Mentoassociates.com – Legal Articles

This is an interesting piece of legislation about which the general public does not have much awareness. The Act has a noble intention of prohibiting the charging of exorbitant interest by financiers and money lenders. An exorbitant interest is an interest at a rate more than what is fixed under section 28 of the Karnataka money lenders Act 1961. This amount to 15 % in case of secured loans and 18% in case of unsecured loans. Hence anybody charging interest more than the above rate is said to charging exorbitant interest.

As per the Act whoever charges exorbitant interest on any loan advanced by him shall be punishable with imprisonment for a term of which may extend to 3 years and also with a fine which may extend to Rupees 30,000/- .
A debtor may deposit the money due in respect of a loan received by him  from any person together with interest thereon into the court along with the petition to record that amount deposited is in full or part satisfaction of the loan including the interest thereon. The Court may after inquiry, pass order recording the satisfaction of the loan and interest therefore in full or in part as the case may be. The Court may, on a petition filed by the debtor for settlement of loan including the interest therefor, pass an order for the adjustment of the interest, if any, paid by the debtor, over and above the rate of interest fixed by the State Government towards the loan.

Where a debtor or any member of his family commits suicide and if it is shown that immediately prior to such suicide the debtor or any member of his family was subjected to molestation by any person, the person who has advanced loan shall, unless the contrary is proved, be deemed to have abetted the commission of such suicide