PRAFULLA KUMAR V. BANK OF COMMERCE, KHULNA AIR 1947 PC 60
FACTS
The case revolved around the Bengal Money Lender Act of 1940. This Act placed restrictions on the amount a moneylender could recover on loans for both principal and interest and prohibited payments exceeding the prescribed limits. The respondents received the assets of the Khulna Loan Bank, Ltd. through a High Court order dated May 12, 1941, in compliance with Section 153A of the Indian Companies Act.
In some of the cases before the Board of their Lordships, the respondents aimed to recover loans and interest from promissory notes signed by the appellant borrowers. In other instances, the appellant debtors sought a declaration that the Act's provisions had reduced their debt, and in some cases, claimed reimbursement for overpaid amounts.
It's worth noting that the loans in question were extended by the Khulna Loan Company or the Khulna Loan Bank, not the respondents. Although the proceedings commenced in 1941, 1942, and 1948, the loans in question were issued much earlier, with promissory notes serving as collateral for each transaction. Section 30 of the Act, the legality of which their Lordships had to determine, stipulates that a borrower is not obliged to pay more than the amount specified in the agreement or mandated by any existing law after the Act's enactment.
A borrower can contest a loan covered by the Act's provisions up to a certain amount pertaining to both principal and interest, or more than a specific percentage of the amount, as a defence to the moneylender's claim.
This case holds significance as it necessitated consideration of the delineation of authority between federal and provincial legislatures in India, and how to determine which subjects fall under Sections 99 and 100 of the Government of India Act, 1935, and the three lists outlined in its Seventh Schedule, respectively.
ISSUES:
JUDGEMENT-
The case was decided on February 11, 1947, the Bengal Money Lender Act of 1940, which restricted the amount a moneylender could recover on debts, was contested. The Act also prohibited payments of both principal and interest that exceeded its stipulations.
The assets of the Khulna Loan Bank, Ltd. were transferred to the respondents by a judgment from the High Court of Calcutta on May 12, 1941, in accordance with Section 153A of the Indian Companies Act. The respondents were an incorporated organization. Initially, the High Court of Calcutta deemed the Act to be beyond the jurisdiction of the Provincial Legislature. However, this decision was overturned on appeal to the Federal Court.
It was determined that the legislative authority of the Bengal Legislature in India should be confined, and in determining the subjects to be dealt with by the Government of India Act of 1935, and the three lists outlined in the Seventh Schedule, it was concluded that the Act was ultra vires.
This case holds significance as it marked the first application of the Doctrine of Pith and Substance in India. This doctrine assesses the true essence and character of a law to ascertain which list it falls under. If the essence aligns with the Union List, any accidental overlap with the State List does not render it invalid.