Banque Indosnez vs Pawan and Company

H. Suresh, J.—The plaintiffs have filed this suit to recover a sum of Rs. 83,575.59 together with interest at the rate of 18 per cent. per annum from the date of the bill of exchange, namely, September 30, 1989.

The plaintiff''s case is that the defendants are the acceptors of a hundi dated March 12, 1987, payable within 90 days from the date of acceptance of the said hundi. There is also a notice dated September 11, 1989, addressed to the defendants calling upon them to pay the amount. The defendants have not replied to the said notice. Hence, the present suit.

The defendants have filed their affidavit-in-reply to the summons for judgment. There are a number of contentions. Firstly, they contend that the plaintiffs cannot claim interest at the rate of 18 per cent. per annum and their contentions is that, under the law, the plaintiffs could have claimed interest only at the rate of 6 per cent. per annum as the bill of exchange does not specify any rate of interest. The second contention is that the bill of exchange is not duly stamped. The third contention is that the plaintiffs have already filed another suit against the drawers of the said bill of exchange and the said suit includes the present claim under the bill. Their further contention is that the said bill of exchange was drawn at New Delhi and that the defendants'' proprietor affixed his signature on the said bill in New Delhi. The said bill of exchange was not payable at Bombay nor was it discounted at Bombay and, therefore, no part of the cause of action has arisen in Bombay. The defendants, therefore, submit that this court has no jurisdiction to entertain and try the suit.

The defendants also contend that the said drawers, namely, Chemie Flora Ltd., had assured the defendants that they alone would be responsible for payment of the amount of the bill of exchange on or before the due date and that, therefore, the defendants are not liable to pay the said amount. According to them, the said drawers had given certain assurances and the defendants affixed their signature on the said bill of exchange on the strength of those assurances. They also submit that the said bill of exchange was without any consideration and that the plaintiffs knew about these facts. They refer to a letter dated May 16, 1987, which is annexed to the affidavit-in-reply as exhibit-1, in which they say that they had sent two demand drafts to the said Chemie Flora Ltd., who, in turn, had assured that the amount would be paid to the plaintiffs.

The main argument centres round the question of claim of interest. The argument is that till recently the law had permitted, u/s 80 of the Negotiable Instruments Act, 1881, interest at the rate of 6 per cent. per annum from the date the same ought to have been paid by the party charged. The law was amended by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, whereby the rate of interest has been raised to 18 per cent. per annum and the said amendment came into force on December 30, 1988. Mr. Nain, appearing for the defendants, therefore, submitted that the plaintiffs could not have claimed interest at the rate of 18 per cent. per annum, inasmuch as, in the present case, the hundi was of March 12, 1987, and the due date was June 10, 1987, much before the said amendment to the law came into force, and that, therefore, the plaintiffs could not have claimed interest at any rate above 6 per cent. per annum. Mr. Nain submitted that since, at the date of the execution of the bill of exchange, the instrument did not mention any rate of interest, it could be presumed that the obligation to pay interest was only at the rate of 6 per cent. per annum, as per the law as it stood them. His argument is that if in the meanwhile before the filing of the suit, the law increases the rate of interest, it cannot be said that such a higher rate of interest would become operative retrospectively.

Mr. Tulzapurkar, appearing for the plaintiffs, in this connection submitted that the language of the law is very clear. The language clearly shows that it has only replaced the words "six per centum" by "eighteen per centum". The rest of the section has remained the same. His submission is that the language of the section calls for no interpretation. It is clear, if one reads the section as it stands today, that where no rate of interest is specified in the instrument, the rate of interest shall be calculated at the rate of 18 per cent. per annum "from the date at which the same ought to have been paid by the party charged". Mr. Tulzapurkar submitted that, subject to the law of limitation, if any, whatever be the date, it could be even prior to December 30, 1988, if the amount is outstanding and the amount has not been paid on the due date, the plaintiffs are entitled to claim, in such circumstances, interest at the rate of 18 per cent. per annum. He submitted that the law has only declared as to what could be the rate of interest in such a situation. It is not the date when the law came into force that is important. But, what is important is the rate of interest that is specified and which a party can claim in such circumstances.

In this connection, Mr. Tulzapurkar relied on the Statement of Objects and Reasons which says why the law was amended. The relevant portion of the said Statement of Objects and Reasons is as follows :

"(x) to revise the rate of interest from the present level of six per cent. to eighteen per cent. per annum payable on a negotiable instrument from the due date in case no rate of interest is specified, or payable to an indorser from the date of payment on a negotiable instrument on its dishonour with a view to discouraging the withholding of payment on negotiable instruments on due dates."

Therefore, this revision of the rate of interest from the level of 6 per cent. per annum became necessary because of Legislature felt that it was necessary to discourage the withholding of payment on negotiable instruments on due dates. In fact, the earlier provision of the rate of interest at 6 per cent. per annum had no relation to reality and parties were taking advantage of the same and were abusing the law as it then stood. Therefore, precisely to meet such a situation and to prevent abuse by parties retaining the amount without paying the amount, the law came to be amended.

Mr. Tulzapurkar also drew my attention to the case of B. Prabhakar Rao and Others Vs. State of Andhra Pradesh and Others, . The relevant portion is as follows (page 227) :

"While it is a general rule of law that statues are not to operate retrospectively, they may so operate by express enactment, by necessary implication from the language implied or where the statute is explanatory or declaratory or where the statute is passed for the purpose of protecting the public against some evil or abuse or where the statute engrafts itself upon existing situations, etc. But it would be incorrect to call a statute ''retrospective'' ''because a part of the requisites for its action is drawn from a time antecedent to its passing.'' (vide R. v. St. Mary, Whitechapel (Inhabitants) [1848] 12 QB 120)."

Mr. Tulzapurkar submitted that these observations directly apply to the present case, inasmuch as this could be considered as an instance where the statute engrafts itself upon the existing situations, and, therefore, it can be said to be a statute which is explanatory or declaratory and is passed for the purpose of protecting the public against abuse of the law.

As against this, Mr. Nain submitted that, by virtue of the amendment, the liability of the defendants has been increased from 6 per cent. per annum to 18 per cent. per annum and, therefore, unless the language of the law is clear, it cannot be construed retrospectively. He submitted that the normal rule is to construe the law as prospective in operation. In this connection, Mr. Nain drew my attention to a passage from Maxwell on the Interpretation of Statutes, 12th edition, at page 215. The relevant portion is as follows :

"4. Retrospective operation of statutes. - Upon the presumption that the Legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation. They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect is clearly intended. It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication."

Mr. Nain also relied on paras 36, 43, 42 and 45 of the case of Allied Exports and Imports, Gudur Nellore District Vs. State of Andhra Pradesh, Hyderabad, . It is not necessary to deal with this case as the amendment of the law here in entirely on a different basis, and ultimately each provision of the law has to be construed in the light of the language that is used in each section. The argument is that a right vested or where a right is enjoyed, whether present or future, cannot be taken away unless the intention of the Legislature is clear. I do not understand as to how these observations can have any bearing on the question that is argued before me.

Mr. Nain''s submission is that, in this case, if the amount had been paid on December 29, 1988, then in that event, the plaintiffs could have claimed only 6 per cent. interest and nothing more. Similarly, his argument is that if the instrument had been executed prior to December 30, 1988, but the amount had not been paid on the due date, which could be prior to December 30, 1988, or it could be even after December 30, 1988, the obligation having arisen at the time the instrument was executed, the rate of interest could only be as had been mentioned in the statute then. Therefore, his submission is that it is only in such cases where an instrument had been executed after December 30, 1988, and if the instrument is silent as to the rate of interest, then, in that event, the plaintiffs can claim interest at the rate of 18 per cent. per annum. In all other cases, if the instrument is prior to December 30, 1988, the plaintiffs could have claimed interest only at the rate of 6 per cent. per annum and not at 18 per cent. per annum.

Mr. Nain also relied on the case of Sree Bank Ltd. Vs. Sarkar Dutt Roy and Co., . The relevant observation on which Mr. Nain relied on are at para four of the said judgment. But, in this very judgment, it is made clear that if a statute is passed with the object of protecting the public against some evil or abuse, it may be allowed to operate retrospectively, even if, by such operation, it will deprive some person or persons of a vested right. In the present case, the Statement of Objects and Reasons clearly shows that the law was amended to prevent abuse of the law. If the argument of retrospectivity is relevant, then the answer can be found in the said Statement of Objects and Reasons. According to me, there is no question of the section being made operative retrospectively or prospectively. The section merely sets out as to what is the rate of interest which a party can claim if an instrument is silent as to the rate of interest and the amount is unpaid and in that even the party can claim interest at the rate mentioned in the statute from the date on which the amount ought to have been paid.

Mr. Tulzapurkar is right when he says that this statute is declaratory in character and, therefore, the section has to be construed as it stands, according to its plain meaning, and the court is not concerned with the consequences of such interpretation if the language of the law is clear.

Mr. Tulzapurkar also submitted that if Mr. Nain''s argument is to be accepted, it would lead to a classification which did not exist prior to the date of the said amendment and which classification will have no nexus with the object sought to be achieved by bringing about the amendment. In other words, there would be two classes of debtors, one paying interest at the rate of 6 per cent. and the other paying at the rate of 18 per cent. though both of them have to pay from the due date, the dividing line December 30, 1988. If the object of increasing the rate of interest is to prevent the abuse of law, then this classification has no justification. When the amendment is brought, the date when it was brought into effect would be of no consequence. That is not relevant. What is relevant is the prevention of the abuse of the law and, for that purpose, the law set right the position and increased the rate of interest from 6 per cent. per annum to 18 per cent. per annum.

I, therefore, hold that there is absolutely no substance in the contention that the plaintiffs could not have claimed interest at the rate of 18 per cent. per annum.

This takes me to the other contention that the document has not been properly stamped. It is true that the rubber stamp on the adhesive stamp bears a date which is not very clear and it appears to be in a language which is not known to us. However, if one has regard to all the facts and circumstances of this case, it becomes clear that the defendants had accepted the said hundi and they signed the same. The letter dated May 16, 1987, being exhibit 1 to the affidavit-in-reply, clearly shows that the defendants had signed the said hundi and had even directed the drawers to pay the amount due and payable under the said hundi and that the payment was to be made to the plaintiffs "on or behalf", meaning thereby that the payment was to be made on behalf of the defendants. The fact that the drawers did not pay the bank cannot give any defence to the defendants as far as this hundi is concerned.

As regards the other contention that the defendants acted on certain representations made by the drawers is again of no consequence as far as the plaintiffs are concerned.

Similarly, the contention that the plaintiffs were aware of the arrangement between the drawers of the hundi and the defendants is not very convincing and this plea is very vague.

In the result, I pass the following order :

ORDER

I grant conditional leave to the defendants to defend on their depositing a sum of Rs. 1 lakh within a period of 12 weeks from today. Suit is transferred to the list of commercial causes. Written statement within 12 weeks after the deposit as aforesaid. Usual order for discovery and inspection.