowed, during the pendency of the litigation and up to the date fixed in the decree for re- payment of the mortgage-money. In our opinion, each of these contentions is well founded and must prevail.

(2.) In so far as the first ground is concerned, the Subordinate Judge has held upon the evidence that the whole of the principal sum scared by the first mortgage was not paid at the date of the execution of the bond. He has in substance made a new case for the defence and has overlooked the very important fact that in the application which accompanied the deposit by the defendant on the 1st May 1905, he admitted receipt of the sum of Rs. 3,999 secured by the mortgage of the 11th January 1904. The view taken by the Subordinate Judge cannot be supported and the sum of Rs. 2,944-13-3 must be treated as paid on the 11th January 1905. The effect will be that interest will be allowed upon the principal sum secured by the first mortgage up to the 11th January 1905, and for the period subsequent to that date, interest will be calculated only upon the balance due. The first ground, therefore, prevails.

(3.) In so far as the second ground is concerned, the Subordinate Judge has held that as the plaintiff took an unfair advantage of his position as creditor and dominated the will of the first defendant, he is not entitled to claim compound interest as provided in the third mortgage. This view clearly cannot be supported. As was pointed out by their Lordships of the Judicial Committee in the case of Dhanipal Das v. Maneshar Bakhsh Singh 28 A. 570; 4 C.L.J. 1; 1 M.L.T. 205; 33 I.A. 118; 3 A.L.J. 495; 9 O.C. 188; 8 Bom.; L.R. 491; 10 C.W.N. 849; 16 M.L.J. 292 the Court must, in a case of this description, first consider the terms of the amended Section 16 of the Indian Contract Act only. Now Section 16, as amended in 1899, provides in the first sub-section that a contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of another and use that position to obtain an unfair advantage over the other. Sub-section (3) of Section 16 provides that where a person, who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon; the person in a position to dominate the will of the other. It is clear, therefore, that to bring the case within the first clause of Section 16, it is necessary for the defence to show that an unfair advantage has been obtained over him while to bring the case within Sub-section (3), he must prove that the transaction is unconscionable; unless these elements are established, the mere fact that one of the parties is in a position to dominate the will of the other, does not entitle the latter to free himself from his obligations under the contract. Now in the case before us, the loan secured by the third mortgage bond carried compound interest at 12 per cent, per annum with annual rests. We are unable to say that this provision was unconscionable on that the plaintiff took an unfair advantage over his debtor. No doubt, the first mortgage bond carried simple interest at. 11 per cent, per annum, while the second bond carried compound interest at 9 per cent, per annum. But it must be remembered that the same property was repeatedly given as security for the successive loans; and as the debtor evidently failed to pay the interest punctually, it was only reasonable that the creditor should insist on interest upon the interest money withheld. It has not been suggested, and common experience shows that it cannot be reasonably suggested, that 12 per cent, per annum is a high rate of interest. Reference was, however, made by the respondent to the decisions of the Judicial Committee in Dhanipal Das v. Maneshar Bakhsh Singh 28 A. 570; 4 C.L.J. 1; 1 M.L.T. 205; 33 I.A. 118; 3 A.L.J. 495; 9 O.C. 188; 8 Bom.; L.R. 491; 10 C.W.N. 849; 16 M.L.J. 292 and Maneshar Buksh Singh v. Shadi Lal 13 C.W.N. 1069; 31 A. 386 (P.C.) 6 A.L.J. 707; 11 Bom. L.R. 804; 10 C.L.J. 76; 36 I.A. 114; 6 M.L.T. 71; 12 O.C. 300; 3 Ind. Cas. 385; 19 M.L.J. 438 in support of the contention that the transaction was unconscionable and should not be enforced in a Court of equity. But neither of these cases is of any real assistance to the respondent. In the first case, the interest provided in the mortgage instrument was compound interest at 24 per cent, per annum with half yearly rests. In the second case, the interest provided was compound interest at 18 per cent, per annum with half yearly rests. In both the cases, as was pointed out by their Lordships of the Judicial Committee, the debtor was in a position of considerable embarrassment; his estate was in charge of the Court of Wards; as a disqualified proprietor, he was incompetent to deal with his property, and, at the same time, he was in urgent need of money. Under these circumstances, the Judicial Committee held that the provision for payment, of interest at a high rate could not be enforced. But, as their Lordships of the Judicial Committee have also held, urgent need of money on the part of the borrower does not of itself place the lender in a position to dominate his will within the meaning of Section 16: Sunder Koer v. Rai Sham Krishen 34 I.A. 9; 34 0. 150 (P.C.); 9 Bom. L.R. 304; 17 M.L.J. 43; 11 C.W.N. 249; 4 A.L.J. 109; 2 M.L.T. 75; 5 C.L.J. 106: to the same effect are the decisions of Umesh Chandra v. Golap Lal 31 C. 233; Ganesh Narayan v. Vishnu Ramchandra 32 B. 37; 9 Bom. L.R. 1164; Chairing. Mool Chand and Co. v. Whitchurch 32 B. 208; 9 Bom. L.R. 1296 and the earlier decisions in Madho Singh v. Kashi Ram 9 A. 228; A.W.N. (1887) 19; Poma v. Gillespie 31 B. 348; 9 Bom. L.R. 341 cannot be regarded as good law. Reliance was placed by the respondent also upon the case of Samuel v. Newbold (1906) A. 0. 461; 75 L.J. Ch. 705; 95 L.T.209; 22 T.L.R. 703 where the House of Lords affirmed the decision in Saunders v. Newbold (1905) 1 Ch. D. 260; 74 L.J. Ch. 120; 92 L. 67; 53 W.R. 162; 21 T.L.R. 104. The facts of that litigation were of an exceptional character and bear no analogy to the circumstances of the present case. It is clear however, that the observations of Lord Loreburn do not assist the respondent, and may possibly be claimed in support of the contention of the appellant. A transaction may fall within the description of harsh and unconscionable in many ways. It may do so because of the borrower s extreme necessity and helplessness or because of the relation in which he stands to the lender or because of his situation in other ways. These are only illustrations; and, as in the case of fraud, it is neither practicable nor expedient to attempt any exhaustive definition; what the Court has to do in such circumstances is, if satisfied that the interest or charges are excessive, to see whether in truth and fact and according to its sense of justice, the transaction was harsh and unconscionable. What we are asked to say is that an excessive rate of interest cannot of itself be evidence that it was so. We do not accept that view. Excess of interest or charges may of itself be such evidence and particularly if it be unexplained. In re A Debtor (1903) 1 K.B. 795;72 L.J.K.B. 382; 88 L.T. 401; 51 W.R. 370; 10 Manson 130, which, as pointed out in Abhiram v. Mukunda 5 C.L.J. 542; overrules Wilton v. Osborne (1901) 2 K.B. 110; 10 L.J.K.B. 507; 84 L. T 684; 17 T.L.R. 431; Carringtons Ld. v. Smith (1906) I.K.B. 79; 75 L.J.K.B. 49; 93 L.T. 779; 54 W.R. 424;22 T.L.R. 109. In the case before us, the difficulty of the respondent is that we are not satisfied that the interest was excessive; he is consequently not entitled to call upon the Court to afford him relief against the provision for payment of compound interest upon the third mortgage-bond. The second contention, therefore, must be allowed.