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Mada Nagaratnam Vs. Puvvada Seshayya and Anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1939Mad361; (1939)IMLJ272
AppellantMada Nagaratnam;In Re: the Madras Agriculturists' Relief Act
RespondentPuvvada Seshayya and Anr.;
Cases ReferredSadanand v. Aman Khan
Excerpt:
.....are overburdened with debt cannot cultivate their lands to the best advantage. the manager is in the position of an agent and the provincial legislature has under the concurrent legislative list power to legislate with regard to agency as well as with regard to contract......liability, the legislature is not interfering with any principle of hindu law. the same remarks apply in the case of the manager of a family contracting a debt for family necessity. the members of the family are liable to the extent of their interests in the family property for so much of the debt as is lawfully recoverable. the manager is in the position of an agent and the provincial legislature has under the concurrent legislative list power to legislate with regard to agency as well as with regard to contract. there is no substance in the argument that the act operates to change the principles of hindu law.18. for the reasons indicated we hold, that the madras agriculturists' relief act is intra vires the powers of the provincial legislature and the references will be.....
Judgment:

Alfred Henry Lionel Leach, C.J.

1. Under the provisions of Order 46, r. 1 of the Code of Civil Procedure the District Munsif of Guntur, the district Munsif of Cuddalore and the Subordinate Judge of Cocanada have referred to this Court for decision questions with regard to the validity of the Madras Agriculturists' Relief Act, 1938, an Act passed by the Madras Legislature to provide for the relief of indebted agriculturists in the Province. The Act provides for the scaling down of debts and interest and for remission of arrears of rent. All the references raise the question whether the provisions of the Act relating to the scaling down of debts and interest are ultra vires the powers of the Provincial Legislature in that these provisions are repugnant to provisions of the Negotiable Instruments Act, 1881. The reference by the District Munsif of Guntur couples the Usurious Loans Act, 1918, with the Negotiable Instruments Act and the reference by the 'District Munsif of Cuddalore raises the further question whether the Act is ultra vires because its provisions conflict with the provisions of Hindu Law which impose upon a son the pious obligation to discharge his father's debts, lawfully contracted, and liability on a member of a joint family to pay out of his share of the family property a debt incurred by, the manager of the family for a family necessity. The references have been heard together and it will be convenient to answer them in one judgment.

2. The objections to the Madras Agriculturists' Relief Act are based on provisions of the 'Government of India Act, 1935, and the questions referred will be more readily understood if the relevant sections of the latter enactment are first stated. Section 99 of the Government of India Act provides that subject to the provisions of the Act, the Federal Legislature may make laws for the whole or any part of British India or for any Federal State, and a Provincial Legislature may make laws for the Province or for any part thereof. Section 100, Sub-section (1) confers upon the Federal Legislature exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule to the Act (the 'Federal Legislative List'). Sub-section (2) provides that, notwithstanding anything in Sub-section (3), the Federal Legislature, and subject to Sub-section. (1) a Provincial Legislature also, have power to make laws with respect to any of the matters enumerated in List III in the Schedule, (the 'Concurrent Legislative List'). Sub-section (3) states that subject to the two preceding sub-sections the Provincial Legislature has, and the Federal Legislature has not, power to make laws for a Province or any part thereof with respect to any of the matters enumerated in List II (the 'Provincial Legislative List'). The Provincial Legislature is, therefore, given exclusive power to legislate with regard to the matters specified in List II. Section 107 deals with the position when there is inconsistency between a Federal law and a Provincial law, or between an 'existing Indian law' and a Provincial law. Sub-section (1) of this section reads as follows:

If any provision of a Provincial law is repugnant to any provision of a Federal law which the Federal Legislature is competent to enact or to any provision of an existing Indian law with respect to one of the matters enumerated in the Concurrent Legislative List, then subject to the provisions of this section, the Federal law, whether passed before or after the Provincial law, or, as the case may be, the existing Indian law shall prevail and the Provincial shall to the extent of the repugnancy be void.

3. An existing Indian law is defined in Section 311. It is not necessary to set out the whole of the definition. Stated shortly it means any law which was lawfully passed before the commencement of Part III of the Act. Part III relates to Governors' Provinces and deals inter alia with the constitution of Provincial Legislatures. It came into force on the 1st April 1937.

4. Sub-section (2) of Section 107 states:

Where a Provincial law with respect to one of the matters enumerated in the Concurrent Legislative List contains any provision repugnant to the provisions of an earlier Federal law or an existing Indian law with respect to that matter, then, if the Provincial law, having been reserved for the consideration of the Governor-General or for the signification of His Majesty's pleasure has received the assent of the, Governor-General or of His Majesty, the Provincial law shall in that Province prevail, but nevertheless the Federal Legislature may at any time enact further legislation with respect to the same matter.

5. Reading Sub-sections (1) and (2) of Section 107 together the effect is this. A Federal law always overrides a Provincial law unless the Provincial law is in respect of one of the matters enumerated in the Concurrent Legislative List and has been reserved for the consideration of the Governor-General or for the signification of His Majesty's pleasure and has received the assent of the Governor-General or of His Majesty, in which case the Provincial law prevails in the Province until the Federal Legislature chooses to legislate further. The position is the same in respect of an 'existing Indian law'. An existing Indian law with respect to a matter enumerated in the Concurrent Legislative list overrides a Provincial law unless the Provincial-law has been reserved and has received the assent under Sub-section (2). The power of the Federal Legislature to legislate further when a Provincial law has been reserved and has received the assent is subject to the proviso that no Bill or amendment shall be introduced without the previous sanction of the Governor-General. The respective legislative lists are comprehensive, but Section 104 empowers the Governor-General to assign to the Federal Legislature Or to a Provincial Legislature a matter which has not been enumerated.

6. To the Federal Legislature is given the power of legislating with regard to:

Cheques, bills of exchange, promissory notes and other like instruments.

7. This is paragraph 28 of the Federal Legislative List. To the Provincial Legislature is given the power of legislating with regard to 'agriculture' (paragraph. 20). The word 'agriculture' is used in a wide sense and it is expressly stated that it includes agricultural education and research, protection against pests and prevention of plant diseases, improvement of stock and prevention of animal diseases, veterinary training and practice, pounds and the prevention of cattle trespass. The Provincial Legislature's powers also relate to 'land', that is to say, rights in or over land, land tenures including the relation of landlord and tenant and the collection of rents; transfer, alienation and devolution of agricultural land, land improvement and agricultural loans (paragraph 21) and 'money-lending and moneylender' (paragraph 27). Included in the Concurrent Legislative List are:

Contracts including partnership, agency, contracts of carriage and other special forms of contract, but not including contracts relating to agricultural land' (para. 10).

8. I will now turn to the provisions of the Madras Agriculturists' Relief Act. Section 7 of the Act provides that notwithstanding any law, custom, contract or decree of Court to the contrary, all debts payable by an agriculturist at the commencement of the Act, shall be scaled down in accordance with the provisions of Chapter II of the Act. No sum in excess of the amount as so scaled down shall be recoverable from him or from any land or interest in land belonging to him; but shall his property be liable to be attached and sold or proceeded against in the execution of any decree against him in so far as such decree is for an amount in excess of the sum as scaled down under Chapter II. Section 8 makes provision for the scaling down of debts incurred before the 1st October, 1932. The section states that all interest outstanding on the 1st October, 1937, in favour of any creditor of an agriculturist whether the same be payable under law, custom or contract or under a decree of Court and whether the debt or other obligation has ripened into a decree or not, shall be deemed to be discharged and only the principal or such portion thereof as may be outstanding shall be deemed to be the amount repayable by the agriculturist on that date. Where an agriculturist has paid to any creditor twice the amount of the principal whether by way of principal or interest or both, such debt including the principal, shall be deemed to be wholly discharged. Where the sums repaid by way of principal or interest or both fall short of twice the amount of the principal, such amount only as would make up this shortage, or the principal amount or such portion of the principal amount as is outstanding, whichever is smaller, shall be repayable. Where a debt has been renewed or included in a fresh document in favour of the same creditor, the principal originally advanced by the creditor together with such sums if any as have been subsequently advanced as principal shall alone be treated as the principal sum repayable by the agriculturist under the section. Section 9 makes provision for scaling down of debts incurred on or after the first October, 1932. In such cases interest shall be calculated up to the commencement of the Act at the rate applicable to the debt under the law, custom, contract or decree of Court under which it arises or at 5 per cent, per annum simple interest, whichever is less, and credit shall be given for all sums paid towards interest and only such amount as is found outstanding for interest thus calculated shall be deemed payable together with the principal amount or such portion of it as is due. Any part of the debt which is found to be renewal of a prior debt shall be deemed to be a debt contracted on the date on which such prior debt was incurred, and if such debt had been contracted' prior to the 1st October 1932 shall be dealt with under the provisions of Section 8. Section 12 states that all debts which have been scaled down under the provisions of the Act shall, so far as any sum remains payable thereunder, carry from the date up to which they have been scaled down interest on the principal amount due on that date at the rate previously applicable under law, custom, contract or otherwise; provided that it shall not in any case exceed 6 1/4 per cent, per annum simple interest. Under Section 13, in any proceeding for recovery of a debt, the Court shall scale down all interest on any debt incurred by an agriculturist after the commencement of the Act, so as not to exceed a sum calculated at 6 1/2 per cent, per annum simple interest, but power is reserved for the Provincial Government to alter and fix any other rate of interest from time to time.

9. The Madras Agriculturists' Relief Act makes no difference between a simple contract debt and debt due on a promissory note or other negotiable instrument. Therefore, debts arising on negotiable instruments are within the purview of the Act. If, debts on promissory notes were excluded, the Act would to a very large extent be rendered nugatory, the practice of lending money on promissory notes being so widespread. It is said that as the Negotiable Instruments Act contemplates the payment of the full amount due on a negotiable instrument, the Provincial Legislature has no power to enact a measure which cuts down the amount payable on the negotiable instrument. In this connection, our attention has been drawn to the provisions of Sections 32, 78, 79 and 80 of the Negotiable Instruments Act. Section 32 states 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 term 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. Section 78 says that subject to the provisions of Section 82, which relates to the discharge from liability, payment of the amount due on a promissory note, bill of exchange or cheque, must in order to discharge the maker or acceptor, be made to the holder of the instrument. Section 79 requires that 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, and Section 80 states that interest shall be calculated at 6 per cent, per annum where no interest is specified in the instrument.

10. The first question which falls for decision is whether the Madras Agriculturists' Relief Act is a measure which is directly within the exclusive powers conferred upon the Provincial Legislature. The Government of India Act, 1935, has been drafted in the light of the experience gained by the working of the Canadian and Australian Constitutions, particularly by the working of the Canadian Constitution which is governed by the British North America Act, 1867. The British North America Act differs in an important respect from the Government of India Act in that it contains no Concurrent Legislative List, apart from the two subjects mentioned in Section 95. The powers of the Federal Parliament in Canada are defined in Section 91 of the Act and the powers of the Provincial Legislatures in Section 92. But the fact that there is a Concurrent Legislative List in the Indian Act does not affect the principles which apply in deciding what is within the exclusive power of the Federal Legislature and what is within the exclusive power of a Provincial Legislature. There have been numerous cases before the Privy Council relating to the British North America Act and the principles stated by the Judicial Committee in those cases have direct application when the Court has to consider whether a particular Act is or is not ultra vires the powers of a Provincial Legislature. However carefully an Act is drawn it is not possible to avoid questions arising with regard to the powers of the respective legislatures, but as was stated in Citizens Insurance Co. of Canada v. Parsons (1881) 7 A.C. 96 it could not have been the intention that conflict should exist and in order to prevent such a result, the two sections must be read together, and the language of one interpreted, and, where necessary, modified, by that of the other. In this way, as was further pointed out, it may be, in Most cases, be found possible to arrive at a reasonable arid practical construction of the language of the sections so as to reconcile the respective powers they contain, and give effect to all of them. The fact that an Act of a Provincial Legislature may in some respect trench upon a Federal subject is not the deciding factor. In deciding whether a particular Act is ultra vires the powers of a Legislature the Court has to have regard to 'the true nature and character of the legislation in the particular instance in order to ascertain the class of subjects to which it really belongs'. Russell v. The Queen (1882) 7 A.C. 829. In Hodge v. The Queen (1883) 9 A.C. 863 the Privy Council, in deciding whether an Act passed by the Legislature of the Province of Ontario and known as 'The Liquor Licence Act of 1877' was within the; powers of the Provincial Legislature said that subjects which in one aspect and for one purpose fall within Section 92 of the British North America Act may in another aspect and for another purpose fall within Section 91. In, other words, in one aspect and for one purpose a subject may be within the powers, of the Federal Parliament while in another aspect and another purpose it may fall within the powers of a Provincial Legislature. This statement of the law; was emphasised in John Deere Plow Co. Ltd. v. Wharton (1915) A.C. 330 where Lord Haldane, in delivering the Judgment of the Board observed:

It must be borne in mind in construing the two sections, that matters which in a special aspect and for a particular purpose may fall within one of them may in a different aspect and for a different purpose fall within the other. In such cases the nature and scope of the legislative attempt of the Dominion or the Province, as the case may be, have to be examined with reference to the actual facts if it is to be possible to determine under which set of powers it falls in substance and reality.

11. The House of Lords expressed the same opinion in Gallagher v. Lynn (1937) A.C. 863 a case tinder the Government of Ireland Act, 1920. That Act conferred upon the Parliament of Northern Ireland the power to make laws for the peace, order and good Government of Northern Ireland with certain limitations. The Act expressly provided that the Parliament of Northern Ireland should not have power to make laws in respect of trade with any place out of that part of Ireland within their jurisdiction, except so far as trade may be affected by the exercise of the powers of taxation given to the said Parliaments, or by regulations made for the sole purpose of preventing contagious disease, or by steps taken by means of inquiries or agencies out of that part of Ireland within their jurisdiction for the improvement of the trade of that part, or for the protection of traders of that part from fraud.

12. The Parliament of Northern Ireland passed an Act called the Milk and Milk Products Act (Northern Ireland), 1934, which had the effect of putting an end to the milk trade between the farmers of Donegal which is in the Free State and customers in Derry which is in No them Ireland. It was said that the Act was an Act in respect of trade outside Northern Ireland. The House of Lords refused to accept this contention holding that it was a law for the peace, order and good Government of Northern Ireland in respect of precautions taken to secure the health of the inhabitants of Northern Ireland by protecting them from the dangers of an unregulated supply of milk. Lord Atkin observed:

It is well-established that you are to look at the 'true nature and character of the legislation' Russell v. The Queen (1883) 7 A.C. 829, 'the pith and substance of the legislation'. If, on the view of the statute as a whole, you find that the substance of the legislation is within the express powers, then it is not invalidated if incidentally it affects matters which are outside the authorised field. The legislation must not under the guise of dealing with one matter in fact encroach upon the forbidden field. Nor are you to look only at the object of the legislator. An Act may have a perfectly lawful object e.g. to promote the health of the inhabitants, but may seek to achieve that object be invalid methods, e.g. a direct prohibition of any trade with a foreign country. In other words, you may certainly consider the clause of an Act to see whether they are passed in respect of the forbidden subject. In the present case any suggestion of an indirect attack upon trade is disclaimed by the appellant. There could be no foundation for it. The true nature and character of the Act, its pith and substance, is that it is an Act to protect the health of the inhabitants of Northern Ireland; and in those circumstances, though it may incidentally affect trade with County Donegal, it is not passed 'in respect of trade, and is therefore not subject to attack on that ground.

13. The passage which I have quoted from the judgment of Lord Atkin (which was concurred in by Lord Thankerton, Lord Macmillan and Lord Wright) was quoted in extenso in the judgment of the Privy Council in Shannon v. Lower Mainland Dairy Products Board (1938) A.C. 708 a case which related to the powers of the British Columbia Legislature to set up a central marketing Board, to establish or approve schemes for the control and regulation within the province of the transportation, packing, storage and marketing of natural products, to constitute marketing Boards, to administer such schemes and to vest in them powers considered necessary or advisable to exercise those functions, including the powers to fix and collect licence fees. It was held that the Act did not encroach upon the powers of the Federal Legislature to deal with the regulation of trade and commerce and the raising of money by taxation. The Court has, therefore, to look to the Madras Agriculturists' Relief Act to see whether it is in substance within the express powers of the Provincial Legislature. If it is, it is not invalidated' because incidentally it may affect matters which are within the Federal field.

14. The Madras Agriculturists' Relief Act, 1938, was placed on the Statute book because the Madras Legislature considered that it was expedient to provide relief to indebted agriculturists in the Province and the provisions of the Act are all directed to the attainment of this object. The Court is not concerned with the policy of the Act, but with the effect of its provisions. That agriculturists in the Province are heavily indebted is a matter of common knowledge and the Legislature decided that the situation demanded that relief should be given to them in the form of the scaling down of their debts. Agriculturists who are overburdened with debt cannot cultivate their lands to the best advantage. They have not the means, and there is a risk of their lands passing into the hands of non-agriculturists to the determent of agriculture. Therefore the Act is one which does relate to agriculture and consequently relates to a subject reserved for the provincial Legislature. But the matter does not rest there. The Act is certainly one which relates to money-lending to agriculturists and money-lending is another subject which is reserved for the Provincial Legislature. The power to deal with money-lending must carry with it a power to limit the amount to be recovered by the money-lender. This has not been seriously challenged. The main attack on the Act has been based on the fact that its scaling down provisions are repugnant to the Negotiable Instruments Act in that they do not allow the full amount due on a promissory note to be recovered from an agriculturist. But we do not regard the Agriculturists Relief Act as really affecting the principles embodied in the Negotiable Instruments Act. Negotiation of a promissory note is not prohibited nor is it said that a maker or an indorser shall not be liable. The only effect of the Madras Agriculturists' Relief Act so far as Negotiable Instruments are concerned is to reduce liability where the maker or indorser is an agriculturist. In providing for this the Provincial Legislature was acting in the interests of agriculture and regulating money-lending to agriculturists. It could never have been the intention of Parliament in conferring a general power on the Federal Legislature to legislate with regard to negotiable instruments to reduce the power of Provincial Legislature to deal with subjects within its exclusive control. When examined the Madras Agriculturists' Relief Act is in substance within the express powers of the Madras Legislature and the fact that in particular cases it may operate to reduce liability on contracts evidenced by negotiable instruments cannot affect its validity. The authorities which 1 have quoted are definite on the point.

15. Even if the matters dealt with in the Madras Agriculturists' Relief Act do not come within the exclusive powers of the Provincial Legislature the Act can be supported on the ground that it relates to contracts falling within the Concurrent Legislative List. The indebtedness of the agriculturists arises out of contract and contract of the nature contemplated by the Concurrent Legislative List. Regarding the Act as an Act dealing with a matter falling within the Concurrent Legislative List, Section 107 of the Government of India Act comes into operation. The Negotiable Instruments Act is an 'existing Indian Law' within the meaning of Section 107. The Madras Agriculturists' Relief Act was reserved for the consideration of the Governor-General under the provisions of Section 107(2) and received his assent. Therefore even if the Act does not come within the exclusive powers of the Legislature its provisions must prevail in the Province by virtue of the provisions of Section 107 of the Government of India Act, unless and until the Federal Legislature thinks fit to legislate in respect of the same matter. But by virtue of the proviso to the section this cannot happen without the previous sanction of the Governor-General.

16. The argument based on the Usurious Loans Act stands or falls with the argument based on the Negotiable Instruments Act. If the Provincial Legislature had the power to pass the Madras Agriculturists' Relief Act as being an Act dealing with matters in the Provincial Legislative List - and we hold that it had - the fact that it affects, so far as agriculturists are concerned, the discretion given to the Court by the Usurious Loans Act can make no difference to its validity But in any event the Madras Agriculturists' Relief Act here again finds support from the provisions of Section 107 of the Government of India Act. In the course of the argument our attention was drawn to the decision of the Patna High Court in Sadanand v. Aman Khan (1938) 20 P.L.T. 1. We have been given to understand that this decision is being made the subject-matter of an appeal to the Federal Court, and in these circumstances we do not consider it fitting that we should discuss the views expressed in the judgments delivered by the learned Judges who decided that case. It is sufficient to say that in deciding the references now before us we have considered the Patna decision.

17. The only question which remains to be considered is whether the Madras Agriculturists' Relief Act is ultra vires because it conflicts with the provisions of the Hindu law imposing on a son pious obligation to discharge his father's debts and liability on a member of a joint family to pay out of his share of the family property debts incurred by the manager of the family for family necessity. The argument here is that the Government of India Act does not authorise either the Federal Legislature or the Provincial Legislature to legislate on matters relating to Hindu Law and that, therefore, until the Governor-General under the powers conferred upon him under Section 104 of the Act has assigned to the Federal Legislature or the Provincial Legislature power to enact laws with regard to Hindu law, neither Legislature can pass an Act which alters the personal law of the Hindus. The Provincial Legislature has power to legislate with regard to contracts and no exception is made in respect of contracts entered into by Hindus. There is no Federal or 'existing Indian law' which stands in the way and even if there were the sanction of the Governor-General given under Section 107(2) of the Government of India Act would remove it. The Provincial Legislature had, therefore, full power to legislate with regard to contracts entered into by Hindus and to reduce their contractual obligations. A Hindu son cannot be made liable for more than what his father is liable for, and in cutting down the father's liability, the Legislature is not interfering with any principle of Hindu Law. The same remarks apply in the case of the manager of a family contracting a debt for family necessity. The members of the family are liable to the extent of their interests in the family property for so much of the debt as is lawfully recoverable. The manager is in the position of an agent and the Provincial Legislature has under the Concurrent Legislative List power to legislate with regard to agency as well as with regard to contract. There is no substance in the argument that the Act operates to change the principles of Hindu Law.

18. For the reasons indicated we hold, that the Madras Agriculturists' Relief Act is intra vires the powers of the Provincial Legislature and the references will be answered in the sense indicated in this judgment. The costs of the reference will in each case be made costs in the cause. We grant a certificate in each case under Section 205 of the Government of India Act, 1935. (Memorandum of costs will follow).


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