JUDGMENT
Manisana, J.
1. This is an appeal from the preliminary decree dated 27-5-86 passed by the Assistant District Judge, Jorhat in Title Suit No. 31 of 1981. The plaintiff-Bank instituted the suit for recovery of Rupees 86,996.83 by sale of mortgaged properties. The facts of the case, in brief, are thus. The defendant Mayeeduz Zaman Ahmed took a loan of Rs. 31,000/- from the plaintiff-Bank. The payment of the loan was secured by a demand promissory note and a mortgage by deposit of title-deeds. The defendant failed to pay the amount due and, therefore, the plaintiff-Bank ascertained a sum of Rupees 59,669.61 as on 28-3-78 and initiated a proceeding for recovery of the same before the Bakijai Officer against the defendant under the Assam Loan Recovery Act, 1976. The Bakijai Officer returned the certificate on the ground that the Bakijai Officer had no jurisdiction to entertain the claim. Thereafter, the plaintiff-Bank instituted the suit claiming Rs. 86,996.83 which includes interest on Rs. 56,669.61. The trial Court partly decreed the suit declaring an amount of Rs. 59,669.61 to be paid by the said defendant to the plaintiff-Bank. The decree also orders the defendant to pay the plaintiff-Bank the amount so declared with interest at 16% per annum from the date of the suit till the date of decree within six months from the date of decree failing which the amount so declared would carry interest at 8% per annum from the date of decree till its realisation. Hence this appeal by the plaintiff-Bank. The defendant had neither filed appeal nor cross-objection.
2. Mr. B.K. Goswami, learned Counsel for the appellant, has submitted that the trial Court should have declared Rs. 86,996.83 claimed by the plaintiff-Bank as principal amount found due on the mortgage. Mr. A.K. Phukan, learned Counsel for the respondent, has contended that under Section 34 or Order 34, Rule 11, C.P.C., the plaintiff is entitled to claim interest on the principal amount and not on the total amount which includes interest on the date of the suit. But the sum of Rs. 86,996.83 is aggregate of the principal amount and interest and, therefore, Rs. 86,996.83 cannot be declared as the principal amount due on mortgage. Mr. Phukan has referred us to the following decisions to support his contention.
3. In M.V. Mahalinga Aiyar v. Union Bank, AIR 1943 Mad 216, it has been held in a suit based on promissory notes that, under Section 34, the interest awardable from the date of suit to the date of the decree must be only upon the principal sum due and not on the suit amount which includes interest. In I.K. Sohan Singh v. S.B.I., AIR 1964 Punj 123, the suit was for recovery of Rs. 34,000/- (25,000/- principal + 9000/- interest) with interest. In that case, the Punjab High Court has held that Section 34 does not provide for payment of any interest on any amount which consists of interest prior to the date of the suit. The future interest shall be on Rs. 9,000/-. In I.K. Merchants v. Indra Prakash, AIR 1973 Cal 306, the Calcutta High Court has, in a suit based on promissory note, held that, before the Amendment Act of 1956, the Court had power to award interest on principal and other sum on the decree. But after the amendment, the Court had power to award interest on the decree on the principal amount only and not on the aggregate sum.
4. The above decisions are of no assistance as those cases were neither suit for sale of property mortgaged nor interest was payable at monthly nor quarterly rests. In the case on hand, under the mortgage-deed the interest was payable at monthly rests. At this stage, it will be helpful to refer to a decision of the Privy Council reported as Muthu v. Meenakshisundaram, AIR 1920 PC 35. In that case, the Privy Council has held that, when default is once made on the occasion of the first rest, the debtor thenceforth pays interest not merely on the original debt he owed, but upon a composite debt including the original debt plus the added interest. If it be as compound interest the arrear has sunk into the principal. If the unpaid interest sinks into principal debt, the debtor loses all rights to have it separated again from that debt and dealt with independently.
5. As the interest was payable at monthly rests, in view of above decision of the Privy Council, when default was once made by the defendant on the occasion of the first rest, the interest has sunk into principal, and the aggregate amount (principal plus interest) was to be treated as a principal for the next month and so on and so forth and the interest was to be paid on the composite sum, and the defendant also had lost all his rights to have the interest separated from the principal. Merely ascertaining the sum of Rs. 59,669.61 in the year 1978 does not necessarily mean that the defendant is exempted from payment of interest unless mortgage-money is discharged by the defendant. This being the position, the sum of Rs. 86,966.83 is the principal amount found due on the mortgage and interest pendente lite and future interest shall be on Rs. 86,996.83 so declared due on the mortgage. The view taken by us also finds support from a decision of the Delhi High High Court reported and Syndicate Bank v. West Bengal Cement Ltd., AIR 1989 Delhi 107. In that case, the bank advanced loan with interest at quarterly rests. The bank computed interest at quarterly rests and after every quarter added interest at the last balance and treated that as a principal sum for the next quarter for computing interest. It has been held that the principal sum advanced would be sum total of the original advance and unpaid interest.
6. It will be, now, pertinent to discuss the decision in Chotey Lal v. Raja Mahammad. AIR 1933 Oudh 128, which was cited by Mr. Phukan, learned Counsel for the respondent. In that case, it has been held that the expression “the principal amount found or declared due on the mortgage” in Order 34, Rule 11(1) means only the principal amount on the mortgage without interest till date of the suit. Therefore, the mortgagee is entitled to interest from the date of suit to the date fixed for payment of the principal amount on the mortgage and not for the total amount due on the date of the suit. The fact of the case was that the defendant executed a mortgage-deed as security in favour of the plaintiff for a loan of Rs. 50,000/- bearing interest at 12% per annum with six monthly rests. The defendant defaulted payment and, therefore, the plaintiff brought a suit for recovery of Rs. 1,00,325/-bysaleofpropertymortgaged.
The suit was decreed for Rs. 1,00,325/-, but pendente lite and future interest was awarded on Rs. 50,000/-. In view of our conclusion above, we, with a great respect, are unable to agree with the view taken in Chotey Lal’s case (AIR 1933 Oudh 128) (supra).
7. In the result, it is declared that an amount of Rs. 86,996.83 is to be paid by the defendant to the plaintiff-Bank and the preliminary decree of the trial Court is set aside. The plaintiff is given decree for sale of property described in Schedules-‘B’ and ‘C’ to the plaint for Rs. 86,996.83 with cost of the suit and with interest at 6% per annum on amount so declared till the payment of the amount so declared. The defendant-respondent is given six months’ time to pay the amount so declared. If the defendant fails to pay the amount within six months, the property described above shall be sold.
8. The appeal is allowed to the extent indicated above. The parties shall bear their respective costs of this appeal.