1. Suit for recovery of Rs. 29,305-14-4 due on the mortgage deed Ex. A, dated 13th June 1911. The mortgage was executed by a widow, Kandukuri Raja Seshamma Garu in favour of defendant 2, while she was enjoying a life-interest in her husband's estate, and before she adopted defendant
1. Defendant 2 transferred the mortgage right to plaintiff under Ex. P. Seshamma Garu is dead and defendant 1 has become owner of the estate.
2. The transaction takes its origin from a compromise decree in this Court dated 8th January 1883, Ex. D, under which Seshamma Garu is bound to pay the mortgagee plaintiff Rs. 5,000, and interest at 10 annas per cent per mensem, for which a village stands hypothecated as security, and it is provided that if the principal is not paid within five years the plaintiff shall take possession of the village, reckon its income at Rs. 500 and hold it till the debt is paid off.
3. Issue 1 is whether this decree is valid and binding on defendant 1. There is no reason to hold the contrary and that point is not now in dispute. In 1883, the estate was undoubtedly saddled with a binding debt under the terms of Ex. D. In 1888, when the five years had expired the debt was not paid off, and Seshamma Garu was liable to surrender the village. Instead of doing so she executed a mortgage Ex. C agreeing to pay off the principal in five years, with interest at 11 annas per mensem, on arrears at Re. 1-4-0 per mensem and mortgaging the same village.
4. When these five years expired in 1903 another mortgage was executed, Ex. B, and it was arranged to pay off the debt in 14 instalments with interest at 9 annas 6 pies per cent per mensem and one rupee per cent per mensem for arrears. Finally in 1911 Seshamma Garu undertook under Ex. A to pay in 20 yearly instalments of Rs. 1,000 with interest at 12 annas per cent per mensem compound interest on arrears at one rupee per cent per mensem with annual rests. This is the suit document.
5. Issue 2 is whether Exs. C, B and A are true, valid and supported by consideration. There is not the least doubt that they are true and supported by consideration, and nothing which affects their validity is specifically in issue. In para. 7 of his statement defendant 1 alleges, but does not specify fraud; in para. 8 he denies the right of his adoptive mother to make any contract varying the terms of Ex. D; and in para. 10 he alleges that Ex. D was the most favourable of all the arrangements. If something on these lines had been put in issue it would be easier to understand what exactly is the defence.
6. The learned Subordinate Judge finds that Ex. C is true, but as regards its validity holds that its execution was a very improper and an imprudent act. He refused to admit evidence of the income of the mortgaged village. The refusal comes at the evidence of D. W. 2 in the record, but the plaintiff avers (affidavit of 30th September 1930), and it is not disputed, that he refused to take it when plaintiff led his evidence. It is difficult to see how without knowing the income the learned Judge could stigmatize the act as imprudent. If the income is Rs. 10,000 it is obviously prudent to keep possession of the village. The respondent has now filed an affidavit putting the income in 1885 at Rs. 1,300 and in 1894 at Rs. 1,391, and Rs. 1,493 in 1903. If under Ex. D the mortgagee, as he would by defendant's reckoning took possession of the village till 1907, or for about 20 years he would receive an ostensible income of Rs. 10,000, and an actual income of about Rs. 26,000. No doubt by 1907 the defendant would have been paid off, but at an exorbitant cost. Under Ex. C the debt would have been cleared by 1893 at half the cost. We are unable to follow the lower Court's reasoning in para. 5, and we hold that Ex. C is valid and binding upon the estate. The subsequent modifications in Ex. B and Ex. A are mere matters of degree. The variations are not large enough to warrant an assumption that the widow was acting with imprudence or the mortgagee with dishonesty, especially as no special imputation is made; and no evidence is led as to the state of the market.
7. In Ex. B the interest is 9 annas 6 pies per mensem, time is given from 1903 to 1917, and the interest on arrears is 1 rupee per mensem. In Ex. C the interest is 11 annas per mensem, and on arrears 1 rupee and 4 annas per mensem. So B is not more onerous than C.
8. In Ex. A the interest is 12 annas, the time runs from 1911 to 1931, and the interest in default is one rupee per mensem compound interest. By the time that Ex. A came to be executed the payments under Ex. B had fallen into arrear and interest was payable on Rs. 12,000 lapsed instalments at 12 per cent. Under Ex. A, so long as there were no further arrears the interest would be 9 per cent. It is admitted that Rs. 20,000 in Ex. A is a round figure rather favourable to the debtor.
9. The time under Ex. B would expire in 1917 and defendant 2 as P. W. 1 says that he was threatening that he would sue them and give no further extensions unless he were given a higher rate of interest. So under Ex. A it was agreed to pay 12 annas as against 9 annas per mensem in consideration of an extension of time for payment up to 1931.
10. Defendant 2 admits that he demanded a fresh document as a condition of advancing a loan to Seshamma Garu's brother-in-law. This is relied upon as suggesting a sinister origin for Ex. A but the very frankness of the admission disarms suspicion, and there is no ground for supposing that the widow, her brother-in-law, and the mortgagee, were conspiring against the interest of the estate. Not only did the widow pay Rs. 20,000 towards the principal and interest of the debt, but a large portion of the repayment came out of the brother-in-law's estate: see endorsements on Ex. A, pp. 47--50 documents. So the widow can hardly be said to have evaded her obligations to pay interest. Nor can the mortgagee be said to have connived at any such evasion. In Ex. A for the first time compound interest is leviable upon arrears, and if a creditor chooses to give a widow debtor this sharp reminder that she ought not to fall into arrear with her interest, the Courts can hardly object that he is acting legally. Whether as a matter of equity they will enforce the penal clause is another question.
11. We find therefore that even were the point in direct issue there is nothing in the facts of this case to warrant any finding of fraud or collusion.
12. The respondent relies rather upon a bare proposition of law that a widow cannot alienate the property of the estate in which she holds a life interest for payment of interest on a debt binding the estate. In Sarkar's Hindu law, Edn. 5, p. 625 it is stated thus:
An alienation of husband's estate for the payment of husband's debts will not bo binding on the estate unless it could not have been paid out of the current income.
13. This purports to be based on a Madras case reported in Sakhi Reddy v. Venkanna A.I.R. 1914 Mad. 113. In that case a distinction was drawn between the principal debt and the interest payable thereon; but the Court upheld the alienation because it was not proved that the widow had sufficient income to pay the interest or that the alienee had acted mala fide.
14. In an unreported case A.S. No. 113 of 1918 the law is laid down as follows:
The widow is bound if the income of her husband's estate admits of it to pay the interest payable on the binding debts as well as other necessary charges. But it does not necessarily follow that where the debt is a binding debt the interest payable upon that debt is not chargeable to the estate. In fact a proposition like that is prima facie untenable. The interest follows the principal and is recoverable from the estate if the principal amount is so recoverable. I (Abdur Rahim, J.), do not think that any contrary proposition is laid down in Sakhi Reddy v. Venkanna A.I.R. 1914 Mad.
113...Tyabji and Spencer, JJ., simply stated the proposition which is not disputed that it is the duty of the widow to pay out of the income the interest due on her husband's debts.
15. With which Spencer, J., concurs.
16. The question is really one of fact. Ordinarily a widow is expected to pay the interest on her husband's debts, and if that interest accumulates as a charge upon the estate the conduct both of the widow and of the creditor will require scrutiny. In this case, as already observed, there is nothing in the conduct of either party to warrant a finding that they were committing fraud against the estate. The estate was heavily involved under Ex. D. By Ex. C the widow considerably lightened the burden. If she had died on 28th March 1888, the date of Ex. C there can be no question as to which document, Ex. D or Ex. C, the reversioner would have preferred to find when he entered upon his property.
17. In Boddu Jagayya v. Goli Appala Raju  18 I.C. 953 it is asked:
Was the widow entitled to allow the debt to accumulate and to make the interest a burden on the estate so as to bind the reversioners,
18. And the ruling proceeds:
A purchaser however will not necessarily be affected by the fact that the widow could have discharged the interest by means of her own income.... If he bona fide believed the sale was necessary ho must be protected.
19. At the stage of Ex. C the widow was reducing not adding to the burden on the estate, and the mortgagee was acting bona fide. In Gauri Shankar v. Kamala Prasad, A.I.R. 1926 All. 645, Ashworth, J., holds that the creditor is responsible for mismanagement in which he connives in advance; which is merely to state that he will bo unsuited on proof of fraud.
20. Then, as already pointed out, if Ex. C is valid and binding, its subsequent modifications by Ex. B and Ex. A are unexceptionable, and may be said to be merely in the course of business. We see no reason not to uphold these transactions, except that wo think defendant 1 may bo relieved against the penal provision of compound interest. Interest will be reckoned under Ex. A at 9 per cent on instalments not due on date of suit otherwise on the overdue instalments and . interest thereon 12 per cent simple, per annum. Otherwise plaintiff is entitled to a decree as prayed for with costs throughout.
21. The appeal in the main is allowed.
22. The appeal having been set down to be spoken to on Tuesday, 18th October 1931, upon perusing the judgment and the proposed draft decree in the appeal and the objections to the draft decree and upon hearing the arguments of Mr. K. Ramamurthi advocate for the appellant and of Mr. V. Viyanna, advocate for respondent 1 and respondent 2 not appearing in person or by pleaders and the appeal having stood over for consideration till Thursday, 22nd October 1931, and Civil Miscellaneous Petition No 4980 of 1931 filed on behalf of respondent 1 in the appeal praying to pass an order as to costs in Appeal No. 197 of 1930 directing parties to pay and receive proportionate costs, coming on for hearing on the said Thursday, 22nd October 1931, upon perusing the figures worked out and arrived at by the office on the directions given by the Court, and the said petition and upon hearing the arguments of Mr. V. Viyanna, advocate for the Petitioner, and of Mr. K. Ramamurthi, advocate for the respondent in the petition, the Court made the following
23. The office method of working it out for each year with counter-interest is the meaning of the judgment which does not allow of compound interest and the figures thus arrived at by the office are accepted. The parties will pay and receive proportionate costs.