Case: Jiwanlal Achariya Vs. Rameshwarlal Agarwalla

Wanchoo, J. (On behalf of himself and Shah J.)1. Two questions of law arise in this appeal by special leave against the judgment of the Patna High Court. The facts which have been found by the High Court and which are necessary for our purposes may be briefly narrated. The appellant was the defendant in a suit filed by the plaintiff-respondent for recovery of money on the basis of a promissory note for Rs. 10,000 executed on February 4, 1954 by the defendant-appellant in favour of the plaintiff-respondent. 12 per cent per annum interest was to run on the promissory note which was payable on demand or to the order of the plaintiff-respondent. The suit was filed on February 22, 1957 and was thus obviously beyond time from February 4, 1954. The plaintiff-respondent relied on a payment by cheque on February 25, 1954 to bring the suit within time.2. The two questions raised by the defendant-appellant which now survive for decision arose in this way. The appellant claimed that no money was in fact advanced on February 4, 1954 and that the promissory note executed on that date was to pay by renewal a loan for Rs. 4,000 which had been taken as far back as October 1946. The sum of Rs. 10,000 included the principal amount of Rs. 4,000 and the remainder was towards interest. The defendant-appellant therefore claimed that the suit was barred by S. 4 of the Bihar Money-Lenders (Regulation of Transactions) Act, No. 7 of 1939 (hereinafter referred to as the 1939-Act) which lays down that"no Court shall entertain a suit by a money-lender for the recovery of a loan advanced by him after the commencement of this Act unless such money-lender was registered under the Bihar Money-Lenders Act, 1988 at the time when such loan was advanced."It appears that the joint family consisting of the respondent and his brother was registered as a money-lender some time about 1952, and the case of the defendant-appellant was that as the loan was advanced really in 1946 when there was no registration the suit was barred by S. 4 of the 1939-Act. The other main defence was of limitation. The respondents case on that point was simple, namely, that on February 25, 1954 a cheque for Rs. 1,000 was given in part payment and, therefore, the three years period of limitation would start from that date. The appellants case on the other hand was that it was on February 4, 1954 that a post-dated cheque for Rs. 1,000 was given and though the cheque might have been cashed on or after February 25, 1954, the payment must be deemed to have been made on February 4, 1954 and, therefore the three years period of limitation ran from that date and the suit was out of time.3. Thus two main questions arose for decision of the High Court, namely, (i) whether the suit was not maintainable in view of S. 4 of the 1939-Act, and (ii) whether the suit was barred by limitation. On the first question the High Court held that S. 4 was not a bar to the maintainability of the suit. On the facts the High Court held that there was no actual advance of money on February 4, 1954 and that the promissory note for Rs. 10,000 executed on that date was in lieu of an earlier promissory note for Rs. 8,000 executed on February 21, 1951. Even so the High Court held that the suit was maintainable as it was based on a loan alleged to have been advanced in 1954 which was long after the respondents family was registered as a money-lender. The High Court was of the view that the maintainability of the suit depended upon the pleadings on which the plaintiff came to Court and on the pleadings of the case, S. 4 had no application. On the question of limitation the High Court held that the case of the plaintiff-respondent that the cheque for Rs. 1,000, dated February 25, 1954 was given on that date was not correct. The High Court was of the view that the cheque for Rs. 1,000 was given in fact on February 4, 1954, though it was post-dated to February 25, 1954 and was actually realised sometime after February 25, 1954. Even so the High Court held that the delivery of the post-dated cheque on February 4, 1954 could not be treated as an unconditional payment and that for the purpose of S. 20 of the Indian Limitation Act, No. 9 of 1908, the payment must be held to have been made at the earliest on February 25, 1954 for the cheque could not possibly have been paid before that date. The High Court, therefore, held that S. 20 applied as part payment had been made on 25-2-1954 and the cheque itself was an acknowledgment of the payment and was in the handwriting of the appellant. The High Court, therefore, overruled both the contentions of the defendant-appellant and after going into the accounts decreed the suit for an amount which was slightly less than that claimed by the plaintiff-respondent.4. In the present appeal the same two questions of law have been raised before us, namely - (i) whether the suit was not maintainable in view of S. 4 of the 1939-Act, and (ii) whether the suit was barred by the three-year rule of limitation.Re. (i).5. We have already set out S. 4 of the 1939-Act and it does bar a suit by a money-lender for recovery of a loan advanced by him after the commencement of the 1939-Act unless the money-lender is registered under the Bihar Money-Lenders Act, 3 of 1938. In the present case it is not in dispute that the joint family of which the plaintiff-respondent was a member was registered as a money-lender sometime about 1952. The promissory note on the basis of which the suit was filed was executed in 1954 after the registration and, therefore, prima facie S. 4 would not bar the suit for the loan was advanced after the plaintiff-respondents family had been registered as a money-lender. But the appellants contention is that the High Court found that real loan of Rs. 8,000 was advanced in 1951 and that the promissory note for Rs. 10,000 executed on February 4, 1954 was only in renewal of that loan, and, therefore, S. 4 applied.6. We are of opinion that there is no force in this contention. It is necessary in this connection to refer to the definition of the word "loan in S. 2 (f) of the 1939-Act."Loan" means "an advance, whether of money or in kind, on interest made by a money-lender, and shall include a transaction on a bond bearing interest executed in respect of past liability and any transaction which in substance is a loan, but shall not include . ... (rest is immaterial) ..... "It will be seen from this definition that the word "loan" for purposes of the 1939-Act includes not only an actual advance whether of money or in kind but also a transaction on a bond bearing interest executed in respect of past liability, i.e., an instrument which is in renewal of a past advance of money. It is, however, urged on behalf of the appellant that a promissory note is not a bond, even though the promissory note in dispute might have been executed in respect of past liability and bore interest. Now the word "bond" has not been defined in the 1939-Act. It is true that a bond for the purpose of the Stamp Act is not the same thing as a promissory note. But it appears to us that the word "bond is not used in S. 2 (f) in the special sense in which it has been defined in the Indian Stamp Act. It appears to have been used in its general sense that is a deed by which one person binds himself to pay a sum to another person. This was the view taken by the Federal Court in Surendra Prasad Narain Singh v. Sri Gajadhar Prasad Sahu Trust Estate, 1940 FCR 39: (AIR 1940 FC 10), and we respectfully agree with it. Sulaiman, J., after referring to the definition of the word "bond" in the Indian Stamp Act and the Limitation Act pointed out that "the essential common feature of these definitions is "any instrument whereby a person obliges himself ". He accordingly held that the meaning of the word "bond" for the purpose of the 1939-Act was an instrument which itself obliges the obligor to the obligee, that is to say, "the language of the instrument itself must expressly create the obligation." This view of Sulaiman, J. was apparently accepted by the other two learned Judges. Therefore all that S. 2 (f) requires is that there should be an instrument in writing by which the obligor obliges himself to pay the past liability and the instrument should bear interest. These conditions are satisfied in the present case, for, by the promissory note of February 4, 1954 the defendant-appellant obliged himself to the respondent and it was in respect of past liability and bore interest. Clearly, therefore, this transaction of February 4, 1954 was a loan within the meaning of S. 2 (f) of the l939-Act.7. But it is urged that when S. 4 speaks of loan, it does not include the inclusive part of the definition given in S. 2 (f) of the 1939-Act and only refers to that part of the definition in S. 2 (f) which says that a loan means an advance whether of money or in kind on interest made by a money-lender. It is true that definitions in S. 2 begin with the words "in this Act" unless there is anything repugnant in the subject or context" and therefore, it may be possible to argue that in S. 4 the word "loan" should not be given the meaning which has been given to it in S. 2 (f). But what learned counsel argues is that it should be given that meaning in S. 2 (f) which says that it has to be an advance whether of money or in kind, but it should not be given the extended meaning which it has in S. 2 (f) by the inclusive part of the definition. We cannot accept this contention. We have to use the definition of "loan" given in S. 2 (f) in its entirety for the purpose of S. 4 or we should not use it at all. But we cannot say that half the definition should be used for the purpose of S. 4 and not the other half. Further we see no reason to hold that the intention was that in S. 4 the word "loan" should have any meaning other than that given to it in S. 2 (f). In this connection stress is laid on the words "advanced by him" which qualify the word loan, and it is said that when a promissory note is made in renewal of a past liability arising out of an earlier advance it cannot be said that any loan was advanced when the renewal was made. There are two answers to this argument. When a loan is renewed by the execution of a fresh document there is no difficulty in holding that the former loan was repaid by borrowing a fresh loan on the document of renewal: (see B. S. Lyle Ltd. v. Chappell, (1932) 1 KB 691). So the transaction of February 4, 1954 itself can be treated as a fresh loan for the purpose of S. 4 of the 1939-Act. Secondly, we are of opinion that there is no reason to lay such emphasis on the word "advanced" in S. 4 as is being done on behalf of the appellant. The word "advanced" appears to have been used there for convenience of language, particularly to indicate that the loan must have been made after the commencement of the 1939-Act. If we were to substitute the first part of the definition of "loan" in S. 4, (for it is not disputed on behalf of the appellant that the first part certainly applies to the word "loan" in S. 4), the relevant part of the Section will read like this: "for the recovery of an advance whether of money or in kind advanced by him". That will show that the word "advanced was used in S. 4 merely for convenience of language and means no more than what would have been meant by using the word "made" or "given" in place of "advanced". It does not imply that there should have been an actual advance whether of money or in kind. All that it means is that a loan as defined in S. 2 (f) should have been made and if it was after the commencement of the 1939-Act the money-lender would have to be registered before he could maintain a suit. We have therefore, no hesitation in holding that the word "loan" used in S. 4 has the same meaning as it has in S. 2 (f) and includes a transaction on a bond bearing interest executed in respect of past liability. As the promissory note of February 4, 1954 is a loan within the meaning of S. 2 (f) and as it was made after the joint family firm of the respondent had been registered, S. 4 is not a bar to the maintainability of the suit. We, therefore, hold accordingly.Re. (ii)8. This brings us to the question of limitation. The facts are not in dispute now. The promissory note was executed on February 4, 1954. On the same date a post-dated cheque bearing the date February 25, 1954 was given by the defendant-appellant to the plaintiff-respondent, the intention being that on being realised it would be credited towards part payment. It was realised sometime after February 25, 1954 and was credited towards part payment, the appellant himself having made an endorsement admitting this part payment. But it is contended on behalf of the appellant that as the post-dated cheque was given on February 4, 1954, that must be held to be the date on which part payment was made.It has been held by the High Court that the acceptance of the post-dated cheque on February 4, 1954 was not an unconditional acceptance. Where a bill or note is given by way of payment, the payment may be absolute or conditional, the strong presumption being in favour of conditional payment. It followed from the finding of the High Court that the payment was conditional, i.e., that the payment will be credited to the person giving the cheque in case the cheque is honoured.In the present case the cheque was realised and the question is what is the date of payment in the circumstances of this case for the purpose of S. 20 of the Limitation Act. Section 20 inter alia lays down that where payment on account of debt is made before the expiration of the prescribed period by the person liable to pay the debt, a fresh period of limitation shall be computed from the time when the payment was made. Where, therefore, the payment is by cheque and is conditional, the mere delivery of the cheque on a particular date does not mean that the payment was made on that date unless the cheque was accepted as unconditional payment. Where the cheque is not accepted as an unconditional payment, it can only be treated as a conditional payment. In such a case the payment for purposes of S. 20 would be the date on which the cheque would be actually payable at the earliest, assuming that it will be honoured. Thus if in the present case the cheque which was handed over on February 4, 1954 bore the date February 4,1954 and was honoured when presented to the bank the payment must be held to have been made on February 4, 1954, namely, the date which the cheque bore. But if the cheque is post-dated as in the present case it is obvious that it could not be paid till February 25, 1954 which was the date it bore. As the payment was conditional it would only be good when the cheque is presented on the date it bears, namely, February 25, 1954 and is honoured. The earliest date, therefore, on which the respondent could have realised the cheque which he had received as conditional payment on February 4, 1954 was the 25th February 1954 if he had presented it on that date and it had been honoured. The fact that he presented it later and was then paid is immaterial for it is the earliest date on which the payment could be made that would be the date where the conditional acceptance of a post-dated cheque becomes actual payment when honoured.We are, therefore, of opinion that as a post-dated cheque was given on February 4, 1954 and it was dated February 25, 1954 and as this was not a case of unconditional acceptance, the payment for the purpose of S. 20 of the Limitation Act could only be on February 25, 1954 when the cheque could have been presented at the earliest for payment. As in the present case the cheque was honoured it must be held that the payment was made on February 25, 1954. It is not in dispute that the proviso to S. 20 is complied with in this case, for the cheque itself is an acknowledgment of the payment in the hand-writing of the person giving the cheque. We are, therefore, of opinion that a fresh period of limitation began on February 25, 1954 which was the date of the post-dated cheque which was eventually honoured.9. The decision ol this Court in Commr. of Income-tax v. M/s. Ogale Glass Works Ltd., 1935-1 SCR 185 : (AIR 1954 SC 429 ), does not support the proposition that even where the acceptance of a post-dated cheque is conditional the date on which payment is made is the date of acceptance of the post-dated cheque provided it is honoured. It is true that there are observations in that case to the effect that if the cheque is not dishonoured the payment related back to the date of the receipt of the cheque, and in law the date of payment was the date of the delivery of the cheque. There is nothing to show, however, that this Court was dealing with a post-dated cheque in that case. The cheques in question in that case were issued by the Government of India and we have no reason to suppose that they were post-dated. The observations, therefore, made in that case must in our opinion be read in the light of the fact that the cheques in that case were not shown to be post-dated. Where, therefore, the cheque bears the date on which it is delivered and it is honoured, Ogales case, 1955-1 SCR 185 : (AIR 1954 SC 429 ), lays down that the payment is on the date on which the cheque was delivered. But it is difficult to accept the proposition that the same would be the position where the cheque is post-dated, for it is clear that no payment of a post-dated cheque is possible before the date which it bears. Section 20 of the Limitation Act saves limitation from the date of payment, and if the payment i made by a post-dated cheque, unless the cheque is accepted as unconditional payment, it cannot be regarded as payment before the due date. We see no reason to hold that in such a case also the payment is on the date the cheque is delivered.10. In the case of Marreco v. Richardson, (1908) 2 KB 584, the cheque bore the date on which it was delivered, though there was an oral arrangement that it would not be presented for sometime, and it was in those circumstances that the Court held that the date of payment must be the date of delivery, notwithstanding the oral arrangement. That case in our opinion is no authority for the proposition that if the cheque is in fact post-dated the payment even though conditional would still have been on the date it was handed over.11. The case of Felix Hadley v. Hadley, (1898) 2 Ch 680, also does not help the appellant as that case did not clear with a post-dated cheque. We may, however, add that we are expressing no opinion as to what would happen in case there was a bill payable on a future date, for that question does not directly arise in the present appeal. But there can in our opinion be no doubt that where a post-dated cheque is accepted conditionally and it is honoured, the payment for purposes of S. 20 of the Limitation Act can only be the date which the cheque bears and cannot be on the date the cheque is handed over, for the cheque, being post-dated, can never be paid till the date on the cheque arrives. In the present case the cheque was, dated February 25, 1954 and was honoured soon after and, therefore, the date of payment for the purpose of S. 20 of the Limitation Act would be the 25th February, 1954. The suit was, therefore, within time and the second contention raised on behalf of the appellant must also fail.

Decision:
0[ds]Re. (i).5. We have already set out S. 4 of the 1939-Act and it does bar a suit by a money-lender for recovery of a loan advanced by him after the commencement of the 1939-Act unless the money-lender is registered under the Bihar Money-Lenders Act, 3 of 1938. In the present case it is not in dispute that the joint family of which the plaintiff-respondent was a member was registered as a money-lender sometime about 1952. The promissory note on the basis of which the suit was filed was executed in 1954 after the registration and, therefore, prima facie S. 4 would not bar the suit for the loan was advanced after the plaintiff-respondents family had been registered as ais true that a bond for the purpose of the Stamp Act is not the same thing as a promissory note. But it appears to us that the word "bond is not used in S. 2 (f) in the special sense in which it has been defined in the Indian Stamp Act. It appears to have been used in its general sense that is a deed by which one person binds himself to pay a sum to another person. This was the view taken by the Federal Court in Surendra Prasad Narain Singh v. Sri Gajadhar Prasad Sahu Trust Estate, 1940 FCR 39: (AIR 1940 FC 10), and we respectfully agree with it. Sulaiman, J., after referring to the definition of the word "bond" in the Indian Stamp Act and the Limitation Act pointed out that "the essential common feature of these definitions is "any instrument whereby a person obliges himself ". He accordingly held that the meaning of the word "bond" for the purpose of the 1939-Act was an instrument which itself obliges the obligor to the obligee, that is to say, "the language of the instrument itself must expressly create the obligation." This view of Sulaiman, J. was apparently accepted by the other two learned Judges. Therefore all that S. 2 (f) requires is that there should be an instrument in writing by which the obligor obliges himself to pay the past liability and the instrument should bear interest. These conditions are satisfied in the present case, for, by the promissory note of February 4, 1954 the defendant-appellant obliged himself to the respondent and it was in respect of past liability and bore interest. Clearly, therefore, this transaction of February 4, 1954 was a loan within the meaning of S. 2 (f) of theis true that definitions in S. 2 begin with the words "in this Act" unless there is anything repugnant in the subject or context" and therefore, it may be possible to argue that in S. 4 the word "loan" should not be given the meaning which has been given to it in S. 2 (f). But what learned counsel argues is that it should be given that meaning in S. 2 (f) which says that it has to be an advance whether of money or in kind, but it should not be given the extended meaning which it has in S. 2 (f) by the inclusive part of the definition. We cannot accept this contention. We have to use the definition of "loan" given in S. 2 (f) in its entirety for the purpose of S. 4 or we should not use it at all. But we cannot say that half the definition should be used for the purpose of S. 4 and not the other half. Further we see no reason to hold that the intention was that in S. 4 the word "loan" should have any meaning other than that given to it in S. 2 (f). In this connection stress is laid on the words "advanced by him" which qualify the word loan, and it is said that when a promissory note is made in renewal of a past liability arising out of an earlier advance it cannot be said that any loan was advanced when the renewal was made. There are two answers to this argument. When a loan is renewed by the execution of a fresh document there is no difficulty in holding that the former loan was repaid by borrowing a fresh loan on the document of renewal: (see B.S. Lyle Ltd. v. Chappell, (1932) 1 KB691). So the transaction of February 4, 1954 itself can be treated as a fresh loan for the purpose of S. 4 of the 1939-Act. Secondly, we are of opinion that there is no reason to lay such emphasis on the word "advanced" in S. 4 as is being done on behalf of the appellant. The word "advanced" appears to have been used there for convenience of language, particularly to indicate that the loan must have been made after the commencement of the 1939-Act. If we were to substitute the first part of the definition of "loan" in S. 4, (for it is not disputed on behalf of the appellant that the first part certainly applies to the word "loan" in S. 4), the relevant part of the Section will read like this: "for the recovery of an advance whether of money or in kind advanced by him". That will show that the word "advanced was used in S. 4 merely for convenience of language and means no more than what would have been meant by using the word "made" or "given" in place of "advanced". It does not imply that there should have been an actual advance whether of money or in kind. All that it means is that a loan as defined in S. 2 (f) should have been made and if it was after the commencement of the 1939-Act the money-lender would have to be registered before he could maintain a suit. We have therefore, no hesitation in holding that the word "loan" used in S. 4 has the same meaning as it has in S. 2 (f) and includes a transaction on a bond bearing interest executed in respect of past liability. As the promissory note of February 4, 1954 is a loan within the meaning of S. 2 (f) and as it was made after the joint family firm of the respondent had been registered, S. 4 is not a bar to the maintainability of the suit. We, therefore, hold accordingly.Re.the present case the cheque was realised and the question is what is the date of payment in the circumstances of this case for the purpose of S. 20 of the Limitation Act. Section 20 inter alia lays down that where payment on account of debt is made before the expiration of the prescribed period by the person liable to pay the debt, a fresh period of limitation shall be computed from the time when the payment was made. Where, therefore, the payment is by cheque and is conditional, the mere delivery of the cheque on a particular date does not mean that the payment was made on that date unless the cheque was accepted as unconditional payment. Where the cheque is not accepted as an unconditional payment, it can only be treated as a conditional payment. In such a case the payment for purposes of S. 20 would be the date on which the cheque would be actually payable at the earliest, assuming that it will be honoured. Thus if in the present case the cheque which was handed over on February 4, 1954 bore the date February 4,1954 and was honoured when presented to the bank the payment must be held to have been made on February 4, 1954, namely, the date which the cheque bore. But if the cheque is post-dated as in the present case it is obvious that it could not be paid till February 25, 1954 which was the date it bore. As the payment was conditional it would only be good when the cheque is presented on the date it bears, namely, February 25, 1954 and is honoured. The earliest date, therefore, on which the respondent could have realised the cheque which he had received as conditional payment on February 4, 1954 was the 25th February 1954 if he had presented it on that date and it had been honoured. The fact that he presented it later and was then paid is immaterial for it is the earliest date on which the payment could be made that would be the date where the conditional acceptance of a post-dated cheque becomes actual payment when honoured.We are, therefore, of opinion that as a post-dated cheque was given on February 4, 1954 and it was dated February 25, 1954 and as this was not a case of unconditional acceptance, the payment for the purpose of S. 20 of the Limitation Act could only be on February 25, 1954 when the cheque could have been presented at the earliest for payment. As in the present case the cheque was honoured it must be held that the payment was made on February 25, 1954. It is not in dispute that the proviso to S. 20 is complied with in this case, for the cheque itself is an acknowledgment of the payment in the hand-writing of the person giving the cheque. We are, therefore, of opinion that a fresh period of limitation began on February 25, 1954 which was the date of the post-dated cheque which was eventuallyis true that there are observations in that case to the effect that if the cheque is not dishonoured the payment related back to the date of the receipt of the cheque, and in law the date of payment was the date of the delivery of the cheque. There is nothing to show, however, that this Court was dealing with a post-dated cheque in that case. The cheques in question in that case were issued by the Government of India and we have no reason to suppose that they were post-dated. The observations, therefore, made in that case must in our opinion be read in the light of the fact that the cheques in that case were not shown to be post-dated. Where, therefore, the cheque bears the date on which it is delivered and it is honoured, Ogales case, 1955-1 SCR 185   : (AIR 1954 SC 429  ), lays down that the payment is on the date on which the cheque was delivered. But it is difficult to accept the proposition that the same would be the position where the cheque is post-dated, for it is clear that no payment of a post-dated cheque is possible before the date which it bears. Section 20 of the Limitation Act saves limitation from the date of payment, and if the payment i made by a post-dated cheque, unless the cheque is accepted as unconditional payment, it cannot be regarded as payment before the due date. We see no reason to hold that in such a case also the payment is on the date the cheque iscase in our opinion is no authority for the proposition that if the cheque is in fact post-dated the payment even though conditional would still have been on the date it was handedmay, however, add that we are expressing no opinion as to what would happen in case there was a bill payable on a future date, for that question does not directly arise in the present appeal. But there can in our opinion be no doubt that where a post-dated cheque is accepted conditionally and it is honoured, the payment for purposes of S. 20 of the Limitation Act can only be the date which the cheque bears and cannot be on the date the cheque is handed over, for the cheque, being post-dated, can never be paid till the date on the cheque arrives. In the present case the cheque was, dated February 25, 1954 and was honoured soon after and, therefore, the date of payment for the purpose of S. 20 of the Limitation Act would be the 25th February, 1954. The suit was, therefore, within time and the second contention raised on behalf of the appellant must also fail.We are of opinion that there is no force in thiswill be seen from this definition that the word "loan" for purposes of theincludes not only an actual advance whether of money or in kind but also a transaction on a bond bearing interest executed in respect of past liability, i.e., an instrument which is in renewal of a past advance ofthe word "bond" has not been defined in the