Banerjee and Pratt, JJ.
1. This appeal arises out of a suit brought by the plaintiff appellant to recover a certain sum of money due on a promissory note. The defence was that the interest claimed was exorbitant, and was not therefore recoverable. The only question upon which the parties went to trial was whether the plaintiff was entitled to the interest claimed.
2. The first Court held that the plaintiff was not entitled to the interest claimed, as the defendant appeared to be 'a young; man who had not much worldly experience and sound discretion,' and it was 'pretty clear that the defendant No. 2 took undue advantage of the position of the defendant No. 1' and compelled him to enter into the transaction in question.'
3. On appeal the Lower Appellate Court has affirmed that decision, but solely on the ground that the bargain was an unconscionable one, as 'the rate of interest was so exorbitant as to be ridiculous.'
4. In second appeal it is contended on behalf of' the plaintiff appellant that the decision of the Lower Appellate Court is wrong in law, and that the mere fact of the rate of; interest being exorbitant was not sufficient to disentitle the plaintiff to the interest claimed in the absence of any circumstances, such as want of sufficient capacity in the defendant to understand the nature of the transaction or the existence of any fiduciary relation between the parties; and in support of this contention the oases of Zebonnissa v. Brojendro Coomar Roy Chowdhry (1874) 21 W. R. 352., Mackintosh v. Wingrove (1878) I. L. R. 4 Calc. 137., and Appa Rau v. Suryanarayana (1887) I. L. R. 10 Mad. 203. are relied upon. We are of opinion that the contention of the learned vakil for the appellant is correct. It is true that the rate of interest in this case is exorbitant, but that alone would not be sufficient to entitle the defendant to exemption from liability. By Section 2 of Act XXVIII of 1855 it is enacted that, where interest is recoverable, Courts should decree interest at the rate agreed upon. The question, then, is whether interest is recoverable in this case. That question must be answered in the affirmative. That being so, unless the defendant can claim exemption upon equitable principles, interest must be decreed at the rate agreed upon. No doubt there is the principle of equity, which has been recognised in many cases, that where the terms of a contract are so extortionate as to involve the conclusion that the party did not understand what ho was about or was the victim of severe imposition, such a contract is not enforced by Courts of Justice. Here it cannot he said from the mere terms of this contract, irrespective of other consideration, that they are of a nature such that the reasonable inference must be that the defendant either did not understand what he was about or was the victim of some imposition. The terms of the contract are of the simplest character, not involving even, any arithmetical calculation. The rate is the rate of one rupee per diem on the entire amount. But of course if there existed any fiduciary relation between the parties, or if the defendant, though of age, was, by reason of his extreme youth or inaptitude for business shown to be unable to understand the nature of the transaction like ordinary men, the Court might have inferred from that circumstance, coupled with the exorbitant rate of interest, that the bargain was an unconscionable one such as ought not to be enforced, Although the first Court in its judgment appears to have taken that view of the matter, the Lower Appellate Court does not go into any of the circumstances noticed above, but comes to the conclusion that the bargain is not enforceable merely by reason, of the rate of interest being so exorbitant as to be ridiculous. That view cannot, we think, be held to be correct. In the first of the cases cited by the appellant, namely, the case of Zebonnissa v. Brojendra Coomar Roy Chowdhry (1874) 21 W. R. 352., Sir Richard Conch in delivering the judgment of the Court observes:
Then the question is, ought we, in the absence of any of the facts to which I have alluded, in the absence of any confidential relation between the parties, of any imposition or misrepresentation or any want of capacity to say that this contract is of so hard or unreasonable a character that the Courts ought not to enforce it. There may be oases (they are few) in which a Court of Equity has refused to enforce a contract or has set it aside on that ground. In the words of Lord Westbury in Tennent v. Tennents (1870) L. R. 2 Scotch App. 6 (8) there is an equity which may be founded on gross inadequacy of consideration, but it can only be when the inadequacy is such as to involve the conclusion that the party either did not understand what he was about or was the victim of some imposition. The question then resolves itself into this, can this Court say a contract to pay interest at the rate of 75 per cent, per annum or to give a security for a loan which was considered as possibly of so much value that the plaintiff ought to be paid 75 per cent interest, if he did not get it, is one which the Court ought to decline to enforce? If we were to say that, it would be in effect to say that the Courts will not enforce a contract to pay interest beyond a certain rate. I am unable to say what rate should be fixed. Looking at the risk in lending money, at the many circumstances which in different cases may induce a person about to borrow money to agree to give a very high rate of interest, benefits which, he thinks he may obtain by borrowing the money in a particular quarter,--'considering all possible circumstances, I do not think the Court can undertake to say a contract to pay interest at this rate is, without other facts being shown, so hard or unreasonable that it should be declared to be invalid.
5. The same view was taken by this Court in the case of Mackintosh v. Wingrove (1878) I. L. R. 4 Calc. 137., and also in Deno Nath Santh v. Nibaran Chandra Chuckerbutty (1899) I. L. R. 27 Calc. 421., and by the Madras High Court in the case of Appa Rau v. Suryanarayana (1887) I. L. R. 10 Mad. 203.
6. There is another important circumstance which may be noticed in this connection and that is that there was no security for the loan in this case such as there was in the case of Kamini Sundari Chaodhrani v. Kali Prossunno Ghose (1885) I. L. R. 12 Calc. 225. As for the two cases decided by the Allahabad High Court, which are referred to in the judgment of the first Court, namely, the cases of Bansidhar v. Bu(sic) Ali Khan (1880) I. L. R. 3 All. 260. and Madho Singh v. Kashi Ram (1887) I. L. R. 9 All. 228., they are inapplicable to this case--the first, because the question there was, whether the higher rate of interest was in the nature of a penalty, and the second, because there was then ample security for the loan.
7. For these reasons we are of opinion that the decree of the Lower Appellate Court must be set aside. But as the first Court referred to certain facts which may have the effect of disentitling the plaintiff to a decree for interest at the rate claimed, and as the Lower Appellate Court has pronounced no' opinion on those facts, we think the case ought to go back to the Lower Appellate Court in order that it may dispose of the appeal in accordance with the' directions contained in this judgment.
8. The costs will abide the result.