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Indian Case Summary

Prafulla Kumar Mukherjee vs The Bank Of Commerce on 11 February, 1947 – Case summary

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In the case of Prafulla Kumar Mukherjee vs The Bank Of Commerce on 11 February 1947, the Bombay High Court was called upon to consider the principle upon which the respective jurisdictions of the Federal and Provincial legislatures in India are to be delimited. The case revolved around the validity of the Bengal Money-lenders Act, 1940, which limits the amount recoverable by a moneylender on his loans for principal and interest and prohibits the payment of sums larger than those permitted by the Act.

The respondents in the case were an incorporated body to which the assets of the Khulna Loan Bank, Ltd. were transferred by an order of the High Court of Calcutta. The respondents claimed to recover loans and interest alleged to be due upon promissory notes, executed by appellant borrowers. In other instances, appellant debtors claimed a declaration that their indebtedness was at least diminished by the provisions of the Act and even in some instances that they were entitled to repayment of sums overpaid.

The Act, the validity of which the court had to determine, provides that no borrower shall be liable to pay after the commencement of this Act more than a limited sum in respect of principal and interest or more than a certain percentage of the sum advanced by way of interest. It is retrospective in its effect, and its limitations can be relied upon by a borrower by way of defense to an action by the moneylender or the borrower can himself institute a suit in respect of a loan to which the provisions of the Act apply.

The respondents argued that while they are money-lenders, they are engaged in banking and are holders of promissory notes, matters which are solely within the Federal jurisdiction and that a Provincial Act such as the Bengal Money Lenders Act is ultra vires in that it deals with Federal matters. These matters, they say, are so intertwined with the rest of the Act that they cannot be disassociated and therefore the Act is wholly void.

The Judges of the High Court found in favor of the appellants on the ground that though the Federal List prevails over the Provincial List, where the two lists come in conflict, yet the Act being a money-lenders’ Act, deals with what is in one aspect at least a Provincial matter and is not rendered void in whole or in part by reason of its effect upon promissory notes.

However, this opinion was reversed in the Federal Court which thought the Act a clear interference with the subjects set out in item 28 in the Federal List and declared the Bengal Act to be ultra vires in so far as it dealt with those subjects. It was not, however, in their opinion totally void.

The case highlighted the complexities of the division of powers between Federal and Provincial legislatures in India, and the potential for overlap and conflict. The court’s observations underscored the need for a nuanced understanding of the scope and limits of legislative powers, and the importance of considering the pith and substance of an Act when determining its validity.