1. The learned Advocate for the appellant has relied on Annamalai Chetti v. Veerabadram Chetty I.L.R.(1902) M. 111 and Sundar Koer v. Rai Sham Krishen and asked us to award compound interest at some enhanced rate after default. In the first of these cases, the learned Judges considered that compound interest was compensation for non-payment of interest only and there must be some compensation for non-payment of principal. Under the latter heading they increased the rate from 15 to 24. I am not aware of any case in which this method has been adopted or in which the decision has been followed. Though the decision has been frequently cited before me, I have never followed it. I now think it is necessary to state my dissent from that decision. All that the Act wants us to do is to award a reasonable compensation not exceeding the penalty named. It does not require us to separate the process into two parts.
2. The case in Sundar Koer v. Rai Sham Krishen is a peculiar case. It contains two stipulations by way of penalty and two enhanced rates. The High Court awarded compound interest at the lower enhanced rate and the Privy Council confirmed the decision. The remarks of the Privy Council are not in favour of the appellant.
3. I do not mean to say that if the Court wishes to award compound interest at an enhanced rate, it is precluded from doing so. All that I am saying is that it is not bound to do so.
4. In my opinion, when the parties themselves have contemplated compound interest that may be made a ground of awarding compound interest, but, in general, only at the contract rate, for, compound interest gives ample compensation for any kind of default.
5. I award compound interest at 10 1/2 per cent, (the contract rate) throughout. Even if this works out at more than what the Lower Court has awarded, I would not give costs in appeal. Cases of this kind are not matters for appeal unless the decision of the first Court is very perverse. In appeal each party will bear its own costs.
6. I agree.