Debi Sahai v. Ganga Sahai

Richards and Tudball, JJ.:— This appeal arises out of a suit on foot of two mortgages. The rate of interest was Re. 1-14-0 per cent. per mensem with yearly rests. The first bond was dated the 6th of August, 1897, for Rs. 215, and the second was dated 5th December, 1899, for Rs. 99. The total amount claimed was Rs. 1,270-9-0 after allowing payment of Rs. 150. The only question is whether or not the court below was justified in reducing the interest from the contractual rate of Re. 1-14-0 per cent. per mensem compound interest with yearly rests to Rs. 24 per cent. per annum simple interest. The learned Judge says the defendants pleaded that the rate of interest was hard and unconscionable, and he then goes on to cite cases upon which he relies as authorities for the proposition that the court can of its own motion reduce interest as unconscionable. He says:—“It has been laid down that in the case of an unconscionable bargain a court can interfere in the absence of undue influence or penal clauses to reduce interest. There can be no doubt that the learned Sub-ordinate Judge had discretion to reduce interest.” It will be seen that it was neither pleaded nor proved that there was any undue influence or any penalty. In the judgement of this Bench delivered on the 16th of May, 1910, in Second Appeal No. 891 of 1909, we pointed out that the power of a court to interfere with contracts is limited to the provisions of the Contract Act. There are dicta to be found in the cases of Balkishen Das v. Madan Lal and Kirpa Ram v. Sami-ud-din Ahmad Khan which seem to us liable to misconstruction. These dicta must be read in conjunction with the facts of the cases. We therefore think it right to refer to the decision of their Lordships of the Privy Council in the case of Dhanipal Das v. Maneshar Bakhsh Singh . At page 583 of the report their Lordships, referring to the decision of the Sub-ordinate Judge which had been confirmed by the Judicial Commissioner of Oudh, said as follows:—“The Sub-ordinate Judge was wrong in deciding the case in accordance with what he supposed to be English equitable doctrine. He ought to have considered the terms of the amended section 16 only.” The Contract Act is referred to. It is quite clear that it is only under section 16 in cases like the present that the court has power to interfere with a contract entered into by the parties. The section is limited to contracts induced by undue influence. A contract induced by undue influence is defined by section 16, clause (1) of the Contract Act. Clause (3) is the only clause which refers to unconscionable bargains, and in applying the provisions of the section it will be seen that it is only where the lender is in a position to dominate the will of the borrower that a presumption arises that a transaction which on the face of it appears to be unconscionable was induced by undue influence. In the present case, as already pointed out, undue influence was neither pleaded nor proved, nor is there anything whatever to show that the plaintiffs were in a position to dominate the will of the borrowers. Under these circumstances we allow the appeal and modify the decrees of the courts below by decreeing the plaintiffs' claim in full. As the rate of interest was in our opinion very high, we allow no interest from the date of suit. The appellants must have their costs.

Appeal allowed.