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Calcutta High Court
Sungut Lal vs Baijnath Roy And Anr. on 17 June, 1886
Equivalent citations: (1886) ILR 13 Cal 164
Author: N A Macpherson
Bench: Norris, Macpherson


JUDGMENT

Norris and Macpherson, JJ.

1. We are of opinion that this appeal should be dismissed, Two grounds have been taken by the learned pleader for the appellant. In the first place, he complains that the Court below was wrong in not allowing his client, the plaintiff, to allocate the money value of the grain payments made by the defendants to him towards the extinction of certain debts due from the defendants to the plaintiff, before the execution of the mortgage bond upon which this suit is brought; and. he based his contention upon Section 60 of the Contract Act. That section says: “Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.”

2. It is impossible to say that there are here “no other circumstances” indicating to which debt the payment was to be applied. There is not only no evidence on the record to show that there had been an agreement between the parties that the antecedent debt or debts should be liquidated by payments of grain, but there is specific evidence that this one debt-the debt upon this bond-should be liquidated by payments in kind and not in money. We think, therefore, that the Courts below were abundantly right in disallowing the plaintiff’s claim to allocate these grain payments towards the extinction of the debts due before the execution of this bond.

3. The second ground upon which the learned pleader relies is this, that the Courts below are in error in having treated the interest mentioned in the bond as a penalty and not as liquidated damages.

4. The exact terms of the bond are not set out in the plaint: they have been read to us; they amount to this, that there is a present advance of Rs. 44-1, and bygone debts amounted to Rs. 73-15, and the mortgage was in consideration of Rs. 118. There was a stipulation that, if the whole mortgage debt was not repaid by deposit of crops by Bysakh 1287, then one per cent, per mensem as interest should be charged, not from the breach of the contract, that is to say, not upon the failure to deliver any of the specified quantities of the grain at the specified time, but the interest was to run from the date of the bond. A great many cases as to whether this, under the circumstances, is to be considered as penalty or liquidated damages have been cited before us, The case which the learned pleader for the appellant has relied upon most strongly is the case of Dehary Lall Bass v. Tej Narain I.L.R. 10 Cal. 764. That case was decided by Mr. Justice Tottenham and myself, and though in that case no reference is made to a good many of the cases, which have been cited here, and though the distinction which is drawn by Mr. Justice Wilson in the case of Mackintosh v. Crowd I.L.R. 9 Cal. 689 is not there taken, yet the distinction, does, as a matter of fact, exist, and though it is not the ratio decidendi in that case, it none the less exists. In the case of Behary Lall Dass v. Tej Narain I.L.R. 10 Cal. 764 the increased rate of interest became due upon the breach of covenant and not from the date of the original bond. Now, the distinction seems to be, as we think, perfectly; well drawn by Mr. Justice Willson. In giving judgment in the case of Mackintosh v. Crow I.L.R. 9 Cal. 689 he points out that practically Section 74 of the Contract Act has done away with the distinction between a penalty and liquidated damages, which, he says, “must be borne in mind: in dealing with cases decided before the Contract Act, many of which, turned upon this distinction. Under this section, whether a sum would formerly have been held a penalty or liquidated damages, if it be named in the contract as the amount to be paid in case of breach, it is to be treated much as a penalty was before as the maximum limit of damages.”

5. Then he proceeds to point out the distinction between the increased rate of interest to be paid, from the date of breach and the increased rate of interest to be paid from the date of the bond. We think that distinction is a well-founded one, and, upon the strength of that distinction, we ought to hold that this interest is in the nature of a penalty and only to be taken into consideration as a basis upon which damages for breach of contract are to be estimated. That being so, we see no reason to interfere with the rate of damages at which the lower Appellate Court has arrived. We, therefore, think that this appeal ought to be dismissed with costs.


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