damdupat
Tandy P Namgy
(Querist) 03 September 2009
This query is : Resolved
what is damdupat?
A V Vishal
(Expert) 03 September 2009
The amount of principal together with the rate of interest cannot exceed double the principal, called damdupat. This rule was prevalent in ancient Hindu Courts. But it has lost its relevancy now
Atul Singh
(Expert) 03 September 2009
Use "Search" function. This has been answered a numerous times in the Forums.
Swami Sadashiva Brahmendra Sar
(Expert) 03 September 2009
Undoubtedly, this is a rule of Hindu personal law.But, there are conflicting views regarding it's applicability in present times.the confusion rests on three points: 1. Is it applicable to a case where debtor and creditor both are hindus? 2. Is it applicable to some parts of India only? 3. Is it applicable to bank loans also?
The Rule of Damdupat simply
means that the creditor is not entitled to recover at any given time an amount
by way of interest which is in excess of the amount of principal due at that
rime. The Rule of Damdupat is inapplicable in the Madras Presidency and in
Bengal except in the town of Calcutta It has been held to be in force in the
presidency of Bombay (See N.R. Raghavachariar's Hindu Law, 8th Edition Page
303.)
In Mulla Principles of Hindu Law (Fifteenth Edition) it is stated "the
Rule of Damdupat is a branch of the Hindu law of Debts". According to this rule,
the amount of interest recoverable at any one time cannot exceed the principal.
It is further stated that where a suit has been instituted to recover a loan,
the rule of Damdupat ceases to operate. The result is that though the Court is
bound to apply the rule of Damdupat upto the dale of the suit, it is free to
award interest to the creditor at such rate as it thinks proper from the date of
the suit up to the date of the decree or payment upon the total amount that may
be found due to him after applying the rule. In the same text it is further
stated that the Rule of Damdupat does not apply to interest recoverable in
execution of a decree. The reason is that the rule ceases to operate after suit.
It is further stated that the rule of Damdupal applies in the Bombay State. It
applies also in the town of Calcutta, but not in any other part of Bengal. The
rule is not given effect to in the State of Rajasthan or in any part of the
Madras State or the Uttar Pradesh. Of course, there is no dispute that the Rule
of Damdupat applies only where the original contracting-parties are Hindus.
However the Bombay High Court appears to have taken the view that all that is
necessary for the application of the Rule is that the original debtor should be
a Hindu. (See Harilal v. Nagar, (1897) 21 Bom. 38. It is true that the Bombay
High Court held that the Rule of Damdupat applies not only to unsecured loans,
but loans secured by apledge of movable property and those secured by a mortgage
of immovable property. (See Nathubhai v. Mulchand, (1868) 5 Bom. HCAC 196, 198
and Narayan v. Satvaji, (1872) 9 Bom. HC 83, (Referred to in Mulla Principles of
Hindu Law (Fifteenth Edition.)
A Full-Bench of Rajasthan High Court in Sheokaransingh v. Daulatmm, AIR
1955 Rajasthan 201 held that the Rule Damdupat as recognised by Hindu Law, in
the absence of any statute is no longer of binding force and cannot be given
effect to in the State of Rajasthan. It is further held that "though Damdupat in
text books of Hindu Law, is a rule of Hindu Law of debts, itis not in force in
any part of India now as a principle of Hindu Law. The reason is that Hindu Law,
as now enforced by Courts of law, is confined only to matters of personal law,
while the question of interest is not a matter of personal law, but of civil law
generally.
Recently, the Allahabad High Court has applied the rule of damdupat in a petition against recovery of bank loan.
Swami Sadashiva Brahmendra Sar
(Expert) 04 September 2009
Also see, Section 30(2) of of the Punjab Relief of Indebtedness Act, 1934 which says that:
"In any suit in respect of a debt as defined inspection 7, advanced after the commencement of this Act. no Court shall pass or execute a decree or give effect to an award in respect of such debt for a larger sum than twice the amount of the sum found by I he Court to' have been actually advanced less any amount already received by a creditor."
The Delhi High Court in Life Insurance Corporation Of India vs Sham Surat Singh And Ors. decided on 26/8/observed that:
“(4) This section codifies the ancient doctrine of damdupat as known to Hindu Law. This Act was enacted with object of protecting borrowers whose needs or advertises compelled them to borrow money against the oppressive exaction of money lender which often they were powerless to resist. The Act prohibits a court from passing a decree in respect of a debt for a larger sum than twice the amount of sum actually found by the court to have been advanced less any amount already received by the creditor. The Act is a shield of protection to the debtor. This- is the legislative policy behind the Act. The court has- to
enforce the legislative policy.
(5) The Act is a social legislation. It is the product of social awareness that characterised the mid-thirties. It was enacted to achieve a social end. The social end was to give "relief of indebtendness", as the title suggests. One practical means adopted to achieve that end was to codify the ancient rule of damdupat. The Act strikes at transactions entered into by rapacious money lenders reserving an unconscionable or exorbitant rate of interest.
(6) But as the Act applies to private money lenders it applies to conglomerations of power. It applies to Life Insurance Corporation with full rigour. True L.I.C. is an instrumentality of the State but nonetheless a mortgagee. It has advanced money to borrowers. These are debts. All 'debts' are covered by the definition of the term in Section 7(1) whether secured of
unsecured, mature or not, simple or decretal. A mortgage debt is a debt. It is true some defined liabilities are excluded from that definition. It is also true that certain concentrations of power and wealth like banks are excluded from the purview of Section 7(1). Lest the shield of protection becomes a sword of offence. But L.I.C. is not excluded.”
