An agreement to grant a mortgage for the true amount of indebtedness is enforceable in equity even if the exact sum is subject to adjustment, and high interest rates are valid if they reflect the risk and market conditions.

Judgement

Consolidated Appeal (No. 97 of 1926) from a decree of the High Court (May 22, 1925) reversing a decree of the Subordinate Court of Dhanbad.

On September 21, 1920, the respondent entered into an agreement with one Kedarnath Daga, now represented by the appellants and referred to herein as the plaintiff, to sell to him a half-share in certain collieries ; the agreement pro vided also for the execution of a deed of partnership. The plaintiff paid to the defendant Rs.3,50,000 as earnest money. Pending completion the parties worked the collieries and the plaintiff expended large sums in working expenses and in further advances to the respondent. Considerable delay occurring in the completion the plaintiff pressed for security for the sums advanced.

A draft mortgage bond was prepared by the respondents solicitors which stated the total sum advanced as being Rs.5,81,567 and mortgaged the collieries to the plaintiff to secure that sum and such further advances as might be made, with interest at 18 per cent, per annum. The terms of this bond were not accepted, but the plaintiff, after some demur, agreed to take a mortgage of the collieries in substitution for the agreement for sale and partnership.

Accordingly a memorandum dated February 5, 1921, was prepared as to the terms, and was signed by both parties. It provided (inter alia) for interest at 21 per cent, per annum, and that the principal amount secured should be Rs.5,50,000, any amount due in excess of that sum to be paid on execution of the mortgage. A draft deed carrying out these terms was prepared and approved by the solicitors of both parties. The deed was engrossed, and the defendants solicitors sent the plaintiffs solicitors a cheque for the stamp. The respondent having failed, in spite of repeated demands, to execute the mortgage, the plaintiff instituted the present suit.

By his plaint he claimed, among numerous relief’s (a) a declaration that the property was mortgaged for Rs.6,05,642 ; (6) an order for specific performance of the agreement of February 5, 1921, with execution of the engrossed deed; (c) a decree for immediate payment of the amount found due; (d) such declarations and decrees for specific performance, and otherwise, as the plaintiff should be found entitled to.

The Subordinate Judge passed a decree for the plaintiff declaring that he was entitled to Rs.5,50,000 with costs at 21 per cent., and ordering that he should have possession of the collieries and work the same until the debt was satisfied.

On an appeal by the defendant, and a cross-appeal by the plaintiff claiming compound interest, the decree was set aside and the suit dismissed. Das J. (with whose judgment Adami J. agreed) found that the true amount due was only Rs.4,41,650, and was of opinion that the plaintiff was not entitled to specific performance unless he proved that Rs.5,50,000 was due ; he was further of opinion that it was an implied term of the agreement that the accounts should be adjusted before execution of the mortgage could be called for, although the parties had undoubtedly thought that at least Rs.5,50,000 would be found to be due. The learned judges declined to make a money decree, unless the plaint was amended.

1927. Nov. 10, 11. Wallach for the appellants. The respondent did not appear.

Dec. 12. The judgment of their Lordships was delivered by

LORD BUCKMASTER. Their Lordships have not had the advantage of hearing counsel for the respondent on this appeal, but they have carefully considered the relevant documents, the evidence, and the judgments both of the Subordinate Judge of Dhanbad and those delivered in the High Court of Judicature at Patna, and they think that the appellants are entitled to certain relief refused by the High Court.

The only question now raised relates to the agreement for a mortgage dated February 5, 1921, and made between Kedarnath Daga, represented by the appellants, and the respondent. It is therefore unnecessary to consider the previous com