1. This appeal arises out of a suit on a simple mortgage in which the plaintiff claimed Rs. 1,500 on a mortgage bond executed on 15th Falgun 1320 corresponding to about 1st March 1914 by defendant 1, and the predecessor of defendants 2 to 5. The amount borrowed was Rs. 200 payable in six instalments running over six years from .1914-1919 and it was stipulated that in default of payment of any one of these instalments the mortgagors would pay interest on the defaulted instalment at the rate of one pan of betelnut par rupee per month. The evidence on record shows that a pan of betelnut at the time when the contract was entered into was, worth from 2 annas to 4 annas. The interest accordingly chargeable on a defaulted instalment was under the bond from 150 to 300 per cent. The plaintiff however in the suit charged interest at 1 anna per rupee per month, that is 75 per cent per annum. There were various defences on the merits but we are concerned with one which relates to a question of law, that the plaintiff is not entitled to claim interest at the bond rate or even at the rate claimed in the suit, under Section 74, Contract Act. The Subordinate Judge in the trial Court hold that the stipulation was not by way of penalty and. decreed the suit in full. The learned District Judge on appeal held that it was doubtful if the stipulation about interest could be brought within the strict wording of Section 74, Contract Act, but as the rate of interest was certainly extortionate ha in the exercise of his equitable discretion, reduced it to 25 per cent per annum.
2. The bond shows that the mortgagors borrowed 50 maunds of paddy worth Rs. 200 at Rs. 4 a maund. One of the defences was that the paddy at the date of the bond was selling at the rate of Rs. 2 or Rs. 2-4-0 a maund and the price on the data on which the bond was executed was fixed at Rs. 4 in consideration of future interest and profit to the mortgagee. The trial Court upon the evidence on the record found that the defendant had failed to prove that the price of paddy was at the data of the bond less than Rs. 4 a maund. It accordingly held that the bond was for the proper price of the quantity of paddy lent. The defendants-were appellants in the lower appellate Court and it does not appear that this question was raised before the District Judge and therefore we have to accept the finding of the trial Court that the bond was executed for the proper price of the paddy lent.
3. We are thus invited to consider in this case the question as to whether the stipulation for interest is in the nature of penalty within the meaning of Section 74, Contract Act. We are not concerned with cases where there is stipulation for a double rate of interest, namely, one rate of interest if the amount lent is paid within a certain period and a higher rate if it is not paid within that period, either from the date of the bond or the date of default. On this question there was considerable divergence of opinion, some cases holding that if the increased rate of interest was payable from the date of the bond it was penalty under Section 74 as it stood before its amendment in 1899, some others holding that where the increased interest was payable from the date of default it did not coma within the wording of that section. Mackintosh v. G. C. Gore  9 Cal. 689. In this state of the case law the legislature intervened and in 1899, Section 74, Contract Act, was amended by insertion of certain words in the body of the section and an explanation. In the body of the section the words added ware ' if the contract contains any other stipulation by way of penalty.' The explanation added was to the effect that ' a stipulation for increased interest from the data of default may be a stipulation by way of penalty.' The amendment in 1899 did not touch the question before us, namely, whore originally no interest is stipulated but it is provided to run from the data of default. The question was however considered in several cases before the amendment of 1899. In my judgment the law, so far as this question is concerned, was left in the state in which it was before the amendment for it did not interfere with the law as understood before it with reference to a contract ?where interest was not chargeable for a certain period and was chargeable only on default. I cannot persuade myself to hold that the explanation added by the amending Act of 1899 covered a ease of this nature, for it clearly says that a stipulation for increased interest from the date of default may be a stipulation by way of penalty. In a case like the one before us the interest charged is not 'increased' interest but it is charged for the first time from the date of default and there is only one rate of interest whereas the explanation contemplates two rates, one lower and the other higher. In the case of Najaf Ali Khan v. Muhammad Fazal Ali Khan A.I.R. 1828 All. 255 I find that one of the learned Judges of the Allahabad High Court took the view that the explanation covered a case like the present. But when the law speaks of a particular kind of contract it is not permissible to say that it includes other contrasts also but not of the same nature, on the principle of expressio unius est exclusio alterius.
4. The question of no interest and of subsequent interest from data of default was, so far as the reports go, was raised as early as 1869 before the Bombay High Court. In the case of Motaji v. Husen  6 Bom. H.C.R.A.C. 8 the facts were that the promissory note after stipulating for payment by monthly instalments without interest provided for interest at 1 anna per rupee per mensem in default of payment of any one of the instalments. The plaintiff admitted in his evidence that the amount for which the note had been taken included interest in advance for the period to which the instalments extended. On those facts the Court was of opinion that 'the increased rate of interest is penalty and may be relieved from.' This case accordingly is not of much assistance in deciding the question before us. It was followed in the same High Court in the case of Pavanagaji v. Govinda Ramji  10 Bom. H.C.R. 382 where a promissory note stipulated that, in default of payment of principal within three months after date, interest should run at the rate of 75 per cent per annum. The stipulation as to the payment of interest was held to be a penalty. The bond there was for Rs. 27 and it was admitted that a portion of the amount for which the bond was executed included some interest for the amount actually lent. That case too is not of much assistance in deciding the present question. A similar view was taken in the case of Banshidhar v. Bu Ali Chun  3 All. 260 where the contract was to repay to the plaintiff a loan of Rs. 50 on a certain date and in default to pay interest at Re. 1 per day, that is, at the rate of 720 per cent per annum. It was held that looking at the entire contract the stipulation for interest was in the nature of a penalty. But in a subsequent case, Kunj Behari Lal v. Ilahi Baksh  6 All, 64 the interest stipulated to be paid on default of payment without interest on a specified date was Rs. 24 per cent par annum and it was held to be not penal.
5. Coming to our Court the case that is most in point is the case of Arjan Bibi v. Asgar Ali Chowdhury  13 Cal. 200. There the stipulation was for repayment of Rupees 1,000 without interest within two months and 15 days and in default interest was charged from the date of the bond at the rate of 2 annas per rupee per month or 150 per cant per annum, It was there held that the stipulation was one for payment of interest within the meaning of Section 2, Interest Act 28 of 1855 and did not fall within Section 74, Contract Act. This case followed Mackintosh v. Grow  9 Cal. 689 which was however a case of two rates of interest. The view taken therein about the application of the Interest Act was questioned and dissented from in subsequent cases. That decision however is not of much assistance to us in this case because there the interest payable on default was made to run from the data of the bond.
6. Before the decision by their Lordships of the Judicial Committee of the Privy Council in Rani Sundar Koer v. Rai Sham Kishen  34 Cal. 150 it was firmly established that where interest was charged originally at one rate and at an increased rate on default to run from the data of the bond it wag in the nature of penalty. But where the interest was made to run from the date of default it was not a penalty. In the case of Rani Sundar Koer the bond stipulated that additional interest would be paid by the mortgager from the date of the execution both by increase of the general rate and by increased rate of compound interest and their Lordships dealing with the question as to whether the stipulation was by way of penalty observed:
The Indian Courts have invariably held that where as in the present case the stipulation is retrospective and the increased rent runs from the date of the bond and not merely from the , date of default, it is always to be considered a penalty, because an additional money payment in that case becomes immediately payable by the mortgagor. Their Lordships accept that view of the statute and it is unnecessary to discuss under what circumstances increased interest running only from default should or should not be considered a stipulation by way of penalty.
7. The question left open by their Lordships of the Judicial Committee was whether a stipulation for increased interest from the data of default should or should not be considered a stipulation by way of penalty. The question now before us was not exactly before their Lordships. This decision, it may be noted, was in 1906 long after Section 74 was amended in 1899. Sunder Koer's case  34 Cal. 150 and several other cases of the Judicial Committee, such as Raghu Nath Prasad v. Sarju Pershad A.I.R. 1924 P.C. 60 and Aziz Khan v. Duni Chand A.I.R. 1918 P.C. 48 lay down that in a matter where the parties are at arms length and voluntarily enter into a contract the question of equitable consideration does not arise unless the Court is prepared to find facts bringing the case under Section 16, Contract Act. The consideration upon which the learned District Judge in appeal in this case has interfered with the decree of the trial Court which he calls 'equitable consideration' is not justifiable.
8. The question now before us requires examination of some recent decisions. In the case of Vel Chand Chhaganlal v. Flagg  36 Bom. 164 the mortgagor received Rupees 2,440 on a bond which he executed for Rs. 5,000, the balance of the amount of the bond being partly made up of interest calculated on a previous loan. The amount of the bond was made repayable in monthly instalments of Rs. 50 for the first 12 months and after that of Rs. 100 for another 26 months and the balance at the end of the 39th month. In ease of default in payment of any instalment the whole amount of the bond was to become due at once and the mortgagor agreed to pay interest at the rate of 5 per cent per month or 60 per cent per annum. It was held that both the addition of interest in anticipation in the amount of the bond as also the stipulation for enhanced interest at 60 per cent per annum were penal and therefore not enforceable in full under Section 74, Contract Act. This case is no authority for deciding the question before us, for the facts there were different. In the case of A. Muthu Krishna Iyer v. Sankaralingam Pillai  36 Mad. 229 the plaintiff sued on an instalment bond for Rs. 71 payable at half a rupee per month in 142 monthly instalments. In default the bond provided that the defendant should pay interest at 3 pies per diem on the 8 annas and the total amount of all the remaining instalments due would become at once payable with interest at 190 per cent per annum. The principal judgment of the Pull Bench was delivered by Wallis, J., who after discussing the previous authorities observed:
There appears to me to be no substantial difference where, as in the case referred to us, no interest at all is payable until default. In either case there is a stipulation, on default in Payment of the sum of money...originally stipulated for, that the debtor should be liable to pay a further sum by way of interest at an exorbitant rate from the date of default and that appears to me to be sufficient to make the stipulation penal in a very wide sense in which 1 think the word is used in the section.
9. The gist of that decision is that either in the case of two rates of interest or in the case of no interest for some time and interest from the date of default the stipulation is only penal if the interest charged is exorbitant. In the case of Khagaram Das v. Ram Sankar Das Pramanik  42 Cal. 652 the bond was for a sum of Rs.1,500 a considerable portion of which was interest on the original sum advanced by way of loan and the promissory note carried interest at 570 per cent per annum from the date of default. There was a stipulation that the sum of Rupees 1,500 would be repaid in ten instalments spread over five years and no interest was payable up to the due date, but in default the rate of interest was fixed at 75 per cent per annum and there was a further stipulation that in case of default in payment of any instalment the entire sum due would become at once payable and carry interest at the above rate. It was held that the stipulation was by way of penalty inasmuch as it made the enforce sum payable on the date of default together with interest thereon and the interest chargeable on default was exorbitant. It was further held that the facts of that case made it clear that the creditors were in a position to take advantage of the embarrassment of their debtors and the bargain was unconscionable and therefore attracted the operation of Section 16, Contract Act. Mookerji, J., after an elaborate consideration of the cases on this point observed:
We adopt the principle, consequently, as fairly deducible from the modern decisions, that the Court is competent to grant relief whenever the rate of interest appears to the Court to be penal.
10. From a review of the case law it would appear that when money is lent payable without interest within a certain period and to carry interest on default the stipulation is not penal unless the rate is exorbitant. This view is justifiable for if the rate is exorbitant it comes within the words 'if the contract contains any other stipulation by way of penalty' added to Section 74 in 1899, for the Court would then be entitled to infer that the high rate of interest was put not as a matter of actual contract between the parties but for the purpose of either accelerating payment of the original loan or penalizing the borrower for not paying within the time specified. Such a contract therefore contains a stipulation which may fairly be regarded as penalty.
11. It does look strange that there should be a distinction between a case where interest is charged at an exorbitant rate from the date of the bond and that in which it is chargeable on a subsequent date. In the first case the stipulation is enforceable unless it comes under Section 16, Contract Act. In the latter case, however generously the lender may have acted towards the borrower or even if the debtor may have of free will agreed to pay at that rate, the stipulation is to be considered penal. But such is the policy of law.
12. The following propositions are fairly deducible from the wording of Section 74, Contract Act, as it now stands and the authorities upon it where the bond stipulates that the loan will carry no interest for a period but in default of payment during that period interest is to be charged from the date of default:
(1) Where interest is to be charged from the date of the bond, whatever the rate may be, the stipulation is in the nature of penalty:
(2) Where interest is to be charged from the date of default at the usual, ordinary, contract rate the stipulation is not in the nature of penalty. (This is not of much importance as if interest is charged at the ordinary rate the Court will not interfere with the contract even if the stipulation is held to be penal).
(3) Where the loan includes the sum advanced and future compensation or past interest due the stipulation for payment of interest at any rate from the date of default is penal.
(This is in accordance with the principle underlying Illus. (g), Section 74, added by the amending Act of 1899).
(4) If the rate of interest is exorbitant the stipulation is penal.
13. The contract that we have been called upon to consider in this case comes under Rule 4. It has been found that the bond was for the proper price of the paddy lent to the mortgagors. The rate of interest is however 150 to 300% though the plaintiff charged only 75% which too has been considered high: see Illus. (d), Section 74, Contract Act. It does not say that in default of any one instalment the entire amount of the bond would become due, but the rate of interest chargeable under the contract and actually charged is exorbitant enough to make the stipulation penal which may be relieved against.
14. In this view of the matter I think the Court is entitled to reduce the rate of interest though not on the ground on which the learned Judge has done so but on the express wording of Section 74, Contract Act. The interest allowed by the lower appellate Court is not, in the circumstances, too low and we therefore affirm the decree of the learned District Judge. In the result the appeal fails and must be dismissed with costs.
15. The only point involved in this appeal is as to the rate of interest which the plaintiff, the appellant before us, is entitled to recover. Other issues were raised in the suit as to the genuineness of the bond and the passing of the consideration, but those issues have been decided in favour of the appellant, and, as they involve pure questions of fact, the concurrent findings thereon in the Courts below must be accepted and cannot be disturbed in second appeal.
16. The question as to interest has arisen in this way. The plaintiff-appellant as purchaser of the right of the mortgagee (defendant 9) sued on a registered bond dated 15th Falgun 1320 B.S. executed by defendant 1 and the predecessor of defendants 2 to 5 his case being that it was stipulated that Rs. 200 should be paid in instalments from 1321 to 1326 B.S. and that interest should be paid in default of payment of any instalment. The interest claimed was at the rate of 75 per cent though the rate specified in the bond was 150 par cent.
17. Defendants 7 and 8, described as subsequent purchasers of some of the mortgaged properties, contested the suit, and in addition to the issues on the merits referred to above, pleaded that the stipulation in the bond was by way of penalty and was not enforceable. The trial Court found upon this issue in favour of the plaintiff and gave a decree for the full amount claimed with costs and interest on the principal amount at the bond rate.
18. On appeal by the defendants that decision was modified by the learned District Judge of Noakhali who while expressing doubt as to whether the stipulation about interest could be brought within the strict wording of Section 74, Contract Act, as only one rate of interest was mentioned in the bond, held that the rate of interest was extortionate and reduced it to 25 per cent per annum.
19. It is argued on behalf of the appellant that the learned District Judge erred in law in not decreeing the interest as stipulated in the mortgage bond. The question is whether such a stipulation comes within the terms of Section 74, Contract Act. The first explanation in that section says that:
A stipulation for increased interest from the date of default may be a stipulation by way of penalty,
and Illus. (d) cites the following example:
A gives B a bond for the repayment of Rs. 1,000 with interest at 12 per cent at the end of six months, with a stipulation that in case of default, interest shall be payable at the rate of 75 per cent from the date of default. This is a stipulation by way of penalty, and B is only entitled to recover from A such compensation as the Court considers reasonable.
20. Now in this ease no interest was to be paid if the instalments were paid on the due data, and it was only in the event of failure so to pay them that interest was to be paid, the rate stipulated being 150 per cent per annum, although the plaintiff reduced his claim to 75 per cent. If the bond had provided for repayment of the instalments with interest say at 10 or 12 per cent with an increase of that rate to 75 per cent in the event of default it could not presumably have been questioned that the stipulation comas within the purview of the section unless there were special circumstances to justify such a rate of interest. It is argued however on behalf of the appellants that as only one rate of interest is mentioned in the bond, the case is not covered by the section, and that that being so, the Court of appeal below ought to have enforced the contrast strictly under Section 2, Act 28 of 1855. That section provides that:
in any suit in which interest is recoverable, the amount shall be adjudged or decreed by the Court at the rate, if any, agreed upon by the parties and, if no rate shall have been agreed upon at such rate as the Court shall doom reasonable.
21. The argument advanced on behalf of the appellants appears to me to be fallacious for, if, where two rates of interest are mentioned, a stipulation to increase the rate of interest from 12 to 75 par cent on default of due payment of the instalments be held to be a penalty, a stipulation, such as we have in this instance, to substitute what is prima facia an exorbitant rate of interest in place of no interest at all must,surely be deemed a fortiori to be a penalty on the principle that the greater includes the less. Can the position of the plaintiff be held to be any better by reason of the fact that ha has not stipulated for an increase of interest, but that he has stipulated for 159 per cent in lieu of no interest at all ?
22. The same contention that the Court is fettered by Act 28 of 1855 was put for ward in a number of cases referred to by Mookerjee, J., in Khagaram Das v. Ram Sankar Das Paramanik  42 cal. 652 and was overruled one of the grounds given being that, if any other view ware taken, there would be no limit to the extravagant and extortionate extant to which the most usurious claims might not be carried in the name of interest. Other cases were also referred to in which the opposite view was taken but Mookerjee, J., observed as follows:
Notwithstanding the small group of oases to which we have referred, where a restricted view was taken of the authority of the Court to relieve against a penalty, the tide has turned back, and the more modern cases repudiate the doctrine that any rate of interest however exorbitant, cannot be deemed to be penal.
23. He then went on to refer to the case of Miajan Patari v. Abdul Jubbar  10 C.W.N 1020 where there was a stipulation for payment of interest at the rate of 75 per cent from the date of the bond on failure to pay the principal sum in two instalments on specified dates, it being held in that case that the stipulation was in the nature of a penalty. That case was very similar to the present one as the instalments were to be paid without interest, and the rate of interest payable in default was 75 per cent. There is this difference in the two eases that in that case the interest; was to be paid from the date of the bond whereas in the present case it was to be paid from the date of default only.
24. In support of the argument that Section 74, Contract Act, does not apply where only one rate of interest is mentioned in the bond and that the Court is bound by Section 2, Act 28 of 1855, reliance has been placed upon the judgment of Mitter, J., in the case of Arjan Bibi v. Asgar Ali Choudhuri  13 Cal. 200. That case was referred to by Mookerjee, J., in his judgment in the case to which I have referred above, and was dissented from. In my opinion |we ought to follow the later decision and hold that the stipulation for interest at 75 per cent and a fortiori at 150 per cent is penal unless there are special circumstances which can be deemed to (justify so high a rate of interest. For S.74, it is to be observed, says ' may be a stipulation by way of penalty' so that a discretion is conferred upon the Court. That is so seems to be borne out by certain remarks made by their Lordships of the Judicial Committee in the case of Ram Sundar Koer v. Sham Krishen  34 Cal. 150. 'The 'explanation' to Section 74, Contract Act' they observe:
as amended says that a stipulation for increased interest from the date of default may be a stipulation by way of penalty. The Indian Courts have invariably held that where (as in the present case) the stipulation is retrospective, and the increased interest runs from the date of the bond and not merely from the date of default, it is always to be considered a penalty, because an additional payment in that case becomes immediately payable by the mortgagor. Their Lordships accept that view of the statute, and it is unnecessary to discuss under what circumstances increased interest running only from default should or should not be considered a stipulation by way of penalty,
25. The last part of this passage indicates that there may be cases in which increased interest running only from default may be a stipulation by way of penalty, and, as I have already said, if an increase in the rate of interest is penal, a substitution of an exorbitant rate of interest in place of no interest must also be penal.
26. For the reasons given I am of opinion that the rate of interest sued for in this case comes within Section 74, Contract Act, and must be held to be penal notwithstanding the fact that only one rate of interest is mentioned in the bond. An ingenious argument was advanced on behalf of the appellant with the object of showing that in the particular circumstances of this case that rate ought not to be doomed to be penal. It is true, it is said, that 150 per cent, or even 75 per cent per annum may at first sight appear to be exorbitant and therefore penal, but, if the circumstances are taken into consideration, it will be apparent that in reality it was not so. The terms of the loan were generous providing for repayment of the principal in equal instalments extending over a period of no less than six years' without any interest if payment was made on the due dates. Interest was only to be paid in the event of default and then too not from the date of the bond but from the date of default. Therefore it is argued, if the defendants failed to take 'advantage of these liberal terms and did not pay up within the time stipulated they have only themselves to blame and the rate of interest claimed ought not to be considered to 'be penal. Even however if allowances are made for those circumstances interest at 75 per cent must I think be deemed to be in the nature of a penalty, and that being so it was open to the Court to give relief by reducing the rate of interest from 75 per cent to 25 per cent. I agree therefore that the appeal fails and must be dismissed.