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Issues Involved:
1. Validity of the Rs. 7,000 item in the mortgage bond consideration. 2. Reasonableness of the interest rate stipulated in the mortgage deed. Detailed Analysis: 1. Validity of the Rs. 7,000 Item in the Mortgage Bond Consideration: The first issue concerns an item of Rs. 7,000, part of the consideration recited in the mortgage bond. The lower court's judgment, particularly in para. 9, discussed this issue extensively. Initially, the accounts showing a loan of Rs. 6,000 to the defendant's mother were unavailable as they were part of the records in a pending High Court appeal. The defendant did not deny the arrangement that the Rs. 7,000 was to be used to discharge his mother's debt to the plaintiff. His contention was that the plaintiff promised to prove the debt by producing the accounts, which he had not done. However, after the accounts were produced from the other case's records, the appellant's counsel did not deny the debt but suggested that Rs. 200 or Rs. 300 might have remained after discharging the mother's debt. This point was not raised in the lower court, and evidence indicated that any balance was paid over to the defendant. Consequently, there was no reason to differ from the lower court's conclusion on this point. 2. Reasonableness of the Interest Rate Stipulated in the Mortgage Deed: The second issue pertains to the interest rate. The mortgage deed (Ex. A) provided for repayment of the principal within a year, with interest fixed at Re. 1-8-0 per cent per mensem, payable every six months. In case of default, the interest amount would be added to the principal, and compound interest would be applied every six months. The terms implied compound interest at 18% per annum with six-monthly rests. A clause in the document suggested that the debtor consented to this rate due to difficulty in obtaining loans elsewhere. The court found no evidence of overreaching by the creditor, and the terms were not induced by undue influence as per Section 16 of the Contract Act. However, the Usurious Loans Act (10 of 1918) provided the court with broader powers to deal with such matters. Two conditions must be satisfied for relief under this Act: the interest must be excessive, and the transaction must be substantially unfair. The court referenced English cases and legislative amendments to illustrate the complexities in determining excessive interest. The Indian Legislature provided guidance through explanations in Sub-section 2 of Section 3 of the Usurious Loans Act. Clause (a) defined "excessive" interest as that which exceeds what the court deems reasonable, considering the risk incurred. The court noted that the mortgagee had ample security, and previous transactions between the parties involved lower interest rates (13% per annum, simple interest). The plaintiff did not justify the higher rate based on any special risk but claimed it was his usual lending rate. The court concluded that the interest rate of 18% per annum, compounded every six months, was excessive given the circumstances. The court also considered whether the transaction was substantially unfair. The debtor was about 20 years old, recently estranged from his adoptive mother, and inexperienced in financial matters. The court inferred that the debtor was not in a position to make an informed decision about the loan terms. Therefore, the transaction was deemed substantially unfair. Conclusion: The court directed that compound interest at 18% per annum should be calculated with annual rests instead of six-monthly rests. This modification was deemed sufficient to address the unfairness in the transaction. The decree of the lower court was confirmed with this variation, and the appellant was ordered to pay the respondent's costs in the appeal.
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