1. The Suit put of which this revision case has arisen was instituted, by the plaintiff for recovery of the principal and interest due on a registered bond, the amounts of principal and interest claimed being respectively Rs. 80 and Rs. 301-7-6 pies. The rate of interest claimed was what was stipulated in the bond, namely compound interest at 25 per cent per annum with yearly rests. The defendant did not appear to contest the claim. The Judge of the Court below decreed the suit ex parte for the principal amount of Rs. 80 and simple interest at the rate of 25 per cent per annum from the date of the bond, namely 1st May 1921, together with costs. The plaintiff has moved this Court and obtained this rule.
2. The learned Judge has refused enforcement of the stipulation as to compound interest contained in the bond for the following reason : 'The transaction,' says he:
is between landlord and his tenant and consisting of arrears of rant and salami claimed. I consider that the transaction is substantially unfair inasmuch as an undue advantage has been taken in getting the very hard terms as to stipulation for compound interest. I therefore consider that the transaction is substantially unfair inasmuch as an undue advantage has been taken in getting the very hard terms as to stipulations for compound interest. I therefore consider the transaction unfair and stipulation to pay compound interest excessive, and by virtue of Section 3, I disallow the stipulation to pay compound interest.
3. Section 3 referred to in these observations is Section 3, Usurious Loans Act of 1918.
4. In several cases that have come up before me I have seen this Act loosely interpreted and applied and I therefore consider it necessary to take this opportunity of saying a few words as regards the precise scope of this piece of legislation.
5. Section 3, Sub-section (1) of the Act provides that, notwithstanding anything in the Usury Law Repeal Act, 1855, where, in any suit to which the Act applies, whether heard ex parte or otherwise, the Court has reason to believe that the interest is excessive and that the transaction was, as between the parties thereto, substantially unfair, the Court may exercise all or any of the powers, which are mentioned in the various clauses therein. Leaving aside the proviso to Sub-section (1) we pass on to Sub-section (2). Clauses (a), (b) and (c), Sub-section (2), deal with excessive interest. Clause (d) Sub-section (2), says how the question as to whether a transaction is substantially unfair is to be determined and the explanation to this clause provides that interest may of itself be sufficient evidence that a transaction was substantially unfair.
6. Two conditions therefore, must be satisfied before the debtor can be relieved : 1st, that the interest must be excessive, and 2nd, the transaction, substantially unfair as between the parties thereto.
7. Upon the section itself the following points are clear:
First. - The duty is past upon the Court, in cases to which the statute may be applicable to apply its mind to its provisions even in a suit heard ex parte.
Second. - The words 'whether heard ex parte or not' and the 'Court has reason to believe' indicate that the intention of the legislature was to enable the Court to take up the question, of it own motion, whether it has been raised by the defence or not.
Third. - The words 'has reason to believe' have a significance. The Indian Legislature has said in some other Act that a person is said to have reason to believe a thing if he has sufficient cause to believe that thing, but not otherwise. It is only when the circumstances are such that a reasonable man would be led by a chain of probable reasoning to the conclusion or inference that the thing exists, though the circumstances may fall short of carrying absolute conviction to the mind of all persons, that the phrase is satisfied. The words however mean something more than mere suspicion.
Fourth. - As regards 'excessive interest' the word 'excessive' as James, L.J. said in the case of Samuel v. New-bould  A.C. 461 'is a relative and elastic term, impossible of absolute definition.' Clauses (a), (b) and (c) of Sub-section 2 indicate with sufficient particularity the enquiries to be made in order to find out in any given case whether the rate of interest stipulated for is excessive or not the points to be noted are to be determined by taking into account such matters as the financial conditions of the debtor, the nature of the security, etc., the risk incurred by the creditor; the extra amounts not paid but incorporated into the principal as expenses, etc., in the case of compound interest the periods of the rests; and lastly the the total advantage that may be reasonably expected to accrue to the respective parties from the transaction.
Fifth. - The expression 'substantially unfair' requires to be properly understood. The section is founded upon Section 1, English Money Lenders Act. In Samuel v. Newbould  A.C. 461, Lord Macnaghten observed:
What an intolerable strain would be thrown upon inferior Courts, unfamiliar with the doctrines and the practice of Courts of equity, if they were privileged or condemned to listen to lengthy arguments and venerable precedents before deciding a question that any man of common sense is just as capable of deciding as the most learned Judge in the land provided he is not hampered by authorities which require no little training to discriminate and appreciate at their true value.
8. These words appear to have been borne in mind in the Usurious Loans Act of 1918. While keeping in view the principles of the English Act it has rendered the application of those principles much simpler by substituting the words 'substantially unfair' for the words 'harsh and unconscionable' and instead of referring the Court to considerations of general principles of. equity has laid down in Clause (d), Sub-section (2), certain practical tests for its guidance. The Act therefore, relieves the Courts from the necessity of going into elaborate and often very intricate questions which arise under Sections 16 and 19-A, Contract Act.
9. Bearing these propositions in mind let us examine the facts of the present case. The only evidence that there is on the record is the evidence of the plaintiff's witness who, besides proving the execution of the bond and the consideration, said:
Paban (meaning, the defendant) is literate... Rs. 80 was borrowed to pay of arrears of rent and selami. The interest claimed is at & annas a rupee per annum and this is the usual rate of interest prevailing there.
10. The Judge has not taken the trouble of enquiring into the matter by putting further questions to the witness to find out whether there existed circumstances which would enable him to apply the rules laid down in the different clauses of Sub-section (2), Section 3. Interest at 25 per cent, per annum compound with yearly rests by itself is not excessive and would not under Clause (d), Sub-section (2) justify a conclusion that the transaction was substantially, unfair. The fact that the amount consisted of arrears of rent and selami, if those items were justly due, and the fact that the tenant entered the stipulation with his landlord, are hardly sufficient to form the foundation for a reasonable belief that the transaction was substantially unfair. As regards the Judge's finding, that the creditor has taken an undue advantage over the debtor, there is absolutely nothing which can raise even a suspicion to that effect. It has been said on behalf of the plaintiff here that the arrears of rent for which the bond was executed carried interest under a patta at the rate of 374 per cent per annum simple.
11. In my opinion there are no materials on which the debtor may justly be relieved of the stipulation to pay interest according to the bond and the learned Judge of the Court below was wrong in the decree that he has passed.
12. The Rule is accordingly made absolute. The decree of the Court below is set aside, and it is ordered that a decree be entered in plaintiff's favour for the principal amount of Rs. 80, with compound interest at the rate of 25 per cent, per annum, with yearly rests from the date of the bond, i.e. 1st May 1921, till the date of the institution of the suit, i.e. 26th April 1928, and interest at 6 per cent, per annum from the date of suit till date of realization. The plaintiff will be awarded the costs mentioned in the decree of the lower Court which will carry interest at the rate of 6 per cent per annum from the date of the lower Court's decree till date of realization. There will be no order as to costs in this rule.