1. This is a defendant's appeal against a decree of the learned Subordinate Judge of Budaun decreeing the plaintiff's claim. It appears that since the case was decided in the Court below both the plaintiff and defendant have died and they are now represented by their heirs. The plaintiff's claim was upon two mortgages, dated 3rd February 1919 and 23rd July 1924 respectively. The claim was originally against three defendants, namely the executant Maulvi Abul Hasnain, Mohammad Baza defendant 1, his wife Mt. Khurshed Jahan Begam defendant 3 and the present appellant Maulvi Ibne Hasan who was impleaded as a subsequent transferee of a part of the property mortgaged. The suit was originally decreed against all three defendants, but this decree, in so far as it concerned the present appellant, was ex parte. Later the present appellant applied to have the decree, in so far as it affected him, set aside and this was ordered. Upon the matter coming up for hearing a decree was eventually passed against him in the same terms as the decree passed against defendants 1 and 3, that is, the actual executant of the mortgages and his wife. The decree was for the principal sums due together with arrears of interest calculated at the contractual rates.
2. A number of defences was taken by the present appellant before the learned Subordinate Judge, but it is only necessary to consider one of the defences in this judgment, because that is the only matter which is now urged before us. It was contended in the lower Court and it has been strenuously contended before us that the rates of interest agreed to, viz., 15 annas per cent. per mensem and Re. 1 per cent. per mensem compoundable annually, were excessive and that the lower Court should have made a substantial reduction in such rates of interest when passing a decree. It is to be observed that the appellant does not contend that no decree should have been passed against him, and all that he urges now is that the rates of interest should be reduced and that the decree should be for a considerably lesser sum. It has been contended on behalf of the appellant that this Court has power to reduce the contractual rates of interest, because this case falls within the provisions of Section 3, Usurious Loans Act, 1918. That section does allow the Courts to interfere in a number of cases where the interest claimed is excessive, but in our view the appellant cannot claim the advantage of that section in this present appeal. Proviso 2 to Section 3 reads as follows:
Provided that in the exercise of these powers the Court shall not do anything which affects any decree of a Court.
3. In short the Court has no power whatsoever to reduce interest or to re-open hard and harsh bargains if the effect is going to be that another decree of a Court is affected. It is to be observed that this proviso prohibits the Court from exercising its powers under Section 3 in all cases where any decree of a Court is affected. It has been urged that this proviso must has no power to interfere only in cases where a decree of a Court inter partes is affected, but the words of the proviso are very much wider than that. The Court in the exercise of its powers under Section 3 must not do anything which affects any decree whether such decree be inter partes or not. In our view if we accede to the appellant's contention in this case and reduce the rates of interest we would inevitably affect a decree of a Court passed upon these very mortgages. As we have pointed out previously, the original decree passed in this suit was only set aside in so far as it affected the present appellant. That decree, in so far as it affected defendants 1 and 3, remained and still remains effective. The time within which defendants 1 and 3 could appeal against that decree has long since passed and that decree cannot now be varied by them. In that decree the rates of interest given were the contractual rates, namely the rates of interest stated in the two mortgages. If we, in this appeal, reduce the rates of interest at the request of the appellant, there would be two decrees passed upon the same mortgages in which the interest had been calculated at different rates. The decree against defendants 1 and 3 would be for a very much larger amount than the decree against the present appellant if we materially reduced the rates of interest in his case.
4. The result would be that the present appellant would be able to redeem the properties mortgaged for a considerably lesser sum than defendants 1 and 3 could do. If he redeemed the properties at this lesser sum, the result would be that the properties would be freed from all encumbrance, yet the mortgagee would still be entitled to a considerable sum from defendants 1 and 3, though such sum could hardly remain charged upon the properties which would have been freed by the present appellant redeeming for the lesser sum. If we reduce the rates of interest in this case, the decree against defendants 1 and 3 is inevitably affected. The effect of the present appellant redeeming the mortgages in the event of the interest being reduced would be to wipe out altogether the previous decree. In our judgment we cannot reduce the mortgage interest in this case without affecting a decree tent jurisdiction, and that being so we cannot exercise the powers given by Section 3, Usurious Loans Act, 1918. As the case for the reasons given does not fall within Section 3, Usurious Loans Act, 1918, the appellant can only obtain a reduction of interest if he establishes that his case falls within any of the provisions of the Contract Act. It has not been contended that these are penal rates of interest within the meaning of Section 74, Contract Act and that being so the appellant can only succeed if he can establish that the case falls within the provisions of Section 16, Contract Act. Counsel for the appellant has contended that the contractual rates of interest were and are so high that they in themselves establish a prima facie case that the contracts were harsh and unconscionable and such as should be varied by this Court. It is to be observed that no issue was framed upon the question of undue influence and no evidence was led with a view to establishing that the borrower in this case was under the domination of the lender. In our view it would be difficult if not impossible to establish such a case, because it is an admitted fact that the borrower was an educated man capable of understanding business transactions and of looking after himself. In our view the fact that the rates of interest in this case are somewhat high affords no evidence that there was any undue influence or that there was anything unfair in the transaction.
5. It has been expressly laid down by their Lordships of the Privy Council in Bala Mal v. Ahad Shah 1918 16 ALJ 905, that questions as to undue influence, unconscionable bargains, and dealings with expectant heirs, must be decided on the provisions of the Contract Act as amended by the Contract Amendment Act, 1899, and these alone. The principles on which English Courts of equity deal with similar questions are entirely inapplicable. In money-lending transactions the mere fact that the sum ultimately claimed exceeds enormously the amount originally advanced is no ground for holding the transaction unconscionable. It must also appear that there is something unconscionable, either in the original dealings, or in the subsequent stages of the transaction. By making short term loans and insisting on capitalising the interest immediately it falls due, a money lender may pile up compound interest at an oppressive and unconscionable rate. But there is nothing inherently wrong or oppressive in his securing interest upon interest after the interest has been due and unpaid for a considerable time. In a later case Raghunath Prasad Sahu v. Sarju Prasad Sahu 1924 22 ALJ 105 their Lordships of the Privy Council again considered hard unconscionable bargains between lenders and borrowers. In that case they lay down that to attract the operation of the provisions of Section 16, Contract Act it is necessary, in the first instance, to prove that one of the parties was in a position to dominate the will of the other.
6. Mere unconscionableness of the bargain is not the first thing to be considered. The exaction of excessive and usurious interest even though there may be ample security, does not in itself raise any presumption of undue influence unless it is first established that the lender was in a position to dominate the borrower's will. A contract to pay compound interest at 2 per cent. per mensem was enforced and their Lordships allowed interest at the contractual rate from the date of the deed until the date of the decree of the trial Court. In that case it is to be observed that the rate of interest was considerably higher than the rates of interest with which we are concerned, yet their Lordships refused to interfere holding that the mere fact that the rate of interest was high was no evidence in itself, that there was anything unfair or unconscionable about the bargain. In this present appeal no evidence has been adduced to establish undue influence, and we are asked to interfere merely on the ground that the rates of interest appear to be somewhat high. In our judgment we are bound by the decisions of their Lordships of the Privy Council to which we have referred, and we cannot interfere unless we are satisfied that there was undue influence in this case. As we have stated, there is no such evidence before us. It was urged that there were cases in this Court which threw some doubt upon the views, which we have expressed, of the decisions of their Lordships of the Privy Council, but we find that they are entirely in agreement with the views which we have expressed and that being so it is unnecessary for us to consider them in detail. All we need say is that a Bench of this Court in Bharat Singh v. Jeobodh Lal (1934) 32 ALJ 593, expressed the same views which we are giving effect to in this judgment, In that case it was observed by the learned Judges:
The argument of the learned Counsel is not tenable as in the absence of a finding to the effect that the contract evidenced by the mortgage deed in suit was brought about by the exercise of undue influence, the Court has no jurisdiction to interfere with that contract and substitute a new one in lieu thereof. The matter is set at rest by a decision of their Lordships of the Privy Council in Raghunath Prasad Sahu v. Sarju Prasad Sahu 1924 3 Pat 279. Their Lordships held in that case that although a mortgage for ample security provides for excessive and usurious interest, no presumption arises that it was induced by undue influence in the absence of proof by the mortgagor that the mortgagee was in a position to dominate his will.
7. We entirely agree with the view expressed in this case and are satisfied that there are no decisions of this Court to the contrary. In our view this case does not fall within any of the provisions of the Contract Act, and that being so we are powerless to interfere with the contractual rates of interest. For the reasons given above we see no ground for interfering with the decree passed by the learned Subordinate Judge and that being so this appeal must be dismissed with costs.