The provisions of Sections 5 and 6 of the Punjab Relief of Indebtedness Act can be invoked by the Divisional Bench to reduce the interest as stated above.

Headnote:
USURIOUS LOANS ACT - SECTION 3 - SECTION 5 - SECTION 6 - PUNJAB RELIEF OF INDEBTEDNESS ACT - SECTION 5 - SECTION 6 - INTEREST REDUCTION - RETROSPECTIVE EFFECT - APPEAL - PENDING SUIT - INTERPRETATION OF STATUTES - VESTED RIGHTS - PROCEDURE - SUBSTANTIVE RIGHTS.
Fact of the Case:

A mortgage decree was passed in 1953 for Rs. 76,692-9-8, including interest at 9% per annum for the first 3 months and 12% per annum till the institution of the suit. The mortgagor appealed against the decree in 1954, seeking a reduction of interest by Rs. 7,900 and a future interest rate of 9% per annum. During the pendency of the appeal, the Punjab Relief of Indebtedness Act, which amended the Usurious Loans Act, was extended to Delhi in 1956. The mortgagors applied to the High Court under Section 3 of the Usurious Loans Act, as amended, claiming that interest in excess of 71/2% per annum could not be awarded.
Finding of the Court:

The High Court allowed the application and reduced the interest in the mortgage by Rs. 15,027, applying the provisions of the Punjab Relief of Indebtedness Act. The court held that the provisions of the Act applied to the case even though the decree had already been passed and an appeal was pending at the time the amendment was brought into force.
Issues: Whether the provisions of Sections 5 and 6 of the Punjab Relief of Indebtedness Act could be invoked by the Divisional Bench to reduce the interest as stated above.
Ratio Decidendi: The court held that the amended Section 3 of the Usurious Loans Act is mandatory and requires the court to re-open a transaction if there is reason to believe that the interest is excessive. Further, where the rate of interest exceeds seven and a half per centum per annum simple, the court must hold that it is excessive. The court also held that Section 6 of the Relief of Indebtedness Act, which gives retrospection to Section 5, applies to all suits pending on or instituted after the commencement of the Relief of Indebtedness Act. The court interpreted the word "suit" in Section 6 to include an appeal from the decision in the suit. The court reasoned that an appeal is a part of the cause and that the preliminary decree which emerges from the appeal will be the decree, which can become a final decree. Therefore, the court held that the High Court was right in applying Section 3 of the Usurious Loans Act (as amended) to the case.
Final Decision: The appeal was dismissed with costs.

Judgement

HIDAYATULLAH, : In this appeal by special leave against the judgment and decree of the Punjab High Court, dated October 15, 1959 the only question is whether, in the facts to be stated presently, the High Court was right in reducing interest in a preliminary mortgage decree, dated August 12, 1953 by applying Ss. 5 and 6 of the Punjab Relief of Indebtedness Act which were extended to Delhi on June 8, 1956.

2. On January 17, 1946 Hazarilal (predecessor of respondents 1to 5) and one Jagat Narain (respondent 6) executed a simple mortgage-deed for Rs. 50,000 with interest at 9 per cent per annum or in default of payment of interest for 3 months at Re. 1 per cent per month for the period of default. As the mortgagors made default in payment of interest and also did not pay anything out of the mortgaged amount a suit was filed for enforcement of the mortgage by sale of properties. The claim was for Rs. 76,692-9-8, by calculating interest at 9 per cent per annum for the first 3 months and at 12 per cent per annum till institution of the suit and allowing credit for Rs. 14,000 as repayment. The defendants admitted the mortgage and the consideration but pleaded that the rate of interest was both penal and excessive. This plea was not accepted and a preliminary decree was passed for the full claim on August 12, 1953. Hazarilal alone appealed on January 5, 1954 (R. F. A. No. 1-D of 1954) and asked for reduction of interest by Rs. 7,900 and of the rate of future interest to 9 per cent per annum. Court-fee was paid on Rs. 7,900. During the pendency of this appeal the decree was made final on April 3, 1954.

3. Before the appeal was disposed of Inderjit and Satya Narain, sons of Hazarilal, filed a suit for a declaration that the properties were ancestral and belonged to a joint family. They claimed that the properties could not be sold and asked for a temporary injunction which was first granted and later vacated. Against the order vacating the stay they filed an appeal (F. A. O. 68-D of 1957) and obtained temporary stay from the High Court. The mortgagees also filed in that appeal a petition (C. M. 1318-D of 1957) for vacation of the stay order. On February 10, 1958 a conditional say order was passed by a learned single Judge of the High Court but we need not trouble ourselves with it.

4. On October 29, 1958 the legal representatives of Hazarilal (respondents 1 to 5) presented an application under S. 3 of the Usurious Loans Act as amended by S. 5 of the Punjab Relief of Indebtedness Act, when the latter Act was extended to Delhi on June 8, 1956 under S. 2 of Part C States (Laws) Act, 1950 (30 of 1950) and claimed that interest in excess of 71/2 per cent per annum could not be awarded in this suit. We may, at this stage, read the relevant sections. Section 3 of the Usurious Loans Act, in so far as it is material to our purpose, reads as follows :-

"3. Re-opening of transactions.

(1) Notwithstanding anything in the Usuary Laws Repeal Act, 1855, where, in any suit to which this Act applies, whether heard ex parte or otherwise, the Court has reason to believe, -

(a) that the interest is excessive; and

(b) * * *

the Court may exercise all or any of the following powers, namely, may, -

(i) re-open the transaction, take an account between the parties, and relieve the debtor of all liability in respect of any excessive interest :

* * * *

(2) (a) In this section "excessive" means in excess of that which the Court deems to be reasonable having regard to the risk incurred as it appeared, or must be taken to have appeared, to the creditor at the date of the loan.

(b) * * *

(d) * * *

(3) This section shall apply to any suit, whatever its form may be, if such suit is subsantially one for the recovery of a loan or for the enforcement of any agreement or security in respect of a loan or for the redemption of any such security.

* * * *

* * * *"

5. By S. 5 of the Punjab Relief of Indebtedness Act, it was provided :-

"5. Amendment of the Usurious Loan

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1966 Supreme(SC) 16

The provisions of Sections 5 and 6 of the Punjab Relief of Indebtedness Act can be invoked by the Divisional Bench to reduce the interest as stated above.

Cases Referred (1)