JUDGMENT
1. This is a defendant's appeal arising out of final decree proceedings in a mortgage suit. The plaintiff obtained a preliminary decree on the basis of a mortgage deed on the 15th March 1933 and in due course applied for the preparation of a final decree when the defendant took certain objections. We are concerned with only one of them in this appeal. The defendant claimed that under the terms of the preliminary decree, the plaintiff was not entitled to the total interest claimed by him. This objection was disallowed by the Court below, and it was ordered that a final decree be prepared. The defendant has now come up in appeal to this Court and the only point which we have to decide is whether the defendant is entitled to a reduction in the interest granted by the Court below under the terms of the final decree. In Jagannath Prasad v. Surajmal Jalal A.I.R. 1927 P.C. 1, their Lordships of the Privy Council held that:
On a preliminary decree for foreclosure or sale under Order 34, Rules 2, 4, Civil P.C. 1908 a mortgagee was entitled to interest at the rate, and with the rests, stipulated in the mortgage down to the date fixed for redemption by the decree; and if the decree was varied on appeal, down to the date fixed for redemption by the appellate Court.
2. This decision was given in the month of October, 1926. Both parties to the appeal are agreed before us that before the enactment of Rule 11, Order 34 the law was as stated in the above mentioned judgment of their Lordships of the Privy Council. The plaintiff contends that the law is still the same as it was when the case reported in Jagannath Prasad v. Surajmal Jalal A.I.R. 1927 P.C. 1 was decided by their Lordships of the Privy Council. The contention of the defendant is, however, different. In 1930, Rule 11 of 0. 34, was enforced for the first time and the contention raised by Mr. Malik, learned Counsel for the defendant, is that by the introduction of Rule 11, Order 34, the Legislature has changed the law on the subject. This is the only question for consideration in this appeal before us. Before proceeding to discuss the point in issue we may be permitted to point out that Sir Dinshaw Fardunji Mulla in his Code of Civil Procedure expressed the opinion that this new Rule 11 of Order 34 gives effect to judicial decisions under the Transfer of Property Act of 1882 and under Order 34 of the Code. That is to say it places in the Civil Procedure Code a rule laying down how the interest is to be calculated. Rule 11 of Order 34, enacts as follows:
In any decree passed in a suit for foreclosure, sale or redemption, where interest is legally recoverable, the Court may order payment of interest to the mortgagee as follows, namely:
(A) Interest up to the date on or before which payment of the amount found or declared due is under the preliminary decree to be made by the mortgagor or other person redeeming the mortgage:
(i) On the principal amount found or declared due on mortgage at the rate payable on the principal, or where no such rate is fixed, at such rate as the Court deems reasonable, (ii) On the amount of the costs of the suit awarded to the mortgagee at such rate as the Court deems reasonable from the date of the preliminary decree and, (iii) On the amount adjudged due to the mortgagee for costs, charges and expenses properly incurred by the mortgagee in respect of the mortgage security up to the date of the preliminary decree and added to the mortgage money, at the rate agreed between the parties, or failing such rate, at the same rate as is payable on the principal, or failing both such rates at nine per cent, per annum; and (B) Subsequent interest up to the date of realization or actual payment at such rate as the Court deems reasonable, (i) On the aggregate of the principal sums specified in Clause (a) and of the interest thereon as calculated in accordance with that clause; and, (ii) On the amount adjudged due to the mortgagee in respect of such further costs, charges and expenses as may be payable under Rule 10.
3. The contention raised by learned Counsel for the appellant is that the words "on the principal amount found or declared due on the mortgage", in Clause (a), Sub-clause (i) have made a change in the method of calculating interest. Learned Counsel contends that the Legislature has enacted that in calculating the amount due to the mortgagee up to the date fixed for redemption, interest from the date of the decree till the date fixed for redemption should be calculated on the principal sum secured by the deed and not on the total amount due on the date of the decree on account of principal as well as compound interest. In other words, his argument is that the view expressed by their Lordships of the Privy Council in Jagannath Prasad v. Surajmal Jalal A.I.R. 1927 P.C. 1 is no longer good law. As we have already pointed out, their Lordships have laid down in that case that a mortgagee was entitled to interest at the rate, and with the rests, stipulated in the mortgage down to the date fixed for redemption of the decree. According to the arguments of learned Counsel for the appellant, this view is no longer correct and that having regard to the provisions of Rule 11, Order 34, Civil P.C., the Court should not grant any interest to the mortgagee from the date of the decree till the date fixed for redemption on the sum which had already become due on account of compound interest. We are wholly unprepared to agree with this contention. In our opinion, the enactment of Rule 11, Order 34, has not made any change whatsoever in the law on the subject and the view expressed by their Lordships of the Privy Council in the above mentioned ruling still holds good.
4. The mortgagee, in our opinion, is entitled to interest at the contract rate from the date of the suit till the date fixed for payment. If the mortgage deed provides that interest will be calculated six monthly and if it was not paid then it would become a part of the principal then that agreement will have to be enforced. Rule 11, Order 34 does not provide that at the time of calculating the amount due to the mortgagee, interest will be allowed only on the principal sum secured by the deed and not on the interest which, according to the agreement of the parties, had become part of the principal on the date on which the accounts are taken Learned counsel, has, in support of his contention, relied on a ruling of the Oudh Chief Court : Chotey Lal v. Mohammad Ahmad Ali Khan A.I.R. 1933 Oudh 128. This case certainly supports the contention raised by learned Counsel for the appellant. It was decided in that case that the words "principal amount found due or declared due on the mortgage" mean only the principal amount secured under the mortgage deed without interest till the date of the suit and that therefore, the mortgagee was entitled to interest from the date of suit to the date fixed for payment at the contract rate only on the principal sum secured by the mortgage deed and not on the total amount which at the date of suit consisted of the amount secured as well as the interest which had become part of the principal in accordance with the terms of the mortgage deed. With the utmost respect to the learned Judges who decided the case, we find ourselves unable to agree with this view taken by them. We may point out that in a later decision of the same Court Rajendra Bahadur Singh v. Raghbir Singh A.I.R. 1934 Oudh 473, a different view was taken. It is only fair to add that the case of Chotey Lal v. Mohammad Ahmad Ali Khan A.I.R. 1933 Oudh 128 does not seem to have been cited before the learned Judges who decided the ease of Rajendra Bahadur Singh v. Raghbir Singh A.I.R. 1934 Oudh 473. The learned Judges who decided the later case of 1934 held that:
Where the mortgage deed provided that in case of non-payment of interest for any period of six months on the due date, the amount of interest shall be added to the principal money and interest and compound interest thereon shall run at the aforesaid rate till the date of payment, the Court could allow interest on the aggregate amount found due instead of on the principal sum lent.
5. We may also refer in this case to a Single Judge case of this Court, which was decided on 20th July 1935 and is reported in Tara Chand v. Haibat Shah A.I.R. 1935 All 1003. In this case it was held by a learned Judge of this Court that:
In a suit for sale brought by a mortgagee on basis of a hypothecation bond, the rate of interest to be awarded is the contractual rate for the period down to the date fixed for payment under Order 34, Rule 4, Civil P.C.
6. We are clearly of opinion that the view taken in Chotey Lal v. Mohammad Ahmad Ali Khan A.I.R. 1933 Oudh 128, is not correct. In our judgment, the words "on the principal amount found or declared due" in Clause (a) Sub-clause (i) refer not only to the principal sum secured by the mortgage deed but also to the amount due on account of interest which has become a part of principal in accordance with the terms of the deed on the date when the preliminary decree is prepared. In our judgment, there is no force in the contention that the Legislature when they used the words "due or declared to be due" in Rule 11, enacted that in calculating interest from the date of the suit till the date fixed for redemption no interest on interest was to be allowed to the mortgagee in spite of the terms of the mortgage deed. For the above reasons, we hold that the view taken by the Court below is correct and we accordingly dismiss the appeal with costs.