USURIOUS LOANS ACT, 1977

Act No. XLVII of 1977

16th Chet, 1977

An Act to give additional powers to Courts to deal in certain cases with usurious loans of money or in kind. Whereas it is expedient to give additional powers to Courts to deal in certain cases with usurious loans of money or in kind; It is hereby enacted as follows:-

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S.1 Short title, extent and commencement

(1) This Act may be called the Usurious Loans Act, 1977.

(2) It extends to the whole of the Jammu and Kashmir State. It shall come into force on the 1st of Baishakh, 1978.

(3) 1[The Government] may, by notification in the Jammu and Kashmir Government Gazette, direct that it shall not apply to any specified area, class of persons, or class of transactions.

1. In section 1 (3) the words "the Government" substituted for the words "His Highness" by Act X of 1996.

S.2 Definitions

In this Act, unless there is anything repugnant in the subject or context,

• (1) "interest" means rate of interest and includes the return to be made over and above what was actually lent, whether the same is charged or sought to be recovered specifically by way of interest or otherwise;
• (2) "loan" means a loan whether of money or in kind and includes any transaction which is, in the opinion of the Court, in substance a loan;
• (3) "suit to which this Act applies" means any suit-
  • (a) for the recovery of a loan made after the commencement of this Act; or
  • (b) for the enforcement of any security taken or any agreement, whether by way of settlement of account or otherwise, made, after the commencement of this Act in respect of any loan made either before or after commencement of this Act.

S.3 Rate of interest to be decreed by Courts

In any suit in which interest is recoverable, the amount shall be adjudged or decreed by the Court at the rate (if any) agreed upon by the parties; and if no rate shall have been agreed upon or where the Court considers the stipulated rate as excessive or unfair, at such rate as the Court shall deem reasonable.

S.4 Rate of interest upon a judgment or decree

Whenever a Court shall direct that a judgment or decree shall bear interest, or shall award interest upon a judgment or decree, it may order the interest to be calculated at the rate allowed in the judgment or decree upon the principal sum adjudged, or at such other rate as the Court shall think fit.

S.5 Contract for usufruct of property in lieu of interest

A mortgage or other contract for the loan of money, by which it is agreed that the use or usufruct of any property shall be allowed in lieu of interest, shall be binding upon the parties.

S.6 Rate of interest on future adjustment of accounts

In any case in which an adjustment of accounts may become necessary between the lender and the borrower of money upon any mortgage, conditional sale of landed property, or other contract whatsoever, which may have been entered into before, or which may be entered into after the passing of this Act, interest shall be calculated at the rate stipulated therein, or if no rate of interest shall have been stipulated and interest be payable under the terms of the contract, at such rate as the Court shall deem reasonable.

S.7 Re-opening of transactions

(1) In any suit to which this Act applies whether heard ex parte or otherwise if the Court has reason to believe-

• (a) that the interest is excessive; and
• (b) that the transaction was, as between the parties thereto, substantially unfair, the Court may exercise all or any 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, reopen 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; and
• (iii) set aside either wholly or in part or revise or alter security given or agreement mad