Modalavalana Mukundarao and Others vs Hanumantha Suryanarayana Naidu

Subba Rao, J.—The only question in this appeal is whether the Subordinate Judge of Chicacole was right in refusing to give relief under the

Usurious Loans Act, 1918. The defendants executed a mortgage bond in favour of the plaintiff, Ex. P-1 dated 10-8-1936 for Rs. 6,000 payable

with interest thereon at 12 annas per cent per mensem at compound rate. The defendants pleaded that the said rate was excessive and substantially

unfair and therefore was liable to be reduced. The learned Subordinate Judge, Chicacole, held that there was nothing excessive or unconscionable

in the rate of interest charged on the suit bond. The defendants have preferred the above appeal.

Section 3(1) of the Usurious Loans Act, 1918 reads :

Notwithstanding anything in the Usury Laws Repeal Act, 1885, where, in any suit to which this Act applies, whether heard ex parte or otherwise,

the Court has reason to believe.

(a) that the interest is excessive, and

(b) that the transaction was, as between the parties thereto, substantially unfair, the Court may exercise all or any of the following powers.

The Act is amended in its application to the Madras Presidency by the Usurious Loans (Madras Amendment) Act, 1936, Act VIII of 1937. The

relevant amendment reads as follows :

Explanation (1). If the interest is excessive, the Court shall presume that the transaction was substantially unfair; but such presumption may be

rebutted by proof of special circumstances justifying the rate of interest, Provided that in the case of loans of agriculturists if compound interest is

charged the Court shall presume that the interest is excessive.

A combined reading of these provisions indicates that if compound interest is charged and there is no rebutting evidence the Court shall presume

the interest charged is excessive and the transaction is also substantially unfair. In this case as compound interest is charged, under the proviso the

Court shall presume that, the interest is excessive. The Subordinate Judge held on the evidence that the said presumption was rebutted. I cannot

agree. (After discussing the evidence, the judgment proceeded : ) From this evidence, I cannot hold that the presumption in favour of the

defendants is rebutted. Having regard to the circumstances of the case, in my view, 9 per cent simple interest will be a reasonable rate. As regards

lawyer''s fee no case is made out for interference.

The appeal is allowed in part with proportionate costs in this Court. The plaintiff will only get his proportionate costs in the Court below.