JUDGMENT

1. This is a defendant's appeal against the decree dated 28th April 1931 of the learned Subordinate Judge of Unao. It arises out of a suit for foreclosure on foot of a mortgage-deed date 9th May 1917 executed by the defendant Ganga Prasad in favour of the plaintiffs Bishunath Singh and Aparbal Singh. The principal amount secured by this mortgage deed is Rs. 5,500. It contains a promise to repay it within three years. The rate of, interest stipulated in the deed is 12 annas per cent, per mensem. In case of default in payment of interest annually, the mortgagor made himself liable to pay interest at the rate of 2 per cent per mensem on the unpaid interest till the payment of the entire mortgage money. Nothing was paid by the defendant either towards the interest or towards the principal. The plaintiffs therefore claimed that a sum of Rs. 22,628-8-9 was due to them for principal, interest and interest upon interest according to the terms of the deed and claimed a decree for foreclosure in respect of it.

2. The only two pleas raised in defence which are material for the purpose of this appeal were that the rate of interest provided in the deed was penal and that the suit was barred by limitation. The learned Subordinate Judge rejected both of these pleas and gave the plaintiffs a decree for Rs. 22,628-8-9 and costs and ordered that if the defendant paid the aforesaid amount with 9 per cent per annum interest on Rs. 5,500 from the date of decree till the date of payment, within six months from the date of the decree, the mortgaged property would stand redeemed otherwise it should be foreclosed.

3. The main contention urged on behalf of the appellant is that the stipulation for enhanced interest from the date of default is one by way of penalty. Reliance has been placed upon a Full Bench decision of the Madras High Court in A. Muthukrishna Iyer v. Sankaralingam Pillai, (1913) 36 Mad 229. In this case no interest was payable until default but interest at an exhorbitant rate, namely, one pie per rupee per day, which was a little more than 190 per cent per annum was payable from the date of default. It was held by the Full Bench that the latter stipulation was penal and that the Court could award reasonable compensation in lieu of such excessive interest. Thus it will be clear on the facts stated above that the case is not in point. In Rajinder Bahadur v. Bhagwandin, AIR 1931 Oudh 33 to which one of us is a party, it was held that the question whether such stipulation is or is not penal in any particular case must depend on the facts and circumstances of that case. We Have therefore to see whether in the circumstances of the present case, the provision for interest on interest at an enhanced rate is one intended by way of reasonable compensation to the mortgagee for the default in payment of interest on the part of the mortgagor or is intended as a punishment for the default. It is very common in this part of the country to make provision for compound interest.

4. But it is important to note that the mortgage-deed in suit does not provide for any compound interest. All that it provides is that in case interest is not paid regularly, the amount of interest which remains unpaid is to carry simple interest at the rate of 2 per cent per month. If the deed had provided for compound interest at the rate of 12 per cent per annum, the amount payable at the date of suit would have been considerably more than the amo.unt claimed by the mortgagee under the terms stipulated for in the deed. In a case decided by the Allahabad High Court in Mt. Deo Kuar v. Mt. Gulab Kuar which is on all fours with the present case, it was held that the provision for interest on interest at the enhanced rate of 2 per cent per mensem when the original rate of interest was only 9 per cent was not necessarily a penal rate. Having given our consideration to all the terms and conditions of the deed, we are of opinion that the provision for interest on interest was