INTEREST SHOULD BE REASONABLE

The Supreme Court has ruled in the case of Dhana Lakshmi Bank Limited that the rate of interest imposed by the debt tribunal should be reasonable, taking into account the inflation and bank rate of interest cuts. In this case, the debtor defaulted on the loan. The bank moved to the tribunal. It allowed the sale of the mortgaged properties by the bank which could charge interest at the rate 25 per cent. The appellate tribunal and the Madras High court dismissed the debtor’s appeals. However, the SC allowed his appealing citing Section 34 of the Code of Civil Procedure which says that rate of interest should be reasonable. The court reduced the rate to 9 per cent.