Fawcett Ag. C.J.
1. In this case the plaintiffs sued the defendants to recover Rs. 5,368-13-6 as due on a mortgage passed by the defendants. The mortgage is not disputed; nor is the claim, except in regard to the compound interest fixed by the bond being excessive and the bond therefore unconscionable, and in regard to the liability of the defendants to pay the interest claimed for the period prior to February 1, 1923. The Subordinate Judge held that the agreement to pay compound interest at twelve annas per cent, per month was not unconscionable. It is to be noted that the parties are both traders and money lenders, and there was nothing which showed that there was anything in the nature of undue influence or pressure put upon the defendants when they agreed to pay such compound interest. In my opinion nothing has been shown that would justify our differing from the lower Court's view on this point.
2. Therefore, there remains only the question about interest prior to February 1, 1923. The contention of the defendants is that there was a compromise between the plaintiffs and defendant No. 1 as representing all the defendants about the interest due up to the end of January 1923, and that this compromise was arrived at in the month of January 1928. The written statement asserted that it was then agreed that on the defendants paying Rs. 1,500 more to the plaintiffs the entire claim for interest due till the end of January 1923 would be discharged and the balance of interest would be remitted; that accordingly on February 1, 1928, the defendants paid Rs. 1,500 to the plaintiffs by giving a cheque for that sum, so that the interest only from February 1, 1923, onwards was in arrears; but that the plaintiffs by their notice dated February 16, 1923, claimed Rs. 5,066-1-0 contrary to this compromise. The plaintiffs denied the alleged compromise and they raised an issue, whether evidence of this alleged oral adjustment was inadmissible. The lower Court has held that such oral evidence is inadmissible under proviso (4) of Section 92 of the Indian Evidence Act, That proviso excepts the case of a document which is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents, from the provision that the existence of any distinct subsequent oral agreement to rescind or modify the terms of a document may be proved. It followed the decisions in Jagathnaih v. Shankar I.L.R (1919) Bom. 55: 22Bom. L.R. 39. and Mallappa v. Matum Nagu Chetty I.L.R (1918) Mad. 41, wherein it was held that a subsequent oral agreement to take less than what is due under a registered mortgage bond is an agreement modifying the terms of a written contract, and if it has to be proved, oral evidence is inadmissible for that purpose under the exception contained in this proviso (4),
3. It is contended in this appeal that that view is wrong, Reliance is placed by Mr. Thakor for the appellants upon the distinction that has been made in Mallappa v. Matwm Nagu Chetty I.L.R (1918) Mad. 423, and Ariyaputhira v. Muthukotnaraswami I.L.R (1912) Mad. 423, between an attempt to prove a subsequent oral agreement to rescind or modify a contract contained in a registered document and evidence that in fact a creditor has accepted a less sum than is really due under the registered instrument in whole or part discharge of the mortgage debt. Thus Sadasiva Ayyar J., at page 45, after saying that an oral agreement to substitute a mortgage charge for Rs. 150 payable in instalments in supersession of the mortgage charge for Rs, 175 payable at once under the registered mortgage bonds was inadmissible in evidence, goes on to say : 'If, however, the Rs. 150 had been paid up regularly, there would have been a complete discharge and satisfaction of the mortgage debt which could be proved in accordance with the Indian decisions though the oral agreement could not be proved. 'He then cites Kattika Bapanamma v. Kattika Kristnamma I.L.R (1906) Mad. 23, upon this question. In that case it was held that evidence of the actual discharge of certain arrears of maintenance by the plaintiff taking possession of certain land and getting the rents and profits thereof was admissible to show that there had been in fact such a discharge, although evidence to prove the agreement so to modify the original registered contract was inadmissible. Similarly, in Karampalli Unni Kurup v. Thekku Vittil Muthorakutti I.L.R (1902) Mad. 195, the creditors gave a discharge for the whole rent due on receiving a less sum, and it was held that that could be proved as a discharge under Section 63 of the Indian Contract Act, and that the fact that the discharge had been given in pursuance of an alleged oral agreement was immaterial. In Ariyaputhira v. Muthuhomaraswami I.L.R (1912) Mad. 423 it was held that a mortgage created by a registered instrument may be proved to have been discharged by admissible evidence (including oral evidence) of payment of the mortgage amount, or by admissible evidence of any other transaction which operates as a mode of payment. It is, therefore, urged that this is not a case of an oral agreement to modify or rescind the terms of the written document, but that the evidence sought to bE put in was merely evidence of a settlement of a past liability for payment of interest, which did not prevent the terms of the agreement operating in future as before and which therefore does not fall at all under Section 92 of the Indian Evidence Act. On the other hand, in Jagannath v. Shanlcar I.L.R (1919) Bom. 55: Bom. L.R. 39, the plaintiff sued to recover Rs. 2,000 as balance due at the foot of an account of two registered mortgage deeds and the defendants pleaded that their father had paid a sum of Rs. 800 to the plaintiff, who accepted it in full satisfaction of the mortgage debts. The Assistant Judge allowed oral evidence to be led by the defendants to show that the plaintiff had agreed to accept Rs. 800 in full satisfaction of his claim, and holding the defendants' contention proved dismissed the plaintiff's suit. On appeal the District Judge contained the decree. A second appeal from the decree was dismissed by Batchelor J. But on an appeal under the Letters Patent it was held that oral evidence was inadmissible to prove the alleged discharge of the mortgage debt under Section 92, proviso (4), of the Indian Evidence Act. Macleod C.J. in his judgment (p. 58) says, after referring to Mallappa v. Matum Nagu Chetty I.L.R (1918) Mad. 41..But the argument before us has been that there has not been a subsequent oral agreement to rescind or modify the mortgage, but there has been an actual discharge, and that oral evidence was admissible to prove a discharge. In my opinion there is no substance in that argument, The defendant's case must be that the mortgagee agreed to receive Rs. 800 in full satisfaction of the much greater amount which was due on the mortgage, and although he might have said when receiving Ks. 800 I now discharge you from the mortgage ', there was none the less an agreement which modified the original agreement of mortgage. It would be an extremely dangerous precedent if oral evidence were allowed of such agreements.
4. Heaton, J. in his judgment says (p. 60):-
The modification suggested is that the mortgage debt should be changed, from what under the deed it would be, to a sum of Rs. 800. That would be a very large modification of the terms of the deed. This modification could not be proved, as is provided by proviso (4) to Section 92 of the Indian Evidence Act, by the method by which the defendant sought to prove it.
This decision has been dissented from by the Calcutta High Court in Mahim v. Ram Dayal (1925) 42 C.L.J. 582. There it was held that oral evidence may be admitted to prove that a mortgage bond has been discharged either by full payment by partly by payment and partly by release of the debt, and there is nothing in Section 92 of the Indian Evidence Act to prevent such evidence being admitted. Ghose J., after quoting the passage in Sir Norman Macleod's judgment that I have already cited, says (p. 583) :-
With all respect I am unable to accept the reasoning of the learned Chief Justice, A mortgage is discharged either by the payment of the full amount of the debt or by release of the debt itself. It has never been doubted that a discharge of the debt by payment may be proved by oral evidence, This point is not contested on behalf of the appellant. The cases in support of this will be found referred to in Ariyaputhira Padayichi v. Mulhiikamaratwami Padayachi I.L.R (1912) Mad. 423. Oral evidence of such discharge is not excluded by any provision of Section 92 of the Evidence Act. A release of a debt alas may be effected by parol, but if it is in writing it should be registered, if it falls within the provisions of Section 17 of the Registration Act.
5. That decision was followed in Rain Rajan Roy v. Jayanti Lal Patrai (1926) 44 C.L.J. 449, where it was held that evidence of an oral agreement going to contradict, vary or add to the terms of an instrument in writing is inadmissible, but evidence proving a discharge of the debt, not being a varying or adding to the terms, is not excluded by Section 92 of the Indian Evidence Act.
6. In this state of the authorities, and having regard to the difference between an actual disoharge or remission falling under Section 63 of the Indian Contract Act and an under-lying agreement to accept a less amount, which may fall within the provisions of Section 92 of the Indian Evidence Act, there might be a case for submitting the question to a Full Bench as to whether the view taken in Jagannath v. Shankar I.L.R (1919) Bom. 55 : 22 Bom. L.R. 39, does not go too far. But in the present case, after careful consideration, it seems to me that this question does not really arise. What the defendants allege is that there was an oral agreement arrived at between the parties in January 1923, and that in pursuance of that agreement the defendants sent to the plaintiffs a cheque for Rs. 1,500, and that accordingly Rs. 1,500 were paid in full settlement of the interest due up to the end of January 1923, by virtue of a previous agreement which had been arrived at in January 1923. The whole plea of discharge and satisfaction is baaed upon this alleged prior oral agreement. There is no allegation that when the cheque was paid it was taken to the plaintiffs and that they then accepted it in full satisfaction. All that is alleged is that, there being this prior oral agreement, a cheque accordingly was sent to the plaintiffs; and, therefore, the case in not one, which I think really raises the important point I have mentioned, It is to be noted also that, at the time in January 1923, when this oral agreement is alleged to have been arrived at, some part of the interest up to January SI, 1923, was not yet due, viz., for the days in January that still had to run; and it is not, therefore, a case of a settlement purely as to a liability that had already been incurred. But that is a minor point. The major ground on which this appeal must be dismissed is that the alleged discharge is based entirely upon the alleged oral agreement, and unless the oral agreement is proved the discharge cannot be established. In my opinion, therefore, the view taken by the lower Court that evidence of the oral adjustment is inadmissible is correct, I would dismiss the appeal with costs.
7. The plaintiffs sued the defendants to recover Ks. 5,366-18-6 on a mortgage of July 12, 1910, the principal sum secured being Rs. 3,000 and the interest, less amounts already received, totalling Rs. 2,366-13-6.
8. Execution of the mortgage and receipt of Rs. 3,000 were admitted, But the defendants urged that they had already paid Rs. 1,972-8-0 as interest and that in January 1923 they had compromised as to arrears of interest, the terms being that defendants should pay Rs. 1,500 down, and should then be held to have gatisfied the full amount of interest due, up to January 81, 1923 and that they had accordingly paid the sum and that interest was therefore only due from February 1, 1923. The plaintiffs' conduct was also impugned, as having been fraudulent, and it was pleaded that the interest charged was ' hard and unlawful,' and that simple interest instead of compound at nine per cent, only should be allowed.
9. At the trial evidence as to the alleged oral agreement was excluded as irrelevant under Section 92, proviso 4, of the Indian Evidence Act, and it was also held that the terms of the mortgage as to interest were not unconscionable, Rupees 5,336-13-6 were found due on the mortgage and a decree for sale was accordingly passed, interest at six per cent, being allowed from date of suit,
10. Defendants have appealed, and the main point in the appeal is whether the learned Subordinate Judge was right in excluding all evidence of the oral agreement set up by the appellants' written statement; it being urged before us that this arrangement did not modify the terms of the original contract, and hence that the authorities relied on by the original Court did not apply. It has also been argued that the agreement as to compound interest was unconscionable.
11. The cases relied on by the learned Subordinate Judge were those reported in Mallappa v. Matum Nagu Chetty I.L.R (1918) Mad. 41, and Jagannath v. Shanlcar s.c. 22 Bom. L.R. 39. The former of these cases is reported as an appeal under Clause 15 of the Letters Patent and was from the decree in a suit on two mortgages, the defendant having pleaded that by a subsequant oral arrangement the plaintiff had agreed to take a smaller amount than what was due, if such amount were paid within a certain time; and that this condition having been complied with, the plaintiff was not entitled to recover the full amount. The plaintiff admitted the oral agreement, but denied that its terms had been carried out. The learned Judges who heard the second appeal differed. After discussing authorities, Sadasiva Ayyar J. held that the agreement was one altering the written registered contract and that it was inadmissible. Bakewell J., on the other hand, thought that this was not an agreement modifying the termg of the original contract, and that Section 92 of the Indian Evidence Act did not apply. On a reference, the Chief Justice was of opinion that a subsequent agreement to take less than is due under a registered mortgage is clearly an agreement modifying the terms of the original contract, and if it has to be proved, oral evidence is inadmissible under the 4th proviso to Section 92 of the Indian Evidence Act; but that since the agreement had been admitted in the pleadings and did not require any proof, effect could be given to it in that case. The remaining judgments differ of some points; but all the Judges agreed that evidence of such an agreement if proposed to be given would have been inadmissible.
12. The head-note of the Bombay authority (Jagannath v. Shan-Kar) is that oral evidence led to prove discharge of a mortgage debt by the payment of a smaller sum of money than is actually due is inadmissible. The appellate Judge had held that such evidence was admissible as. having been directed towards showing that these contracts of mortgage had been terminated by the discharge of the obligation imposed by them; but the learned Fudges did not accept this view and following the Madras decision just discussed, held that the evidence had been wrongly admitted.
13. The case reported in Mahim v. Ram Dayal (1925) 42 C.L.J. 582, is also in point. In this case defendants' plea had been that the mortgage debt 'had been discharged but the discharge involved a relinquishment by plaintiff of Rs. 73. The Madras and Bombay cases, already cited, were considered, but the view of the Court was that when in such circumstances the plea is a discharge of the obligation, partly by payment and partly by remission, there is nothing to prevent a party proving these facts by oral evidence. The case reported in Ham Ranjan Roy v. Jayanti Lal Patra (1926) 44 C.L.J. 449, is in the same sense; and in a case reported in Jhabba Singh v. Chhajjoo (1926) 24 A.L.J. 548. it was held that a subsequent oral agreement which operated as a discharge or waiver of a portion of the rent due under a registered lease could be proved. This ruling appear s to me to go further towards admitting oral evidence in such cases than do the ones previously discussed, but the leading Madras and Bombay authorities do not appear to have been considered and are not quoted. The distinction emerging from a consideration of these precedents seems to be this-that when the plea is that a new contract has been made, the effect of which is to alter or modify the terms of the mortgage or other instrument within the meaning of Section 92, proviso 4, oral evidence of such a contract cannot be admitted. But, on the other hand, where all that the defendant wants to prove is some fact or facts tending to show that the obligation has been discharged, either by payment, or by remission of anything that was due, such facts may be proved as not amounting to a modification of the conditions of the mortgage but relating mainly to the discbarge of the contract, and not involving any question of its terms. The plea being essentially, either that the due payments have been made, or that some part of such payments has been made and some sum due has been foregone under Section 63 of the Indian Contract Act, no fresh contract is involved in such a plea, which only amounts to an allegation of conduct or acts of the mortgagor, in the case of the payments, or remission by the mortgagee.
14. But in the present case, what was sought to be proved was a new contract, or as it was called a compromise, made in January 1923, which had the effect of altering the obligation of the mortgage as to interest up to January 31, 1923. The defendants further pleaded that they had carried out their part of this new agreement by the payment of Rs. 1,500. This was a modification of the terms of the mortgage and oral evidence to prove it has lightly been excluded.
15. The terms of the mortgage do not appear to be unconscionable. The agreement was between traders and nine per cent, is an ordinary rate of interest. The condition that it shall be compound certainly considerably increases the rate, but not so as, in my opinion, to call for interference with the parties' contract by the Court.
16. I agree with the learned Chief Justice that the lower Court's decree should be confirmed and the appeal be dismissed.