A term in a loan contract that gives a party the power to alter the interest rate does not render the contract uncertain or void under Section 29 of the Indian Contract Act, provided that both parties have agreed to such a provision.

JUDGMENT:- The appellant herein borrowed a sum of Rs.2,510 on various occasions from the respondent Nidhi on pledge of certain jewels, after executing promissory notes. Exs.B-1 to B-6 are six of the promissory notes executed by him. On the first two loans borrowed in the year 1954 and 1955 the rate of interest mentioned was 6¼ per cent per annum and on the rest 6- per cent per annum. However, under the promissory notes executed by the appellant for the various borrowings, he had agreed to pay interest at the rate mentioned therein "or such other rate as may, from time to time, be fixed by the directors of the said Nidhi and notified by them at the office of the said Nidhi." Relying on this clause, the respondent Nidhi demanded interest at the rate of 10½ per cent per annum as and from 1-7-1966 but the appellant refused to pay interest at the enhanced rate. In view of the appellant's attitude the respondent brought the pledged jewels to sale on 10-3-1968. With a view to avert that sale, the appellant filed O.S.800 of 1968 on the file of the City Civil Court, Madras, out of which this second appeal arises, for a declaration that he is liable to pay interest only at the rate of 6¼ per cent per annum on the first two loans end at 6- per cent per annum on the remaining loans, and for an injunction restraining the defendant Nidhi from bringing the pledged jewels to sale.

2. The respondent resisted the suit contending that the appellant is a shareholder of the Nidhi, that the loans were advanced by the Nidhi as per the Articles of Association which are binding on the appellant, that the Articles of Association of the Nidhi empowered the Board of directors to fix the rate of interest from time to time on the loans advanced by the Nidhi, that the appellant having expressly agreed to pay interest on the said loans at such rate as may from time to time be fixed by the Board of directors of the Nidhi. he is bound by the fixation of the rate of interest by the Board of Directors with effect from 1st July 1966. and that the Nidhi is entitled to bring the pledged jewels to sale in enforcement of its right as pledgee.

3. The trial court as well as the lower appellate court upheld the right of the respondent Nidhi to collect interest at 10½ per cent. per annum on the basis of the resolution of the Board of directors and the appellant is aggrieved against the said decision of the courts below.

4. Thus, the only question that has to be considered in this second appeal is whether the enhancement of the rate of interest by the respondent on the borrowings made by the appellant on the pledge of the jewels from 1st July 1966 is valid and enforceable.

5. All the borrowings are covered by promissory notes and six of the promissory notes have been filed into court. They are in printed forms. As the question involved has to be decided with reference to the recitals in the promissory notes, it is better to extract one of them, Ex.B-1 promissory note is as follows:-

"S.L. No.M.2839 Madras 11-6-1969

Rs.75/-. On demand I promise to pay the Madras Pursawalkam Hindu Janopakara Saswatha Nidhi or the Permanent General Benefit Fund Ltd. or order for value received, the sum of Rs. seventy five only together with interest thereon at 6- per cent per annum or such other rate as may. from time to time be fixed by the directors of the said Nidhi and notified by them at the office of the said Nidhi."

The appellant contends that his liability is to pay interest only at 6- per cent per annum under the above promissory note, while the respondent contends that it is entitled to charge interest at a higher rate in view of the alternative provision empowering the directors to fix a higher rate of interest. The learned counsel for the appellant submits that, notwithstanding the alternative provision for enhanced rate of interest, the respondent cannot unilaterally fix an enhanced rate of interest, and that the alternative provision will have to be taken as invalid as there