1. This appeal arises out of a suit for the recovery of the mortgage-money due upon a mortgage-deed executed on the 20th July, 1914, as security for the sum of Rs. 2,000 advanced by the plaintiff to one Wahabuddin. In the mortgage-deed itself the interest agreed upon between the parties was stated to be 1 per cent. per mensem, compoundable yearly.
2. The only question for decision in this appeal is whether the Court below was right in decreeing only simple interest at the rate of 1 per cent. per mensem, in contravention of the terms of the mortgage deed.
3. In our opinion the Court below was clearly wrong in admitting evidence of an oral agreement modifying the terms of the written contract between the parties. The defendants' case was that, as a matter of fact, the contract between the parties relating to interest was that only simple interest should be paid at the rate of 1 per cent, per mensem, but in the bond it was entered that the interest should be compoundable annually, and this stipulation 'was caused to be entered merely by way of precaution for the sake of further satisfaction of the creditor. In reality it was agreed that merely simple interest would be paid'. The plaintiff denied the alleged oral agreement about simple interest, and maintained that compound interest was agreed upon, as stated in the bond. The parties produced witnesses in support of their respective allegations. The Court below has disbelieved the oral evidence, finding that neither side has been able to produce reliable evidence on this point. The Court has, however, been much impressed by the fact that 17 months and three days after the execution of the deed the mortgagor made a payment of Rs. 490 and this payment was credited, Rs. 340 on account of interest and Rs. 150 on account of principal. This is shown by an endorsement on the mortgage-deed itself. The Court finds that as 17 months' interest was due, and as the interest if calculated as simple interest would amount to exactly Rs. 340, and as this very sum was credited towards interest on that date, it may be inferred that the defendant is correct in stating that, as a matter of fact, the agreement between the parties was for simple interest only and not for compound interest as set forth in the mortgage deed. On this ground the learned Subordinate Judge has decreed only simple interest instead of compound interest.
4. In the first place, we think it is clear that all the evidence in support of the alleged oral agreement is absolutely inadmissible under the provisions of Sections 91 and 92 of the Indian Evidence Act, 1872. If the defendant alleges that the parties never did agree to compound interest, but only to simple interest, then all evidence in support of his allegation is excluded by Section 91. If his case is that he agreed in writing to pay compound interest, but the parties entered into a simultaneous oral agreement that only simple interest should be paid, then all evidence of that, alleged oral agreement is excluded by Section 92. Upon any view of the case, therefore, the evidence in proof of the alleged oral agreement, contradicting or varying the terms of the written and registered contract of mortgage, was wholly inadmissible. Such evidence should never have been recorded. Even if such evidence were held to be admissible, it is quite insufficient, in our opinion, to prove the defendants' case. The defendants' witnesses were held by the Court below to be untrustworthy and we see no reason to dissent from that view. The mere fact that Rs. 340 were credited by the mortgagee towards interest 17 months and 3 days after the execution of the mortgage, does not, in our opinion, prove conclusively that the mortgagee admitted that only that amount of interest, and no more, was due upon that date. The plaintiff's own evidence is to the effect that, in accordance with the instructions of his debtor, he credited Rs. 150 towards principal and Rs. 340 towards interest but no account was taken of the amount of interest due upon that date. He never accepted Rs. 340 in full discharge of all liability for interest up to the date of payment. We see no reason to disbelieve the plaintiff.
5. We hold, therefore, that the learned Subordinate Judge had no jurisdiction for disallowing compound interest.
6. We accordingly allow the appeal and amend the decree of the Court below by substituting compound interest at the rate of 1 per cent. per mensem, compoundable yearly, instead of simple interest at 1 per cent. per mensem. Let a decree be prepared accordingly. Six months' time from to-day will be allowed for payment. The appellant will get his full costs in both Courts.