B. P. JEEVAN REDDY, J.

( 1 ) PLAINTIFFS are the appellants. The only question that arises in this case is about interest awarded by the trial Court. The suit is based upon two mortgages, Exs. A-1 and A-3, dated 25-11-1964 and 4-4-1966 respectively. Under the first mortgage, a sum of Rupees 6,000/- was borrowed and, under the second mortgage a sum or Rupees 8,000/- was borrowed. The stipulations in both the mortgages are identical, except the rate of interest. The first mortgage provided that the entire loan amount shall be repaid within a period of one year with 12 per cent per annum interest simple. It, however, provided that if interest is not so paid, the mortgagor shall be liable to pay interest on interest, i. e. , compound interest. Such compound interest was payable in case of default, every year. In the second mortgage, interest stipulated is Rs. 1-15 Ps. per cent per month, i. e. , 13. 18 per cent per annum simple interest (with identical stipulations ). On the ground that the defendants have failed to repay the principal or the interest, except a small amount, the present suit was instituted for recovery of a sum of Rs. 32,462. 00. The suit was instituted in the year 1974.

( 2 ) AMONG other contentions, the defendants raised the contention that the interest calimed is penal and usurious. Issue No. 3 in the suit related to this plea. It reads: "whether the interest claimed in the suit is penal and usurious". This issue was discussed by the trial Court in paragraph 11 of its judgment. No specific evidence was led by the defendants in support of their plea in this behalf. Yet, the trial Court was of the opinion that the rate stipulated is substantially unfair and penal. The reasons given by it can best be set out in its own words;--". . . . . . . . . BUT the amount under the two mortgages accrued is Rs. 32,462. 00 though the defendants already paid nearly about Rs. 5,000. 00 as admitted by the plaintiff. In this case the calculation of interest over interest with yearly rests amounts to penal interest and calculation is substantially unfair. So, under Section 3 of the Usurious Loans Act, the penal interest has to be scaled down. On consideration of the facts and circumstances of the case I am oi the view that interest at 12% per annum simple is reasonable. So, I find on this issue that the interest claimed in the suit is penal and usurious, and interest at 12% p. a. , simple has to be calculated. . . . . . . . ,"

( 3 ) IN this appeal, the correctness of the above reasoning is attacked.

( 4 ) THIS being a suit based on mortgage, the award of interest is governed by Order XXXIV, Rule 11, C. P. C. and not by Section 34. As held by the Supreme Court in S. P. Majoo v. Gangadhar (AIR 1969 SC 600), interest up to the date of suit has to be awarded at the contractual rate, unless it is found to be usurious of penal within the meaning of the Usurious Loans Act. But, so far as interest from the date of suit till the date of redemption is concerned, the court, held that ft is a matter within the discretion of the Court, which has to be exercised in the light of all the facts and circumstances of the case.

( 5 ) I will first take up the question oi rate of interest prior to the date of suit. Mr. M. S. K. Sastry, the learned counsel for the respondents, seeks to support the judgment of the trial Court on two grounds. Firstly, he submits, on the basis of a decision of the Madras High Court in Venkata Rao v. Venkataratnam, (1952) 2 Mad LJ 60 : (AIR 1952 Mad 872) that stipulation of any interest over and above 12% per annum simple, is per se excessive and usurious and ought not to be awarded. Secondly, he submits, on the basis of the decision of the Supreme Court in S. R. Naidu v. Bank of Karaikudi, (AIR 1971 SC 884) that, inasmuch as the contract herein provides for payment of compound interest in case at default in paying the simple interest orginally stipulated, the stipulation for compound interest is penal and should not be enforced

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