1. This appeal arises out of a suit upon a mortgage.
2. The amount advanced on the mortgage (on the 31st Bhadra 1304) was Rs. 700. The interest agreed upon to be paid was at the rate of 15 per cent. per annum with annual rests. In Sraban 1305 the mortgagors paid Rs. 300, which satisfied tie interest up to that date and reduced the mortgage debt by Rs. 210; some further payments were subsequently made, and the debt of Rs. 489 and odd, which was due in August 1898, swelled to Rs, 4,727 at the date of the suit.
3. The Court below has disallowed compound interest, and has given a decree for simple interest at 15 per cent. The plaintiffs have appealed to this Court.
4. It is not found that the contract to pay compound interest was brought about by any undue influence on the part of the creditors or that they had unduly taken advantage of their position in the matter. The Court below has disallowed compound interest, mainly on the ground that the mortgagors did not realise that the interest would be so much when they entered into the bargain. The learned District Judge observes: When the rate of interest is stated as a monthly rate, the borrower does not realize what that rate works out at per annum. Far less does a borrower realize at what compound interest works out after a few years, if the mortgagors could have understood that, inspire of the payments they had made, they would have been paying interest at the rate of nearly 150 per cent. on the principal money due at the date of the suit, or that at the present time they would have been paying interest at the rate of 200 percent, it is certain that they would never have entered into the bargain.
5. But the mere fact that the borrower did no. at the time of borrowing realize what the rate of compound interest would work out after a few years or that he entered into an improvident bargain (unless it is an un-conscionable one), cannot deprive the lender of the compound interest stipulated to be paid. In the recent case of Aziz Khan v. Duni Chand 48 Ind. Cas. 933 : 23 C.W.N. 130 : 101 P.R. 1918 : 160 P.W.R. 1908 (P.C.) the judicial Committee observed: 'The transaction was undoubtedly improvident, but in the absence of any evidence to show that the money-lender had unduly taken advantage of his position, it is difficult for a Court of Justice to give relief on grounds of hardship'.
6. The learned District Judge relied upon certain decisions of this Court in support of the position that the Court is competent to grant relief whenever the rate of interest appears to be of a penal character, that is so unconscionable and extravagant that no Court should allow it He seems to be of opinion that any compound interest is penal at any rate the rate of interest (15 per cent, compound interest) in the present case was of a penal character, that it is so unconscionable and extravagant that no Court should allow it. Bat compound interest is not necessarily penal. What constitutes a stipulation by way of penalty must be determined in each individual case upon its own special circumstances. In Khagaram Das v. Ram Sankar Das 27 Ind. Cas. 815 : 42 C. 652 : 21 C.L.J 79 : 19 C.W.N. 775 there was a stipulation for payment of interest on default at 75 per cent, and the creditors were in a position to take advantage of the embarrassment of their debtors. In Challaphroo v. Banga Behary Sen 31 Ind. Cas. 394 : 20 C.W.N. 408 : 22 C.L.J. 311 the interest was 48 per cent, per mensem with six monthly rests, the amount advanced viz., Rs. 400 swelled to 3 lacs and 75 thousand rupees at the date of suit, though the claim was laid at Rs, 3,000. The result of the contract was the plaintiff had become entitled to interest at the rate of 5,858 per cent, which no Court of Justice would enforce. In Abdul Majid v. Ksherode Chandra Pal 29 Ind. Cas. 848 : 42 C. 690 : 19 C.W.N. 809 the rate of interest was 5 per cent per mensem (compound interest) and the Court took into its consideration the ignorance and want of knowledge of the defendant and the conduct of the parties. Lastly in the case of Krishna Charan Barman v. Sarat Kumar Las 34 Ind. Cas. 609 : 2 C.W.N. 740 : 25 C.L.J. 24 : 44 C. 162 the interest was at the rate of 75 per cent. and the defendants were poor and ignorant men.
7. In the present case the interest stipulated to be paid was (sic) per cent. per annum with annual rests, and we are unable to hold that it was a penal rate. It is tine in the case of Abdul Majid v. Ksherode Chandra Pal 29 Ind. Cas. 848 : 42 C. 690 : 19 C.W.N. 809 cited above there is an observation of the' learned Judges (Holmwood and Chapman, JJ.) that 'where there is ample security] an excessive rate of interest has been held to be anything over ten per cent'. We do not find, however, any authority for such a proposition : on the other hand in the case of Aziz Khan v. Duni Chand 48 Ind. Cas. 933 : 23 C.W.N. 130 : 101 P.R. 1918 : 160 P.W.R. 1908 (P.C.) before the Privy Council the interest was 25 per cent. compound interest. In Lala Balla Mal v. Ahad Shah 48 Ind. Cas. I : 23 C.W.N. 233 at p. 239 : 35 M.L.J. 614 : 16 A.L.J. 905 : 121 P.R 1918 : 25 M.L.T. 55 : 180 P.W.R 1918 : 29 C.L.J. 165 : 1 U.P.L.R. (P.C.) 25 : 21 Bom.L.R. 558 (P.C.) the judicial Committee observed: '2 rupees per mensem is by no means an unusual rate of interest in cases from India coming before this Board', and in Gopeswar Saha v. Jadab Chandra 32 Ind. Cas. 537 : 21 C.L.J. 352 : 20 C.W.N. 689 : 43 C. 632 interest at the rate of 22 per cent (simple) was held not to be exorbitant. We have referred only to the recent cases, in other cases interest at even higher rates was allowed.
8. As stated above, the question whether the rate of interest stipulated to be paid is or is not penal, must depend on the circum-stances of each particular case, and we are unable to hold that 15 per cent. compound interest is of such a highly exorbitant character that no Court should allow interest at such rate.
9. The learned District Judge observes that 'Every time the mortgagors made a payment, they asked that the compound interest should be remitted and though no definite promise was made to them, they were led to hope that some substantial remission would be given. In this way, the debt was allowed to drag on for 17 years for the bane-fit of the creditors, each year the compound interest increasing more and more rapidly'.
10. The matter has been discussed before us on the evidence and ultimately the learned Pleader for the appellant has agreed on be half of his client to accept the sum of Rs. 4,000 in full satisfaction of his claim in the suit under the mortgage, provided the amount is paid within three months from this day, and if the said amount is not paid within the time specified, this appeal will stand decreed with costs, i.e., the plaintiff will get a decree for the full amount claimed with compound interest as stipulated in the bond, the amount whereof will be determined by the Court below.