Where, after making a demand, a suit is brought against the maker of a promissory note payable on demand, but the note is silent as to interest and specifies no place for payment, interest at the rate of six per cent per annum is recoverable on the amount of the note from its date, under Section 80 of the Negotiable Instruments Act 1881.
Bishun chand v. Babu Audh Behari Lal (1917) 2 P.L.J. 451. and Framroz Edulji v. Mahomed Essa (1925) I.L.R. 50 Bom. 266, s.c. 28 Bom. L.R. 141 followed.
Best v. Haji Muhammad Sait (1898) I.L.R. 23 Mad. 18, dissented from.
1. The question submitted to this Full Bench runs as follows :-
A suit is brought after demand made on a promissory note payable on demand. The note is silent as to interest and specifies no place for payment. Is interest recoverable? If so, from what date and at what rate?
2. I will first consider whether interest can be claimed under the Negotiable Instruments Act, 1881, This depends primarily on two points arising on the construction of Section 80, viz,, (1) whether the section includes cases where as here no interest at all is mentioned in the instrument, or whether it is confined to cases where interest is mentioned in the instrument, but not the actual rate, and (2) what is the date at which the amount due on the instrument ought to have been paid by the party charged. It is important to observe that the party charged in the present case is the maker, and not an indorser. Throughout this case therefore we are dealing only with the liability of a maker of a promissory note.
3. As regards the first point the section provides that 'when no rate of interest is specified in the instrument, interest on the amount due thereon' shall be calculated, etc. On the true construction of this section I would hold that if no interest is mentioned at all, then 'no rate of interest' is mentioned, and consequently the section applies, This, I think, is the ordinary meaning of the language used, and I see no reason to cut down what seems to me its plain meaning. In fact, cases where interest is mentioned, but not the rate, are rare. Cases, on the other hand, where no interest is mentioned at all, are quite common. It is true that Section 79 deals with cases where interest at a 'specified rate' is made payable in the instrument. But I do not think that it follows from this that Section 80 ought to be construed as referring only to cases where interest at an unspecified rate is mentioned. The Legislature intended, I think, by e, 80 to provide for all the other cases generally.
4. The above view has been the one adopted either expressly or by assumption in the Indian authorities on the point. As regards Best v. Haji Muhammad Sait I.L.R. (1898) 23 Mad. 18, where the Court expressly adopted that construction and reversed the decision of the trial Judge to the contrary, I would only mention that I do not rest my opinion on the law merchant prior to the Act, but on the plain words of the Act itself. In this respect I would refer to what Lord Herschell has said in Bank of England v. Vagliano Brothers  A.C. 107 to the effect that the proper way of construing an Act is in the first place to examine closely the language of the Act itself, and not to start with inquiring how the law previously stood, and then to base the construction of the Act on that.
5. Turning next to the second point, this is the crux of the case. It depends on the meaning to be given to the words 'be calculated' from the date at which the same 'ought to have been paid by the party charged'. When then is the amount on a promissory note like this due, and when ought it to be paid? This throws us back on the earlier sections of the Act. Section 19 provides that a promissory note in which no time for payment is specified is payable on demand. The Act contains no definition of the words 'on demand'. But Section 21 provides that the expressions 'at sight' and 'on presentment' mean on demand; whereas the expression 'alter sight' means, in a promissory note, after presentment for sight. Next comes an important section, viz, 22, which provides that the maturity of a promissory note is the date at which it falls due. Then it provides for days of grace, except in the case of promissory notes payable on demand.
6. Next, turning to another important section, viz,, 32, this provides that 'in the absence of a contract to the contrary, the maker of a promissory note... are bound to pay the amount thereof at maturity according to the apparent tenor of the note... In default of such payment as aforesaid, such maker... is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default'. This section has clearly a material bearing on the meaning of the word 'ought' ins. 80.
7. Next, Section 64, which deals with presentment for payment, provides that 'where a promissory note is payable on demand, and is not payable at a specified place, no presentment is necessary in order to charge the maker thereof'. Section 74 provides that a negotiable instrument payable on demand must be presented for payment within a reasonable time after it is received by the holder. This, I take it, must be subject to the exception in Section 64. Section 76 provides that no presentment for payment is necessary, and the instrument is dishonoured at the due date for presentment in certain cases, e. g., sub-section (b) 'as against any party sought to be charged therewith, if he has engaged to pay notwithstanding non-presentment'. Then follow Sections 79 and 80, which I have already referred to. Section 81 provides that any person liable to pay, and called upon by the holder thereof to pay, the amount due on a promissory note, is, before payment, entitled to have it shown to him. It will be noted that this section contemplates two contingencies, viz., (1) a liability to pay, and (2) a request to pay. Section 92 provides that a promissory note is said to be dishonoured by non-payment when the maker of the note makes default in payment upon being duly required to pay the same. The above, I think, are the more material clauses for our consideration.
8. In my opinion, the first essential to determine is what is the maturity of the suit promissory note, for under Section 32 this is the date at which the maker has to pay it. Now under Section 22 the maturity of this note is the date at which it falls due. We have no further guidance in the Act as to the meaning of maturity in the case of the suit promissory note. Nor, as I have already said, is there any definition in the Act of the words 'on demand' which are mentioned in Section 19 and elsewhere. But it is well settled law in England that a promissory note payable on demand becomes payable at once. A leading case on the subject is Norton v. Ellam (1837) 2 M. & W. 461. In that case there was a note payable with interest on demand, and the question was from what time the Statute of Limitations began to run. Baron Parke, in giving judgment, said (p. 464);:-
I entertain no doubt at all on this point. It is the same as the case of money lent payable upon request, with interest, where no demand is necessary before bringing the action, There is no obligation in law to give any notice at all; if you choose to make it part of the contract that notice shall be given, you may do so. The debt which constitutes the cause of action arises instantly on the loan. Where money is lent, simply, it is not denied that the statute begins to run from the time of lending. Then is there any difference where it is payable with interest? It is quite clear that a promissory note, payable on demand, is a present debt, and is payable without any demand, and the statute begins to run from the date of it. Then the stipulation for compensation in the shape of interest makes no difference, except that thereby the debt is continually increasing de die in diem.
9. That decision has often been followed. I may refer, for instance, to In re George: Francis v. Bruoe (1890) 44 Ch, D. 627, where Mr. Justice Chitty held that a promissory note payable on demand with interest from the date thereof, is a present debt, and 'at maturity' as soon as given. This decision was approved by the Court of Appeal in Edwards v. Walters  2 Ch. 157, where Lord Lindley says (p. 166) :-
A promissory note payable on demand is payable at once without any demand, and may be sued upon accordingly. Such a note, therefore, ' matures' within the meaning of Section 62 as soon as the note is made and delivered to the payee (see In re George).
10. Lord Lopes says (p. 169) :-
Under Section 62, for a renunciation to be effectual the note must be mature. ----------------------A note such as this-a note payable on demand-is at maturity immediately it is made, and therefore that portion of the section is complied with.
11. In In re J. Brown's Estate: Brown v. Brown  2 Ch. 300. Mr. Justice Chitty applied this principle to a case where there was a covenant by a father and son in a mortgage to pay 'on demand', and also 'in the meantime from the date hereof' to pay interest. The father was surety for the son. There the learned Judge said (p. 304) :-
I am not satisfied that the distinction attempted to be made between the law merchant and the general law with regard to the meaning of the words pay on demand 'can be supported.
Then after citing a part of the above passage from Norton v. Ellam, he proceeded (p. 304) :
That is a general proposition and not one based upon the law merchant; and, without going through the whole of the cases to which I have referred in the course of the argument, it is plain that a distinction has been taken and maintained in law, the result of which is, that where there is a present debt and a promise to pay on demand, the demand is not considered to be a eondition precedent to the bringing of the action. But it is otherwise on a promise to pay a collateral sum on request, for then the request ought to be made before action brought.
12. The learned Judge then held, on the construction of the particular deed before him, that the father was only liable as a surety and that a demand should be made before bringing any action on the father's covenant.
13. As far as the Indian authorities are concerned, the English law on this particular point has been followed in Bishun Chand v. Bahu, Audh Behari Lal (1917) 2 P.L.J. 451, a decision of Mr. Justice Mullick and Mr. Justice Atkinson, and in Framroz Edulji v. Mahomed Essa (1925) 28 Bom. L. R 141 s. I.L.R. 50Bom. 266, a decision of Sir Norman Macleod and Mr. Justice Coyajee. These two cases do not, however, refer to another line of English authorities which lay down that though an action may be brought without a prior demand, no interest will be awarded in a case like the present except from the date of demand (if any) or alternatively from the date of suit. These other authorities I will deal with later. Further, as regards Framroz Edulji v. Mahomed Essa, I notice that there the note was payable 'in Bombay'. It does not appear to have been discussed whether by these words the note was payable 'at a specified place' within the meaning of Section 69. If so, then a demand was necessary as I held in an unreported case of Mathuradas v. Maganlal (1918) 0. C.J. Suit No. 1848 of 1919, decided by Marten J., on October 11, 1919, (Unrep.), But it is unnecessary to diseuss that question in the present case, and I give no opinion on it. I would only refer in that connection to a case I previously followed, viz., In re Fast of England Banking Co. (1868) L.R. 4 Ch. 14, which I will deal with later.
14. On the main point I am dealing with Sir Lancelot Sanderson in Brajendra Kishore Roy Chowdhury v. Hindustan Co-operative Insurance Society, Ld I.L.R. (1917) 44 Cal. 978, in deciding a case of limitation, stated (p. 988) :-
The promissory note being payable on demand, there was a present debt, which was payable without any demand.
Then after citing Norton v. Ellam, above mentioned, the learned Chief Justice proceeded (p. 989):-
This is the English law, and in my judgment it is the same here, and this is recognised by the provision in the Statute of Limitations, Article 73, which provides that in the case of a promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue, the period of limitation begins to ran from the date of the note.
15. So, too, in The Secretary of State for India v. Prasad Baptdi I.L.R. (1922) 46 Mad. 259, the trial Judge, Mr. Justice Coutts-Trotter, stated (p. 276):-
The result of the English oases is clearly this that where you merely have ' on demand' without its being a necessary factor in the determination of the time of payment it means nothing more than the money is to be paid unconditionally as in the ordinary cases of promissory-notes ' on demand I promise to pay,' the ' on demand' does not import that it is a condition precedent to the liability arising that a demand should be made; but where demand is necessary to fix some subsequent date or where the obligation is collateral and therefore a contingent liability, so that until the demand is made the person said to be liable does not know that his liability has come into being then demand is a condition precedent to a successful claim.
16. On appeal Sir Walter Schwabe said (p, 288):-
According to the law of England when money is payable on demand and nothing further is said, in is payable at once and without demand and time under the Statute of Limitations begins to run at once. The most common instances of the application of that principle are of money lent repayable on demand or at request, and promissory-notes payable on demand.
17. The learned Chief Justice then referred to Tarinee Pershad Ghose v. Pran Kishen Banerjee (1870) 14 W.R. 224, where it was held that the principle of the English common law did not apply to cases in the mofussil. That case, however, was long before the present Negotiable Instruments Act. And it would appear that the notes or bonds in The Secretary of State for India v. Prasad Bapuli were not promissory notes within the meaning of the Indian Limitation Act (see p. 269). The eventual decision was that a demand was necessary because the instruments were payable at a particular place and in some cases in a particular manner (p. 290).
18. In D.N. Shaha & Co. v. The Bengal National Bank, Ltd. I.L.R. (1920) 47 Cal. 861, a case on a promissory note, Mr. Justice Mookerjee said (p 864) :-
As explained in Norton v. Ellam,... no demand is necessary before bringing an action upon a note payable on demand, because its payment is a duty which attaches the moment the loan is given and the note is made. To put the matter differently, the creditor cannot extend the period of limitation by omission to make a demand and time runs against him from the date of the note, on the principle that the cause of action arises instantly on the loan and the contract on the note is in a state of being broken perpetually.
19. Counsel also cited to us Ram Chunder Ghosaul v. Juggut-monmohiney Dabee I.L.R. (1878) 4 Cal. 283. This was the case of a mortgage deed where the money was expressed to be paid on demand, and there Sir Richard Garth and Mr, Justice Mark by differed as to whether a demand was necessary.
20. I may also state that in Madhavbhai Shivbhai v. Fattesing Nathubhai (1873) 10 B.H.C.R. 487. it appears that Sir Michael Westropp had in an earlier case on the Original Side followed the English law as to a demand not being necessary before suit brought. But in a case then before the Court from the mofussil, the learned Judge was not prepared to say that that necessarily applied to mofussil cases.
21. Reference may also be made to Ameer-oon-Nissa v. Moorad-oon-Niasa (1855) 6 M.I.A. 211 their Lordships recognise that the 'authorities show that there may be cases where an action would not He except where a request or demand is made, and others where such demand is not necessary'.
22. The clear trend then of the cases above mentioned, at any rate the more modern ones, is to accept the English view on the subject. In Beat v. Haji Muhammad Sait I.L.R. (1898) 23 Mad. 18, the opposite conclusion was arrived at. But that decision turned on the following sentence in the judgment with relation to the application of Section 80: 'The notes being payable on demand, it is not the date of the making, but the date of demand, that must be taken as the point from which to calculate interest', Accordingly, interest was only given from the respective dates of demand. With all respect to the learned Judges this conclusion was arrived at without any express reference to the Negotiable Instruments Act, nor as to the meaning usually given in a Court of law to the words 'on demand'. Under these circumstances, and with all respect, I am unable to follow the decision.
23. So far as the Indian Limitation Act is concerned, it will be seen from Article 73 that on a promissory note payable on demand, time runs from the date of the note. So, too, under Article 59 where money is lent under an agreement that it shall be payable on demand, time runs from the date when the loan is made. On the other hand, if money is deposited under an agreement that it shall be payable on demand, including money of a customer in the hands of his banker, then under Article 60 time runs from the date when the demand is made. And as my brother Blackwell has pointed out, a demand may be necessary in certain other cases, apart from the Indian Limitation Act, e. g., where the cause of action is in detinue or in trover. (See Clayton v. Le Roy  2 K.B. 1031, a decision of the Court of Appeal),
24. A main point for the respondent which we have considered very carefully is that under English law interest only runs from the date of demand under a promissory note like the present Curiously enough this point does not appear to have been considered in the Indian cases so far reported. But the proposition itself is clear in English law from the long line of authorities cited in the referring judgment.
25. Thus in Pierce v. Fothergill (1835) 2 Bing. N.C. 107 132 R.R 66, the head-note runs:
On a promissory note payable on demand, where there is no proof of any agreement for interest, the Plaintiff1 is only entitled to interest from the day of issuing the writ of summons.
26. So, too, in In re East of England Banking Co. (1868) L.R. 6 Eq. 368 Vice Chancellor Malins said (p. 375):-
The law is perfectly well known and distinct, that with regard to all negotiable instruments, by the law merchant, every bill of exchange and promissory note carries interest from the date of its maturity. Where a note on demand having no period of payment, is intended to bear interest, the usual course is to say ' I promise to pay on demand so much money with interest at a certain rate', otherwise it will carry no interest until the demand is made. But where a note is payable on demand which on the face of it does not carry interest its is perfectly well known that it carries interest only from the time when the demand is made. The notes in respect of which interest is here claimed were common bank notes, I presume in the usual form. The banker promises to 'pay bearer on demand'.
27. That case went on appeal, and it would appear from the arguments and judgments that the notes were to be presented either at the Company's bank at Norwich or at the London and Westminster Bank in London (see L.R. 4 Ch. App. 14, at pp. 17 and 18). It was held on appeal that a demand was therefore necessary, but that in fact such demands had been made at the proper places.
28. The above general proposition is stated to the like effect in Halsbury, Vol. II, p. 524, It is now embodied in Section 57 of the Bills of Exchange Act, 1882. We have, therefore, in the English Act a clear provision that presentment is necessary so far as a claim to interest is concerned. But we have no corresponding section in the Indian Act. On the contrary, Section 80 awards interest from the time when the money due ought to have been paid. But if we once arrive at a clear opinion as to the true construction of the Indian Act, then we cannot be influenced by the circumstance that the English Act contains an equally clear provision to the contrary. It may be unfortunate that there should thus be a difference between Indian and English law as to the effect of a particular class of negotiable instruments, But this is a matter for the Legislature to remedy, if remedy is needed, and not for us.
29. It was strenuously argued by Mr. Wadia that the words 'on demand' in the promissory note and in Section 19 ought to be given their popular meaning, and that consequently the maker was under no obligation to pay until he received a demand as was indeed held in Best v. Haji Muhammad Sait already cited. The argument further ran that there was no 'injuria', and therefore no cause of action until a demand had been made and refused; and that to hold otherwise would be to give a legal cause of action without a legal injury having been suffered. But as regards the meaning to be attributed to the words 'on demand', in a negotiable instrument, I think, they have become too crystallised by mercantile usage and judicial decisions to be given now a different meaning. We are really invited to hold that a promissory note payable on demand does not fall due within the meaning of Section 22 at its date and ought not to be paid at once. This I find myself quite unable to do. The argument is really in the teeth of the main decisions to the contrary in England and India, and its acceptance would certainly cause considerable confusion in the mercantile community, and incidentally lead to other difficulties in the construction or application of the Act which I need not consider.
30. As regards the absence of au 'injuria', it must be taken that the 'injuria' is the non-payment of the promissory note at the date thereof. No doubt parties do not usually intend that the money should be repaid the instant it is advanced. But clearly in law the promisee may, if he likes, make an immediate demand for the money. Therefore the corresponding legal position as regards the promisor is not so illogical as it might at first sight appear.
31. Nor is there anything really inequitable in arriving at this conclusion. A man who borrows money and gives a promissory note can hardly expect that the lender is a philanthrophist, and will not charge any interest. And if the interest the borrower has to pay is confined to six per cent., as it is by Section 80, then he may think himself lucky to got off' with that rate and not to have to pay a substantially higher rate, as is more usually the case in present-day money transactions in India.
32. The real explanation is that the words 'on demand' are only a sort of label to identify a particular form of document, and that to ascertain the rights and obligations of the parties under a document in that particular form one has for turn to the provisions of the Act itself, as explained by settled authority on the point.
33. As regards the criticisms of Austin on Jurisprudence as to this particular principle of the English common law, it may be answered that if a plaintiff brings a suit on a promissory note without any prior demand, be may be able to maintain the suit. But, on the other hand, if the litigation is really unnecessary and vexatious and brought without any previous warning, it is conceivable that the Court might refuse him any costs (cf. Walter v. Steinkopff  3 Ch. 489, In that event the result of the writ might have little more effect than a demand in writing, assuming the defendant at once tendered the amount.
34. After careful consideration then of the Act, and of the numerous authorities in India and in England that have been cited to us, I would hold that a promissory note like the one we have hero matures and falls doe within the meaning of Section 22 at the date when it is made. Consequently, under a 32 the maker is bound to pay it at that same date, and presentment for payment is unnecessary having regard to Section 61. In my judgment, therefore, the date at which the suit note 'ought to have been paid by the party charged' -within the meaning of Section 80 is the date of the note itself. In the present case the party charged is the maker had been the indorser, different considerations would arise, for, under the explanation to Section 80, the indorser would be liable to pay interest only from the time that he received notice of dishonour. In this connection I am not prepared, on the construction of this particular Act, to draw a distinction between the words 'are bound to pay' in Section 82, and the words 'ought to have been paid' in Section 80. I think in this Act they mean substantially the same thing, and that if the maker of a note was 'bound to pay' it at maturity, then he 'ought to have paid' it at maturity.
35. In the result, therefore, I would hold that in the present case the promissory note became payable immediately on its execution, that that was the date at which it ought to have been paid within the meaning of Section 80, and that accordingly as against the maker, the promisee is entitled to interest at six per cent, per annum from the date of the note. I would, therefore, answer the specific question submitted to us as follows : 'Yes, under the Negotiable Instruments Act, 1881, from the maker of the promissory note at six per cent, per annum from the date of the promissory note'.
36. As then, in my judgment, the promisee is entitled to interest, I think it is unnecessary to consider the effect of the Interest Act, 1839. For there the matter depends on the discretion of the Court, and if the debt is not payable 'at a certain time', then interest would only run from the date of a demand giving notice that interest would be claimed. So, too, as regards Section 34 of the Civil Procedure Code, that is also discretionary, and only applies to interest from the date of the suit. On the other hand, Section 80 of the Negotiable Instruments Act gives interest as a matter of right in cases to which it applies.
37. In conclusion, I would like to acknowledge the assistance given to the Court by the able arguments of Mr. Kao and Mr. Wadia, and to say that the latter's argument as amicus curioe has been none the less valuable because in the result we have decided in favour of the appellant. We have thereby had an advantage which the Court in Framroz Edulji v. Mahomed Essa I.L.R. (1925) 50 Bom. 266, 28 Bom. L. R, 141, and in some other cases did not have, viz., arguments on both sides of the question.
38. I agree and have nothing to add.
39. I agree.
40. The appeal was then considered on merits by a bench consisting of Marten G.J. and Crump J.
Amberson Marten, Kt., C.J.
41. Having regard to the decision of the Full Bench, the interest payable under the promissory note runs from the date of the note itself, viz,, September 8, 1920, and not, as found by the lower appellate Court, from the date of demand. The appeal, consequently, must be allowed on that point. Further, the learned Judge has not awarded any costs to the successful plaintiff, and his order must be varied in that connection also.
42. That being so, our order will be : Appeal allowed, Orders in both Courts below set aside. Decree that the defendant do pay to the plaintiff Rs. 2,600 with interest at six per cent, per annum from September 8, 1920, to the date of today's judgment, and costs throughout in all Courts with further interest from the date of this judgment at six per cent, per annum on the balance of the principal sum of Rs. 2,600 and costs for the time being remaining unpaid. The said amount to be recoverable from and to be paid by the defendant in equal annual instalments of Rs. 400 each, the first of the same to be paid on November 30, 1927. On failure of the defendant to pay any two instalments, the plaintiff is to be at liberty to recover the whole amount outstanding.