The main legal point established in the judgment is the interpretation and application of the provisions of the Usurious Loans Act, particularly in relation to the presumption of unfairness in case of excessive interest and the treatment of compound interest in the context of loans to agriculturists.

Patanjali Sastri, J.

1. The only question raised in this second appeal relates to the respondents claim to relief under the Usurious Loans Act, 1918, as amended by the Usurious Loans (Madras Amendment) Act, 1936.

2. The respondents who own extensive garden lands and coffee plantations in the District of Madura had dealings with the appellant, a money-lender and commission agent at Dindigul, from 1927. There were settlements of account from time to time at varying intervals at which interest was calculated at twelve per cent. per annum and added to the principal then due, the composite sum thereafter bearing interest at the same rate. At one of such settlements which took place on 22nd February, 1933, the amount due to the appellant was fixed at Rs. 17,000 and a promissory note for that sum was executed by the respondents. There were no further advances after that date but some repayments were made. On 30th November 1935, the balance due was settled at Rs. 21,375 for which another promissory note was given in discharge of the earlier note. On 15th March, 1937, the respondents sold certain immovable properties to the appellant for Rs. 20,000 out of which Rs. 19,500 was adjusted towards She debt due under the promissory note. There was a final settlement on 11th July, 1937, at which the sum due to the appellant, after deducting the sale price adjusted as aforesaid and Rs. 2,500 remitted on the occasion, was fixed at Rs. 4,000, and it was further agreed that, if the respondents repaid on or before 30th March, 1940, this sum together with Rs. 20,000 the sale price and the rents if any due for the lands which were then leased to the respondents, the lands should be reconveyed to them by the appellant, but if they made default in such payment, the appellant should enjoy the lands absolutely and recover the balance of Rs. 4,000 with interest as provided in the promissory note of 1935 as well as the unpaid rents, if any, due under the lease. The respondents having made default, the appellant has brought the suit for recovery of Rs. 4,000 with interest from nth July, 1937.

3. The Courts below held that the respondents were agriculturists within the meaning of the Usurious Loans Act, 1918, as amended in Madras (hereinafter referred to as the Act), the compound interest at twelve per cent. having been charged, the interest must be presumed to be excessive and the transaction unfair, that no special circumstances were proved to rebut the presumption and that, therefore, the respondents were entitled to relief under the Act. They accordingly reopened the accounts already settled between the parties and, allowing only simple interest at the agreed rate of twelve per cent. throughout and reappropriating the payments on that basis, passed a decree for the amount found due to the appellant.

4. Before me, Mr. Rajah Ayyar for the appellant assailed every part of the finding of the lower Courts as erroneous and unsustainable, and endeavoured to show that no case for relief under the Act was made out by the respondents. He contended, firstly, that the respondents were not agriculturists and could not therefore invoke the rule of presumption regarding excessive interest, secondly, that this was not a case where compound interest was charged and for that reason too such presumption could not be made, and lastly that, in any case, the circumstances in which and the purposes for which the advances were made to the respondents were sufficient to rebut such presumption.

5. Before dealing with these contentions it will be convenient here to sot out the material provisions of the Act.

Section 3(1). Notwithstanding anything in the Usury Laws Repeal Act, 1855 where in any suit to which this Act applies, whether heard ex parts 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--

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(ii) notwithstanding any ag