Judgment:
G. Bhavani Prasad, J.
1. The appeal is directed against the judgment and decree in O.S. No. 42 of 1999 on the file of Senior Civil Judge's Court, Kavali, dated 10-06-2003, while the civil revision petition is directed against the order in E.A. No. of 2007 in E.P. No. 24 of 2006 (34 of 2006 ?) in O.S. No. 42 of 1999 of the same Court, dated 08-06-2007.
2. O.S. No. 42 of 1999 was filed for recovery of Rs. 2,49,302/- with interest and costs on the basis of a mortgage, dated 26-12-1991 for Rs. 80,000/- agreed to be repaid with interest at 18 per cent per annum with triennial rests. The mortgage of the plaint schedule property was not redeemed and as no payment was made in spite of demands, the suit was filed for recovery of principal with the contractual interest (triennially compounded) by sale of the mortgaged property, if not redeemed within the time to be fixed by the Court, along with future interest from the date of the suit till realization and costs.
3. The suit was resisted contending that only Rs. 30,000/- was paid under the mortgage and the balance of Rs. 50,000/-was not paid on the next day as promised or at any time thereafter. The recited interest is invalid and ultra vires and only simple interest without rests can be claimed. The interest claimed is usurious, excessive, arbitrary and capricious and there was no notice prior to the suit. The defendant expressed his readiness to pay Rs. 30,000/-with simple interest, if the rest of the claim were to be dismissed with costs.
4. On such pleadings, the trial Court framed issues on the execution of the mortgage deed, passing of consideration under it and the legality of the interest claimed. During trial, P.Ws.1 to 4 and D.W.1 were examined and Exs.A-1 and A-2 were marked.
5. In the impugned judgment, the trial Court concluded that failure of consideration to the extent of Rs. 50,0007- was not probablised in the absence of any corroboration for D.W.1, the defendant and due to his silence up to the suit. The trial Court also concluded that the interest claimed only at 18 per cent per annum on the mortgage debt is not excessive. Accordingly, it granted a preliminary decree with costs as prayed for, granting three months time for redemption.
6. The preliminary decree drafted in pursuance of the said judgment calculated interest from the date of the suit till the date of decree at a sum of Rs. 1,60,799/-.
7. The defendant challenged the said judgment contending that the oral evidence was not properly scrutinized and that the claim for interest was not properly appreciated. Granting interest on the suit amount but not the principal amount since the date of the suit is an error in law and hence, the defendant desired intervention with the judgment and decree under appeal.
8. Pending the appeal, an order of interim suspension of the judgment and decree was granted in C.M.P. No. 6764 of 2004 on 12-03-2004 subject to deposit of Rs. 1,00,000/- and costs within four weeks.
9. As the condition did not appear to have been complied with, the decree-holders proceeded with the execution in E.P. No. 34 of 2006 in O.S. No. 42 of 1999 and the defendant/judgment-debtor filed a petition claiming that in view of the decision reported in : 2008 (1) ALT 665 : 2005 (2) ALD 134 (Viswanatham Bala Subba Rayudu v. Lakki Reddy Chennamma), the rule of Damdupat applies even to mortgage claims, about which he was unaware while contesting the suit. Therefore, the further proceedings in the execution be stayed and the total recovery be confined to Rs. 1,60,000/-.
10. The executing Court passed the order challenged in the civil revision petition without taking the petition on file and after hearing the judgment-debtor, holding that the judgment-debtor owes a duty to raise such a plea in the suit or an appeal and the executing Court, which has to implement decrees and judgments, cannot go beyond the decrees and the rule of Damdupat is not applicable to execution proceedings.
11. The petition was accordingly rejected, against which the civil revision petition was filed contending that the rule of Damdupat applies to all transactions and the legal plea ought to have been allowed at any stage in the interests of justice. The very claim in the execution petition for Rs. 4,46,160/- as against the principal sum of Rs. 80,000/- is highly excessive and usurious and hence, the judgment-debtor desired the said order to be reversed.
12. As per the orders in A.S.M.P. No. 1562 of 2007, dated 02-08-2007, the appellant was permitted to raise the plea of rule of Damdupat being applicable to the transaction.
13. In C.M.P. No. 3950 of 2007, pending the civil revision petition an interim stay was granted on condition of depositing Rs. 1,60,000/- within four weeks and the said condition is stated to have been complied with.
14. Sri T.S. Anand, learned Counsel for the appellant/revision petitioner and Sri P. Ravikiran, learned Counsel for the decree-holders/respondents are heard at length and Sri Anand brought to notice the different precedents on the rule of Damdupat, which will be referred to in due course.
15. Both the appeal and the civil revision petition are disposed of by this common judgment as arising out of the same cause between the same parties.
16. The points that arise for consideration herein are:
1. Whether the suit mortgage is not fully supported by consideration ?
2. Whether the defendant is entitled to the benefit of rule of Damdupat ?
3. Whether the interest claimed or granted is not just and legal ?
4. To what relief?
Point No. 1:
17. In so far as the partial failure of consideration for the mortgage to an extent of Rs. 50,000/- is concerned, the admitted execution of the suit mortgage bond by the defendant obviously places burden of proof squarely on him and his self-serving and interested testimony as D.W.1 in this regard is countered by the evidence of P.Ws.1 to 4. Thus, the evidence available being oath against oath and the admitted execution of the document probablising the correctness of the recitals therein in the absence of any contrary proof, this plea of the defendant cannot be sustained and the trial Court cannot be considered incorrect on this aspect.
Point No. 2:
18. Coming to the applicability of rule of Damdupat, it is true that in Lokam Ramachandra Rao v. Bank of Baroda : 1999 (1) An.W.R. 58 : 1999 (2) ALD 250, the principle of rule of Damdupat was applied, but the learned Judge was specific that the relief was being granted without going into the moot question whether the principle of rule of Damdupat is applicable to the loans advanced by banks or not in view of peculiar facts and circumstances of the case. It is clear from the unambiguous observations of the learned Judge that neither the principle about the application of the rule of Damdupat to any categories of loans nor the applicability of the said rule to a particular territory were being considered on merits in the said decision.
19. Similary, it is equally true that in Viswanatham Bala Subba Rayudu v. Lakki Reddy Chennamma : 2008 (1) ALT 665 : 2005 (2) ALD 134, the learned Judge held that the principle of Damdupat applies to all transactions including mortgage transactions. The learned Judge, of course, observed about the extension of the principle to all transactions by the decision of the Apex Court in M.R. Patil v. S.B. Rainade : AIR 1988 SC 1200 overruling Madhwa Sidhanta Onatini Nidhi v. Venkataramanjulu Naidu ILR (1903) Mad 662. But His Lordship was not considering the territorial application of the rule of Damdupat in that case.
20. However, the Apex Court itself observed in M.R. Patil v. S.B. Rainade (supra) in para 21 that admittedly, the rule of Damdupat was never applicable to Madras and the overruling of Madhwa Sidhanta's case (supra) was not with reference to the extension or exclusion of the applicability of the rule to any territory, but with reference to the applicability of the rule even to mortgages governed by the Transfer of Property Act (the case before Their Lordships having arisen from Bombay, to which territory, the rule of Damdupat applies).
21. In fact, in Syndicate Bank v. I. Guravareddy : 1998 (1) ALT 735, in which the learned Counsel for the appellant herein Sri T.S. Anand was Amicus Curiae assisting the Court, His Lordship Hon'ble Sri Justice B. Sudershan Reddy (as His Lordship then was) specifically considered the territorial application of the rule of Damdupat. His Lordship made it clear that the Apex Court judgment in M.R. Patil v. S.B. Rainade (supra) is not an authority for the proposition that the rule of Damdupat is applicable throughout India including State of Andhra Pradesh, but on the other hand, it is held in categorical terms that the rule of Damdupat was never applicable to Madras. His Lordship also made it clear that the observations of the Apex Court about Madhwa Sidhanta's case (supra) are required to be understood in their context and the question dealt with was whether the rule of Damdupat is applicable only to simple loan transactions or even to mortgage transactions. With reference to the authoritative statement of the principle in N.R. Raghavachariar's Hindu Law (8th Edition) and Mulla on Principles of Hindu Law (15th Edition), His Lordship held that the rule of Damdupat has no application whatsoever to the State of Andhra Pradesh in respect of any transactions. His Lordship had been pleased to place on record the appreciation for the assistance rendered by Sri T.S. Anand, learned Amicus Curiae in that case.
22. With reference to the self-same precedents, I held in the judgment in A.S. No. 1445 of 1997, dated 13-03-2007 that the rule has no application to the State of Andhra Pradesh and cannot be used to negative the right to claim the contractual rate of interest unless it is shown to be otherwise usurious in nature and penal in effect. Therefore, the claim of the appellant to the benefit of the rule of Damdupat cannot be upheld.
Point No. 3:
23. The plaint claimed interest at 18 per cent per annum from
26-12-1991, the date of mortgage, up to the suit and the interest was compounded triennially thrice, making the total quantum of liability Rs. 2,49,302/- by the date of the suit. Up to the date of the suit, the contractual rate of interest governs the parties subject to interference only if the said contractual rate is otherwise illegal or unenforceable with reference to any provision or principle of law.
24. The defendant as D.W.1 while admitting signing Ex.A-1 mortgage deed after going through its contents, did not substantiate his claim that the claim for interest with three yearly rests is invalid and ultra vires under law. It is well settled that mere compounding by itself is no indication of usuriousness of the contractual interest and there is no corroboration for the allegation that the interest is usurious and excessive within the meaning of the Usurious Loans Act or otherwise to justify any interference by the Court with the contractual obligations of the parties. The burden of proof under the Usurious Loans Act cannot be considered to have been discharged by the defendant.
25. Though there can be no interference with the interest up to the date of the suit, the grant of subsequent interest since the date of the suit up to the date of decree by the preliminary decree under appeal at the same contractual rate of 18 per cent per annum triennially compounded appears to be impermissible. Order XXXIV Rule 11 of the Code of Civil Procedure which applies to payment of interest under mortgage transactions, clearly lays down that the Court may order payment of interest to the mortgagee up to the date of redemption to be 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. While the subsequent interest from the date of the decree granted at 6 per cent per annum on the principal sum of Rs. 80,000/-is not under challenge by either party, learned Counsel for the appellant Sri T.S. Anand has rightly relied on N.M. Veerappa v. Canara Bank 1998 (2) ALT 6 (SC), wherein the Apex Court held with reference to Order XXXIV Rule 11 of the Code of Civil Procedure as amended in 1929 that the new provision gives a certain amount of discretion to the Court so far as pendente lite interest is concerned. The Apex Court made it clear that the discretionary power conferred on the civil Court under Order XXXIV Rule 11 to cut down the contract rate of interest for the period from the date of suit up to the date fixed for redemption by the Court is very much there, even if there was no question of the rate being penal, excessive or substantially unfair within the meaning of the Usurious Loans Act, 1918. That discretionary power was held to be an independent power not traceable to Section 74 of the Contract Act or Usurious Loans Act or any State Statutes. Therefore, it is clear that the compound interest awarded by the preliminary decree in question from the date of the suit till the date of decree has to be necessarily interfered with in the interests of justice, further keeping in view that the teacher, aged about 52 years by now became liable to pay more than thrice the amount he borrowed even by the date of the suit, his liability having been further enhanced by many more times by now. After hearing the learned Counsel for both sides and keeping in view the facts and circumstances of the case, the judicial discretion conferred on the Court under Order XXXIV Rule 11 of the Code of Civil Procedure can be justifiably exercised to fix the rate of interest at 12 per cent per annum simple from the date of the suit till the date of preliminary decree granting relief both in the rate and nature of interest further clarifying that the said interest is payable only on the principal sum of Rs. 80,000/- and not on the entire suit sum as calculated in the impugned preliminary decree.
Point No. 4:
26. While the first appeal has to result in modification of the impugned judgment and preliminary decree to the extent indicated, concerning the post suit and pre decreetal interest, the impugned order in the civil revision petition is not open to interference in view of the conclusion that the rule of Damdupat in any view has no application in the territory of the State of Andhra Pradesh irrespective of the question whether the same could not have been raised in execution by the judgment debtor.
27. However, it should be clarified that further progress in E.P. No. 34 of 2006 in O.S. No. 42 of 1999 can only be for recovery of the amount due under the preliminary decree as modified by this judgment.
28. The parties can be directed to bear their own costs in the first appeal and the civil revision petition in view of the peculiar facts of the case.
29. In the result, the judgment and preliminary decree, dated 10-06-2003 in O.S. No. 42 of 1999 on the file of Senior Civil Judge's Court, Kavali are modified by awarding interest on the principal sum of Rs. 80,000/- at 12 per cent per annum simple from the date of the suit till the date of the preliminary decree (i.e. 10-06-2003) and confirming them otherwise in all other respects and A.S. No. 1399 of 2004 is accordingly allowed in part without costs. C.R.P. No. 3043 of 2007 is dismissed without costs, but the further proceedings in execution in E.P. No. 34 of 2006 in O.S. No. 42 of 1999 on the file of Senior Civil Judge's Court, Kavali shall only be for realization of the amounts that may be due under the preliminary decree as modified by this judgment and after duly giving credit to all the payments made so far from time to time, if any, including the deposit of Rs. 1,60,000/- made in pursuance of the interim orders of this Court in C.M.P. No. 3950 of 2007, dated 13-07-2007.