Scope of the provisions.

This is an appeal from the judgment and decree passed by Ramaswami, J., in a suit instituted on the Original Side of this Court, C.S. No. 72 of 1950. The suit was for the recovery of the amount due under four mortgages which were executed by one Dhanakoti Ammal in favour of the plaintiff, Srinivasa Varadachariar, on 20th March, 1936, 14th September, 1936, 27th July, 1937 and 2nd January, 1938 for sums of Rs. 25,000, Rs. 9,000, Rs. 7,000 and Rs. 7,000 respectively. The terms relating to the interest were the same in respect of each of these four mortgages, namely, Rs. 15 per cent. per annum compound with quarterly rests. A favourable rate of interest at 12 per cent. per annum was, however, provided in case of payment of interest due for each month by the 20th day of succeeding month. Dhanakoti Ammal was adjudged insolvent and her estate vested in the Official Assignee, Madras. The Official Assignee sold the four items mentioned in the plaint schedule comprised in the four mortgages to Dr. Gopala Menon on 6th July, 1944. The sale was subject to the aforesaid four mortgages. Though there were several defendants in the suit, the main contesting defendant was Dr. Gopala Menon, the second defendant. The only plea in defence was that the interest provided in respect of the mortgages is excessive and that he would be entitled to relief under the Usurious Loans Act. Ramaswami, J., who tried the suit reduced the interest to 15 per cent. per annum compound interest with yearly rests. The second defendant Dr. Gopala Menon is the appellant before us and in the appeal the arguments were confined to the same plea of excessive interest.

Mr. K. V. Venkatasubramania Ayyar, learned counsel for the appellant, contended that the interest provided under the mortgage deeds was usurious and therefore he was entitled to relief under the Usurious Loans Act and submitted that the interest should be reduced to 12 per cent. simple till date of plaint. The only question in this appeal therefore is what if any is the relief which the appellant can be granted under the provisions of the Usurious Loans Act (X of 1918). The relevant section of the Usurious Loans Act as amended by the Usurious Loans (Madras Amendment) Act (VIII of 1937) is section 3 which runs thus:

"3. (1) Notwithstanding anything in the Usury Laws Repeal Act, 1865, where in any suit to which this Act applies, whether heard ex parte 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) re-open 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, purporting to close previous dealings and to create a new obligation, re-open any account already taken between them and relieve the debtor of all liability in respect of any excessive interest, and if anything has been paid or allowed in account in respect of such liability, order the creditor to repay any sum which it considers to be repayable in respect thereof;

(iii) set aside either wholly or in part or revise or alter any security given or agreement made in respect of any loan, and if the creditor has parted with the security, order him to indemnify the debtor in such manner and to such extent as it may deem just."

The provisos are not material.

"Explanation I.- If the interst is excessive, the Court shall presume that the transaction was substantially unfair ; but such presumption may be rebutted by proof of special circumstances justifying the rate of interest ;

Explanation II.- In the case of a suit brought on a series of transactions the expression ‘the transaction ‘means, for the purpose of Proviso (i), the first of such transactions.

(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 a