Stuart, C.J:— The “rukka” or contract which forms the subject of this reference is in the following terms:—“Bansidhar, son of Buldeo Das, of Hathras, writes this rukka to Babu Ali Khan for Rs. 50, cash received, to be repaid on Miti Magsar Badi 3rd (about four days after date) without objection or excuse: in event of non-payment according to promise, he will pay interest at one rupee per diem without objection or excuse, and receive back the ‘rukka’ on discharge, dated Miti Kartik Sudi 15th, 1935, corresponding with 9th November, 1878.” And the first question is what is the legal character of such a document? Is it a “promissory note” within the strict meaning of that term, or is it an agreement or other obligation? Taken as a whole, I am clear that it is not a promissory note either within the meaning of that expression in s. 3, Act XVIII of 1869, or it is known to European lawyers, for the condition as to interest deprives it of that character of certainty as to amount which is essential to the legal efficacy of a bill of exchange or promissory note; in other words, that the condition as to interest prevents us from regarding it as an engagement “absolutely to pay a specific sum of money,” within the meaning of the definition of promissory note given in s. 3 of the Stamp Act of 1869. It appears to me that the document is of a two-fold character. It is a promissory note so far as the engagement to pay Rs. 50 four days after is concerned, and as such may be detached from the undertaking to pay the interest at one rupee per diem. That undertaking I regard as in the nature of a collateral obligation. Such a collateral obligation might have been made in the form of a separate instrument, or it might be, as in the present case, incorporated with or added on the promissory note. In either case it is in its nature, in my opinion, quite distinct from the latter, and is to be regarded and dealt with solely on its own legal merits as a mere penalty or otherwise. That such is the true view of this rukka appear to me to be clear from a strict view of its precise terms, according to which the promise to pay “the specified sum” ended with the first sentence. The document then goes on to provide that, “in event of no payment according to promise, he (“the promisor) will pay interest at one rupee per diem, and receive back the rukka on discharge,” not, be it observed, this rukka, but “the rukka,” showing, as I think may fairly be held, that a distinction was intended by the parties between the document so far as it was a promissory note for Rs. 50, and the engagement to pay extortionate interest of one rupee per diem, that is, at the rate of Rs. 730 per cent, per annum. The document therefore is not at all of the same nature occasionally and somewhat rarely found noticed in. English law books, whereby the maker, in addition to the principal sum, engages to pay interest from the date of the bill or note, or, which is the same thing in legal effect, engages in the body of the instrument, and as part of the promise, to pay interest at a particular rate, in which case it has been held by the English Courts that such a contract is good, the interest being payable from the date of the note. In the present case, however, we have a very different document, for the undertaking to pay interest at one rupee per diem is not only not essential to the primary obligation to pay the Rs. 50 four days after date, but is a condition of a highly penal character, and legally objectionable therefore not only on that ground, but being a penalty and therefore reducible in equity, it must have the effect, if viewed as a necessary part of the whole rukka of destroying its character as a promissory note, inasmuch as there cannot, under such circumstances, be shown to be on the face of the instrument a debt which is a certain and specified sura, the sum recoverable taken in connection with the interest as a penalty being essentially uncertain and incapable of being spceified before decree.
That the interest stipulated for was a penalty, and one of a very outrageous kind, being at the rate of, as I have said, Rs. 730 per cent, per annum, cannot for a moment be doubted. A ruling by Mr. Justice Pontifex of the Calcutta High Court, in a case before him—Bichook Nath Panday v. Ram Lochun Singh —was referred to at the hearing in support of this view, and I entirely concur in all that learned Judge says on the subject, and I have had occasion frequently in this Court to refer to that excellent judgment as expressing a just and accurate view of the law but we scarcely needed such an exposition in the present case where the condition as to interest, by its very enormity, writes itself down not only as a penalty, but as a penalty of the most impudent and shameless character.
I have only to add that, as a penalty, the interest can only be, recovered to an amount which will cover a reasonable rate, and also costs, and nothing more.
Straight, J. Pearson, J. and Oldfield, J.:— concurring. This is a reference by the Officiating Judge of Aligarh under s. 617 of the Civil Procedure Code, which has been remitted to the Full Bench by Pearson and Oldfield, JJ.
With regard to the first question put to us, it appears to us that the real and substantive character of the instrument is that of a promissory note, or, in other words, that it is an absolute promise in writing to pay a specified sum on a given date. The stipulation as to interest does not in our opinion, alter the direct object of the document, the undertaking to pay the principal amount on a particular day, which naturally falls within the definition of a specially designated form of contracts known as Promissory Notes and described in s. 3 of the Stamp Act of 1869; and we see no satisfactory reason for straining construction of its terms so as to throw it into the category of “Bond” or “Agreement not otherwise provided for” by that statute. Every promissory note is an agreement, which in the present case is a promise to pay a certain sum on a certain date with interest from maturity at the rate of one rupee per diem. Had interest not been mentioned in the note it would have been recoverable, and it seems to us the mention of the amount of interest can scarcely be held to alter the whole character of the instrument. The answer to the first question of the Officiating Judge therefore should be that the document was adequately stamped, as a promisory note and admissible in evidence for all purposes. Such being our view, it is unnecessary to reply to questions 2, 3, and 5. The fourth point involves many difficult considerations, and in expressing an opinion upon it, we do so with some doubt and hesitation. It is true that s. 2 of Act XXVIII of 1855 provides that, “in any suit in which interest is recoverable, the amount shall be adjudged or decreed by the Court at the rate (if any) agreed on by the parties.” But were the terms of that section strictly applied in every case, it would be impossible to say to what extravagant and extortionate extent the most usurious claims under the name “interest” might not be carried. In a country like this, where there is so much borrowing by the ignorant lower classes, who as much require to be protected against themselves as against the money-lenders, a too literal application of the above provision could only be productive of oppression and injustice of the most grievous kind. We entirely concur in the observations made by Pontifex. J., in a valuable judgment in Bichook Nath Panday v. Ram Lochun Singh , that the question as to whether “interest,” as expressed in a document, is to be regarded as interest or a penalty should be decided according as the intention of the parties can be gathered from the document as a whole. In the present case, for example, for each day's default in payment of the principal sum, which by the way was only borrowed for four days, one rupee interest per diem was to be paid, or at the rate of Rs. 730 per cent, per annum. Now in one sense this may be said to be the “rate of interest agreed upon between the parties,” if the word interest, being mentioned in the contract, is to be arbitrarily accepted in its strict sense. But we doubt if any Court of Equity would allow itself to be made the medium to enforce terms so monstrous. On the contrary it seems to us that, were the decision of the case referred before this Court, our plain duty would be to hold that, looking at the entire instrument, the parties intended, when they spoke of interest, a penalty for each day's default in payment of the principal sum; for it must be admitted that one rupee per diem for failure to repay Rs. 50 is, as interest, an extortionate amount, for which no adequate consideration is shown, and which no man would contract absolutely to pay.
Holding this view, and as an answer to the fourth question, we think that the amount of interest mentioned in the promissory note is in the nature of a penalty, and may be so treated by the Officiating Judge in disposing of the plaintiff's claim.