A mortgagee must reserve the higher interest rate as the interest payable under the mortgage and provide for its reduction in case of punctual payment.

JUDGMENT

Lort-Williams, J. - The plaintiffs in this case are the Trustees for the Improvement of Calcutta. There are three defendants. Purna Chunder Sinha, defendant 1, is the only one who contests the suit. By a registered indenture of mortgage dated 14th March 1927 made between the plaintiffs and defendant 1, defendant 1 mortgaged by way of first charge a piece of land, to secure payment of Rs. 36,250 being the price payable by him to the plaintiffs for the purchase of the said property, with interest and costs as provided in the deed.

2. The deed provides inter alia that defendant 1 shall pay a yearly rent charge of Rs. 2,175 representing interest on the said sum of Rs. 36,250 @ 6 per cent. per annum on the first day of April in every year. That if this payment remains unpaid for 15 days, then the whole sum of Rs. 36,250 shall become due and payable with interest thereon @ 6 per cent, and that it shall be lawful for the plaintiffs to enter into and upon and to hold all or any part of the mortgaged property and to proceed to a sale thereof by public auction or private contract.

3. Defendant 1 paid the yearly interest up to 31st March 1931. He failed to pay interest as it became due on 1st April 1932 and 1st April 1933 respectively, and the mortgaged property was advertised for sale on 20th January 1933 and 16th February 1934 respectively, but was withdrawn from sale on each occasion because defendant 1 paid up the interest in arrear and costs. He again failed to pay the interest which became due on 1st April 1934 and the property was advertised for sale, but could not be sold owing to the absence of bidders. The plaintiffs were put to the expense of Rs. 369-12-0. The plaintiffs say therefore that there is now due and owing the sum of Rs. 42,119-5-0, and they ask for a mortgage decree in respect of the mortgaged property in terms of Form 5-A, Civil P.C.

4. Mr. Bose on behalf of defendant 1 has admitted the facts alleged by the plaintiffs, and that the sum claimed is due, except that he disputes that the plaintiffs are entitled to charge 6 per cent. interest, and/or the sum of Rs. 369-12-0 for the costs of the infructuous sale. Further he disputes that the plaintiffs are entitled to a personal decree against defendant 1. Unfortunately for the plaintiffs, the mortgage deed was in my opinion inefficiently drafted. It recites in the first place that in the conveyance executed prior to the mortgage deed, it was provided that the payment of the purchase money should stand out at 6 per cent. interest per annum, the owner executing therefor in favour of the plaintiffs a yearly rent charge of Rs. 2,175, that is, it provided that interest upon the purchase price should be at the rate of 6 per cent. Later on it provides that if the yearly payment of interest should remain unpaid for 15 days after the date when it ought to have been paid, then the whole sum of Rs. 36,250 should become due and payable with interest thereon at the rate of 6i per cent. per annum, that is, it provides that there shall be an increase in the rate of interest if the interest remains unpaid for more than 15 days.

5. So far as I know, it has always been and is now, the law that, as stated in Vol. 21, Halsbury's Laws of England, at p. 116 Para. 208:

An agreement for increasing the rate of interest on failure in punctual payment is regarded as a penalty against which the Courts will grant relief.

6. The authorities for this proposition are a number of old cases referred to in the note to that paragraph and one as recent as the year 1880, Wallingford v. Mutual Society (1880) 5 A C 685 702. It has been argued however on behalf of the plaintiffs that proposition is no longer good law, and I have been referred to Coote on Mortgages, Edn.9 Vol. 1 page 155 where the learned author says that an

agreement that the rate of interest shall be raised if interest at the normal rate be not punctually paid, is still regarded as being of the nature of a penalty and to be relieved against