1. The question which arises in this appeal is whether the compromise decree contained a contract involving a penalty within the meaning of Section 74 of the Contract Act. The learned Judge in the Court below held that he was unable to go behind the terms of the decree in which he appears to be in error. He also held that there was nothing unlawful or in the nature of penalty in the stipulations of the contract which was embodied in the decree.
2. The terms of the decree, as stated in the judgment, which are admitted to be contract by the appellant, are as follows: It is ordered that out of the amount claimed and costs, a decree be passed for Rs. 400 after deducting Rs. 503, remitted by the plaintiff, and that the defendant do pay the said sum according to the instalments stated below. In default of payment of any instalment, the whole amount shall become payable at once together with the sum remitted.' So far, in our opinion, there is no penalty whatever. The case is precisely an ordinary one of discount for prompt payment, the debt due being Rs. 908 and Rs. 508 being remitted with a stipulation that Rs. 400 should be paid in eight instalments of Rs. 50 each without any interest, thus relieving the debtor of the exorbitant interest of 36 per cent per annum, which was stipulated for in the original loan. But we find that in addition to this stipulation, which is one merely restoring the original principal if the conditions of remittance are not fulfilled, there is a further provision that interest shall be paid on the whole amount at the rate of half anna per rupee per mensem, that is, 36 per cent, per annum. Now this strictly speaking does come within the purview of Section 74 of the Indian Contract Act, and we may say that having regard to the unconscionable nature of the original bargain we do not think it necessary to assess any compensation in lieu of this interest which will be entirely expunged from the decree. But notwithstanding the view we take of the unconscionable nature of the original bargain we must hold that it is not within our competence to treat the restoration of the admitted debt to its original amount upon default under very easy terms of payment, which were given to the judgment-debtor in consideration of this large discount, as a penalty. To do so would be to work injustice in many other cases.
3. The appeal having been partially successful the appellant is entitled to his costs from the other side, who has not appeared, in proportion to the amount which will have to be deducted from the decree. We assess the hearing fee at three gold mohurs.