Prafulla Kumar v.

Bank of Commerce, Khulna, AIR 1947 PC 60

Date of Judgment 11 February 1947

Court High Court of Bombay India
Appellant Prafulla Kumar Mukherjee
Respondent The Bank of Commerce
Bench Wright, Porter, Uthwatt, M Nair, J
Beaumont
Referred Bengal Money Lenders Act (10 of 1940),
S.30, S.36, S.38, S.2& S.100, S.99,
Schedule.7 List 1 item28 and Item.38,
Schedule List 2 Item 27.
Case Type Civil Nature

FACTS OF CASE:-
A significant case in the history of Indian law was Prafulla Kumar Mukherjee v. The Bank of Commerce,
Khulna (AIR 1947, PC 60). The Bengal Money Lender Act, 1940, which restricted the amount a moneylender
may recoup on loans for principal and interest and prohibited the payment of amounts greater than those
allowed by the Act, was at issue in the case.
The Khulna Loan Bank, Ltd.’s assets were transferred to the respondents by order of the High Court of
Calcutta dated May 12, 1941, which was issued in accordance with Section 153A of the Indian Companies
Act. In some of the cases currently on appeal before their Lordships Board, the respondents sought to
recoup loans and interest they claimed were owed on promissory notes signed by the appellant borrowers.
In other cases, the appellant debtors sought a declaration that the Act’s provisions at least reduced their
debt, and in some cases, that they were entitled to reimbursement for amounts that were overpaid.
The Khulna Loan Company or the Khulna Loan Bank, not the respondents, made loans at considerably
earlier dates. The procedures started in 1941, 1942, and 1948, but the loans in question were made much
earlier. Promissory notes signed concurrently with the transaction served as collateral for the loans in each
case.
Section 30 of the Act, whose legality their Lordships had to decide, states that no borrower will be obligated
to pay more than the amount specified in the agreement or in any law currently in effect after the Act’s
start.
A borrower may bring a lawsuit about a loan covered by the Act’s provisions up to a particular amount in
respect of principle and interest or more than a specific percentage of the amount provided as a defence to
the moneylender’s claim.
This case is significant because it made it necessary to think about how the federal and provincial
legislatures in India should be divided into their respective jurisdictional areas and how to decide which
topics fall under Sections 99 and 100 of the Government of India Act, 1935, and the three lists listed in its
Seventh Schedule, respectively.

ISSUE:-
The issue is Prafulla Kumar v. Bank of Commerce, Khulna AIR 1947, PC 60 was whether the Government of
India Act of 1935 is invalid because of Schedule 7, List 1 Items 28 and 38.

ARGUMENT:-
In 1947, Prafulla Kumar Mukherjee was a party to a legal dispute with The Bank of Commerce that the Privy
Council heard and that centred on the legality of the Bengal Money Lender Act, 1940. The Act restricted the
amount of principal that a moneylender may collect from his loans. And interest, as well as forbade the
payment of amounts greater than those allowed by the Act. In this instance, the Act’s legality was
contested, but the court ultimately affirmed it.
In this case, Prafulla Kumar Mukherjee argued that the Bengal Money Leader Act, 1940 placed restrictions
on the amount that might be recovered by a moneylender from any loan as well as the rate of interest. It
was stated that even though incidental encroachment on “Promissory notes,” which is key subject, was
occurring, state law regarding money lending and money lenders was still legal and related to promissory
notes was a key matter.
My source does not specifically cite the Bank of Commerce's defence in this instance. However, it can be
assumed that they were defending their right to recoup loans and interest on promissory notes that the
appellant borrowers were said to have signed. Additionally, they argued that the Act's provisions had
reduced their debt, and in some cases, they were even entitled to reimbursement for overpayments.

JUDGEMENT:-
Prafulla Kumar Mukherjee v. The Bank of Commerce, which was decided on February 11, 1947, is the case
to which you are alluding. The Bengal Money Lender Act, 1940, which limited the amount a moneylender
may recover on his debts for, was challenged in the case. Payments of principle and interest in excess of
what the Act permits were forbidden. The Khulna Loan Bank, Ltd.'s assets were transferred to the
respondents by judgement of the High Court of Calcutta dated May 12, 1941, in accordance with Section
153A of the Indian Companies Act. The respondents were an incorporated organisation.
The Act was deemed to be outside the authority of the Provincial Legislature by the High Court of Calcutta.
However, the ruling of the High Court of Calcutta was overturned on appeal to the Federal Court. The law-
making authority of the Bengal Legislature in India is to be limited, and the procedure to be used in deciding
the subjects which are to be dealt with by 1935, and the three lists set forth the Seventh Schedule, it was
decided that the Act was supra vires.
This case is noteworthy because it was the first time the Doctrine of Pith and Substance was applied in India.
The doctrine considers a law’s genuine essence and character to determine which list it belongs to. If the
substance is on the Union List, then a law’s accidental intrusion onto the State List does not invalidate it.