Annexation and party intention determined hypothecation validity, while contract interest was upheld as neither excessive nor usurious.

Machinery fixed to a mill premises remained movable property where the mode of annexation and the parties' intention showed it was not attached for permanent beneficial enjoyment of the immovable property; the hypothecation was therefore valid without a registered mortgage. Applying the same principle, the contract rate of interest at 11 per cent per annum with quarterly rests was upheld because there was no evidence of unconscionability, abnormality, or oppression. The decree was modified to recognise the bank's charge over the hypothecated movables and to sustain the agreed interest.

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Issues: (i) Whether the machinery and movables described in the hypothecation deed were to be treated as movable property capable of being charged in favour of the Bank, or as part of the immovable property so as to require a registered mortgage instrument; (ii) whether the agreed interest at 11 per cent per annum with quarterly rests was excessive or usurious.

Issue (i): Whether the machinery and movables described in the hypothecation deed were to be treated as movable property capable of being charged in favour of the Bank, or as part of the immovable property so as to require a registered mortgage instrument.

Analysis: The decisive test under Section 3 of the Transfer of Property Act, 1882 is the nature of annexation and the intention behind it, especially whether the attachment is for the permanent beneficial enjoyment of the immovable property. The evidence showed that the machinery was fixed on studs, bolts, and concrete bases, but not for such permanent beneficial enjoyment as to become part of the mill premises. The separate hypothecation deed, its description of the assets as hypothecated goods, and the conduct of the parties in executing distinct securities for the premises and for the machinery showed an intention to treat the machinery as movable property.

Conclusion: The machinery remained movable property, the hypothecation was valid, and the Bank was entitled to a charge decree over the B Schedule properties.

Issue (ii): Whether the agreed interest at 11 per cent per annum with quarterly rests was excessive or usurious.

Analysis: The enhancement of interest followed the increase in banking rates and was accepted by the borrowers. No evidence was produced to show that the rate was abnormal compared with other banks or that the resultant burden was unconscionable. A court interferes with a contract rate only when the circumstances show clear excessiveness or oppression, which was not established here.

Conclusion: The rate of 11 per cent per annum with quarterly rests was not usurious or unreasonable.

Final Conclusion: The decree of the trial court was modified in favour of the Bank by recognising its charge over the hypothecated movables and by upholding the agreed rate of interest, and the appeal was allowed.

Ratio Decidendi: Whether machinery fixed to premises is movable or immovable depends on the mode of annexation and, above all, the intention of the parties, while a contractual rate of interest will not be struck down as excessive in the absence of evidence showing it to be unconscionable or commercially abnormal.

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