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Vythilinga Mudali Vs. Ravana Sundarappayyar - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Judge
Reported in(1883)ILR6Mad167
AppellantVythilinga Mudali
RespondentRavana Sundarappayyar
Cases ReferredVengideswara Putter v. Chathu Achen I.L.R.
Excerpt:
penalty - promise to pay interest at imusual rate to secure prompt payment--contract act, section 74. - - should i fail to pay it at the said time, i bind myself to pay at the rate of 1 anna per rupee per diem from this date. ' and the explanation seems probable, seeing that the defendant was a poor man, to whom it would not have been safe to lend money as an investment......per rupee per diem from this date.' no interest was payable if the principal had been repaid in fifteen days.2. the first question is whether the high rate of interest payable in default of payment of the principal within fifteen days is to be regarded as a penalty to secure prompt payment. such was the explanation given by the plaintiff in his deposition. he said, 'i demanded the said interest for the purpose of payment being made according to time.' and the explanation seems probable, seeing that the defendant was a poor man, to whom it would not have been safe to lend money as an investment. and by the terms of the document the high rate of interest in default of payment in fifteen days would commence, not from the date of default, but from the date of the document. this case,.....
Judgment:

Kindersley, J.

1. The defendant in this case borrowed Rupees 10 promising in the following terms to repay the amount: 'I shall return the said Rupees 10 within fifteen days from the present date. Should I fail to pay it at the said time, I bind myself to pay at the rate of 1 anna per rupee per diem from this date.' No interest was payable if the principal had been repaid in fifteen days.

2. The first question is whether the high rate of interest payable in default of payment of the principal within fifteen days is to be regarded as a penalty to secure prompt payment. Such was the explanation given by the plaintiff in his deposition. He said, 'I demanded the said interest for the purpose of payment being made according to time.' And the explanation seems probable, seeing that the defendant was a poor man, to whom it would not have been safe to lend money as an investment. And by the terms of the document the high rate of interest in default of payment in fifteen days would commence, not from the date of default, but from the date of the document. This case, therefore, resembles that of Vengideswara Putter v. Chathu Achen I.L.R. 3 Mad. 224 in which it was held that interest at a higher rate, to be carried back to the date of the loan, was of a penal character, and should not be enforced, and that, since the passing of the Indian Contract Act, the creditor was entitled only to reasonable compensation for his loss.

3. I should be disposed to give the plaintiff a decree for Rupees 10 with interest on that sum at the rate of 12 per cent, per annum from the date of the document, the 30th July 1878, and costs throughout in proportion.

Innes, J.

4. I concur in the decree proposed. I doubt if Section 74 of the Indian Contract Act affects the question, as that Section seems in its terms to apply only to cases in which 'a sum is named' as payable on breach of the contract, and not to cases in which interest at a certain rate is so payable, though in principle it is difficult to distinguish the one from the other. But I observe that this case is distinguishable from Arulu Maistry v. Wakuiku Chinnayan 2 M.H.C.R. 205 in that the interest in that case was only to run from the date of default. In the present case, as in Vengideswara Putter v. Chathu Achen I.L.R. 3 Mad. 224 the interest is to be calculated from the date of the bond, and, on the authority of that decision, and having regard to the evidence of the plaintiff as quoted by Mr. Justice KINDERSLEY, I think the stipulation for interest in the event of a breach may properly be regarded as penal, and Act XXXII of 1839 admits of our allowing interest at the current rate from the date of the bond as proposed. I concur as to costs.


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