1. This was a suit to enforce a mortgage bond. It appears that the defendant executed a bond in favour of the plaintiff to secure a sum of Rs. 500 with interest which amounted to Rs. 37-8-0 per cent per annum with six-monthly rests. Furthermore the bond contained a stipulation that the defendant borrower should not be empowered to pay the money within three years, and if he did pay within three years, he should nevertheless be obliged to pay three years' interest at the rate already mentioned. The amount claimed by the plaintiff is the sum of Rs. 3,897-1-0. The defence was an allegation that at the time of the loan the defendant had fallen into dissolute habits, that his father had refused to provide him with any money and that the bargain he had entered into was a hard and unconscionable bargain, which should not be enforced against him. The Court of first instance set forth the facts that I have already mentioned, and says as follows: 'It was under such circumstances that the bond in suit was executed. The terms of the bond in the face of them disclose a hard and unconscionable bargain. Only Rs. 200 were paid before the registering officer, the vest being previous debts. The rate of interest stipulated was Rs. 37-8-0 per cent, per annum with six-monthly rests. The result was that Rs. 500 in a few years had swollen to Rs. 3,897-1-0. It also stipulated that the debtor would have no power to pay off the bond within three years. On the whole I find that it was a hard and unconscionable bargain, brought about by plaintiff taking advantage of defendant's youthful folly.' The Court then directed that the claim for Rs. 500 principal with simple interest at the rate of Rs. 24 per cent, per annum should be decreed. The plaintiff' appealed against this decree in his favour contending that he was entitled to the full interest stipulated for in the bond. The lower appellate Court dismissed the appeal.
2. In the course of the judgment the learned Judge says that the defendant was no doubt a man in good position, of 28 years of age and that there was no reason to suppose that any undue influence was brought to bear on him or that any unfair advantage was taken of him. He says on the other hand that he was a profligate, addicted to drink, and his father had stopped all supplies, but he was determined to raise money at any cost. While the learned Judge makes these remarks he nevertheless finds that the bargain was a hard and unconscionable bargain, He expresses no disagreement with the finding of the Court of first instance, and as a result he gave his decision dismissing the appeal.
3. Taking the bargain as set forth in the bond it is impossible to say that it was anything else except a hard bargain. The stipulation that the borrower should not relieve himself from the onus of the terms of the loan by repayment before the expiration of three years, while the lender might at any moment enforce his security, throws a flood of light on the whole transaction. Taking this in conjunction with the admitted facts that at the time the defendant had given way to intemperance and profligacy, it is impossible to say that there was no evidence upon which the Court could come to a conclusion that the bargain was hard and unconscionable. The appellant takes his stand upon the alleged findings of fact of the lower appellate Court and submits that upon these findings of fact, unless the interest is by way of penalty within the meaning of the Section 74 of the Contract Act, as amended, he is entitled to his full rate of interest. In my judgment the rate of interest was not a penal rate within the meaning of that section. But I do not agree with the learned Counsel for the appellant as to the effects of the findings of fact of the Court below. In my judgment both the Courts below intended to find and did find upon evidence that the bargain which the appellant seeks to enforce is a hard and unconscionable bargain. The Courts in India have in many cases refused to enforce bargains of this nature, and in a very recent case--Kirpa Ram v. Sami-ud-din Ahmad Khan (1908) I.L.R., 25 All., 284--a Bench of this Court dismissed an appeal against a decree in exactly the same terms as the decree now appealed against. There the rate of interest was 2 per cent, per mensem with monthly rests. The bond had been entered into by a young man, aged 18, of dissolute habits. The bargain was there held to be an unconscionable bargain. In the present case the facts only differ by the rate of interest being something more while the rests were less frequent and the age of the borrower was 28 instead of 18. These are mere distinctions in the details of the evidence. The evidence may or may not have been as strong in the present case as in the case just referred to, but there were in both cases circumstances upon which the Court was entitled to arrive at the conclusion at which it did arrive, viz., that the bargain was under the circumstances such a hard and unconscionable bargain that the Court ought not to enforce it without modification. As the appellant has thought fit to prefer a second appeal, I think he ought to pay the costs. I would accordingly dismiss the appeal with costs.
4. I fully agree with what my brother Richards has said. As he has pointed out, the Court below, while finding that 'the borrower was a man of 28 years of age, of good position, son of a wealthy man, and he was himself a man of business, an Agarwala Bania by case, and a Municipal Commissioner. There is no reason at all to suppose that any undue influence was brought to bear on him or that any unfair advantage was taken of him,' also finds that the contract was beyond doubt unconscionable. Further, it gave effect to that finding by a decree, which awarded simple interest at 24 per cent, per annum from the date of the bond to the date of the realization of the money instead of the much larger sum asked for in the plaint by way of interest. The learned Counsel for the appellant strenuously contended that upon the former of these findings his client was entitled to the sum claimed as the sum asked for by way of interest could not be considered to be a penalty. I agree with him that the case is not one which falls under the terms of Section 74 of the Contract Act as amended. But the learned vakil for the respondent, to whom we are indebted for a very exhaustive and careful argument, has taken an equally stout stand upon the latter finding. He referred us to a long array of cases in which the Courts holding that they had to deal with unconscionable bargains refused to give effect to these bargains as contained in the contracts and granted relief on terms consonant with equity. The following cases were cited to us:
(1) Madho Singh v. Kashi Ram (1887) I.L.R., 9 All., 228.
(2) Kirpa Ram v. Sami-ud-din Ahmad Khan (1903) I.L.R., 25 All., 284.
(3) Kamini Sundari Chaodharani v. Kali Prosunno Ghose (1885) I.L.R., 12 Calc., 225.
(4) Kunwar Ram Lal v. Nil Kanth (1893) L.R., SO I.A. 112.
(5) Rajah Makhan Singh v. Rajah Rup Singh (1893) L.R. 20 I.A., 127.
5. From a careful consideration of these cases I am prepared to hold that even where no undue influence has been brought to bear on the man or any unfair advantage shown to have been taken of him, the bargain may still be an unconscionable one. In the present case the security given was a pacca nishastgah. It is described by the learned Counsel for the appellant as property of little value, specially as the borrower had only a fractional interest in it. If this be the case, we have then a case on the appellant's own showing, in which the borrower had property of little value available, and the inference is that he was trusted on the credit of his expectations, specially when it is admitted that he was the son of a father who was both rich and respectable.
6. Again when we look at the terms contained in the bond we find not only excessive interest, but a very one-sided term, whereby the lender was empowered to sue for the money lent at anytime, but the borrower, even if he paid the money within three years nest after the date of the contract, would still have to pay high rate of interest stipulated for just as if he had made no payment at all. Upon my asking the learned Counsel for the appellant whether this provision did not mean that if the borrower had repaid the sum borrowed within a day or two of borrowing it, he would still have to pay for the Rs. 500 thus borrowed the sum of Rs. 522 odd, it was admitted that this was the case. These terms speak for themselves. They are prima facie oppressive end extortionate, and such us a man of ordinary sense and judgment cannot be supposed likely to give his free consent to. Where both those conditions exist, even if it be not shown that the lender went out of his way to bring any active influence upon the borrower, still the bargain entered into may be an unconscionable one. Such a bargain seems to me to i.e similar to the bargain in the case of Madho Singh v. Kashi Ram (1887) I.L.R., 9 All., 223. I Find considerable difficulty in distinguishing this case from that case if it can at all be distinguished. I therefor fully agree.
7. This appeal is dismissed with costs.