Full Judgment Text
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PETITIONER:
K. MANICKCHAND & ORS.
Vs.
RESPONDENT:
ELIAS SALEH MOHAMED SAlT & ORS.
DATE OF JUDGMENT:
03/12/1968
BENCH:
BHARGAVA, VISHISHTHA
BENCH:
BHARGAVA, VISHISHTHA
SHELAT, J.M.
CITATION:
1969 AIR 671 1969 SCR (2)1083
1969 SCC (1) 52
ACT:
Mysore Money Lenders Act 13 of 1939 s. 17-"Principal amount
of original loan", meaning of-Interest under-Code of Civil
Procedure (Act 5 of 1908), O. 34, r. 11 application of-
Mysore Usurious Loans Act (Mys. Act 19 of 1923);
determination of fair rate of interest under.
HEADNOTE:
The predecessor-in-interest of the appellants filed a suit
under two mortgages claiming as principal and interest in
respect of the first mortgage a sum of Rs. 51,200 and in
respect of the second mortgage a sum of Rs. 60,200. The
trial court applying s. 17 of the Mysore Money Lenders Act,
1939 held that the principal amount of the loan in the case
of the first mortgage. deed was the consideration shown
therein, namely Rs. 20,000, and similarly the principal
amount under the second mortgage was Rs. 24,000.
Accordingly the trial court passed a decree for the amount
of Rs. 44,000 towards principal under the two mortgages and
an equal amount as laid down in the aforesaid s. 17, towards
interest. The High Court in appeal held that the principal
amount of the original loan was Rs. 15,017-8-0 in respect of
the first mortgage and Rs. 22,954 in respect of the second
mortgage the aggregate being Rs. 37,971.50 Np. The High
Court therefore passed a decree for Rs. 37,971.50 Np. as
principal and the same amount as interest. The High Court
further held that this would be the arrears of interest to
which the appellants would be entitled up to the date fixed
for payment of the redemption money by its judgment. The
High COurt also made a direction that the principal amount
would carry interest at 6% per annum from the date fixed
for redemption till realisation. The appellant in appeal
to this Court by certificate urged: (i) that the High Court
was wrong in reopening the accounts in respect of loans
prior to the two mortgage deeds which ’formed the
consideration for the two mortgage deeds in suit and it
should have held, like the trial court, that the principal
amount was Rs. 44,000 for the mortgages; (ii) that the
arrears of interest under s. 17 of the Act should be
interpreted to mean arrears only up to the date of the
institution of the suit, and the High Court should have
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granted future interest subsequently instead of granting it
only with effect from the date fixed for redemption. The
Court also had to consider whether there was a conflict
’between O. 34 r. 11 of the Code of Civil Procedure and s.
17 of the Act.
HELD: (i) Section 17, in prescribing the maximum
amount of arrears of interest to be allowed, refers to "the
principal of the original loan" and not "the principal of
the loan". If the latter expression had been used, it could
have been argued in the present case that the sums of Rs.
20,000 and Rs. 24,000 which purported to be the principal
amounts of the two loans evidenced by the two mortgage-deeds
in suit, were the principal amounts of the loans to be taken
into account in
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working out the maximum amount of interest permissible under
s. 17 of the Act. The expression "the principal of the
original loan" makes it clear that, in determining the
amount of arrears of interest allowable, the court must go
behind the transaction of the loan and found out what was
the actual cash originally advanced as principal and ignore
all the interest that may have been added subsequently to
that original advance in order to make up the consideration
for the loans in suit. In the present case therefore the
High Court was justified in looking at the transactions
prior to the two mortgage deeds to find out what were the
actual cash amounts originally advanced which, together
with interest and after adjustment of accounts formed the
principal amounts for the two mortgage-deeds.
(ii) Section 17 is in the form of a directive to a Court
not to pass a decree on account of arrears of interest for
a sum greater than the principal of the original loan.
Obviously, the directive is to be carried out by the court
at the time of passing the decree and, consequently, it
would be at that time that the court will see how much it is
awarding for arrears of interest. The maximum prescribed
for the arrears of interest must, therefore be held to be
the maximum amount in respect of interest payable up to the
date of the decree when the court carries out the directive
laid down in this section.
The decree of an appellate court takes effect _from the
date of the decree of the original court, so that no
question can arise of holding that the arrears of interest
under s. 17 of the Act must be computed up to the date on
which the High Court passed the decree.
(iii) There is no conflict between O’. 34 r. 11 C.P.C.
and s. 17 of the Act. Section 17 confines itself to laying
down the maximum of arrears of interest to be allowed up to
the date of the decree and is not concerned with the
interest that is to be allowed for the period thereafter.
Admittedly the Code of Civil Procedure was applicable to
the present suit and consequently interest subsequent to
the date of the decree had to be awarded in accordance
with O. 34 r. 11 C.P.C.
The interest under the mortgage-deeds was payable @
1% per mensem but under the provisions of the Act read
with the provisions of the Usurious Loans Act (Mys. Act ix
of 1923) the fair interest payable on the loan would be @ 9’
per cent per annum. [The Court gave appropriate directions
for the calculation of interest.]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 441 of 1965.
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Appeal from the judgment and decree dated September 19,
1958 of the Mysore High Court in Regular Appeals Nos. 154
and 196 of 1952-53.
S. Govind Rao and K. Rajendra Chaudhuri, for the appellants.
C.B. Aggarwala and R. Gopalakrishnan, for the respondents..
1084
The Judgment of the Court was delivered by
Bhargava, J. One Khanmull, whose legal representatives
are the appellants in the present appeal, instituted
Original Suit No. 59 of 1949-50 on 10th January, 1950 for
recovery of amounts due to him on the basis of two simple
mortgages dated 12th January, 1937 and 14th June, 1937 in
the Court of the District Judge, Civil Station, Bangalore.
Both these mortgages were executed by three brothers, Ahmed
Saleh Mohamed Sait (since deceased), Elias Saleh Mohamed
Sait (respondent No. 1), and Mohamed Saleh Mohamed Sait
(respondent No. 2), while their mother Rahamatbai alias
Bhayabai joined them in the execution of the mortgagedeed of
14th June, 1937. In the suit, in addition to respondents 1
and 2, Hajirabai widow of the deceased brother Ahmed Saleh
Mohamed Sait, and their sisters, Ameenabai and Haneefabai,
were also impleaded as defendants 3, 4 and 5. Further, Khan
Saheb Abdul Gani Saheb, and Khan Saheb Abdul Shakoor Saheb
were impleaded as defendants 6 and 7 in their capacity of
purchasers of the equity of redemption from the mortgagors.
On the foot of the first mortgage, the amount claimed was
Rs. 51,200/- as principal and interest, while, on the foot
of the second mortgage, the amount claimed as principal and
interest was Rs. 60,200/-. The contractual rate of interest
was 1 per cent per mensem. The trial court decreed the suit
on 27th March, 1952, after applying the provisions of
section 17 of the Mysore Money Lenders Act No. 13 of 1939
(hereinafter referred to as "the Act"). For the purpose of
giving effect to.the provisions of s. 17 of the Act, the
trial court held that the principal amount of the two loans
was Rs. 44,000/-, being the aggregate of the consideration
shown in the two mortgage-deeds, and, consequently, allowed
as arrears of interest the sum of Rs. 44,000/-. The
preliminary decree was, therefore, granted for a sum of Rs.
88,000/- composed of Rs. 44,000/- as principal and Rs.
44,000/- as interest. The excess interest claimed at the
contractual rate of 1 per cent per mensem was disallowed on
the ground of the maximum limit for the grant of the total
amount of interest laid down in section 17 of the Act.
Thereupon, both the parties filed appeals in the High Court
of Mysore. The High Court held that the trial court had
wrongly treated the amounts of Rs. 20,000/- and Rs. 24,000/-
as the principal amounts of the original loans; and recorded
a finding that the principal amounts, in fact, were Rs.
15,017-8-0 in respect of the first mortgage-deed, ’and Rs.
22,954/- in respect of the second mortgage-deed. The High
Court, thus, worked out the aggregate of Rs. 37,971/50P as
the principal amount of the two loans advanced under these
two mortgage-deeds and, applying s. 17 of the Act, granted a
decree for this amount as principal together with the same
amount as interest. The High Court further held
1085
that this would be the arrears of interest to which the
appellants would be entitled up to the date fixed for
payment of the redemption money by the judgment of the High
Court, that date being the 19th March, 1959. The High Court
also made a direction that the principal amount will carry
interest at 6% per annum from the date fixed for redemption
till realisation. The appellants have now come up against
this decree passed by the High Court by certificate granted
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by that Court.
In this appeal, Mr. Govinda Rao, learned counsel for
the. appellants, raised only two points. The first point
urged was that the High Court was wrong in re-opening the
accounts in respect of loans prior to. the two mortgage-
deeds which formed the consideration for the two mortgage-
deeds in suit, and that the. High Court should have held
that the principal amount was Rs. 44,000/- for the two
mortgages as decided by the trial Court. The second point
urged by learned counsel was that the High Court was wrong
in fixing the dates up to which the arrears of interest
could be calculated for being included in the decree and for
prescribing future rates of interest. It was urged that the
arrears of interest envisaged by s. 17 of the Act should be
interpreted to mean arrears only up to the date of the
institution of the. suit. and the High Court should have
granted future interest subsequently instead of granting
future interest only with effect from the date fixed for
redemption.
So far as the first point raised by learned counsel is
concerned, it appears to us that it is totally misconceived,
because the language of s. 17 of the Act plainly justifies
the view taken by the. High Court. Section 17, in
prescribing the maximum amount of arrears of interest to be
allowed, refers to "the principal of the original loan" and
not "the principal of the loan". If the latter expression
had been used, it could have been argued in the present case
that the sums of Rs. 20,000/- and Rs. 24’000/which purported
to be the principal amounts of the two loans evidenced by
the two mortgage-deeds in suit, were the principal amounts
of the loans to be taken into account in working out the
maximum amount of interest permissible under s. 17 of the
Act. The expression "the principal of the original loan"
makes it clear that, in determining the maximum amount of
arrears of interest allowable, the Court must go behind the
transaction of the loan and find out what was the actual
cash originally advanced as principal and ignore all
interest that may have been added subsequently to that
original advance in order to make up the consideration for
the loans in suit. In the present case, therefore, the High
Court was justified in looking at the transactions prior to
the two mortgage-deeds to find out what were the actual cash
amounts origi-
1086
nally advanced which, together with interest and after
adjustment of accounts, formed the principal amounts for the
two mortgagedeeds. It was admitted by counsel for both
parties before us that the figures accepted by the High
Court as the principal amounts of the two loans are correct,
if the original cash advances are treated as the principal
amounts of the original loans. It is, therefore, clear that,
on the plain language of s. 17 of the Act, the High Court
was right in holding that the aggregate of the principal
amounts of the original loans was only Rs. 37,971/50
P and. not Rs. 44,000/- and, consequently, in awarding
arrears of interest only to the extent of the same amount
and not a larger amount.
On the second question, we are unable to agree with the
view of the High Court that the arrears of interest
mentioned in s. 17 of the Act mean interest calculated up to
the date fixed for redemption. At the same time, we are
also unable to accept the submission made on behalf’of the
appellants that the arrears of interest in this section mean
arrears of interest up to the date of the suit. It is to be
noticed that the section is in the form of a directive to a
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Court not to pass a decree on account of arrears of interest
for a sum greater than the principal of the original loan.
This language clearly gives an indication of the intention
of the Legislature. Obviously, the directive is to be
carried out by the court at the time of passing the decree
and, consequently, it would be at that time that the court
will see how much it is awarding for arrears of interest.
The maximum prescribed for the arrears of interest must,
therefore, be held to be the maximum amount in respect of
interest payable up to the date of the decree when the court
carries out the directire laid down in this section. In the
present case, the trial Court passed the decree on the 27th
March, 1952 and, consequently, the amount of Rs. 37,971/50 P
awarded as arrears of interest must be the arrears of
interest due up to that date. The High Court, in our
opinion, was not correct in holding that these arrears of
interest will cover interest due up the date fixed for
redemption by the High Court.
In this connection, learned counsel for the respondents
urged that the arrears of interest envisaged by s. 17. of
the Act should be held to include interest due up to the
date of the decree by the High Court, because that is the
effective decree granting interest to the mortgagees; but
this arguments overlooks the principie of law that the
decree of an appellate Court-takes effect from the date of
the decree of the original court. In this case, therefore,
even though the High Court passed the appellate decree at a
later date, that decree has to. be deemed to have come into
1087
effect from 27th March, 1952 which was the date of the
decree of the trial Court, so that no question can arise of
holding that the arrears of interest under s. 17 of the Act
must be computed up to the date on which the High Court
passed the decree.
The further point that arose was as to the interest which
the appellants could claim after the date of the decree,
viz. 27th March, 1952, on the amount decreed. On behalf of
the appellants, reliance was placed on Order 34, r. 11 of
the Code of Civil Procedure and it was urged that interest.
should be allowed after that date in accordance with the
provisions of that rule. The High Court has expressed the
opinion that, if interest is allowed under r. 11 of Order
34, C.P.C., it would be in conflict with s. 17 of the Act;
but we are unable to see any such conflict. Section 17 of
the Act confines itself to laying down the maximum of
arrears of interest to be allowed up to the date of the
decree and is not concerned with the interest that is to be
allowed for the period thereafter. Admittedly, the Code of
Civil Procedure was applicable to this suit and,
consequently, interest subsequent to the date of the decree
had to be awarded in accordance with Order 34, r. 11, C.P.C.
Under r. 11(a)(i), interest would be payable on the
principal amount found or declared due on the mortgage, from
the date of the decree up to the date fixed for payment, at
the rate payable on the principal, or, where no such rate is
fixed, at such rate as the Court may deem reasonable. In
this case, the date of the decree by the trial Court was
27th March, 1952, while the date fixed for payment became
19th March, 1959 as a result of the decree of the High
Court. The interest for this period has to be calculated in
accordance with r. 11(a)(i) of Order 34, C.P.C., on the
principal amount of Rs. 37,971/50 P. As regards the rate,
it is true that, under the mortgage-deeds, the interest was
payable @ 1% per mensem but, under the provisions of the Act
read with the provisions of the Usurious Loans Act (Mysore
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Act IX of 1923), the fair interest payable on the loan would
be @ 9 per cent per annum and it is at this rate that the
interest must be calculated on this principal amount for
this period. In addition, under r. 11(a)(ii) of 0.34,
C.P.C., interest @ 6% per annum has to be allowed on the
amount decreed for costs, charges and expenses incurred by
the appellants up to the date of the preliminary decree. A
further direction that is necessary is that interest under
r. 11 (b) of 0.34. C.P.C., will be payable up to the date of
realisation or actual payment on the aggregate of the two
principal sums just mentioned @ 6% per annum which must be
deemed to be reasonable as interest at that rate is
ordinarily awarded in all decrees in respect of future
periods.
1088
The result is that the decree passed by the High Court
will have to be amended in respect of calculation of
interest in the manner indicated by us above. The appeal is
partly_ allowed to this extent. In the circumstances of this
case, we direct parties to bear their own costs of this
appeal.
G.C. Appeal partly allowed.
L 6 Sup. CI/69--2,500--Sec.VI---24-I-70--GIPF-
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