Ajit Kumar Maitar vs Joynarayon Agarwalla

Agarwala, J.—This is an application by the defendant against the decree of the Court of Small Causes on a claim to recover Rs. 406-5-0 on the basis of a handnote dated 16th February 1940, alleged to have been executed by the defendant in consideration of a loan by the plaintiff of Rs. 400. The handnote stipulated interest at 2 1/2 percent, per mensem. The plaintiff, however, claimed to reoover only at the rate of 1 per cent. per mensem.

The defence was that the actual amount of the loan taken was Rs. 200 and that he had repaid Rs. 45. The defendant was a railway guard and was stationed at Gomoh at the date of the transaction. His case was that being under orders of transfer from Gomoh he was in urgent need of money to meet his debts at Gomoh before leaving the station. The plaintiff was not prepared to accept a surety for a loan of Rs. 200, but agreed to lend the money provided that a handnote for Rs. 400 was executed. This case was supported in Court by the defendant himself and by another witness who claims to have been present at the time of the execution of the handnote. The third witness, who was a guard at Gomoh, deposed to having heard the plaintiff making a demand for re-payment of Rs. 400 from the defendant and the defendant protesting that he received only Rs. 200 and was willing to re-pay that amount. The learned Small Cause Court Judge disbelieved the story as inherently improbable. There is nothing inherently improbable in a moneylender insisting upon a client executing a handnote for more than the actual advance, as a matter of fact it is a common practice among some of money, lenders. The evidence in support of the defendant''s story is, in my opinion, worthy of credence; it may be observed that as soon as the plaintiff made a demand through a pleader for repayment of the money, the defendant wrote back saying that if the plaintiff was prepared to accept the amount actually advanced, namely Rs. 200, he would make arrangement to repay it.

The suit, however, must fail for another reason. Section 4, Bihar Money-Lenders Act, 1939, which came into force in the area from which the suit arose on 20th July 1939, debars a Court from entertaining a suit for the recovery of a loan advanced after the commencement of the Act unless the lender was registered under the previous, Money-Lenders Act of 1938 or within six months after the Act of 1939 came into operation. The plaintiff was not registered under the Act of 1938 and was not registered within six months of the commencement of the present Act, the date of his registration being 9th May 1940. It has, however, been contended that he was exempted from registration by reason of a notification issued by the Local Government in exercise of the powers conferred on it by Section 3 of the Act. That section empowers a Provincial Government by a notification to exempt any class of money-lenders or loans from the operation of all or any of the provisions of the Act, By a notification dated 19th July 1939, the Provincial Government exempted from the operation of Section 4 of the Act persons who in the course of a year have not advanced more than Rs. 500. In the present case in addition to the loan of Rule 200 to the defendant on 16th February 1940, the plaintiff advanced to another person Rs. 1000 in May or June of the same year. In the Court below, the learned Small Cause Court Judge held that the word ''year'' in this notification meant the year in which the plaintiff keeps bis books and not ordinary year beginning on 1st January. In a previous case which came before me a short time ago, Rai Shyam Bahadur Vs. Rameshwar Prasad Rohatgi and Another, , in which this question arose, I held that the word ''year'' in the notification should be taken in its ordinary eon-notation to be the period from 1st January, to the following 31st December which is the definition of ''year'' both in the General Clauses Act and in the Bihar and Orissa General Clauses Act. In this Court the learned Advocate for the plaintiff contends that Section 4 does not apply to the present case, because at the time when the advance to the defendant was made, the plaintiff had not made any other advances so as to take him out of the operation of the notification. That to my mind is immaterial. In order to apply Section 4 of the Act what is to be seen is whether the plaintiff is registered and if he is not registered whether he is entitled to the benefit of the notification by reason of his total advances in the course of a year being not exceeding Rs. 500. It is immaterial that sometime during the year his advances were less than that amount.

It is next contended on behalf of the plaintiff that Section 4 of the act is ultra vires of the Provincial Legislature. It is sufficient to refer to the decision of the Federal Court in AIR 1941 47 (Federal Court) . The Court was there dealing with the Madras Agriculturists Relief Act, 1938, and was considering whether its provisions were ultra vires of the Madras Legislature in so far as the act affected the Negotiable Instruments Act. The learned Chief Justice of India observed:

It is clear that the pith and substance of the Madras Act, whatever it may be, cannot at any rate be said to be legislation with respect to negotiable instruments or promissory notes; and it seems to me quite immaterial that many, or even most, of the debts with which it deals are in practice evidenced by or based upon such instruments.

In the result it was held that the local Act was Dot ultra vires. Similarly, in the present case the act of 1939 deals with money-lending generally and it is only in particular cases that it touches the question of money-lending transactions evidenced by the Negotiable Instruments Act. On the pith and substance rule as enunciated in the judgment of the Federal Court, to which I have just referred, I have no doubt that Section 4 is not ultra vires of the Provincial Legislature. The result is that the decree of the Court below is set aside and the plaintiff''s suit dismissed with costs throughout.