LexSRINIVASA VARDACHARIAR AND ORS. versus GOPALA MENON AND ORS.
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A B c D E F G H SRINIV ASAY ARDACHARIAR AND ORS. v. GOPALA MENON AND ORS. October 4, 1966 [K. N. WANCHOO, J.M. SHELAT AND G. K. MITTER, JJ.) Usurious Loans (Madras Amendment) Act (8 of 1937), s. 3-Rate ot interes..t permissible. The first appellant advanced monies to D against mortgages of her property. D was adjudicated an insolvent in 1949 and her properties got vested in the Official Assignee of Madras. The Official Assignee brought the properties to sale which were ultimately purchased by the first res- pondent. The Trial Court decreed the appellants' suit for enforcement of the mortgages against the property and awarded interest at the rate of 15 per cent compoundable with yearly rests. In appeal the Division Bench of the High Court found that in the circum1tances of the case a rate of 10 per cent compound interest with yearly rests was just. With certificate- the appellants came to this Conrt. Section 1 of the Usurious Loans (Madras Amendment) Act, 1937 fell for consideration. HELD : The net result of the various clauses of s. 3 - to be that the court must go back to the date of the original transaction and form· an opinion as to the rate of interest which would be reasonable ·after consi- dering : (a) the value of the security offered; (b) the financial condition of the debtors including the result of any earlier transaction; (c) the known and probable risks in getting repayment; (d) whether compound interest was provided for and if 10 the fre- quency of the reriod of calculatton of interest for being added to the principa amount of the loan. [725 E-0] In the circumstances of the case the Division Bench rightly held that 10 per cent compound interest with yearly rests would meet the justice of the case. The security was not inadequate and the threat of a auit by the brother of the mortgagor was not serious. [726 A-BJ Venkatarao v. Venkatratnam, A.I.R. 1952 Madras 872 and Sri Ba/a.- lllJl'aswatl v. A. Parameswara Aiyar, A.I.R. 1957 Mad. 122 referred to. There was also no reason to interfere with the scaling down of the rate of interest to 6 per cent from the date of filing of the suit. Although tho reasons were not indicated it was fairly clear that the High Court was using its discretion as regards interest pendente lite. [726 El CIVIL APPEHATE JURISDICTION : Civil Appeal No. 636 of 1964. Appeal from the judgment and decree dated September 1 1959 of the Madras High Court in 0. S. Appeal No. 104 of 1955'. T. V. R. Tatachari, for the appellants. R. Thiagarajan, Jayaram and M. R. K. Iyer, for respondents. Nos. 1 and 9. 722 SUPREME COURT REPORTS [1967) I S.C.R. The Judgment of the Court wa; delivered by Mitter, J. This is an appeal from a judgment of the High Court at Madras on a certificate granted by it. The main question in ihis appeal relates to the rate of interest payable in respect of four mortgages executed in between March 20, 1936 and January 2, 1938. Both the learned trial Judge, Rama- swami J. of the Madras High Court and the Bench of two Judges in appeal were of the view that the provision for interest in the impugned mortgages should be reduced; but whereas the learned trial Judge reduced the rate of interest from 15 per cent compoundable every quarter to 15 per cent compoundable with yearly rests, the Judges in appeal after taking all the circumstances into consideration held that ID per cent com- pound interest with yearly rests would not be excessive and they reduced the rate accordingly. They also scaled down the rate of interest to 6 per cent from the date of the institution of the suit. The creditor has come up before this Court in appeal and his sub- stantial complaint is that the rate of interest should not have been cut down by the Division Bench of the Madras High Court. The power of the court to reduce interest in a case like this is derived from s. 3 of the Usurious Loans (Madras Amendment) Act VIII of 1937. Sub-section (I) of that section gives the court the power to give relief in various ways if it has reason to believe that the transaction as between the parties thereto was substantially unfair. One of such reliefs is the reopening of the transaction and relieving the debtor of all liability in respect of any excessive interest. Explanation I to the section lays down that "if the in- terest is excessive, the court shall presume that the transaction was substantially unfair; but such presumption may be rebu
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