1 S.A. No. 442/2003 HIGH COURT OF MADHYA PRADESH: JABALPUR SINGLE BENCH: HON. SHRI JUSTICE A.K. SHRIVASTAVA SECOND APPEAL NO. 442/2003 ....APPELLANT: Vishnu Pratap Singh ....DEFENDANT S/o Ramvishwas Singh, Agriculturist, R/o Village Kachur, Tehsil Huzoor, District Rewa, M.P. -Versus- ....RESPONDENT: Pradummna Prasad Agrawal, .....PLAINTIFF S/o Ramkumar Agrawal, businessman, R/o Fort Road Rewa, Tehsil Huzoor,District Rewa, M.P. ............................................................................................... Appellant - Shri R.L. Ariha, Advocate Respondent - Shri Vijay Rai and Shri R.D. Singh, Advocate. ................................................................................................ J U D G M E N T (12/09/2011) 1. This second appeal has been filed at the instance of appellant-defendant. 2. On the basis of a promissory note, interest accrued and cost of notice a suit for the recovery of Rs.26,878.25/- has been filed by the plaintiff-respondent. 2 S.A. No. 442/2003 3. The plaint averments were refuted by defendant- appellant by filing written statement and denied the transaction. 4. The learned Trial Court framed necessary issues and after recording evidence of the parties decreed the suit up to the extent of Rs.26,878.25/- along with further interest @ 6% p.a. The first appeal which was filed by the appellant has been dismissed by the impugned judgment and decree. 5. In this manner, this second appeal has been filed by the appellant-defendant. 6. This Court on 7.5.2003 admitted the appeal on the following substantial question of law:- “Whether the Courts below erred in law in not adverting to the provisions of The Usurious Loans Act, 1918, in not holding that the agreed rate of interest is excessive and in not reopening the transaction as per mandatory provisions of the Act ?” 7. The contention of Shri R.L. Ariha, learned counsel for the appellant is that the suit was filed for realization of Rs. 26,878.25/- including interest @ 36% p.a. which is contrary to Section 3 of The Usurious Loans Act, 1918 (M.P. Amendment) (hereinafter referred to as the Act of 1918). Learned counsel submits that at the most the interest could be claimed @ 18% p.a. 3 S.A. No. 442/2003 8. On the other hand, Shri Vijay Rai and Shri R.D. Singh,learned counsel for the respondent argued in support of the impugned judgment and decree. 9. Having heard learned counsel for the parties, I am of the view that this appeal deserves to be allowed. Regarding Substantial Question of Law framed:- 10. No argument is required to decide the substantial question of law and simply the provisions of Section 3 of the Act of 1918 (State amendment) is to be seen which reads thus:- “ (1) In its application to the whole State of Madhya Pradesh, in sub-section (1) of Section 3- (a) for the word 'and' in clause (a), the word 'or' shall be substituted; and (b) for the words “the Court may exercise all or any of the following powers, namely, may” occurring after clause (b), the words “the Court shall exercise all or any of the following powers, namely, shall” shall be substituted. (2) After clause (a) of sub section (2) of section 3, the following provisos shall be inserted, namely :- “(i) Provided that compound interest in excess of ten percent, on any loan made after such date as the Local Government may, by notification, fix, shall be deemed to be excessive. (ii) Provided further that, where in any suit the Court finds the rate of interest exceeds twelve percent, per annum in the case of a secured loan or eighteen percent, per annum in the case of an unsecured loan or that there is a stipulation for rents at 4 S.A. No. 442/2003 intervals of less than six months, it shall, until the contract is proved, presume that such rate is excessive, but this provision shall be without prejudice to the powers of the Court under sub-section (1) where the Court is satisfied that the interest charged, though not exceeding twelve percent, per annum or eighteen percent, per annum, as the case may be, is excessive. 11. On bare perusal of the proviso (ii) of sub-section 2 of Section 3 of the said Act of 1918 (State amendment) this Court finds that at the most interest @18% p.a. could be realized by the plaintiff-respondent. Hence, I am of the view that learned two Courts below erred in substantial error of law by decreeing an amount of Rs. 26,878.25/- including the interest @ 3% per month i.e. 36% per annum Indeed, the plaintiff is entitled to interest @ 18% per annum. The decree passed by the learned two Courts below is accordingly modified. 12. The substantial question of law is thus answered in favour of appellant and against the respondent that the learned two Courts Courts below erred in substantial error of law in not adverting to the provisions of The Usurious Loans Act, 1918, in not holding that the agreed rate of interest is excessive and in not reopening the transaction as per mandatory provisions of the Act. 5 S.A. No. 442/2003 13. This appeal is accordingly allowed and the decree passed by the learned two Courts below is accordingly modified and it is hereby held that plaintiff-respondent is entitled to interest @ 18% per annum prior to the date of filing of the suit. No costs. (A.K. SHRIVASTAVA) Judge rao 6 S.A. No. 442/2003