USURIOUS LOANS ACT, 1977 THE USURIOUS LOANS ACT, 1977 (Act No. XLVII of 1977) [16th Chet, 1977] An Act to give additional powers to Courts to deal in certain
cases with usurious loans of money or in kind. Whereas it is expedient to
give additional powers to Courts to deal in certain cases with usurious loans
of money or in kind; It is hereby enacted as follows:- (1)
This Act may be called the Usurious Loans Act, 1977. (2)
It extends to the whole of the Jammu and Kashmir State. It shall
come into force on the 1st of Baishakh, 1978. (3)
[1] [The
Government] may, by notification in the Jammu and Kashmir Government Gazette,
direct that it shall not apply to any specified area, class of persons, or
class of transactions. In this Act, unless there
is anything repugnant in the subject or context,? (1)
"interest" means rate of interest and includes the
return to be made over and above what was actually lent, whether the same is
charged or sought to be recovered specifically by way of interest or otherwise; (2)
"loan" means a loan whether of money or in kind and
includes any transaction which is, in the opinion of the Court, in substance a
loan; (3)
"suit to which this Act applies" means any suit- (a)
for the recovery of a loan made after the commencement of this
Act; or (b)
for the enforcement of any security taken or any agreement,
whether by way of settlement of account or otherwise, made, after the commencement
of this Act in respect of any loan made either before or after commencement of
this Act. In any suit in which
interest is recoverable, the amount shall be adjudged or decreed by the Court
at the rate (if any) agreed upon by the parties; and if no rate shall have been
agreed upon or where the Court considers the stipulated rate as excessive or
unfair, at such rate as the Court shall deem reasonable. Whenever a Court shall
direct that a judgment or decree shall bear interest, or shall award interest
upon a judgment or decree, it may order the interest to be calculated at the
rate allowed in the judgment or decree upon the principal sum adjudged, or at
such other rate as the Court shall think fit. A mortgage or other
contract for the loan of money, by which it is agreed that the use or usufruct
of any property shall be allowed in lieu of interest, shall be binding upon the
parties. In any case in which an
adjustment of accounts may become necessary between the lender and the borrower
of money upon any mortgage, conditional sale of landed property, or other
contract whatsoever, which may have been entered into before, or which may be
entered into after the passing of this Act, interest shall be calculated at the
rate stipulated therein, or if no rate of interest shall have been stipulated
and interest be payable under the terms of the contract, at such rate as the
Court shall deem reasonable. (1)
In any suit to which this Act applies whether heard ex parte or
otherwise if the Court has reason to believe- (a)
that the interest is excessive; and (b)
that the transaction was, as between the parties thereto,
substantially unfair, the Court may exercise all or any of the following
powers, namely,? (i)
re-open the transaction, take an account between the parties, and
relieve the debtor of all liability in respect of any excessive interest; (ii)
notwithstanding any agreement, purporting to close previous
dealings and to create a new obligation, reopen any account already taken
between them and relieve the debtor of all liability in respect of any
excessive interest, and if anything has been paid or allowed in account in
respect of such liability, order the creditor to repay any sum which it
considers to be repayable in respect thereof; and (iii)
set aside either wholly or in part or revise or alter security
given or agreement made in respect of any loan, and if the creditor has parted
with the security, order him to indemnify the debtor in such manner and to such
extent as it may deem just: Provided that, in the
exercise of these powers, the Court shall not-(i) re-open any agreement
purporting to close previous dealings and to create a new obligation which has
been entered into by the parties or any person from whom they claim at a date
more than six years from the date of the transaction; (ii) do any thing which
affects any decree of a court. Explanation. ? In the case
of a suit brought on a series of transactions the expression 'the transaction'
means, for the purposes of proviso (i), the first of such transactions. (2) (a) In
this section "excessive" means in excess of that which the Court
deems to be reasonable having regard to the risk incurred as it appeared, or
must be taken to have appeared, to the creditor at the date of the loan; (b) in considering whether
interest is excessive under this section, the Court shall take into account any
amounts charged or paid, whether in money or in kind, for expenses, inquiries,
fines, bonuses, premia, renewals or any other charges, and if compound interest
is charged, the periods at which it is calculated, and the total advantage
which may reasonably be taken to have been expected from the transaction; (c) in considering the
question of risk, the Court shall take into account the presence or absence of
security and the value thereof, the financial conditions of the debtor, and the
result of any previous transactions of the debtor, by way of loan, so far as
the same were known or must be taken to have been known to the creditor; (d) in considering whether
a transaction was substantially unfair, the Court shall take into account all
circumstances materially affecting the relations of the parties at the time of
the loan or tending to show that the transaction was unfair, including the
necessities or supposed necessities of the debtor at the time of the loan so
far as the same were known, or must be taken to have been known to the
creditor. Explanation. ? Interest may
of itself be sufficient evidence that a transaction was substantially unfair. (3)
This section shall apply to any suit, whatever its-form may be, if
such suit is substantially one for the recovery of a loan or for the
enforcement of any agreement or security in respect of a loan. (4)
Nothing in this section shall affect the right of any transferee
for value who satisfies the Court that the transfer to him was bona fide, and
that he had at the time of such transfer no notice of any fact which would have
entitled the debtor as against the lender to relief under this section. For the purposes of this
sub-section a person shall be said to have "notice " of a fact when
he actually knows that fact, or when, but for willful abstention from an
inquiry or search which he ought to have made or gross negligence he would have
known it, or when information of the fact is given to, or obtained by his agent
under the circumstances mentioned in the Contract Act, section 229. (5) Nothing
in this section shall be construed as derogating from the existing powers or
jurisdiction of any Court. [1] In
section 1 (3) the words "the Government" substituted for the words
"His Highness" by Act X of 1996.
Preamble - THE USURIOUS LOANS ACT, 1977PREAMBLE