DEO NANDAN PROSAD Vs. RAM PRASAD

JUDGEMENT

(1.) These three cases all raise questions with regard to the Bihar Money-Lenders Act, and it is convenient to dispose of them together. The only one which involves any real difficulty is Civil Revision No. 631 of 1940, and I, therefore, take it first. On 3 April 1940, the petitioner instituted a Small Cause Court Suit (No. 13 of 1940) in the Court of the First Subordinate Judge, Monghyr, claiming a sum of Rs. 383-12-0, on the basis of a promissory note, dated 9 Chait 1344 Fasli (corresponding to 4 April 1937), for Rs. 280, with interest at the rate of 1 per cent, per month, besides costs and pendente lite interest. The defendant admitted the execution of the note, but contended that it was executed for previous dues, which included interest at high rates, and prayed for re-opening the accounts, and also pleaded certain payments. The petitioner produced his account books, which were accepted by the Court, and showed that the hand-note in suit was a renewal of a previous hand-note, after crediting certain payments made by the defendant, which in terms, was a renewal of an earlier hand-note, and so on ? back to the first hand-note which was executed by the defendant on 12 Jeth 1335 Fasli, on receipt of Rs. 400. The Small Cause Court Judge held that the rate of interest was not exorbitant, and could not be touched. He, however, found that the repayments credited in the account book of the plaintiff came in all to Rs. 594-9-1 and being of opinion that the plaintiff could not under Section 7, Bihar Money-Lenders Act, recover more than double the amount originally advanced he decreed the suit for Rs. 205-6-10 only, that is to say, for less than the principal of the last hand- note. This application for revision has been preferred under Section 25, Provincial Small Cause Courts Act, on the ground that the learned Judge was not entitled to apply the Bihar Money-Lenders Act so as to give the plaintiff a decree for a sum smaller than that due for principal and interest on the tenor of the promissory note. It is necessary, in the first place, to notice that what the learned Judge has done, if permissible at all under the Money-Lenders Act, involves the application not only of Section 7 of the Act, but also of Section 8; because he has not only applied the rule of damdupat incorporated in Section 7, but he has also for that purpose re-opened the whole account as provided by Section 8, and has gone behind the hand-note in suit, as he has applied the rule of damdupat not upon the final hand-note but upon the original loan, and so has given a decree for a sum less than even the principal of the hand-note in suit without the calculation of any interest thereon. Section 32, Negotiable Instruments Act (26 of 1881), provides that: In the absence of a contract to the contrary, the maker of a promissory note and the acceptor before maturity, of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note, or acceptance respectively, and the acceptor of the bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand. In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default." Section 79 of the same Act provides: "When interest at a specified rate is expressly made payable on a promissory note or bill of exchange interest shall be calculated at the rate specified, on the amount of the principal money due thereon, from the date of the instrument, until tender or realisation of such amount or until such date after the institution of a suit to recover such amount as the Court directs.

(2.) What the Judge has done conflicts with the provisions of both these sections. He has not given the plaintiff a decree for his full principal, much less has he allowed any interest on the sum due under the hand note in suit. He has in short followed the provisions of Secs.8 and 7, Money-Lenders Act, in preference to those of Secs.32 and 79, Negotiable Instruments Act, and only by ignoring the latter. The question is could he legally do so? If the Bihar Money Lenders Act could not operate to repeal pro tan to these provisions of the Negotiable Instruments Act, it is obvious that he could not.

(3.) The same question, so far as Section 8 of the Act is concerned, came before a Division Bench of this Court to which I was a party, in Sagarmal V/s. Bhuthu Ram A.I.R. 1941 Pat. 99. The decision of the Court was that nothing in Section 8, Money-Lenders Act, can debar the holder or the holder in due course of a promissory note, who sues upon that note from recovering the full amount of principal and interest due according to the apparent tenor of the note. If this decision is correct, it is equally applicable to Section 7. In the course of my judgment in that case I expressed the view, as I was bound to do having regard to the Full Bench decision of this Court in Sadanand Jha V/s. Aman Khan A.I.R. 1939 Pat. 55, that the so-called "pith and substance" doctrine was not applicable in the interpretation of Section 100, Government of India Act, 1935. This question came before the Federal Court in Subrahmanyan v Muthuswami Goundan and it was held that the reasoning in Sagarmal V/s. Bhuthu Ram A.I.R. 1941 Pat. 99 was incorrect in this respect, and the pith and substance argument was applicable.