TMI Blog1947 (2) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (earlier known as the Khulna Loan Coy., Ltd.) were transferred. 4. Some of the cases now under appeal to their Lordships' Board were brought by the respondents who claimed to recover loans and interest alleged to be due upon promissory notes, executed by appellant borrowers and in other instances by appellant debtors claiming a declaration that their indebtedness was at least diminished by the provisions of the Act and even in some instances that they were entitled to repayment of sums overpaid. 5. The proceedings began in 1941, 1942 and 1948, but are concerned with loans made at a much earlier date not by the respondents but by the Khulna Loan Company or the Khulna Loan Bank. In every case the loans were secured by promissory notes executed contemporaneously with the transaction. 6. The Act, the validity of which their Lordships have to determine, by Section 30 provides that "Notwithstanding anything contained in any law for the time being in force, or in any agreement (1) No borrower shall be liable to pay after the commencement of this Act-" more than a limited sum in respect of principal and interest or more than a certain percentage of the sum advanced by way of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (1) 'bank' means a banking company as defined in Section 277F of the Indian Companies Act, 1913.... (2) 'borrower' means a person to whom a loan is advanced.... (9) 'lender' means a person who advances a loan and includes a money-lender. (12) 'loan' means 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.... (d) a loan advanced before or after the commencement of this Act- (i) by a bank which was a scheduled bank on the first day of January, 1.089, or by a bank which has been declared to be a notified bank under Section 3,.... (e) an advance made on the basis of a negotiable instrument as defined by the Negotiable Instruments Act, 1881, other than a promissory note; (13) 'money-lender' means a person who carries on the business of money-lending in Bengal or who has a place of such business in Bengal, and includes a pawnee as defined in Section 172 of the Indian Contract Act, 1872; (14) 'money-lending business' and 'business of money-lending' mean the business of advancing loans either solely or in conjunction with any other business; 11. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed what banks should become notified banks under Section 2 of the Act. 18. The latter contention is plainly untenable and indeed was not persisted in in the Federal Court or before their Lordships' Board. 19. Moreover it is to be observed that in the Subordinate Court no reliance appears to have been placed upon the contention that banking rights were interfered with. The point, however, seems to have been taken in the High Court, but no decision on it was given there or in the Federal Court. 20. In these circumstances their Lordships do not think that the respondents are entitled to argue that they carry on the business of banking. No proof has been given that they do so and the facts cannot be assumed without proof. 21. The respondents are however entitled to say that the Act deals with banks and banking and is therefore void in whole or in so far as it deals with banking matters. 22. In the present cases the Judges of the High Court found in favour of the appellants on the ground that though the Federal List prevails over the Provincial List, where the two lists come in conflict, yet the Act being a money-lenders' Act, deals with what is in one aspect at least a Provin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in either Chamber of the Federal Legislature without the previous sanction of the Governor-General in his discretion. (3) If any provision of a law of a Federated State is repugnant to a Federal law which extends to that State, the Federal law, whether passed before or after the law of the State, shall prevail and the law of the state shall, to the extent of the repugnancy, be void. 24. The High Court's conclusion would no doubt be true, if they are right in saying that interest on promissory notes is a matter with respect to contracts and therefore an item contained in the Concurrent List. The Act to which it was said to be repugnant was the Negotiable Instruments Act, 1881, which no doubt applied to the whole of India, but, as the High Court points out this Act is not a Federal but an existing India Act, and under the provisions of Section 107(2) would give place to the Bengal Money Lenders Act (which had received the assent of the Governor-General), provided that Act does not deal with matters over which the Federal Legislature alone has jurisdiction. This opinion, however, was reversed in the Federal Court which thought the Act a clear interference with the subjects set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt because it incidentally touches upon matters outside the authorised field. 30. Thirdly, they maintained that upon its true construction item 28 is confined to that part of the law relating to negotiable instruments which has reference to their negotiability and does not extend to that part which governs the contractual relationship existing between the immediate parties to a bill of exchange or promissory note. That part, they said, lay in the field of contract. 31. If then the subject matter of the Act lay in contract, which is one of the items within the Concurrent List, it was, it was true, in conflict with an existing Indian Law-viz. the Negotiable Instruments Act, 1881-within the meaning of Section 31(1) of the Constitution Act, but inasmuch as the impugned Act had recieved the assent of the Governor General, it must prevail over the Negotiable Instruments Act as a result of the provision of Section 107(2) of the Constitution Act. 32. The respondents on the other hand pointed out in the first place that the Constitution Act differs in form from the British North America Act and the Australian Commonwealth Act. Those Acts, they said, contain no concurrent list and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corning within List III. 38. But this result depends upon two assumptions, viz.:-(1) that the impugned Act in dealing with promissory notes, or for that matter with banking, is concerned with contract and (2) that the reference to negotiable instruments, promissory notes and the like instruments in List I item 28 is a reference to them in their capacity of negotiability only. 39. The point was raised in the Federal Court in Subramanyan Chettiar's ease (supra) but that Court did not find it necessary finally to decide it, though Sulaiman J. in his dissenting judgment inferentially rejected it. Like the Federal Court, their Lordships in the present case do not find it necessary to express a final opinion upon these points, but it is, they think, essential to determine to what extent under the Indian Constitution Act of 1935 the jurisdiction of the several legislatures is affected by ascertaining what is the pith and substance of an impugned At. 40. The two remaining points taken on behalf of the appellant can in their Lordships' opinion and indeed must be considered together since to say that power to make laws in respect to money-lending necessarily imparts power to affect th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Act is ultra vires in whole or at any rate where in any place it affects an entry in the Federal List. 42. Similarly any item in the Concurrent List if dealt with by the Federal Legislature is outside the power of the Provinces and it is only the matters specifically mentioned in List II over which the Province has complete jurisdiction, although so long as any item in the Concurrent List has not been dealt with by the Federal Legislature the Provincial Legislature is binding. 43. In their Lordships' opinion this argument should not prevail. To take such a view is to simplify unduly the task of distinguishing between the powers of divided jurisdictions. It is not possible to make so clean a cut between the powers of the various Legislatures: they are bound to overlap from time to time. 44. Moreover, the British Parliament when enacting the Indian Constitution Act had a long experience of the working of the British North America Act and the Australian Commonwealth Act and must have known that it is not in practice possible to ensure that the powers entrusted to the several Legislatures will never overlap. As Sir Maurice Gwyer C.J. said in Subramanyan Chettiar's case (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or less, but is the trespass, whatever it be, such as to show that the pith and substance of the impugned Act is not money-lending but promissory notes or banking? Once that question is determined, the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true content. 49. This view places the precedence accorded to the three lists in its proper perspective. 50. No doubt where they come in conflict List I has priority over Lists III and II and List III has priority over List II, but, the question still remains, priority in what respect? Does the priority of the Federal Legislature prevent the Provincial Legislature from dealing with any matter which may incidentally affect any item in its list or in each case has one to consider what the substance of an Act is and, whatever its ancillary effect, attribute it to the appropriate list according to its true character? In their Lordships' opinion the latter is the true view. 51. If this be correct, it is unnecessary to determine whether the jurisdiction as to promissory notes given to the Federal Legislature is or is not confined to negotiability. The Bengal Money-lenders Act is valid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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