1. This is a matter referred to this Bench under Chap. 5, Rule 3 of the Original Side Rules. It is an application by the defendants in Suit No. 1895 of 1936 of the original civil jurisdiction of this Court for relief under the Bengal Money-lenders Act, 1940. On 1st June 1936, the applicants executed certain documents in the following form. I will take the first document; they are all alike in form and date.
Rs. 2500. 83 Cossipore Road, Calcutta,1st June 1936.Sixty days after date without grace we promise to pay to Messrs. Hursookhdas Balkissendass or order at Calcutta the sum of rupees two thousand five hundred only for value received. Sd. Dhirendranath Boy.Sd. Girindranath Roy. Sd. Birendranath Roy.
2. Across that document was written 'Accepted. Dhirendranath Roy, Girindranath Roy, Birendranath Roy'. The document was executed on a paper on which is engraved the form of a stamp for Rs. 2-4-0. The upper part of the stamp bears the word 'hundi'. In all seven documents, similar to the one mentioned, bearing different amounts were executed on 1st June 1936. The total amount specified in the seven documents is Rs. 20,000. Apparently, those documents were not met at maturity although they were presented to the makers, with the result that a suit was brought on the original side of this Court by the plaintiffs against the defendants. The suit was brought under the provisions of O.37, Civil P.C., which provide for a summary method of obtaining judgment. In the plaint the instruments just mentioned were set out and it was stated that the plaintiff-firm's claim was against the defendants as drawers of the seven hundis drawn upon and accepted by the defendants themselves, payable to the plaintiff-firm or order at Calcutta. Paragraph 2 of the plaint alleges that the defendants verbally agreed to pay interest after the due dates at the rate of 12 per cent. per annum. Paragraph 3 alleges that the said hundis were duly presented for payment on the due dates, but were dishonoured. Paragraph 4 sets out the claim by the plaintiffs, the principal, namely Rs. 20,000 and the interest from the respective due dates up to 30th November 1936, at 12 per cent. per annum, such interest amounting to Rs. 933-10-8. The claim was for a decree for Rs. 20,933-10-8 interim interest, and interest on judgment. Though it does not appear that the claim for interest under the verbal agreement alleged was strictly within the provisions Order 37, Rule 2, yet a decree was passed by the Court against the defendants on 5th March 1937 for the sum of Rs. 21,261-9-10 with interest thereon at the rate of six per cent. per annum from the date thereof until realization. We are informed that a sum of about Rs. 5000 has been paid by the defendants, the applicants, to the plaintiffs under that decree.
3. On 1st September 1940, the Bengal Moneylenders Act, which had previously received the assent of the Governor-General, came into force. Under that Act a loan which is not secured by way of mortgage may not bear interest exceeding a rate of ten per cent. per annum, and further provisions are made enabling Courts to reopen unsatisfied decrees where the interest has exceeded the prescribed amount. If interest on the loan had been reckoned at ten per cent. only, it would have been less than the sum of Rs. 1261-9-10 which is included in the decree in respect of interest. Consequently, the defendants-the present applicants- made an application to this Court to have the decree re-opened and to be given such relief as they were entitled to under the Bengal Money-lenders Act. That relief as claimed would include a reduction in the decretal amount in respect of the interest accrued up to the time of the decree; it would also include the cutting out of the interest awarded from the time of the decree until realisation, and it would further include the alterations of the decree so as to make the decretal amount payable by instalments and not in one sum. Such relief was originally claimed. When the matter came before this Court the defence was raised that the Bengal Money-lenders Act, in particular, Section 34 (2), under which the relief was asked, was outside and beyond the law-making powers of the Bengal Legislature in that it purported to deal with loans evidenced by promissory notes. Promissory notes are mentioned in Item 28 of List I of Schedule 7, Government of India Act, 1935, and consequently it was contended that legislation with respect to promissory notes can only be undertaken by the Federal or Central Government and not by the Government of Bengal. We asked counsel for the applicants to satisfy us that the interest included in the decretal amount exceeded ten per cent. He did so, but he stated at the same time that it exceeded ten per cent. by such a small sum that it was not worth his while to ask for relief from the excessive interest which was contained in the decretal amount. He abandoned that part of his claim for relief and simply asked for the abrogation of the interest from decree to realization, and an order for payment of the decretal amount without interest by instalments. The Bengal Money-lenders Act in Section 2 (12), defines 'loan' to be an advance, whether of money or in kind, made on condition of repayment with interest and includes any transaction which is, in substance, a loan but does not include amongst other things,
(e) an advance made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881, other than a promissory note.
4. The first question, therefore, is whether the instruments upon which the plaintiffs sued and obtained the decree at any rate in part were promissory notes or whether they were other negotiable instruments as defined in the Negotiable Instruments Act of 1881. Section 4, Negotiable Instruments Act, defines a promissory note as follows:
A 'promissory note' is an instrument in writing (not being a bank-note or a currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.
5. Section 5 enacts:
A 'bill of exchange' is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
6. There is no definition in the Negotiable Instruments Act of the instrument called a 'hundi.' Apparently, there is no legal definition either statutory or otherwise of a hundi, though such documents are in common use. There is, however, a definition or description of a hundi in Wilson's Glossary published in 1940 and edited by Mr. Ganguly and Mr. Basu, both advocates of this Court, and that description or definition is 'hundi-a bill of exchange.' The applicants in order to bring themselves within the Act say that although these instruments bear the word 'hundi' on the face of them, they are promissory notes simply. The plaintiffs on the other hand contend that these instruments are on the face of them labelled 'hundis' and so bills of exchange, that further they have been accepted by the applicants, so that both in their nature and by their description they are bills of exchange other than promissory notes. The documents themselves, as I have said, were executed on engraved paper as described. It must be remembered, however, that under the Stamp Rules of 1925 made under the Stamp Act of 1899 it is provided in Rule 5 that:
A promissory note or bill of exchange shall, except as provided by Section 11 or Rules 13 and 17, be written on paper on which a stamp of the proper value, with or without the word 'hundi' has been engraved or embossed.
7. Section 11, Stamp Act, so far as it is material provides:
The following instruments may be stamped with adhesive stamps, namely:
(a) Instruments chargeable with the duty of one anna (or half an anna), except parts of bills of exchange payable otherwise than on demand and drawn in sets;
(b) bills of exchange and promissory notes drawn or made out of British India.
8. Rule 13 of the Stamp Act Rules, as far as is material, provides:
The following instruments may be stamped with adhesive stamps, namely:(a) Bills of exchange payable otherwise than on demand and drawn in sets, when the amount of duty does not exceed one anna for each part of the set.
9. Rule 17 provides:
The following instruments when stamped with adhesive stamp shall be stamped with the following descriptions of such stamps, namely:
(a) Bills of exchange, cheques and promissory notes drawn or made out of British India and chargeable with a duty of more than one anna; with stamps bearing the words 'foreign bill.
10. It will be seen, therefore, that Section 11, Stamp Act, Rule 13 and Rule 17 of the Stamp Act Rules, have no application whatever to documents of the kind now under consideration and that Rule 5 simply provides that a promissory note or a bill of exchange shall be written on paper on which a stamp of the proper value with or without the word 'hundi' is engraved or embossed. Therefore, an instrument on which the word 'hundi' is engraved may be either a promissory note or a bill of exchange. The word 'hundi' on the stamp does not determine the character of the document. To determine the character of the document we must look to the provisions of the document itself. Pram the definitions of 'promissory notes' and 'bills of exchange' it will be seen that the essential character of a promissory note is that it shall contain a promise and the essential character of a bill of exchange is that it shall contain an order. In this particular case each one of these instruments contains a promise. None of them contains an order. They, therefore, satisfy the definition of a promissory note, but do not satisfy the definition of a bill of exchange. It is contended, however, that the word 'accepted' over the signatures of the makers changed the character of the document from a promissory note to a bill of exchange. Certainly it is not usual for the maker of a promissory note to write 'accepted' across it, but it is sometimes the case that the maker of a bill of exchange writes 'accepted' across it. But that in my view is not conclusive. The word 'accept' simply means with regard to bills of exchange, to take responsibility for or to agree to meet. That is according to common language. In Section 7, Negotiable Instruments Act, where reference is made to the acceptor of a bill of exchange, it is provided:
After the drawee of a bill has signed his assent upon the bill . . . and delivered the same, or given notice of such signing to the holder or to some person on his behalf he is called the 'acceptor.'
11. That indicates what acceptance means according to the Negotiable Instruments Act. It means assent, but it means assent on the part of the drawee. Here there is no drawee because there is no order. The effect of the word 'acceptance,' if it has any effect at all, which I very much doubt, is simply to add the assent of the maker of the note to the promise he has already given. In other words, it repeats the promise the promisor has already made. That can have no further legal effect. In my view it is clear from the definitions of 'promissory note' and 'bill of exchange' that these particular documents are nothing but promissory notes. Those conclusions follow from a consideration of the Negotiable Instruments Act. However, they appear to be in keeping with the decisions which were given upon promissory notes and bills of exchange before the law was codified either here or in England. In Davis v. Clarke (1844) 6 QB 16 in discussing the question as to whether a particular document was a promissory note or a bill of exchange Coleridge J., said:
The safe course is to adhere to the mercantile rule that an acceptance can be made only by the party addressed, or for his honour. Here the last is not pretended; and the first cannot be presumed. If the John Hart addressed is different from the John Hart who draws, there is still no acceptance; if the same, then the instrument is a promissory note and not a bill of exchange.
12. There is also the dictum of a very great lawyer, Parke B., in Peto v. Reynolds (1854) 9 Ex 410 At p. 415, Parke B. said:
With the exception of Regina v. Hawkes (1838) 2 Mood CC 60 there is no case in which it has ever been decided that an instrument could be a bill of exchange where there was not a drawer and a drawee.
13. A little later:
I do not see why the instrument may not be treated as a promissory note, because, upon the face of it, there is a promise to pay the amount written in the name of Samuel Reylonds.
14. In coming to the conclusion based on a consideration of the Negotiable Instruments Act that these instruments are promissory notes and not bills of exchange, therefore, there is the support of the law previous to its codification. The position then being that these documents are promissory notes, the question is whether, the decrees being based on them, the Bengal Provincial Legislature directing the Court to alter them was acting outside its legislative powers. As I said earlier it was contended that only the Federal Legislature can legislate with regard to promissory notes and not the Provincial Legislature. The powers that we are asked to exercise were given by Section 34 (1) (b), Bengal Money-lenders Act:
In respect of loans advanced before the commencement of this Act other than those referred to in Clause (a) (which are loans secured by mortgage). . . .
(ii) On the application of a judgment-debtor against whom a decree in such suit has been passed whether before or after the commencement of this Act and after notice to the decree-holder, the Court may order at any time after the decree has been passed that the amount of the decree shall, subject to such conditions as the Court may impose, be payable without interest in such number of annual instalments, on such dates and within such period not exceeding twenty years as the Court thinks fit having regard to the circumstances of the plaintiff and the defendant or the decree-holder and the judgment-debtor and the amount of the decree, and that, if default is made in making payment of any instalment that instalment and not the whole of the decretal amount shall be recoverable,
15. This was a loan based on a promissory note. It was a loan to which prima facie the provisions of the Act apply. The plaintiffs said that the Act is ultra vires because it deals with promissory notes which is a federal matter. Now, the Act certainly deals with loans based on promissory notes. But the main and obvious purpose of the Bengal Money-lenders Act is to give relief to borrowers of money. The Local Legislature has powers to do that under item 27 of List II. But borrowers of money very frequently give promissory notes and it would be impossible to give relief to borrowers of money in a great many cases if promissory notes and decrees under them were untouched. The Act appears to deal with promissory notes only so far as is necessary to give relief to borrowers. If it were necessary to decide whether the Bengal Moneylenders Act 1940, in this respect, were encroaching upon the powers of the Central Legislature under List I, item 28 to legislate with respect of promissory notes, or dealing incidentally with rights of holders of promissory notes in the carrying out of its purpose of dealing with money-lenders and money-lending under List II, item 27, I should be prepared to decide that matter. But whatever the legal position as regards the Act and promissory notes may be, this case has to be decided upon its own facts.
16. When the Bengal Money-lenders Act came into force on 1st September 1940, after the Governor. General had given his assent, the rights and obligations of the promisees and the promisors under these notes had become merged in the rights of the decree-holders and the judgment-debtors respectively. The decree-holders obtained their decrees for the principal and interest up to the date of the decree under Order 37, Rule 2, Civil P.C. From the date of the decree the decree-holders got their subsequent interest under Section 34, Civil P.C. Under whatever provisions of the law the decree was given, we have to deal with the decree as it stood at the time this application was made, because that decree embodies the rights of the decree-holders and the judgment-debtors. We are asked to alter not the rights of anyone under a promissory note but to alter the rights of someone under the decree by striking out the order for the payment of interest from the date of the decree to realization and by making the decretal amount payable by instalments instead of in one sum. This is to be done by the exercise of the powers given to the Court by the Bengal Money-lenders Act after that Act had received the assent of the Governor-General. The Bengal Legislature with the assent of the Governor. General was competent to give the Court those powers under Items 4 and 15 of the Concurrent List, List III. (See Section 107 (2), Government of India Act). That being so, the question of the validity of the provisions of the Bengal Money-lenders Act with regard to promissory notes does not arise in this case. This view is in accordance with the decision of the majority of the Federal Court in the recent case in Subrahmanyan Chettiar v. Muthuswami Goundan . For these reasons I am of the opinion that this Court has power to give the relief now asked for, namely to alter the decree so that it no longer carries interest as from the date it was passed and to make it payable, instead of in one sum, by instalments. The balance of the decretal amount will be payable in four annual instalments, the first instalment of Rs. 4011 beginning on 1st May 1941 : the other three instalments of Rs. 4000 each will be payable on 1st May of each year. There will be no order as to costs in this matter. Certificate under Section 205, Government of India Act of 1935, is granted.
17. I agree and I have nothing to add.
Nasim Ali, J.
18. I agree. In the hundis in question drawers and the drawees are the same persons. They contain two promises by the same persons to pay the amount to the payee. Further, the hundis in question do not contain anything in the writing of the makers from which the drawees can be ascertained with reasonable certainty. The word 'accepted' and the signatures under that word may imply some sort of arrangement that the drawers themselves would be the drawees. But such arrangement is not an arrangement evidenced by anything in the writing of the maker. The instruments in question contain promises to pay. In view of the contents of the instruments in question it is very difficult to read these promises as orders.
19. The contention of the decree-holder firm is that the decision of the majority of the Judges of the Federal Court (Gwyer C. J., and Varadachariar J.) in Subrahmanyan Chettiar v. Muthuswami Goundan does not conclude the dispute relating to the question whether Section 34 (1) (b) (ii), Bengal Money-lenders Act, 1940, is ultra vires of the Bengal Legislature. The arguments in support of this contention are these : (1) The definition of 'debt' in the Madras Act does not expressly include a debt on a promissory note. Sections 7, 8 and 19, Madras Act, do not expressly refer to decrees on promissory notes, passed before the commencement of the said Act. In view of the special provisions of the Madras Act the pith and substance of the said Act was held by the majority of the Judges as legislation not with respect to promissory notes. The definition of 'loan' in the Bengal Money-lenders Act expressly includes promissory notes. Sections 30, 31 and 34 (1) (b), Bengal Act, operate on decrees passed before the commencement of the Act in suits on loans which expressly include loans on promissory notes. The pith and substance of the Bengal Act cannot, therefore, be said to be legislation not with respect to promissory notes. (2) The majority of the Judges did not decide whether decrees in suits on promissory notes come under Item 53 of List I or not.
20. The decision of the majority of the Judges in Subrahmanyan Chettiar v. Muthuswami Goundan ('41) 28 AIR 1941 FC 47 is that legislation with respect to decrees on promissory notes before the commencement of the Madras Act is not legislation 'with respect to promissory notes' (Item 28 of List I). It is true that there are some observations in the judgment of the Chief Justice of India to the effect that the Madras Act contains no express reference to promissory notes and that the pith and substance of the Madras Act cannot be said to be legislation with respect to promissory notes but the decision of the learned Chief Justice was based on the broad ground that a decree on a promissory note passed before the commencement of the Madras Act was not a debt on the promissory note, the debt having merged in the decree before the commencement of the Act. Varadachariar J. made a distinction between decrees passed before the date of the Madras Act and decrees, passed subsequent to the Act and repelled the contention that where the decree on promissory note was passed before the Madras Act the matter must be regarded as falling under Item 28 of List I. In view of the interpretation put by the majority of the Judges upon the words 'promissory note' in Item 28 of List I, the Bengal Act so far as it operates on decrees in suit on loans evidenced by promissory notes passed before the commencement of the Act would not come under the said item. It is true that the majority of the Judges in Subrahmanyan Chettiar v. Muthuswami Goundan do not expressly refer to Item 53 of List I in their judgments. Sulaiman J. in his judgment refers to this item. This item refers to jurisdiction and powers of all Courts with respect to any of the matters in List I. The only item in this list dealing with promissory notes is Item 28. This item having been interpreted by the majority of the Judges to exclude decrees in suits on promissory notes before the commencement of the Act it was not necessary for the learned Judges to refer to Item 53. If decrees on promissory notes before the commencement of the Act are outside Item 28, they are necessarily outside Item 53. The provisions of Section 34 (1) (b) (ii) are not in conflict with the Negotiable Instruments Act (an existing Indian law on a subject in List I within the meaning of Section 107 of the Constitution Act). These provisions are in conflict with Rules 3 and 11, Order 21, Rule 2 (2-b), (3), Order 37, Civil P.C. (an existing Indian law). In view of the decision of the majority of the Judges in Subrahmanyan Chettiar v. Muthuswami Goundan that decrees on promissory notes passed before the commencement of the Act do not come under Item 53 read with Item 28 of List I, the impugned provisions must be held to be with respect to the Code of Civil Procedure, and jursdiction and powers of Courts with respect to matters outside the Federal List. They, therefore, come under Items 4 and 15 in List III. The repugnancy of the impugned provisions to the Code of Civil Procedure (an existing Indian law) has, therefore, been cured by the assent of the Governor-'General.