Case Note & Summary
The dispute arose from a money recovery suit filed by the respondent (a registered money-lender) against the appellant on the basis of a promissory note for Rs. 10,000 executed on February 4, 1954. The appellant claimed that the promissory note was merely a renewal of an earlier loan advanced in 1946 or 1951 when the respondent's joint family was not registered as a money-lender under the Bihar Money-Lenders Act, 1938, and therefore the suit was barred by Section 4 of the Bihar Money Lenders (Regulation of Transactions) Act, 1939. The appellant also contended that the suit, filed on February 22, 1957, was barred by limitation because a part payment of Rs. 1,000 was made by a post-dated cheque delivered on February 4, 1954, even though the cheque was dated February 25, 1954 and encashed later. The respondent argued that the promissory note executed in 1954 after registration constituted a fresh loan within Section 2(f) of the 1939 Act, and that the part payment took effect on February 25, 1954, the date of the cheque, bringing the suit within time. The Patna High Court had accepted the respondent's contentions and decreed the suit, leading to the present appeal by special leave. The Supreme Court, by a majority of Wanchoo and Shah JJ. (Bachawat J. dissenting on limitation), dismissed the appeal and upheld the High Court decree. On the first issue, the Court held that the term 'loan' in Section 4 of the 1939 Act had to be read with the inclusive definition in Section 2(f), which includes a transaction on a bond bearing interest executed in respect of past liability. The word 'bond' was interpreted in its general sense as any instrument whereby a person binds himself to pay a sum, following Federal Court precedent. The promissory note of 1954 satisfied these conditions and was executed after registration, so Section 4 did not bar the suit. On the second issue, the majority held that a post-dated cheque accepted conditionally and honoured constitutes payment only on the date it bears, because a post-dated cheque cannot be paid before that date. Therefore, the part payment was made on February 25, 1954, and the suit filed within three years thereof was not barred by limitation. Bachawat J., dissenting, would have held that payment by a negotiable instrument, including a post-dated cheque, takes effect from the date of delivery, making the suit time-barred. The final decision affirmed the decree in favour of the respondent, with the appeal dismissed and the money decree upheld.
Headnote
A) Money Lending - Maintainability of Suit - Section 4 Bihar Money Lenders (Regulation of Transactions) Act, 1939 - Definition of Loan Includes Promissory Note for Past Liability - The promissory note executed in 1954 in renewal of an earlier loan was a loan within Section 2(f) as a transaction on a bond bearing interest executed in respect of past liability. The word 'bond' was used in general sense, not as defined in the Indian Stamp Act, and included any instrument whereby a person obliges himself to pay a sum. Since the respondent's joint family was registered as a money-lender in 1952 and the promissory note was executed in 1954, Section 4 did not bar the suit. Held that the suit was maintainable. B) Limitation - Part Payment by Post-Dated Cheque - Section 20 Indian Limitation Act, 1908 - Date of Payment is Cheque Date When Honoured, Not Delivery Date - A post-dated cheque accepted conditionally and honoured operates as payment only on the date it bears, not on the date of delivery, because the cheque cannot be paid before that date. The cheque dated February 25, 1954, though delivered on February 4, 1954, constituted part payment only on February 25, 1954. The suit filed on February 22, 1957 was within three years from that date. Held that the suit was not barred by limitation.
Issue of Consideration
Whether the suit was not maintainable under Section 4 of the Bihar Money Lenders (Regulation of Transactions) Act, 1939 because the promissory note was a renewal of a loan advanced before money-lender registration; and whether the suit was barred by limitation under Section 20 of the Indian Limitation Act, 1908 where part payment was made by post-dated cheque delivered before but dated after.
Final Decision
The Supreme Court, by majority (Wanchoo and Shah JJ., Bachawat J. dissenting on limitation), dismissed the appeal and upheld the decree of the Patna High Court. The Court held that the suit was maintainable under Section 4 of the Bihar Money Lenders (Regulation of Transactions) Act, 1939, because the promissory note of 1954 was a loan within Section 2(f) and was executed after the respondent's family was registered as a money-lender. The majority further held that the part payment by post-dated cheque took effect on February 25, 1954, not February 4, 1954, so the suit was within limitation. The decree in favour of the respondent for the amount determined by the High Court was affirmed.
Law Points
- Legal points not extracted
- Definition of loan includes transaction on bond bearing interest executed in respect of past liability
- promissory note is a bond in general sense
- suit under Section 4 of Bihar Money Lenders (Regulation of Transactions) Act
- 1939 is maintainable if loan advanced after registration
- part payment by post-dated cheque under Section 20 of Indian Limitation Act
- 1908 takes effect on the date the cheque bears when honoured
- not on delivery date
