Ramnandan Prasad Narayan Singh vs Mahanth Kapildeo Ram Jee

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeals Nos. 98, 99, 100 and 101 of 1950

Decision Date: 12 January, 1951

Coram: N. Chandrasekhara Aiyar, Hiralal J. Kania

In this matter, the Supreme Court of India issued its judgment on the twelfth day of January, 1951. The opinion was authored by Justice N. Chandrasekhara Aiyar, who sat with Chief Justice Hiralal J. Kania and Justice M. Sastri on the bench.

The petition was filed by Ramnandan Prasad Narayan Singh, who was designated as the petitioner, while the respondents were Mahanth Kapildeo Ram Jee and three additional parties. The case is reported in the 1951 volume of the All India Reporter at page 155 and in the Supreme Court Reporter at page 138. The citation also appears in the Indian Law Reports (Punjab) as 1963 SC 1503 (19).

The legal dispute centered on the interpretation of section 7 of the Bihar Money-Lenders (Regulation of Transactions) Act of 1939. The question before the Court was how to determine the “amount of loan mentioned in, or evidenced by, such document” when a new document was executed to reflect the remaining balance of a loan that had originally been created under an earlier instrument. Specifically, the Court examined whether the amount to be considered for the purpose of the statute should be based on the earlier loan document or on the later one, and how interest could be calculated for the period preceding the filing of the suit.

In addressing this issue, the Court held that when a fresh document is executed to represent the outstanding balance of principal and interest on a loan that was previously documented, the “amount of loan” referred to in section 7 is the amount set out in the later document, not the amount stated in the original instrument that was renewed. Consequently, the Court may decree interest for the time before the suit was instituted, provided that the total of such pre-suit interest together with any interest accruing after the date of the later document does not exceed the loan amount specified in that later document. The Court further clarified that the maximum decree amount cannot be based on a calculation that adds interest to the original loan amount so that the sum would surpass the original principal.

The Court referred to several earlier decisions for guidance, including Singheswar Singh and Others v. Nadni Prasad Singh and Others (AIR 1940 Pat 65), Lal Singh v. Ramnarain Ram and Others (AIR 1942 Pat 138), Madho Prasad Singh v. Mukutdheri Singh and Others (193 IC 661), Deo Nandan Prasad v. Ram Prasad (ILR 23 Pat 618), Ram Nandan Prasad Narayan Singh v. Kulpati Shri Mahanth Goshwami Madhwanand Ramji ([1940] FCR 1), and Surendra Prasad Narayan Singh v. Sri Gajadhar Prasad Sahu Trust Estate and Others ([1940] FCR 39). These precedents were considered relevant to the interpretation of the statutory provision.

The appeals before the Supreme Court were Civil Appeals numbered 98, 99, 100 and 101 of 1950. They originated from orders of the High Court of Judicature at Patna, delivered by Justices Manohar Lall and Imam. The appeals were grouped as Miscellaneous Appeals numbered 108 to 111 of 1948. Counsel for the appellants were Shambhu Barmeswar Prasad and Ramanugrah Prasad, while the respondents were represented by H.J. Umrigar.

Justice Chandrasekhara Aiyar delivered the judgment of the Court. He observed that the four appeals were interconnected and had arisen from the decisions of the Patna High Court in the four miscellaneous appeals cited above, thereby necessitating a unified consideration of the legal questions presented.

The case turned on how section 7 of the Bihar Moneylenders (Regulation of Transactions) Act, 1939 should be interpreted. The factual background that gave rise to the appeals was set out in the petition filed by the present appellants in the third Court of the Sub-Judge, Patna, and is reproduced here for ease of reference. The petitioners explained that their father had borrowed forty thousand rupees from the guru, an ancestor of the decree-holder, under a mortgage bond dated 11-January-1893. Up to 4-January-1910 interest and compound interest had accrued to the amount of forty thousand three hundred seventy-rupees-seven-annas-six-paise; of this sum thirty-two thousand three hundred seventy-rupees-seven-annas-six-paise had been paid in cash. The remaining balance, comprising eight thousand rupees of interest together with the principal of forty thousand rupees, totalling forty-eight thousand rupees, led the father to file Mortgage Suit No. 14 of 1910 in the first Court of the Sub-Judge, Patna. In settlement of that suit and its costs, two fresh mortgage bonds were executed on 11-July-1910: one for forty thousand rupees and the other for nine thousand four hundred eighty-eight rupees. The latter bond was satisfied by a cash payment of fifteen thousand eight hundred thirty-five rupees. Against the bond of forty thousand rupees dated 11-July-1910 the petitioners subsequently paid thirty-eight thousand five hundred thirty-rupees-thirteen-annas-six-paise. Later, Mortgage Suit No. 110 of 1927 was instituted in the third Court of the Sub-Judge, Patna, and a decree for fifty-eight thousand twelve-rupees-two-annas-zero-paise was passed on 9-July-1929. From this decree five thousand rupees were paid in cash; the balance of fifty-three thousand twelve-rupees-twelve-annas-zero-paise was secured by a mortgage bond dated 6-October-1931 for forty-two thousand rupees, and on the same date two hand-notes were executed, one for five thousand rupees and the other for six thousand twelve-rupees-two-annas-zero-paise. Suit No. 14 of 1933 concerning both hand-notes was filed in the third Court of the Sub-Judge and a decree for fifteen thousand eight rupees-two-annas-zero-paise was passed on 28-February-1935, which decree remains under execution. When the decree-holder moved to execute the money decree by attaching and selling the judgment-debtors’ properties, it claimed that the properties were subject to a mortgage lien of sixty-two thousand two hundred seventy-two rupees-thirteen-annas-zero-paise under the bond dated 6-October-1931. The two judgment-debtors, who were brothers, filed separate objections under sections 11 and 16 of the earlier Bihar Money-lenders Act III of 1938 and under section 47 of the Civil Procedure Code. They argued that, after proper calculation pursuant to section 11, no lien remained because payments totalling ninety-two thousand three hundred ninety-four rupees-two-annas-zero-paise had already been made towards the mortgage debt. The Subordinate Judge held that the brothers’ plea could not be dealt with in the miscellaneous proceeding concerning execution; the only step permissible was to notify the mortgage encumbrance without determining the correctness of the amount claimed to be due. This view was partly based on the High Court’s declaration that section 16 of the Act was void. The brothers appealed this finding to the High Court, but their appeals were dismissed. Consequently, they appealed to the Federal Court, contending that sections 7 and 13 of the new Act (which correspond to sections 7 and 11 of the old Act) were applicable and that the court was obliged to estimate the value of the property after making the necessary calculations under section 7 with reference to the lien.

In this case, the appellants argued that the provisions corresponding to sections 7 and 11 of the earlier legislation were applicable and that the court had a duty to estimate the value of the mortgaged property after making the necessary calculations under section 7, taking the lien into account. The Federal Court’s decision, reported in Ramnandan Prasad Narain Singh and Another v. Kulpati Shri Mahanth Goshwarni Madhwanand Ramji(1), was to remit the matter back to the High Court and to give the appellants liberty to file an application under section 13. Consequently, a fresh application for execution dated 2-7-1042 was filed, and the two brothers raised the same objections as before. The matters were recorded as Miscellaneous Cases Nos. 45 and 46 of 1942, relating to sections 7 and 13 of the Bihar Money-lenders Act, and Miscellaneous Cases Nos. 50 and 52 of 1942, relating to objections under section 47 of the Code of Civil Procedure. The Subordinate Judge held that the loan amount should be taken as the sum mentioned in the mortgage deed of 6-10-1931 rather than the amount advanced in 1893, and he concluded that a balance of Rs 70,840 remained due on the bond. He assessed the market value of the several properties given as security by applying a multiplier of sixteen times the net income. The appeals to the High Court were numbered M.A. 108 to 111 of 1943 and were heard by two judges. The High Court modified the lower court’s order in certain respects. It affirmed that the loan amount was that stipulated in the mortgage bond of 6-10-1931, but because a sum of Rs 11,855-3-0 had been expressly repaid towards the principal after the date of the bond, the outstanding principal was reduced to Rs 28,150. Adding an equal amount as interest, which the court regarded as the maximum permissible under section 7 of the Act, the total liability was fixed at Rs 56,300 and a charge was declared on the property for that amount. The court also directed that the valuation of the property should be fixed at twenty times the net income rather than sixteen times. The present appeals arose from that order. The appellants urged two points: first, that the decree-holder was barred by constructive res judicata from contending that the construction placed upon section 7 by the judgment-debtors was erroneous; and second, that in applying section 7 the court must consider the original loan of Rs 40,000 granted in 1893 and allow interest only on that maximum sum after taking into account all sums paid by the appellants and their predecessors towards interest since 1893. The court found the first point to be entirely without substance. When the decree-holder argued that section 11 of the Bihar Money-lenders Act, 1938, had been declared void and ultra vires and that therefore section 7 of the new Act was also inapplicable, the judgment-debtors pleaded that they were entitled to the benefit of section 7 of the new Act.

In the matter before the Court, the judgment-debtors argued that the portion of the earlier legislation corresponding to section eleven was not applicable, and that they were therefore entitled to claim the benefit of section seven of the new Act. The Federal Court, in the case of Ramnandan Prasad Narain Singh and Another v. Kulpati Shri Mahanth Goshwami Madhwanand Ramji(1), had held that the judgment-debtors, who are now the appellants, could rely on the provisions of the new Act when the executing court applied section thirteen to assess the value of the properties slated for sale. The parties did not dispute the proper construction of section seven itself. The Court observed that acknowledging the appellants’ right to avail themselves of section seven is distinct from accepting the appellants’ own interpretation of that provision. The Federal Court had not addressed any question of interpretation, and the doctrine of constructive res judicata could not be identified as offering any assistance to the appellants in this context. The second issue raised on behalf of the appellants concerned the exact meaning of section seven of the Bihar Moneylenders (Regulation of Transactions) Act VII of 1939, which reads as follows: “7. Notwithstanding anything to the contrary contained in any other law or in anything having the force of law or in any agreement, no Court shall, in any suit brought by a money-lender before or after the commencement of this Act in respect of a loan advanced before or after the commencement of this Act or in any appeal or proceedings in revision arising out of such suit, pass a decree for an amount of interest for the period preceding the institution of the suit, (1) [1940] F.C.R. 1, which together with any amount already realised as interest through the court or otherwise, is greater than the amount of loan advanced, or, if the loan is based on a document, the amount of loan mentioned in, or evidenced by, such document.” In the present dispute, the original loan of forty thousand rupees was advanced on 11-1-1893. The appellants maintain that, for the purpose of calculating any interest payable before the filing of the suit, the loan amount should be taken as that original sum, and that once all interest actually received by the creditor from that date up to the filing of the suit is accounted for, no further interest would be due. Conversely, the decree-holder contends that, in accordance with the latter part of the provision, the loan amount should be measured by the figure stated in the mortgage bond dated 8-10-1931, namely forty-two thousand rupees. Irrespective of which calculation method is adopted, the Court emphasized that the computation is required not to determine a decree on the mortgage loan itself but to assist in the valuation of the mortgaged properties under section thirteen of the Act for the purpose of their eventual sale.

The decree for the execution of money was issued against the appellants. The Court referred to the observation made by Sir Maurice Gwyer, C.J., in Surendra Prasad Narain Singh v. Sri Gajadhar Prasad Sahu Trust Estate and Others, noting that Section 7 of the Act of 1937 is undeniably obscure and poorly drafted. The Court acknowledged that discerning the true intention of the legislators who framed the Act is a difficult task. Nevertheless, the Patna High Court has consistently adopted an interpretation of Section 7 that runs counter to the appellant’s position in the present proceedings. The issue was expressly considered for resolution in Singheshwar Singh and Others v. Madni Prasad Singh Others(2). In that case a mortgage bond dated 31-August-1922 stated a sum of Rs 2,000, which represented the balance of principal and interest due under an earlier mortgage bond dated 11-October-1912 for Rs 1,391. The judgment debtors argued that the court should revert to the 1912 bond and, because Rs 1,512 had already been paid as interest on that bond, no decree could be granted for more than the principal amount of Rs 1,391. The learned judges rejected this plea and treated the amount specified in the 1922 document, namely Rs 2,000, as the loan. They consequently held that the plaintiffs were entitled to a decree for interest on a sum not exceeding Rs 2,000, since no payment had been proved after the execution of the later bond. The same principle was applied in Lal Singh v. Ramnarain Ram and Others(1), where the plaintiffs received a decree on the basis that the loan should be measured at Rs 2,909-8-0, the amount for which the hand-note relied upon was executed, rather than at Rs 1,000, the original sum advanced under an earlier hand-note of 1924. A similar position was affirmed in Madho Prasad Singh v. Mukutdhari Singh and Others(2). The Full Bench decision in Deo Nandan Prasad v. Ram Prasad(3) reiterated this view, highlighting the distinction between Sections 7 and 8 of the Act. The Court explained that while Section 8 permits reference to the original loan despite the existence of a later document, Section 7 requires that the loan correspond to the document on which the suit is based, that is, the final document, not the original one. Each of these decisions examined the true meaning of Section 7 in detail. The Court observed that this construction enables a creditor to bypass the protective provisions of the Act by using a document that records interest due and adding that amount to the principal. Gwyer C.J. identified this difficulty on page 59 of Surendra Prasad Narain Singh v. Sri Gajadhar Prasad Sahu Trust Estate and Others(4). If the interpretation does not reflect the legislature’s intent because of ambiguous drafting, the Court noted that it is for the Legislature to intervene.

In this case, the Court observed that when the language used in a statute is unhappy or ambiguous, it becomes difficult to discern the intentions of the framers of the Act; consequently, it is the duty of the Legislature to step in and clarify the provision. However, the Court noted that the Legislature has not done so. Instead, it has, as shown by the cited authorities—A.I.R. 1942 Pat. 138,139; I.L.R. 23 Patna 618; (1941) 193 I.C.661; and [1940] F.C.R.39—acquiesced for many years to the interpretation that the Patna High Court has consistently applied to the section from the year following the enactment of the statute. Considering the considerable obscurity in the wording of the relevant provisions and the continued inaction of the Legislature, the Court held that it is reasonable to infer that the view adopted by the Patna High Court is consistent with the Legislature’s intended purpose. Accordingly, the Court dismissed the appeals. The dismissal was ordered with costs, a single set of costs to be borne by the appellants in all the appeals together. The Court recorded the names of the agents representing the parties: the agent for the appellants was Tarachand Brij Mohanlal, and the agent for the respondent was R.C. Prasad.