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FACTS OF CASE

The case of Prafulla Kumar Mukerjee vs The Bank of Commerce, Khulna, AIR 1947, PC 60, was a landmark case in India legal history. The case involved the validity of the Bengal Money-Lender Act,1940, which limited the amount recoverable by a moneylender on loans for principal and interest and prohibited the payment of sums larger than those permitted by the Act.

The respondents were an incorporated body to which the assets of the Khulna Loan Bank, Ltd. Were transferred by an order of May 12, 1941 passed by the High Court of Calcutta under Section 153A of the Indian Companies Act. 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, execute by appellant borrowers and in other instances by appellant debtors claiming a declaration that their indebtedness was at least diminished by the provision of the Act and even in some instances that they were entitled to repayment of sums overpaid.

The proceedings began in 1941, 1942, and 1948, but are concerned with loans made at 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.

The Act, the validity of which their Lordships had to determine, by Section30 provides that notwithstanding anything contained in any law for the time being in force, or in any agreement, No borrower shall be liable to pay after the commencement of this Act, more than a limited sum in respect of principle and interest or more than a certain percentage of the sum advanced by way of defence to an action by the moneylender or the borrower can himself institute a suit in respect of s loan to which the provision of the Act.

This case is significant as it necessitated a consideration of the principle upon which the respective jurisdictions of the federal and Provincial legislature in India are to be delimited and of the method to be adopted determining the subjects which are to be dealt with by one or the other under the provision of Section 99 and 100 the Government of India Act,1935, and the three lists set out in the Seventh Schedule there to.

ISSUE

whether the reason of Schedule 7, List 2 Items 28 and 38 of the Government of India Act,1935 and thereby is void.

ARGUMENT

Prafulla Kumar Mukherjee was involved in a legal case against The Bank of Commerce in 1947, the case was heard by the Privy Council and concerned the validity of the Bengal Money Lender Act,1940. The Act limited the amount recoverable by a moneylender on his loans for principal and interest and prohibited the payment of sums larger than those permitted by the Act. The validity of this Act was challenged in this case, but the court ultimately upheld its validity.

In this case, Prafulla Kumar Mukherjee’s argument was that the Bengal Money Leader Act, 1940 limited the rate of interest and the amount recoverable by a moneylender on any loan. It was argued that promissory notes were a central matter and law with respect to money lending and money lender was a state matter and was valid even if incidental encroachment upon ‘Promissory notes’ which is Central matter was taking place.

The Bank of Commerce’s argument in this case is not explicitly mentioned in my source. However, it can inferred that they were defending their right to recover loans and interest alleged to be upon promissory notes, executed by appellant borrowers. They were also defending their indebtedness was diminished by the provisions of the Act and even in some instances that they entitled to repayment of sums overpaid

JUDGEMENT 

The case you are referring is Prafulla Kumar Mukherjee vs The Bank of Commerce, which was decided on 11 February 1947. The case involved the validity of the Bengal Money LenderAct,1940, Which limited the amount recoverable by a moneylender on his loans for principal and interest and prohibited the payment of sums larger than those permitted by the Act. The respondents were an incorporated body to which the assets of the Khula Loan Bank, Ltd, were transferred by an order of May 12, 1941 passed by the High Court of Calcutta under Section 153A of the Indian Companies Act.

 The case was heard by a bench consisting of Wright, Porter, Uthwar, M Nair, and J Beaumont with Porter delivering the judgment. The case was brought to determine whether the Bengal Money lending Act 1940 was valid or ultra vires of the Bengal Legislature and limited the amount and rate of interest recoverable by a lender on any loan. It was challenged on the ground being a provincial (State) Law, it affected promissory notes which was a subject matter of the Centre under Entry 46 of List 1.

The High Court of Calcutta held that the Act was intra vires to the Provincial Legislature. However, upon appeal to the Federal Court, the decision of High Court Calcutta was reversed. It was held that the Act was ultra vires to the law- making power of the Bengal Legislature in India are to be delimited and of the method to be adopted in determining the subjects which are to be dealt with by 1935, and the three lists set out the Seventh Schedule.

This case is significant as it applied the Doctrine of Pith and Substance for the first time in India. The doctrine looks at the true nature and character of a legislation for determining which list it falls under. If the substance falls within Union List, then incidental encroachment by the law on State List does not make it invalid.

References

www.indiankanoon.org

www.the-laws.com

www.casemine.com

Written by Ziya Praveen an intern under legal vidhiya.

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