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Report No. 199

Usurious Loans Act, 1918: Reopening of transactions:

The Usurious Loans Act, 1918 is an Act to give additional powers to courts to deal in certain cases with usurious loans of money or in kind. Section 3 of the Act provides for reopening of transactions if the court has reasons to believe -

(a) that the interest is excessive; and

(c) 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, 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 on 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 [twelve] years from the date of the transaction;

(ii) do anything which affects any decree of a Court.



Unfair (Procedural and Substantive) Terms in Contract Back




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