1. This is a petition by the plaintiff for an order directing the Additional District Judge of the Agency Division, Waltair, to review his judgment and decree in A.S. No. 2 of 1923, dated 30th April 1923. The suit came to the Additional District Judge on appeal from the Judicial Assistant Commissioner of the Agency Division, Vizagapatam, in a mortgage suit on a bond dated 9th May, 1901, executed by the 1st defendant in favour of one K. Perrazu, said to be the adoptive father of the plaintiff. The 1st defendant is the undivided father of the defendants 2, to 6 and the manager of the joint family. No less than 14 issues were originally framed in the case and there is in fact a petition by the defendants 2 to 6 against the findings of the learned Additional District Judge on points of adoption, limitation and the binding nature of the mortgage. These points were all given up before us, and the petition is confined to the conclusions arrived at by the learned Judge in paragraph 8 (a) to (f) of his judgment.
2. The dealings between the parties began on the 12th December, 1892 by a promissory note of that date for Rs. 600 at 18 per cent., Ex. D. This was followed by a promissory note of 4th February, 1893, Ex. D-2 for Rs. 600 at 12 per cent., and also on the 7th May, 1895, Ex. D-1 for Rs. 1,000 at 12 per cent. Nothing having been paid on any of these promissory notes, they were consolidated into a mortgage on the nth November, 1895, Ex. L for Rs. 6,000 at 10 1|8 per cent. payable on the nth November every year, in default interest to be paid compounded, the whole principal and interest being repayable on the 11th November, 1897; and if it is not paid within that time interest shall be at 12 per cent. compound. Nothing having been paid under this, the further suit mortgage, Ex. S, dated 9th May, 1901 for Rs 11,000 was executed at Re. 1-0-6 or 12 3/8 per cent. compound interest. Nothing having been paid for this mortgage the plaintiff instituted the suit for no less than Rs. 1,07,000 odd. The learned Additional District Judge evidently impressed, I think, with the way in which this debt has accumulated, has reduced the interest payable so as to make the whole amount due from the defendants Rs. 45,000 odd. The learned Additional District Judge in paragraph 8 (a) to (f) considers whether the bargain was harsh and unconscionable based on undue influence by the mortgagee or the inherent harshness of the bargain. It may be said at once that no case of undue influence was proved, and in fact I think it is fair to say that the' contention of the parties and their counsel was not really focussed on this point of excessive interest until the last moment. Their attention was concentrated on that date on the more important points of adoption, limitation, etc., and Mr. C. Sambasiva Rao, Barrister-at-Law, who was present at the hearing in the Additional District Court,has stated to us that it was only in the later stages in the hearing of the appeal that this point was raised and was pressed on the attention of the learned Judge owing to counsel and the vakils in the case having received a copy of the Privy Council decision in Ram Bhujwan, v. Nathu Ram (1922) 44 MLJ 615 which will be presently noticed. The suit had a curious history. It began as O.S. No. 41 of 1913 before the Subordinate Judge of Cocanada, some of the properties being situated in the Godavari District and some in the Agency. The plaintiff got a decree and costs. Execution was taken of the properties within the ordinary jurisdiction and a small sum was recovered. As for the balance due the decree was transferred to the Agency Judge for execution. It was held, however, that a fresh suit must be brought in the Agency Court. So O.S. No. 7 of 1921 was filed in consequence. The learned Judges held in Ram Bhujwan v. Nathu Ram (1922) 44 MLJ 615 that where, as here, the manager of a Hindu family borrows money on the mortgage of a family property, it must be proved that there was necessity to borrow at the rate contracted for and secondly, that it was not unreasonable to borrow at some such high rate and upon such terms. The learned Judge took these propositions from the judgment in Ram Bhujwan v. Nathu Ram (1922) 44 MLJ 615 where they are quoted from Nawab Nazir Begam v Rao Raghunath Singh ILR (1919) A 571 : 36 MLJ 521 and this is the law report referred to by Mr. C. Sambasiva Rao in his statement to us from the bar. The learned Judge proceeds : ' The main thing is to see its results show that the terms taken as a whole were harsh and unconscionable.' On the other hand the Privy Council in a case reported in Lala Balla Mal v. Ahad Shah (1918) 35 MLJ 614 say that it is misleading to have regard to the result alone. Their Lordships say : '' It is not enough--indeed, it is misleading--to look at the result alone. A borrower who obtained a loan secured by a promissory note on a quite reasonable basis, by neglecting to pay the note at maturity, further neglecting to pay the accruing interest for the several years following, and then giving a renewal note for the original debt plus the capitalised interest, could produce a result which might at first sight appear oppressive, and yet there would be nothing harsh or unconscionable in the creditor's demand, since the added interest only accumulated while he forebore to enforce the payment of the sums from time to time due to him. 'As to this the learned Judge himself says : 'There is no suggestion that the mortgagee wilfully allowed default so as to take advantage of an improvident man and to pile up debt swiftly; on the other hand it is clear that the mortgagee warned the mortgagor of the rapidity with which the debt was swelling.' The learned Judge is obviously swayed by the hardship on the younger sons losing practically the whole of their estate owing to the improvidence of their father, not in borrowing the money for interest as it was in fact admitted or found to exist, but in failing to pay interest as it fell due and thereby causing payment of compound interest to become necessary.
3. Ordinarily speaking it is extremely doubtful whether the sons would have been allowed to raise this plea at all. The issues taken as regards this point are issues 3 and 11. The third issue is : Is the suit mortgage debt binding on the defendants 2 to 6? It is contended for the sons that this issue opens the whole point of the liability of sons for the father's debts created by the mortgage. This point is considered at length by the learned Judge in paragraph 8 (a) to (f) and he agrees with the Lower Court that the mortgage is a valid charge on the joint family property. The question that it lay on the plaintiff to show that the father could not raise money at a lower rate is not considered in that part of the judgment and it is perfectly clear to me that neither side at the hearing of the appeal contemplated that Issue No. 3 would admit that discussion at all. The only other issue properly referrable to the point is Issue No. 11, whether the interest claimed is usurious and penal. On an examination of the respondent's grounds of appeal to the Lower Appellate Court, the only grounds urged are that the enhanced rate of interest provided for in Ex. L and carried into Ex. S is penal and unconscionable and that the Lower Court erred in thinking that it had no power to give relief for the usurious and preposterous claim. Cases have been cited to us by the learned vakil for the respondents to show that the pleadings in this country are to be leniently considered. He contends that practically any objection to the transaction can be made to raise this point as to the binding nature of the interest claimed. He points for example to Gangapershad Sahu v. Maharani Bibi ILR (1884) C 379. There the issue was whether the defendant is bound to pay off the debt. It was held that that enabled the question of the amount to be raised. I cannot, speaking personally, see why in this case the issue could not have been clearly and distinctly taken. One view of it was certainly advanced in Issue No. 11, but Mr. S. Varadachari for the respondents quite frankly says that their case here is not for relief under Section 74 of the Contract Act. He based his case entirely on the Hindu Law. I have carefully considered all the cases that we have been referred to. The principle laid down in Nazir Begam v. Rao Raghunath Singh ILR (1919) A 571 : 36 MLJ 521 is that where there is no evidence on either side, i. e., as to the necessity for borrowing at the particular rate. Their Lordships of the Privy Council would relieve where ' the thing speaks for itself.' This is the case previously quoted by the later decision of their Lordships in Ram Bhujwan v. Nathu Ram (1922) 44 MLJ 615 . Their Lordships holding that, although there may be necessity to borrow, it is open to the defendants to show that there was no necessity to borrow on the onerous terms of the mortgage. In that case the rate was Rs. 2-8-0, 30 per cent., simple, and in default Rs. 3-2-0 or 37 1/2 compound. So it seems to me that before any question of reduction of the amount in question can be raised, there being no evidence on either side, we must see if 'the matter speaks for itself, ' that is to say, if it is obvious from the terms of the document that an unfair bargain as against the sons , has been concluded by the father. The Privy Council cases to which we have been referred, nearly all concern a rate which is obviously very high. In the case just referred to in Nazir Begam v. Rao Raghunath Singh ILR (1919) A 571 : 36 MLJ 521 the sum originally borrowed, Rs. 398, became three lakhs. In Ram Radha Kishun v. Jag Sahu (1924) 47 MLJ 329, another Privy Council case, the rate was 24 per cent. compound with half-yearly rests. Their Lordships observe there that it was evident on the face of the document that the interest charged was far in excess of the commercial rates. In Ram Bhujwan v. Nathu Ram (1922) 44 MLJ 615 the interest was 36 per cent. compound with quarterly rests. Nand Ram v. Bhupal Singh ILR (1911) A 126 refers to a very high rate of interest, the original sum borrowed being Rs. 80 at 27 per cent. compound. In Manna Lal v. Kant Singh (1919) 13 LW 652 the Privy Council concurred in altering 18 per cent. compound to 18 per cent. simple. In Rama-chandra Prasad v. Mahabir Prasad Singh (1921) 64 IC 247 the Patna High Court held that an agreement to pay compound interest on failure to pay simple is not invalid and does not fall within Section 74 of the Indian Contract Act. It will, I suppose, be agreed that each case must be judged by its own circumstances. In the present case, we have a series of prior transactions between the parties at 12 per cent. and 18 per cent. simple. We have Ex. L with 10 1|8 per cent. simple and in default 12 per cent. compound. Nothing having been paid for over a period of nine years to the lender, the final transaction, Ex. S, which consolidates all the others, reserves a rate of interest at 12 per cent. compound there being no increase on that rate in case of default. It is all very well to consider the case of hardship of the family, but they presumably had the benefit of the amounts borrowed. They have also had what benefit there might be in delaying the payment of interest and principal. That this has now aggregated to a very large sum there is no doubt. But, on the other hand, the interests of the lender who has been kept out of his money for a long series of years have also to be considered and, as stated, there is no evidence that he took any undue advantage of his borrower. On the other hand, he warned him that the sum due was very rapidly growing. 1. cannot agree that on the face of the document or that the thing of itself speaks of an unjust or unfair transaction as far as the sons are concerned. What the commercial rate of borrowing referred to by their Lordships of the Privy Council in Ram Bhujwan v. Nathu Ram (1932) 44 MLJ 615 may be in Cocanada we have no means of knowing. But it is not an unfair inference from the facts as we know them that the lender was not willing to wait for his money any longer unless the borrower consented to pay 12 per cent. compound interest which he had already bound himself to pay by his default in the repayment of the sum borrowed under the previous mortgage, Ex. L. On the best consideration 1 can give to both the facts and law of this case, I am bound . to say, I think, that the learned Additional District Judge was wrong in the view he took of this transaction as far as it affects the sons. In my view the petition must be allowed with costs and the decree of the Additional District Judge set aside and the First Court's decree restored.
4. C. M. P. No. 3092 of 1923 : This is a petition by the defendants 2 to 6 with regard to the question of necessity of borrowing and its binding character on the sons and also raises the question of limitation and adoption which were not raised before us. It must be dismissed with costs.
5. The defendants will have six months from this date to redeem.
6. Wallace, J. in C. M. P. No. 2561 of 1923 : I agree. I do not quarrel with the principle that the manager of a joint family, whether the father or not, is not entitled in law to barrow money at an exorbitant rate of interest unless there was necessity for such a rate, and that, if the rate of interest is excessive, the onus will be on the lender to show that there was necessity for such an onerous rate. This involves two principles : firstly, that the rate must be shown to be onerous; and, secondly, that there was pressing necessity at the time of the loan for such an onerous rate. 1 fail to see how the actual result brought about by the mounting of interest, if not paid, to a crushing figure can affect the second principle. If the manager, bona fide, was in urgent necessity for money and could not get it at a lower figure, then he was in law justified in borrowing at that figure, and the aftermath of that transaction is irrelevant to the consideration of whether he was justified or not. The onerous nature of the interest would only be justified reasonably if the necessity for the money at the time of the loan was really urgent. The more urgent the need the less unjustifiable a high rate of interest. Both questions are, therefore, questions of fact to be decided by the circumstances of the case. This is the principle approved by the Privy Council in the case quoted by my learned brother reported in Lala Balla Mal v. Ahad Shah (1918) 35 MLJ 614
7. Hence it appears to me that 'a Court has no right to presume without evidence that any particular rate of interest is onerous, at least without affording the plaintiff an opportunity of rebutting that view. A rate prima facie harsh may, considering the nature of the security offered, its dubious title or its exigious nature, be perfectly reasonable when the facts are known. Therefore it seems to me that normally the Courts are not entitled to presume anything either way without evidence and that these questions are entirely matters of proof in the circumstances of each case. Those attacking the transactions must first show prima facie that the rate of interest is unnecessarily high for the circumstances of the case. It may be that in certain cases the original rate of interest is prima facie so excessive that proof is practically unnecessary and that the plaintiff must know that it is his duty to show necessity for it. But in other cases it may be that the rate, although high, is not so high that the plaintiff should reasonably take it for granted that he has to explain it, even though the Court does not call upon him to do so. In such a case he cannot reasonably be mulcted if he does not explain it. It seems to me not proper that, when the trying Court has not considered it necessary to call on the plaintiff to explain the rate of interest, and no issue has appraised him that it is necessary for him to explain it, Courts of Appeal should interfere without giving him an opportunity to explain it, unless the rate is so monstrous as to be unconscionable in any conceivable set of circumstances, that is, so harsh that no explanation whatever would stand any chance of acceptance by the Courts. Under some such principle I would group the Privy Council cases which have been quoted before us. They resolve themselves into three classes : firstly, where there is a finding of the Lower Appellate Court, that is, the High Court, a finding of fact that the rate of interest was excessive and the Privy Council saw no good reason to disturb it, such as Gangapershad Sahu v. Maharani Bibi ILR (1884) C 379; Harro Nath Rai Choudhri v. Randhir Singh ILR (1890) C 311; Nand Ram v. Bhupal Singh ILR (1911) A 126, Nazir Begam v. Rao Raghunath Singh ILR (1919) A 571 : 36 MLJ 521; AzizKhan v. Duni Chand 23 C W N 130, and Manna Lal v. Karu Singh (1919) 13 L W 652 ; secondly, the cases in which the Privy Council has reduced the rate of interest awarded by the High Court, such as Ram Bhujwan v. Nathu Ram (1922) 44 MLJ 615 and Ram Radha Kishun v. Jag Sahu (1924) 47 MLJ 329 in which they restore the Subordinate Judge's finding, that is, the trying Court's finding on the rate of interest. In the former case the initial rate was 36 per cent. compound interest and in the latter it was 24 per cent. compound interest, rates which the trying Court had already found excessive. In the former case the Subordinate Judge had, on the question of fact, held that the fair commercial rate was 12 per cent. simple interest. The third class of cases is those in which the Privy Council has increased the rate of interest awarded by the High Court and restored the rate of interest awarded by the trying Court, such as Lala Balla Mal v. Ahad Shah (1918) 35 MLJ 614 . In no case, therefore, has the Privy Council decided ' in the air, ' if I may use that expression, without a finding of fact by one or the other of the Lower Courts, that finding of fact being based also not ' in the air ' or on an appeal ad miseri cordiam but on the circumstances surrounding the transaction.
8. In the present case, the Judicial Assistant Commissioner, the trying Court, has considered whether the interest could be called usurious or penal and he has found that it could not. The Additional District Judge has given a very halting judgment on this point, based merely on an ad miseri cordiam appeal by the sons, and, without considering whether the rate was at the time of the bond excessive in the circumstances of the case, has based his decision entirely on what has resulted purely from the father's failure to pay anything whatever towards either interest or principal, which has caused the interest to mount up to a very large sum.
9. I should have preferred to send the case back for a finding of fact on this matter of the alleged excessive rate of interest, but I am not prepared to dissent from the order proposed by my learned brother, considering the long delay that has already occurred in the trial of this case, which is chiefly due to the obstructive tactics of the defendants, to which again is due very much of the swelling of the interest. A further remand would have the further result of prolonging the litigation and swelling the interest still more. As has already been pointed out by my learned brother in neither of the Lower Courts was any issue taken on this matter, nor was any plea put forward of any undue influence, while the bond in question was taken in renewal of loans which had run for several years without payment of a pie either for interest or principal. I am not prepared to hold that in the present case the rate of interest is on the face of it excessive or unconscionable.
10. Under these circumstances I agree with my learned brother that the Additional District Judge was not justified in relieving the sons of their obligations to pay the debt, since they have not shown that the interest was unduly high in the circumstances of the case and it was, therefore, not necessary for the plaintiff to prove necessity for such a rate of interest.