BANK OF MADURA LIMITED Vs. L SETHU CHETTIAR

JUDGEMENT

(1.) The plaintiff in O.S.No.111 of 1977 on the file of the Subordinate Judge of Tiruchirapalli, is the appellant: in this appeal. The respondent is the defendant in the suit. The plaintiff laid the suit for recovery of the amounts due under two promissory notes, one dated 28.12.1972, marked in the case as Ex.A1 for Rs.15,000 and the other dated 1.9.1975, marked in the case as Ex.A2 for Rs.10,000.00. There is no necessity to advert to the details of the averments in the plaint, because the controversy that was raised before the Court below was only with regard to the method of charging interest. I must straightway point out that so far as Ex.A1 promissory note is concerned, the rate of interest claimed was 12-1/2 per cent with quarterly rests and that has been countenanced by the court below as fair and reasonable. The Court below has countenanced the grievance of the defendant only with regard to the charging of interest at 19 per cent per annum with quarterly rests under Ex. A2. While the rate of interest has been countenanced, the capitalisation of arrears of interest at every quarter has been disallowed by the Court below. This has given room for the plaintiff to come to this Court by way of this appeal, impeaching the judgment and decree of the Court below, so far as it disallowed capitalisation of arrears of interest at every quarter.

(2.) Miss Pushpa Jain, learned counsel appearing for the plaintiff, appellant herein, would submit that merely because the arrears of interest got capitalised at every quarter, it cannot be stated that such charging of interest was usurious and the burden lay on the defendant to plead and prove as to how this method adopted for charging interest was usurious and unfair and, in the instant case, the defendant has failed to discharge his burden of proof in this regard. On going through the materials placed in the case, I am inclined to agree with the submission made by the learned counsel for the plaintiff. There is no general rule that any interest above a specified rate is excessive, usurious or unfair. So also, it cannot be stated as a general rule that compound interest is per se usurious. We are not concerned with the case of an agriculturist to draw the presumption that the interest is excessive as contemplated under Sec.3(2) proviso of the Usurious Loans Act, 1 of 1918, hereinafter referred to as the Act. It is not possible to lay down a particular rate of interest as the maximum interest, exceeding which it could be stated that the rate of interest is usurious. It is true that in deciding whether the interest charged is excessive, several factors have to be taken into consideration and those factors are set out in Sec.3(2)(a) to (c) of the Act. In the present case, the rate of interest at 19 per cent per annum with regard to Ex.A2 promissory note has been countenanced by the Court below, but only the capitalisation of arrears of interest at every quarter has been disallowed. Then the question is as to whether such capitalisation of arrears of interest at every quarter could be found fault with on the ground that it would amount to charging of interest usuriously. Interest getting capitalised is not, on principle, open to any objection. But, on the facts and circumstances of the case, the defendant may demonstrate that such charging of interest is usurious and unfair. The defendant, in the present case has not even chosen to go into the box. This is not a- case where security has been taken. It is not shown that the method of charging interest was unusual and. was not prevalent with the other banks. These were all features which the defendant, if he wants to avoid the method of charging interest, must plead and prove, There is total dearth of evidence on the side of the defendant as to how the method of charging interest with quarterly rests was substantially unfair and usurious. In the said circumstances of the case, I do not find any justification for the Court below disallowing the charging of interest with quarterly rests.

(3.) The above discussion obliges me to interfere in appeal and accordingly, this appeal is allowed and the plaintiff would be entitled to interest as claimed by it in the plaint for the promissory note, Ex.A2, and the decree of Court below will stand modified incorporating the above relief also. In the circumstances of the case, 1 make no order as to costs in this appeal.