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1935 Supreme(SC) 64
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD ALNESS, LORD ROCHE, AND SIR GEORGE LOWNDES.
KUSUM KUMARI - Appellant
Versus
DEBI PROSAD DHANDHANIA - Respondents
On appeal from the High Court at Patna
Decided On : November 28, 1935.
Solicitors for appellant, Kusum Kumari:Watkins & Hunter. Solicitors for respondents: Clarke, Rawlins & Co.
Interest limits imposed by local regulations on contractual debts do not restrict a court's discretion under Section 34 of the Code of Civil Procedure to award interest pendente lite or interest on a decretal amount, as the debt merges into the judgment.
Headnote:(A) Sonthal Parganas Settlement Regulation, 1872 - Section 6 - Code of Civil Procedure - Section 34 and Rule 34 - Mortgage decree - Interest on decretal amount - Interest pendente lite - Limitation on interest under local regulation vs. judicial discretion under general law - The restriction that total interest shall not exceed the principal applies to the contractual relationship between debtor and creditor - Once a decree is passed, the debt merges into the decree, and the matter passes from the domain of contract to the domain of judgment - Interest on the decretal amount and interest pendente lite are matters of judicial discretion under Section 34 of the Code of Civil Procedure and are not governed by the limits imposed by the local regulation on contractual interest.
(B) Mortgage Decree - Subsequent interest - Rule 34 of the Code of Civil Procedure provides for payment of subsequent interest out of sale proceeds, which gives effect to the court's power under Section 34 to award interest on the aggregate amount after the date fixed for redemption.
Facts of the case:
Mortgagees sought to enforce a mortgage, claiming principal and interest. The trial court, applying a local settlement regulation, limited the recoverable interest to an amount equal to the original principal. The court refused to allow interest pendente lite but granted interest at 6% per annum on the decretal amount after a six-month grace period until realization. The mortgagor appealed against the allowance of interest on the decretal amount, while the mortgagees appealed against the refusal of interest pendente lite.
Findings of Court:
The court held that the local regulation limiting interest to the principal amount applies only to the contractual phase of the loan. Once a decree is passed, the loan or debt no longer exists as a subject of enforcement but is merged into the decree. Therefore, the allowance of interest on the decree is not additional interest on the loan, and the court's discretion under the Code of Civil Procedure remains intact.
Issues: Whether the court has the discretion to award interest pendente lite and interest on the decretal amount under Section 34 of the Code of Civil Procedure when the total interest already reaches the limit prescribed by a local regulation, and whether such awards contravene the statutory bar on interest exceeding the principal.
Ratio Decidendi: The restriction on interest under the local regulation applies only to the loan or debt during the contractual relationship. Upon the passing of a decree, the matter shifts from the domain of contract to the domain of judgment. Consequently, the court's discretion to award interest pendente lite and interest on the decretal amount under Section 34 of the Code of Civil Procedure is not curtailed by the local regulation, as the debt merges into the decree.
Result: Both appeals dismissed.
Legal Category Hierarchy
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practice and procedure
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civil procedure
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mortgage suits
- interest on decree
- interest pendente lite
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mortgage suits
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civil procedure
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property law
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mortgages
- enforcement of mortgage
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mortgages
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local laws
- sonthal parganas settlement regulation
Judgement
Consolidated Cross-appeals, by special leave, from a decree of the High Court (April 9, 1930) affirming a decree of the Subordinate Judge of Bhagalpur (June 20, 1927).
The suit was brought by mortgagees claiming to enforce their mortgage by sale of the mortgaged lands, situated in the Sonthal Parganas, the amount alleged to be owing being Rs.723, 538-10-8 for principal and interest up to the date of the institution of the suit, to which they prayed should be added future interest at the mortgage rate till the date of realization.
The Subordinate Judge, acting in accordance with the provisions of s. 6 of the Sonthal Parganas Settlement Regulation, 1872, refused to allow interest beyond a sum equal to the principal, after deducting therefrom payments made by the mortgagor from time to time. He made a preliminary mortgage decree for sale, finding the amount due to be Rs.402, 595-6-9 with Rs. 10,067-6-3 costs, making a total of Rs.412, 662-13-0. In default of payment within six months the property was to be sold. He refused to allow any interest pendente lite, but he allowed interest at the rate of 6 per cent. per annum on the decretal amount after the expiration of the six months period of grace until the realization of the decretal amount.
On appeal the High Court (Jwala Prasad and Ross JJ.) affirmed the decree of the Subordinate Judge.
Special leave to appeal to His Majesty in Council was limited to " questions of interest after the date of the institution of the suit," the mortgagees contending that interest pendente lite should have been allowed, the mortgagor that interest on the decretal amount should not have been granted.
1935. Nov. 11, 12. Dunne K.C. and Pringle for the appellant (defendant No.1). These two appeals raise questions upon the construction of s. 6 of the Sonthal Parganas Settlement Regulation, 1872. The first is whether the Court, having given the interest on the mortgage at the full amount of the original principal, can afterwards give interest upon the decretal amount. Are the plaintiffs (mortgagees) precluded from getting anything more than double the actual cash advance in view of s. 6 of the Regulation? [Sect. 6 (a) and (b) read.] In Maha Prasad v. Ramani Mohan Singh (( 1913) L. R. 41 I.
A. 197.) the Board held that they were bound to abide by the rules of usury in this Act. The question in this appeal is whether the plaintiffs are entitled to interest from the institution of the suit up to the date fixed for repayment in the decree. In our cross-appeal we complain that the 6 per cent, interest on the decreed sum should not have been allowed. The High Court decided against Rs. The first point is that interest on the decreed sum cannot be granted under the terms of s.6 (b). The decree that has been granted was for principal and interest, and it has granted the full amount of interest equaling the original advance, and therefore, once that position has been reached, no further interest can be decreed at all under the section. Secondly, the interest that has been granted at 6 per cent, on the aggregate amount is in itself interest upon interest, because in the decree itself there is interest, and it falls within the terms of the section which forbid compound interest arising from any intermediate adjustment. This decree is within the terms of that section an intermediate adjustment. That section is a statutory bar to any Court having jurisdiction in the Sonthal Parganas from giving interest except according to the terms of the section. The statute says in terms that an "intermediate adjustment" means " any adjustment of account which is not final and includes the renewal of an existing claim by….decree."
The plaintiffs say that s. 34 of the Code of Civil Procedure applies because under that section there is discretion. There are two provisions in the Code of Civil Procedure which it is suggested would apply in this case, s. 34 and r. 34, sub-r. 4 (1) Sect. 34, with the discretionary power to a
