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Deno Nath Santh Vs. Nibaran Chandra Chuckerbutty and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata
Decided On
Judge
Reported in(1900)ILR27Cal422
AppellantDeno Nath Santh
RespondentNibaran Chandra Chuckerbutty and ors.
Cases ReferredKamini Sundari Chaodhrani v. Kali Prossunno Ghose
Excerpt:
interest - mortgage bond--failure to pay on due date--stipulation for the payment of enhanced interest from date of default till date of realization. whether such stipulation is a penalty where a sum is mentioned in the contract as the amount to be paid in case of a breach of the contract--contract act. (ix of 1872), section 74. - .....if the provision had been that interest would be charged at the enhanced rate, not merely from the date of default in payment but from the date of the original loan, then it might be said that so far as the increased interest between the date of the loan and the date of default was concerned, that was a definitely ascertainable amount which became payable on the date of the breach of the contract. but here there is no such provision: the increased rate of interest is claimable only from and after the date of default in payment.10. it was argued that in the case of kala chand kyal v. shib chunder boy (1892) i.l.r., 19 gal., 392, the interest at the enhanced rate accruing due subsequent to the date of default was held to come within the scope of section 74 of the contract act, but that was.....
Judgment:

Francis William Maclean, K.C.I.E., C.J.

1. The question in substance which we are called upon to decide is whether, or not, we should allow to the mortgagee, under the mort gage, which is set out in the Paper Book, a less amount in the shape of interest than he alleges is stipulated for by the contract, and we are asked by the mortgagor to do this by putting in force the equitable principles of Section 74 of the Contract Act.

2. The parties in this case are adults, they made their own bargain, and as regards interest, the contract runs in these terms: 'On account of interest of the said sum of money, you shall take the profits of the said lands, and I will pay Rs. 20 per annum as the balance of interest from year to year by getting the said amount endorsed on the back of this document, and if I fail to do so, then at the end of the year the said amount of interest shall be added to the principal; and for the total amount whatever it will be I will pay up to the date of repayment interest at the rate of i anna per rupee per mensem.'

3. It is urged for the appellant that the provision for the payment of this additional interest is, upon the construction of the document, a penalty, and that, being a penalty, it is open to the Court, under the provision of the section to which I have referred, to give a less amount than that stipulated for by way of reasonable compensation.

4. The question of whether in cases of this class the payment which is stipulated for is by way of penalty or of liquidated damages is often a somewhat, perplexing one, as is illustrated by the variety of authorities upon the point in the Courts of England; but Section 74 of the Contract Act was intended, as I understand, to do away with the distinction between a penalty and liquidated damages as was pointed out by Mr. Justice Wilson in the case of Mackintosh v. Crow (1883) I.L.R., 9 Cal., 689, and to determine the perplexity. I am not quite satisfied that the latter result has ensued.

5. Now, upon the best consideration that I have been able to give to the construction of the mortgage in this case,--and in each of these cases, the decision of the question depends, in effect, upon the construction of the document, and upon ascertaining what the parties really intended by it--I do not think that the provision can be regarded as a penalty. The bargain may have been a stringent one, but the parties made it, and they were competent to make--it, and the language to my mind only shows that in certain events, and under certain circumstances, a certain amount of interest was to be paid. Unless, this is to be regarded as a penalty--a view I have negatived--this is not a. 'sum named in the contract as the amount to be paid in case of such breach, and Section 74 does not apply. As was pointed out by Sir George Jessel, Master of the Rolls, in the case of Wallis v. Smith (1882) L.R., 21 Ch. Div., 243, Courts of Law should be chary about interfering with the contract made by the parties. His Lordship says. 'It is of the utmost importance, as regards contracts between adult persons not under disability, and at arms length that the Courts of Law should maintain the performance of the contracts according to the intention of the parties; that they should not overrate any clearly expressed intention on the ground that the Judges know the business of the, people better than the people know it themselves.'

6. In this view I do not propose to go through the rather numerous, authorities to which our attention has been directed, and for the simple reason that each of these cases depends upon the actual language used in the contract and what, upon the construction of that language, was the true bargain between, and intention of, the contracting parties. Whilst I do not propose to go through those authorities, I may perhaps say that I agree in the view of the law as laid down by Mr. Justice Wilson in the case of Mackintosh v. Grow (1883) I.L.R., 9 Cal., 689, to which I have already referred. Upon these short, but I think, sufficient grounds, the appeal fails and must be dismissed with costs.

Banerjee, J.

7. I am of the same opinion. We are asked by the learned Vakil for the plaintiff-appellant, to hold that the stipulation relating to the payment of interest at an increased rate is not enforceable, first, because the case comes within the scope of Section 74 of the Contract Act, and the creditor is entitled, not to the sum named in the contract, but only to reasonable damages, and, secondly, because, even if the case did not come within the scope of that section, still, having regard to the nature of the contract, we should hold upon equitable principles that it is not enforceable, and that the mortgagee is entitled only to reasonable compensation.

8. In support of the first branch of the contention the cases of Kala Chund Kyal v. Shib Chunder Roy (1892) I.L.R., 19 Cal., 392, Ramendra Roy Chowdhury v. Serafuddin Ahmed (1898) 2 C.W.N., 234; and Manoo Bepari v. Durga Churn Saha (1898) 2 C.W.N., 333, are especially relied upon, and in support of the second branch of the contention the case of Pardhan Bhukhan Lal v. Narsmg Dyal (1898) I.L.R., 26 Cal., 300, is cited.

9. I am of opinion that the stipulation for the payment of enhanced interest in this case does not come within the scope of Section 74 of the Contract Act, for this simple reason that here no sum is named in the contract as the amount to be paid in ease of a breach of the contract. What is specified in the contract is only the enhanced rate of interest, but no definite amount is specified as being payable in the event of a breach. Nor can it be said that the amount, though not expressly stated in definite terms, is an ascertainable and definite amount which would become payable at the date of the breach. If the provision had been that interest would be charged at the enhanced rate, not merely from the date of default in payment but from the date of the original loan, then it might be said that so far as the increased interest between the date of the loan and the date of default was concerned, that was a definitely ascertainable amount which became payable on the date of the breach of the contract. But here there is no such provision: the increased rate of interest is claimable only from and after the date of default in payment.

10. It was argued that in the case of Kala Chand Kyal v. Shib Chunder Boy (1892) I.L.R., 19 Gal., 392, the interest at the enhanced rate accruing due subsequent to the date of default was held to come within the scope of Section 74 of the Contract Act, but that was only because it was considered by the majority of the Full Bench to be a part of the whole amount that became payable on the breach of the contract, the other part being interest at the enhanced rate that had become payable in regard to the period between the date of the loan and date of default. This is what Mr. Justice Pigot, whose judgment was concurred in by the majority of the Full Bench, said in his judgment: 'Upon the second question I think that when the provision in the contract in question amounts to a provision for a penalty (or which is the same thing, stipulated for a sum in case of breach within the meaning of Section 74), that goes to the whole sum which may accrue due under the provision, although it may be that by non-payment for an indefinite time the aggregate amount ultimately payable may greatly exceed the amount--the fixed ascertainable amount--to be due at time of default. I think they cannot be separated, and that Section 74 applies to all, that is, that it applies to the money claimed at the increased rate of interest from the date of the bond until realisation.' But the reason for the application of that principle, which consisted in a part at least of the amount claimable being already due and ascertainable at the date of the default, is wanting in this case, there being no provision that the enhanced interest is to be recoverable from any date anterior to the date of default.

11. In the two cases cited from 2 0. W.N., this distinction is expressly pointed out, and the learned Judges in those two cases held that they came within the scope of Section 74, because they were of opinion that under the terms of the contract they had before them, the increased rate was claimable, not merely from the date of default, but from the date of the loan.

12. Then, as to the second branch of the contention urged on behalf of the appellant, it is enough to say, that although it is in the power of the Court, if a proper case is made out, to refuse to enforce a clause in a contract quite independently of Section 74 of the Contract Act, no such case has been made out. The parties to the contract were sui juris. The party seeking the benefit of the contract stood in no fiduciary relation to the other party, which would require the application to this case of considerations such as those that were applied by the Privy Council in the case of Kamini Sundari Chaodhrani v. Kali Prossunno Ghose,.(1885) I.L.R., 12 Cal., 225. Nor can it be said that the terms of the contract here are, in themselves so extortionate that the Court is bound to hold that it was an unconscionable bargain, and as such not enforceable.

13. Both branches of the contention urged before us on behalf of the appellant therefore fail, and the appeal must be dismissed with costs.

Harington, J.

14. I am of the same opinion. It appears to me that the parties have made an arrangement for the payment of the interest during the continuance of the mortgage which has been put into an alternative form. The mortgagee may, if he likes, either pay Rs. 20 a year during the time the mortgage is subsisting, or he may pay 1/2 anna a rupee a month on the principal and interest, these payments all coming to an end, when the time arrives for the repayment of the money borrowed under the mortgage deed. The parties have chosen to make an alternative stipulation as to the payment of the interest on the mortgage; that, it seems to me, they were quite entitled to do, and it is impossible to say that the second stipulation involving the payment of interest at a different rate from that provided by the first stipulation is 'a sum named in the contract to be paid in the case of a breach' as provided in Section 74*. If that is so, I am also of opinion that this appeal fails.


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