Manohar Lall, J.@mdashThis is an appeal by the plaintiff against a decision of the learned Subordinate Judge dated 2nd March 1936, by which he decreed in part the suit of the plaintiff, which was instituted to recover his dues on the basis of two mortgage bonds dated 16th February 1926 and 11th November 1927. The defendants have also preferred a cross objection. The appeal and the cross objection are both concerned with the question of interest. The learned Subordinate Judge decreed the interest in favour of the plaintiff on the two bonds at the rate of 10 annas per cent, per mensem with yearly rests instead of 12 per cent. per mensem with yearly rests in the case of the first bond of 1926 and 13� per cent, with yearly rests in the case of the second bond of 1927 as claimed by the plaintiff; hence the appeal on behalf of the plaintiff before us.
2. The defendants, on the other hand, by their cross objection seek to reduce the interest decreed by the Court below to simple instead of compound with yearly rests. The suit was instituted on 20th December 1934; the principal contest between the parties on the matter which is now before us, was as to whether there was no legal justification for charging the rate of interest as stated in the two bonds. It was also pleaded that under the Usurious Loans Act the transaction as to the rate of interest was hard, unconscionable and unfair, between the parties, and, that the plaintiff had'' taken advantage of his relationship with defendant 1, who is now contesting the case, and his father, since deceased.
3. A large number of cases, which have centred round the question of interest which are usually cited, were placed before us on behalf of the parties. But it is now well settled, as was pointed out by the learned Subordinate Judge in the course of ,his judgment under appeal, that each case depends upon its own facts and circumstances, and that although in some cases the Courts have allowed simple rate of interest and in other cases the Courts have allowed compound rate of interest, at varying rates, it is impossible to lay down any hard and fast rule. The question as to what is a "commercial rate of interest" was decided by their Lordships of the Privy Council in Sunder Mall v. Satya Kinker A.I.R (1928) . P.C. 64 where the earlier relevant cases were reviewed. It is well to bear the observations of Viscount Sumner in this case as to the meaning of the words to "borrow upon reasonable commercial terms" in order to decide the matters in issue. It is a matter of common experience in this Court that it is usual for rates of interest to be charged upon secured loans amounting to one per cent. Per mensem, and in some circumstances even going as high as two per cent, per mensem compound:
4. The learned advocate for the respondents has relied upon a number of documents to show that in the transactions covered by those documents interest at simple rate was charged: for instance, Ex.A (1) is a mortgage bond of the year 1922 executed by Kishore Chaudhury in favour of Indranarain Ojha of Nawada where interest at the simple rate of 10 annas per cent, was charged; but the evidence of witness 2 for the defendants shows that the mortgagor was related to the mortgagee; Ex.A at p.10 of Part III of the paper book is another mortgage bond of the year 1919 executed by one Chandra Narayan Chaudhury in favour of Jatashanker Chaudhuri where the interest agreed upon was only 8 annas per cent.: similarly, Ex.A (10) is a mortgage bond of the year 1921 where interest at the rate of 11 annas per cent, was agreed to be paid: Ex. A (3), the mortgage bond of the year 1923, where interest at the rate of 10 annas per cent, was agreed to be paid; and, lastly, Ex.A (8) of the year 1930, that is four years after the date of the transaction in suit shows that a sum of Rs. 10,000 was borrowed at the rate of 8 annas per cent. Attention was also called to the evidence of a number of witnesses for the defendants who say in general terms that the customary rate of interest in the locality where the defendants reside is 8 to 10 annas per cent, simple. But, in my opinion, this evidence, both oral and documentary, is wholly insufficient to enable us to come to a decision as to whether in this particular case the transaction between the mortgagor and the mortgagee was or was not unfair. It is no doubt that in the case of legal necessity where a joint family is concerned, it is upon the lender to establish that there was legal necessity for the interest argeed upon. But when the bor. rower is sui juris as in the case of the bond of 1927, the onus is upon the defendant to establish that the bargain into which he entered was vitiated by fraud, undue influence, coercion or things of a similar nature.
5. To take up the bond of 16th February 1926 first, it appears that the mortgagors, the father of defendant 1 and defendant 1, were under an undoubted necessity to raise the amount to pay off a decretal amount of a certain decree in execution of which property was put up for sale on 2nd March 1926. It is not argued before us that there was no necessity for the loan. The necessity is obvious. But it is argued that there was no necessity for agreeing to pay interest at such a high rate, that is to say 12 per cent, compoundable with annual rests. The learned advocate for the respondents relied upon a number of handnotes which were executed by his client or by the father of defendant 1 between the date of the first document of February 1926 and the date of the second document of November 1927. In these handnotes the plaintiff himself has charged interest at the simple rate of 12 to 13 per cent.
6. It was therefore argued that when the plaintiff himself charged the defendant on unsecured loans at simple rate of interest this was sufficient to establish that an agreement to pay compound rate of interest on secured loans was wholly beyond the capacity of the father as the head of the joint Hindu family. But it is obvious that these loans on handnotes were short term loans which were intended by parties to be repaid within a short time and when the loans were not paid, it is clear from the facts of the case that the lender insisted upon a security, and accordingly he took the security well knowing that there would be difficulty in realizing the amount due on the bonds without recourse to a Court of law. Some handnotes were executed even after November 1927 in favour of the plaintiff by the defendants which were again at the simple rate of interest. These handnotes would clearly indicate that when the loans were taken for a short time, the interest agreed between the parties was at the simple rate, and these also establish that the plaintiff was not taking any undue advantage of the position of the borrowers.
7. It was argued that the plaintiff was a pleader of the defendants and of their family and was instrumental in July 1925 in effecting a reconciliation between the father and the son, and, therefore, it was suggested that he was in a position to dominate the will of his clients. I do not find any evidence of a satisfactory character upon the record, which would establish this suggestion even remotely. The evidence on the other hand, such as it is, is exactly to the contrary. As I have just shown, loans for short terms were advanced on the handnotes upon the ordinary simple rate of interest. It also appears that the plaintiff came to the rescue of the defendants when their properties were put up for sale and advanced the money from time to time to meet their necessities. The plaintiff and the defendants were at arms length and the latter knew the terms upon which the loans could be advanced or were available to the defendants from the plaintiff. If indeed the loans were available to the defendant upon very much easier terms in his locality, it is difficult to understand why he or his father would allow the properties to be in peril and wait till the very last date in February 1926 when he could secure the money only from the plaintiff.
8. Upon a review of the oral and documentary evidence, I am satisfied that the rate of interest agreed upon in the bond of February 1926 is a fair reasonable rate of interest and that the joint family of defendants is liable to meet the debts secured by the bond. It was faintly argued that there being ample security the rate of interest must be held to be high. This contention is no doubt based upon an earlier Calcutta case,
Their Lordships think it right to observe that the judgment now pronounced is not in accord with the principles laid down by the Appellate Civil Court of Calcutta in
9. In the present case I have already held that the plaintiff was not in a position to dominate the will of the defendant or his father. Therefore the fact that the security may have been sufficient is no ground for holding that the compound rate of interest was unjustified.
10. With regard to the second bond of 1927, it appears that defendant 2 was born some time after November 1927, and therefore lie was not in existence on the date when defendant 1 executed the document. In this state of affairs, it is not open to defendant 2 to challenge the validity of the mortgage of November 1927. As an authority for this proposition,
11. It is enough to say that it is not permissible to this Court to treat the decision of their Lordships of the Judicial Committee in the manner in which we are asked to do. Their Lordships have decided this point, and it is incumbent upon us to follow the decision. If I may say so respectfully, I think the decision is in accord with the state of law which existed in India even before the commentary in question. In Edn. 7 of the same book at p. 449, the learned commentator came to this very conclusion. It is obvious to me that an after-born son can only acquire an interest in the property which exists on the date of his birth. If a property has already been alienated in part or in whole, he cannot succeed to the part alienated but can have an interest in that property only to the extent to which it exists. In the case of a lease, for instance, for 999 year''s the after-born son can only succeed to the remainder. In the case of a mortgage the after-born son can only succeed to the equity of redemption; but in either case he could not challenge the transfer to the extent to which it has already been made.
12. It appears, however, that the interest which is charged at 134 par cent, compound is not justified. I do not see any change of circumstances in the state of this defendant which justifies a departure from the rate of interest agreed upon between the parties in February 1926. I would therefore allow a decree to the plaintiff at the compound rate of interest at the same rate as in the bond of 1926, namely 12 per cent. For these reasons the appeal is allowed to this extent that the plaintiff will be entitled to a mortgage decree to be drawn up on the two bonds with interest at 12 per cent, compounded annually. The period of grace will be fixed at one month from this date. The plaintiff will be entitled to receive from the defendants and pay to them proportionate costs in proportion to the success in each Court. The cross objection is dismissed. Reliance was placed by the respondents on Section 11, Bihar Money-Lenders Act; but we are bound by the decision of the Pull Bench of this Court in Sadanand Jha v. Aman Khan A.I.R (1939) Pat. 55.
13. The appellants are entitled to a certificate that the case involves a construction of certain: Sections of the Government of India Act and is a fit one for appeal to the Federal Court.
Harries C.J.
I agree.
