Rate of interest on loans
Tashi Norbu Basi
(Querist) 01 December 2012
This query is : Resolved
In my town there are individuals who give loans but the rate of interest can be as high as 7% (seven percent)per MONTH.
Is there any law which prohibits charging exorbitant rates of interest on loans?
V R SHROFF
(Expert) 01 December 2012
YES, HE CANNOT CHARGE EXORBITANT HIGH INTEREST. HIS MONEY LENDING licence CAN BE SUSPENDED.
Raj Kumar Makkad
(Expert) 03 December 2012
Generally such persons do not hold Money lenders License thus they cannot do such business as this is illegal and if those file any case, they cannot recover anything. If they hold this license then the rate of interest cannot be more than the prevailing market rate.
ajay sethi
(Expert) 03 December 2012
does meoney lender have money lender license .? the rate of interest charged is exhorbitant . he cannot legally recover such interest .
J K Agrawal
(Expert) 03 December 2012
The Interest Act 1978 regulates the rate of interest.
Tashi Norbu Basi
(Querist) 05 December 2012
Dear experts,
Thank you all.
The lenders are individuals without any license.
To expert J K Agrawal, a special thank you. Full marks to your reply. Your answer is what I would expect from a lawyer (sorry, no offense to the others).
Raj Kumar Makkad
(Expert) 05 December 2012
We all experts jointly try to provide the best reply to the querist without caring for the marks so thanks to you and Sh. J. K. Aggarwal also as you have liked his reply.
V R SHROFF
(Expert) 07 December 2012
The Interest Act, 1978
THE INTEREST ACT, 1978
ACT NO. 14 OF 1978 [ 31st March, 1978.]
An Act to consolidate and amend the law relating to the allowance of interest in certain cases.
BE it enacted by Parliament in the Twenty- ninth Year of the Republic of India as follows:-
1
Short title, extent and commencement.
1. Short title, extent and commencement.
(1) This Act may be called the Interest Act, 1978 .
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such date 1 as the Central Government may, by notification in the Official Gazette, appoint.
Definition.
2. Definition. In this Act, unless the context otherwise requires,-
(a) " court" includes a tribunal and an arbitrator;
(b) " current rate of interest" means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949 . (10 of 1949 ) Explanation.- In this clause," scheduled bank" means a bank, not being a co- operative bank, transacting any business authorised by the Banking Regulation Act, 1949 ; (10 of 1949 )
(c) " debt" means any liability for an ascertained sum of money and includes a debt payable in kind, but does not include a judgment debt;
(d) " personal injuries" includes any disease and any impairment of a person' s physical or mental condition;
(e) all other words and expressions used herein but not defined and defined in the Reserve Bank of India Act, 1934 , (2 of 1934 ) shall have the meanings respectively assigned to them in that Act.
1. 19th August, 1981, see Notification No. S. O. 657 (E) dated 19th August, 1981, Gazette of India. Extraordinary, 1981, Pt. II, Sec. 3 (ii), p. 11 16.
Power of court to allow interest.
3. Power of court to allow interest.
(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,-
(a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings;
(b) if the proceedings do not relate to any such debt, them from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings: Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment.
(2) Where, in any such proceedings as are mentioned in sub- section (1),-
(a) judgment, order or award is given for a sum which, apart from interest on damages, exceeds four thousand rupees, and
(b) the sum represents or includes damages in respect of personal injuries to the plaintiff or any other person or in respect of a person' s death, then, the power conferred by that sub- section shall be exercised so as to include in that sum interest on those damages or on such part of them as the court considers appropriate for the whole or part of the period, from the date mentioned in the notice to the date of institution of the proceedings, unless the Court is satisfied that there are special reasons why no interest should be given in respect of those damages.
(3) Nothing in this section,-
(a) shall apply in relation to-
(i) any debt or damages upon which interest is payable as of right, by virtue of any agreement; or
(ii) any debt or damages upon which payment of interest is' barred, by virtue of an express agreement;
(b) shall affect-
(i) the compensation recoverable for the dishonour of a bill of exchange, promissory note or cheque, as defined in the Negotiable Instruments Act, 1881 (26 of 1881 ); or
(ii) the provisions of rule 2 of Order II of the First Schedule to the Code of Civil Procedure, 1908 ; (5 of 1908 )
(c) shall empower the court to award interest upon interest.
Interest payable under certain enactments.
4. Interest payable under certain enactments.
(1) Notwithstanding anything contained in section 3, interest shall be payable in all cases in which it is payable by virtue of any enactment or other rule of law or usage having the force of law.
(2) Notwithstanding as aforesaid, and without prejudice to the generality of the provisions of sub- section (1), the court shall, in each of the following cases, allow interest from the date specified below to the date of institution of the proceedings at such rate as the court may consider reasonable, unless the court is satisfied that there are special reasons why interest should not be allowed, namely:-
(a) where money or other property has been deposited as security for the performance of an obligation imposed by law or contract, from the date of the deposit;
(b) where the obligation to pay money or restore any property arises by virtue of a fiduciary relationship, from the date of the cause of action;
(c) where money or other property is obtained or retained by fraud, from the date of the cause of action;
(d) where the claim is for dower or maintenance, from the date of the cause of action.
Section 34 of the Code of Civil Procedure, 1908 to apply.
5. Section 34 of the Code of Civil Procedure, 1908 to apply. Nothing in this Act shall affect the provisions of section 34 of the Code of Civil Procedure, 1908 . (5 of 1908 )
Repeal and Saving.
6. Repeal and Saving.
(1) As from the commencement of this Act, the Interest Act, 1839 (32 of 1839 ) and any other law corresponding thereto in force in any State immediately before such commencement shall stand repealed.
(2) The provisions of this Act shall not apply to any suit or other legal proceeding pending at the commencement of this Act and the provisions of the corresponding law applicable immediately before such commencement shall, notwithstanding the repeal of such law by sub- section (1), continue to apply to such suit or other legal proceeding.
(3) The mention of particular matters in sub- section (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 , (10 of 1897 ) with regard to the effect of repea.
Basi,
does it serve ur purpose??
according to me the Ans is "NO."
as % not specified..
ML not clear.
. [THE BOMBAY MONEY-LENDERS Act, 1946]*
Raj Kumar Makkad
(Expert) 07 December 2012
What more remains to be cleared to resolve this query?
prabhakar singh
(Expert) 07 December 2012
These loan are known as HARD MONEY LOANS and are sought for usually those who do not qualify for institutional banking loans. These lenders are very often found exploiters of their debtors which became a rouge in society,hence STATES in country decided to regulate this business and have passed money lending regulation Acts where under this business is regulated,,the lender seeks a license from DM generally and rate of interest to be charged is found mentioned in the Act.
Yet these legislation have not been able to address the problem adequately and there are lenders who carry on this business without license and charge exorbitant interest which is illegal and such contract can not be enforced through court of law.
Tashi Norbu Basi
(Querist) 08 December 2012
Dear experts,
Thank you all for your replies. If my aforesaid thanks offended any one of you, please accept my most sincere apologies. That was never my intention. I am a regular visitor to this websites and have received help from all of you'll. Help which were priceless and which cannot be quantified. And for which I owe an unredeemable debt of gratitude to all of you.
Thank you very much.
