SUKHRAJ RAI Vs. PRITHVI CHAND LAL CHAUDHURI

JUDGEMENT

(1.) This is a plaintiffs appeal against a decree of the learned Subordinate Judge of Bhagalpur partly decreeing their claim. The respondent has preferred a cross objection against the same decree. The suit out of which this appeal arises was brought for the recovery of Rs. 13,306 on the basis of a roka dated 20th September 1932. According to the plaintiffs, the defendant borrowed on that day from the plaintiffs a sum of Rs. 50,000 and executed the roka in question. In the roka it is provided that the defendant was to pay interest at the rate of 18 per cent, per annum with yearly rests. The plaintiffs admitted that the defendant had from time to time made payments amounting to Rs. 50,000 and the claim was brought for the balance of principal and interest due upon this transaction. The defendant admitted borrowing Rs. 50,000 but pleaded that the interest agreed upon was not 18 per cent, per annum compoundable yearly but 6 per cent, per annum simple.

(2.) The learned Subordinate Judge came to the conclusion that the rate of interest agreed upon was 18 per cent, per annum compoundable yearly. He however was of opinion that this interest was excessive and that the transaction as between the parties was substantially unfair. He accordingly acting under the provisions of the Usurious Loans Act 1918, reduced the rate of interest upon this loan to 12 per cent, per annum simple and passed a decree upon that basis. The plaintiffs being dissatisfied with this decision as to interest have preferred this first appeal. The defendant being dissatisfied with the finding that the rate of interest was not 6 per cent, per annum simple as alleged by him has preferred a cross-objection.

(3.) In the first place, it must be observed that the loan in this case was a very substantial one, namely Rs. 50,000. Further it was a loan made upon no security whatsoever. In ordinary circumstances the risk of such a loan is great, and in my view the risk was greater than usual in this case by reason of the financial position of the defendant. The learned Subordinate Judge has referred to the defendant as a man possessing vast properties yielding an annual income of about Rs. 10,00,000. However it, is clear that the defendant's properties are very heavily mortgaged and at the time when this loan in dispute was made, a portion of the defendant's properties was about to be sold for arrears of Government revenue. It is obvious that at the time when, the money was borrowed the defendant was financially embarrassed. In evidence he has admitted that interest is mounting up rapidly on their loans, and it cannot possibly be said that the defendant is a person with ample resources out of which he can repay money borrowed. He is a man who owns large properties, but unfortunately; for him those properties yield him little or nothing at all. Lending to a man whose financial position is similar to that of the defendant is a highly risky transaction. That being so the lender is clearly entitled to a higher rate of interest to compensate him for the risk which he is running.