1. Plaintiff sued upon a khata for recovery of Rs. 294 made up of principal Rs. 100 and interest at the rate of 6 1/4 per cent per mensem. Defendant repudiated the execution of the khata entry and denied the loan.
2. The entry in the khata shows a stipulation to pay interest at 6 1/4 per cent without mentioning whether it was per mensem or per annum. Defendant in several places in his written statement adverted to the plaintiff's allegation in the plaint of the stipulated rate of interest being per month but did not controvert it specifially or plead its excessive or unconscionable character, beyond denying the transaction in toto. Paragraph 5 of the written statement, however, when translated runs thus: 'The stipulation mentioned in the plaint is illegal and no claim for interest is sustainable on the basis of the same. It is exceedingly improbable and unnatural to borrow money at the rate of 6i per cent per mensem for the purposes of business; and if such a transaction ever took place it is humanly improbable that the debt should have been left unpaid or unrealised for such a long time. Besides interest at the rate claimed is penal and unconscionable.' Whether by this statement the defendant invited the Court to adjudicate on the question as to the character of the interest or he merely pleaded it showing the improbability of the transaction is not very clear. From the Summons book all that appears is that only one witness for the plaintiff stated and that in cross-examination that the rate of interest stipulated was 6 1/4 per cent per mensem.
3. The Court has disbelieved the defence and decreed the plaintiff's suit in full.
4. Defendant complains that he had seven witnesses in attendance, and that he had tendered seven witnesses to prove his case including the unreasonableness and penal nature of the interest claimed, but the learned Judge closed the case upon examination of only three witnesses on the petitioner's side. I quote this from the affidavit filed in support of the petition of motion. To this allegation there is no reply on the other side. The statement however is not quite clear, whether the examination of the remaining witnesses was in fan; refused by the Court or whether it was given up in consequence of some discussion that may have transpired; the insinuation is there was a refusal.
5. At one stage in the hearing of this Rule I was inclined to take the view that upon the denial of the whole transaction by the defendant and upon the fact that no real attempt was made to prove that if the transaction did at all take place, the rate of interest was otherwise than what was claimed and upon the vagueness of the statement referred to above the Rule should be discharged. On a further consideration I have come to the opinion that it would not be right to do so.
6. The Usurious Loans Act, 1918, applies to the transaction. Section 3 (1) of that 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. The proviso to Sub-section (1) need not be referred to as it has no bearing on the present case. Sub-section (2) is important. It lays down certain principles for determining whether the interest is excessive and whether the transaction was as between the parties substantially unfair. The Explanation to Clause (d) of Sub-section (2) is also important. It says that interest may of itself be sufficient evidence that a transaction was substantially unfair. The other sub-sections need not be referred to.
7. Upon the plain words of the Statute a duty is east 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. The expression 'Has reason to believe' clearly indicates that the intention of the Legislature was to enable the Court to take up the question, of its own motion, whether it has been raised by the defence or not. The section is founded upon Section 1 of the English Money Lender's Act In Samuel v. Newbould (1906) 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.' This observation appears to have been borne in mind in the Usurious Loans Act, 1918. While keeping in view the principle of the English Act it has rendered the application of the principle 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 certain practical tests for its guidance. The Act, therefore, will relieve the Courts from the necessity of going into elaborate and often very intricate questions which arise under Sections 16 and 19-A of the Indian Contract Act. Once a proper case presents itself the rules of evidence disentitling a party from varying the terms of a written agreement by evidence of a parol agreement inconsistent therewith are suspended, the rules prohibiting the setting up of inconsistent defences cease to have operation and the Court can, nay ought to, go behind the written document, find out the real nature of that transaction by admitting evidence relating thereto and do justice to the cause.
8. It is obvious that 75 per cent per annum is a high rate of interest; it is, at any rate, more than the ordinary. The plain duty of the Court in such a case is to apply its mind to consider whether it is excessive and then, if necessary, to apply the provisions of the Act, which it does appear to have done.
9. I accordingly sot aside the decree of the learned Munsif and send back the case to him to admit relevant evidence for the purpose of considering the provisions of the Act and dispose of the suit in accordance with law. I am of opinion that the dishonest defence set up by the defendant led. the Court astray. I accordingly make no order as to costs in this Rule.