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Judgment
Das, J.—This appeal arises out of a suit instituted by the appellant Bank against the respondent to enforce a mortgage bond executed by the respondent in favour of the appellant Bank.
The only question that arises in this appeal is as to the interest claimed by the appellant Bank.
The bond provided that interest should run at the rate of 12 per cent with annual rests. The learned Subordinate Judge has taken the view that the provision as to "the high and exorbitant rate of interest with stipulation for compound interest was a hard and unconscionable bargain and operated by way of penalty u/s 74 of the Contract Act." I am wholly unable to agree with this view. The learned Subordinate Judge is in error in thinking that the tendency in the modern decisions is to disallow high rate of interest on security bonds where a property is sufficient for payment of a loan advanced by the creditors. I may refer to the decision of this Court in Baluaki Mahapatra v. Kruspasindhu Mahapatra (1917) P.H.C.C. 135=42 I.C. 680=2 Pat. L.W. 175. In that case the rate of interest was 37 per cent. The learned Judges thought that the Court had no jurisdiction whatever to reduce the rate of interest. It was pointed out that the "Indian law does not recognize the English principle of equity which gives relief to a debtor whenever a Court considers the rate of interest unduly high"
"The law of India," as Mr. Justice Mullick has pointed out in that case, '' is that unless the debtor can bring himself within the four corners of section 16 of the Indian Contract Act, he is entitled to no relief".
Now the learned Subordinate Judge was aware of these decision and so he tried to make out a case of section 16 of the Indian Contract Act for the defendant. His reasoning may be given in his own words:
"The defendant was in need of money to meet the expenses of certain litigations, The Bank was the only capitalist which could advance a loan of Rs. 30,000. It is in evidence that the security offered by the defendant was found sufficient and satisfactory on enquiry made by the officers of the Bank. The defendant, therefore, urges that the Bank really took advantage of his position and embodied the said stipulation in the bond."
All that I can say is that this reasoning does not convince me at all. If this reasoning be correct, then it might be said that whenever a person is in need of money, the creditor is in a position to dominate the will of the debtor. A case u/s 16 is not made out by the finding arrived at by the learned Subordinate Judge in this case.
I would allow the appeal, modify the decree passed by the learned Subordinate Judge and allow interest at 12 per cent with yearly rests.
The mortgage decree must be drawn up by the office in accordance with this decision. Period of grace 3 months from the date of this decree.
The appellant Bank is entitled to the costs of this appeal.
Adami, J.
I agree.
Appeal allowed.