In the absence of a clear stipulation for compound interest, only simple interest can be awarded after the whole sum becomes exigible in a mortgage-deed.

Macnair, A J C—Dnanoba, respondent 1, executed a mortgage-deed in favour of the plaintiff-appellant. The consideration was Rs. 4,000 in cash. The conditions regarding repayments were as follows : The debt was to bear interest at As. 14 per cent per mensem. The principal was to be repaid in anuual instalments of Rs. 300 each and a final instalment of Rs. 400. The interest accrued was to be paid with each instalment. If there was default in payment; of any instalment, that instalment was to bear compound interest at the rate of Re. 1-8-0 per cent, per mensem. In default of three instalments the whole sum became exigible. No repayment was: made. The, point which I have to decide in appeal relates to the interest payable on the whole sum after it became exigible.

2. The learned District Judge allowed simple interest at As. 14 per. cent per mensem on the principal together with As. 8 per cent, per mensem, simple interest, on the accumulated sum of interest which had become due when the whole sum became exigible. The plaintiff appealed and his counsel has put forward every possible argument on behalf of his client. I have not found it necessary to issue notice to the respondents, as in my opinion the appeal cannot succeed.

3. Admittedly, there is no express stipulation to pay interest after the whole sum became exigible. The condition that defaulted instalments should carry enhanced compound interest is a condition by way of penalty and provides only for the period during which instalments were in arrears but the whole sum was not exigible.

4. After the whole sum becomes exigible the plaintiff is entitled to interest at the rate stipulated for in the, bond : Mahadeo Prasad v. Dhiraj Singh, 1923 AIR(All) 7. Now in the bond there is no express stipulation for compound interest. There is a stipulation by way of penalty which comes into force as soon as there is a default, but this is not a provision for compound interest. The terms of the main contract were such that it was not necessary to embody any condition for compound-interest : as soon as there was a default the parties were governed by special provisions. The Courts do not lean to compound interest, nor award it in the absence of stipulation : Hari v. Lahu Ramji,1904 28 ILR(Bom) 371. There is no clear stipulation for compound interest: only simple interest can therefore be awarded.

5. It is urged that the advance was for cash and the rate of interest was low. But these circumstances by themselves do not justify reading into the bond a stipulation for compound interest. The question whether simple interest at the original rate is reasonable compensation for breach of the contract does not arise, as mortgage-deeds, such as the one under consideration, are interpreted as evidencing a contract for interest after the breach. The lower Court has passed a decree for some interest in addition to the interest at As. 14 per cent, per mensem on the principal for the period succeeding the date from which the whole amount became exigible. I, therefore, dismiss this appeal without notice to the respondents.

Final Result : Dismissed