P.S. Narayana, J.
1. Heard Sri Kanakaraju, counsel representing the appellant and Sri Ramesh Kumar Nayani, counsel representing the respondent.
2. The plaintiff in O.S. No. 130/87 on the file of Subordinate Judge, Vizianagaram, aggrieved by the modification of the Judgment and decree, so far as it relates to the granting of interest at 24% per annum with quarterly rests in A.S. No. 60/92 on the file of I Additional District Judge, Vizianagaram, is concerned, had preferred the present Second Appeal, and pending the Second Appeal, the appellant died and the present appellant, appellant No. 2, was brought on record in C.M.P. No. 15735/2000 by an order dated 11-10-2000 and at present the 2nd appellant is prosecuting the present litigation.
3. The facts of the case are very plain and simple. The deceased plaintiff filed the suit O.S. No. 130/87 on the file of Subordinate Judge, Vizianagaram for passing a preliminary decree directing the defendants to pay a sum of Rs.24,583-30 together with interest at 24% per annum with quarterly rests on the principal amount of Rs.10,000/- due on a simple mortgage bond executed by the defendant in favour of the plaintiff on 4-10-1982. The 2nd defendant is the minor son of the 1st defendant and both are the members of the joint Hindu family governed by the Mitakshara School of Hindu Law and the 1st defendant is the father, manager and kartha thereof and for their joint family necessity, they borrowed from the plaintiff a sum of Rs.10,000/- on 4-10-1982 agreeing to repay the same with compound interest @ Rs.2/- per Rs.100/- per month within three years therefrom and in evidence thereof the defendants executed a registered simple mortgage bond of even date in favour of the plaintiff giving security of their house property described in the schedule. Subsequent thereto, the 1st defendant made part payments. In spite of repeated demands made by the plaintiff and despite the issuance of registered notices, since the defendants had not chosen to pay the balance, the suit was instituted.
4. The 1st defendant filed a written statement on his behalf and also on behalf of his minor son, the 2nd defendant, wherein it was pleaded that the 1st defendant never borrowed any amount from the plaintiff and never signed and executed the deed of simple mortgage in favour of the plaintiff at all on 4-10-1982 or on any other date either by himself and on behalf of the 2nd defendant and the 1st defendant also denied the receipt of notices and had taken a plea that they have no necessity to borrow any amount and equally the plaintiff had no capacity to advance so much of amount and the interest stipulated @ 24% compound interest is excessive, exorbitant, unconscionable and the same is hit by Usurious Loans Act.
5. On the strength of the pleadings, as many as six Issues were settled. The plaintiff had examined himself as PW-1 and the attestor of the mortgage deed dated 4-10-1982 Ex.A-1 was examined as PW-2. Apart from Ex.A-1, Exs.A-2 to A-12 also were marked and none had been examined on behalf of the defendants and hence the Court of first instance granted a preliminary decree decreeing the suit partly with costs for a sum of Rs.24,583-30 with subsequent interest on Rs.10,000/- at the contractual rate of 24% per annum from the date of suit till the date of realization as against the 1st defendant and four months time was granted for redemption. But however, the suit against the 2nd defendant was dismissed, without costs. The 1st defendant, aggrieved by the same, had preferred A.S. No. 60/92 on the file of Additional District Judge, Vizianagaram and the appellate Court had allowed the Appeal in part setting aside the Judgment and decree made in O.S. No. 130/87 on the file of Subordinate Judge, Vizianagaram so far as it relates to the granting of interest @ 24% per annum with quarterly rests from the date of suit till the date of realization and granting interest @ 18% per annum from the date of suit till the date of realization on the principal sum of Rs.10,000/, is concerned. The respondent/plaintiff aggrieved by the same, so far as it relates to the reduction of interest is concerned, had preferred the Second Appeal and inasmuch as the appellant died, the 2nd appellant was brought on record as the legal representative of the 1st appellant who is prosecuting the litigation at the present.
6. Sri Kanaka Raju, the learned counsel representing the present appellant had drawn my attention to Ground No. 7(a) to(c) of the Memorandum of Grounds of Appeal and had contended that in the present case, the Court of first instance was well justified in granting interest at the contractual rate as specified in Ex.A-1 and the modification by the appellate Court is definitely unsustainable. The learned counsel also with all vehemence had contended that the burden to prove whether the interest charged is penal or usurious in the facts and circumstances is on the respondent and he had not chosen to enter into the witness box at all and hence in such a case, an adverse inference has to be drawn for non-examination of such a party. Strong reliance was placed on RAJAPPA HANAMANTHA RANOJI v. MAHADEV CHANNABASAPPA, AIR 2000 S.C. 2108. The learned counsel also had drawn my attention to KONAKALLA VENKATA SATYANARAYANA v. STATE BANK OF INDIA, 1974(2) An. W.R. 217, VIJAYA BANK, GUNTUR BRANCH v. KOMMAREDDY JAJI REDDY, 2002(2) A.L.D. 71, CENTRAL BANK OF INDIA v. RAVINDRA, 2002(2) A.L.D. 97 (SC).
7. Per contra Sri Ramesh Kumar Nayani, counsel representing the respondent had submitted that the period of redemption was fixed as four months by the Court of first instance which was no doubt modified as two months by the appellate Court and from the date fixed for redemption in view of the provisions of Order 34 CPC, the granting of subsequent interest is within the discretion of the Court irrespective of the fact whether it is penal or usurious and hence in any view of the matter, the interest has to be further reduced granting only 6% during the pendency of the litigation in stead of granting 18% as modified by the appellate Court. The learned counsel had drawn my attention to SOLI PESTONJI MAJOO Vs . GANGA DHAR KHEMA, : [1969]3SCR33 , JAGANNATH PROSAD SINGH CHOWDHURY v. SURAJMUL JALAL AND OTHERS, AIR 1927 P.C. 1 and also to certain observations which had been made by the Apex Court in the decision referred (4) supra.
8. Heard both the counsel.
9. The question involved in the present Second Appeal is in relation to the granting of interest in a mortgage transaction. It is no doubt true that the respondent had not entered the witness box at all. It was also recorded by the appellate Court that it is recited in Ex.A-1, the mortgage bond, that the 1st defendant is a business person but the amount was borrowed for the repairs of the house and for family expenses and to discharge the debts and Ex.A-1 does not show that the appellant/1st defendant borrowed money for the purpose of business. It is not in dispute that the contractual rate of interest is 24% per annum with quarterly rests. The main grievance of the appellant is that when the contractual rate of interest was granted by the Court of first instance, modification of the same by the appellate Court cannot be justified. Hence, the only substantial question of law which arises for consideration in the present Second Appeal is as follows:
Whether the Judgment and decree of the appellate Court be sustained, so far as it relates to the alteration of the rate of interest which had been granted by the Court of first instance in the facts and circumstances of the case, is concerned
10. The recitals in Ex.A-1 are self-explanatory and there is no controversy between the parties relating to the same. There cannot be any controversy also in this regard in view of the concurrent findings which had been recorded by both the Courts below. In the decision referred (6) supra, it was held that till the period for redemption has expired the matter remains in contract and the interest has to be paid at the rate and with the rests specified in the contract or mortgage; but after the period of redemption has expired the matter passes from the domain of contract to that of Judgment and the right of the mortgage should thenceforth depend, not on the contents of his bond, but on the directions in the decree. In the decision referred (5) supra, the Apex Court held :
'We pass on to consider the second contention raised on behalf of the appellants, namely that even if the respondent is entitled to institute a second mortgage suit the High Court ought not to have granted interest to the respondent at the rate of 12 per cent p.a. with monthly rests even after the date of the suit and the maximum interest which should have been allowed was not more than 6 per cent p.a. simple on the principal sum adjudged. In our opinion this argument is well founded and there was no justification for the High Court to allow interest at the contractual rate from the date of the suit on the amount adjudged. Prior to 1929 the legal position was that under Section 34 of the Civil Procedure Code in 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 Order 34, Rule 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 Section 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 of redemption had expired the matter passed from the domain of contract to that of judgment. The right of the mortgage would henceforth depend not on the contents of his bond but on the directions of the decree.-(See the decision in Jagannath Prosad Singh Chowdhury v. Surajmal Jalal, AIR 1927 PC 1). By Act 21 of 1929, O.34 of Civil Procedure Code was amended and a new R.11 was inserted which deals specially with interest and which states:
11. In any decree passed in a suit for foreclosure, sale or redemption, where interest is legally recoverable, the Court may order payment of interest to the mortgage as follows, namely:
(a) 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 by the mortgagor or other person redeeming the mortgage -
(i) on the principal amount found or declared due on the mortgage at the rate payable on the principal or, where no such rate is fixed, at such rate as the Court deems reasonable,
(ii) on the amount of the costs of the suit awarded to the mortgage at such rate as the Court deems reasonable from the date of the preliminary decree, and
(iii) on the amount adjudged due to the mortgage for costs, charges and expenses properly incurred by the mortgage in respect of the mortgage-security up to the date of the preliminary decree and added to the mortgage-money at the rate agreed between the parties, or, failing such rate (at the same rate as is payable on the principal, or failing both such rates, at nine per cent per annum), and
(b) subsequent interest up to the date of realization or actual payment at such rate as the Court deems reasonable -
(i) on the aggregate of the principal sums specified in clause (a) and of the interest thereon as calculated in accordance with that clause; and
(ii) on the amount adjudged due to the mortgage in respect of such further costs, charges and expenses as may be payable under Rule 10'.
This rule was further amended by the Code of Civil Procedure Amendment Act, 1956 but we are not concerned with this further amendment in the present case. It is apparent that the new Rule 11 as inserted by the Amending Act 21 of 1929 provides that the Court 'may' order payment of interest to the mortgage upto the date fixed for payment at the rate payable on the principal. It was held by the Federal Court in Jaigobind Singh V. Lachmi Narain Ram, AIR 1940 FC 20 that the language of the rule gives a certain amount of discretion to the Court so far as interest pendente lite and subsequent interest is concerned and it was no longer absolutely obligatory on the Courts to decree interest at the contractual rates upto the date of redemption in all circumstances even if there is no question of the rate being penal, excessive or substantially unfair within the meaning of the Usurious Loans Act, 1918. In view of the principle laid down by the Federal Court in this decision 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 realization'.
11. In the decision referred (4) supra, the Apex Court held:
'Award of interest pendente lite and post-decree is discretionary with the Court as it is essentially governed by Section 34 of the CPC de hors the contract between the parties. In a given case if the Court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of the principal sum actually advanced the Court may exercise its discretion in awarding interest pendente lite and post-decree interest as a lower rate or may even decline awarding such interest. The discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner.'
12. In the decision referred (3) supra, this Court while dealing with Order 34 Rule 11 CPC and Section 21-A of the Banking Regulation Act 1949 held that the present Section 21-A of the Banking Regulation Act does not over ride Order 34 Rule 11 CPC and the Courts have discretion and power under Order 34 Rule 11 CPC to fix the rate of interest from the date of suit till the date of realization notwithstanding the provisions in Section 21-A of Banking Regulation Act. In the decision referred (2) supra, a Division Bench of this Court held that there can be no presumption that the charging of compound interest is per se excessive and the burden of establishing that interest is excessive lies on the debtor setting up the plea that the interest charged is usurious.
13. It is pertinent to note that in the present case, no evidence was let in on behalf of the defendants and no doubt the Court of first instance had decreed the suit as per the terms specified in Ex.A-1 which was modified by the appellate Court to some extent. It is also pertinent to note that the respondent herein had not preferred any independent Second Appeal aggrieved by the modification of interest made by the appellate Court and the said Judgment and decree in a way became final. However, an attempt is made before this Court to get the interest further reduced to 6% on the strength of the ratio laid down in the decisions specified supra. It is the plaintiff, aggrieved by the reduction of interest, who had approached this Court by way of Second Appeal and as already referred to supra, none of the defendants had entered into the witness box. No doubt, as against the 2nd defendant - minor, the suit was dismissed even by the Court of first instance. Strong reliance was placed on the decision referred (1) supra to convince the Court that adverse inference can be drawn in case of non-examination of a witness and not giving any explanation thereof. In the light of the peculiar facts and circumstances and in view of the limitations of this Court to interfere in a Second Appeal, inasmuch as the unsuccessful plaintiff alone had preferred the Second Appeal, I am not inclined to accept with the contentions advanced by the learned Counsel representing the respondent to the effect that interest can be further reduced to 6% since he had not preferred any independent Second Appeal raising such grounds. Hence, both in law and in equity, I am not inclined to interfere with the Judgment and decree made by the appellate Court and in view of the same, the Second Appeal is bound to fail and accordingly the same is dismissed. But however, since the parties fought this litigation only on the limited question of quantum of interest, this Court makes no order as to costs.