( 1 ) THIS appeal by the plaintiff- union Bank of India, Vijayawada from (he judgment and decree of the learned subordinate Judge Vijayawada in O S No. 236 of 1979, raises the question as to the applicability of the Proviso to Section 3 of the Usurious Loans Act, 1918, as amended by Act VIII of 1937.

( 2 ) THE parties in this appeal are referred to in their original character as they appeared in the Court below. The first defendant borrowed a sum of Rs. 1,12. 356/-from the plaintiff-Bank for doing abkari business. Defendants 2 to 4 are the guarantors. The 2nd defendant it was alleged, mortgaged the plaint schedule properties which comprise two houses; and the first defendant executed a promissory note Ex. A-3 dated: 29-9-1976 in respect of the amount borrowed. The contractual rate of interest is 15% with quarterly rests.

( 3 ) THE 2nd defendant filed a written statement specifically contending that the interest charged with quarterly rests was usurious and opposed to public policy". He also pleaded that all the defendants are agriculturists and "they are entitled to the benefits of Act IV of 1938 and Act VII of 1977".

( 4 ) THE 3rd defendant in his written statement stated that he is an agriculturist eking out his livelihood only by agriculture. He also raised the plea that the interest charged was usurious.

( 5 ) DEFENDANTS 1 and 4 filed a memo adopting the written statement filed by the 2nd defendant.

( 6 ) THE evidence brought on record is meagre and sketchy. PW 1 is an officer of the Bank. What all he stated is that the Banks are charging the interest as per the directions of the Reserve Bank of india and that private money lenders are charging more interest. In the cross- examination he denied that the rate of interest charged in respect of the defendants was usurious. He had no personal knowledge as to the rate of interest prevailing in the market. The first defendant went into the box as DW 1 and he asserted that he was an agriculturist owning Ac. 3. 50 cents of land, that he has one brother and that he is not an income-tax assessee. He admitted that the loan was taken for abkari business and he has no idea about the rates of interest charged by private money leaders.

( 7 ) BASED on the aforesaid evidence the learned Judge granted a preliminary decree for Rs. 1,12,356/- with interest at 12% per annum from the date of the promissory note Ex. A-3 dt: 29-9-1976 till the date of the decree and at 6% per annum from the date of decree till the date of realisation. The learned Judge held that as the first defendant is an agriculturist, the rate of interest charged was usu. rious and therefore he was of the view that 12% simple interest in the circumstances would be just and proper. As regards the liability of the guarantors the learned judge held that their liability could not be higher than that of the principal debtor and in that view held that the statutory benefit to which the first defendant is entitled to should be extended to the other defendants also.

( 8 ) THIS appeal brought by the plaintiff-Bank is confined only to the rate of interest alowed by the Court below. Sri T. S. Harinath, learned counsel for the plaintiff-appellant contends that the statutory presumption under the proviso to section 3 of the Usurious Loans Act 1918, hereinafter referred to as the Act is not attracted to the case on hand and even if that presumption is attracted the benefit should be confined to the first defendant only and the other defendants are liable to pay interest at the contracted rate. I am unable to agree.

( 9 ) THE Proviso to Section 3 in so far as it is material for the purpose of this case, reads:" (THE Court) has reason to believe that the transaction was as between the parties thereto substantially unfair the court shall exercise one or more of the following powers, namely,- ii) the Explanation to the same sub-section shall be renumbered as Explanation ii and the following shall be inserted as Explanation 1, na