Vencatachellam Chettiar vs Veerappen Ambalagaran and Another

Sundara Aiyar, J.—I am of opinion that the Subordinate Judge''s decision with respect to the point in dispute in this Court cannot be sustained. The defendant executed a bond for Rs. 200 agreeing to re-pay the amount within one month, and in default he agreed to pay compound interest at 2 per cent, per mensem with six months'' rests. The rate of interest provided till the due date was also two per cent. The Subordinate Judge awards the plaintiff "compound interest," as he says, but he does not allow any rests. In other words, he allows the plaintiff interest on arrears of interest. I doubt whether this is really awarding compound interest. ''Compound interest,'' I believe, involves the idea of rests whatever the intervals may be for the rests. I see no reason for holding that a promise to pay compound interest with six months'' rests from the date of default is a penalty. It was apparently not so regarded by their Lordships of the Judicial Committee of the Privy Council in Sundar Koer v. Rai Sham Krishen 4 A.L.J. 109 See also Sinnachami v. Ramasamy Chettiar (1911) 2 M.W.N. 539 : 10 M.L.T. 463. I, therefore, modify the decree of the Subordinate Judge by allowing compound interest from the date of default at 2 per cent, with six months'' rests. The petitioner will have the whole of his costs in this Court and in the Court below.