9911796707
TMI Blog1981 (11) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... oan of ₹ 2,00,000 against the same. The amount was liable to be returned within five years as specified in the mortgage deed. Interest was agreed initially to be paid at the rate of 9 1/2% per annum and was liable to be computed at quarter, rests. In the event of non-payment of interest in cash, the same was liable to be debited to the defendants' account and further interest was liable to be calculated on the amount due inclusive of unpaid interest. The Bank was also authorised to vary the rate of interest from time to time. By the time the suit came to be instituted, interest was raised to 16% per annum. The defendants also executed a promissory note on 22nd July, 1978 acknowledging the amount due on that date and agreeing to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. With the coming into existence of the pronote, says Mr. Agarwal, the earlier transaction of mortgage gets extinguished and the plaintiff can rely on the pro-note and not the original transaction of mortgage. The contention is obviously untenable. In the first instance, the liability under the mortgage deed can come to an end only when the mortgage money is paid and the deed is returned or the same is cancelled by another registered document. Mere execution of promissory note cannot have the effect of wiping out the mortgage transaction and the liability created thereunder. It is nobody case that the pro-note was accepted in discharge of the debt. Each promissory notes are invariably executed by way of additional security and evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The amount of ₹ 3,79, 199-50 on which the trial Court directed to pay interest from the date of the suit includes only such unpaid interest which is merged in the principal which under the contract is to be treated as principal. The amount of ₹ 3,79, 199-50 found due till the date of the suit is in fact thus the amount of principal. This is held to be permissible by the Privy Council in Jagannath Prasad Singh Chowdhury v. Surajmal Jalal Accounts of dues are liable to be worked out till the date of the suit in terms of the contract. Any contract to treat unpaid interest as principal and permit the creditor to charge interest thereon is not per se illegal. The legality of this practice of calculating interest at six monthly rests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the rate of interest fixed by the Reserve Bank. We, however, think, that the Bank should not be permitted to charge compound interest from the date of the suit. It would not be proper to permit compound interest when the matter is left to the Court's discretion. The learned trial Judge has also not given any compound interest from the date of the suit. The order as to interest, therefore, subsequent to the date of the suit in this case does not call for any interference. 9. Mr. Agrawal then contends that, at any rate, the defendants may be allowed to pay the decretal dues by installments. From the affidavit filed before us, the defendants do not appear to be in a position to pay the decretal dues in lump sum. The sale of the mortga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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