Sant Ram and another vs Nand Lall

Mehar Singh, J.—This is a first appeal by plaintiffs Sant Ram and Naurata Ram from the judgment and decree, dated 21-9-1950, of the District Judge at Patiala.

The plaintiffs brought a suit against Nand Lal defendant for recovery of Rs. 10,277/15/- on the foot of a bond, Ex. PA, dated 3rd Assauj 2008 Bk. The bond was for the amount of Rs. 7,500/-, payable in annual instalments of Rs. 400/- on 1st Besakh of each year. The first instalment was due on 1st Besakh, 2007 Bk.

According to the plaintiffs, the defendant made a default in the payment of the first instalment, and thus they became entitled, under the terms of the bond, to the immediate realisation of the total sum of Rs. 7500/- plus Rs. 2,200/-, the amount of the interest that had been given up at the time of the execution of the bond, plus Rs. 577/15/- as interest from the date of the bond to the date of the suit.

The defendant admitted execution of the bond, but pleaded (a) that the amount of the bond was made up of compound interest, (b) that there had been no default in the payment of the first instalment, as he had made the offer on due date, which offer was not accepted by the plaintiffs, (c) that there was no condition in the bond for realisation of the remaining amount as ''lump sum'' on default of an instalment, (d) that the claim'' for Rs. 2,200/- and interest from the date of the bond to the date of the suit is penal and should be relieved against, and (e) that in any case he should be given the benefit of instalment in the decree.

2A. The learned District Judge found that the amount of the bond was to some extent at least made up of compound interest, that the story of the defendant that the amount of the first instalment was offered on due date is not believable, that the claim for Rs. 2,200/- and interest from the date of the bond to the date of the suit is penal, and that under the terms of the bond the whole sum did not become due at once on default of the first instalment. The first instalment had in fact been offered on 24th Besakh, 2007 Bk.

Therefore, the learned District Judge granted a decree to the plaintiffs against the defendant for recovery, of Rs. 400/- of the first instalment with interest at the stipulated rate of thirteen annas per cent, per mensem from 1st to 24th Besakh, 2007 Bk., with the direction that the remaining instalments shall continue to be paid on due dates and in the event of default interest would be chargeable at the stipulated rate. He disallowed the claim of the plaintiffs for the amount of Rs. 2,200/- and interest from the date of the bond to the 1st Besakh, 2007 Bk.

In this appeal the plaintiffs have made three claims: (a) for the amount of Rs. 2,200/-, (b) for the amount of Rs. 577/5/- as the amount of interest from the date of the bond, and (c) payment of the original amount of Rs. 7,500/- not by instalments but ''lump sum''.

The plaintiffs have paid court-fee correctly with regard to the first two claims and as to the third claim they have paid a court-fee of Rs. 10/-. There is a preliminary objection by the Learned Counsel for the defendant that in the third claim of the plaintiffs payment of the court-fee is not proper. He contends that according to Art. 1 of Sch. 1, Court-fees Act and S. 16 of that Act the plaintiffs should pay court-fee with regard to the third relief upon the difference between the value of the relief they claim to be entitled to and that granted by the decree appealed against, and in this behalf reliance is placed on - Lukhun Chunder v. Khoda Buksh'', 19 Cal 272 (A); - ''Gobind Lal v. Rao Baldeo Singh'', AIR 1914 Lah 390 (B); - ''Agha Sher Md. Khan Zamanuddin v. Haji Fazal Hahi Gurwara'', AIR 1936 Pesh 232 (C) and - ''Zainul Abdin v. Emperor'', AIR 1931 Pesh 30 (D).

All these cases support the contention of the Learned Counsel, and no case to the contrary has been referred to by the Learned Counsel for the plaintiffs. All the cases cited were cases in which the decree was for instalments and in appeal the claim was for ''lump sum'' amount.

The method of calculation of difference between the relief claimed by the appellant in appeal in such, cases and the value of the decree adopted is that interest, at the agreed rate or in the absence of such rate at the Court rate of six per cent, per annum, is calculated upon each instalment from the date of the decree to the date it becomes due and payable. The total amount of interest thus calculated is deducted from the amount claimed by the appellant and the amount remaining is the present value of the decree. In the present case the amount of interest on the instalments at the stipulated rate of thirteen annas per cent, per mensem comes to Rs. 6,669/- and this amount deducted from the lump sum'' amount of Rs. 7,500/- claimed by the plaintiffs leaves a remainder of Rs. 831/-.

So that the present value of the instalment decree to the plaintiffs is Rs. 831/- and the relief claimed by them is payment of a ''lump sum'' of Rs. 7,500/-, the difference between the two conies to Rs. 6,669/-, and court-fee payable upon this amount, after allowance for the court-fee of Rs. 248/8/- already paid on all the reliefs is Rs. 434/-, which is to be paid by them to make up the deficiency in the court-fee stamp. They have paid this amount in Court.

The first question for consideration in the case is what is the effect of the finding of the trial Judge that part of the amount of the bond is made up of compound interests It has not been shown by the teamed counsel for the defendant how the Court has power to go behind the bond admittedly executed by the defendant and thereby he having accepted the correctness of the previous accounts, if any, between the parties, it is in these circumstances not open to the Court to re-open the transaction and to take accounts between the parties except where a mistake or fraud is pleaded or claim for re-opening of the transaction is made under any statute. In the present case no such contention has been advanced on behalf of the defendant. Therefore, this finding of the learned District Judge really has no bearing on the merits of the case. This finds support from a Division Bench case reported as - AIR 1936 51 (Lahore) .

The second question for consideration is whether in fact there was default in the payment of the first instalment on due date of 1st Besakh, 2007 Bk. (On discussing the evidence, the judgment proceeded:) We are satisfied upon the evidence that the finding of the learned District Judge on this point is correct and that in fact the defendant did not offer the instalment on the due date. The fact that after the due date he made attempts to offer the instalment is really not material in the case.

The next question for consideration is whether on default having been made in the payment of the first instalment on due date, it is one of the terms of the bond that the remaining amount would become payable as a ''lump sum'' or not? The term stated in the bond is that should the defendant not pay any instalment on due date, Sant Ram and Naurata Ram creditors would have a right to realise the remaining amount with the amount of Rs. 2,200/- that had been given up, at thirteen annas per cent, per mensem interest, from the defendant and from the joint property of the family of the defendant.

It will be seen that although the bond says that the remaining amount will become realisable with the amount of Rs. 2,200/- given up when the bond was executed, it does not use the word ''lump sum.'' The version of the defendant is that he told the petition-writer that the word lump sum should not be written in the bond as the agreement in case of default of an instalment was not to repay the remaining amount as ''lump sum'' and that the petition-writer specifically told him that he had not used the term ''lump sum'' in the bond.

The defendant says that he never agreed to the condition to pay the remaining amount as ''lump sum'' in the event of a default of an instalment. He admits to having heard the bond read over and to having executed it. The petition-writer has not been produced in this case. of the two plaintiffs Naurata Ram has appeared as a witness and he says that there was a specific agreement between the parties that in case of default of an instalment the remaining amount will be payable in ''lump sum'', and that this term was incorporated in the bond.

It is admitted on all hands that no witness was present when the bond was executed. After it had been written and signed by the defendant it was taken over by the plaintiffs and the petition-writer was allowed to go. It was afterwards that the presence of the two attesting witnesses Parshotam Dass P.W. 1 and Ram Chand P.W. 2 was obtained. They questioned the defendant about the terms of the bond and in fact Parshotam Dass P. W. 1 says that he again read over the bond to the defendant and having ascertained the terms, they attested the bond as witnesses. Under the attestation of each are in his handwriting repeated the terms between the parties.

The witnesses admit that those terms had been ascertained by them from the defendant and also it follows from the plaintiffs. It is not stated in those writings of the witnesses that in the event of a default of an instalment the remaining amount shall be payable in ''lump sum''. The explanation of the witnesses, which is obviously a mendacious explanation, is that that term could not be incorporated in their writings because there was not enough space left for it, which is not true on mere looking at the bond.

The witnesses are definite now in Court and so is plaintiff Naurata Ram that there was specific agreement that on default of an instalment the remaining amount shall be payable ''lump sum'' at once. What is written in the writings of the witnesses discredits this story and the omission of the use of the word ''lump sum'' in the bond discredits the present version of plaintiff Naurata Ram.

It is true that the words used in the bond may in themselves be susceptible to an interpretation that in case of default of an instalment the remaining amount shall become due immediately and in ''lump sum'', but here there is a definite case of ''the plaintiffs, as supported by their two witnesses, at least false in this respect, that the pointed agreement between the parties was that the remaining amount shall be payable at once and in ''lump sum'' in case of default of an instalment and that being so there appears to be no explanation why the matter was not specifically and succinctly stated in the bond and rather dubious words were used leaving the matter to interpretation subsequently.

If the parties had not put forth their conflicting versions of the matter and if the whole thing was left merely to the interpretation of the bond, there might not have been any difficulty in the decision of the case. But now the interpretation of the bond must be influenced by the specific cases put forward by the parties. There is little doubt that on consideration of the evidence the version put forward by the plaintiffs and the two attesting witnesses, is a false and untrue version and this lends support to the claim of the defendant that he was not agreeable to a term in the bond as put forth by the plaintiffs now and that to that effect he made sure from the petition-writer that no such term was entered in the bond.

This now explains the non-production of the petition-writer. The probability of the circumstances and the subsequent behaviour of plaintiff Naurata Ram and the two attesting-witnesses in the Court lends strength to what the defendant has pleaded in this connection. If the matter rested there, it is clear that the decision must be in favour of the defendant that the bond does not mean that in the event of failure of an instalment the remaining amount becomes payable in ''lump sum'' at once.

However, the Learned Counsel for the plaintiffs urges that it is the document alone which is evidence of the terms settled between the parties and no extraneous evidence can be looked into to substitute the words of the bond or to contradict those words. This is ordinarily true. But in this case the defendant has pleaded and stated definitely that before he executed the bond he ascertained from the petition-writer that there was no such term in the bond and he executed the bond upon that express understanding. Subsequent to the signing of the bond by the defendant the writings of the two attesting witnesses also lead to the inference that the defendant did not agree to this term otherwise it would have found mention in those writings as the other terms.

Of the two versions of the parties, which as stated have been definite and specific, the one put forth by the defendant has been believed and that of the plaintiffs disbelieved. In these circumstances it is evident that the defendant executed the bond under a mistake of fact as to the real terms that had been agreed upon between the parties. This is in spite of the fact that the bond had been read over to him. It is written in Urdu and he is not conversant with that language. The case of such a mistake falls within the scope of proviso (1) of S. 92, Evidence Act and under that proviso evidence is admissible to prove the true state of affairs.

In - ''Po Naw v. Maung Ba Chit'', AIR 1929 Rang 262 (F) the appellants stood surety for a judgment-debtor for his appearance in Court. In the application they made showing their readiness to stand surety they stated that they were ready to furnish sufficient security for the appearance of the judgment-debtor. This was accepted, but in the security-bond in fact executed by them it was written that they would be liable to pay the amount of the debt in the event of the judgment-debtor not appearing in Court and also in the event of his not paying the debt. The judgment-debtor appeared in Court on due date but was unable to pay the debt. The creditor claimed the amount from the appellants under the security-bond. The appellants relied upon their application made to Court before the execution of the security-bond and produced two clerks in the Court to give oral testimony that in fact what the appellants agreed to was to be sureties for the appearance of the judgment-debtor and not for payment of the debt in the event of the judgment debtor not being able to do so.

The learned Judge accepted the documentary evidence of the previous application and the oral testimony of the two witnesses to establish the truth of the story of the appellants that they had stood surety for the appearance of the judgment-debtor and not for the payment of the debt in the event of the judgment-debtor being unable to do so and this he did under proviso (1) to S. 92, Evidence Act.

The case is the nearest parallel to the present case. On consideration of the evidence therefore we are of the opinion that the defendant executed the bond under a mistake of fact that he was doing so not agreeing to any term to the effect that in the event of failure of an instalment the remaining sum shall become due at once and in ''lump sum''. In this view the finding of the learned trial Court is sound that there was no such term agreed to between the parties and the terms of the bond cannot be read as including any such term. The plaintiffs are, thus, not entitled to the realisation of the remaining total amount in ''lump sum''.

The last question for consideration is whether the claim for the amount of Rs. 2,200/- and interest from the date of the bond is penal. It is well settled that on default claim for interest prior to the date of the default retrospectively is a penalty under S. 74, Contract Act and so the learned District Judge was right in disallowing the claim of the plaintiffs for the amount of Rs. 577/5/- from the date of the bond. He has already allowed them interest from the date of the default to the date of first instalment was offered. This claim of the plaintiffs fails. But we do not agree with the learned trial Judge that the claim for the amount of Rs. 2,200/- is by way of penalty.

It is common ground between the parties that there were two hand-notes Ex. PB of Chet shudi 1, 2004 bk. for an amount of Rs. 5,800/-, and Ex. PC of Besakh shudi 1, 2004 bk, for an amount of Rs. 3,200/-, both carrying interest at the rate of thirteen annas per cent, per mensem, executed by the defendant in favour of the plaintiffs. The total amount due under those hand-notes was Rs. 9,000/-, out of which Rs. 1,500/- had been paid leaving a sum of Rs. 7,500/-. Interest at the stipulated rate from the dates of the hand-notes to the date of the bond, Ex. PA, comes approximately to Rs. 2,200/-.

The bond recites that the defendant had requested the plaintiffs to give up the interest and that they had agreed to do so and the defendant executed the bond for the amount of Rs. 7,500/-, payable in instalments, with the condition that in the event of failure of an instalment the remaining amount, with the sum of Rs. 2,200/- that had keen given up, shall be realisable at the stipulated rate of interest.

The Learned Counsel for the plaintiffs contends that the amount of Rs. 2,200/- was given up as a concession by the plaintiffs and as soon as the defendant made the default they were, under the terms of the bond, entitled to withdraw that concession, and thus claim for this amount is not by way of penalty, as nothing in excess is being claimed from the defendant simply by reason of the default, but what is being claimed is that which was in fact due from him and had been given up because of the method of payment agreed to by the defendant. The Learned Counsel for the defendant replies that it is not a case of a concession.

According to him there is a distinction between a case in which after accounting the parties fix one sum as the liability of the debtor and provide for its payment and in default agree that the debtor shall pay an extra amount and the case in which the initial liability is filed at one sum, out of which a certain amount is given up in view of the debtor agreeing to pay the remaining amount promptly and in the event of default to pay the total initial sum fixed as his liability. Assuming that there is this distinction between the two classes of cases we are of the opinion that the present case comes under the second category.

The bond definitely recites that the defendant had requested for the giving up of the amount of the interest and that the plaintiffs had acceded to his request, thus the remaining amount was Rs. 7,500/-, payable by instalments, and in the event of default of an instalment, it was agreed that the amount that had been given up coining to Rs. 2,200/- shall become payable at the stipulated rate of interest.

It is true that in the beginning the amount of the interest is not specifically stated, but that makes no difference because the defendant admitted his liability for the amount of Rs. 7,500/- and interest and then upon his request the amount of the interest was given up. Later the amount of interest has been specifically stated. So that there is no difficulty in reaching the conclusion that the liability admitted by the defendant in the case was for the amount of Rs. 7,500/- and interest amounting to Rs. 2,200/-.

The latter amount was given up at his request, but made payable by him in the event of failure to pay any instalment. This as stated comes within the second category of the cases as stated in the argument of the Learned Counsel for the defendant and he admitted that in that class of cases the extra amount payable in the event of default is a concession and not a penalty because it was originally part of the liability of the debtor. In this view, the claim of the plaintiffs for the amount of Rs. 2,200/- is not penal and the learned-trial Judge was not right in disallowing it.

This claim is allowed to the plaintiffs and they are entitled to the realisation of this amount at the stipulated rate of interest of thirteen annas per cent, per mensem from the date of default.

The result is that the appeal of the plaintiffs only succeeds to the extent of first relief for the amount of Rs. 2,200/- with stipulated rate of interest but it fails with regard to the second and the third reliefs, that is, for the claim as to Rs. 577/5/- and for the claim as to the realisation of the debt as a ''lump sum''. The appeal is, therefore, partly accepted to the extent stated as above and otherwise it stands dismissed. The parties are left to their own costs.

Gurnam Singh J.

I agree.