The court clarified the applicability of interest rates in mortgage suits and the discretion of the Court in awarding interest beyond the agreed rate.

L.N.Mittal, J.

1. Respondent No. 1 - plaintiff Life Insurance Corporation of India filed suit against Preet Singh Dalal, already dead before filing of the suit, through his legal representatives i.e. Raj Bala Dalal - appellant (wife) and Priya and Preeti - proforma respondents No. 2 and 3 herein (daughters). Appellant Raj Bala Dalal was also impleaded as defendant No. 2 in her individual capacity. The plaintiff alleged that Preet Singh Dalal (since deceased) had raised loan of Rs. 1,90,000/- from the plaintiff and agreed to pay the same with interest @ 14% per annum compounded monthly and in the event of default, additional interest @ 3% per annum was payable. Defendant No. 1 created equitable mortgage of his House No. 2137, Sector 37, Faridabad. Defendant No. 2 - appellant stood guarantor for the said loan. Some LIC policies were also deposited as collateral security by the loanee. Ultimately, a sum of Rs. 2,32,168/- remained due from the defendants to the plaintiff as on 01.04.2003. Making these averments, respondent No. 1 filed suit for recovery of the said amount.

2. The defendants pleaded ignorance about raising of loan by Preet Singh Dalal and also about terms and conditions thereof and also regarding creation of mortgage. Defendants also pleaded that recovery of loan from the defendants was unjust and unfair. It was also alleged that the amount has not been calculated correctly. Defendants, as legal heirs of the loanee, are not liable to pay the suit amount. Various other pleas were also raised.

3. Learned Civil Judge (Senior Division), Faridabad, vide judgment and decree dated 10.08.2007, dismissed the suit as time barred, although it was held that otherwise, the plaintiff is entitled to recover the suit amount from the defendants. First appeal preferred by the plaintiff has been allowed by learned Additional District Judge, Faridabad, vide judgment and decree dated 07.03.2009 and thereby, suit filed by the plaintiff has been decreed for recovery of Rs. 2,32,168/- with interest @ 14% per annum compounded monthly from the date of institution of suit till recovery. Defendants were granted six months time to satisfy the decree, failing which the plaintiff was held entitled to recover the decretal amount by sale of mortgaged property. Feeling aggrieved, defendant No. 2, who is also defendant No. 1 (a), has filed the instant second appeal.

4. I have heard learned counsel for the parties and perused the case file.

5. Learned counsel for the appellant, at the outset, contended that defendants are ready to pay the due amount, but disputed the right of the plaintiff to claim compound interest and that too, compounded every month. Rate of interest was also alleged to be exorbitant.

6. Learned counsel for the appellant, at the outset, referred to calculation Annexure A-1 and contended that interest has been calculated @ 17% per annum w.e.f. 01.04.2003 onwards. However, this calculation has not been accepted by the lower appellate court. On the other hand, lower appellate court has awarded interest @ 14% per annum only from the date of filing of suit till recovery. Consequently, the aforesaid contention is completely misconceived and irrelevant.

7. Learned counsel for the appellant next contended that interest could not be compounded monthly and rate of interest @ 14% is also excessive. Reliance in support of this contention has been placed on various judgments namely : N. M. Veerappa v. Canara Bank reported as 1998(1) R.C.R.(Civil) 669 : AIR 1998 Supreme Court 1101, Central Bank of India v. Ravindra and others reported as 2002(1) R.C.R.(Civil) 49 : AIR 2001 Supreme Court 3095, Punjab National Bank v. Prem De Vastra and others reported as 2001(2) R.C.R.(Civil) 78 : AIR 2001 Delhi 172 and Samadh Baba Narain Dass Ba Ihaman Swami Ram Tirath v. Surta and others reported as 2002(1) R.C.R.(Civil) 547 : AIR 2002 Punjab and Haryana 108.

8. On the other hand, learned counsel for the plaintiff contended that agreed rate of interest