Skip to content


Baijnath Singh Vs. Shah Ali Hosain - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Judge
Reported in(1887)ILR14Cal248
AppellantBaijnath Singh
RespondentShah Ali Hosain
Cases ReferredMackintosh v. Crow
Excerpt:
confession - confession of an accused--question and answer--memorandum in english by magistrate--criminal procedure code (act x of 1882), sections 164, 364 and 533. - .....a breach as the higher rate of interest became payable before the demand and therefore before the date of breach. suppose, again as it was the case in arjan bibi v. asgar ali chowdhuri 13 c. 200, no interest is chargeable under the contract for a certain time, and that if the money be not paid within that time interest would be payable at a certain stipulated rate from the commencement of the loan. here also the case cannot fall under section 74 of the contract act. it seems to me, therefore, that in both classes of cases mentioned in the judgment of wilson, j., section 74 of the contract act is not applicable. the law that is applicable is contained in section 2, act xxviii of 1855, which says : 'in any suit in which interest is recoverable, the amount shall be adjudged or decreed by.....
Judgment:

Mitter, J.

1. (after stating the facts set out above continued).--The plaintiff has preferred this second appeal, and it is contended before us that the decision of the lower appellate Court is contrary to law. The decision upon which the lower appellate Court specially relies is that in the case of Muthura Persad Singh v. Luggun Kooer 9 C. 615. There the stipulation in the bond was that, in case of default of payment of the principal sum with interest at the rate of one per cent, per mensem on a certain date, interest should be paid at the rate of two per cent, per mensem from the date of the bond. Mr. Justice Wilson, in delivering the judgment of the Court, refers to certain cases apparently taking a contrary view, but he distinguished them from the case before him in the following way : 'The former of these cases probably dealt with a document executed before the Contract Act, but however that may be, such cases differ materially from the present. In them the agreement to pay an increased rate of interest from a future day may well be regarded as a substantive part of the contract, not as a penalty for its breach ; but where, as here, an increased rate of interest from the date of the bond is made payable on default, we cannot regard it in any other light than as a sum named in the contract to be paid in case of breach within the meaning of Section 74 of the Contract Act.' He has more fully .explained this view in a later case, namely, Mackintosh v. Crow 9 C. 689. He says in the decision in that case : Two rules of law are established by the Legislature of this country:

First, that a man is free to contract to pay any rate of interest that he chooses upon money borrowed, and the Courts must enforce it against him (Act XXVIII of 1855, Section 2), and there is nothing to hinder his agreeing with regard to the future as well as the present. He may contract to pay no interest at present, but interest hereafter ; or to pay one rate of interest now and a higher or lower rate hereafter.

Secondly.--By Section 74 of the Contract Act, when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of such breach is entitled, whether or not actual damage is proved to have been caused thereby, to receive from the party who has broken the contract, reasonable compensation not exceeding the amount so named.

This section, it will be observed, does away with the distinction, between a penalty and liquidated damages ; and this must be borne in mind in dealing with cases decided before the Contract Act, many of which turned upon this distinction. Under this section, whether a sum would formerly have been held a penalty or liquidated damages, if it be named in the contract as the amount to be paid in case of breach, it is to be treated, much as a penalty was before, as the maximum limit of damages.

2. Then he considers the question as to whether the particular case before him fell within the first or the second of the above-mentioned two rules. In the case before him the stipulation as to the payment of interest was that, in case of default, the higher rate of interest would be paid from the date of the default and not from the date of the bond. He comes to the conclusion that, where the higher rate is stipulated to be paid from date of default as in the case before him, the provisions of Section 2, Act XXVIII of 1855, would apply, but where the higher rate is, under the terms of the contract, payable from the commencement of the loan in the event of the principal being not paid on the date agreed upon, the provisions of Section 74 of the Contract Act would apply. Referring to a variety of cases, all set out in his judgment, he says that : 'In all such cases this element is present, that by the terms of the contract a sum is made payable by reason of the breach, capable of calculation at the time of the breach, and payable in all events, though in the second class of cases the payment is spread over a term. But where, as here, the contract is merely that if the money is not paid at the due date it shall thenceforth carry interest at an enhanced rate, I do not see how it can be said that there is any sum named as to be paid in case of breach. No one can say at the time of the breach what the sum will be. It depends entirely on the time for which the borrower finds it convenient to retain the use of the money. It is a fresh sum becoming due month by month, or, as the case may be, for a new consideration. And, in my opinion, the case falls under the first rule of law above mentioned, not under the second. This view of the law was acted upon by this Court in Mackintosh v. Hunt 2 C. 2.'

3. It seems to me, with deference to his opinion, that whether the interest in the case of non-payment of the principal on the date fixed in the contract is payable from the commencement of the loan, or from the, date fixed for the repayment of the loan, Section 74 of the Contract Act has no application. That section says : 'When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named.' In either of the cases mentioned above no amount is named in the contract as the amount to be paid in case of breach. It is true that on the date when the breach took place, the amount that under the contract would be due on that date to the creditor could be ascertained by arithmetical calculation, but that is not a case where it can be said that that amount is named in the contract as the amount to be paid in case of a breach. Then, again, the amount which may be ascertained by such calculations is not the whole amount which is named in the contract as the amount to be paid in case of a breach, even if it be conceded that the use of the word 'named' does not make any difference. The whole amount which, in consequence of the breach, would be payable to the creditor cannot be precisely ascertained on the date of the breach even by arithmetical calculation, because the breach continues so long as the money is not repaid after due date, and, therefore, to use the language used in the judgment of Mr. Justice Wilson, 'no one can say at the time of the breach what the sum will be.' One or two illustrations will help to throw considerable light on the question, whether a case of this description falls under Section 74 of the Contract Act. Suppose a loan is advanced on the condition that it is to be repaid on demand ; that interest at a certain rate is to be paid upon the amount borrowed if it be paid within a certain time ; but if not paid within that time but paid within another fixed time, interest is to be paid at a certain other rate, and that if, again, the money borrowed with interest be not repaid within the last mentioned time, the principal should carry interest at a certain other rate ; suppose no damand is made for the payment of the money till all these dates expire, certainly it could not be said that a case of this description would fall under Section 74, because no amount would be named here as payable in case of a breach as the higher rate of interest became payable before the demand and therefore before the date of breach. Suppose, again as it was the case in Arjan Bibi v. Asgar Ali Chowdhuri 13 C. 200, no interest is chargeable under the contract for a certain time, and that if the money be not paid within that time interest would be payable at a certain stipulated rate from the commencement of the loan. Here also the case cannot fall under Section 74 of the Contract Act. It seems to me, therefore, that in both classes of cases mentioned in the judgment of Wilson, J., Section 74 of the Contract Act is not applicable. The law that is applicable is contained in Section 2, Act XXVIII of 1855, which says : '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.' In the case before us the rate agreed upon by the parties is 24 per cent, under one set of circumstances, and double that rate under another set of circumstances. It is not a case of any sum being payable in case of a breach of the contract, but the stipulation amounts to this that two different rates of interest are payable for the loan under two different sets of circumstances. The decision of the Judicial Committee of the Privy Council in the case of Balkishen Das v. Run Bahadur Singh 10 C. 305 fully supports the view we take. In that case the defendant executed in favor of the plaintiff a solehnama, upon the basis of which a decree was passed. The solehnama stipulated for the payment of a debt due from the defendant to the plaintiff by instalments, and it provided that the plaintiff should get interest on the decretal money at the rate of 6 per cent, per mensem from the defendant. Then it further provided that, if the first instalment be not paid on the 30th Bhadon 1281 Fusli, then the decree-holder shall have the power to realize the principal with interest at the rate of one rupee percent, per mensem from the date of the solehnama. The date of the solehnama was the 29th March 1873, corresponding with the month of Choitro 1280. Therefore it is clear that the stipulation in the solehnama was that, in case of nonpayment of the first instalment on the due date, that is, on the 30th Bhadon 1281 Fusli, interest at the rate of 12 per cent. per annum was to be paid from the date of the solehnama, that is from Choitro 1280. The rate otherwise agreed upon to be paid was 6 per cent, per annum. The High Court had held, with reference to this provision, that the double rate of interest was in the nature of a penalty. Their Lordships of the Judicial Committee, with reference to this decision, say : 'independently of the fact that no appeal was preferred against that decision, their Lordships are of opinion that the construction of the decree was substantially correct, though they do not concur with the High Court that the payment of a double rate of interest was in the nature of a penalty. The solehnama was an agreement fixing the rate of interest, which was to be at the rate of 6 per cent. under certain circumstances, and 12 per cent, under others.' Then further on they say : 'It is scarcely necessary to refer to the argument that the stipulation for payment of interest at 12 per cent, per annum upon the whole decretal money was a penalty from which the parties ought to be relieved. It was not a penalty, and even if it were so, the stipulation is not unreasonable, inasmuch as it was a mere stipulation of interest at 12 instead of 6 per cent, per annum in a given state of circumstances.' It seems, therefore, that the case cited by the lower Appellate Court and all the other similar cases cited in the judgment of Mr. Justice Wilson, in the case of Mackintosh v. Crow 9 C. 689, ruling that the stipulation for the payment of a higher rate of interest in the event of the non-payment of the debt on the date fixed in the contract, from the commencement of the loan, is in the nature of a penalty, have been overruled by their Lordships of the Judicial Committee in the case cited above.

4. The decree if the lower Appellate Court will, therfore, be reversed, and that of the Court of first instance restored with costs in all the Courts.

Macpherson, J.

5. I think we are bound to follow the view taken by the Privy Council in the case referred to, and which practically over-rules the decisions of this Court to which refernce is made. I concur, therefore, in reversing the decree of the lower Appellate Court.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //