1. This appeal arises out of a suit for sale instituted by the respondents against the appellants and several others.
2. So far back as on 17th May 1912 two persons Manohar and Mt. Chandan Kunwar, since deceased, executed the bond in suit hypothecating immovable property for the sum of Rs. 300, Manohar is alive and was a party to the suit in the Court below. As regards Mt. Chandan Kunwar the plaintiffs' case was that defendant 1 was her daughter but as it was contested by certain people that she was not Mt. Chandan Kunwar's daughter the plaintiffs impleaded the defendants other than defendants 1 and 2 'as reversioners to the estate of Mt. Chandan Kunwar's husband Bechi Lal.
3. Several issues were raised in the ease including whether Manohar had any interest in the property mortgaged. The reversioners denied that there was any ' legal necessity for the loan. They pleaded that the suit was barred by limitation and they also pleaded that the interest was excessive.
4. The learned Subordinate Judge found that Manohar was not entitled to the property and was not really a member of the family to which Mt. Chandan Kunwar's husband belonged, that there was legal necessity only to the extent of Rs. 112-4-0 and that the rate of interest stipulated for was payable. He also held that the suit was not time barred. In the result, the claim was decreed for recovery of Rs. 112-4-0 with the stipulated rate of interest.
5. In appeal which is on behalf of the defendants, who were impleaded as reversioners to the estate of Bechi Lal, three points have been urged, namely, the suit was really time barred, that there was no evidence of legal necessity for the loan and that there is no sufficient justification for 'allowing the interest stipulated as it was not supported by legal necessity.
6. The point of limitation arises in this way. The bond in suit which will be found printed at p. 49, stipulates that the money was to be repaid in the course of one year, then the mortgagors agreed that they would pay interest every six months, and if they failed to pay interest at the end of six months the interest would be added to the principal and interest should be paid not only for the principal but also the added interest. The actual words used in the bond on this point are as follows:
Iqrar yeh hai ki mublighan mazkur mai sud fishadi Rs. 2 mahwari ke arsa ek sai men ada wa bebaq kar denge. Aur and mubligan mazkur ka shashmahiwar dete rahenge. Agar sud shashmahiwar ada ua, karan tau wuh sud usi shashmahi par shamil zar asil ke hokar uspar bhi sud besarah adar ta yom bebaqui hai rawan rahega. Basurat wada khilafi dayiman ho ikhtiar hai ki kal rupaya apna mai sud darsud zal wa jaidad makhfula...kasb zabta wasul kar lenge.
7. It is argued that the stipulation meant that although the stipulated period for payment was one year, that stipulated period would be cut short to six months if there was a default in payment of interest at the end of the first six months. We find it difficult to read the document as meaning what the learned Counsel for the appellants contends for. The document provides that in case of default the creditor shall have power to realize the amount due not only with interest but also with compound interest. The compound interest could not be due at the end of the first six months. It would be due, at the earliest at the end of one year from the date of the execution of the bond. In this view the language does not support the learned Counsel's contention. We were referred to two unreported decisions by the learned Counsel, namely decisions in S.A. No. 316 of 1925 decided on 21st April 1927, and S. At No, 1178 of 1921 decided on 6th June 1922. In none of these cases it was considered what was the effect of the words ' and compound interest.' On the other hand, there is a decision in Ramadhar v. Raj Narain : AIR1929All908 in which these words were examined, and it was held that the words ' with interest and compound interest ' necessarily meant that the money could not be realized till at least two six months had expired. This was the view taken by one of the learned Judges. The other learned Judge was of opinion that as the defendants had failed to show that there was a clear stipulation that money would be paid earlier under certain circumstances than the clearly stipulated period, it had not been shown that the suit was time barred. Whichever view we take of this case, the arguments advanced by the learned Judges in that judgment equally apply. We are therefore of opinion that the suit is governed more by the case of Ramadhar v. Raj Narain : AIR1929All908 with which we agree than by the two unreported cases in which the language used was not considered in all its bearing. We hold therefore that the suit is not time barred.
8. The second point is the legal necessity for the loan itself. It appears that Thakur Das and Sukhlal were two brothers. Sukhlal's son, it was said, was defendant 2 Manohar. It has been found that Manohar, defendant 2, was not the son of Sukhlal. Thakur Dass' son was Beche Lal, and Beche Lal's widow was Mt. Chandan Kunwar. Thakur Dass and Sukhlal, it was alleged borrowed money from Khubchand on 4th February 1923 by execution of a mortgage by conditional sale printed at p. 25. When Khubchand wanted to enforce this document, a suit was instituted by Sukhlal and Thakur Das to have it declared that the mortgage deed was a forgery, and no money had been borrowed on foot of it by the plaintiffs. That suit was decreed by the Munsif on 24th May 1874, and that judgment was upheld on appeal. It appears however that in spite of that decree a suit was instituted later on by a successor-in-title of Khubchand against one Manohar as the heir of Sukhlal and against Mt. Chandan Kunwar alias Mt. Gomti. It appears that advantage was taken of the enlargement of the law of limitation in 1908, and a suit was brought to enforce an old bond which had been declared to be a forgery by Courts. The defendants were in ignorance of the true facts and a decree was actually passed for foreclosure. The decree having been passed was no doubt a binding decree, and Mt. Chandan Kunwar stood in danger of losing her property. She had accordingly to borrow money from plaintiff 1 and the predecessor of plaintiff 2. It must therefore be taken that the loan was justified to the extent it was required to pay the decree obtained by Dwarka Parsad on 20th February 1912 : (vide p. 37). The tender of deposit at p. 39 shows that the money was actually deposited in Court. We agree therefore with the Court below that to this extent the mortgage was supported by legal necessity.
9. The third point is one of interest, The burden of proof was on the creditor to show that not only was there a legal necessity for borrowing the money but there also existed legal necessity for borrowing the money at the stipulated rate of interest. The only evidence on that point is that of Baldeo Sahai a witness for the plaintiff. His evidence has not been printed, but we have been referred to the original record for his evidence. All that he says is that the usual rate of interest was between 8 annas per cent to Rs. 2 per cent per mensem. He does not say that compound interest at Rs. 2 per annum was also the usual rate of interest. No doubt, taken by itself a stipulation as regards compound interest is a fair transaction, but when the evidence is simply this that from 8 annas to 2 pet cent is the usual rate of interest, we cannot read it meaning that 2 per cent per annum compoundable every six months was also a fair rate of interest. We accordingly think that on the evidence we must reduce the rate of interest 2 to per cent per annum simple interest.
10. In the result the appeal succeeds only to the reduction of interest as indicated above. The rest of the appeal is dismissed. Parties will receive and pay costs in proportion to their respective success and failure.
11. The respondents owe Rs. 43 to the office as arrears of translation and printing charges. Mr. Aziz the learned Counsel for the respondents, has agreed to pay it up quickly, but if the money remains unpaid, no copy of the decree will be issued to the respondents, and the decree will not be executable by the respondents till the money has been paid. The non-payment will be endorsed on the decree, and information to that effect will be given to the Court below.
12. A fresh decree under Order 34, Rule 4, Civil P. C, will be prepared, Six months are allowed to pay up.