The agreement for payment of interest in the mortgage suit was not considered a penalty under sec. 74 of the Indian Contract Act.

JUDGMENT

Mookerjee, J. - This is an appeal by the Defendant in a mortgage suit. The preliminary decree was made on the 15th January 1920, and the appeal now before us was lodged in this Court on the 21st April 1920. It appears that though in the interval, the final decree had been made on the 16th March 1920, the appeal is directed only against the preliminary decree and not against the final decree In these circumstances, an objection has been taken by the Respondent that the appeal is incompetent, on the authority of the decision in Mackenzie v. Nursingh Sahai I. L. R. 36 Cal. 762 (1909). This preliminary objection is manifestly well-founded on principle for if we were now to reverse the preliminary decree at the instance of the Appellant, the final decree would still remain unaffected, as no attempt has been made to challenge the propriety of that decree. But our attention has been drawn by the Appellant to the case of Khirodamoyee Dasi v. Adhar Chandra Ghose 18 C. L. J. 821 (1912), which is clearly distinguishable. There the final decree was made after the appeal had been preferred against the preliminary decree. In these circumstances, it was ruled that the final decree must be deemed to have been made on the assumption that if the preliminary decree should be modified or set aside in the appeal, the final decree also would be similarly modified or set aside. The present case, however, is not of that description and is covered by the decision in Mackenzie v. Nursingh Sahai I. L. R. 36 Cal. 762 (1909) which was followed in Abdul Jalil v. Amar Chand Pal 18 C. L. J. 223 (1912). When we intimated this opinion to the Counsel for the Appellant, he made an application for leave to amend the memorandum of appeal so as to turn it into an appeal not merely against the preliminary decree dated the 15th January 1920 but also against the final decree, dated the 16th March 1920. It was stated in the petition that the Appellants were ignorant villagers and apparently at the time when the appeal against the preliminary decree was lodged in this Court, neither the Appellants themselves nor their legal advisers were aware that the final decree had already been passed. In these circumstances we have thought it right to grant the application made by the Counsel for the Appellant. He has undertaken to attach to the memorandum of appeal a certified copy of the final decree and to amend it suitably. This order is made on the condition that the Respondent would be entitled in any event to Rs. 50 as extra costs thrown away.

2. As regards the merits of the appeal, the contention is that the agreement for payment of interest is a penalty and should not have been enforced. The mortgage executed on the 11th February 1915, provides that interest would run at the late of Rs. 2 per cent, per month and would be paid off every year. It further provides that the amount of interest which will remain unpaid at the end of the year would be treated as principal and interest., that is, compound interest would run at the rate of Rs.2 per cent, per month. The agreement consequently was that the loan would carry interest at the rate of Rs. 2 per cent. per month with annual costs. There is a further provision to the following effect : "Although the rate of interest per cent, per month is fixed at Rs. 2 in the bond and the same is agreed by us, yet at our request and supplication you also agree that in case we pay off in one lump the entire sum due as interest in proper time, that is, just at the end of the year from the date of this document, then we shall pay interest at the rate of Re. 1 per cent, per month instead at Rs. 2 per cent, per month and you and your heirs shall take interest at the said rate of Re. 1 per cent, per month without any objection. But if we or our heirs do not pay the whole interest in one lump sum at the rate of Rs. 1 per cent, per month within the year, then we and our heirs shall remain bound to pay interest and compound interest at the ra