Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Rule No. 305 of 1942

Judges

Derbyshire, C.J
Gentle, J.

Acts

BENGAL MONEY LENDERS ACT 1940
Act.5. Section 29 (3). The provisions of this Act
follows:4. Section 28(1).
simple,7. Section 36(1).

See more information ...

Smart Summary

Judicial Opinion Summary — Gentle, J. (with concurrence by Derbyshire, C.J.)

Factual and Procedural Background

On 10 July 1925 Opposite Party No. 1 (the borrower) granted a mortgage of immovable property to Opposite Party No. 2 (the mortgagee) for a loan of Rs. 7,500 at 12% per annum with quarterly rests. In 1927 the mortgage and debt were assigned to the Petitioner for Rs. 9,500, which represented the principal and interest then due. In 1929 the mortgagor paid Rs. 1,700. In 1933 the Petitioner (assignee) sued on the mortgage and obtained a preliminary decree for Rs. 15,000 with further interest and costs of Rs. 1,338; a final decree followed in 1935. In 1936 the mortgaged property was sold for Rs. 15,500 (the Petitioner being the purchaser), and a personal decree for Rs. 3,178 was entered against the Opposite Party as the balance said to be due.

The First Subordinate Judge at Alipore, on the application of Opposite Party No. 1, ordered the decree to be re-opened under the Bengal Money-Lenders Act, 1940 (the Act). The Petitioner (decree-holder) obtained this Rule against that decision, and the matter came before Gentle, J. for determination. The Court records that the borrower has in aggregate repaid Rs. 17,200 (Rs. 1,700 in 1929 and Rs. 15,500 in 1936), which is Rs. 662 in excess of the total sum of decree and costs (Rs. 16,338).

Legal Issues Presented

Whether section 36(5) of the Bengal Money-Lenders Act, 1940 protects a bona fide assignee (who received the assignment before the Act and did not receive the statutory notice in section 28(1)(a)) from having the transaction re-opened under section 36.
Whether section 29(2) and section 30 operate to include an assignee within the definition of "lender" for the purpose of limiting a borrower's liability to twice the original principal, and thus whether the assignee may recover sums in excess of that limit.
Whether a borrower's entitlement to relief under section 30 is dependent upon the transaction first being re-opened under section 36, or whether section 30 operates immediately where it is manifest that the borrower has paid double the principal.
Whether the Court may order repayment under section 36(1)(d) of sums paid by the borrower in excess of the limits prescribed by section 30 where those payments were made before 1 January 1939.

Arguments of the Parties

Petitioner's Arguments

The Petitioner contended that unless and until a transaction is re-opened under section 36, a borrower is entitled to no relief under the Act — i.e., relief under section 30 must be effected by the machinery of section 36, which enables re-opening, taking accounts and releasing liability. Therefore, relief cannot be obtained unless the Court has first re-opened the transaction under section 36.

Opposite Party's Arguments

The opinion does not contain a detailed account of the Opposite Party's legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rai Manmatha Nath Bose v. Renula Bose	Whether section 36(5) applies to an assignee who became such before the Act (Sir Harold Derbyshire, C.J. expressed the view that it does; Nasim Ali, J. took the opposite view).	The court preferred and adopted the view of Sir Harold Derbyshire (that section 36(5) applies to pre-Act assignees) and relied on that position in holding that section 36 does not affect the rights of the Petitioner as assignee.
Bhupendra Nath v. Debendra Nath Ash	Decision supportive of the view that section 36(5) applies to an assignee who became such before the Act (Sen, J. gave a finding in accordance with Sir Harold Derbyshire's opinion).	The court noted Sen, J.'s finding as consistent authority for applying section 36(5) to pre-Act assignees and used it to reinforce the chosen view.
Krishnadhan Mondal v. Nalini Chandra	Presented an opposite view: Roxburgh, J. expressed the same conclusion as Nasim Ali, J. (i.e., that section 36(5) does not apply to assignees who became such before the Act).	The court acknowledged this contrary authority but rejected that view, preferring the precedents that held section 36(5) applicable to pre-Act assignees.

Court's Reasoning and Analysis

The Court proceeded in these steps:

Applicability of the Act: It was common ground (subject to section 29(2)) that the Act applied to the loan obtained by the Opposite Party as borrower.
Nature of the Assignment and section 36(5): The Petitioner had paid Rs. 9,500 in 1927 as consideration for the assignment, representing principal and interest then due. The assignment was held to be bona fide and, because it occurred 13 years before the Act, the statutory notice in section 28(1)(a) could not have been and was not given to the Petitioner. Section 36(5) exempts from the operation of section 36 "any assignee or holder for value" if the Court is satisfied the assignment was bona fide and that he had not received the section 28 notice. The Court construed the word "any" to include assignees who obtained assignments before the Act and concluded that section 36(5) must be given effect.
Interaction between section 29(2) and section 36(5): Although section 29(2) provides that the Act shall apply to loans advanced before its commencement and that references to "lender" include assignees, the Court held that this provision must be read subject to other express provisions (such as section 36(5)) that make exceptions. The Court rejected an interpretation that would wholly ignore section 36(5).
Precedential support: The Court reviewed conflicting judicial opinions (Rai Manmatha Nath Bose — two views, Bhupendra Nath — supporting application of section 36(5), and Krishnadhan Mondal — opposing). It preferred the reasoning of Sir Harold Derbyshire, C.J., and Sen, J., and therefore held that section 36 does not affect the rights of the Petitioner as a bona fide assignee who had not received the statutory notice; consequently the transaction could not be re-opened under section 36 as against the Petitioner.
Operation of section 30 as to limits of liability: The Court observed that section 30(1)(a) plainly limits a borrower's liability to payment of principal and interest together up to twice the principal of the original loan. Unlike section 36, section 30 contains no saving like section 36(5). By virtue of section 29(2) (which includes assignees within the word "lender" for the purposes of the Act), an assignee is in the same position as the assignor-lender in regard to section 30. Thus section 30 prevents recovery of any sum in excess of double the principal.
Whether re-opening is necessary to obtain relief under section 30: The Court rejected the Petitioner's contention that relief under section 30 is available only after a transaction is re-opened under section 36. The Court explained that re-opening (and taking accounts) is a procedural device to discover amounts when calculations or investigations are needed, but where it is manifest that the borrower has paid double the principal, there is no need to re-open: section 30 operates immediately to terminate liability.
Application to the facts: It was common ground and manifest on the record that the Petitioner had received more than twice the principal (total payments Rs. 17,200 against principal Rs. 7,500 and double principal Rs. 15,000). Therefore the borrower's liability was discharged under section 30 and the Petitioner was prevented from recovering further sums or executing against the personal decree for Rs. 3,178.
Repayment under section 36(1)(d): Section 36(1)(d) permits repayment orders only in respect of payments made on or after 1 January 1939. The payments here (Rs. 1,700 in 1929 and Rs. 15,500 in 1936) were made before that date. Thus even if section 36 were applicable, the Court could not order repayment of any excess.
Conclusion as to lower court's order: On these grounds the learned Subordinate Judge erred in directing the transaction to be re-opened; the Rule must be made absolute.

Holding and Implications

RULE MADE ABSOLUTE.

Holding (direct outcomes):

The Court held that section 36(5) protects a bona fide assignee (the Petitioner) who did not receive the notice required by section 28(1)(a), even though the assignment occurred before the Act; accordingly the rights of the Petitioner as assignee were not affected by section 36 and the transaction could not be re-opened against him under that section.
Independently, section 30(1)(a) limits the borrower's liability to twice the original principal, and by virtue of section 29(2) an assignee is included within "lender" for that purpose. Because the Petitioner had received more than twice the principal, the borrower's liability was discharged and the Petitioner was prevented from recovering any further sum or from executing the personal decree for Rs. 3,178.
Section 36(1)(d) empowers repayment only for payments made on or after 1 January 1939; the payments in this case were prior to that date, so no repayment order could be made.
The learned Subordinate Judge's direction to re-open the transaction was therefore erroneous; the Rule challenging that direction was made absolute.

Implications:

Direct consequence for the parties: The Petitioner retains the protection accorded by section 36(5) as a bona fide assignee who did not receive the statutory notice, but is nevertheless barred by section 30 from recovering sums exceeding twice the principal; the Opposite Party's liability is discharged to the extent already paid (it being manifest that double the principal had been paid).
The Court clarified that relief under section 30 may operate independently where it is manifest that the borrower has paid double the principal and does not always require re-opening under section 36 to take effect.
No order as to costs was made because the application by the Opposite Party was prompted by an imminent or threatened execution of the personal decree; the Court noted it was for the borrower to invoke available protection.
No broader or novel precedent beyond these statutory interpretations was announced; the Court expressly adopted existing lines of authority (as noted) in preferring the view that section 36(5) applies to pre-Act bona fide assignees who did not receive the notice.

Derbyshire, C.J. concurred and adhered to his previously expressed opinion in Rai Manmatha Nath Bose v. Renula Bose. The judgment concludes with "P.C." indicating the judgment was pronounced in open Court.

Show full summary ...

Hemanta Kumar Mukherjee v. Basanta Kumar Mukherjee And Anr. Opposite Party.

Gentle, J.:— The Opposite Party No. 1 is the judgment-debtor in a mortgage decree upon whose application the First Subordinate Judge at Alipore ordered the decree to be re-opened under the provisions of the Bengal Money-Lenders Act, 1940 (hereinafter called “the Act”). This Rule was obtained by the Petitioner, who is the decree-holder, against the decision of the lower Court.

2. The relevant facts are as follows:— On 10th July, 1925, the Opposite Party No. 1 granted a mortgage upon his immovable property in favour of Opposite Party No. 2, as mortgagee, in consideration of a loan of Rs. 7,500, carrying interest at the rate of 12 per cent, per annum with quarterly rests. In 1927 the mortgagee assigned the mortgage to the Petitioner who paid Rs. 9,500 for the assignment, which amount represented the principal sum and interest up to date. The Petitioner thus became the assignee of the loan, the interest thereon up to the date of the assignment, and of the mortgage security. In 1929, the sum of Rs. 1,700 was paid towards the mortgage debt by the mortgagor. In 1933, the Petitioner filed a suit on the mortgage and a preliminary decree was passed for the sum of Rs. 15,000 with further interest and for Rs. 1,338 costs. In 1935, the final decree was passed. In 1936, the mortgaged property was sold for Rs. 15,500, the Petitioner being the purchaser, and a personal decree for Rs. 3,178 was passed against the Opposite Party, being the balance due under the mortgage decree, the personal decree reciting that the final decree was not satisfied to the extent of the above sum. The principal sum advanced being Rs. 7,500, therefore Rs. 15,000 is twice the amount of the principal of the original loan. The Opposite Party is also liable for costs of the suit which were taxed at Rs. 1,338, making a total of Rs. 16,338. The borrower has repaid a sum of Rs. 17,200, being the total of the amounts of Rs. 1,700 and Rs. 15,500 which is Rs. 662 in excess of the above amount of Rs. 16,338.

3. The relevant provisions of the Act which require consideration are as follows:

4. Section 28(1). Where any debt in respect of

(i) a loan advanced by a lender, whether before or after the commencement of this Act, or

(ii) interest on any such debt, or

(iii) the benefit of any agreement made, or security taken, in respect of any soon debt…….. is assigned to any person, the assignor…….. shall, before the assignment is made—

(a) give to the assignee notice in writing that the debt, interest thereon, agreement or security is affected by the operation of this Act.

5. Section 29 (3). The provisions of this Act shall apply and be deemed always to have applied and shall continue to apply as respects any debt due to a lender or money-lender in respect of loans advanced by him before the commencement of this Act or in respect of interest on such loans or of the benefit of any agreement made or security taken in respect of any such debt or interest, notwithstanding that the debt or the benefit of the agreement or security may have been assigned to any assignee, and except where the context otherwise requires, references in this Act to a lender or moneylender shall accordingly be construed as including any such assignee as aforesaid.

6. Section 30. 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—

(a) any sum in respect of principal and interest which together with any amount already paid or included in any decree in respect of a loan exceeds twice the principal of the original loan

(ii) secured loans, eight percentum simple,

7. Section 36(1). Notwithstanding anything contained in any law for the time being in force, if in,[any suit to which this Act applies, or in any suit brought by a borrower for relief under this section, whether heard ex parte or otherwise, the Court has reason to believe that the exercise of one or more of the powers under this section will give relief to the borrower, it shall exercise all or any of the following powers as it may consider appropriate, namely shall—

(a) reopen any transaction and take an account between the parties;

(d) if anything has been paid or allowed in account on or after the first day of January, 1939 in respect of the liability referred to in clause (c), order the lender to repay any sum which the Court considers to be repayable in respect of any such payment or allowance in account as aforesaid;

Provided that in the case of a loan to which the provisions of sub.sec (2) of sec. 29, apply the lender or money-lender and each of his assignees shall be liable to repay the sum which the Court considers to be repayable in respect of, and in proportion to, the sum received by such lender or money-lender and such assignee;

(5) Nothing in this section shall affect the rights of any assignee or holder for value if the Court is satisfied that the assignment to him was bona fide, and that he had not received the notice referred to in clause (a) of sub-sec. (1) of sec 28.

8. Subject to sec. 29 (2) it is common ground that the Act applies to the loan obtained by the Opposite Party as the borrower.

9. Firstly as to sec. 36(5) of the Act. The Petitioner paid to the assignor Rs. 9,500 as consideration for the assignment, representing the amount both for principal and for interest at the rate reserved in the mortgage deed which was the total sum then due to the mortgagee assignor. There is no evidence, indeed nothing to suggest, that the assignment was anything other than bonâ fide and I am satisfied it was so. The assignment took place 13 years before the Act was passed and the notice, required in sec. 28 (1) (a), was not and could not be given and the Petitioner did not receive it. The subsection exempts the provisions of the section from, affecting the rights of “any” assignee who complies with the requirements in sec. 36 (5). “Assignee” is not confined to a person who obtained an assignment after the Act came into force or after any specified date as could have been done, had it been the intention of the legislature to restrict the application of the sub-section to an assignee limited by date or otherwise. Whether an assignment is taken either before or after the passing of the Act, a bond fide assignee to whom the statutory notice has not been given is in the same position, when he has not received the notice. The word “any” makes it clear that the section is to apply to each and every such assignee. Whilst sec. 29 (2) provides that the Act shall apply to a loan advanced by a lender before the commencement of the Act notwithstanding it may have been assigned to an assignee, the sub-section further provides that except when the context otherwise requires, reference in the Act to a lender shall accordingly be construed as including any such assignee. Sec. 36 (5) being in the Act, effect must be given to it. The provision in sec. 29 (2) could only apply in every respect to every assignee by ignoring sec. 36 (5) altogether. In my view sec. 29 (2) applies except when other provisions in the Act [in this instance sec. 36 (5)] make it inapplicable. In Rai Manmatha Nath Bose v. Sm, Renula Bose(1), Sir Harold Derbyshire, C.J, expressed the opinion that sec. 36 (5) applies to an assignee who became such before the Act; Nasim Ali, J., in the same case took the opposite view. In Bhupendra Nath v. Debendra Nath Ash(2), Sen, J., gave a finding in accordance with the opinion of Sir Harold Derbyshire, whilst Roxburgh, J., in Krishnadhan Mondal v. Nalini Chandra(3) expressed the same conclusion as Nasim Ali, J.

10. I prefer the view and decision expressed by Sir Harold Derbyshire and Sen, J., and hold that the provisions of sec. 36 do not affect the rights of the Petitioner as assignee of the debt and the mortgage security, nor to the decree obtained by him. Consequently the transaction cannot be re-opened.

11. Other provisions of the Act do however apply. Sec. 30 (1) (a) of the Act is clear that no borrower shall be liable to pay, in respect of the principal of, and interest upon, a loan, any sum exceeding twice the amount of the principal. Consequently any amount in excess of double the principal sum is irrecoverable by the lender. This section has not a similar provision to sec. 36 (5). Therefore by sec. 29 (2) “lender” in sec. 30 includes an assignee and he is in the same position as his assignor-lender in regard to the provisions in this section.

12. It was argued on behalf of the Petitioner that unless and until a transaction is re-opened under sec. 36, a borrower is entitled to no relief under the Act as this section enables a Court to re-open a transaction, take an account between the parties, and release the borrower from liability in excess of the limits specified in sec. 30 (1) and (2). No relief, it was contended, could be obtained unless a transaction is re-opened, as the provisions of sec. 30 are subject to and are to be effected by the machinery in sec. 36.

13. The process of re-opening is to enable the position between the parties to be ascertained by taking accounts (when that is necessary to be done) in order to discover either whether the borrower has discharged his liability or the amount remaining due in light of the provisions in sec. 30. When, for example, a calculation of the rate of interest or investigation of the payments made, are required, then relief cannot be given until the transaction is re-opened and these things have been done. When, however, it is apparent that the borrower has paid double the amount of the original loan, there is no need to re-open the transaction and to take an account. In such event, sec. 30 terminates the borrower's liability as it enacts he is not liable to pay anything more. This is quite apart from relief being given by the Court after it has directed the transaction to be re-opened. There is nothing in sec. 30 which makes its provisions subject to their being invoked under sec. 36. There is no need for the borrower to do anything more than to show the sum he has paid is equal to or exceeds twice the amount of the principal of the original loan. Upon this being manifest, the statutory provision immediately applies and this liability is therefore determined as sec. 30 enacts he is not liable for any further sum.

14. It is common ground that the Petitioner has received more than double the amount of the principal, advanced by him; the Opposite Party's liability has therefore been discharged and the Petitioner is prevented by sec. 30 from recovering any further sum and from executing for any part of the personal decree for Rs. 3,178.

15. Sec. 36 (1)(d) enables a Court to order the lender to refund any sum paid by a borrower in excess of the limit of liability prescribed in sec. 30 (1) and (2) but only in respect of payments made on or after the 1st January, 1939. The payments made by Opposite Party No. 1 were Rs. 1,700 in 1929 and Rs. 15,500 in 1936 (the proceeds of the sale of the mortgaged property being equivalent to a payment by the borrower) both of which were before the 1st January, 1939. Even if sec. 36 were applicable, the Court could not order repayment of any excess.

16. The learned Subordinate Judge was wrong in directing the transaction to be re-opened and this Rule must be made absolute.

17. The Opposite Party No. 1 issued his application as the Petitioner was threatening or was about to execute the personal decree, which he is not entitled to do. In those circumstances there should be no order as to costs. It is for the borrower to take such steps as are available to him if he considers his position requires protection.

Derbyshire, C.J:— I agree with the decision that has been given and have nothing to add save that I adhere to the opinion that I expressed in the case of Rai Manmatha Nath Bose v. Renula Bose.

P.C

Hemanta Kumar Mukherjee v. Basanta Kumar Mukherjee And Anr. Opposite Party.

Judicial Opinion Summary — Gentle, J. (with concurrence by Derbyshire, C.J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Opposite Party's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Hemanta Kumar Mukherjee v. Basanta Kumar Mukherjee And Anr. Opposite Party.

Comments