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TMI Blog1959 (9) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... aint schedule comprised in the four mortgages to Dr. Gopala Menon on 6-7-1944. The sale was subject to the aforesaid four mortgages. Though there were several defendants in the suit, the main contesting defendant was Dr. Gopala Menon, the second defendant. The only plea in defence was that the interest provided in respect of the mortgages is excessive and that he would be entitled to relief under the Usurious Loans Act. Ramaswami J. who tried the suit reduced the interest to 15 p.c. per annum compound interest with yearly rests. The second defendant Dr. Gopala Menon is the appellant before us and in the appeal the arguments were confined to the same plea of excessive interest. 2. Mr. K. V. Venkatasubramania Aiyar, learned counsel for the appellant, contended that the interest provided under the mortgage deeds was usurious and therefore he was entitled to relief under the Usurious Loans Act and submitted that the interest should be reduced to 12 p.c. simple till date of plaint. The only question in this appeal therefore is what if any is the relief which the appellant can be granted under the provisions of the Usurious Loans Act (X of 1918). The relevant section of the Usurious L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compound interest is charged, the court shall presume that the interest is excessive. (c) In considering the question of risk, the court shall take into account the presence or absence of security and the value thereof, the financial condition of the debtor and the result of any previous transactions of the debtor, by way of loan, so far as the same were known, or must be taken to have been known, to the creditor. (d) In considering whether a transaction was substantially unfair, the court shall take into account all circumstances materially affecting the relations of the parties at the time of the loan or tending to show that the transaction was unfair, including the necessities or supposed necessities of the debtor at the time of the loan so far as the same were known, or must be taken to have been known, to the creditor. 3. It was not suggested by learned counsel for the appellant, Mr. Venkatasubramania Aiyar, that the transactions of mortgages in respect of which the suit has been brought were substantially unfair because of circumstances materially affecting the relations of the parties at the time of the loan. Nor did he contend that there were other circumstances a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Govinda Menon and Ramaswami Gounder, JJ. was referred to, it was held that there could be no absolute maximum rate of interest beyond which it would become automatically usurious and unconscionable, and that the circumstances of each case must be examined to judge whether the rate is penal, usurious or unconscionable. Subba Rao J. in C. S. No. 163 of 1949 which related to a mortgage executed by Dhanakoti Ammal herself prior to the suit mortgage, made it clear that the observation in AIR 1952 Mad 872, that in the Madras State anything above 12 per cent simple interest is excessive, cannot be taken as a principle of law applicable to all cases irrespective of the circumstances obtaining at the time of the transactions. On the evidence before him, Subba Rao J. reduced the rate of interest from 15 per cent compound interest to 12 per cent per annum simple. We are clearly of opinion that to lay down an absolute maximum rate of interest beyond which interest would be excessive within the meaning of the Usurious Loans Act would be in direct contravention of what is laid down in the Act itself. Section 3(2)(a), (b) and (c) of the Usurious Loans Act which continues to be applicable no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mortgages. It appears to us to be reasonably clear that though there was certainly security, the value of the security was certainly not very ample, though at the same time it cannot be said that it was markedly inadequate. It might well have appeared to the creditor that if a long time were to elapse before the money due under the mortgages can be recovered, the value of the security might not be sufficient to cover the entire amount which would become payable. 4. There is also another fact which also must have contributed to the idea that the creditor was undergoing a risk in granting the loan. Admittedly there was litigation in respect of the properties. A brother of the mortgagor had filed a suit claiming that the entire property was ancestral property and the will under which Dhanakoti Ammal derived title to the property was invalid. That suit no doubt was decided against him in the trial court as well as in the appeal. But there was at or about the time of the first loan a certain apprehension that a suit would be filed by the bother after he attained majority to set aside the decree in the prior suit on the ground that his next friend was negligent in the conduct of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excessive within the meaning of the enactment. The plaintiff is a money lender and presumably he would be able to invest the interest if paid on the due dates and earn profits therefrom. For the deprivation of his profits it would not be inequitable to hold that on default of payment of interest for a period of one year the amount due for interest should be treated as further principal. 8. Ultimately the rate and terms of interest to be fixed by the court when granting relief must of necessity be arbitrary. Taking all the circumstance into consideration we hold that 10 per cent compound interest with yearly rests would not be excessive. The appeal is allowed to this extent and there will be a decree calculating interest at the rate which we have now fixed, from the date of the plaint the interest would be six per cent. 9. We may mention that though we have been taken through the evidence bearing on the subject we have purposely refrained from making any reference to an alleged agreement between Dr. Gopala Menon and the plaintiff relating to the discharge of the four mortgages because that agreement was not acted upon, nor was it pressed on us by either side. Such an agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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