1. The scope and true effect of Sec. 21-A of the Banking Regulation Act X of 1949 (hereinafter called the Act) falls for determination in this appeal. The defendants who suffered an ex parte decree on the foot of a mortgage at the instance of the plaintiff-bank are the appellants in this appeal. The defendants remained ex parte in the trial Court and subsequent to the preliminary decree a final decree was also passed.
2. In this appeal filed against the preliminary decree the sole question raised is whether the defendants who claim to be agriculturists are entitled to the benefit of Act IV of 1930 (hereinafter called the State Act).
3. The learned counsel of the appellants relied upon a judgment of this Court reported in Indian Bank, Alamuru v. M. Krishna Murthy AIR 1983 Andh Pra 347, wherein the latter portion of Sec.4(e) of Act IV of 1938 was struck down as offending Art. 14 of the Constitution of India. By virtue of the said provision as it originally stood the debts due to the banks are excepted from the purview of the Act. The original provision of Sec.4 (e) is in the following terms:
B1 '4. Nothing in this Act shall affect debts and liabilities of an agriculturist falling under the following. Heads:-
(a) and (b) XX XX xx XX
(b) any liability in respect of any sum due to any co-operative society, including a land mortgage bank, registered or deemed to be registered under the Andhra Pradesh (Andhra Area) Co-operative Societies Act, 1932, or [any debt due to any corporation formed in pursuance of an Act of Parliament of the United Kingdom or of any social Indian Law or Royal Charter or Letters Patent;]'
(c) The latter portion of this clause shown in brackets was struck down and hence the exception in favour of the banks or other corporations enumerated therein is no longer in operation. Hence it is urged that the agriculturists governed by this Act are entitled to get benefit even in respect of the debts due to the bank and no bank can collect the rate other than the one notified under Sec. 13 proviso of the Act.
4. In answer to this submission the learned counsel for the plaintiff relied upon Sec. 21-A of the Banking Regulation Act inserted by Sec.24 of the Banking Laws (Amendment) Act 1983 (I of 1984). The provision is in the following terms:
'21.A. Rates of Interest Charged by Banking Companies Not To Be Subject To Scrutiny By Courts.-
Notwithstanding anything contained in the Usurious Loans Act, 1918, or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.'
It is urged that in view of the said provision that notwithstanding the above judgment, the transactions between a banking company and its debtors cannot be reopened in spite of the provisions of Usurious Loans Act or many other law relating to indebtedness in force in any State. Hence the question is whether this provision has the effect of making the provisions of the Madras Agriculturists' Relief Act IV of 1938 inapplicable to debts due to banks.
5. On the other hand the learned counsel for the appellants contended that unless the exception engrafted in Sec.4 (e) was re-enacted the benefits conferred under Act IV of 1938 shall continue in the State of Andhra Pradesh and Sec. 21A has no application.
6. We have to consider the operation of both the Acts. While construing this provision it is necessary to bear in mind that Act I of 1984 pertains to Banking Law, whereas Act IV of 1938 is a law relating to relief of the agriculturists' indebtedness governed by Entry 30 of Lists II of Seventh Schedule of the Constitution of India.
7. The learned counsel for the respondent-Bank contended that -
(1) The nonobstante clause in Sec. 21-A of the Act clearly brings in all laws relating to indebtedness in force in any State and the present State Act is one such and it is clearly covered by the said provision.
(2) The State Act also intended to prevent collection of interest that was considered to be excessive and hence Sec. 21A is attracted.
(3) Taking into account the background in which the Banking Laws (Amendment) Act was passed after the judgment of this Court the construction now urged by the Bank is correct.
8. In order to examine these submissions it is necessary to notice the provisions of the Usurious Loans Act 10 of 1918 (hereinafter called the Central Act) and its objects. The preamble of the said Act reads as follows:
'Whereas it is expedient to give additional powers to Courts to deal in certain cases with usurious loans of money or in kind.'
Section 3 which is a pivot of the Central Act empowers the Court to reopen the transaction where the Court has reason to believe that interest is excessive and the transaction was substantially unfair. The Act was amended by several States in its application to those States. The Madras Amendment of 1936 (8 of 1937) is made applicable to Andhra Pradesh and it amended Sec. 3 of the Central Act. The said Act while amending sub-section (1) of Sec. 3 of the Central Act added new Explanation I stating 'If the interest is excessive, the Court shall presume that the transaction was substantially unfair; but such presumption may be rebutted by proof of special circumstances justifying the rate of interest.' It also added a proviso to clause (b) to sub-section (2) which states.
'Provided that in the case of loans to agriculturists, if compound interest is charged, the Court shall presume that the interest is excessive.'
9. Thus it is seen that though the original Act IV of 1938 excepted all bank debts from the purview of the said Act, the State Legislature amended the Central Act and gave marginal benefit to the agriculturists by enacting a presumption as stated above. The provisions of these two Acts are intended to govern different fields and different classes of persons. The Central Act is intended to prevent collection of interest which is considered to be excessive and substantially unfair. The provisions of Sec.3(2) laid down several criterial to find out when a rate can be said to be excessive. Considering the surrounding circumstances, the Courts have held that compound interest of 18% and even 24% was reasonable rate of interest and not excessive. (Vide K. Raja Rao v. K. Veeraraju, AIR 1927 Mad 1143 and Ramalingam Chettiar v. Subramanya Chettiar, AIR 1927 Mad 620. But the object of the State Act is quite different. It is intended to confer special benefit as a class legislation on agriculturists. The benefit conferred by the Act is not to merely prevent an excessive rate of interest but to wipe out the indebtedness of the agriculturists on a class. In fact it makes a special provision under Sec.9Aof the Act in respect of mortgages wiping out those debts altogether in certain circumstances. The benefit conferred under the Act is not merely for preventing the excessive collection of interest but liquidating the debts themselves. The preamble says, ''hereas it is expedient to provide for the relief of indebted agriculturists in Andhra area of the State of Andhra Pradesh.'' Considering the agricultural economy and the general economic conditions the State Government was empowered under Sec.13, proviso, to notify the rate of interest from time to time payable by agriculturists on loans after the commencement of the Act. Viewed in this background the operation of the Central Act and the State Act are quite independent and intended to achieve different objects altogether.
10. The learned counsel laid stress on Sec.7 of the State Act which used the expression 'No sum in excess of the amount as so scaled down shall be recoverable. 'Sec.7 provides scaling down of debts payable by agriculturists at the commencement of the Act. Sec.13 speaks of rate of interest payable to agriculturists on new loans. The learned counsel also drew my attention to the meaning of the word 'excessive' which means 'outrageous or overstopping the due limits.' Once we have seen the provisions of both the Acts, the concept of excessive rate is different in both the enactments. Hence I am of the view that Sec.21-A is intended to prevent reopening the transactions on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive. The relief under the State Act is not on the ground that it is excessive but it is on the ground that the general indebtedness of agriculturists shall be relieved and they should not be required to pay more than the statutory rate and also to liquidate certain debts in its scheme.
11. It is true that we are not considering the vires of Sec. 21-A but while construing the said provision the Court is entitled to see the operation of the Central Act and the State Act. It is pertinent to note in this connection that Entry 30of List Ii of the State List in the Seventh Schedule of the Constitution of India added for the first time a new subject 'Relief of Agricultural Indebtedness'. Under the Government of India Act 1935 in the corresponding provision of Item 27 of List II of the Seventh Schedule only money lending and money lenders were found. However, construing that entry the Federal Court in Subramanyan v. Muttuswami AIR 1941 FC 47, upheld the Constitutional validity of the State Act holding that the Act comes within the scope of the provincial subject with respect to money lending and money lenders and not trenching upon the federal subject of Negotiable Instruments or Promissory Notes. This question was again considered by the Federal Court in Bank of Commerce, Khulna v. Kunja Behari, AIR 1945 FC 2 when the validity of the Bengal Money Lenders Act was questioned and it was held that the Act is void in part in so far as it encroaches on the law relating to promissory notes. But the Privy Council reversed the said view and held that the said legislation is valid being a legislation relating to the money lending in pith and substance not encroaching on the federal subject of promissory notes or banking. (Vide Prafulla Kumar v. Bank of Commerce, Khulna, AIR 1947 FC 60. Under the present Constitution to remove doubts a specific enumeration is made in the present entry stating 'Relief of Agricultural Indebtedness'. In fact the Supreme Court had an occasion to consider the scope of this Entry 30 of List II while considering the constitutional validity of the Maharashtra Debt Relief Act 3 of 1976 and held 'The whole gamut of money lending and debt-liquidation is thus within the State's legislative competence, and not in conflict with Entry 52 of List I.' (Vide Fatechand v. Stateof Maharashtra, : 2SCR828 ).
12. Thus we cannot conceive that Sec.21A is intended to operate on the field of State Legislature when there is a special law on the subject of agricultural indebtedness.
13. We shall examine this question from a different angle. Suppose that initially the State Act IV of 1938f never made an exception to the bank debts under sec.4(e): there cannot be any doubt that all debts due to the banks by agriculturists would be also governed by the State Act. A provision like Sec. 21A of the Act cannot have the effect of repealing the State law covering the field of agricultural indebtedness which is a State subject. After the judgment of this court striking down the latter portion of that clause, it must be treated as if the said portion was not enacted originally by the Legislature.
14. The last contention urged by the learned counsel for the Bank is that the Banking laws Amending Act 1983 in the light of the judgment of this Court wanted to take away the debts due to the Bank from the purview of the State Act. We cannot readily assume such intention on the part of the Central Legislation to impinge on the State Act which is a special law intended to benefit the agriculturists and which is a State subject. However, as a matter of construction I am of the opinion that sec. 21A of the Act has not the effect of engrafting an exception to the debts due to the bank without the necessity of amending the State Act. It prohibits the reopening of the debts on the ground that it is excessive; whereas the State Act liquidates the debts on the ground that the debtors are agriculturists. The operation of both the Acts is quite distinct and different. Accordingly, I am of the opinion that the debts due to the banks are not excluded from the purview of the State Act as excepted debts by virtue of S.21-A of the Act and the agriculturists governed by Act IV of 1938 are entitled to the benefit of the said Act in respect of the debts due to the banks also.
15. However in the present case in view of the fact that the defendants remained ex parte in the trial Court and no evidence was let in about their status while confirming the decree on merits, I direct the trial Court to make an enquiry about the status of the appellants whether they are agriculturists or not within the meaning of Act IV of 1938 and if the finding is affirmative to modify the decree as per the provisions of Act IV of 1938.
16. In the result, the appeal is allowed and the matter is remanded to the trial Court for fresh disposal on the above question. Subject to this direction the decree obtained by the plaintiff bank shall stand. I make no order as to costs.
17. Appeal allowed, Matter remanded.