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General and Credit Corporation (India) Ltd. Vs. Sri Raja Inuganti Venkata Rama Rao Bahadur Garu and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberSpl. Tribunal Appeal No. 13 of 1953
Judge
Reported inAIR1959AP433
ActsDebt Law
AppellantGeneral and Credit Corporation (India) Ltd.
RespondentSri Raja Inuganti Venkata Rama Rao Bahadur Garu and ors.
Appellant AdvocateP. Somasundaram and ;P. Suryanarayana, Advs.
Respondent AdvocateV. Balakoteswara Rao, Adv. for ;1st Govt. Pleader, ;C. Kondiah and ;N.V. Ranganadham, Advs.
DispositionAppeal allowed
Excerpt:
.....sum of rs. 15,500 at 10% interest rate - mortgagor did not repay - contention of mortgagor that excessive rate of interest violated provisions of usurious loans act - court observed that relief under usurious loans act available only when transaction substantially unfair - high court on facts found that rate of interest was not excessive and transaction was fair - relief denied. - maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as..........loans act. a court or a tribunal is only concerned with the rate of interest as obtaining at the time of the transaction. there is also no material on which the tribunal could form an opinion as to the fair rate of interest that prevailed even at the time of the rendering of the judgment. a court has to determine whether a particular rate of interest is excessive or not, having regard to the rates of interest at the time when the impugned transaction was entered into and the surrounding circumstances. what amounts to excessive interest has to be determined with reference to various factors, such as the security which the creditor obtained for the amount advanced by him, the pecuniary position of the debtor, the rate of interest prevailing at that time and the advantages which the.....
Judgment:

P. Chandra Reddy, C.J.

1. This is an appeal against the order of the States Abolition Tribunal, Chittoor, dated 5-1-1953.

2. The appellant filed a claim before the Tribunal on the basis of a mortgage created by the first respondent on 16-11-1941, over certain villages, which were' subsequently taken over by the Government in pursuance of the provisions of the Madras (Estates Abolition and Conversion into Ryotwari) Act, 1948 for a sum of Rs. 15,500/-. This amount was to any interest at ten per cent per annum with yearly rests. There was also a stipulation that the interest accruing should be paid every month to the mortgagee. Obviously, nothing was paid by the mortgagor. On two of the three villages forming the subject matter of the mortgage, being taken over under the Estates Abolition Act, the Government deposed a sum of Rs. 26,000/- and odd under Section 54-A of the aforesaid Act. Thereupon, the mortgagee, i. e., the present appellant, applied to the Tribunal on 31-8-1951 for payment of the amount due to him under the mortgage.

3. In the counter filed by the first respondent while the truth and validity of the mortgage bond was not denied, it was pleaded that the rate of interest was high and that he was entitled to the benefits of the Usurious Loans Act (X of 1918). The Tribunal allowed interest on the claim only at nine per cent per annum (simple interest) on the ground that ten per. cent Compound Interest was too high a rate 'having regard to present rates and the fact that the Estates have been taken over by Government'. Dissatisfied with the disallowance of the contract rate of interest, the mortgagee has brought this appeal.

4. It is argued by the learned Counsel for the appellant that the Tribunal' in not granting the contract rate of interest was influenced By irrelevant considerations and that their view was erroneous. We think there is considerable force in these contentions. We fail to see what bearing the taking over of the estates by the Government has on a consideration of the question whether the rate of interest is usurious within the purview of the Usurious Loans Act. That is absolutely immaterial in deciding whether the interest could be regarded as excessive or not.

We are also convinced that the Tribunal fell into an error in thinking that the rate of interest as prevailed at the time of the decision would serve as a criterion in the application of the principles of the Usurious Loans Act. A court or a Tribunal is only concerned with the rate of interest as obtaining at the time of the transaction. There is also no material on which the Tribunal could form an opinion as to the fair rate of interest that prevailed even at the time of the rendering of the judgment. A court has to determine whether a particular rate of interest is excessive or not, having regard to the rates of interest at the time when the impugned transaction was entered into and the surrounding circumstances. What amounts to excessive interest has to be determined with reference to various factors, such as the security which the creditor obtained for the amount advanced by him, the pecuniary position of the debtor, the rate of interest prevailing at that time and the advantages which the debtor would derive from the loan.

A debtor would get relief under the Usurious Loans Act only if it is established that the transaction is substantially an unfair one. It is true that the Explanation introduced by the Madras amendment has laid down that if the interest is excessive, the court shall presume that the transaction was substantially unfair; but such a presumption may be rebutted by proof of special circumstances justifying the rate of interest. Thus, before the Explanation could be invoked, it should be established that the interest is excessive. It is only then that it may be presumed that the transaction was an unfair one. As we have already pointed out, whether a particular rate of interest is excessive or not depends upon various circumstances.

In this case, the preamble to the mortgage sets out the history of the mortgage in question. The properties of the first respondent were brought to sale in February 1942 in execution of a decree obtained on the foot of an earlier mortgage executed by the father of the first respondent and on 31-3-1942 the sale was to be confirmed. The decree-holder and the judgment-debtor filed a joint memo agreeing inter alia that if the full decretal amount was paid on or before 17-11-1951 the sale should stand cancelled, otherwise it should stand confirmed. In such a situation, the judgment-debtor, having, failed to obtain the wherewithal to satisfy the decree, approached the appellant for a loan on 16-11-1941, there being hardly twenty-four hours for complying with the terms of the compromise and the appellant advanced the money needed on the terms and conditions set out above.

In these circumstances, the interest agreed to be paid could not be regarded as an excessive one and there is no scope for characterising the transaction as an unfair one. There can be little doubt that the rate of interest charged was a justifiable one. In Paramasiva Mudaliar v. Rangachariar : AIR1954Mad764 , it was laid down by a Bench of the Madras High Court that interest at ten per cent per annum with yearly rests could not be treated as excessive. After all, in deciding whether the rate of interest is excessive or not, there can be no hard and fast rule. Each case has to be decided on its own merits taking into account the various factors. It follows that the order under appeal has been successfully assailed and has to be set aside.

5. In the result, the appeal is allowed with costs. The appellant will gel interest on the amount of his claim at the contract rate upto the date of deposit and thereafter at six per cent per annum. Since the Government, who have no interest in the matter, has been added as a party, it is fair that they should get their costs from the appellant. The Government Pleader's fee is 'fixed' at Rs. 100/-;


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