( 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