Case: Prafulla Kumar Mukherjee Vs The Bank of Commerce. High Court of Bombay (India)
| Judges | Wright, Porter, Uthwatt, Madhavan Nair and John Beaumont, JJ. |
| Issue | Banking Law |
| Citation | (1947) 49 BomLR 568 |
| Judgement Date | February 11, 1947 |
| Court | High Court of Bombay (India) |
Judgment:
Porter, J.
1. This group of cases and those which immedately follow necessitate a consideration of the principle upon which the respective jurisdictions of the Federal and Provincial legislatures in India are to be delimited and of the method to be adopted in determining the subjects which are to be dealt with by the one or the other under the provisions of Sections 99 and 100 of the Government of India Act, 1935, and the three lists set out in the Seventh Schedule thereto.
2. The question immediately in dispute is as to the validity of the Bengal Money-lenders Act, 1940. By way of introduction it is enough to say that that Act limits the amount recoverable by a moneylender on his loans for principal and interest and prohibits the payment of sums larger than those permitted by the Act.
3. The respondents are an incorporated body to which by an order of May 12, 1941, passed by the High Court of Calcutta under Section 153A of the Indian Companies Act, the assets of the Khulna Loan Bank, Ltd. (earlier known as the Khulna Loan Coy., Ltd.) were transferred.
4. Some of the cases now under appeal to their Lordships' Board were brought by the respondents who claimed to recover loans and interest alleged to be due upon promissory notes, executed by appellant borrowers and in other instances by appellant debtors claiming a declaration that their indebtedness was at least diminished by the provisions of the Act and even in some instances that they were entitled to repayment of sums overpaid.
5. The proceedings began in 1941, 1942 and 1948, but are concerned with loans made at a much earlier date not by the respondents but by the Khulna Loan Company or the Khulna Loan Bank. In every case the loans were secured by promissory notes executed contemporaneously with the transaction.
6. The Act, the validity of which their Lordships have to determine, by Section 30 provides that "Notwithstanding anything contained in any law for the time being in force, or in any agreement (1) No borrower shall be liable to pay after the commencement of this Act-" more than a limited sum in respect of principal and interest or more than a certain percentage of the sum advanced by way of interest. Moreover it is retrospective in its effect, and its limitations can be relied upon by a borrower by way of defence to an action by the moneylender or the borrower can himself institute a suit in respect of a loan to which the provisions of the Act apply.
7. Section 100 of the Government of India Act, 1935, is in the following terms:-
100. (1) Notwithstanding anything in the two next succeeding subsections, the Federal Legislature has, and a Provincial Legislature has not, power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to this Act (hereinafter called the 'Federal Legislative List').
(2) Notwithstanding anything in the next succeeding subsection, the Federal Legislature and, subject to the preceding subsection, a Provincial Legislature also, have power to make laws with respect to any of the matters enumerated in List III in the said Schedule (hereinafter called the 'Concurrent Legislative List').
(3) Subject to the two preceding subsections, the Provincial Legislature has, and the Federal Legislature has not, power to make laws for a Province or any part thereof with respect to any of the matters enumerated in List II in the said Schedule (hereinafter called the 'Provincial Legislative List').
(4) The Federal Legislature has power to make laws with respect to matters enumerated in the Provincial Legislative List except for a Province or any part thereof.
8. The Federal Legislative List referred to in this section assigns to the Federal Legislature jurisdiction to make laws with respect to
(28) Cheques, bills of exchange, promissory notes and other like instruments,
(33) Corporations, that is to say, the incorporation, regulation and winding-up of trading corporations including banking....
(38) Banking, that is to say, the conduct of banking business....
and denies that jurisdiction to Privincial Legislatures.
9. The Provincial Legislative List however empowers the Provincial Legislature in item (27) to make laws with respect to "Trade and Commerce within the Province...; money lending and money lenders," and therefore no objection could be taken to the provisions of the Bengal Money Lenders Act, if they were concerned only with the limitation of capital and interest recoverable.
10. But the Bengal Act goes further: Section 2 contains certain definitions in the following terms:-
(1) 'bank' means a banking company as defined in Section 277F of the Indian Companies Act, 1913....
(2) 'borrower' means a person to whom a loan is advanced....
(9) 'lender' means a person who advances a loan and includes a money-lender.
(12) 'loan' means an advance, whether of money or in kind, made on condition of repayment with interest and includes any transaction which is in substance a loan, but does not include....
(d) a loan advanced before or after the commencement of this Act-
(i) by a bank which was a scheduled bank on the first day of January, 1.089, or by a bank which has been declared to be a notified bank under Section 3,....
(e) an advance made on the basis of a negotiable instrument as defined by the Negotiable Instruments Act, 1881, other than a promissory note;
(13) 'money-lender' means a person who carries on the business of money-lending in Bengal or who has a place of such business in Bengal, and includes a pawnee as defined in Section 172 of the Indian Contract Act, 1872;
(14) 'money-lending business' and 'business of money-lending' mean the business of advancing loans either solely or in conjunction with any other business;
11. Section 277F of the Indian Companies Act defined a banking company as:
A company which carries on as its principal business the accepting of deposits of money on current account or otherwise, subject to withdrawal by cheque, draft or order, notwithstanding that it engages in addition in any one or more of the following forms of business, namely:-
(1)...the lending or advancing of money...
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