The Judgment of the Court was as follows:—

The point which I have to decide in this case is, whether a promissory note payable on demand, in which there is no mention of interest, comes within the provisions of sec. 80 of the Negotiable Instruments Act, 1881, and if so, from what date is interest payable where no place is specified for payment, and no demand was made prior to suit.

Secs. 79 and 80 are as follows:—

Sec. 79.—When interest at a specified rate is expressly made payable on I a promissory note, interest shall be calculated at the rate specified, on the I 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.

Sec. 80.—When no rate of interest is specified in the instrument, interest on the amount due thereon shall, (notwithstanding any agreement relating to interest between any parties to the instrument) be calculated at the rate of six per centum per annum, from the date at which the same ought to have been paid by the party charged until tender or realisation of the amount due thereon, or until such date after the institution of a suit to recover such amount as the Court directs.

It will be observed that sec. 80 refers to cases in which no “rate” of interest is specified in the instrument, and the first question which arises is, whether this includes cases in which the instrument is silent altogether upon the subject of interest. This has been the subject of decision by the Courts on several occasions—and in Best v. Haji Mahammad Sait , F.E Din-shaw v. Mahammad Essa , Ganpat Tukaram v. Sopana Tukaram , Bishna Chand v. Audh Behari Lal and Ghanasiam Lalji v. Ram Narain (5), (a decision of the Privy Council), the Judges all held, though for different reasons, that the provisions on the section did apply. I see no reason to diller from these decisions, though the section is not happily worded—I agree with Marten, C.J, in Ganpat Tukaram v. Sopana Tukaram , that if the subject of interest is not mentioned at all in the instrument, then it is possible argue that “no rate of interest is specified therein,” and consequently the section applies.

With regard to the second question it was decided in Best v. Haji Mahammad Sait that “interest should be calculated from the dates at which the several notes ought to have been paid” and “the notes being payable on demand, it is not the date of making, but the date of demand, that must be taken as the point from which to calculate interest.” In my opinion the learned judges in this case arrived at a correct decision by accident, because the grounds upon which they based it were erroneous.

This error was pointed out in F.E Dinshaw v. Mahammad Essa in which Macleod, C.J, pointed out that the liability on a promissory note payable on demand arises from the date of the note and not from the date on which a demand is made for payment. But he concluded, in my opinion erroneously, that interest under the section runs, therefore, from the date of the note and disagreed with the decision in Best v. Haji Mahammad Sait . A similar conclusion was arrived at in Bishnu Chand v. Audh Behari Lal in which the Judges pointed out that the law in England and India was the same, and quoted Lord Blackburn's statement: “In general where money is payable on demand, the law holds that the debtor is bound to find out the creditor and pay him and this the debtor is liable to do at once. Therefore a promissory note ‘payable on demand’ is payable at the instant the note is made. No demand is necessary prior to an action.” Accordingly they found that interest was payable from the date on which the note was executed, because this was the “date on which the amount secured by the hand-note ought to have been paid,” within the words of the section.

The same reasoning was adopted in the case of Ganpat Tukaram v. Sopana Tukaram . This was a Full Bench case in which the points were fully argued, and a carefully considered judgment delivered by Marten, C.J

The learned Judge pointed out, quite rightly, that the crux of the question depends upon the meaning to be given to the words “be calculated… from the date at which the same ought to have been paid by the party charged.” Thereupon he jumped to the conclusion, without further consideration, that this refers to the date when the amount secured by the note ought to have been paid, and proceeded to consider when such amount on a note payable on demand becomes due. I agree with the learned Judge, and I do not think that there can be a shadow of doubt about it, that according to both English and Indian law, it is due at once without any demand and may be sued for without notice.

That this is the law is made quite clear by reference to such cases as Norton v. Ellam (6), In re George (7), Rowe v. Young (8), Maltby v. Murrells (9), Edwards v. Walters (10) and In re J. Brown's Estate (11) and a number of Indian cases cited by Marten, C.J, at p. 103 and seq.

In the result the learned Judge held that a promissory note payable on demand becomes payable on its execution, that is the date at which it ought to have been paid within the meaning of sec. 80 and that accordingly, as against the maker, the promisee is entitled to interest at six per cent from the date of the note.

In my opinion this conclusion and the conclusions reached in the other cases to which I have referred other than that in Best v. Haji Muhammad Salt are due to a misconception of the plain meaning of sec. 80 and with all respect to those learned Judges such misconception has been due to a disregard of those salutory rules for the construction of statutes laid down by Lord Herschell in Bank of England v. Vagliano Bros. (12) and actually referred to with approval by Marten, C.J

This misconception is surprising because the correct interpretation of the section was placed clearly before the Court in Ganpat Tukaram v. Sopana Tukaram by Mr. B.J Wadia, appearing as Amicus Curiae, in a most lucid argument, and the learned Chief Justice himself considered carefully the distinction in law, so far as regards the question of the necessity for demand, between a claim for the amount due on a note payable on demand, and a claim for interest thereon.

Now what is the natural meaning of sec. 80—if we examine the language uninfluenced by any considerations derived from the previous state of the law, as advised by Lord Herschell?

In my opinion, the phrase “date at which the same ought to have been paid” has no reference to the “amount due” on the note, as has been assumed, by all the Judges to whose judgments I have referred, but retates to the “interest” due thereon.

This is the plain meaning of the words and sentences.

The word “same” creates the confusion. The noun to which it relates is the word “interest” and not the word “amount”—Eliminating unnecessay words, the sentence runs “Interest on the amount due… shall….be calculated… from the date at which the same ought to have been paid …. until tender or realization of the amount due…..

If the word “same” is replaced by the word “interest” the sentence is just as good and as grammatical, but if it is replaced by the words “amount due,” the sentence becomes clumsy and tautologous.

If it had been intended that the word “same” shall relate to the words “amount due,” it is inconceivable that any draughtsman would have repeated the words “amount due” in the line following the word “same”—lie would have repeated the word “same” or he would have omitted the words “of the amount due thereon.”

The latter words have been contrasted by the draughtsman with the word “same,” and distinguished therefrom.

By their difference combined with their juxtaposition he desired to make clear that they did not refer to the same thing, instead of which he has succeeded only in making everything as obscure as possible.

Such is the inevitable consequence of employing jargon to express (or obscure) one's meaning. It is not a lawyer's mode of expression. If the word “interest” had been used instead of the word “same” it would have obviated even the possibility of confusion or obscurity arising—The only alternative to the reading which I have suggested, is to hold that “same” relates to “instrument.” But an instrument cannot be “paid,” except ungrammatically.

The view which I have formed of the meaning of the sections seems to me to be confirmed by the fact that there is a contrast in the wording of secs. 79 and 80.

If the word “same” was intended to relate to the “amount due thereon,” there does not seem to be any adequate reason for the distinction. The date at which the “amount due thereon” “ought to have been paid” would have been better and more conveniently expressed as “the date of the instrument” as in sec. 79 or “the date of maturity,” or “on presentation” or some such definite date upon which the amount due on the instrument becomes payable.

But if the word “same” relates to “interest” as I have suggested, the necessity for the distinction immediately becomes apparent, to any one conversant with the law merchant and the English Law upon which the Act is based.

And reference to such previous law for the purpose of construction is perfectly legitimate, if, as Lord Herschell said, a provision is of doubtful import.

According to such law interest is payable on all negotiable instruments but is calculated from different dates in different circumstances.

Thus in In re East of England Banking Co. (13) Vice-Chancellor Malinst said at p. 375:—

“The law is perfectly well known and distinct that with regard to all negotiable instruments by the law merchant every bill of exchange and promissory note carries interest from the date of its maturity. Where a note on demand, having no period of payment, is intended to bear interest, the usual course is to say ‘I promise to pay on demand so much money with interest at a certain rate,’ otherwise it will carry no interest until the demand is made. But where a note is payable on demand which on the face of it does not carry interest, it is perfectly well known that it carries interest only from the time when the demand is made.”

In In re Herefordshire Banking Co. (14) Lord Romilly M.R held that no interest could be allowed on the notes of a banking company payable on demand where no demand for payment had been made before the company was ordered to be wound up.

And in Pierce v. Fothergill (15) the head-note runs:—

“On a promissory note payable on demand where there is no proof of any agreement for interest, the Plaintiff is only entitled to interest from the day of issuing the writ of summons.” In In re the East of England Banking Co. (16)—Lord Cairns, L.C, said at p. 18. “I am not aware that any particular form of demand is required by the law of merchants” — and Sir W. Page Wood L.J dealing with the same point at p. 19 said “if the holder had brought an action that would have been sufficient.”

In Webster v. British Empire Mutual Life Assurance Co. (17) Cotton, L.J states that where the instrument sued upon contains no agreement to pay interest, and there is no proof of any such agreement aliunde, interest is no part of the debt or of the sum stipulated by the contract to be paid, and if it can be recovered, it must be in the nature of damages.

The only damages, as a rule, given for the improper detention or refusal to pay money are interest, loss of interest being the damage which the law supposes a man usually suffers for non-payment of money to him. And he quotes Mr. Justice Bayley in Cameron v. Smith (18) which was an action on a promissory note, in which there was no stipulation for interest, but where nevertheless the jury gave interest by way of damages or gave damages calculated according to the rate of interest. He said at p. 308:—

“Although by the usage of trade, interest is allowed on a bill, yet it constitutes no part of the debt, but is in the nature of damages.”

In another case, which was referred to in the course of the argument, damages were said to be given for the wrongful detention of the money.

In Lowndes v. Collens (19) Sir William Grant said that “wherever there is a written contract for a sum payable on demand, or upon a day certain, interest is payable from the time of the demand made or from the fixed period of payment, and there is no difference whether that contract is contained in a promissory note or any other instrument.”

It is clear from the above cases that interest is only payable as damages, that is, in case of default—and it follows that where there is no specific agreement to pay interest, it cannot be claimed until after demand, or from the fixed period of payment, as the case might be.

It may be noted also that in all cases of detinue or trover, damages cannot be claimed until demand has been made [see Clayton v. LeRoy (20).]

Incidentally but nevertheless of some importance to the mercantile community is the fact that this interpretation of the section avoids the possibility of difference between the English and Indian Law as to a particular/class of negotiable instruments which was deprecated by Marten, C.J, in Ganpat Tukaram v. Sopana Tukaram .

The principles embodied in the above decisions are concisely stated in “Laws of England,” Vol. 2, paras. 895 and 896 thus:—

In the event of dishonour damages may be recovered….and they may include (1) the amount of the instrument (2) interest thereon from the time of presentment for payment if the instrument is payable on demand, and from its maturity in any other case. In notes to these paras—it is stated, on the authority of Pierce v. Fothergill , that where no demand had been made interest will run from the service of the writ, and that in the absence of an agreement to the contrary the rate of interest will be 5 per cent per annum.

For these reasons, the necessity for the distinction between the two sections, becomes clear. Interest on those instruments to which sec. 80 applies, is payable from the date of execution, or from maturity, or from presentation, or from demand, or from service of cummons, according to the circumstances of each case, and in consequence the date of necessity was left indefinite— This was not so, with regard to instruments to which sec. 79 applies.

In the present case, there was no agreement to pay interest, and no demand was made prior to suit. Therefore interest at 6 per cent will be calculated from the date of service of the summons.

Mr. B.N Sein, Solicitor for the Plaintiff.

Mr. M.C Seal, Solicitor for the Defendant.

B.N.B