The main legal point established in the judgment is the application of the Usurious Loans Act (10 of 1918) and Section 16 of the Contract Act in determining the fairness of the transaction and the interest rate, with a focus on excessive interest, substantially unfair transaction, and the risk incurred by the creditor.

Varadachariar, J.

1. This is an appeal by the mortgagor, against a decree for sale passed in the mortgagees suit. Only two points have been raised in the appeal: One relates to an item of Rs. 7,000, which formed part of the consideration recited in the mortgage bond; the other question relates to the rate t f interest.

2. The first question formed the subject of issue 6 and has been discussed pretty fully in para. 9 of the lower Courts judgment. Before the lower Court, the accounts showing a loan of Rs. 6,000 to defendant is mother were not available, as they were in the records of the High Court in a pending appeal. Defendant 1 did not deny the arrangement that the sum of Rs. 7,000 now claimed was to be utilised in discharge of the above debt due by his mother to the plaintiff. His only contention was that the plaintiff promised to satisfy him that such a debt was really due from the mother by the production of the accounts, but that he had not done so. We are not prepared to accept his statement that he felt any doubt about the truth of the mothers indebtedness, though technically he is entitled to the proof of it by the production of the accounts. Whatever strength there was in this contention, in the Court below, it ha i now been shown to be unfounded. The accounts have been called for from the records of the other case and after their production, the appellants learned Counsel has not gone the length of denying the fact of the debt due by the mother to the plaintiff but merely raised a point that Rs. 200 or Rs. 300 out of the Rs. 7,000 might have remained after the discharge of the mothers debt. No such point was raised before the Court below and there is an incidental atatement in the evidence of P.W. 2 that the balance that remained after the discharge of the mothers debt, w s paid over to defendant 1. In these circumstances, we see no reason to differ from the conclusion arrived at by the lower Court on this point.

3. The second question, as to interest, arises under the following circumstances: The mortgage deed Ex. A provides for repayment of the principal in a years time. Interest was fixed at Re. 1-8-0 per cant, per mensem and was made payable once every six months.

4. In default of payment of interest on the expiration of six months, the debtor agreed that the said amount of interest should be added to the principal and that he should pay compound interest on the aggregate amount calculated once every six months. There can be little doubt that the terms of the document were meant to provide that up to the date of payment, the debt shall carry compound interest at 18 per cent per annum with six monthly rests. There is a clause at the end of the document which runs as follows:

Inasmuch as various other persons whom I approached for obtaining a loan for the purpose of effecting improvements in my village and bringing them to a good state demanded a high rate of interest, and as there is stringency in the money market, I applied to you for a loan and you agreed to comply with my request in consideration of my interest. Hence I have of my free will consented to the aforesaid rate of interest of Rupees one and annas eight and executed this mortgage bond.

5. The evidence of the plaintiff and his agent P.W. 3 does not carry the story as to the insertion of this clause very far. They only say that that clause was found in the draft prepared by their vakil. There is some difference between the parties as to whether the draft was brought by the defendant himself or by the plaintiff and also whether the draft was returned to the defendant or not. But we do not think anything turns upon that. We are certainly not prepared to believe the defendants story that he did not read the document before he signed or that he was assured that this was a formal clause not intended to be enforced. But it is significant that neither the plaintiff nor P.W. 3 says that any representation of the kind implied in this clause was made to either