RAGHU NATH DASS Vs. RAJENDRA KUMAR

JUDGEMENT

(1.) The following question has been referred for opinion of the Full Bench:-" Are renewals included in the term 'loan' as used in Section 28 of the U. P Agriculturists' Relief Act and/or a debtor can insist that transactions of renewals should be re-opened and interest allowed according to the Scheduled rate of the Act on the amount of the first transaction of renewal after coming into force of the U. P. Agriculturists' Relief Act and that the subsequent renewals should be ignored?" The facts which have given rise to this reference may be briefly stated. The respondents filed a suit for recovery of a sum of Rs. 16,270/14/- on the basis of a promissory note. There were money lending transactions between the parties to the suit and after an accounting which took place on Aghan Badi 12 Sambat 1991, a sum of Rs. Rs. 9,178/11/3 was found due to the plaintiff from the defendants. The defendants executed a promissory note for this amount in favour of the plaintiff on the 3rd of December 1934 and at the same time executed a receipt explaining how the whole of the consideration money for the pronote had been received by them. This receipt stated that the executants had money lending dealings with the plaintiff and, on account being taken, a sum of Rs. 9,178/11/3 was found due on account of principal and interest and it was in lieu of this sum due that the pronote was being executed. This promissory note was renewed on the 30th of November 1937, for a sum of Rs. 11,150/-. Once again a receipt for consideration was also executed in which it was stated that accounts have been taken in respect of the earlier pronoter of December 1934 and after setting off the payments made, a sum of Rs. 11,150/- was found due which was acknowledged and in respect of which the fresh pronote was executed. There was a second renewal on the 29th of November 1940 and on this occasion also a similar receipt was executed showing that the consideration for this pronote was also represented by the amount found due on account, being taken to respect of the pronote of the 30th of November 1937. The last renewal took place by execution of a pronote dated the 28th of November 1943 and this time also the receipt of consideration was similarly acknowledged by stating that account had been taken in respect of the pronote. of the 29th of November 1940 and after setting off the payments made a sum of Rs. 13,550/11/9 was found due. This last pronote was, therefore, executed for this amount. The suit was instituted by the plaintiffs on the basis of this pronote claiming this amount as the principal money due and interest on this amount from the date of this pronote viz. the 28th of November 1943 upto the date of suit an the stipulated rate of 8 per cent per annum it may be mentioned that the agreed rate, of interest in the first pronote dated the 3rd of December 1934 was 9 per cent per annum compoundable yearly and in all the three subsequent pronotes it was 8 per cent per annum compoundable yearly. It was also the admitted case of both the parties that, at the time of each renewal of the pronotes the accounts were made on the basis of the pay-ments actually made and on the basis of the rate of interest stipulated in the pronotes without taking into account the provisions of the U.P. Agriculturists Relief Act (hereinafter referred to as the Act).

(2.) The suit was contested by the defendant appellants on various grounds but the only plea with which we are concerned relates to the claim of the defendants to obtain benefit under the provisions of Section 28 of the Act. It is contended that interest, should be a allowed at the reduced rate provided by that provision of law on the two pronotes executed in 1940 and 1943. The plaintiff resisted this plea on the contention that each transaction of renewal really amounted to a fresh loan and consequently for the purpose of applying the provisions of Section 28 of the Act the earlier renewals, were of no effect so that the plaintiff should be allowed Rs. 13,530-11-0 as principal amount deemed to have been taken as a loan on the 28th November 1943 and interest on that amount at the rate laid down in the Act. It is in these circumstances that the Division Bench, before which the appeal came up for hearing, framed the question of law reproduced above and referred it to the Full Bench for opinion.

(3.) The question that has been referred to the Full Bench is clearly divisible into two parts and, in fact, the Bench framing the question has itself divided that question into two parts though incorporating both the parts in one single question. The first part of the question is as to whether renewals are included in the term 'loan' as used in Section 28 of the Act. On this question it does not appear to me to be necessary to go into any deep discussion about the purpose and the language of the Act as there is already a Full Bench decision of this Court with which I respectfully agree. The first decision on this point was given by a Division Bench in Dharam Singh v. Bishan Sarup, 1937 All LJ 882: (AIR 1938 All 1) which case came up to this Court as arising out of proceedings under Section 33 of the Act. In that case, a usufructuary mortgage was executed in lieu of two previous hypothecation bonds and it was held that, as there was no fresh advance of any money under the usufructuary mortgage the transaction could not be regarded as a fresh advance so that the applicant was entitled under Section 30(1) of the Act to have the interest reduced for the period of Jan. 1, 1930, till August 1933 when the new mortgage deed was executed. This decision of the Division Bench was, however, overruled by a five-Judge pencil of this Court in Pratap Singh v. Gulzari Lal, 1942 All LJ 3 : (AIR 1942 All 50) (FB). The majority judgment in that case was delivered by Bajpal, Hamilton and Dar, JJ. It will be enough to quote from the judgment of Dar, J. for the purpose of explaining the reasons for the view arrived at by majority in that case. Dealing with this point Dar, J. held:- "Is there anything in the express language of the Agriculturists Relief Act which confines the term 'loan' to the original loan and excludes renewed loan from its operation? Is there any thing in the express language of the statute which declares a perfectly legitimate transaction on the basis of which one loan was closed and another loan started as inoperative? Is there anything in the express language of the Act which says that a well-recognized doctrine of law in moneylending transactions, viz. renewal of bonds on the basis of notional payment and as a result of which transactions were closed and settled years ago in this case before us, the first more than twenty years and the second more than eight years ago, will all be reopened and declared as not binding on the parties? I cannot find any express language in the statute which will compel me to adopt such an interpretation. For the moment I turn again to the Interpretation. Clauses in Section 2(10) of the U.P. Agriculturists Relief Act. It is said that the definition of the words 'loan' and 'interest' as given in Section 2 justified the interpretation, that loan in Section 2 (10) means money actually lent and not what is nationally lent. I can only take Section 2(10) as an interpretation clause which defines and not one which under the guise of definition enacts. Now, Section 2(10) defines 'loan' as an advance to agriculturist whether money or in kind and it includes any transaction which is in substance a loan. I should say that an original loan, when accounts have been settled and on the basis of settlement of accounts it is renewed by a fresh-mortgage bond, is in substance a loan within the meaning of the definition and there is no reason to interpret the words 'which is in substance a loan' in any sense so as to destroy the-validity of past transactions and in my opinion, where an earlier transaction of loan is renewed, the new transaction itself is a 'loan' for purposes of Section 2(10) of the U. P. Agriculturists' Relief Act." The learned Judge thereafter proceeded to take notice of the fact that the word 'loan' occurs in four different sections of Ch. IV of the Act and did not rule out the possibility that, in each of these sections, it may have a somewhat-different meaning for the reason that differences-may arise on account of the different language of the sections and the context in which it occurs. In this connection, the learned Judge went on to say that ''It may be that the payment referred to in Section 29 of the Act may mean an actual payment and not a notional payment and it may further be that for purposes of Sections 28 and 31, that is, for loans taken after the Act, renewal may be permissible or it may be subject to limitation that interest realised or accrued cannot exceed the principal sum of thy original loan." Due to this doubt expressed by the learned Judge, it was urged before us that the view, expressed by the. Full Bench to the effect that, where an earlier transaction is renewed, the new transaction' itself is a loan, should not be held to be applicable to the interpretation of the word "loan' in Section 28 of the Act. I am, however, unable to find any reason why the word 'loan' in Section 28 of the Act should be interpreted differently from that word as used in Section 30 of the Act. The word 'loan' has been defined in Section 2(10) (a) of the Act and the meaning given in the definition has been made applicable to the word 'loan' as used in all the sections of the Act unless a contrary intention may appear from the context. The meaning given to the word 'loan' in Section 30 by the Full Bench should, therefore, apply to that word used in Section 28 of the Act also unless it is held that there is something in the context in Section 28 which compels the courts to give a different meaning to the word 'loan' in that section. I have not been able to find any particular reason why the word 'loan' in Section 28 of the Act requires to be interpreted differently from that word as used in Section 30 of the Act. In this connection, notice may be taken of the various decisions in which it has been held that apart from Section 30 of the Act,, even in other sections of the Act or in other laws, where the word 'loan' is similarly defined, a renewed loan is to be treated as a new loan. A Full Bench of the Oudh Chief Court in Badloo v. Inder Bikram Singh, AIR 1945 Oudh 242 held that a debt originally advanced before the Act came into force and renewed by a pro-note after the Act, is in substance a loan under Section 2(10) (a) of the Act and the provisions of Section 39 of the Act would apply if they are not excluded on account of other considerations. A Division Bench of this Court in Lachmi Lal v. Narain Das, AIR 1950 All 152 also held that a renewal is a fresh loan as it is in substance a loan and, if it came into existence for the first time after the Act came into force, it is clearly governed by Section 39 of the Act. A Full Bench of this Court in Ketki Kunwar v. Ram Swarup, 1942 All LJ 578 : (AIR 1942 All 390) had occasion to deal with the word 'loan' as defined in the U.P. Debt Redemption Act. The definition of the word 'loan' in that Act is in terms almost identical with the definition given in Section 2(10) (a) of the Act and) the Full Bench held that a renewed loan is a transaction which amounts to an advance within the meaning of Section 2(9) of the U.P. Debt Redemption Act. A contrary view, however, appears to have been taken by a Division Bench of this Court an Badri Prasad v. Nirmal Singh, 1948 All LJ 431: (AIR 1949 All 179) where it was held that a loan renewed before the Act came into force would no doubt be regarded as a loan for the purpose of the Act but loans renewed by an agriculturist after the coming into force of the Act, could not be treated as fresh loans for purposes of Sections 28 of the Act. I may say with respect that the learned Judges, who decided that case, rightly held that the decision of the five-judge Full Bench in 1942 All LJ 3 : (AIR 1942 All 50) (FB) did not in terms apply to the case before them as they were dealing with a case of renewal after the enforcement of the Act, while the Bench in the case of 1942 All LJ 3: (AIR 1942 All 50) (FB) had before it a case where the renewal to be considered was one made prior to the enforcement of the Act. After noticing this distinction between the two cases, the learned Judges, however, 'proceeded to hold that the language of Section 30 of the Act was substantially different from that used to Section 28 of the Act and the considerations, which applied to the interpretation of Section 30, would not be the same as are applicable to the other section. Relying on the language of Sub-section (1) of Section 28 of the Act, they expressed the view that this section prohibits the taking of a loan by an agriculturist after the coming into force of the Act bearing interest at a rate higher than that specified in Schedule II and, consequently, a loan renewed after the enforcement of the Act can-not be treated as a new loan. It appears that, in giving this interpretation to the word 'loan' in Section 28 of the Act, the learned Judges were considerably influenced by the fact that if, a renewed loan is treated as a new loan, it would permit unscrupulous creditors to evade the provisions of Section 28 of the Act and, take advantage of the renewal to claim validly interest at a rate higher than that permitted by Section 28 of the Act. It has appeared to me that the interpretation put on the word 'loan' by the five-Judge Full Bench in 1942 All LJ 3 : (AIR 1942 All 50) (FB) can be applied to the word 'loan used in Section 28 of the Act without creating any such anomaly provided it is kept in view that, at the time of each renewal, the amount, for which the fresh loan is deemed to have been taken, is represented by only a notional amount equated with the amount due on the previous loan and no actual advance in cash or kind takes place on the occasion of such a renewal. This aspect of the case, I consider, needs a little, more detailed explanation, particularly because it is this aspect which is covered by the second part of the question referred to our Bench for opinion. Consequently I proceed to deal with this aspect as being involved in the first part of the question as well as the point for consideration in the second part of the question.