This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 raises the question as to the competency of the respondent to charge interest on compound basis. The House Building Finance Corporation (respondent herein) advanced a sum Rs.40,000 to the petitioner under an agreement executed between the parties, copy of which has been placed on record. The repayment of the amount alongwith interest was secured inter alia by creation of mortgage which was evidenced by mortgage deed dated 19th March, 1975.
2. There is no dispute about the liability of the- petitioner to pay the principal amount or the interest at the rates indicated in the mortgage deed. The grievance of the petitioner is that respondent has now demanded an additional amount of Rs.68,275 on the ground that petitioner was liable to pay interest on compound basis on the amount lent to him.
3. Learned counsel for the petitioner has relied upon the pronouncement of Supreme Court in House Building Corporation v. Shahinshah Humayun Cooperative House Building Society and others (1992 SCM R 19) to contend that demand of respondent for payment of compound interest is unjustified and unsustainable in law.
4. Learned counsel appearing for respondent has requested for an adjournment on the ground that the respondent wants to engage another counsel. There appears to be no reason for granting adjournment especially when on the last date of hearing the case was adjourned at the request of the learned counsel for the respondent.
5. In the precedent cited by the learned counsel for the petitioner, it has been authoritatively held by the Supreme Court that in the absence of any stipulation in the agreement between the parties for payment of compound interest on that basis cannot be charged. The sanction letter as also mortgage deed which is on the standard form, have been perused. None of these documents provides for charge of interest on compound basis. That being so, the rule laid down in the House Building Corporation (supra) becomes clearly applicable. It follows therefore that the respondent has no entitlement to recover interest from the petitioner on compound basis.
In view of what has been stated above, this petition is allowed and demand of the respondent for charge of interest on compound basis is declared to be without lawful authority and of no legal effect. No order as to costs.