CHITTURI VENKATARAJU Vs. KODARASETTI VENKATARAMANA

JUDGEMENT

(1.) This is an appeal by the plaintiff-mortgagee against the judgment and decree of the Subordinate Judge of Kakinada in so far as his claim for compound interest has been disallowed. The suit was on a mortgage for Rs. 3344 repayable in six instalments and carrying interest at the rate of twelve annas per cent per mensem with yearly rests. The first defendant who had purchased the property from its prior owner had undertaken to discharge an earlier mortgage on this very property of the year 1922. The principal sum advanced thereunder was Rs. 2000. That mortgage carried interest at nine per cent per annum compound interest. Out of the consideration for the sale, the first defendant had been directed to discharge the mortgage of 1922. It appears that he made some payments thereunder and ultimately the suit mortgage came to be executed in 1935 for the amount of Rs. 3344. Defendants 2 and 3, the sons of the first defendant, were then minors. The suit is brought in 1947 for recovery of the amounts due. Defendants 2 and 3 had now become majors. The main defence was that the rate of interest provided in the suit mortgage bond is usurious, excessive and unconscionable and the defendants should be given relief under the terms of the Usurious Loans Act. Several other defences were raised. But they were all found against the defendants and rightly. Learned counsel for the respondents admitted that the decision on those points could not be challenged. The lower Court took the view that the property at the time of the mortgage was worth about Rs. 10000 at least and in those circumstances, the provision for compound interest at nine per cent was excessive, and the transaction was substantially unfair. In this view, he disallowed the compound interest but decreed the claim for balance of principal and interest calculated at nine per cent per annum simple interest. It is against the amount so disallowed that this appeal has now been filed by the plaintiff.

(2.) The point for determination is, "Is compound interest in the circumstances excessive and was the transaction substantially unfair to invite the application of the Usurious Loans Act?"

(3.) The defendants are traders. They are described as such in the plaint. No doubt all of them claim to be agriculturists within the meaning of Madras Act IV of 1938. It is significant however in the deed of mortgage Ex. A-1, the mortgagors described themselves as merchants and residents of Kakinada village. It was fairly admitted before me that they were carrying on business and it could not be extended that their main source of income was agriculture. In these circumstances the mere fact that compound interest is provided for cannot be a basis for drawing the presumption that the transaction was substantially unfair. The Madras Amendment of the Act in relation to agriculturist borrowers cannot therefore apply. The decision relied on by the learned counsel for the respondents in 'Mukundarao v. Suryanarayana Naidu', A.S. No. 615 of 1947 is not altogether in point.