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(2006) 3 MLJ 713 (Mad)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Present : Ms. Chitra Venkataraman, J.
Case Number(s) : Company Application Nos. 749 to 752 of 2003 in Company Petition No. 48 of 2000.
Judgement Date :
Tuesday 13th of June 2006
| K. Madhu and Another | .....Appellant(s) | | Versus | | | Dugar Finance India Ltd. and Others | .....Respondent(s) |
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(A) Usurious Loans Act, 1918 Section 3 as amended by Madras Act (8 of 1937) Indian Contract Act, 1872 Section 23 Agreement Ashok Leyland vehicle purchased by Kunhammad, original purchaser Taking loan from second respondent financier company, for balance consideration Rs. 4,00,000 Rs. 56,474 paid by original purchaser Second respondent company in liquidation claiming to be owner of vehicle Demanding different amounts each time from applicant, subsequent purchaser Contending agreement is a hire purchase agreement giving licence to seize the vehicle Suit by applicant Said agreement hire purchase agreement or loan agreement, question of Insurance in the name of original purchaser, Kunhammad Delivery taken by said Kunhammad As per documents, repayment worked out not with reference to value of vehicle But with reference to loan amount required by said Kunhammad Respondent company not owner of vehicle but a mere creditor Interest charged on only Rs. 4,00,000, the loan amount, not on value of vehicle, Rs. 4,56,474 Said transaction, in substance, a simple loan transaction Right of respondent company extinguished by payment of loan amount due under agreement Excess amount paid by applicant to be refunded by respondent company with interest at 6% per annum.
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(B) Usurious Loans Act, 1918 Section 3 as amended by Madras Act (8 of 193 7) Indian Contract Act, 1872 Section 23 Public Policy Interest at 36% p.a. charged as additional finance charges Penal interest at 36% p.a. excessive, illegal, offensive of provisions of Usurious Loans Act, hence set aside.
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Ratio(s) Decidendi
If the interest is excessive, Court will presume the transaction to be unfair and the agreement, against public policy.
When a person who desires to purchase goods does not have sufficient money and borrows the required amount from a third person and pays it to the vendor, the transaction between the customer and lender will unquestionably be a loan transaction. Court has power to go behind the document to determine the true nature of the document whatever be the form of the document.
Cases Referred
Ashok Kumar Singh v. State of West Bengal AIR 2004 Cal. 46
Ganga Hire Purchase Pvt. Ltd. v. State of Punjab AIR 2000 SC 449
Indian Bank, Tiruvannamalai v. A. B. Gurukal : 1982 [2] M.L.J. 238
S. Rajagopalaswami Naidu v. Bank of Karaikudi Ltd. AIR 1971 SC 884
S. Varadachariar v. Gopala Menon AIR 1967 SC 412
State Bank of Travancore v. George 1975 KLT 416
Sundaram Finance Ltd. v. State of Kerala AIR 1966 SC 1178
Tarun Bhargava v. State of Haryana AIR 2003 P & H 98
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