The court established that mortgage interest rates must reflect contractual agreements and economic realities, allowing for discretion in determining reasonable rates based on inflation and property value increases.

JUDGMENT :

P.B. Balaji, J.

1. ''It is not my principle to pay interest and it is not in my interest to pay the principal'', of late, appears to be the motto of unscrupulous debtors.

2. This Second Appeal has been filed against the judgment and decree dated 12.02.2018 made in Cross Objection No. 450 of 2009 on the file of the V Additional City Civil Court, Chennai, allowing the Cross Objection modifying the judgment and decree dated 27.03.2008 made in O.S. No.3358 of 2007 on the file of XII Assistant City Civil Court, Chennai.

3. The Second Appeal arises in a suit for redemption of mortgage filed by the plaintiffs. The defendants have come up by way of the present Second Appeal, questioning only the rate of interest awarded by the First Appellate Court. There is no appeal preferred as against the judgment and decree against the plaintiffs adjudicating the principal amount payable by them in the suit for redemption of mortgage.

4. The parties are described as per their litigating status before the Trial Court.

5. The 1st plaintiff is the owner of the suit property, having purchased the same under a registered Sale Deed dated 15.12.1983. The 2nd plaintiff is the wife of the 1st plaintiff. The plaintiffs borrowed a sum of Rs. 6,00,000/- from the defendants to meet their domestic requirements and also to purchase a plot at Pammal and in respect of the said borrowing, the plaintiffs executed/registered a Deed of Mortgage dated 03.03.2005, in favour of the defendants, undertaking to repay the said sum of Rs. 6,00,000/-, together with interest at 24% per annum on or before 31.12.2005. The 2nd plaintiff joined the institution of the suit in the capacity as surety. In terms of the Mortgage Deed, interest payable was 24% per annum at compounded rate and in the event of default for three subsequent months, the Mortgagee would be entitled to demand the entire money due, together with interest thereon. Penal interest at the rate of 30% was also contracted between the parties and power of sale under Section 69 of the Transfer of Property Act, without the intervention of the Court, was also conferred on the defendants.

6. Admittedly, the plaintiffs defaulted in payment of interest and calling upon the plaintiffs to pay the principal, along with accrued interest at Rs. 9,98,388/-, the defendants caused a lawyer's notice on 03.05.2007. Thereafter, the plaintiffs have approached the Court admitting the borrowing of Rs. 6,00,000/- as well as the execution of the registered Mortgage Deed on 03.03.2005, seeking redemption of the Mortgage and also for declaration that the claim of interest at 24% per annum and default, penal interest was illegal and null and void.

7. The defendants filed a written statement resisting the suit claim and stating that the Mortgage Deed was prepared only by the plaintiffs and having agreed to pay 24% interest at compounded rates and also having admitted the borrowing and execution of the Mortgage Deed as well as the default, the plaintiffs were not entitled to any relief. The suit was therefore sought to be dismissed.

8. The Trial Court finding that the plaintiffs had paid Rs. 24,000/- on 04.07.2005 towards interest and further sum of Rs. 75,000/- on 30.06.2007 towards principal, adjudged the principal amount due as Rs. 5,25,000/- and fixed the rate of interest at 6% per annum payable from the date of plaint till the date of realization.

9. Aggrieved by the judgment and decree of the Trial Court, the plaintiffs preferred an appeal in A.S. No.58 of 2009. In the said appeal, the defendants preferred a cross objection in Cross Objection No. 450 of 2009, aggrieved by the rate of interest being fixed at 6% per annum pendente lite and claiming contractual rate of interest to be paid by the plaintiffs.

10. The First Appellate Court dismissed the first appeal and allowed the cross objection, thereby adjudicating the principal amount a