V MOHANGOVINDA DOSS Vs. A M DHANAPAL CHETTIAR

JUDGEMENT

(1.) The third defendant is the appellant and the defendants 1 2, 4 and 5 are the respondents. The first defendant executed a mortgage in favour of the plaintiff for Rs. 17,000.00 on 5th July, 1965. The first defendant was adjudged insolvent in I.P.No. 3 of 1971 on the file of the District Judge, Dharmapuri at Krishnagiri and the property came to be vested with the second defendant, He sold property subject to all encumbrances in public auction on 19th July, 1973, and the third defendant purchased the same for Rs. 26,050.00 and the sale was confirmed in his favour on 5tb November, 1973. The defendants 4 and 5 are said to be subsequent mortgagees. The plaintiff has filed the suit for recovery of the amount due on the mortgage executed by the first defendant.

(2.) The contention of the third defendant, who has filed the present appeal is that the interest claimed at 18% per annum is excessive and usurious and he is entitled to the benefits under the Usurious Loans Act, 1918 as amended by the Tamil Nadu Act VIII of 1937. The trial Court held that even after giving allowances for the taxes to be paid to the Municipality, the third defendant will be getting not less than Rs 1,000 as rent from the shops whereas the plaintiff claims only Rs. 250.00 per month being the interest on the loan at 18 per cent per annum and the third defendant and his father are money lenders charging interest at 36 per cent and plaintiff has placed special circumstances under which he can claim interest at 18% as per the default clause and the claim of simple interest at 18% on the mortgage of the year *20th April, 1983. 1965 cannot be said to be either excessive or usurious. On these findings, the trial Court granted a preliminary decree in favour of the plaintiff for a sum of Rs. 46,841-75 with proportionate costs. Against this decree and judgment of the trial Court, the third defendant has filed the present appeal.

(3.) Relying on the decisions of the Supreme Court reported in Varadachariar v.Gopala Menon1 and S. Rajagopalaswami Naidu v. Bank of Karaikudi Limited2, learned counsel for the third defendant-appellant contended that the circumstance to be taken into account for considering whether the interest claimed is excessive under the Usurious Loans Act are: (a) the value of the security offered (b) the financial condition of the debtor including the result of any prior transaction (c) the known or probable risks in getting repayment, and all these factors had to be considered with reference to the date of loan and the circumstances relied on by the trial Court such as his father charging interest at 36 per cent and the realisation of rent from the property is much more than 18 per cent interest claimed in the plaint are totally irrelevant and extraneous factors and applying the decisions laid down by the Supreme Court in the two decisions referred to supra, the third defendant is entitled to the relief under the Usurious Loans Act, 1918.