TMI Blog1983 (4) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, they borrowed on 12-6-1973 from the Indian Bank, Allamuru Branch on a promissory note a sum of ₹ 2,166/-. The defendants undertook to pay the Indian Bank interest at the rate of 3=% per annum over and above the official rate of interest fixed by the Reserve Bank of India, with quarterly rests, but subject to a condition that the minimum rate of interest payable by them should not be less than. 10=% per annum in any event. The official rate fixed by the Reserve Bank of India, however remained, fairly high and within a period of three years, the liability of the defendants-agriculturists had jumped to ₹ 3093-65. No wonder, the defendants could not keep their promise to repay the amounts borrowed from the Indian Bank. The plaintiff bank has, therefore, sued the defendants on the foot of the promissory note executed by the defendants for recovery of the principal amount together with interest calculated at 3=% per annum over and above the Reserve Bank rate with quarterly rests. 4. In Maine's famous dictum that history of civilized societies is its history from status to contract, retained its validity today the defendants probably could, not have afforded to plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the United Kingdom) or of any special Indian Law or Royal Charter or Letters Patent. 6. On these contentions, the major question of law that falls for our consideration in this case is, whether Section 4(e) of the Madras Act would be applicable to the debt due from the defendants to the plaintiff-bank. The question of the extent of applicability of Section 4(e) of the Madras Act should be answered on the basis of the meaning it bears in the Act. But its meaning is to be gathered not merely from the words in which it is couched, but also from the context in which the section occurs and from the overall purpose of the Madras Act. The above Section 4(e) is a non-obstante provision and therefore to the extent that provision applies to the facts in this case, it could clearly override Section 13 of the Madras Act on which the defendants rely upon for defeating the claims of the plaintiff-bank. But in considering the rival contentions of the parties, we must be aware that Section 4(e) of the above Madras Act enacts an exception to the general purpose of the above Madras Act and even runs directly counter to the central objective which the Madras Act seeks to achieve which is to reliev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration and is entitled to recover the suit debt from the defendants which was advanced by it in the year 1973. Thus the above first two conditions should be held to have been fully fulfilled. But what is not so easy to decide is the question whether the plaintiff-bank can be said to have satisfied the requirements of the third condition. What does the third condition mean? For promoting clarity of our discussion, we may sub-divide the requirements of the third condition into two parts, the first part relating to formation of the Bank and the second part relating to the meaning of special Indian Law. According to the first part of this sub-division of the third condition, the Indian Bank should have been formed in pursuance of a law or a legal instrument'. According to the second part of this sub-division of the third condition, the above law or legal instrument in pursuance of which the bank is formed should have been either an Act of British Parliament or a special Indian Law or a Royal Charter or Letters Patent. Now the question is, whether the plaintiff-bank can be said to have been formed in pursuance of a law. That depends upon the meaning which should be ascribed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uage or by necessary implication therefrom. The words under the Act would in that context signify what is not directly to be found in the Statute itself but is conferred or imposed by virtue of powers enabling this to be done. The distinction is thus between what is directly done by the enactment and what is done indirectly by Rule making authorities which are vested with powers in that behalf by the Act. 9. Thus understood, the words in pursuance of , can be said, to have been used appropriately by the legislature only to signify the activity of formation of a Corporation, carried on by an intermediary third party acting under a law as different from an activity of formation carried on by that law itself. In one case, the Corporation is formed by a subsequent act of an intermediary and in another by law itself. Applying the above distinction drawn by the Supreme Court and other Courts, it should be held that the plaintiff-bank constituted by the mandate of Section 3 of the above Act itself and not by any subsequent intermediary act of any other authority is not a Corporation formed in pursuance of any law. It is significant to note that Section 3 of the Union Act designates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dras Act. The Madras General Clauses Act does not define the words any special Indian Law. Those words were used in an Act enacted by the Madras Provincial Legislature during the British rule of this country. A careful reading of Section 4 (e) of the above Act, would show that the words any special Indian Law could not have been intended to refer to any law made by any legislature of our country. A statute enacted by one of our nation's legislatures could not have been referred to with any degree of propriety or appropriateness as a special Indian Law. In speaking of any special Indian Law, Section 4(e) of the Madras Act, in our opinion, is referring not to a law made by any Indian Legislature but only to a law made by the British Imperial Parliament as a piece of special legislation applicable to India. Section 4(e) of the Madras Act, in our view, while speaking of any special Indian Law is only speaking of a special Indian Law made by the British Parliament as different from any Act enacted by the British Parliament that might have application to India also in common with the rest of the British colonies. We must remember that the British Parliament was once legally compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal international treaty obligations. They are one sided and are made to ensure the economic exploitation of this country by the British finance capital. The continuance of such a law on our Statute Book even after our Independence, would be clearly offensive to the status of our Sovereign Democratic Republic, for that reason, parts of Section 4(e) of the Madras Act referring to a Corporation formed in pursuance of an Act of British Parliament or Royal Charter or Letters Patent should be held to be unconstitutional. (See State of Madras v. Menon, AIR 1954 SC 517). In Menon's case (supra) the Supreme Court observed that the grouping of India with overseas British possessions is repugnant to the conception of a Sovereign, Democratic Republic. On the same reasoning, we hold that the granting of exemption to any corporation formed by the British Law is repugnant to the conception of our Sovereign, Democratic Republic, We are of the opinion that the last part of Section 4(e) of the Madras Act containing the words, any debt due to any Corporation formed in pursuance of an Act of Parliament of the United Kingdom or any special Indian Law or Royal Charter or Letters Patent is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Division Bench in the above Imperial Bank case denied the Bank's claim for exemption from the provisions of the Act, on the ground that the Imperial Bank was a Scheduled Bank, falling under Section 10 of the Madras Act. This judgment clearly shows the difficulty in accepting the literal interpretation of Section 4(e) of the Act As the Imperial Bank case shows, a bank falling under S. 4(e) may also be a bank falling under Section 10 of Madras Act. Under Section 4(e) of the Madras Act such a bank would be totally exempt from the operation of the provisions of the Act. But under Section 10 of the Madras Act, the maximum rate of interest which a Scheduled Bank can charge alone is fixed. In other words, in the above Imperial Bank case Section 4(e) is treated as subordinate to Section 10 of the Madras Act. In other words, the decision of the Imperial Bank of India (supra) did not accept the literal interpretation of Section 4(e) of the Madras Act and gave effect only to the underlying purposes of the Act. The above Judgment of the Madras High Court was no doubt dissented from by a judgment of our High Court in K. Swami Rao v. K.S.V. Samajan, AIR 1968 AP 147 However, neither the Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious Loans Act as amended by the Tamil Nadu Act No. 8 of 1937 Which is applicable to our State. The Usurious Loans Act authoresses the Court to relieve an agriculturists from the load of his debt liability arising out of any transaction providing for payment of excessive interest if the court has reason to believe that the transaction, as between the parties, was substantially unfair. But the Tamil Nadu amendment directed the courts to hold that where compound interest is charged such an interest is excessive. Thus the effect of the Tamil Nadu amendment is to mandate the courts to presume that in cases of loans to agriculturists, the charging of compound interest by itself is excessive and substantially unfair. As noted above, the interest which is chargeable in this case is calculated, with quarterly rests. That makes the interest a compound interest as different from a simple interest. Such a charging of interest amounts to charging interest on interest which is the essence of a compound interest as different from simple interest. Under the Tamil Nadu amendment of the Usurious Loans Act, we have to relieve an agriculturist from the burden of paying such a compound interest. But i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
