1. This is a reference under Section 113, Civil P.C., by the Judge, Small Cause Court, at Hathras. The facts are that a suit was instituted in his Court on 6th July 1940 by Jamna Prasad against Raghunath Prasad on the basis of a bond executed by the latter on 28th September 1938. The bond was in the sum of Rs. 60 and interest was at the rate of Re. 1-2-0 per cent. per mensem. The bond was payable on demand. When the matter came before the learned Judge he felt that Sections 29 and 39, U. P. Agriculturists' Relief Act, were not reconcilable. He also thought that under the circumstances of the case interest did not accrue on the document at all. He further formulated another question of law for our decision. That question is as follows :
Whether in view of the mandatory provisions of Section 39, Agriculturists' Relief Act, it is necessary that in every document a specific date should be provided for the repayment of the loan and also the rate of interest which shall prevail, if repayment is made within that date, must be given in the document ?
2. This question is not very happily worded, but we appreciate the difficulty which the learned Judge felt, and we shall try to remove that difficulty in the course of our judgment. Section 29 of the Act provides as follows :
If an unsecured loan taken after the date on which this Act comes into force is, if it is not a loan for a fixed term, repaid within two years of the date of the taking of the loan, or, if it is a loan for a fixed period, is repaid within such period, the debtor shall not be liable to pay interest at a rate higher than the prevailing rate of interest for a secured loan of the same class in force at the time the loan was taken.
3. The rules made under the U.P. Agriculturists' Relief Act, 1934, and printed at the Government Press, give the form of a bond at page 11, and we think that creditors who advance loans to agriculturists might have the form of a bond before them at the time of the transaction and comply as nearly as possible with the form. The meaning of Section 29 of the Act is not that a bond on demand cannot be executed at all, but the meaning is that in the case of a bond on demand there must be a separate entry to the effect that if the sum advanced is paid within two years of the execution of the bond, then the debtor shall not be liable to pay interest at a rate higher than the prevailing rate of interest for a secured loan of the same class in force at the time the loan was taken. These rates are mentioned in Schedule 2, U.P. Agriculturists' Relief Act. It is, therefore, necessary for the creditor to see that an entry is made to that effect -- an entry in which the lesser rate of interest is clearly specified if the payment is made within two years of the execution of the bond.
4. All that we have stated above applies to the case of a bond which is payable on demand. If, however, a fixed term is given ; in the bond itself, then also the creditor must see that an entry is made in the bond to the effect that if the payment is made within the time fixed in the bond itself the debtor will be liable to pay interest according to the rate prevailing for a secured loan of the same class in force at the time the loan was taken. We now come to a consideration of Section 39 of the Act. That section makes it compulsory on the creditor to see that every loan given after the date on which the Act comes into force shall be evidenced by a written document of which a copy shall be given to the debtor. This is Sub-section (1) of Section 39. Under Sub-section (2), all the entries to which reference has been made by us in an earlier portion of our judgment must be made so that Section 29 of the Act might come into play and might enable the debtor to know clearly that under certain circumstances he will be able to discharge the loan by payment of a lesser rate of interest. Sub-section (3) of Section 39 then casts a disability on the creditor and says that if a loan is not evidenced by a written document and if a copy of such document has not been given to the debtor and if the document does not contain the entries required by Section 29 then the creditor will lose interest altogether.
5. It was not the intention of the Legislature that bonds on demand should no longer be drawn up, but the intention was that there should be the entries which Section 29 requires. Our answer, therefore, to the reference, is that if the provisions regarding the entries as laid down in Section 29 are not complied with, then interest shall not. accrue on the document. We further think that in a case where the creditor is not entitled to any interest by reason of the failure to comply with the conditions laid down in Section 29, there is no repugnancy between Section 29 and Section 39 of the Act. As regards the first question as to the necessity of a specific date being provided for the repayment of the loan, our answer is that it is necessary to this extent that a separate entry for the repayment of the loan should be made in the document, but it is not necessary that there should be no bond payable on demand. We might make this position a little clearer. It is open to the parties to the transaction to say that the bond will be payable on demand but at the same time there should be an entry to the effect that if the loan is repaid within two years from the date of the taking of the loan, the debtor will have to pay the statutory rate of interest as provided in the Act. The bond must also state the rate of interest which shall prevail if repayment is made within two years of the execution of the bond in the case of a bond payable on demand or within the time fixed for payment if the loan is for a fixed period. These two entries, we think, must be made in the document. Our answer to the questions formulated by the learned Judge in his reference is as follows :
(1) In view of the mandatory provisions of Section 39, Agriculturists' Relief Act, it is necessary that in every document an entry should be made for the repayment of the loan and there should also be an entry for the rate of interest which shall prevail if repayment is made within that date; but this is only for the purpose of earning the, benefit provided in Section 29 of the Act. This does not mean that bond payable on demand cannot be executed. (2) If the entries required by Section 39 of the Act, are not complied with interest shall not accrue at all on the document. (3) There is no real repugnancy between Section 39 and Section 29, Agriculturists' Relief Act. The two provisions of law are enacted to meet different contingencies, as has been explained in an earlier portion, of our judgment.