Ramanujulu Naidu, J.
1. Against the preliminary decree dt. 22-11-1978 passed in O.S. No. 20 of 1975 on the file of the Court of the subordinate Judge Guntur, instituted by the 1st respondent against defendants 1 to 7 thereto for recovery of a sum of Rupees 84,736 on the foot of a deed of mortgage, dt. 15-10-1970 executed by late chilamkuri venkata Kotirathnam. Both on behalf of himself and as guardian of his son impleaded as the 1st defendant in the suit who was then a minor. For a sum of Rs. 49,000 by enforcing the mortgage against the hypothecated property a terraced building situate at Guntur town as also against the other properties of the 1st defendant and of late venkata kotirthnam in the hands of all the defendants defendants 1 and 4 pereferred the above appeal.
2. Defendants 2 and 3 are the divided sons while defendants 5 to 7 are the daughters of late chilamkuri venkata Kotirathnam the 4th defendant is his widow.
3. The case of the plaintiff is that defendants 1 to 3 and their father. Late venkata kotirathnam originally constituted a Hindu joint family that defendants 2 and 3 became divided from the Joint family that late venkata Kotirathnam and the 1st defendant. However continued as members of a Joint family with venkata kotirathnam as manager of the joint family that venkata Kotirathnam borrowed a sum of Rs. 49,000 from him for discharge of the antecedent debts cntracted by the family and for meeting other expenses of the family that late venkata kotirathnam executed a registered deed of mortgage on 15-10-1970 both on his behalf and as father and guardian of the 1st defendant who was then a minor mortgaging the teraced building that compound interest at 12% per annum with monthly rests was stipulated under the deed of mortgage. That venkata Kotirathnam died on 10-8-1974 survived by the defendants. That his share of the property devolved on all the defendants that as the mortgage debt was not discharged he got registered notices issued to all the defendants calling upon them to discharge the mortgage that the 1st defendant caused a reply to be sent to him denying the truth and validity of the mortgage and disowing and liability under Ex. A-1 that defendants 4 to 7 refused to receive the notices and that the 3rd defendant did not choose to send any reply to the notice received by him.
4. The suit was resisted by all the defendnats . In the written statement filled by the 1st defendant it was averred that defendants 2 and 3 went out of hte joint family in the years 1964 and 1967 respectively relinquishing theri interests in the property of the joint family, that in the year 1967 he too got himself divided from the 1st defendant that late venkata Kotirathnam had no right to Act as manger of the alleged joint family that Ex. A-1 executed by him on his behalf without obtaining prior permission of the District Court Guntur as required under the provisions of the Hindu Minority and Guardianship Act was unenforceable and not binding on him that the alleged borrowing under Ex. A-1 was not true and that in any event. The consideration received under Ex. A-1 was not applied in discharge of any binding antecedent debts. Incurred and not spent to meet the necessary expenses of the family.
5. In the written statement filed by defendants 2 and 3. It was averred that they were divided from the joint family int eh years 1964 and 1967 relinquishing their rights in the properties of the joint family that they had nothing to do with the 1st defendant that they were not aware of execution of Ex. A-1 and that in any event the rate of interest stipulated under Ex. A-1 was highly excessive penal and usurious.
6. After framing appropriate issues the learned subordinate Judge found that no evidence whatsoever was let in on behalf fo the 1st defendant in support of his plea of division in status with his father in the year 1967 that the 1st defendant did not even choose to examine himself in support of his plea that Ex. A-1 was true valid and binding on the 1st defendant and that the rate of interest stipulated under Ex. A-1 was neither penal nor usurious In the result a preliminary decree in a sum of Rs. 49,000 was passed on 22-11-1978 directing the defendants to pay the mortgage money together with compound interest thereon at 12 per cent per annum with monthly rests from the date of the mortgage till the date of redemption three months time was granted or redemption of hte mortgage and subsequent interest at the rate of 6 per cent per annum on the principal sum of Rs. 49,000 from the date of realisation was also awarded In case of default in payment of the decretal amount. The mortgaged property was directed to be brought to sale and in case the sale proceeds were not sufficient to satisfy the decree. The plaintiff was declared entitled of the 1st defendant and those of late venkata Kotirathnam in the hands of defendants 1 to 7 In the decree actually drawn up. Interest from the date of hte suit till the date of redemption was calculated at the rate of 6% per annum. Interest upon the date of the suit was calculated at the stipulated rate. The plaintiff filed I.A. No. 655 of 1979 before the learned subordinate Judge for amendment of the decree contending that on account of a mistake interest from the date of suit till date of redemption was calculated at a lesser rate and that the same should be calculated at the rate stipulated in Ex. A-1. The application was allowed by the learned subordinate Judge on 19-4-1979 without notice to the defendants. The amended decree was for a sum of Rs. 1,39.064-06 representing the principal sum of Rupees 49,000 interest in a sum of Rupees 83,842-06 accrued thereon at the stipulated rate from the date of the mortgage up to the date of redemption and costs in a sum of Rs. 6.222. Clause 2 of the amended decree runs as follows:
'2. And it is hereby declared and decreed as follows That the defendants do pay into the Court on or before the day of 22nd February 1979 or any other date up to which time for payment may be extended by the Court the said sum of Rs. 1.39, 064.06 ps. Wtih further interest at 6% from the date of redemption i.e. 22-2-1979 till the date of realisation'.
The defendants thereupon filed I.A. No. 1892 of 1979 before the learned subordinate Judge for setting aside the order dated 19-4-1979 on the ground that they had no notice of the application. The learned subordinate Judge dismissed the application holding that no notice was necessary to be given to the defendants as correction of a clearical error was sought by the plaintiff and ordered in exercise of the powers conferred upon the Court under S. 152 of the civil P.c. '
7. Assailing the judgment and the amended decree passed by the learned subordinate Judge defendants 1 and 4 preferred the above appeal as already stated.
8. Aggrieved by the order dated 19-4-1979 passed by the learned subordinate Judge directing amendmetn of the preliminary decree defendants 1 and 4 preferred C.R.P. No. 199 of 1980. The revision petition came up before Jeevan Reddy J and the learned Judge by his order dated 9-3-1980 upheld the plea of the plaintiff. That only a clerical error that crept in the preliminary decree. Was corrected by the learned subordinate judge. The learned Judge however modified the amended decree by awarding subsequent interest at the rate of 6 per cent per annum from the date of redemption till the date of realisation only on the principal sum of Rs. 49,000. In pursuance of the amended preliminary decree as modified by Jeevan Reddy J., the appellants were permitted to amend the memorandum of grounds of appeal relating to valuation of the subject matter of the appeal suit the deficit court-fee as a consequence there of was also paid by the appellants.
9. It was urged by sri T. Veerabhadraiah learned counsel for the appellants that there was division in status between the 1st defendant and his father in the year 1967 itself and that his father had no right to mortgage his share of the hypothecated property.
10. As already stated. The learned subordinate Judge found that noevidence, oral or documentary was let in on behalf of the 1st defendant and that even the 1st defendant did not choose to examine himself in support of the plea. Realising the difficulty. The 1st defendant filed C.M.P. No. 536 of 1982 under O. XLI R. 27 of the civil P.c. on 20-1-1982 for reception of three documents tendered therein as additional evidence and for marking the same as Exs. B-1 to B-3 one of the three documents is a letter dated 16-10-1967 purporting to have been addressed by Ch v. Kotirathnam to the 1st defendant represented by his maternal uncle as his guardian he then being a minor It is recited in the said document that defendats 1 to 3. Defendants 5 to 7 and another son by name chandrasekhara Rao were born to venkata Kotirthnam that chandrasekhara Rao was taken in adoption by chilamkuri seetharathnamma. Widow of the elder brother of venkata Kotirathnam that defendants 1 to 3 and venkata Kotirathnam constituted members of a Hindu undivided family. That defendants 1, 6 and 7 were to be married by them that the 2nd defendant became divided from the joint family after receiving some properties of the joint family and executing a registered deed dated 27-3-1964 relinquishing his rights in the properties of the joint family that likewise the 3rd defendant relinquished his rights inteh properties of the joint family by executing a registered deed dated 29-8-1967 that venkata Kotirathnam and the 1st defendant however continued to be members of the joint family that venkata kotirathnam was carrying on business in a manner detrimental to the interest of the 1st defendant that the mother and the maternal uncle of the 1st defendant as also some well-wisehers of Venkata kotirathnam and the 1st defendant demanded venkata Kotirathnam to partition the properties of the joint family by metes and bounds that as it was not convenient to do so, severance in status between venkata kotirathnam and the 1st defendant was effected that Venkata kotirathnam undertook not to alienate the 1st defendant's half share inthe properties of the Joint family that the 1st defendant would not be concerned with any profit and would not be liable for any losses incurred or debts contracted by venkata kotirathnam in the business he was carrying on and theat the 1st defendant was relieved of all obligations of maintenance and marriages of the two unmarried sisters. The document purports to have been attested by the mother of the 1st defendant and two others.
11. In para 4 of the affidavit filed in support of the application for reception of the additional evidence it is claimed by the 1st defendant that the document was in the custody of the maternal uncle of the ist defendant that he had no Knowledge of the document until the disposal of the suit that it was only after the disposal of the suit he was apprised of the contents of the document by his maternal uncle and that it was only after the disposal of the suit he was apprised of the contents of the document by his maternal uncle and that at his request the document was given to him by his maternal uncle.
12. It may be noted that the suit was instituted in tehyear 1975 that the ist defendant was the real contestant in the suit that trial of the suit was taken up on 24-11-1976 and that significantly neither the maternal ujcle of the Ist defendant nor his mother apprised him of and supplied him with the most valuable defence available to him to defeat the suit no explanation was offered by the ist defendant for not tendering the document for reception of the additional evidence till 20-1-1982 In the circumstances we have absolutely no hesitation in holding that the document dt. 16-10-1967 was brought into existence by the ist defendant with a view to defeat the rights of the plaintiff.
13. That Ex. A-1 the deed of mortgage was truly executed and also supported by consideration as detailed therein is amply established by evidence of unimpeachable character let in by the plaintiff P.W. 2 the sole proprietory of the plaintiff's concern deposed to the execution of Ex. A-1 by late chilamkuri venkata kotirathnam signing in Ex. A-2 to A-24 were market on his behalf in proof of the various items making up the total consideration of Rs. 49.000 recited in Ex. A-1 P.W. 1 the scribe of Ex. A-1 substantially corroborated the testimony of P.W. 2 and added that some amounts were paid by P.W. 2 towards discharge of the mortgage amount that the plaintiff paid some cash to venkata Kothiratnam for purchase of stamps for execution of Ex. A-1 and that the balance of consideration was paid by the plaintiff to venkata kotirathnam at the time of registration of the document No evidence whatsoever was le tin on behalf of the defendants in rebuttal. The testimony of P.Ws. 1 and 2 thus remains uncontradicted and unchallenged.
14. The consideration of Rs. 49,000 recited in Ex. A-1 consists of (I) Rupees 6,110 towards discharge of the debt due under Ex. A-2 a registered deed of mortgage dt. 31-1-1964 executed by Venkata kotirathnam both on his behalf and on behalf of the 1st defendant he then being a minor as also defendants 2 and 3 in favour of Garee venkata subbarao for Rs. 5.000 borrowed for the purpose of meeting the expenses of erstwhile joint family of venkata kotirathnam and defendants 1 to 3; (ii) Rs. 8, 325 towards discharge of the Khata debt contracted by the ist defendant from Garee venkata subbarao and co.. for the purpose of the business carried on by the joint family consisting of venkata kotirathnam and defendants 1 to 3 and acknowledged by the 3rd defendant on 31-12-1966 in the accounts of Garee venkata subbarao & co., (iii) Rs. 13,000 towards discharge of the debt due to the concern of the plaintiff on a promissory note executed by defendants 2 and 3 the amount covered by the promissory note having been borrowed by them for the purpose of the business carried on jointly by venkata kotirathnam and defendants 1 to 3 in the name of sri Balaji Dal mill after defendants 2 and 3 divided from venkata Kotirathnam and the 1st defendant : (iv) Rupees 3,100 towards discharge of the Khata debt contracted by the 2nd defendant from the concern of the plaintiff for the purpose of the business carried on by the 2nd defendant: (v) Rupees 1,200 received in cash by venkata kotirathnam on 14-10-1970 from the plaintiff towards expenses for purchase of stamps for execution of Ex. A-1; and (vi) Rs. 17,265 received in cash by the 1st defendant before the joint sub Register Guntur at the time of registration of Ex. A-1 as already stated the truth of the details of consideration recited in Ex. A-1 is amply established not only by the unchallenged testimony of P.Ws. 1 and 2 but also by Exs. A-2 to A-24.
15. The question for consideration is to what extent the various items making up the total amount of consideration of Rs. 49,000 recited in Ex. A-1 are binding on the 1st defendant who was a minor at the time of execution of Ex. A-1 and on whose behalf also Ex. A-1 was executed by venkata Kotirathnam.
16. It is unnecessary to advert to the various decided cases as the legal position is neatly summed up in the latest decision of the Supreme Court in prasad v. V. Govindaswamy Mudaliar : 2SCR109 . Their lordships of the Supreme Court held (at pp. 96 to 97);-
'A natural guardian of Hindu minor has power in the management of his estate to mortgage or sell any part thereof in case of necessity or for the benefit of the estate. If the alienee does not prove any legal necessity or that he does not make reasonable enquiries the sale is invalid.
But the father in a joint Hindu family may sell or mortgage the joint family property including the son's interest therein teo discharge a debt contracted by him for his own personal benefit and such alienation binds the sons provided (a) the debt was antecedent to the alienation and (b) it was not incurred for an immoral purpose. The validdity of an alienation made to discharge an antecedent debt rests upon the pious duty of the son to discharge his father debt not tainted with immorality.
'Antecedent Debt' means antecedent in fact as well as in time that is to say, that the debt must be truly independent of and not part of the transaction impeached. The debt may be a debt incurred in connection with a trade started by the father the father alone can alienate the son's share in the case of a joint family. The privilege of alienating the whole of the joint family property for payment of an antecedent debt is the privilege only of the father, grandfather and great-grandfather qua the son or grandson only. No other person has any such privilege.
There is however another condition which must be satisfied before the son could be held liable i.e. that the father or the manager acted like a prudent man and did not sacrifice the property for an inadequate consideration'.
Their Lordships of the Supreme Court quoted with approval the following propositions laid down in Briji Narain v. Mangla prasad. AIR 1924 PC 50:-
'(1) The managing coparcener of a joint undivided estate cannot alienate or burden the estate qua manager except for purposes of necessity but (2) if he is the father and the other members are his sons he may by incurring debt so long as it is not for an immoral purpose lay the estate open to be taken in execution proceedings upon a decree for payment of that debt. (3) if he purports to burden the estate by a mortgage. Then unless that mortgage is to discharge an antecedent debt it would not bind the estat (4) Antecedent debt means antecedent in fact as well as in time that is to say that the debt must be truly independent and not part of the transaction impeached. (5) There is no rule that this result is affected by the question whether the father . who contracted the debt or burdens the estate. Is alive or dead'.
17. The doctrine of pious obligation of a son to pay his father's debts elucidated by a Division Bench of the Madras High Court in shanmukam v. Nachu Ammal AIR 1937 Mad 140 as under was also quoted with approval by their Lordships of hte Supreme Court :
'The doctrine of pious obligation of a son to pay his father's debts cannot be restricted to cases where father also happens to be the manager. If this limitation was well founded it would also follow that the father's power of disposing of the son's share for the satisfaction of his own debts must be likewise limited. There cannot be any justificationof such limitation when it is remebered that the son's obligation to pay his father's debts was under the orginal smritis independent of possesion of assets of joint family property. It depends purely upon the relationship of father and son. It is only by case law developed furing the early part of nineteenth century and by statute law in the Bombay presidency that the liability of the son for father's debt was limited to assets and to joint family property. The true basis of the obligation therefore is the relationship of father and son and not the accident of the father being the manager of the Joint Hindu family'.
18. It is not denied that the mortgage debt evidenced by Ex. A-2 dated 31-1-1964 is an antecedent debt contracted by venkata kotirathnam as the manager of the joint family consisting of himself and defendants 1 to 3 for the purpose of meeting the expenses of the said joint family and is therefore binding upon the 1st defendant Likewise the Khata debt of Rs. 8.325 incurred by the joint family of venkata kotirathnam and defendants 1 to 3 as the manager of the joint family consisting of himnself and defendants 1 to 3 for the purpose of the business carried on by the said joint family is also binding onthe 1st defendant Equally the debt of Rs. 13,000 due on a promissory note executed by defendants 2 and 3 in favour of the oncern of the plaintiff even after defendants 2 and3 got divided from venkata Kotirathnam and the 1st defendant is binding on the 1st defendant the amount covered by the promissory note having been borrowed for the purpose of the business carried on jointly by venkata Kotirathnam and defendants 1 and 3 in the name and style of sri Balaji Dal Mill as recited in Ex. A-1. Two other documents tendered for reception of additional evidence in C.M.P. No 536 of 1982 for the purposes of establishing that the debt of Rs. 13,000 is not binding on the 1st defendnat as the business in connection with which the debt was incurred was carried on by the 1st defendant and the 3rd defendant only are of no assistance as late venkata Kotirathnam must be deemed to have carried ont he business Jointly with the 3rd defendant for the benefit of the 1st defendant also only the debt of Rs. 3,100 contracted by the 2nd defendant from the concern of the plaintiff and discharged by the 1st defendant from out of the principal amount borrowed under Ex. A-1 is not binding on the 1st defendant as the debt contracted by the 2nd defendant was for the purpose of the business solely carried on by the 2nd defendant In discharging the said debt venkata Kotirathnam did not Act like a prudent man. The amount of Rs. 1,200 in cash received by the 1st defendant towards purchase of stamps for the purpose of execution of Ex. A-1 and the amount of Rs. 17,265 also paid to the 1st defendant before the joint sub-registrar Guntur at the time of registration of Ex. A-1 for the purpose of improving the business carried on by the joint family consisting of Venkata Kotirathnam and the 1st defendant the latter is bound to discharge. The amount of Rs. 17,265 received by venkata kotirathnam was for the benefit of the estate of the joint family consisting of venkata Kotirathnam and the 1st defendant admittedly even after defendants 2 and 3 got themselves divided from venkata kotirathnam and the 1st defendants 2 and 3 got themselves divided from venkata Kotirathnam and the 1st defendant. The latter were carrying on the very same business conducted by the erstwhile joint family consisting of venkata Kotirathnam and the 1st defendant Admittedly even after defendants 2 and 3 got themselves divided from venkata Kotirathnam and the 1st defendant the latter were carrying on the very same business ocnducted by the erstwhile joint family consisting of Venkata Kotirathnam and defendants 1 to 3. No evidence was let in on behalf o f the defendants that the amount of Rs. 17,265 paid to the 1st defendant at the time of registration of Ex. A-1 was neither utilised for the business carried on by the joint family consisting of venkata Kotirathnam and the 1st defendant nor applied for any immoral purposes. If therefore follows that the 1st defendants is bound to discharge half of the principal sum of money borrowed under Ex. A-1 minus Rs. 3,100 together with interest. It should however be borne inmind that the other half share of venkata Kotirathnam in the mortgaged property is liable to satisfy the balance of the mortgage debt.
19. In jagannath prasad singh chowdhury v. Surajmul Jalal. AIR 1927 PC 1. Their Lordships of Privy council held:-
'In the case of mortgages order 34 of the code of civil procedure and not S. 34 of the code of civil procedure would determine the question of the rate of interest'.
20. In K. Venkata satyanarayana v. State Bank of India : AIR1975AP113 . It was reiterated that the provisions of S. 34 of the C.P.C. were not applicable to cases of mortgages and that the award of interest was governed by the provisions of O. 34 R. 11 of the civil P.c.
21. It was next contended by the learned counsel for the appellants that compound interest at the rate of 12% per annum with monthly rests stipulated under Ex. A-1 was usurious and that the appellants were entitled to the benefits of the Usurious Loans Act, 1918.
22. Reliance was placed upon the decision in Venkata Rao v. Venkatarathnam SIR 1952 Mad 872 wherein their Lordships held that anything above 12% per annum simple interest was excessive having regard to the nature of the transactions in the then composite state of Madras Their Lordships added (at p. 876):-
'The effect of Madras Act VIII of 1937 by which sub-sec (I) of S. 3 of the Usurious loans Act was amended and explanations and provisos were added is to make it obligatory upon the Court to find out whether there is excessive interest and when once that is done to presume that the transaction was unfair we have already expressed the opinion that anything above 12 per cent per annum simple interest is excessive considering the nature of transactions in this state'.
23. In the said case compound interest was charged at Rs. 1-0-6 per cent with monthly rests. The same was held to be excessive within the meaning of the explanation inserted by madras Act VIII of 1937 only 12% simple interest was awarded to the creditors therein.
24. In Gopala menon v. Sreenivasa, : AIR1960Mad359 adverting to the decision in Venkata Rao v. Venkataratnam. : AIR1952Mad872 (supra) Rajamannar C.J. Speaking on behalf of the Bench observed (at p. 361):-
'We do not however understand the effect of this decision to be to lay down an inflexible rule that anything above 12 per cent per annum simple interest is excessive whatever be the particular circumstances relating to a particular transaction of loan. So far as we are aware this decision has not been under Their Lordships added:
'We are clearly of opinion that to lay down an absolute maximum rate of interest beyond which interest would be excessive within the meaning of the Usurious Loans Act would be in direct contravention of what is laid down in the Act itself S. 3(2) (a) (b) and (c) of the Usurious Loans Act which continues to be applicable notwithstanding the madras amendment makes it abundantly clear that in deciding whether the interest charged is excessive several factors have to be taken into consideration.
One important fact will be the risk incurred as it appeared Or must be taken to have appeared. Or must be taken to have appeared, to the creditor at the date of the loan In considering the question of risk S. 3(2)(c) enacts that it will be material to take into account the presence or absence of security and the value thereof. And the financial condition of the debtor and the result of any previous loan transaction known to the creditor if compound interest is charged the periods at which it is calculated and the total advantage which may be reasonably expected to have accrued from the transaction are important factors'.
25. In the said case compound interest at 155 with quarterly rests stipulated between the parties was held to be excessive and compound interest at 10% with yearly rests was allowed.
26. Their Lordships of the Supreme Court affirmed the aforesaid decision of the Division Bench of the High Court of Madras in varadachariar v. Gopala menon : 1SCR721 .
27. In General and Credit Corporation (India) LTd v. Venkata Ramarao : AIR1959AP433 Chandra Reddy, C.J. And jaganmohan Reddy J., as he then was observed at page 434 as follows:-
'A Court has to determine whether a particular rate of interest is excessive or not having regard to the rates of interest at the time when the impugned transaction was entered into and the surrounding circumstances what amounts to excessive interest has to be determined with reference to various factors such as the security which the creditor obtained for the amount advanced by him, the pecuniary position of the debtor the rate of interest prevailing at that time and the advantages which the debtor would derive from the loan.
A debtor would get relief under the usurious Loans Act, only if it is established that the transaction is substantially unfair one. It is true that the explanation introduced by the Madras Amendment has laid down that if the interest is excessive the Court shall presume that the transaction was substantially unfair; but such presumption may be rebutted by proof of special circumstances justifying the rate of interest. Thus before the explanation could be invoked it should be established that the interest is excessive. It is only then that it may be presumed that the transaction was an unfair one'.
28. In Girwar prasad v. Ganeshlal saraogi, AiR 1949 FC 57 patanjali sastri. J., as he then was held:-
'In order to be entitled to the benefits of the usurious loans Act. 1918 the appellant must establish.
(1) That the interest payable on the loan is excessive and
(2) That the transaction was as between the parties thereto substantially unfair. It was frnakly admitted before us that the appellant adduced to evidence as to the circumstances under which he borrowed moneys from the respondent the availability of credit facilities and possibility of borrowing on easier terms in that part of the country where the transactions took place'.
29. On the facts of that case, the learne d Judges confirmed the Judgment of the High Court allowing compound interest at the rate of 12% as it was not established that the rate of interest charged was in excess of the commercial rate prevailing at that time.
30. The scope of S. 3 of the Usurious Loans Act as amended by the Madras Amending Act VIII of 1937 was also construed in an unreported judgment of this Court dated 5-8-1970. In Godugula Lakshmi narasimha Murthy v. MuthuKumalli venkata subbarao (L.P.A. No. 69/68). After considering the relevant case law on the point the legal position was summarised as under:-
'(1) The Court can reopen the transaction and give appropriate relief in the matter of interest when the transaction is substantially unfair.
(2) If the interest is ecessive the Court shall presume that transaction is substantially unfair, but this is a rebuttable presumption;
(3) No hard and fast rule can be laid down as to what is reasonable or excessive rate without reference to the several circumstances enumerated to Cls. (A) (b) and (c) of the sub-s. (2) of S. 3 of the Act.
(4) In determining whether the rate is reasonable or not the Court has to take into consideration the following circumstances:
(a) The value of the security offered:
(b) The financial condition of the debtor including the result of any prior transaction:
(c) The know or probable risks in getting repayment:
(d) if compound interest was provided for the frequency of the period of calculation of the interest and
(e) The advantage which the debtor reasonably expected to derive from the transaction'.
31. Adverting to the various cases referred to above a Division Bench of this Court in K. Venkata Satyanarayana v. State Bank of India : AIR1975AP113 (supra) observed (at p. 122):-
'The aforesaid rulings clearly establish that there can be no presumption that the charging of compound rate of interest is per se excessive that the burden of establishing that the interest is excessive lies on the debtor setting up a plea that the interest charged is usurious and that it is only when that is established the presumption under explanation (1) to S. 3(1) of the usurious Loans Act, as amended by the madras Amendment Act arises'.
32. In P. Sambamurthy & sons v. M. Krishna Rao, : AIR1981AP77 while adverting to the observations of their Lordships of the Supreme Court in varadachariar v. Gopal Menon : 1SCR721 (supra) Jeevan Reddy J., observed (at p. 79):-
'What is relevant to notice is that the Supreme Court did not say that as a rule of law any interest over and above 12% simple is per se usurious and excessive'.
33. In anunreported judgment in A.S. No. 334 of 1970 dt. 1-8-1972 on the file of this Court, chinnappa Reddy J. While adverting to the decision in Varadachariar v. Gopala menon : 1SCR721 (supra) observed that the mortgage in question in the said case was of the year 1936 and that since then there had been change in the market conditions and the economy. He added (at p. 79):-
'The learned subordinate Judge failed to notice that their Lordships of the Supreme Court were concerned with a transaction of the year 1936 whereas in the present case, we are concerned with a transaction of the year 1962. It cannot be pretended that there has been no change in the economy of our country in the meanwhile it is well known that even the bank rate has gone up during this period In those circumstances. I do not see how it can be said that 12% compound in the face of the evidence that there were several other transactions where similar rate of interest was charged can be considered to be excessive leave alone unfair I therefore think that the learned subordinate Judge ought to have allowed the interest as claimed by the plaintiff'.
34. It therefore follows that it cannot be laid down as a rule of law that interest above a particular rate per se is penal or excessive Whether interest is penal or excessive is always a question of fact to be decided on the facts and circumstances of a given case.
35. In S.P. Majoo v. Ganga Dhar : 3SCR33 their Lordships of the Supreme Court observed (at pp. 603-4):
'Prior to 1929 the legal position was that under S. 34 of the C.P.C granting a decree for payment of money the Court had full discretion to order interest at such rate as it deemed reasonable to be paid on the principal sum adjudged from the date of the suit onwards But O. 34 Rr. 2 and 4 which applied to a mortgage suit enjoined the Court to order an account to be taken of what was due to the plaintiff at the date of such decree for principal and 'interest on the mortgage'. The special provision in O. 34 had therefore to be applied in preference to the general provision in S. 34 Till the period for redemption expired therefore the matter was considered to remain in the domain of contract and interest had to be paid at the rate and with the rests specified in the contract of mortgage but after the period for redemption had expired the matter passed from the domain of contract to that of judgment. The right of the mortgagee would henceforth depend not on the contents of his bond but on the directions of the decree'.
36. It was held by the Federal Court in Jaigobind singh v. Lachmi Narain Ram AiR 1940 FC 20 that the language of O. 34 R.11 gave a certain amount of discretion to the Court so far as interest pendente lite and subsequent interest was concerned and it was no longer absolutely obligatory on the courts to decree interest at the contractual rates up to the date of redemption in all circumstances even if there was no question of the rate being penal excessive or substantively unfair within the meaning of the usurious Loans Act. 1918.
37. Quoting the aforesaid principle approval their Lordships of the Supreme Court in S.P. Majoo v. Ganga Dhar : 3SCR33 (supra) observed (at p. 604):-
'In view of the principle laid down by the Federal Court we are of opinion that in the circumstances of the present case the respondent should be granted interest on the principal sum due at the contractual rate till the date of the suit and simple interest at 6 per cent p.a. on the principal sum adjudged from the date of the suit till the date of the preliminary decree and also at the same rate till the date of realisation'.
Sri C.P. Sarathy the learned counsel for the plaintiff urged that the plaintiff would be entitled to the payment of would be entitled to the payment of subsequent interest not only on the principal sum of money borrowed under Ex. A-1 but also on the amount of interest accrued thereon up to the date of redemption Reliance was placed upon the decision in Narharilal v. Firm Bhogilal Amratlal, : AIR1963Guj253 . Construing O. 34 R. 11 of the civil P.C. V. B. Raju J. Observed (at p. 254):-
'It is provided that the Court may order payment of interest But what is provided in O. 34, R. 11 is interest up to the date on or before which payment of the amount found or declared due is under the preliminary decree to be made. The rule therefore contemplates that a certain amount is found or declared due and that amount has to be paid on or before a date under the preliminary decree. The rule therefore contemplates interest on the amount found due from the date when it is found due up to the date on or before which payment is to be made under the preliminary decree. The amount found or declared due has reference to the amount mentioned in O. 34 R. 2 and O. 34 R. 4 That includes interest from the date of the suit till the date of the preliminary decree. A preliminary decree provides that the amount found or declared due may be paid into the Court on or before such date as the Court may fix within six months from the date on which the Court confirms and countersingns the account taken under sub-cl. (A) of cl. (1) of order 34, R. 2 the Court has therefore to take an account under O. 34 R. 2 sub-cls (a) (b) and (c) of cl. (1) while taking such an account the Court has to include interest as provided in cl. (A) (I) of R. 2 (1). The Court then has to give time for payment of that amount and the time given should be less than six months In regard to the subsequent period which should not exceed six months. The Court has a discretion under O. 34 R. 11 to give interest or not as provided in O. 34 R. 11 the Court has therefore no discretion in regard to the manner of taking account under O. 34 R. 2 and O. 34. R. 4 and is bound to include interest while arriving at the amount found due at the date of the preliminary decree. But under O. 34, R.11 the Court has a discretion whether or not to order interest for the subsequent period of six months from the date of the prliminary decree till the time of actual payment'.
38. We are unable to subscribe to and dissent from the view of V.B. Raju. Supreme Court in K. Manick chand v. B. Saleh Mohammed. : 2SCR1082 . In the said case two simple mortgages in succession were executed by three brothers. A Suit wa instituted in the Court of the District judge civil station Bangalore by one Khanmull for recovery of the amount due under the two mortgages. On the foot of the first mortgage the amount claimed was rupees 51,200 as principal and interest. While on the foot of thesecond 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 S. 17 of the Mysore Money Lenders Act No. 13 of 1939 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 A preliminary decree was therefore granted for a sum of Rs. 88,000 comprising of Rupees 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 under S. 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 principal amounts of the original loans, and recorded a finding that the principal amounts in fact were Rupees 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. 37,971-50 ps. 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 that this would be the arrears of interest to which the appellants would be entitled up to the date fixed for payment of hte redemption money by the judgment of the High Court that the principal amount would carry interest at 6 per cent per annum from the date fixed for redemption till realisation. The decree modified by the High Court was assailed in the Supreme Court.
39. Their Lordships of the Supreme Court observed (at p. 674):-
'Admittedly civil P.C. was applicable to this 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. 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 O. 34 c.P.c. on the principal amount of Rs. 37,971-50 ps. As regards the rate it is true that under the mortgage deeds, the interest was payable at the rate of 1 per cent per mensem: but under the provisions of hte Act read with the provisions of the Act read with the provisions of the usurious Loans Act (mysore Act IX of 1923) the fair interest payable on the loan would be at the rate of 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 Rule 11 (a) (ii) of order 34, C.P.C. interest at the rate of 6 per cent 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 O. 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 at the rate of 6 per cent 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'.
40. In our considered view compound interest at the rate of 12% with monthly rests stipulated under Ex. A-1 is excessive and compound interest at the rate of 12% per annum on the principal sum of money borrowed under Ex. A-1 from the date of execution of Ex. A-1 up to the date of the suit and simple interest at the rate of 12% per annum on the principal sum of money from the date of the suit till the date of redemption as fixed by the Court with subsequent interest at the rate of 6% per annum on the principal sum of money from the date of redemption till the date of realisation would be reasonable . the total interest thus worked out up to the date of redemption amounts to Rs. 54.888-85 ps. There shall be a preliminary decree in favour of the plaintiff directing the defendants to pay Rs. 1,03,888-85 ps. With interest at 6% per annum of Rs. 49.000 from the date of redemption as fixed by the lower Court till the date of realisation. The preliminary decree of the lower Court is accordingly modified In the circumstances of the case while maintaining the decree passed by the lower Court for costs we direct the parties to bear their own costs in the appeal suit.
41. In default of payment of the mortgage money the plaintiff shall be entitled to execute the decree by sale of the mortgage property. As already shated, the 1st defendant is bound to discharge half of ht eprincipal sum of money Borrowed under Ex. A-1 minus Rs. 3,100 together with interest as allowed by us. In other words he is bound to discharge his share of Rs. 22.950 together with compound interest at 12% per annum from the date of the suit till the date of redemption as also the subsequent interest on the said sum of Rs. 22,950 at the rate of 6% per annum from the date of redemption till the date of realisation. He is also liable to contribute Rs. 3,111 towards his share of costs decreed by the trial Court. The 1st defendant's half share in the mortgaged property is accordingly made liable. The other half share of venkata Kotirathnam in the mortgage property is liable to satisfy the balance of the mortgage debt. If there is any short fall the plaintiff will be entitled to proceed against other properties of venkata Kotirathnam in the hands of defendants 1 to 7. There shall also be a personal decree against the ist defendant to that extent.
42. In the reuult the appeal suit is allowed in part and c.M.P. No. 536 of 1982 is also allowed.
43. Order accordingly.