Andhra High CourtChilamkuri Gouri Sankar Rao And Anr. vs Bhurugumalla Venkatappayya Sons And ... on 23 April, 1982Equivalent citations: AIR1983AP310, AIR 1983 ANDHRA PRADESH 310JUDGMENT

 

Ramanujulu  Naidu, J.1.  Against the preliminary  decree dt. 22-11-1978  passed in O.S. No. 20  of 1975  on the file  of the Court  of the  subordinate   Judge  Guntur, instituted   by the  1st  respondent against  defendants 1 to 7 thereto for recovery   of  a sum of  Rupees  84,736  on the foot  of  a  deed  of  mortgage, dt.  15-10-1970  executed  by  late chilamkuri  venkata  Kotirathnam.   Both  on behalf  of  himself  and as  guardian  of his  son   impleaded as the 1st   defendant in the suit  who was  then a  minor.  For a sum  of Rs. 49,000  by enforcing   the mortgage  against the hypothecated  property   a terraced  building   situate  at Guntur  town  as also    against   the other   properties    of the 1st  defendant   and of late  venkata  kotirthnam   in the hands of all the defendants defendants 1 and  4  pereferred  the above  appeal.2.  Defendants   2 and 3  are the  divided sons  while   defendants 5 to 7  are  the  daughters  of late chilamkuri  venkata  Kotirathnam  the 4th  defendant is his  widow.3.  The case  of the plaintiff  is that defendants 1 to 3  and their   father.  Late  venkata   kotirathnam  originally   constituted  a Hindu  joint  family   that defendants 2 and 3  became   divided  from the Joint   family  that late  venkata  Kotirathnam  and the 1st   defendant. However  continued  as members  of a Joint  family    with venkata   kotirathnam  as manager  of the joint  family  that venkata Kotirathnam  borrowed a sum of Rs. 49,000  from him   for discharge   of the antecedent  debts    cntracted  by the   family  and for meeting   other expenses of the family  that  late   venkata kotirathnam  executed  a registered deed  of mortgage  on 15-10-1970   both on his   behalf   and as father    and guardian    of the    1st  defendant who was then a minor   mortgaging   the teraced  building  that compound  interest  at 12%   per  annum  with monthly  rests  was stipulated under  the deed  of mortgage.  That venkata  Kotirathnam died on  10-8-1974  survived  by the   defendants.   That his share  of the property     devolved   on all the defendants that as the mortgage   debt  was not discharged   he got registered notices issued   to all the   defendants calling  upon  them  to  discharge the mortgage that the  1st  defendant caused  a reply  to be sent  to him  denying  the truth   and  validity   of the mortgage and disowing   and liability   under Ex. A-1  that defendants 4 to 7 refused  to receive  the notices and that the 3rd   defendant did not  choose  to send   any  reply   to the notice  received  by him.4.  The suit   was resisted  by all the defendnats .  In the written statement  filled by the   1st  defendant it was  averred that defendants  2 and  3  went  out of hte joint  family   in the years  1964  and 1967  respectively  relinquishing theri  interests  in the property  of the joint  family,  that  in the  year   1967  he too  got himself  divided from the  1st  defendant  that late venkata  Kotirathnam  had  no  right to Act as manger of the alleged    joint   family that  Ex. A-1  executed  by him   on his behalf  without obtaining  prior   permission  of the District   Court  Guntur  as required  under  the provisions of theHindu   Minority  and Guardianship  Actwas unenforceable  and not binding  on him that  the alleged   borrowing   under  Ex. A-1  was not true  and  that in any  event.  The   consideration  received  under  Ex. A-1  was not applied   in  discharge  of any binding antecedent  debts.  Incurred  and not   spent  to meet  the necessary expenses of the family.5.  In the written  statement filed by defendants 2 and  3.  It was  averred that  they  were divided  from  the joint  family   int eh years  1964  and 1967  relinquishing their   rights in the properties  of the joint  family  that they had  nothing  to do with the 1st  defendant   that they were not aware  of execution of Ex. A-1  and   that  in any  event  the rate  of  interest  stipulated under  Ex. A-1 was highly  excessive penal  and usurious.6.  After  framing  appropriate issues the learned  subordinate  Judge  found  that no  evidence whatsoever  was let in  on behalf  fo the 1st  defendant in support  of his  plea  of division in status  with  his   father  in the year  1967  that the 1st   defendant did not  even  choose  to examine  himself   in support   of his plea  that Ex. A-1  was true  valid  and  binding  on the 1st  defendant  and that the rate of  interest stipulated under Ex. A-1  was neither  penal   nor  usurious   In the result  a preliminary   decree in a sum of Rs. 49,000  was  passed on 22-11-1978  directing  the defendants to pay  the mortgage money  together    with compound  interest  thereon at 12 per cent   per  annum  with monthly  rests  from the date  of  the mortgage  till the date  of  redemption   three  months   time was granted  or   redemption  of  hte mortgage   and subsequent   interest  at the rate of  6 per  cent  per annum  on the principal  sum of Rs. 49,000 from  the date  of realisation  was  also  awarded  In case of default  in payment   of the decretal    amount.  The mortgaged property  was directed  to be  brought   to sale  and in case  the sale  proceeds  were  not sufficient  to satisfy   the decree.  The plaintiff  was  declared   entitled of the 1st  defendant and  those  of  late  venkata  Kotirathnam  in the hands   of   defendants  1  to 7  In the decree actually   drawn     up.  Interest from the  date of hte suit till  the date of redemption was calculated at the   rate of  6%  per  annum.  Interest  upon  the date of the  suit was  calculated at  the stipulated rate.  The plaintiff filed I.A. No. 655 of 1979  before  the  learned   subordinate Judge   for  amendment  of the decree contending   that on account  of a mistake  interest  from the date  of suit   till date  of redemption  was calculated  at a lesser rate  and  that  the  same  should be calculated at the rate stipulated  in Ex. A-1.  The  application was  allowed by the  learned subordinate Judge  on 19-4-1979  without notice to the  defendants.  The amended decree was for  a sum of Rs. 1,39.064-06  representing the principal  sum of  Rupees  49,000 interest in a sum of  Rupees  83,842-06  accrued  thereon at  the stipulated rate  from the date  of the   mortgage  up to the  date of redemption  and costs in a sum  of  Rs. 6.222.  Clause 2  of the amended   decree runs  as follows:"2.  And it is hereby  declared  and decreed as follows  That the defendants  do pay  into the  Court  on or before  the day of 22nd  February  1979  or any  other  date up  to which  time  for payment  may be  extended by the  Court  the said  sum  of  Rs. 1.39, 064.06  ps.  Wtih  further interest  at 6%  from  the date  of redemption i.e.  22-2-1979  till the date   of  realisation'.The defendants thereupon  filed I.A. No. 1892  of 1979  before  the learned  subordinate  Judge  for setting  aside the order   dated  19-4-1979  on   the  ground  that they had  no notice  of the  application.  The learned subordinate  Judge  dismissed  the  application holding  that no notice  was  necessary  to be given   to the defendants as  correction  of a clearical   error   was sought  by  the plaintiff and  ordered  in exercise  of the powers  conferred  upon  the Court  under  S.  152  of  the civil  P.c. "7.  Assailing  the judgment and the  amended  decree  passed by  the learned  subordinate Judge  defendants 1 and  4  preferred  the above   appeal  as already  stated.8.  Aggrieved  by the order dated  19-4-1979  passed by the  learned subordinate  Judge   directing   amendmetn of the preliminary  decree defendants  1  and 4  preferred C.R.P.  No.  199 of 1980.   The revision petition came up  before    Jeevan  Reddy  J and  the learned Judge   by his  order dated 9-3-1980  upheld  the  plea  of the  plaintiff.  That only a  clerical  error   that crept  in the preliminary  decree.  Was corrected  by the   learned subordinate  judge.  The  learned  Judge  however  modified   the amended   decree  by awarding subsequent   interest  at the rate  of 6 per  cent  per  annum  from  the date of  redemption  till the date  of  realisation  only  on the principal  sum  of Rs.  49,000.  In pursuance of the amended  preliminary  decree  as  modified  by   Jeevan  Reddy  J.,  the appellants were  permitted  to amend  the memorandum  of grounds   of appeal   relating   to  valuation  of the subject  matter  of the appeal  suit  the  deficit  court-fee as a consequence  there of  was also   paid  by the appellants.9.  It  was  urged  by sri T. Veerabhadraiah  learned counsel for the  appellants that there  was division  in status  between  the 1st  defendant  and his   father  in the  year  1967  itself   and that his   father  had  no right   to  mortgage   his  share  of the hypothecated  property.10.  As  already  stated.  The learned subordinate  Judge  found  that  noevidence, oral  or documentary  was let in  on behalf of the 1st  defendant  and that  even the 1st  defendant did not  choose  to examine  himself  in support   of the plea.  Realising   the difficulty.  The 1st   defendant  filed  C.M.P.  No.  536  of 1982  under  O. XLI  R. 27  of the civil  P.c.  on  20-1-1982    for reception  of three documents  tendered therein  as  additional   evidence and for marking    the same  as   Exs.  B-1  to B-3  one of the  three documents  is a letter dated  16-10-1967  purporting    to  have  been  addressed by  Ch  v. Kotirathnam  to the 1st  defendant represented by his  maternal    uncle as his guardian   he  then being   a  minor  It is   recited  in  the said  document    that defendats  1 to 3.  Defendants 5 to 7 and another  son by name chandrasekhara  Rao  were  born  to venkata  Kotirthnam  that chandrasekhara Rao  was taken  in   adoption  by chilamkuri  seetharathnamma.  Widow   of the  elder  brother  of  venkata   Kotirathnam  that    defendants  1 to 3  and  venkata  Kotirathnam  constituted members  of a  Hindu  undivided   family.  That  defendants 1, 6 and 7 were  to be  married   by them  that the 2nd  defendant  became  divided from  the joint   family   after   receiving  some   properties  of the joint    family  and executing a registered  deed  dated  27-3-1964  relinquishing  his  rights  in the  properties  of the  joint   family  that   likewise  the 3rd  defendant   relinquished  his  rights  inteh properties  of the joint  family  by executing  a registered   deed dated  29-8-1967  that venkata Kotirathnam and the 1st   defendant  however continued  to be  members  of the joint   family  that venkata   kotirathnam  was carrying  on business in a manner detrimental   to the interest  of the 1st  defendant  that the mother  and the maternal  uncle of the 1st defendant as also  some  well-wisehers  of Venkata  kotirathnam   and  the 1st  defendant  demanded  venkata  Kotirathnam  to partition  the  properties  of the joint  family   by metes and bounds  that as  it was  not convenient to do so,  severance  in status  between venkata   kotirathnam  and the 1st   defendant  was effected  that Venkata  kotirathnam  undertook   not to alienate  the 1st  defendant's   half  share inthe properties  of the Joint   family  that the 1st   defendant would not be concerned with any profit   and would  not be liable for any losses incurred or debts  contracted   by venkata  kotirathnam  in the business  he was   carrying    on and theat the 1st  defendant was relieved  of all obligations  of maintenance and  marriages  of  the two  unmarried  sisters.  The document  purports  to have  been  attested   by the   mother of the 1st  defendant  and two  others.11.  In para  4 of the affidavit  filed in support  of  the  application for reception  of the additional evidence it is claimed  by the  1st  defendant that the document  was in the custody  of the maternal   uncle   of  the ist  defendant  that   he  had no  Knowledge  of the document    until   the disposal  of the suit  that it was only   after  the disposal  of the suit  he was apprised  of the contents  of the document  by his   maternal  uncle  and that  it  was only after  the disposal  of the suit  he was apprised  of  the  contents  of the document   by his  maternal  uncle  and that  at  his  request  the document  was given  to him by his maternal uncle.12.  It may  be noted  that the suit was instituted in tehyear  1975  that  the ist  defendant was the real  contestant  in the suit  that trial  of the suit  was taken  up on  24-11-1976  and that significantly   neither  the maternal   ujcle of the Ist   defendant nor his mother  apprised him  of and  supplied him  with   the  most   valuable  defence  available  to him to  defeat   the suit  no explanation was offered by the ist  defendant  for not   tendering  the document  for reception of the additional evidence till 20-1-1982  In the circumstances we have absolutely   no hesitation in holding  that  the  document  dt. 16-10-1967  was brought  into  existence  by the ist  defendant with a view  to defeat  the rights  of the plaintiff.13.  That Ex. A-1  the deed of mortgage was truly    executed  and also supported  by  consideration  as  detailed  therein  is amply   established  by evidence of unimpeachable character let in by the   plaintiff P.W. 2  the  sole  proprietory  of the plaintiff's  concern deposed   to the execution  of Ex. A-1  by late  chilamkuri   venkata kotirathnam   signing  in Ex. A-2  to A-24   were market  on  his behalf   in proof   of   the   various  items  making  up  the  total  consideration  of Rs. 49.000  recited in Ex. A-1  P.W. 1  the scribe   of Ex. A-1  substantially   corroborated  the  testimony  of P.W.  2 and  added  that some amounts  were  paid  by P.W. 2  towards  discharge  of the  mortgage amount  that the plaintiff paid   some cash  to  venkata  Kothiratnam  for  purchase  of  stamps  for   execution  of Ex. A-1  and that the balance   of consideration  was paid   by  the  plaintiff to venkata  kotirathnam  at the time  of registration of the  document  No evidence  whatsoever  was le tin on behalf  of   the   defendants in rebuttal.  The  testimony  of P.Ws.  1 and 2  thus   remains uncontradicted and unchallenged.14.  The consideration of Rs.  49,000 recited in Ex. A-1  consists of (I)  Rupees 6,110 towards   discharge    of  the debt  due under Ex. A-2 a  registered  deed of  mortgage  dt.  31-1-1964  executed  by Venkata  kotirathnam  both on his  behalf    and on behalf of the 1st  defendant he  then being  a minor as also  defendants 2  and 3 in  favour  of Garee   venkata  subbarao  for Rs. 5.000 borrowed  for  the purpose  of meeting   the expenses of  erstwhile  joint  family   of venkata  kotirathnam  and defendants   1 to 3; (ii)  Rs.  8, 325 towards  discharge  of the Khata  debt  contracted by  the ist  defendant from Garee  venkata  subbarao  and co.. for the  purpose  of the business carried  on by the  joint  family  consisting of venkata  kotirathnam  and  defendants  1 to 3  and  acknowledged  by the  3rd  defendant on 31-12-1966   in  the accounts of Garee venkata  subbarao & co.,  (iii)  Rs. 13,000  towards  discharge  of  the  debt  due  to the concern  of the plaintiff  on a promissory  note executed by defendants  2 and 3  the amount  covered  by the  promissory  note having  been borrowed by  them  for   the  purpose of  the  business  carried  on jointly   by venkata kotirathnam and defendants 1 to 3  in the name of sri  Balaji  Dal  mill  after  defendants 2 and 3   divided  from   venkata Kotirathnam and the 1st  defendant : (iv)  Rupees  3,100 towards  discharge  of the Khata debt   contracted by the  2nd   defendant from  the   concern  of the plaintiff for the purpose of  the  business carried  on  by   the 2nd  defendant: (v)  Rupees  1,200  received  in cash  by venkata  kotirathnam on 14-10-1970    from the plaintiff towards  expenses for  purchase  of  stamps   for  execution  of  Ex. A-1;  and  (vi)  Rs. 17,265  received  in cash  by the   1st  defendant  before  the joint  sub   Register  Guntur  at the time of   registration of Ex. A-1  as already    stated the truth   of the details of consideration  recited    in Ex. A-1  is amply  established  not only  by   the  unchallenged  testimony  of P.Ws.  1 and 2  but also by Exs. A-2  to A-24.15.  The question for consideration is to what extent the various  items  making   up  the total  amount  of consideration of Rs. 49,000 recited in Ex. A-1  are binding  on the  1st  defendant who was  a  minor  at  the time  of execution of Ex. A-1  and on  whose  behalf  also Ex. A-1  was executed by venkata Kotirathnam.16.  It is unnecessary  to advert  to  the  various  decided cases   as  the  legal  position is neatly  summed  up in the  latest  decision of the Supreme Court in prasad  v. V. Govindaswamy  Mudaliar  .  Their  lordships  of the Supreme Court held  (at  pp. 96 to 97);-"A natural guardian  of Hindu  minor  has power  in the  management of his estate to mortgage or sell any  part thereof in case of  necessity  or for  the benefit  of the estate.  If  the alienee   does not  prove  any legal  necessity  or that he does not make  reasonable enquiries the sale is   invalid.But  the  father in a joint  Hindu  family  may sell or mortgage the joint   family  property including  the son's  interest   therein teo discharge  a debt  contracted   by him  for his  own  personal  benefit  and  such  alienation binds  the sons  provided  (a)  the debt  was antecedent  to the alienation and  (b)  it was  not incurred for   an immoral purpose.  The  validdity  of an alienation made to discharge  an antecedent debt  rests upon  the pious  duty  of the son to discharge  his father debt  not  tainted with   immorality."Antecedent Debt'  means  antecedent in fact as well as in time that is to say,  that the  debt  must  be  truly   independent of and  not part  of the transaction  impeached. The debt  may be a debt  incurred in connection with a trade  started by the  father  the father  alone can alienate the son's   share  in the case  of  a joint  family.  The  privilege  of alienating  the whole  of  the  joint  family   property  for  payment    of an antecedent   debt    is  the  privilege    only  of the father,   grandfather and great-grandfather  qua  the son or  grandson only.  No other person  has  any  such  privilege.There is however  another   condition which must be satisfied before  the son could  be held  liable  i.e.  that the father   or the  manager acted  like  a prudent   man and did not  sacrifice  the property  for an inadequate consideration'.Their  Lordships of the Supreme Court  quoted with approval  the following  propositions  laid  down inBriji  Narain v. Manglaprasad.  AIR  1924  PC  50:-"(1)  The managing coparcener of a joint undivided estate  cannot alienate or burden  the estate  qua  manager  except   for purposes  of   necessity  but (2) if   he  is the father  and the other   members   are  his sons  he may by incurring debt  so long  as it is not for  an immoral  purpose   lay  the estate  open to be taken in execution proceedings  upon  a decree  for  payment   of that debt. (3)  if  he purports  to burden  the estate by a mortgage.  Then unless that mortgage is to discharge an antecedent debt   it would not bind   the estat (4)  Antecedent  debt  means   antecedent  in fact as well  as in  time that is to say that the debt  must  be  truly  independent and not part of the transaction impeached.  (5)  There is no rule  that  this result  is affected  by the question whether  the father .  who  contracted the debt or burdens the estate.  Is alive or dead".17.  The doctrine of pious  obligation  of a son to pay   his  father's  debts  elucidated by a Division Bench of the  Madras High Court  in   shanmukam v.  Nachu  Ammal AIR  1937  Mad  140 as under   was also quoted with approval  by their  Lordships  of hte Supreme Court :"The doctrine  of pious   obligation of  a son  to pay his father's  debts  cannot be   restricted   to cases  where   father also happens to be the manager. If  this limitation was well  founded it would  also  follow  that the father's    power   of disposing  of the son's   share for the satisfaction   of his own   debts  must  be likewise     limited.  There   cannot   be any  justificationof such limitation when it is  remebered  that the son's   obligation to pay his   father's  debts   was under   the orginal   smritis    independent of possesion of assets of joint   family  property.  It depends purely    upon the relationship   of father  and son.  It is only  by case   law developed furing  the early    part of nineteenth  century    and by statute   law in the Bombay  presidency    that the liability    of the son  for father's  debt   was limited to assets   and  to joint  family     property.  The true  basis of the obligation therefore  is the  relationship   of father   and son  and not the accident  of the father   being the manager   of  the Joint Hindu  family".18.  It is not denied that the mortgage debt  evidenced  by Ex.  A-2  dated   31-1-1964  is an antecedent debt contracted by venkata kotirathnam as the manager of  the  joint  family  consisting of himself  and  defendants  1 to 3  for  the  purpose   of meeting the expenses of the said joint  family   and is therefore    binding  upon  the  1st   defendant    Likewise    the  Khata debt  of Rs. 8.325   incurred by the    joint  family   of venkata  kotirathnam and defendants 1 to 3   as the manager  of the joint   family   consisting   of himnself  and defendants 1 to 3  for  the  purpose    of the business carried  on by the   said  joint  family   is also binding  onthe  1st   defendant Equally   the debt  of Rs. 13,000  due on a promissory  note  executed by defendants 2 and  3  in favour    of the oncern  of the plaintiff   even after defendants 2 and3  got  divided  from  venkata  Kotirathnam and the  1st  defendant is binding on the 1st  defendant   the amount   covered by the  promissory  note  having   been borrowed   for  the   purpose  of the business  carried  on  jointly  by venkata  Kotirathnam  and  defendants  1 and  3 in  the name   and style  of sri  Balaji  Dal  Mill as  recited in Ex. A-1.  Two  other documents  tendered   for reception  of  additional evidence in C.M.P. No  536  of 1982  for  the  purposes  of establishing   that the debt of  Rs. 13,000 is not binding  on the 1st  defendnat as the business in connection   with  which the debt  was incurred was carried on by  the 1st   defendant and the 3rd  defendant  only are  of no assistance as late venkata Kotirathnam  must  be deemed to have carried   ont he business Jointly  with the 3rd  defendant   for  the benefit   of the 1st   defendant also only the  debt  of Rs. 3,100 contracted by the  2nd  defendant from the concern of the plaintiff and discharged by the  1st   defendant from out  of  the  principal amount  borrowed  under Ex. A-1  is not binding   on the  1st   defendant   as the debt  contracted   by the 2nd   defendant  was for the purpose   of the business solely  carried     on by the  2nd   defendant In  discharging  the said debt  venkata Kotirathnam   did not Act like a prudent  man.  The  amount  of Rs. 1,200  in cash  received by the   1st  defendant  towards   purchase of  stamps for  the  purpose   of execution of Ex. A-1  and the amount  of Rs. 17,265  also paid  to the 1st  defendant before   the joint  sub-registrar Guntur  at the  time  of registration of Ex. A-1  for  the purpose  of improving   the business carried   on by the   joint   family   consisting   of Venkata Kotirathnam  and the 1st  defendant the  latter    is bound   to  discharge.   The amount  of Rs. 17,265   received by venkata  kotirathnam  was for the benefit   of the estate  of the joint  family   consisting of  venkata  Kotirathnam  and the 1st  defendant  admittedly   even  after    defendants  2 and  3  got  themselves divided  from venkata   kotirathnam  and the  1st  defendants   2 and  3  got themselves    divided   from venkata  Kotirathnam  and the 1st   defendant.  The  latter were carrying  on the very same  business  conducted  by the  erstwhile   joint  family  consisting of venkata    Kotirathnam   and the 1st   defendant    Admittedly   even after   defendants  2 and 3  got  themselves   divided from venkata   Kotirathnam and the 1st   defendant    the latter were carrying on the very same business ocnducted by the   erstwhile  joint family   consisting   of  Venkata Kotirathnam and defendants  1  to 3.  No evidence  was let  in on behalf    o f the  defendants that  the  amount  of   Rs. 17,265   paid  to the 1st   defendant at the  time   of registration   of Ex. A-1   was neither   utilised for the   business carried   on by the joint family   consisting of venkata  Kotirathnam   and the 1st  defendant nor applied  for any   immoral   purposes.  If  therefore follows   that the 1st   defendants is bound   to discharge  half  of the principal   sum  of money  borrowed  under Ex. A-1  minus  Rs. 3,100 together   with  interest.  It should   however  be borne inmind  that the  other  half   share  of venkata Kotirathnam  in the mortgaged  property  is liable  to satisfy the balance  of the mortgage  debt.19.  In  jagannath  prasad  singh  chowdhury  v. Surajmul  Jalal. AIR  1927  PC 1.  Their  Lordships  of Privy council  held:-"In the case  of mortgages order  34  of the code  of civil procedure  and  not  S. 34  of the code of  civil  procedure   would  determine  the question of the rate of interest".20. In   K. Venkata  satyanarayana v.  State  Bank  of India  .  It was   reiterated  that the  provisions  of S. 34  of  the C.P.C.  were  not applicable  to cases of  mortgages   and  that  the    award  of  interest was  governed  by  the  provisions  of O. 34   R. 11  of  the  civil  P.c.21.  It was   next  contended  by  the learned  counsel  for  the appellants  that  compound   interest  at  the rate  of 12%  per annum  with  monthly  rests  stipulated under Ex. A-1  was  usurious  and that the  appellants were   entitled  to the  benefits  of  theUsurious  Loans  Act,  1918.22.  Reliance  was placed  upon  the  decision in Venkata  Rao  v. Venkatarathnam  SIR  1952  Mad  872  wherein  their Lordships  held  that  anything   above  12%  per  annum  simple  interest  was excessive  having   regard  to the   nature  of the  transactions  in the then   composite  state   of Madras  Their  Lordships  added  (at  p.  876):-"The  effect  of  Madras  Act  VIII  of 1937  by which sub-sec  (I)  ofS. 3of  the Usurious  loans   Act was   amended and  explanations  and provisos  were  added  is to make  it   obligatory   upon  the   Court  to find  out  whether   there is excessive  interest  and when   once  that is done  to presume  that  the   transaction  was  unfair  we have  already  expressed  the opinion  that  anything    above  12  per  cent  per  annum  simple  interest  is excessive  considering  the  nature  of transactions  in this  state".23.  In  the said  case  compound  interest  was  charged  at Rs. 1-0-6  per cent  with  monthly  rests.  The same  was held  to be  excessive  within  the meaning  of  the  explanation  inserted   by madras  Act  VIII  of 1937  only  12%  simple   interest  was  awarded  to the creditors  therein.24.In Gopala  menon  v. Sreenivasa,   adverting  to the decision  inVenkata   Rao v.  Venkataratnam.   (supra)  Rajamannar  C.J.  Speaking  on behalf    of  the   Bench  observed  (at  p.  361):-"We  do not  however  understand  the effect  of this   decision  to be to  lay  down  an inflexible  rule  that anything   above  12 per  cent  per  annum  simple  interest  is excessive  whatever  be  the  particular  circumstances  relating   to a particular  transaction  of loan.  So far  as we  are  aware   this decision  has  not  been  under  Their  Lordships  added:"We   are   clearly   of opinion  that to lay  down  an absolute  maximum  rate  of interest  beyond   which  interest  would  be excessive  within  the  meaning   of theUsurious  Loans   Actwould  be in  direct  contravention  of  what islaid   down   inthe Act  itselfS. 3  (2) (a) (b)and  (c)  of theUsurious    Loans  Actwhich  continues  to be  applicable    notwithstanding  the  madras  amendment  makes  it abundantly   clear  that  in   deciding   whether  the interest  charged  is  excessive  several  factors  have  to be  taken  into   consideration.One   important  fact  will be  the risk  incurred  as it  appeared  Or  must  be taken to have  appeared.  Or  must be  taken  to have  appeared,  to  the   creditor   at  the  date  of the loan  In considering   the  question  of riskS. 3 (2)  (c)enacts   that  it  will  be material  to take  into  account  the presence  or absence  of security  and  the  value  thereof.  And   the  financial   condition    of  the  debtor  and  the result  of  any   previous  loan   transaction   known  to the  creditor    if  compound  interest   is charged  the periods  at which   it is  calculated  and the total  advantage   which   may  be reasonably   expected  to  have   accrued  from  the  transaction  are   important  factors".25.   In  the  said  case   compound  interest at 155  with  quarterly  rests   stipulated  between  the parties  was  held  to  be  excessive   and  compound  interest  at  10%  with  yearly   rests   was  allowed.26.   Their   Lordships  of  the Supreme Court affirmed  the aforesaid  decision of  the  Division  Bench  of  the High Court  of  Madras  in varadachariar  v. Gopala   menon  .27.  In General  and  Credit    Corporation  (India)  LTd  v.  Venkata  Ramarao    Chandra  Reddy, C.J.  And  jaganmohan  Reddy J.,  as  he  then  was   observed  at  page  434  as  follows:-"A  Court  has  to determine  whether  a particular  rate  of interest  is excessive   or not   having  regard  to  the    rates  of  interest  at  the time  when  the impugned  transaction  was  entered  into  and  the surrounding   circumstances   what  amounts  to excessive   interest  has to be determined  with   reference  to various factors  such as the security which the  creditor obtained for  the amount advanced  by him, the pecuniary position of the debtor the rate  of interest prevailing at  that time and  the advantages  which the debtor  would  derive  from  the loan.A  debtor  would get relief under the usurious Loans  Act, only if  it is  established that the  transaction  is substantially     unfair  one.  It is  true    that the explanation   introduced  by the Madras  Amendment  has laid  down that if the interest is excessive  the Court shall  presume  that the transaction was substantially   unfair; but such presumption may be rebutted  by proof  of special circumstances justifying  the rate of interest. Thus before the explanation could be invoked it  should be  established that the interest is excessive. It is  only then that  it may be presumed  that the transaction was  an unfair one".28.  In Girwar prasad v. Ganeshlal saraogi, AiR  1949  FC  57  patanjali sastri. J., as he  then was  held:-"In order to be entitled to the  benefits of the usurious  loans Act. 1918 the appellant must   establish.(1)  That the interest payable   on the  loan  is  excessive  and

 

(2)  That  the transaction was as between the parties thereto substantially  unfair. It was  frnakly admitted before  us that  the appellant adduced to evidence as to the circumstances  under  which he borrowed  moneys from the respondent the  availability of credit facilities  and possibility  of borrowing on easier terms in that part of the country where  the transactions took place".29.  On  the facts of  that case, the learne d Judges confirmed the Judgment   of the High Court  allowing  compound  interest at the rate of 12%  as it was not established that the rate of interest charged was in excess of the commercial  rate prevailing  at that time.30.    The scope  ofS. 3of the Usurious  Loans Act as  amended by the  Madras Amending  Act VIII of 1937  was also  construed in an unreported judgment of  this  Court dated 5-8-1970.  In  Godugula  Lakshmi  narasimha Murthy v. MuthuKumalli  venkata  subbarao (L.P.A. No. 69/68). After  considering  the relevant  case law on the point  the  legal  position was summarised  as under:-"(1)  The Court can  reopen the transaction and give appropriate  relief in the matter of interest when the transaction is substantially unfair.(2)  If the interest is ecessive the Court shall presume that transaction is substantially unfair, but this is a rebuttable presumption;(3) No hard  and fast rule can be  laid down as to what is  reasonable or excessive rate  without reference to the several circumstances enumerated to Cls. (A) (b) and (c) of  the sub-s. (2) ofS. 3of  the Act.(4) In determining whether the rate is  reasonable or not the Court has to take  into consideration the following  circumstances:(a) The value of the security offered:(b) The financial condition of  the debtor including the result of any prior transaction:(c)  The know or  probable risks in getting  repayment:(d) if compound  interest was provided for  the frequency of the period of calculation of the interest and(e) The advantage which the debtor reasonably expected to derive from the transaction".31. Adverting to the various cases referred to above a Division Bench of  this Court inK. Venkata Satyanarayana v. State Bank of India(supra) observed (at p. 122):-"The  aforesaid rulings clearly establish that there can be no  presumption that the charging of compound rate of  interest is per se excessive  that  the  burden of establishing that the interest is excessive lies on the debtor setting  up a plea that  the interest charged is usurious and that it is only when that is established the presumption under  explanation (1) toS. 3 (1)of  the usurious Loans Act, as  amended by the madras Amendment  Act arises".32.  In P. Sambamurthy & sons v. M. Krishna Rao,  while adverting to the observations of their  Lordships of   the Supreme Court in varadachariar v. Gopal Menon   (supra) Jeevan Reddy J., observed (at p. 79):-"What  is  relevant to notice is  that the Supreme Court did not say  that as a rule of law  any interest over and above 12% simple  is per se usurious and excessive".33.  In anunreported judgment in A.S. No. 334 of 1970 dt. 1-8-1972 on the file of  this  Court, chinnappa Reddy J.  While adverting to the  decision in Varadachariar v. Gopala menon  (supra) observed that the mortgage in question in  the  said case was of the year 1936 and that  since then there  had been change   in the  market conditions and the economy.  He added (at p. 79):-"The learned subordinate Judge failed to notice that their Lordships of the Supreme Court were concerned with a transaction of the year 1936 whereas in the present case, we are concerned   with a transaction of the year 1962.  It cannot   be pretended that there has been no change in the economy  of our  country in the meanwhile  it is  well known that even the bank  rate  has gone  up during this  period In those circumstances. I do not see how it can be said  that 12% compound in the   face  of the evidence that there were several other  transactions where similar  rate of interest was charged can be considered to  be excessive leave alone unfair I therefore think  that the learned   subordinate  Judge ought to have allowed the interest as claimed by the plaintiff'.34.  It therefore follows that it cannot be laid down  as a rule of law that interest above a particular  rate  per se is penal or excessive  Whether  interest  is penal or  excessive is always a question of fact to be decided on the  facts and circumstances  of  a given case.35.  In S.P. Majoo v. Ganga Dhar  their  Lordships  of the Supreme Court  observed (at pp. 603-4):"Prior to 1929 the legal  position  was  that underS. 34of the C.P.C granting a decree  for payment  of money the Court had full discretion to order interest at such rate as it  deemed reasonable to  be paid on the principal  sum adjudged  from the date of the suit onwards But O. 34 Rr. 2 and 4 which applied to a mortgage suit enjoined the Court to order an account to be taken  of what was due to the  plaintiff at the date of such decree for principal and "interest on the mortgage". The special provision in O. 34 had therefore to be  applied in preference to the general provision in S. 34  Till the period for  redemption expired therefore the matter was considered to remain in the domain of contract  and interest had to be paid  at the rate  and  with the rests specified in the contract of mortgage but after  the  period  for redemption had expired the matter passed from the domain of contract to that  of judgment.  The right of  the mortgagee would henceforth depend  not on the contents  of   his bond but  on the  directions of  the decree".36.  It was held  by the Federal Court in Jaigobind  singh v. Lachmi Narain Ram AiR  1940 FC 20  that the  language of O. 34  R.11 gave a certain amount of discretion to the Court so far as interest pendente lite and subsequent interest was concerned and it was  no longer  absolutely  obligatory  on the courts to decree interest at the contractual rates up to the date of redemption in all  circumstances even if there was no question of  the rate being penal excessive or substantively unfair within the meaning of the usurious Loans Act. 1918.37.  Quoting the aforesaid principle approval their Lordships of the Supreme Court in S.P. Majoo v. Ganga Dhar  (supra) observed (at p. 604):-"In view of the principle laid down by the Federal Court we are of opinion that in the  circumstances of  the   present case the respondent should be granted interest on the principal  sum due at the  contractual rate till the date of the suit  and simple interest at 6 per cent p.a.  on the  principal sum  adjudged from  the date of  the suit till the  date of the preliminary decree and also at the  same rate till the  date of realisation".Sri C.P. Sarathy the learned counsel  for the  plaintiff  urged that  the  plaintiff would be entitled to the  payment of  would be entitled to the payment of  subsequent interest not only on the principal sum of money borrowed under Ex. A-1 but also on the amount of interest accrued thereon up to  the  date of  redemption Reliance was placed upon  the decision inNarharilal v. Firm Bhogilal Amratlal, .Construing O. 34 R. 11 of  the  civil P.C. V. B. Raju J. Observed (at p. 254):-"It is  provided that the Court may order payment of  interest But what is provided in O. 34, R. 11 is interest up to the  date on or before  which payment  of  the amount  found or declared due is  under the  preliminary decree to be made. The rule  therefore  contemplates that a certain  amount is found  or declared due and  that amount has to be  paid  on or before a date under  the preliminary decree. The rule therefore contemplates interest on the amount found due from the date when it is  found due up to the date on or before  which  payment is to be made under  the  preliminary decree.  The amount  found or declared due has reference  to  the   amount mentioned in O. 34  R. 2 and O. 34 R. 4 That includes interest from the date of the suit  till the date of  the preliminary decree.  A preliminary  decree provides that the amount found or declared due  may be paid   into the  Court on or before  such date as the Court  may fix within six months  from  the   date on which the Court confirms and countersingns   the account  taken under sub-cl. (A)  of cl. (1) of order 34, R. 2  the Court has therefore to  take  an account under O. 34 R. 2 sub-cls (a) (b) and (c) of cl. (1)  while  taking such an account the  Court has to include  interest as provided in cl. (A) (I) of  R. 2 (1).  The  Court  then has to give time  for payment  of  that amount and the time given should  be less than six  months In regard to the subsequent  period   which should  not  exceed six months.  The  Court has a discretion under O. 34 R. 11 to  give interest or not as provided  in O. 34  R. 11 the Court has therefore  no discretion  in regard to the manner of taking account  under O. 34 R. 2  and O. 34. R. 4 and is bound  to  include  interest while  arriving at the amount found  due  at the date of the preliminary decree.  But  under O. 34, R.11 the Court  has a  discretion  whether or not to order  interest for the subsequent  period  of six months   from  the date of the prliminary decree till the time of actual  payment'.38.  We are  unable to subscribe to and dissent from the view  of V.B. Raju. Supreme Court in K. Manick chand v. B. Saleh Mohammed. .  In the  said case two simple  mortgages in succession were   executed by three brothers. A Suit  wa  instituted in the Court of the District judge civil station Bangalore by one Khanmull for  recovery of  the amount due  under the two mortgages.  On the foot of the first mortgage the amount claimed was  rupees 51,200 as principal and  interest.  While on  the  foot of thesecond mortgage the amount claimed as principal and interest was Rs. 60,200.  The   contractual  rate of interest was 1 per cent per  mensem.   The  trial Court decreed  the suit on  27th  March 1952 after applying the provisions of S. 17 of the Mysore  Money Lenders Act No. 13 of  1939 for the purpose   of giving   effect to the provisions ofS. 17of the Act.  The   trial Court   held  that the principal  amount of the two loans was Rs. 44,000 being  the aggregate  of  the  consideration shown in the two  mortgage   deeds, and   consequently  allowed  as arrears  of interest the  sum of Rs. 44,000 A preliminary   decree  was therefore granted for  a sum of Rs. 88,000  comprising of Rupees   44,000  as principal and Rs. 44,000 as  interest.  The excess  interest  claimed at the contractual  rate of 1 per  cent per mensem was disallowed on the ground   of the maximum   limit for  the grant of the total  amount  of  interest laid  down underS. 17of the Act.  Thereupon   both the  parties   filed appeals in the High Court of Mysore.  The  High Court held  that the trial Court had wrongly   treated   the amounts of Rs. 20,000  and Rs. 24,000  as principal   amounts  of the original  loans, and  recorded a finding  that the  principal  amounts in fact were Rupees 15,017-8-0 in respect of the first  mortgage  deed and Rs. 22,954 in   respect   of the second  mortgage deed.  The High Court  thus, worked  out the  aggregate  of Rs. 37,971-50 ps. As the principal  amount  of the  two  loans advanced  under  these   two mortgage  deeds  and  applyingS. 17of the Act.  Granted a decree  for  this amount  as principal   together   with the same amount  as interest.  The  High Court further   held that this would be the  arrears of interest  to which the  appellants would be entitled up to  the date fixed   for payment  of hte redemption   money by the  judgment  of the High Court  that  the principal    amount   would carry  interest at 6 per  cent  per annum  from the  date fixed  for redemption till  realisation.  The  decree modified  by the  High Court was assailed in  the Supreme Court.39.    Their  Lordships  of the Supreme Court observed  (at p. 674):-"Admittedly  civil P.C. was applicable  to this  suit and consequently, interest subsequent  to the date of  the  decree had to be  awarded in accordance  with O. 34, R. 11C.P.C.  Under  R. 11 (a) (I) interest would be payable  on  the principal  amount  found  or  declared  due on the mortgage from the  date of the decree up  to the date fixed  for  payment  at the rate   payable on the principal or where no such rate is fixed at such  rate  as the Court may    deem reasonable.  In this case  the date of  the decree by the  trial  Court  was 27th  March 1952  while  the date   fixed  for  payment   became 19th  March   1959   as a  result    of the decree of the  High Court .  the interest  for this period  has to be calculated in accordance with R. 11 (a)  (I) of O. 34  c.P.c.  on the principal  amount of Rs. 37,971-50  ps. As regards   the rate it is  true   that under the mortgage deeds,   the  interest was  payable  at the rate of 1 per cent   per mensem: but  under the provisions  of hte Act read    with  the   provisions of the Act read   with the  provisions of the usurious  Loans  Act  (mysore Act IX of 1923) the   fair  interest payable  on the loan would  be at  the rate  of 9 per cent per  annum   and it is  at  this rate that the  interest  must be   calculated on  this   principal  amount  for this period    In addition.  Under Rule 11 (a) (ii) of order 34,C.P.C.  interest at  the rate  of 6 per  cent  per  annum  has to be  allowed on the amount decreed   for costs, charges  and expenses  incurred   by  the appellants up to the  date of  the   preliminary   decree.   A further  direction  that is  necessary is that interest  under R. 11 (b) of O. 34C.P.C.   will be payable  up to  the date of realisation or actual payment  on the aggregate   of the two  principal sums  just  mentioned at the rate of  6 per  cent  per  annum  which must  be  deemed to be  reasonable as interest at that  rate  is  ordinarily  awarded in all  decrees  in  respect  of future  periods".40.  In our  considered  view  compound  interest at the rate  of 12%  with  monthly  rests  stipulated  under Ex. A-1  is  excessive  and compound  interest at  the    rate of 12%  per  annum  on the principal  sum  of money borrowed    under Ex. A-1  from   the date of   execution of Ex. A-1  up to  the date of  the suit  and simple  interest at the rate of 12% per   annum  on the principal  sum of money from  the date of the suit  till the date of  redemption as fixed  by the  Court  with  subsequent  interest at the  rate of 6% per  annum  on the principal  sum  of money  from  the date of redemption till the date  of realisation  would be   reasonable  .  the total   interest   thus  worked  out  up  to  the date of  redemption  amounts  to Rs. 54.888-85  ps. There  shall be a preliminary  decree in  favour  of  the plaintiff directing  the   defendants to pay Rs. 1,03,888-85 ps.  With  interest at 6% per  annum  of  Rs. 49.000  from   the   date  of redemption  as fixed  by  the lower Court till  the  date of realisation.  The  preliminary  decree  of the lower  Court is accordingly   modified  In the circumstances    of the case   while  maintaining the decree  passed  by the   lower  Court  for   costs we   direct the   parties to bear  their own  costs in  the appeal suit.41.  In default  of payment   of the  mortgage  money  the plaintiff shall be  entitled  to execute  the decree  by sale  of  the  mortgage  property.  As  already   shated,  the 1st  defendant  is bound to  discharge  half   of ht eprincipal  sum of   money  Borrowed under Ex. A-1  minus   Rs. 3,100 together  with interest  as allowed  by us.  In other words   he is bound  to discharge   his share  of Rs. 22.950  together with compound  interest at 12%  per  annum  from the date of  the suit   till the date of  redemption   as also    the subsequent    interest  on the said  sum  of  Rs.  22,950  at  the rate of 6%  per  annum   from  the date of redemption   till the date  of    realisation.  He  is also liable  to contribute   Rs. 3,111  towards   his  share  of costs   decreed by the  trial  Court.  The  1st   defendant's   half   share in the mortgaged  property   is accordingly  made  liable.  The other   half   share of  venkata  Kotirathnam  in the  mortgage  property is liable   to satisfy   the  balance  of the mortgage  debt.  If  there is any short  fall  the plaintiff will be  entitled   to proceed   against other  properties  of  venkata  Kotirathnam  in the   hands  of defendants  1 to 7.  There shall also  be a personal  decree  against the ist  defendant  to that   extent.42.  In  the  reuult  the appeal suit is  allowed  in part  and c.M.P.  No. 536  of  1982   is also allowed.43. Order  accordingly.