P L D 1963 (W (PLP)

5. The learned Advocate for the plaintiff relied on Bholanath and others v. Fateh Singh and others (I L R 6 All. 63) ; Sunder Mull and another v. Satya Kinker Sahaba and others (55 I A 85) and Govindjee v. C. KO PO YEE (11 I C 891). In my view none of these rulings is relevant to the point involved in this case. In I L R 6 All. 63, the obligor had executed a bond and promised to pay interest at Rs. 6‑4‑0 per mensem and also agreed in the bond that if he made a default in the payment of the interest for any 6 months he was to pay interest on such interest at such rate. It was decided that "There was no question of penalty, that is to say, of a liability to damages for breach of the terms of a contract, in the sense of section 74 of the Contract Act ; the contract rate of interest stipulated to be paid could not be interfered with." The judgment of Tyrrell, J., is very short and revolved round the interpretation of section 74 of the Contract Act.

6. In 55 I A 85, at page 94 the remarks relied upon by the learned counsel for the plaintiff were in these words "The local court has given its decision upon the evidence, and has not reduced either the terms or the rate, but their Lordships can see no reason why the importance of the experi ence of the Indian Court in supplying their Lordships' lack of knowledge is not equally great in the one case as in the other. There is no rule, which their Lordships can discover, which binds them, when the terms of a loan are challenged, to lean to their reduction, or to presume that simple interest must always be judicially preferable to compound interest, or that rates, because they might seem high here, must be un reasonable in India. Compound interest is common and may often be necessary and proper in India under the circumstances of that country." The loan was on a mortgage deed at a compound interest at 11% per mensem with yearly rests. Neither section 79 of the Negotiable Instruments Act nor the provisions of Usurious Loans Act, were considered by their Lordships.

7. In I 1 I C 891 the observations are "Section 79 of the Negotiable Instruments Act of 1881 gives a Court no option to disallow interest where a specified rate of interest is provided for in a pro‑note." The question of monthly rests was not involved in this case Rate of 10% was considered as exorbitant but allowed in view of the terms of section 79.

8. Section 79 of the Negotiable Instruments Act XXVI of 1881 provides for the rate of interest to be allowed on a pro missory note. It reads as under "When interest at a specified rate is expressly made, payable on a promissory note or bill of exchange interest shall be calculated at the rate specified, on the amount of the principal money due thereon, from the date of the instrument, until tender or realization of such amount, or until such date after the institution of a suit to recover such amount as the Court directs."

9. Under the clear terms of section 79 "interest shall be calculated at the rate specified, on the amount of the principal money due thereon". Thus interest can only be allowed on thel principal money due on the promissory note (Rs. 48,000, and not A on the interest added to the principal on monthly rests. The provisions of Usurious Loans Act (Act X of 1918) are also to be borne in mind in this connection. Prior to passing of Usurious Loans Act in 1918, the Court had no power to refuse to allow interest at the rate specified in the instrument, and the terms of section 79 of the Negotiable Instruments Act were imperative as to the rate of interest.

10. The suit is decreed for the principal amount of Rs. 48,000 plus interest at the rate of 10% per annum from the date of the execution of the promissory note to the date of the decree with proportionate costs. Interest will run at 10% per annum from the date of decree on the decretal amount till its realization. K. B. A. Suit decreed.