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Arjan Bibi Vs. Asgar Ali Chowdhuri - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata
Decided On
Judge
Reported in(1886)ILR13Cal200
AppellantArjan Bibi
RespondentAsgar Ali Chowdhuri
Cases ReferredBalkishen v. Run Bahadur Singh I.L.R.
Excerpt:
interest - bond--agreement--penalty--contract act, section 74--act xxviii of 1855, section 2. - .....would be payable. this agreement falls, in our opinion, under section 2 of act xxviii of 1855.6. we may point out here that the authority of the cases in which a higher rate of interest has been considered to be in the nature of a penalty has been much shaken by the decision of the judicial committee of the privy council in balkishen v. run bahadur singh i.l.r. 10 cal. 305. in that case a solenamah provided for the payment of six per cent, interest upon the money payable under it, but under certain circumstances the rate was to be doubled. their lordships observed: '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 solenamah was an agreement fixing the rate of interest, which was to be at the rate of 6 per cent,.....
Judgment:

Mitter, J.

1. The question for decision in this case is, whether the following stipulation in the bond upon which this suit was brought was a stipulation for the payment of interest or a stipulation which falls under Section 74 of the Contract Act, fixing a particular sum as the amount to be paid in case of a breach.

2. The stipulation is, 'I cannot pay Rs. 1,000 now, so I will pay it within two months and fifteen days. If I do not pay it within that period, I will pay the amount with interest from the date of the bond at the rate of 2 annas per rupee per month.'

3. It seems to us that this stipulation does not fall under Section 74 of the Contract Act. No sum is named here as the amount to be paid by the defendant in case of a breach. It simply stipulates that if the money is not paid within two months and fifteen days the borrower agrees to pay the amount borrowed with interest at the rate of 2 annas per rupee per month. It therefore falls within Section 2 of Act XXVIII of 1855.

4. The distinction between an agreement to pay interest at a certain rate and an agreement to pay a certain sum of money as the amount to be paid in case of breach is stated in a decision of this Court in the case of Mackintosh v. Crow I.L.R. 9 Cal. 689. Mr. Justice WILSON in delivering the judgment of the Court, after examining the various cases bearing upon this point and explaining the nature of the provisions of Section 2 of Act XXVIII of 1855, and Section 74 of the Contract Act, says: '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 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, i.e., as the case may be, for a new consideration. And in my opinion the case falls under the first rule of law abovementioned, not under the second. This view of the, law was acted upon by this Court In Mackintosh v. Hunt I.L.R. 2 Cal. 202.'

5. It is true that in this case the rate of interest stipulated for is to be payable from the date of the loan; but this circumstance does not, in our opinion, take the case out of the purview of Section 2 of Act XXVIII of 1855; because there is only one rate of interest stipulated to be paid here. The bond does not provide for the payment of two rates of interest, one lower and the other higher, the latter being payable under certain circumstances. In this case it cannot be therefore held that a lower rate is the stipulated rate of interest agreed to be paid by the debtor under Section 2, Act XXVIII of 1855, and that a higher rate is named in order to determine the amount of compensation to be paid under Section 74 of the Contract Act in case of a breach. The agreement in this case, is that no interest would be payable if the money covered by the bond be paid within the time mentioned in it, but if it be not paid within that time, interest at the rate of 2 annas per rupee per mensem would be payable. This agreement falls, in our opinion, under Section 2 of Act XXVIII of 1855.

6. We may point out here that the authority of the cases in which a higher rate of interest has been considered to be in the nature of a penalty has been much shaken by the decision of the Judicial Committee of the Privy Council in Balkishen v. Run Bahadur Singh I.L.R. 10 Cal. 305. In that case a solenamah provided for the payment of six per cent, interest upon the money payable under it, but under certain circumstances the rate was to be doubled. Their Lordships observed: '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 solenamah 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.'

7. We are therefore of opinion that the lower Appellate Court is wrong in disallowing the stipulated rate of interest. We set aside the decree pf the lower Appellate Court and restore the decree of the Court of First Instance with costs.


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