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Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY, P.KODANDA RAMAYYA
G.Lakshminarasayamma - Appellant
Versus
Bonu Satyavathi - Respondent
Decided On : 10-17-85
USUrious LOANS ACT - SECTION 3 - AMENDED ACT - BURDEN OF PROOF - INTEREST - EXCESSIVE - PRESUMPTION - REBUTTABLE - TRANSACTION SUBSTANTIALLY UNFAIR - CRITERIA.
Fact of the Case:
Plaintiff filed a suit for recovery of debt with interest stipulated in a promissory note executed by the deceased defendant. The defendants, the wife and children of the deceased, contested the suit denying the execution, consideration, and enforceability of the promissory note. They also claimed the benefit of the Usurious Loans Act, 1918, alleging that the interest claimed was usurious and excessive.
Finding of the Court:
The trial court held that the promissory note was true and enforceable against the defendants and that they were not protected by the Usurious Loans Act. However, the court found that the interest stipulated in the promissory note was excessive and reduced it to 12% p.a. from the date of execution till the date of filing of the suit and 6% p.a. from the date of filing of the suit till realization.
Issues: 1. Whether the burden of proof lies on the debtor to show that the interest is excessive before invoking the powers of the court under Section 3 of the Usurious Loans Act? 2. Whether the interest stipulated in the promissory note was excessive?
Ratio Decidendi: 1. The court held that the burden of proof does not lie on the debtor to show that the interest is excessive before invoking the powers of the court under Section 3 of the Usurious Loans Act. The court interpreted the amended Section 3 of the Act, which omitted the requirement of showing that the interest is excessive, and added an Explanation presuming that if the interest is excessive, the transaction is substantially unfair. The court held that this Explanation is an aid to the court and does not cast a burden of proof on the debtor. 2. The court examined the evidence and found that the transaction was not a commercial transaction and that the prevailing bank rate of interest on the date of the transaction was 17%. The court held that 20% simple interest was reasonable for the suit debt and allowed interest at that rate from the date of contract till the date of suit, 15% simple interest from the date of suit till the date of decree, and 6% simple interest from the date of decree till the date of realization.
Final Decision: The court allowed the appeal and modified the decree of the trial court by increasing the interest rate to 20% simple interest from the date of contract till the date of suit, 15% simple interest from the date of suit till the date of decree, and 6% simple interest from the date of decree till the date of realization.
( 1 ) THE plaintiff is the appellant in this appeal. The appeal relates only to interest in so far it was disallowed by the trial court while decreeing the plaintiff s suit.
( 2 ) THE suit is laid on the foot of a promissory note executed by one Bonu satyanarayana under Ex. A-1, dated 18-2-1975 for a sum of Rs. 20,000/ -. The interest stipulated therein is 30% p. a. The plaint alleged that no amount was paid under the suit pronote, that the executant died and that defendants who are the wife and children of the executant were added as parties and the action was laid for recovery of the debt with interest stipulated therein.
( 3 ) THE defendants contested the suit denying the execution, the consideration and the enforceabitity of the same against them. They also raised the plea that they are entitled to the benefit of act IV of 1933 and the interest claimed is usurious and excessive.
( 4 ) THE court below framed relevant issues at paragraph 5 and held that the suit promissory note is true and enforceable against the defendants and the defendants are not protected by Act iv of 1938 but held that the interest is excessive and directed that the decree will be passed with interest at 12% p. a. from the date of execution till the date of filing of the suit and from the date of filing of the suit with interest at 6% till realisation and the suit is decreed with proportionate costs on the assets of late bonu Satyanarayana in the hands of defendants 1 to 7.
( 5 ) IN this appeal Sri Rajeswara rao the learned counsel for the appellant contended that the view of the court below is incorrect in granting a lesser interest. The burden is on the defendants to prove that the interest is excessive and in the absence of any evidence the court below is not justified in reducing the stipulated rate of interest. He also relied upon some of the dictas in the reported judgments to show that the burden is on the debtor to show that the interest is excessive.
( 6 ) WE must at the forefront clear the ground of burden of proof which is a very vital question while invoking the powers of the court under the Usurious loans Act 10 of 1918. It is necessary to notice that Section 3 of the Act was amended by Usurious Loans (Madras amendment) Act 8 of 1937. In order to appreciate fully the change brought out by the Madras Amendment and its effect it is necessary to compare both the provisions as we are afraid that the burden of proof as envisaged under the central Act is still being imported even after the Amended Act referred above which is applicable to the Andhra Area of Andhra Pradesh and also to the entire state by Andhra Pradesh Act 24 of 1961 which came into force on 7-9-1961. The Amended Act amended sub-section (1) of Section 3 and added Explanation I directing the re-numbering of the Explanation in the original section as Explanation II. It also added a proviso to clause (b) of sub-section (2) of Section 3. The first part of Central Act without amendment reads as follows:-" (1) Notwithstanding anything in the Usury Laws Repeal Act, 1855, where, in any suit to which this Act applies, whether heard exparte or otherwise, the Court has reason to believe,- (a) that the interest is excessive; and (b) that the transaction was, as bet ween the parties thereto, substantially unfair, the Court may exercise all or any of the following powers, namely, may. "we shall now read Section 3 as it stands after the State Amendment. It runs as follows:- "3. (1) Notwithstanding any this in the Usury Laws Repeal Act, -18 where in any suit to which this Act applies, whether heard exparte or otherwise, 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- (i) reopen the transaction, take an account between the parties, and relieve the debtor of all liability in respect of any excessive interest; (ii) notwithstanding any agreement, p
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