1. This appeal arises out of a suit based on a hand note dated 29th Pus 1330 (corresponding to 2nd January 1925), for Rs. 3,800 executed by the defendant No. 1, who is said to be the managing member of the joint family of the defendants. The hand note bears interest at the rate of 1 per cent, per month. The first hand note was executed on the 30th Magh, 1318, (corresponding to 13th February 1911) for Rs. 2,650 at an interest of Rs. 1-4-0 per cent, per month. After an adjustment of accounts this hand note was renewed on the 27th Magh 1321 (corresponding to 8th February 1914) for a sum of Rs. 1,591 bearing the same rate of interest. This was again renewed by a hand note dated 7th Magh 1324 (corresponding to 15th January 1917) for Rs. 2,505 at the same rate of Rs. 1-4 0 per cent, per month. The fourth note of hand was dated 4th Magh 1827 (corresponding to 9th January 1920) for Rs. 3,800 at an interest of 1 per cent. per month in renewal of the previous notes. The hand note in suit was executed in lieu of this note of hand on the 29th Pus 1330 for Rs. 3,800 as already stated.
2. The learned Subordinate Judge found all the defendants liable for the transaction; but re-opened the transactions and passed a modified decree for Rs. 2,668-8 against defendant No. 1 and his sons and for smaller amount (namely, Rs. 2,084-9) against other members of the family. What he did was to re-open account within six years prior to the institution of the suit so far as the executant and his sons are concerned; while as regards the rest he re-opened the accounts from the very beginning.
3. It is urged by the learned Counsel for the appellant that the Court below was wrong in applying the Usurious Loans Act and in re-opening the accounts. Section 3 of the Usurious Loans Act enacts that the Court can re-open the transaction, take an account between the parties, and relieve the debtor of all liability in respect of any excessive interest, when (1) the interest is excessive and (2) when the transaction was, as between the parties thereto, substantially unfair. It was pointed out by Mr. Justice Mullick in Balunki Mahapatra v. Krapa Sindhu Mahapatra 42 Ind. Cas. 680 : (1917) Pat, 135 : 2 P.L.W. 175 that the law of India is that unless the debtor can bring himself within the four corners of Section 16 of the Indian Contract Act, he is entitled to no relief; but the position has been changed by the enactment of the Usurious Loans Act. No plea of undue influence was pleaded in the present case and, therefore, the Court cannot reduce the rate of interest fixed by the parties with open eyes unless the case falls within the provisions of the Usurious Loans Act. This Act, as I have mentioned, entitles the Court to re-open a transaction when the interest is excessive and when, the transaction was substantially unfair. The rate of interest provided in the hand note in suit is only 1 per cent, per month. There is nothing to show that this rate of interest is unreasonable and I am unable to consider that the rate of 14 per cent, or as a matter of that Rs. 1-4-0 per cent, per month can be characterised as in any way excessive or extortionate in the case of a hand note which does not carry any security. “The word ‘excessive’ applied to interest, is, of course, a relative and elastic term, impossible of absolute definition” as stated by Lord James in Samuel v. Newbold (1906) A.C. 461 at pp. 475, 476 : 75 L.J. Ch. 705 : 95 L.T. 209 : 22 T.L.R. 703 but bearing in mind the prevailing rate of interest in this part of the country it is impossible to say that the rate of interest is excessive.
4. The question is whether the transaction may be characterised as unfair. It is urged by the learned Advocate for the respondent that it is so, inasmuch as compound interest was taken into account in all the previous notes of hand in arriving at the stated figure for which the hand note in suit was executed. On behalf of the appellant our attention is drawn to the endorsement, in the handwriting of defendant No. 1 himself on the back of the hand notes showing payment of compound interest. Compound interest will not be allowed except where there is an agreement, express or implied, to pay it, or where the debtor has employed the money in trade and has presumably earned it, or unless its allowance is in accordance with a custom of a particular trade or business (Halsbury’s Laws of. England, Vol. 21, page 43, Section 80). It has also been laid down in Fergusson v. Fyffe (1841) 8 Cl. & F. 121 : 8 E.R. 49 : 54 R.R. 12 that there cannot be a title to compound interest without a contract, express or implied custom. An agreement to pay compound interest may be implied from the acts, mode of dealing or acquiescence of the parties. Now, in the present case we find an endorsement on the back of the first hand note that a sum of Rs. 226-11-6 is paid on account of interest and compound interest. There is another endorsement of payment of Rs. 405 on account of interest and compound interest. There is a third endorsement of payment on account of interest and compound interest and of the execution of another note of hand for the balance found due. All these endorsements are in the handwriting of defendant No. 1, the managing member of the family. On the back of the second hand note there is an endorsement in the handwriting of the defendant No. 1, that he is executing this note of hand for a sum of Rs. 2,505 on account of principal and interest after deducting remission. Again, the fourth hand note, that is, the last note, is renewal of which the hand note in suit was executed, bears an endorsement of payment on account of interest and compound interest in the handwriting of defendant No. 1 himself. It appears that, although the first three hand notes bore Rs. 1 4-0 per cent, as interest this was reduced later to the rate of 1 per cent, evidently, because of the payment of compound interest. Having regard to the actings of the parties and the course of dealing an agreement to pay compound interest on the previous transactions can very well be implied in the present case. In the circumstances it is impossible to state that the transaction in suit was anything unfair.
5. The amount was arrived at after deductions and in some instances after remission as noted on the back of one of the documents. Again if the renewed hand notes had not been executed the creditor would have evidently sued the defendants for recovery of his dues and, therefore, the defendants have been benefited by the transactions which have led to the forbearance by the plaintiff in suing upon them. Moreover, if the intermediate hand notes had not been executed and the fourth hand note not renewed by the note in suit, the amount due at the time of the execution of this note would have been more than Rs. 3,800 for which the last hand note was executed. For example, the rate of interest on the first hand note for Rs. 2,650 was Rs. 33-2 per month. In 12 years this would have come up to Rs. 4,770. Deducting payment of Rs. 3,137 made up to that date, the total of the principal and interest would have come up to about Rs. 4,200 while the hand note in suit is executed for Rs. 3,800 only. Considering all the circumstances of the case it is impossible to state that transaction is in any way unfair. Has the rate of interest been exorbitant or extortionate one could have presumed that the transaction was unfair; but that is not the position here.
6. It is said that compound interest was paid by defendant No. 1, by mistake and a reference is made to Daniell v. Sinclair (1881) 6 A.C. 181 : 50 L.J.P.C. 50 : 44 L.T. 257 : 6 W.K. 569, This case has no application, because there is no allegation in the written statement that compound interest was paid by mistake. Reference was also made to Samuel v. Newbold (1906) A.C. 461 at pp. 475, 476 : 75 L.J. Ch. 705 : 95 L.T. 209 : 22 T.L.R. 703 which is based on the Money Lenders Act, 1900, on which the Usurious Loans Act has been modelled. In that case the borrower was a wealthy man and his estate was worth more than £, 40,000. He was intemperate and improvident. The lenders were aware of his position and had been informed by private enquiry agency that no unreasonable risk would be incurred by giving credit for the amount of loan. The borrower was introduced to them by an agent who was to have a handsome commission and a share in the profits. Interest on the advance and principal were lumped together and made re-payable by monthly instalments with a default clause, The rate of interest was about 104 per cent, per annum, if the instalments were paid and rose to about 400 per cent, per annum on the amount falling due on the first date of default.
7. It was held in the circumstances that the transaction was unfair and the debtor was entitled to relief. The present case cannot, by any stretch of imagination, be taken as falling within the purview of this ruling.
8. In view of all the facts and circumstances of the case I am unable to agree that the transaction is unfair between the parties. I may add that the learned Subordinate Judge, although he re-opened accounts under the Usurious Loans Act, does not come to a positive finding that the interest is excessive and that the transaction is unfair. In my opinion the defendants are bound by the transaction in suit entered into by the managing member of their family for their benefit. The abstinence from bringing suits afforded a sufficient benefit to all the defendants who were also benefited by the original transaction which was in respect of a certain purchase made for the family. The contention on behalf of the appellant must prevail and the plaintiff is entitled to a decree for Rs. 3,800 as principal plus interest at the rate of 1 per cent, per month (simple) from the date of the hand note till the date of the suit after deduction of Rs. 1,000 paid since the execution of the hand note. The learned Counsel agrees to a remission of Rs. 700 from out of the amount which will be found due. The plaintiff will, therefore, get a decree for the balance and proportionate costs in both the Courts. The decree shall carry 6 per cent, interest per annum from to-day till realization. The appeal is allowed in part and decree modified to the above extent.
9. I agree.