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The Usurious Loans Act, 1918
THE USURIOUS LOANS ACT, 1918.
ACT NO. 10 OF 1918 1*
[22nd March, 1918.]
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.Short title and extent.
This Act may be called the Usurious Loans Act, 1918.
(2)It extends to the whole of India except 2[the territories which, immediately before the lst November, 1956, were comprised in Part B States) 3* * *.
(3)The State Government may, by notification in the Official Gazette, direct that it shall not apply to any area, class of persons, or class of transactions which it may specify in its notification.
2.Definitions.
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
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1 It has been amended in the U. P. by U. P. Acts 23 of 1934 and 29 1930, fin the C. P. by C.P. Act 11 of 1934,in Madras by Mad. Act, 8.of 1937 in East Punjab by E.P. Act 4 of 1948, extended to the Union territory of Pondicherry by Act 26 of 1968 s.3 and Sch.
Amended in Himachal pradesh by H.P. Act 3 of 1970.
Amended in Andhara pradesh by A.P. Act 24 of 1961.Repeeled in its application to Bellary District by mysore Act 14 of 1955.
Extended to the whole of Madhya pradesh by M.D. Act 23 of 1958.(when notifild).
Amended in uttar pradesh by U.P. Act 29 of 1976.2 Subs. by the Adaptation of Laws (No. 3) Order. 1956. for "Part B States".
3 The Words "including British Baluchistan" omitted by the A.O. 1948.
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8.respect of any loan made either before or after the commencement of this Act; 1[or
(c)for the redemption of any security given after the commencement of this Act in respect of any loan made either before or after the commencement of this Act.]
3.Re-opening of transaction.
Notwithstanding anything in the Usury Laws Repeal Act, 1855 (28 of 1855), where, in any suit to which this Act applies, whether heard ex parte or otherwise, 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 may,-
(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, re-open 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 ;
(iii)set aside either wholly or in part or revise or alter any 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 persons from whom they claim at a date more than 2[twelve] years from the date of the transaction;
(ii) do anything which affects any decree of a Court.
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1 Ins. by Act 28 of 1926, s. 2.2 Subs. by a. 3, ibid., for "six".
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8A 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
9.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 condition 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 the 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 1[or for the redemption of any such security].
(4) Nothing in this section shall affect the rights 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, the word " notice " shall have the same meaning as is ascribed to it in section 4 of the Transfer of Property Act, 1882 (4 of 1882).
(5) Nothing in this section shall be construed as derogating from the existing powers or jurisdiction of any Court.
4.Insolvency proceedings.
On any application relating to the admission or amount of a proof of a loan in any insolvency proceedings, the Court may exercise the like powers as may be exercised under section 3 by a Court in a suit to which this Act applies.
---------------------------------------------------------------------1 Ins. by Act 28 of 1926, s. 3.---------------------------------------------------------------------
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THE INDIAN COMPANIES (FOREIGN INTERESTS) ACT, 1918.
ACT NO. 20 OF 1918.
[26th September, 1918.]
An Act to take power to prohibit the alteration, except with the sanction of 1[the Central Government], of articles of association which restrict foreign interests in certain Companies, and to provide for other purposes connected therewith.
WHEREAS it is expedient to take power to prohibit the alteration, except with the sanction of 1[the Central Government], of articles of association which restrict foreign interests in certain companies, and to provide for other purposes connected therewith ; It is hereby enacted as follows:-
1.Short title.
This Act may be called the Indian Companies (Foreign Interests) Act, 1918.
2.Definitions.
(1) In this Act-
2[(a) the expression "Commonwealth citizen" has the same meaning as in section 1 of the British Nationality Act, 1948, but shall include any association incorporated in any part of the Commonwealth, including India];
(b) the expression "restrictive provision" means any provision in the articles of association of a company which, in the opinion of the Central Government, is designed to restrict or limit or has the effect of restricting or limiting the share or shares or interest which may be held, or the rights, powers or authority which may be conferred upon or exercised by or on behalf of persons other than 3[Commonwealth citizens] in the company, or in respect of the control, management or direction of the affairs thereof.
(2) All words and expressions used in this Act and defined in the 4 Indian Companies Act, 1913,( 7 of 1913) shall be deemed to have the meanings respectively attributed to them by that Act.
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1 Subs. by the A. O. 1950 for "the G. G. in C.".
2 Subs., ibid., for cl. (a).
3 Subs., ibid., for "British subjects".
4 Now see the Companies Act, 1956 (1 of 1956).
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2.3.Application of Act.
This Act shall apply to such companies as the Central Government may, by notification in the Official Gazette, declare to be companies with restrictive provisions, and any such notification shall specify the restrictive provisions.
4.Alterations in restrictive provisions and winding up.
So long as a notification issued under section 3 is in force in respect of any company, notwithstanding anything to the contrary in any other Act-
(1) no alteration of the articles of association of the company affecting either directly or indirectly any restrictive provision shall be of any effect until it has received the consent in writing of the Central Government;
(2) a resolution for the voluntary winding up of the company shall be of no effect unless the Central Government authorizes or ratifies it by a written consent ;
(3) any Court which has jurisdiction to wind up the company may in its discretion refuse to make a winding up order. In the exercise of its discretion, the Court shall be guided by the consideration whether the winding up is bona fide with a view to the discontinuance of the undertaking, or is with a view to continuing the undertaking freed either wholly or in part from any restrictive provision ;
(4) the Central Government in giving consent, or the Court in making a winding up order, as the case may be, may impose such terms or conditions for giving effect to the purposes of this Act as 1[it] thinks fit.
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1 Subs. by the A. O. 1937 for "he or it".
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