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Babu Kunj Behari Lal vs Mt. Ketki Kunwar

High Court Of Judicature at Allahabad|21 December, 1936


1. This is a civil revision under the Agriculturists' Relief Act. The only question is whether the decree-holder opposite party by bringing a suit asking for a simple money decree can obviate any disadvantage which arises from the Agriculturists' Relief Act, Schedule 3, by which the 'rate of interest is to be for a lower rate on a secured loan than on an unsecured loan. The mortgage deed in suit is dated 26th April 1928 and it provided for 1 per cent, compound interest p.m. The plaintiff brought her suit and obtained a simple money decree on 15th February 1934. The Agriculturists' Relief Act came into force on 3rd April 1935. The debtor applied to the Court under Section 30 and asked for a reduction in the rate of interest from 1st January 1930. The Court below has held that the loan should not be treated as a secured loan but as an unsecured loan. This is the sole question before us, whether the loan can be treated as an unsecured loan. Learned Counsel for the decree-holder argued that it was open to the decree-holder to give up her security and when she gave up her security and sued for a simple money debt, then from that date the loan became an unsecured loan and would therefore be subject to the higher rate of interest in Schedule 3. Secured loan is defined in the Act under Section 2(10)(b) as meaning a loan for which property other than agricultural produce is specifically hypothecated as security, and unsecured loan as a loan which is not secured.
2. It appears to us that the correct date to take for the division of loans into two classes is the date on which the loan is taken, that is on 26th April 1928. On that date in the present case there was the execution of this hypothecation deed and accordingly this loan must be classed as a secured loan. The interest on a secured loan is naturally at a lesser rate than the interest on an unsecured loan because the lender is receiving some security for his money. If we were to hold otherwise it would defeat the provisions of the Act because in most eases the creditor could bring a suit for a simple money decree and having obtained that decree would proceed by attachment of the property which had been hypothecated and proceed to sell it on his simple money decree, and by this device he would obtain a higher rate of interest than the rate which is specified in Schedule 3. For these reasons we allow this application in revision and we hold that the proper rate to apply is the rate for a secured loan in Schedule 3. The order of the lower Court will be amended accordingly by the lower Court. The applicant in revision is allowed costs in this Court.
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Babu Kunj Behari Lal vs Mt. Ketki Kunwar


High Court Of Judicature at Allahabad

21 December, 1936