PUNJAB USURIOUS LOANS ORDINANCE, 1959

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THE PUNJAB USURIOUS LOANS ORDINANCE, 1959 
(XVIII of 1959) 
CONTENTS 
1. Short title and extent. 
2. Definitions. 
3. Application of the Ordinance. 
4. Re-opening of transactions. 
5. Insolvency proceedings. 
6. Repeal. 
 
SCHEDULE 
TEXT 
1
THE 
2
[PUNJAB] USURIOUS LOANS ORDINANCE, 1959 
(XVIII of 1959) 
[1 April 1959] 
An 
Ordinance 
to consolidate the law relating to usurious loans in the Province of 
3
[the Punjab]. 
Preamble.– WHEREAS it is expedient to consolidate the law relating to usurious 
loans in the Province of 
4
[the Punjab]. 
 NOW, THEREFORE, in pursuance of the Presidential Proclamation of the 7 th 
day of October, 1958, and in exercise of all powers enabling him in that behalf, the 
Governor of West Pakistan is pleased to make and promulgate the following 
Ordinance:– 
1. Short title and extent .– (1) This Or dinance may be called  the 
5
[Punjab] 
Usurious Loans Ordinance, 1959. 
 
6
[(2) It extends to the whole of the Province of 
7
[the Punjab] , except the 
Tribal Areas.] 
2. Definitions.– In this Ordinance, unless the context otherwise requires, the 
following expressi ons shall have the meanings hereby respectively assigned to 
them, that is to say– 
(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. Application of the Ordinance .– This Ordinance shall apply to all suits 
pending on or instituted after its commencement, namely:– 
                                                           
1This Ordinance was promu lgated by the Governor of West Pakistan on March 31, 1959 , published in the Gazette of West 
Pakistan (Extraordinary), dated April 1, 1959, pp. 255-259; saved and given permanent effect by Article 225 of the Constitution 
of the Islamic Republic of Pakistan (1962). 
2Substituted for the words “West Pakistan” by the Punjab Laws (Adaptation) Order, 1974 (1 of 1974)  (w.e.f. 14.8.1973), 
published in the Punjab Gazette (Extraordinary), dated November 20, 1974, pp. 1425 -A-1425-PP, Article 2(1) read with 
Schedule, Part III, Serial No. 23. 
3Ibid. 
4Ibid. 
5Ibid. 
6Substituted by the West Pakistan Laws (Extension to Karachi) Ordinance, 1964 (VII of 1964), published in the Gazette of West 
Pakistan (Extraordinary), dated May 25, 1964, pp. 1679-1688, s. 2 read with Schedule, Serial No. 22. 
7Substituted for the words “West Pakistan” by the Punjab Laws (Adaptation) Order, 1974 (1 of 1974)  (w.e.f. 14.8.1973), 
published in the Punjab Gazette (Extraordinary), dated November 20, 1974, pp. 1425 -A-1425-PP, Article 2(1) read with 
Schedule, Part III, Serial No. 23. 
(a) for the recovery of a loan made after the twenty -second day of March, 
Nineteen Hundred and Eighteen; 
(b) for the enforcement of any security taken or any agreement whether by 
way of settlement of ac count or otherwise, made after the twenty -
second day of March, Nineteen Hundred and Eighteen, in respect of 
any loan made either before or after the said date; and 
(c) for the redemption of any security given after the twenty -second day of 
March, Nineteen Hundred and Eighteen, in respect of any loan made 
whether before or after the said date. 
4. Re-opening of transactions .– (1) Notwithstanding anything in the Usury 
Laws Repeal Act, 1855
1
, where, in any suit to which this Ordinance applies, whether 
heard ex parte or otherwise, the Court has reason to believe– 
(a) that the interest is excessive; or 
(b) that the transaction was, as between the parties thereto, substantially 
unfair, 
 the Court shall exercise all or any of the following powers:– 
(i) re-open the t ransaction, 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 the account in respect of such liability, order 
the creditor to repay any sum which it considers to be repayab le 
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 who m 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. 
Explanation.– In the case of a suit brought on a series of transactions the 
expression “the transaction” means, for the pu rposes of proviso ( i), the first of such 
transactions. 
                                                           
1XXVIII of 1855. 
(2)(a) In this section “excessive” means in excess of that which the Court 
deems to be reasonable having regard to the risk incurred 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 amount 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 transactions. 
(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. 
(e) The Court shall deem interest to be excessive if it exceeds seven and a 
half per centum per annum simple interest or is more than two per centum 
over the bank rate, whichever is higher at the time of taking the loan, in the 
case of secured loans, or twelve and a half per centum per annum simple 
interest in the case of unsecured loans; 
 Provided that the provisions of this clause shall not apply if the loan 
has been advanced by any bank which is a ‘scheduled bank’ as defined in the 
State Bank of Pakistan Act, 1956
1
, or any banking company registered under 
the Companies Act, 1913
2
, 
3
[* * *] or any Co-operative Society duly registered 
under any law for the time being in force  
4
[, or any credit institution to be 
notified by Government in this behalf.] 
 (3) Whatever be the form of the suit this section shall apply 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 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 
                                                           
1XXXIII of 1956. 
2VII of 1913. 
3Omitted the words,  figures and commas “ prior to the first day of April, 1937, ” by the West Pakistan Usurious Loans 
(Amendment) Ordinance, 1960 (XX of 1960), published in the Gaz ette of West Pakistan (Extraordinary), dated June 14, 1960, 
pp. 2403-2404, s. 2(i). 
4Substituted for full stop and added by the West Pakistan Usurious Loans (Amendment) Ordinance, 1960 (XX of 1960), 
published in the Gazette of West Pakistan (Extraordinary), dated June 14, 1960, pp. 2403-2404, s. 2(ii). 
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
1
. 
 (5) Nothing in this section shall be construed as derogat ing from the 
existing power or jurisdiction of any Court. 
5. 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 unde r section 3 by a Court in a suit to which 
this Ordinance applies. 
6. Repeal.– The enactments specified in the Schedule are hereby repealed to 
the extent mentioned in the fourth column thereof. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1IV of 1882. 
SCHEDULE 
Year No. Short title Extent of 
Repeal 
1 2 3 4 
1918 X The Usurious Loans Act, 1918. The whole. 
1934 VII The Punjab Relief of 
Indebtedness Act, 1934. 
Sections 5 
and 6. 
1935 IV The Usurious Loans (North -West 
Frontier Province Amendment) 
Act, 1935. 
The whole.