Statutory interest limitations under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act prevail over prior agreements on interest rates, protecting borrowers from usurious lending practices.

J U D G M E N T

(Order of the Court was delivered by G.R.SWAMINATHAN, J.) “O believers! Do not consume interest, multiplying it many times over. And be mindful of Allah, so you may prosper” - Surah Al- Imran (3:130).

The defendant in O.S.No.75 of 2019 on the file of the Principal District Judge, Dindigul is the appellant herein. The respondent herein filed the said suit for recovery of a sum of Rs.59,76,307/- with interest. The plaintiff filed the said suit on the basis of three promissory notes executed by the appellant for a total sum of Rs.20,00,000/- (Ex.A.1 dated 31.08.2010, Ex.A.2 dated 01.09.2010 and Ex.A.3 dated 02.09.2010). As per the terms of the promissory notes, the principal amounts were to be repayable with interest @ 24% p.a. Since the appellant committed default, the plaintiff issued Ex.A.4 legal notice dated 24.11.2016. The defendant replied vide Ex.A.5 dated 22.12.2016 admitting the execution of the promissory notes but took the stand that the agreed rate of interest was @ 18% and not @ 24%.

2.Since the demand set out in the legal notice was not complied with, the suit came to be filed. The written statement reflected the stand set out in the reply notice. Based on the rival pleadings, the issues were framed. The plaintiff examined herself as P.W.1. Ex.A.1 to Ex.A.7 were marked. The defendant examined herself as D.W.1 and one Valliyappan who witnessed the transaction was examined as D.W. 2. Ex.B.1 was marked. After considering the evidence on record, the trial Court vide judgment and decree dated 21.12.2023 directed the defendant to pay a sum of Rs.59,76,307/- with interest @ 9% p.a. on the principal sum of Rs.20,00,000/- with effect from 11.03.2018 till the date of judgment and @ 6% p.a. from the date of judgment till date of realization. In other words, interest @ 24% p.a. was to be the applicable rate of interest from the date of execution of the promissory notes till the date of filing of the suit and interest @ 9% p.a. was to be applicable during the pendency of the suit and interest @ 6% p.a. was to be the applicable rate on the decretal amount.

3.Challenging the same, this appeal has been filed.

4.The learned counsel appearing for the appellant submitted that notwithstanding the admission made by the defendant, the applicable rate of interest fixed by the Government under Section 7 of The Tamil Nadu Money-lenders Act, 1957 would be 12% p.a and not 24%. According to him, the provisions of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 have to be applied.

5.Per contra, the learned counsel for the plaintiff / respondent submitted that the appellant cannot go back on what was originally agreed by her. He pointed out that both in the reply notice as well as in the written statement, the defendant had agreed to settle the loan amount with interest @ 18% p.a. The learned counsel invoked the principle of estoppel. He submitted that the impugned judgment is well reasoned and that it does not call for interference. The Court below had merely enforced the terms that were explicitly agreed between the parties in writing. He pressed for dismissal of this appeal.

6.We carefully considered the rival contentions and went through the evidence on record. The only question that calls for consideration is whether the provisions of Tamil Nadu Act 38 of 2003 can be applied to the case on hand.

7.The learned counsel for the plaintiff / respondent drew our attention to the decision reported in (2010) 2 LW 74 (Indiabulls Financial Services Ltd v Jubilee Plots and Housing Pvt Ltd ) and the decision repo