The application of the rule of damdupat to mortgages, calculation of amounts due, and entitlement to penalties for default.

Hallifax, A J C—The mortgage which is sought to be enforced in this case was executed on 20th January 1914. The consideration was a loan of Rs. 1,400 which the mortgagor agreed to repay in instalments of Rs. 200 each, with interest, on Paush Wadya 13th, which is approximately the 20th January of each of the following seven years. Interest on the loan was to be at 9 per cent., but any sum in default was to carry interest at 24 per cent, and the whole amount still due was to be paid at once on the occurrence of two defaults. The mortgagee was in possession of the mortgaged field from May 1917 to February 1925, and made Rs. 150 out of it in each of those eight years. He sued for the enforcement of his mortgage on 13th July 1925, claiming Rs. 3,500.

2. The claim for more than twice the principal is based on the quaint plea that a mortgagee in possession of the mortgaged property is not subject to the rule of damdupat. This was apparently taken in reliance on the head-note in the report of Panduji v. Panduji,1916 12 NLR 1. That head-note states a proposition that is obviously wrong and does not appear in the judgment. The matter is too simple to need discussion. The rule of damdupat is applicable to all mortgages whether the mortgagee is in possession or not, if it is otherwise applicable, but in. some cases, where the mortgagee is in possession, it does not apply, in the sense of being of any effect, because the payments made every year from the income of the property keep the amount of the interest below the amount of the capital. In each case it is merely a matter of calculation.

3. In this case no calculations have been made and the rule of damdupat has been regarded in the lower appellate Court as making Rs. 2,800 due on the date of the suit. That is impossible, as one payment of Rs. 150 had been made in June 1925, at the end of the mortgagee's possession; the total amount due at the time of that payment was only Rs. 2,800 which was reduced by it to Rs. 2,650, and the interest had no time to amount to Rs. 150 more by the date of the suit.

4. It seems to have been assumed that the plaintiff is entitled to all the penalties for default set out in the bond. Continuing to assume that, the account would stand as follows : In January 1915 the interest payable was at 9 per cent, on the whole sum, that is Rs. 126. For the second year it would be at 9 per cent, on Rs. 1,200 and at 24 per cent, on Rs. 326, and thereafter at 24 per cent, on the whole sum due. At the end of the fourth year the total shown by the account would be Rs. 3128, but by the rule of damdupat not more than Rs. 2800 would be due, and that would be reduced to Rs. 2,650 by the payment of Rs. 150. Similarly, in June of each of the next seven years, that is up to a month before the institution of the suit, the amount due would be brought down to Rs. 2,800 by the rule of damdupat and then to Rs. 2,650 by the payment of Rs. 150.

5. But the assumption that the plaintiff is entitled to the full higher rate of interest, under Section 73 or Section 74, Contract Act, has been made without any consideration whatever. If nothing extra is allowed, that is, if the interest is calculated all through at 9 per cent, the amount due in June 1925, was Rs. 1,936-3-6, never having reached damdupat at all. If we call the interest between the date of the last payment and the institution of the suit Rs. 13-12-6, which is approximately correct, the amount due when the suit was filed would be Rs. 1950.

6. But the plaintiff is, certainly entitled to some compensation for the defendant's failure to perform the contract, and raising the interest on default from 9 per cent to 12 per cent, is by no means excessive for that purpose. That, however, would make the amount due in June 1925 Rs. 2,818-12-0, and the result is the same as if the rate was 24 per cent. Allowing Rs. 25 as interest for the month after the last payment, we get Rs. 2675 due at the date of the suit.

7. It is in many cases a hard