1. This is defendant's appeal against whom a preliminary decree for the recovery of Rs. 35853/- by sale of the mortgaged property has been passed by the trial Court.
2. Plaintiff-respondent Bal Krishan filed the present suit for the recovery of Rs. 35853/- alleging that the defendant Gridhari Lal Khanna mortgaged his Kothi with the plaintiff on 12-12-1972 in the sum of Rs. 32,000/-. Although the rate of interest was settled at 12% perannum yet the plaintiff claimed interest at 7 1/2 per annum. In this way Rs. 32,000/- has been claimed as principal and Rs. 3849/- as interest and Rs. 4/- as notice charges. The mortgage was without possession. It was stated by the plaintiff that the amount of Rs. 32000/- has already been advanced on the security of the defendant to M/s, Atlas Engineering Company, Ludhiana, which was a partnership firm consisting of Kuldip Chand Khanna son of Girdhari Lal and Shila Rani wife of Girdhari Lal defendant. According to the plaintiff the accounts for the earlier loan had been settled and the defendant took over the liability to pay the amount of Rs. 32000/- and executed the mortgage deed Ex. P. 1. Since the defendant did not pay the amount and the interest, hence the present suit.
2A. In the written statement it was pleaded that M/s. Atlas Engineering Company was a necessary party to the suit. It was maintained that the plaintiff had advanced a loan to the company of his own from time to time and had been charging highly excessive interest at 2 1/2% per month to 3 1/2% month. It was denied that the defendant was a surety for advance made by the plaintiff to the company. It was further stated that Kuldip Chand Khanna was the proprietor of the said company whereas the plaintiff was father-in-law of Narinder Kumari the daughter of the defendant. Kuldip Chand Khanna due to financial difficulties could not repay the loan along with interest and thus the plaintiff pestered the defendant to execute mortgage deed of his house for payment of the debt of the company. It was further claimed that the plaintiff had already realised interest from the company at excessive rates which it could not do in view of the provisions of Usurious Loans Act and that if interest was calculated at the permissible rate of 12 1/2% per annum, the total amount due from the company to the plaintiff would work out at Rs. 13071.62 which the defendant would be prepared to pay if his plea regarding the mortgage being void because of coercion and undue influence was not accepted.
3. On the pleadings of the parties, the following issues were framed:-
1. Whether M/s. Atlas Engineering Company is a necessary party to the suit? OPD.
2. Whether the amount to the extent of Rs. 32000/- was due against M/s. Atlas Engineering Company? OPP
2A. Whether the defendant is entitled to take benefit of the provisions of the Usurious Loans Act, 1908, and if so to what effect? OPD.
3. If issue No. 2 is proved, whether the mortgage in dispute was without consideration? OPD.
4. Whether the plaintiff is entitled to any interest, if so, at what rate and to what amount? OPP.
5. Whether the mortgage deed was executed under undue influence and coercion exercised by the plaintiff? OPD.
4. Since all the material issues were decided in favour of the plaintiff and against the defendant, consequently a preliminary decree for Rs. 35853/- by sale of the mortgaged property was passed in favour of the plaintiff and against the defendant. Dissatisfied with the same, the defendant has filed this appeal whereas the plaintiff has filed cross objection claiming future interest.
5. In this appeal only the findings under issue No. 2-A are being contested. In the appeal also, the relief sought is that the decree of the trial Court be set aside to the extent of Rs. 18,964.28 and the amount of the decree under appeal be thus reduced to that extent. According to the finding of the trial Court under issue No. 2-A, the defendant was not entitled to take the benefit of the provisions of Usurious Loans Act, 1918 read with Punjab Relief of Indebtedness Act, 1934. According to the trial Court it is a case of notation of the contract as envisaged by S. 62 of the Contract Act and, therefore, when the liability of a debtor is taken over by a third party, the earlier debt gets extinguished and the creditor can recover the debt only from the person taking over the liability of the debtor.
6. According to the learned counsel for the appellant, this approach of the trial Court was erroneous. It was maintained that even the transferee of the debt is entitled to the benefit of the provisions of the said Act. It was further argued that the fresh agreement does not stand in the way for claiming the benefit under the provisions of the said Act. According to the learned counsel the Act was applicable whether it was the surety from the original debtor or the transferee from whom the debt was being realised. In support of his contentions he relied on Full Bench judgment of the Oudh High Court and Patna High Court reported as Sarju Prasad v. Gauri Shankar AIR 1928 Oudh 396 and Balchand Mahto v. Munshi Lal AIR 1955 Patna 494. He also referred to W. I. Oil Distribution Co. v. Rathnasabapathy AIR 1948 Mad 76(2); Raghunath Dass v. Bhagwan Dass AIR 1946 Lah 6 and Venkanna v. Muhammad Rowther AIR 1944 Mad 105. Reference was also made to Mangat Rai v. Kidar Nath AIR 1962 Punj 1 and Baijnath v. Dennet Air 1925 All 400.
7. It is the common case of the parties that a sum of Rs. 60000/- was advanced as loan by the plaintiff to M/s. Atlas Engineering Company. The defendant produced the copies of his accounts showing the payments made to the plaintiff by the said company from time to time. The copies are Exs. D. 1, D.2 and D.3. The plaintiff while appearing in the witness box as P.W. 8 on 9-9-1974 admitted in his cross-examination that, 'It is correct that the debt entries shown in Ex. D. 1 relate to the amount paid towards the interest to me on the amount advanced. It is correct that out of this amount due according to my accounts, I have got the mortgage deed executed from the defendant'. Earlier also he admitted that, 'I have seen the account statement Ex. D. 1 to D. 3. The same is correct'. In Ex. D. 1, it has been shown that the total interest paid to the plaintiff was Rs. 27,994/- whereas interest if calculated at the rate of 12 1/2% comes to Rs.11065.72. Thus the difference shown therein is at Rs. 16928.28P. According to the defendant, it is this excessive amount of Rs. 16,928.28 which the plaintiff was not entitled to in view of the provisions of the Punjab Relief of Indebtedness Act as contained in S. 5 thereof. The interest further calculated on that amount by the defendant comes to Rs. 2036/- and thus it is the total amount of Rs. 18964.28 for which the defendant claimed the relief in the present appeal. This factual position as such could not be denied on behalf of the plaintiff-respondent. Thus, the sole question to be decided in this appeal is whether the defendant is entitled to claim the benefit of the provisions of said two Acts or not.
8. The only argument raised on behalf of the plaintiff-respondent is that it was the original debtor who could claim the benefit but since the defendant was not the original debtor and had entered into a new agreement with the plaintiff and therefore, was bound by the same. However, I do not find any force in this contention. Sub-section (3) of S. 2 of the Usurious Loans Act provides as under:--
2. In this Act, unless there is anything repugnant in the subject or context:--
(1) xx xx xx (2) xx xx xx (3) 'Suit to which this Act applies' means any suit--
a) for the recovery of a loan made whether before or after the commencement of this Act; or
b) for the enforcement of any security taken or any agreement, whether by way of settlement of account or otherwise, made, after the commencement of this Act, in respect of any loan made either before or after the commencement of this Act; or
c) for the redemption of any security given after the commencement of this Act in respect of any loan made either before or after the commencement of this Act'.
Sub-section 3(1)(b)(ii) of the Act further provides that notwithstanding any agreement, purporting to close previous dealings and to create a new obligation, re-open any account already taken between them and relieve the debtor of all liability in respect of any excessive interest, and if anything has been paid or allowed in account in respect of such liability, order the creditor to repay any sum which it considers to be repayable in respect thereof. Sub-section (4) of S. 3 further provides that nothing in this section shall affect the rights of any transferee for value who satisfies the Court that the transfer to him was bona fide, and that he had at the time of such transfer no notice of any fact which would have entitled the debtor as against the lender to relief under this section.
9. Thus from the reading of the said provisions as a whole, it is quite evident that the Act nowhere provides that it only applies to the original debtor.
'(e) The Court shall deem interest to be excessive if it exceeds seven and-a-half percentum per annum simple interest or is more than two percentum over the Bank rate, whichever is higher at the time of taking the loan, in the case of secured loans, or twelve and-a-half percentum per annum simple interest in the case of unsecured loans; Provided that the Court shall not deem interest in excess of the above rates to be excessive if the loans have been advanced by the Imperial Bank of India or any bank included in the Second Schedule to the Reserve Bank of India Act, 1934, or any banking company registered under the Indian Companies Act, 1913, prior to the first day of April, 1937 or any cooperative society registered under the Cooperative Societies Act, 1912'.
11. Section 3(b)(i) of the Usurious Loans Act came up for consideration before the Full Bench of the Oudh High Court in Sarju Prasad's case (AIR 1928 Oudh 396) (supra) wherein it was held that the transferee of the debtor is a debtor within the meaning of S. 3(b)(i) and the Court can, therefore, relieve the transferee.
12. Similarly Patna High Court in Balchand Mahto's case (AIR 1955 Patna 494) (FB) (supra) also considered the meaning of the word 'debtor' in S.3 and held that in absence of any definition of the expression 'debtor' in the Act one has to refer to the dictionary meaning of that word, which is 'one who owes a debt,' The Purchaser of the equity of redemption surely owes a debt to the mortgagee and is debtor. The expression 'debtor' includes also a transferee from a debtor.
13. The matter was also considered in Raghunath Dass's case (AIR 1946 Lah 6) (supra) by the Lahore High Court wherein it was held that under the provisions of the Usurious Loans Act, the Court is bound to reopen any agreement purporting to close previous dealings and to create a new obligation which has been entered into by the parties within a period of twelve years from the date of the transaction.
14. The word 'transaction' in S.3 includes earlier dealings or settlement leading to the fresh agreement. It was held in Venkanna's case (AIR 1944 Mad 105) (supra) that the word 'transaction' in S.3 need not be taken to refer only to the transaction on which the suit is based. It refers also to the earlier dealings or settlements of account which led up to such transaction. S. 3 is wide enough to include a course of dealings by way of advances and repayments although promissory notes have been taken as collateral securities on settlements of account from time to time.
15. The Full Bench of the Punjab High Court in Mangat Rai's case (Air 1962 Punj 1) (supra) also considered the provisions of the Punjab Relief of Indebtedness Act. It was held therein that the definition of word 'debt' in S.7 is inclusive and consequently not exhaustive. The test is that where there is a liability which can be enforced to recover the amount by coercive machinery of the law, it is a case of 'debt' within the meaning of S.7(1).
16. Similarly Allahabad High Court in Baijnath's case (AIR 1925 All 400) (supra) considered S. 2(3)(b) of the Act and it was held that if the creditor wishes to bind another and recover from him a sum of money said to be due on a transaction entered into between himself and the debtor, the Usurious Loans Act would be applicable irrespective of the fact whether that other is liable as a principal debtor or as a surety. S.2(3)(b) is wide enough to cover the case of a surety also. The Act makes no distinction on this account.
17. Thus, in view of these judgments, it could not be successfully argued on behalf of the plaintiff-respondent that the said Act is not applicable to the defendant simply because he had entered into a fresh agreement or payment of the loan due to Atlas Engineering Company, Ludhiana. Admittedly, no fresh loan was advanced to the defendant under the mortgage deed Ex.P.1. The defendant only accepted that the amount said to be due to the plaintiff from the company i.e. Rs. 32,000/- will be paid by him for which he mortgaged his house. Thus, the plea that whether the said sum of Rs. 32,000/- as such was due to the plaintiff or not from the company was certainly open to the defendant and it could not be said that he was debarred to take this plea under the provisions of the said Act. In this view of the matter, the finding of the trial Court under issue No. 2A is liable to be set aside. As observed earlier, it is not in dispute that if this issue is decided in favour of the defendant, then he is entitled to deduct a total sum of Rs. 18964.28 as given in the memorandum of appeal.
18. As regards the cross-objections filed by the plaintiff, I do not find any merit therein. The plaintiff has been allowed future interest at the rate of six per cent per annum on the principal sum from the date of the suit till realisation. According to the learned counsel for the plaintiff, he should have been allowed interest at the rate of 7 1/2% as was claimed in the suit in view of the provisions of Order 34 Rule 11 C.P.C. However, I do not find any merit in this contention. Taking into consideration, the totality of the circumstances and the conduct of the plaintiff, I find that the rate of interest allowed by the trial Court is reasonable.
19. As a result of the above discussion, the appeal succeeds to the extent of Rs. 18,964.28 is allowed with costs and the decree of the trial Court thus stands modified accordingly. The cross-objections filed on behalf of the plaintiff-respondent are dismissed with no order as to costs.
20. Appeal allowed.