072-NLR-NLR-V-36-OBEYESEKERE-v.-FONSEKA.pdf
334
Obeyesekere v. Fcmseka.
1934Present; Dalton J.
OBEYESEKERE v. FONSEKA125—C. R. Colombo, 83,492
Compound interest—Action on promissory note for money due as arrears ofinterest—Interest not recoverable—Civil Procedure Code, s. 192.
In an action to recover money on a promissory note, which representedarrears of interest due on a bond, interest on the money due on the noteis not recoverable as it would amount to compound interest.
Interest may however, be allowed on the principal sum adjudged tobe due on the note, in terms of section 192 of the Civil Procedure Code.
A
PPEAL from a judgment of the Commissioner of Requestsof Colombo.
Weerasooria (with him R. C. Fonseka), for defendant, appellant.Rajapakse (with him Jayasuriya), for plaintiff, respondent.
Cur. adv. vult.
DALTON J.—Obeyesekere v. Fonseka.
335
March 22, 1934. Dalton J.—
In this case the plaintiff used to recover a sum of Rs. 139 capital andRs. 77 interest alleged to be due on a promissory note- made by thedefendant in favour of the plaintiff. The defendant pleaded that thenote had been discharged by payment but on that issue his evidence hasbeen rejected by the learned Commissioner who has accepted the plain-tiff's evidence that the note had not been discharged at all. On thatpoint I am not prepared to disagree with the learned Commissioner’sconclusion. He has accepted the evidence led for the plaintiff on thatpoint and rejected the defendant’s evidence.
A further matter pleaded by the defendant was that the plaintiff cannotas a matter of law, claim interest on the note sued upon as the principal sumof Rs. 139 itself represented arrears of interest and the recovery of interestthereon would amount to compound interest. It is quite clear from theevidence that the note was given by the defendant to cover the balanceof interest due on a mortgage bond. The plaintiff had apparently lent thedefendant money upon a bond in 1921, and in March, 1928, when this notewas signed, the capital due on the bond was paid but a sum of Rs. 130^remained due as interest on the bond. In March, 1928, therefore, it is clearfrom the evidence that the last payment on account of capital due on thebond had been made, and that this note for Rs. 139 was given to cover theinterest due upon the bond. On receipt of that note the plaintiff can-celled the bond. It is quite clear from his evidence that the note wastaken for the balance interest due. No issue was raised upon this legalplea raised by the defendant in his answer, but I must infer from thelearned Judge’s judgment that the question was raised by the Counselwho appeared for the defendant. On this question the learned Judgesays : ** I do not feel inclined to accede to the claim in the answer thatinterest should not be charged on Rs. 139 as this would result in compoundinterest on the amount borrowed on the mortgage bond ”. It was neverdenied that capital sum on the note did not represent interest and thatthe interest claimed on the note was not also interest upon interest, butthe learned Commissioner went on- the footing that “ the defendant hadagreed to pay interest according to the promissory note A and he wasbound by his contract ". Therefore he rejected the defence that interestwas not legally payable by the defendant on the sum of Rs. 139.
It seems to me that the sum of Rs. 77 claimed is interest upon interest,which I take is compound interest. It is claimed on behalf of the plaintiffthat the nature of the sum underwent some change when the note wassigned and that the capital amount of the note was no longer thereafterinterest. It seems to me that this argument, if given effect to, would atany rate in several cases go to wipe out the idea of interest upon interestbeing compound interest together. Mr. Rajapakse has not suggestedthat the sum of Rs. 77 claimed is not interest upon the sum of Rs. 139which is certainly admitted to be due as interest upon the bond.
With regard to the learned Commissioner’s reason for holding that thedefendant was liable to pay the sum of interest for which he has signed thenote, it is urged on behalf of the defendant that the common law does notallow compound interest even though expressly stipulated for. There is
336
DAL.'fON/ J.-i-Obeysekere v. Fonseka.
■I *
authority for that prqpositijon[ in Ceylon. The case of Mudiyanse v.Vanderpoorten1 and th4 cases there referred to did so decide as was arguedin suport of the defendant’s plea on this point. Therefore I must holdthat the learned Commissioner was wrong in his decision that the defend-ant must abide by his stipulation. The law decided in these cases is tothe effect that compound interest is not allowable although expresslystipulated. There would appear to be in section 192 of the Civil ProcedureCode some deviation from the Roman-Dutch law* in the matter I havereferred to, for this section allow the Court to order interest in the decreein the cases laid down in section 192 of the Code, i. e., when the action isfor a sum of money due to the plaintiff. I take it that the words “ for asum of money due to the plaintiff ” may refer to money due on a promis-sory note even in such a case as in this action.
The decree must therefore be varied. The plaintiff is entitled tojudgment for the sum of Rs. 139 and the interest thereon under theprovisions of section 192 of the Civil Procedure Code as laid down in thedecree, and to the costs of the action. The parties have been each inpart successful in the appeal and I would therefore make no order as tocosts of appeal.
Varied.
♦
1 23 N. L. R. 342.