The rate of interest prevailing at the time of the decision is not a relevant factor in determining whether the interest is excessive under the Usurious Loans Act.

( 1 ) THIS is an appeal against the order of the States Abolition Tribunal, Chittoor, dated 5-1-1953.

( 2 ) THE appellant filed a claim before the Tribunal on the basis of a mortgage created by the first respondent on 16-11-1941, over certain villages, which were subsequently taken over by the Government in pursuance of the provisions of the Madras (Estates Abolition and Conversion into Ryotwari) Act, 1948 for a sum of Rs. 15,500. 00. This amount was to any interest at ten per cent per annum with yearly rests. There was also a stipulation that the interest accruing should be paid every month to the mortgagee. Obviously, nothing was paid by the mortgagor. On two of the three villages forming the subject matter of the mortgage, being taken over under the Estates Abolition Act, the Government deposed a sum of Rs. 26,000. 00 and odd under Section 54-A of the aforesaid Act. Thereupon, the mortgagee, i. e. , the present appellant, applied to the Tribunal on 31-8-1951 for payment of the amount due to him under the mortgage.

( 3 ) IN the counter filed by the first respondent while the truth and validity of the mortgage bond was not denied, it was pleaded that the rate of interest was high and that he was entitled to the benefits of the Usurious Loans Act (X of 1918 ). The Tribunal allowed interest on the claim only at nine per cent per annum (simple interest) on the ground that ten per. cent Compound Interest was too high a rate "having regard to present rates and the fact that the Estates have been taken over by Government". Dissatisfied with the disallowance of the contract rate of interest, the mortgagee has brought this appeal.

( 4 ) IT is argued by the learned Counsel for the appellant that the Tribunal" in not granting the contract rate of interest was influenced By irrelevant considerations and that their view was erroneous. We think there is considerable force in these contentions. We fail to see what bearing the taking over of the estates by the Government has on a consideration of the question whether the rate of interest is usurious within the purview of the Usurious Loans Act. That is absolutely immaterial in deciding whether the interest could be regarded as excessive or not. We are also convinced that the Tribunal fell into an error in thinking that the rate of interest as prevailed at the time of the decision would serve as a criterion in the application of the principles of the Usurious Loans Act. A court or a Tribunal is only concerned with the rate of interest as obtaining at the time of the transaction. There is also no material on which the Tribunal could form an opinion as to the fair rate of interest that prevailed even at the time of the rendering of the judgment. A court has to determine whether a particular rate of interest is excessive or not, having regard to the rates of interest at the time when the impugned transaction was entered into and the surrounding circumstances. What amounts to excessive interest has to be determined with reference to various factors, such as the security which the creditor obtained for the amount advanced by him, the pecuniary position of the debtor, the rate of interest prevailing at that time and the advantages which the debtor would derive from the loan. A debtor would get relief under the Usurious Loans Act only if it is established that the transaction is substantially an unfair one. It is true that the Explanation introduced by the Madras amendment has laid down that if the interest is excessive, the court shall presume that the transaction was substantially unfair; but such a presumption may be rebutted by proof of special circumstances justifying the rate of interest. Thus, before the Explanation could be invoked, it should be established that the interest is excessive. It is only then that it may be presumed that the transaction was an unfair one. As we have already pointed out, whether a particular rate of interest is excessive or not depends upon vari