A mortgagee in possession has fiduciary duties and may be liable to pay interest on collections wrongly retained, and the court has discretion to determine the interest rate.

Alfred Henry Lionel Leach, C.J.

1. The appellant is a money-lender. On the 27th August, 1935, the respondent executed in the appellants favour a mortgage to secure the sum of Rs. 32,000 bearing interest at 15 per cent, per annum. The properties covered by the mortgage were lands and buildings in the City of Madras. The mortgagor had previously charged these properties. At the date of the mortgage to the appellant, there was due to four prior mortgagees and to other creditors a total sum of Rs. 31,000. The appellant undertook to discharge all these debts and pay the respondent Rs. 1,000 in cash to pake up the agreed c6nsideration of Rs. 32,000. In the month of January, 1936, the appellant, with the consent of the respondent, went into possession of the mortgaged properties. The arrangement was that he should collect the rents and profits, pay all taxes and maintenance charges out of his collections and appropriate the surplus to the amount due under his mortgage.

2. On the and February, 1942, the respondent wrote to the appellant asking for an account of his appropriations and referred to the fact that he repeatedly asked to be furnished with a statement of account. The appellant ignored this letter. The consequence was that on the 25th February, 1943, the respondent filed a suit on the Original Side of this Court for redemption of the mortgage. On the 16th July, 1943, a preliminary decree for redemption was passed. The appellant had only discharged one of the four prior mortgages out of his own funds and it was agreed that the consideration for the mortgage was limited to Rs. 131,500 up to the 30th October, 1935. The Court ordered accounts to be taken on this basis. The accounts were taken by the Official Referee, who reported to the Court that the moneys collected by the appellant under the arrangement made in January, 1936, when he went into possession were more than sufficient to meet all expenses and to pay the appellant the amount due under his mortgage. He found tha? the balance due to the respondent was Rs. 20,412-10-10, but this figure included interest at 15 per cent, per annum on all moneys which the appellant had, to the detriment of the respondent, retained in his own hands.

3. The appellant filed objections to the Official Referees report. The hearing9 before the learned Judge (Chandrasekhara Aiyar, J.) resulted in the amount of Rs. 20,412-10-10 being reduced to Rs. 18,667-14-0 which included the sum of Rs. 7,724-8-7, interest at 15 per cent, on the collections which the appellant had wrongly failed to pay over to the respondent. The appeal is from the judgment of the learned Judge in the objections to the Official Referees report.

4. The appellant says that the learned Judge erred in law in allowing the respondent any sum by way of interest. In all other respects he accepts the learned Judges findings. Before Chandrasekhara Aiyar, J., the appellant contended that he could only be made liable to interest on the collections wrongly retained by him at therate of six percent, per annum. The learned Judge rejected this contentionand held that the appellant should pay interest at the rate of 15 per cent, that being the rate which he had charged the respondent for moneys lent to him under the mortgage. Mr. Narasimha Aiyar on behalf of the appellant stated in the course of his argument that his client did not object to interest being charged at the rate of six per cent., but he maintained that the Court had no power to grant a higher rate.

5. In Attakkoya v. Kunhikoya AIR1939Mad877 , this Court held that the proviso to the Interest Act leaves it open to the Court to award interest where a Court of Equity would recognise the claim. This decision was based on the judgment of the Privy Council in Maine and Mew Brunswick Electrical Power Co. v. Hart (1929) A.C. 631, and Bengal Nagpur Railway Co., Ltd. v. Ratanji Ramji I.L.R. (1938) 2 Cal. 72. The cases in which a Court of Equity will grant interest are set out in Halsbury