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Suryadevara Seetaramayya Vs. Suryadevara Kotayya and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Judge
Reported in35Ind.Cas.111
AppellantSuryadevara Seetaramayya
RespondentSuryadevara Kotayya and ors.
Cases ReferredBeynon v. Cook
Excerpt:
.....that has arisen is, the respondents having made default in delivering the sixth instalment of paddy, does the document entitle the appellant to demand delivery of the remaining instalments of grain at once or their value in money, or is he entitled only to payment of so much of the principal which is not satisfied by previous instalments already delivered, with interest at twelve per cent? but he has failed to notice that if defendants' construction be adopted, the effect of the clause would be to put it in defendants' power at any time to entirely rid themeselves of the hardship, and place themselves in an extremely favourable position by the simple process of breaking the primary term of their contract. interest can be calculated in paddy as well as in money: relief must not be..........exhibit a was executed by them. they agreed to pay, in satisfaction of the amount, 75 putties of paddy in 10 instalments of 7 1/2 putties each every year. the first payment was to be on the 6th march 1905 and the last on the 26th march 1914. then the deed provides: 'should default occur in giving the paddy in any of these instalments, we shall on demand pay the whole amount with interest at one per cent, per mensem notwithstanding the instalments still remaining to run.' it goes on to say: 'we have mortgaged the property described in the subjoined schedule for that amount till this debt is repaid and have retained it in our possession. we shall, therefore, fully discharge the said debt according to the said instalments by the mortgaged property, by our other properties and by.....
Judgment:

Abdur Rahim, J.

1. The first question we have to decide in this second appeal is one of the construction of Exhibit A, the mortgage-bond executed by the respondents in favour of the appellant. Regarded from the point of view of one party or the other, the question is not free from difficulties. The instrument is one of simple mortgage which recites that on taking account of the debts due by the respondents, Rs. 1,777 were still owing to the appellant, that for Rs. 277 out of this amount, the respondents executed a promissory note and for the balance Rs. 1,500, Exhibit A was executed by them. They agreed to pay, in satisfaction of the amount, 75 putties of paddy in 10 instalments of 7 1/2 putties each every year. The first payment was to be on the 6th March 1905 and the last on the 26th March 1914. Then the deed provides: 'Should default occur in giving the paddy in any of these instalments, we shall on demand pay the whole amount with interest at one per cent, per mensem notwithstanding the instalments still remaining to run.' It goes on to say: 'We have mortgaged the property described in the subjoined schedule for that amount till this debt is repaid and have retained it in our possession. We shall, therefore, fully discharge the said debt according to the said instalments by the mortgaged property, by our other properties and by ourselves, and we shall redeem your mortgage.'

2. It is clear that the expectation of the parties was, that the debt would be discharged by delivery of grain in the course of JO years. But there is no stipulation that the borrower was to be precluded from discharging that debt and redeeming the property before the expiration of 10 years. Nor is there anything to prevent his paying the amount due in money if he was able to do so.

3. The question that has arisen is, the respondents having made default in delivering the sixth instalment of paddy, does the document entitle the appellant to demand delivery of the remaining instalments of grain at once or their value in money, or is he entitled only to payment of so much of the principal which is not satisfied by previous instalments already delivered, with interest at twelve per cent? That depends on the meaning of the Clause above set out. Does the stipulation to pay the whole amount with interest at one per cent, per mensem' refer to the remaining instalments of paddy or the balance of the debt? The vernacular word in the original which has been translated as 'amount' is 'motham' which, I understand, means total.' Whether it is an apt word to use in this connection or not, it means the balance which is left unpaid. That might apply either to the instalment of paddy or the balance of the principal amount. The words 'interest at one per cent, per mensem' would undoubtedly be more appropriate if what was intended to be payable was money and not grain. There is no price fixed for the paddy nor any procedure laid down for its valuation. A reading of the whole instrument suggests that the payment in paddy was regarded as more convenient to the borrower, although the quantity to be delivered in different instalments would amount to much more than interest calculated at twelve per cent. The fact that for a portion of the debt a promissory note was executed and no stipulation is made in the document to debar payment of the debt in money at any time convenient to the debtor tends to strengthen this inference. It is true, on the other hand, that it is nowhere mentioned that each instalment of paddy was to be deemed equivalent to payment of 1/10th of the debt. But having regard to the fact that the instalments were absolutely equal in quantity and to be paid about the same time of the year, the inference is strongly suggested that that is what was intended. It could not, of course, have been intended that each instalment was to represent 1/10th of the principal amount only; that is, Rs. 150, for the value of 7 1/2 putties would admittedly be at least double that amount. What the parties contemplated apparently was that by the delivery of each instalment as provided, 1/10th of the entire debt including the principal and interest or profits was to be discharged. If this reading of the mortgage-deed is right all that the appellant is entitled to, is half of the principal amount with interest at twelve per cent. This is the interpretation placed upon the document by both the lower Courts. The District Munsif was undoubtedly wrong in admitting extrinsic evidence of the intention of parties and relying upon it in construing the document, and the Subordinate Judge has perhaps mixed up the question of hardship a little too much with the question of interpretation. But I am of opinion, for the reasons which I have stated, that their construction of Exhibit A is right. In that view, the question as to whether the stipulation in the sense contended for on behalf of the appellant would be penal and should be relieved against, does not call for decision. The appeal shall, in my opinion, be dimissed with costs.

Ayling, J.

4. The first question for decision in this appeal relates to the construction of the Clause in Exhibit A which provides for the consequences of default on the part of defendants in paying any of the ten instalments on the due dates. The document begins (in effect) by acknowlegment by defendants of a debt of Rs. 1,500 due by them to plaintiffs. It provides that this shall be discharged by 10 annual payments of 7 1/2 putties of kusuma paddy (worth on an average about Rs. 450). Then comes the disputed Clause which runs: 'Should default occur in giving the paddy in any of these instalments, we shall on demand pay the whole amount with interest at 1 per cent, per mensem notwithstanding the instalments still remaining to run.' Lastly the document declares a simple mortgage of the plaint property for the above debt.

5. The rival theories as to the proper construction of the disputed Clause are thus summarised by the Sub-Judge: 'The plaintiff's case is that it means the money value of the instalments of paddy remaining unpaid on the date of default, while the defendants contend that it means the remaining principal sum, taking each instalment of it to be Rs. 150.' Both Courts have accepted the defendants' interpretation; and I am very loath to upset their decision. But it seems to me to have been arrived at on a very inadequate consideration of the terms of the document itself, and chiefly on the strength of oral evidence and on considerations of what is hard and what is reasonable, which have little or no bearing on the point at issue.

6. The District Munsif says he has read the mortgage document very carefully, and then briefly remarks that the plaintiff's contention is 'preposterous'; he then passes to the oral evidence of various witnesses as to what it was that the parties agreed to. This has to be determined from the written document, not from in dependant oral, evidence; and the Munsif's construction of the document, from which, the Sub-Judge says, he is not prepared to differ, is no construction at all. The Sub-Judge fortifies his decision by pointing out that on the plaintiff's construction, the bargain would appear to be a very hard one indeed for defendants, which may be true. But he has failed to notice that if defendants' construction be adopted, the effect of the Clause would be to put it in defendants' power at any time to entirely rid themeselves of the hardship, and place themselves in an extremely favourable position by the simple process of breaking the primary term of their contract. This could hardly have been the intanded effect of a clause, which must, from its nature, have been introduced for the protection of the plaintiff. The Sub-Judge refers to the provision for interest and the absence of provision for valuing the paddy in default; both pertinent remarks, but not, in my opinion, of much weight. Interest can be calculated in paddy as well as in money: and the natural valuation is the market value at the time. These remarks do not furnish sufficient ground for refusing to accept what seems to be the only intelligible meaning of the clause. The word translated 'amount' is: 'motham', which really means total': (vide Brown's Telugu Dictionary) and read with reference to the preceding words it can only refer to the 'total' of the unpaid instalments. The use of the word 'motham' is incomprehensible on defendants' interpretation. The latter is, moreover, built upon a theory that Rs. 150 should be assumed to be the principal sum of each instalment in the event of default a theory which is in violent contradiction of the known value of the grain, and of which the document contains not even a hint.

7. It seems to me that the only possible interpretation of the disputed Clause is that suggested by plaintiff.

8. The next question is to what extent is the contract enforcible, and to what extent should it be relieved against.

9. Its terms may be conveniently broken up thus:

(A). The primary proviso that in consideration of the former debt, defendants should deliver 10 annual consignments of 7 1/2 putties of paddy.

(B). A proviso that in default of payment of any instalment all the unpaid instalments should be deemed to be due.

(C). A proviso for payment of interest at 1 per cent, per mensem of such instalments.

10. Now of these three terms of the contract, (C) is undoubtedly a penal Clause covered by Section 74 of the Contract Act: and looking to illustration (g) to that section, I am not prepared to say that (B) might not be similarly regarded. But in considering what relief should be granted, and what would be reasonable compensation for the breach of contract, it seems to me essential to observe one limitation: relief must not be carried to such an extent as to place the party commuting the breach in a better position, and the other party in a worse position, than they would be in if the breach had not been committed. If term (A) is enforcible, then any relief against term (B) must allowed to infringe it. The Courts must not give plaintiff less than he would have been entitled to if the document had contained no stipulations at all for consequences of breach. This would undeniably be the effect of the lower Appellate Court's decree; which gives plaintiff very much less than he would be entitled to under term (A) without any breach at all. Section 74 authorises the Court to reduce the compensation to what is reasonable. It may conceivably be reasonable to reduce the compensation to vanishing point; it cannot be reasonable to reward the defaulter for his breach.

11. The decree of the lower Appellate Court can, in fact, only be upheld on the view that term A itself can be relieved against by the Court: and this is, in fact, contended by Mr. Ramadoss for respondents. He has quoted various rulings some of which tend no doubt to support this contention; but, with all respect to them, he seems to me to have quoted no authority binding upon us which would justify us in disregarding the plain words of Section 37 of the Contract Act. 'The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.' The words, 'other law' presumably mean some statutory enactment. It is not seriously contended that the present case is governed by any such, or by any of the Sections of the Contract Act itself. There is no plea of coercion, fraud, undue influence, etc., on account of which the Act provides for the invalidating of a contract; on the face of it Section 74 has reference not to the primary term of the contract but to stipulation as to the consequence of a breach.

12. The contention is that in spite of the explicit words of Section 37, a Court has power to decline to enforce a contract on the ground that the terms thereof are harsh and unconscionable. Bouwang Raja Challaphroo Chowdhury v. Banga Behary Sen 31 Ind. Cas. 394 : 20 C.W.N. 408 : 22 C.L.J. 311 (not reported in the authorised series) is referred to as a of case in which the Calcutta High Court actually declined to enforce a contract on this be ground. The provisions of the contract for interest, it may be remarked, worked out at the astounding rate of 5,858 per cent. Per annum: and one may fairly conjecture whether the facts and legitimate inference from them would not bring the case under Section 16 or some cognate section of the Act, although the learned Judge chose to deal with it, following the precepts contained in the rulings of English Courts. Velchand Chhaganlal v. Lieut. A. Flagg 13 Ind. Cas. 853 : 36 B.K 164 : 14 Bom. L.R. 18 is a case not dissimilar to the present one, in which the Subordinate Judge had given relief against a Clause corresponding to what I have called Clause (A). His decree was confirmed by the High Court on appeal. There is no indication in the report of the grounds on which either the Subordinate Judge or the learned Judges of the High Court proceeded as regards this clause. The judgment simply deals with the applicability of Section 74 of the Contract Act to the following Clause providing for consequences of breach.

13. The next case, to which I shall refer and which demands closer attention, is the decision of the Privy Counsel in Kamini Sundari Chaodhrani v. Kali Prossunno Ghose 12 C.P 225 : 12 I.A. 215 : 4 Sar. P.C.J. 652 : 9 Ind. Jur. 437 in which their Lordships intimated for the guidance of the Courts, in future litigation, that they might be prepared to apply the equitable principles enunciated in Beynon v. Cook (1875) 10 Ch. App. 389 : 23 W.R. 531 : 32 L.T. 353 to a case in which fraud and undue influence were not found to be proved.

14. This case is the strongest case in respondents' favour, affording, as it certainly does, some support to the view that the provisions of the Contract Act as to the enforceability of contracts are not exhaustive. But while treating it with the respect and attention which necessarily attaches to every pronouncement of their Lordships of the Privy Council, I may venture to point out that this question of how far the provisions of the Contract Act were exhaustive was not, so far as appears from the report, directly argued. As a fact, since the pronouncement of this judgment (1885), Section 16 of the Contract Act has been recast by Act VI of 1899: and a notable change has been made by the addition of Clause 3. It seems probable that this clause, was added especially to meet the case of unconscionable bargains of the class dealt with in Beynon v. Cook (1875) 10 Ch. App. 389 : 23 W.R. 531 : 32 L.T. 353 as surmised by Sir F. Pollock (vide Pollock and Mulla's Indian Contract Alt, pages 85--86). I certainly think that as the law now stands, a Court should hesitate to infer from this pronouncement of the Privy Council that it was justified in travelling outside the scope of the Contract Act in a case easily distinguishable from the one therein dealt with. I may quote the closing words of their Lordships' judgment:

'This equitable doctrine appears to have a strong application to the facts of this case, where we have the borrower, a purdanashin lady; the lender, her own mukhtar, under the cloak of a benamidar; the security an ample one, as abundantly appears; the interest on both mortgages, especially the compound interest on the latter, exorbitant and unconscionable; and a purchaser, with full notice of these circumstances.' The facts, above set forth, would be sufficient to bring the case under Section 16 as it now stands. There is nothing to correspond with them in the present case; and as I have already stated, Section 16 has not been in the present case, and is not now, relied on.

15. The latest Calcutta case, Khagaram Das v. Rama Sankar Das Pramanik 27 Ind. Cas. 815 : 42 C.P 652 : 21 C.L.J. 79 : 19 C.W.N. 775 is of no use to respondents. It deals with the rate of interest on default: the learned judges do not base their decision outside Section 74; and Mookerjee, J., also applies Section 16.

16. Kirpa Ram v. Sami-ud-din Ahmad Khan 25 A.K 284 : A.W.N. (1903) 44 is undoubtedly an authority in respondents' favour. The learned Judges, while quoting Beynon v. Cook (1875) 10 Ch. App. 389 : 23 W.R. 531 : 32 L.T. 353 simply rely on the practice of that Court in giving relief in cases of unconscionable bargains; they give no other reason for disregarding Section 37 of the Contract Act. How far the practice of the Allahabad High Court has been affected by the peculiar circumstances of that Province, will be apparent from the judgment of Mahmood, J. in Lalli v. Ram Prasad 9 A.P 74 one of the cases quoted in Kirpa Ram v. Saami-ud-din Ahmad Khan 25 A.P 284 : A.W.N. (1903) 44 (see pages 79 and 80). The learned Judge no doubt speaks of India as (in that respect) homogeneous; but in this Presidency, as far as I am aware, neither the Legislature nor the Courts have ever treated the agricultural population as entitled to particularly indulgent consideration on the grounds indicated.

17. Mr. Ramadoss has not been able to quote any authority of this Court in his favour, although he has drawn our attention to the remarks of Sadasiva Aiyar, J., in Avathani Muthukrishnier v. Sankaralingam Pillai 18 Ind. Cas. 417 : 36 M.P 229 : 13 M.L.T. 20 : 24 M.L.J. 135 The reference to the Pull Bench in that case (to which I was a party) related solely to the applicability of Section 74 of the Contract Act to a certain class of cases. The judgment of my learned brother Sadasiva Aiyar, J., undoubtedly indicates a sympathetic desire to apply such powers of relief as the Courts possess in the broadest spirit; but I do not understand him as saying that these powers are independent of legislative enactments or the provisions of the Contract Act. The same remark applies to the judgments of the other learned Judges. Sundara Aiyar, J., on page 265 draws a very clear distinction between primary and secondary contracts which seems to me to support the views I have endeavoured to express on the present question.

18. Giving full weight and consideration to all the above decisions, I do not think a Court is justified in ignoring the clear provisions of Section 37 of the Contract Act, by arrogating to itself powers of relief not conferred by that Act, or by other legislative enactments.

19. I do not think it necessary to consider whether the principles laid down in Beynon v. Cook (1875) 10 Ch. App. 389 : 23 W.R. 531 : 32 L.T. 353 would cover the present case, if we were at liberty to apply them without regard to the provisions of the Act. I very much doubt if they would: but I prefer to rest my decision on the simple ground that respondents are not entitled to relief under this or any other, Act, and that Section 37 prevents the application of any other equitable principle.

20. As a result I would, in, supersession of the decree passed by the Subordinate Judge, give appellant a decree for what he would be entitled to under the primary term of the contract (A); that is, 37 1/2 putties of paddy valued at the market rate prevailing1 when each of the last 5 instalments fell due. Interest should run at 6 per cent, per annum from the date on which each fell due: and each party should pay and receive proportionate costs throughout.

21. The appeal will be dismissed with costs under Section 98(2) of the Code of Civil Procedure.


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