1. The defendant, the Mahant of Balaga Mutt, holds a usufructuary mortgage over a part of the Nandigam Estate, of which the plaintiff is Zamindar. The mortgage deed provides that the mortgagee shall pay annually a sum of Rs. 2,000 towards the peishcush and the land cess due upon the portion mortgaged. The defendant defaulted in making these payments for faslis 1330, and, 1331, so that the plaintiff was himself compelled to pay them. To recover as damages the amounts so paid he has filed two successive suits. That out of which this appeal; arises is the second, and relates to part of the payment for fasli 1330 and the whole of the payment for fasli 1331 The defendant raised various defences, the chief defence pressed at the trial being that the mortgage was not binding upon the Mutt. This was decided against him, and has been abandoned on appeal. The points taken before us are, firstly, that the interest which the Lower Court awarded upon the amounts paid, from dates of payment up to suit, is inadmissible; secondly, that no proof has been adduced that the amount claimed as land cess paid for fasli 1331 is correct; thirdly, that subsequent interest has been calculated not only upon the principal amount due but also upon the pre-suit interest.
2. Dealing first with the question whether interest up to suit is admissible, it cannot seriously be contended that the Interest Act (XXXII of 1839) empowers the Court to award it. The amount claimed as damages is neither a debt nor a sum certain payable by virtue of a written instrument at a certain time, since the occasion for its payment only arose upon a breach of the terms of the mortgage bond, and upon the plaintiff making good the defendant's default. Nor, to satisfy the second stipulation of the Act, has any proof of a written demand of payment been given. Some legal basis other than the Act furnishes must therefore be found if the claim is to be admitted.
3. We are asked to hold that, independently of the Interest Act, interest is payable as damages under Section 73 of the Contract Act. The Act itself closes with a proviso 'that interest shall be payable in all cases in which it is now payable by law'; and Section 73, it is said, supplies the legal provision necessary. Before referring to authority on this point it is, I think, necessary to clear up an aspect of the matter which in the present case has led to attempts to distinguish certain cases, English as well as Indian, which are not in my view distinguishable. The proposition is advanced that, while interest as damages for the nonpayment of a debt or other sum due under contract may not be awardable under Section 73, it is otherwise when the interest is claimed upon a principal sum due as damages, and as a component part of those damages. It is urged that Section 73 empowers the Court to make such an award because it is no more than part of the compensation for loss or damage which naturally arose from such breach; and there is nothing in the section itself to exclude the award of damages in this shape. Indeed, Illustrations(n) and(r) to the section expressly contemplate the award of such interest. Leaving aside for a moment the question of the effect of these illustrations, a little consideration will, I think, show that, whatever be the nature of the obligation to pay the principal sum - whether, for example, it originates in contract or in tort - interest can only be claimed upon it as damages for the reason that payment of it has been improperly withheld. In the present instance, so soon as the plaintiff had paid to Government the sums in the payment of which the defendant had defaulted, he became entitled to be reimbursed them in the shape of damages. Those sums, and those alone, were the measure of the damages due for the breach; and if any interest upon them was payable it could only be because the defendant had further defaulted in promptly compensating the plaintiff for the loss occasioned by the breach - in other words, had improperly withheld money due to be paid.
4. If this be sound reasoning, the case is no more than a particular instance of the general class of claims to interest as damages for the non-payment of a pecuniary obligation, and cases which decide the general question, even although the principal subject-matter of them may not be a claim to damages, are not really distinguishable. That upon this question the law in this country is substantially the same as in England is not disputed. Our Interest Act reproduces Lord Tenterden's Act, and Section 73 of the Contract Act is based upon the Common Law. Accordingly the judgment of the House of Lords in London, Chatham and Dover Railway Co. v. South Eastern Railway Co. (1893) A.C. 429 which had the effect of settling what the English Law was, may be accepted, as indeed it has been accepted, as equally a guide to the law of India upon this point In an earlier English case, Best, C.J. had said:
However a debt is contracted, if it has been wrongfully withheld by the defendant after the plaintiff has endeavoured to obtain payment of it, the jury may give interest in the shape of damages for the unjust detention of the money.
5. This, as Lord Herschell, L.C. says, 'is a very clear expression of principle and a rule sufficiently definite'; and he proceeds to make it equally clear that upon such broad grounds interest is not awardable.
6. The earliest case of this Court, and one which deals with the matter upon these lines, is Kisara Rukkumma Rau v. Cripati Viyanna Dikshatulu (1863) 1 M.H.C.R. 369. It is enough, however, to go back only so far as Kamalammal v. Peeru Meera Levvai Rowthen I.L.R. (1897) 20 Mad. 481 : 7 M.L.J. 245, a case in which the above cited judgment of the House of Lords was followed. The learned Judges then consider the effect of Section 73 of the Contract Act, coupled with Illustration (n), and point out the conflict which would arise if the section were held to allow the award of interest not admissible under the Interest Act. If the proviso to the single section of that Act - 'provided that interest shall be payable in all cases in which it is now payable by law' - enabled so all embracing an application of Section 73, the Act would become a superfluity. This case was followed in Subramania Aiyar v. Subramania Aiyar' I.L.R. (1908) 31 Mad. 250 : 18 M.L.J. 245. The course which decisions have since taken in this Court has been traced quite recently by Venkatasubba Rao and Madhavan Nair, JJ. in Nanchappa Goundan v. Vatasari Ittichathara Mannadiar I.L.R. (1929) 53 Mad. 549 : 59 M.L.J. 358 and it can now be said, I think, that the departure from the generally accepted position marked by Abdul Saffur Rowther v. Hamida Bivi Ammal I.L.R. (1919) 42 Mad. 661 : 36 M.L.J. 456 which went beyond the English law and awarded interest upon broad equitable principles a case which I myself followed in Krishnan Namboodripad v. Komath Ambu Kurup : AIR1927Mad59 has since been definitely disapproved. Indeed, but a short time later Sir John Wallis, C.J. in Rajah of Pittapur v. Ballapragada Pallamraju (1920) 40 M.L.J. 18 reaffirmed the earlier cases, Kisara Rukkumma Rau v. Cripati Viyanna Dikshatulu (1863) 1 M.H.C.R. 369 and Kamalammal v. Peeru Meera Levvai Rowthen I.L.R. (1897) 20 Mad. 481 : 7 M.L.J. 263, basing himself upon the law as it had been settled in England, namely, that at Common Law interest could not be given as damages for the non-payment of debts. This too forms the basis of the Privy Council's decision in The Maine and New Brunswick Electrical Power Co. Ltd. v. Alice M. Hart (1929) 57 M.L.J. 662 (P.C.), a case from New Brunswick but subject to substantially identical provisions of law. The equitable jurisdiction of the Court, it was found, was not involved, and the parties were left to their remedies at law.
7. Reference may now be made to two cases of this Court which relate to damages for breach of contract and are therefore more directly in point. Boddu Sanyasiraju v. Kotra Ramamurthi (1913) 21 I.C. 543 was an ordinary case of failure to deliver goods according to contract, and the question arose whether interest could be allowed upon the damages assessed. It was held that interest was not allowable upon unliquidated damages. Tyabji, J. notices the argument which has been advanced before us, - that the Court ought to have the power to place the aggrieved party in the position he would have enjoyed if the contract had been fulfilled; but he felt constrained by the weight of authority against allowing a remedy of this kind. He qualifies his acceptance of the general position by adding that, if the plaintiff had alleged and proved that having been deprived of the use of the money he had suffered loss, there might have been less difficulty in his recovering damages for the loss so caused. A similar view had been taken in Surja Narain Mukhopadhya v. Pratap Narain Mukhopadhya I.L.R. (1899) 26 Cal. 955 and a cognate exception is to be found in English law, - where the plaintiff's money has been used and interest made upon it 21 Halsbury 40. But without such proof a claim to interest is unsustainable. The other case in which a claim to interest on unliquidated damages-was disallowed is Kavutu Purnanandam v. Lakshminarasimha Charyulu (1914) 26 I.C. 429. The respondent here has attempted to argue that, because the principal amount of the damages cannot, from the nature of the case, be in question, the damages are not unliquidated but liquidated. This is to misconceive the meaning of 'liquidated damages,' a term not used in the Contract Act but employed to denote a sum named in the contract as the amount to be paid in case of a breach. Section 74 deals with such a case, while Section 73 relates to a contract the damages for the breach of which are unliquidated; and the only effect of holding that, we are here dealing with a question of liquidated damages, would be to take the case out of Section 73. It may be that no two opinions are possible as to the amount of the damages due, but it is not passible to found-a distinction upon the relative case' and certainty with which the quantum of damages is ascertainable., Accordingly I 'can discover no grounds for differentiating between a case like the present and any other case of breach of contract. It is equally true of all that an interval must elapse between the date upon which loss occasioned by the breach accrues to the plaintiff and the date upon which he receives compensation for that loss, and that in the meanwhile he is out of pocket. Unless he can resort to some positive provision of law, such as the Interest Act, that circumstance cannot as the law at present stands be met by the award of interest.
8. In the Full Bench case Kandappa Mudaliar v. Muthuswami Aiyar I.L.R. (1926) 50 Mad. 94 : 51 M.L.J. 765 it was decided that a person who sues to recover an advance made for the supply of goods, the contract being broken, is not entitled to interest upon the amount of advance. Of the three learned Judges who took part in that decision, Coutts Trotter, C.J. and Beasley, J. (as he then was) held as above, while Ramesam, J. dissented. The last named learned Judge took the view that London, Chatham and Dover Railway Co. v. South Eastern Railway Co.(1893) A.C. 429 was not against the respondent (who claimed interest) because the case 'related to sums recovered in performance of contract and was therefore covered by the Act,' i.e., Lord Tenterdon's Act. His view seems to have been that while in cases 'covered by the Act,' - which I take to mean cases of the class - based on contract - to which alone the Act applies, the test of admissibility of interest is of one kind it is otherwise with cases not 'covered by the Act,' e.g., a case of damages. It seems to me that this is a distinction somewhat difficult to maintain. It will be agreed that interest claimed as damages is claimed quite independently of the Act. That it was so claimed in the House of Lords case is shown by the following passage in Lord Herschell's judgment (p. 437):
But, my Lords, the appellants contended that even although they might not. under the terms of Lord Tenterden's Act be entitled to interest, yet interest might be given by way of damages in respect of the wrongful detention of the debt.
9. The Full Bench may be taken to have decided the significance of, the -Illustrations (n) and (r) to, Section73. - that they mean no more than that interest, if otherwise payable, will be a proper component of the damages. This had been previously so held in Kamalammal v. Peeru Meera Levvai Rowthen I.L.R. (1897) 20 Mad. 481 : 7 M.L.J. 263 (See Pollock and Mulla's Contract Act, 6th Ed., p. 430.)
10. I conclude accordingly that the interest up to suit awarded by the Court below must be disallowed.
11. Upon this finding the third point taken for the appellant does not arise. There remains the question of the correct amount of land cess to be charged to him for fasli 1331. According to the statement filed with the plaint, the amount claimed was Rs. 1,530-15-4. The Lower Court has found (para. 12) that only half the amount of land cess due upon the mortgaged area minus Rs. 16 was payable by the defendant, and so far there is no dispute. But most unfortunately for the plaintiff, no proof whatever was given of the correctness of the plaint figure, and no admission of it was obtained from the defendant. We cannot therefore confirm the decree in this respect, nor do we find any justification for remanding the suit to have this omission supplied. The only course is to accept the figure which the defendant admits to be his share, viz., Rs. 458-4-6, substituting this for the figure Rs. 749-7-8, found by the Lower Court. The result of this, and of the disallowance of interest, will be that the sum of Rs. 4,633-9-0 named in the decree will be replaced by the sum of Rs. 3,659-4-6, with consequential alterations in subsequent interest and costs. The parties will pay and receive proportionate costs of the appeal.
Sundaram Chetty, J.
12. I agree and wish to state briefly what I have got to say on the somewhat difficult question, relating to the award of interest in this case. The Interest Act (XXXII of 1839) provides for the award of interest in certain categories of cases, viz., claims relating to debts or sums certain, payable at a certain time or other-wise; if they are payable by virtue of some written instrument at a certain time, but if no time is fixed for payment in the instrument, interest can be awarded only when a demand in writing giving notice to the debtor that interest would be claimed, has been given, in which case interest will run only from the date of such demand. The proviso to this section exempts from the operation of this Act all cases in which interest is made payable by law. It is clear, that in respect of claims coming within the scope of the Act, interest can be awarded, if the conditions therein prescribed are satisfied, and there is no need to prove actual loss or damages. The Court is enabled to award interest in such cases, on the strength of this statutory provision. In the category of cases specified in the Act, no interest can be awarded, if the requirements laid down in the Act are not complied with. Otherwise, it would be an infringement of the provisions of this Act. What about claims not coming within the scope of the Act itself? Claims for damages on account of breach of contract are dealt with by Section 73 of the Contract Act, and a number of illustrations are given. For the purpose of the present case, Illustrations (n) and (r) are relevant. As held in Kamalammal v. Peeru Meera Levvai Rowthen I.L.R. (1897) 20 Mad. 481 : 7 M.L.J. 263 this later enactment cannot be taken to have impliedly repealed the Interest Act. The following observation at p. 483 is important:
In fact, there is no real conflict between the two, since effect may well be given to Section 73, by holding that the award of interest, as compensation contemplated by that section, has reference to cases in which such award can be made without infringing the provisions of the other Act.
13. The claim dealt with by the learned Judges appears to be one coming within the scope of the Interest Act, and no interest can be awarded, as the requirements of that Act have not been fulfilled. The decision in Kamalammal v. Peeru Meera Levvai Rowthen I.L.R. (1897) 20 Mad. 481 : 7 M.L.J. 263 has been followed in a series of later decisions of this High Court. The question is, whether in respect of claims not covered by the Interest Act, the Court can award interest by way of damages, under Section 73 of the Contract Act, as component of the compensation to be fixed for the loss caused to the plaintiff by reason of the breach of a contract. Section 73, being declaratory of the English Common Law as to damages, this section cannot be deemed to abrogate the rule of Common Law in the award of damages. Under the Common Law, which is now well settled in England, interest cannot be awarded as damages for the mere wrongful detention of money. I take this to mean, that where it is shown that the non-payment of money due is itself the breach of contract, and nothing else is proved to make out the claim for compensation for such breach, no interest can be awarded in addition to the recovery of the money withheld. But if adequate proof is given, that by reason of the breach of contract, special loss or damage was sustained by the plaintiff, for which the mere repayment of the amount due under the contract would not be an adequate compensation, but the proper measure of damages awardable, should include a reasonable rate of interest also, on account of the loss proved to have been sustained, I think, the Court can award interest as part of the damages, either under Illustration (w) or Illustration (V) to Section 73. If the awarding of interest is deemed to be giving a remote damage, then such a relief will not be given under Section 73. But if the Court should find that in the special circumstances of a case, adequate compensation for the loss caused by the breach of contract, should include a certain rate of interest as its component, and the claim is not one coming under the category of cases specified in the Interest Act, effect may be given to Illustration (n) or (r) of Section 73, without infringing the rule of Common Law or the Interest Act. The observations of Banerjee, J. in Surja Narain Mukopadhya v. Pratap Narain Mukopadhya I.L.R. (1899) 26 Cal. 955 bring out this aspect clearly. I am of opinion, that on such special proof of loss or damage, interest can be.awarded as a component part of compensation, payable for the breach of contract, when the claim is one outside the category of claims mentioned in the Interest Act.
14. In the present case, it can be stated that the claim is not one coming within the purview of the Interest Act, but no proof of special loss or damage as required by Section 73 for awarding interest as damages is adduced.
15. I am, therefore, of opinion that no interest prior to suit is awardable. I agree with my learned brother in the order proposed by him.