This article, written by Vidushi Kachroo, entails detailed information regarding the landmark case of Prafulla Kumar vs. Bank of Commerce (1947). The article includes the facts of the case, the arguments presented, the judgement given by the Hon’ble High Court of Bombay, and the rationale behind it. This case turned out to be a landmark because of the application of the doctrine of pith and substance, which was applied by the privy council for the very first time in India.
Table of Contents
Introduction
The present case is a leading case involving the centre-state relationship, where the Federal Court applied the doctrine of pith and substance to determine the validity of the law enacted by a Provincial Legislature. The doctrine of pith and substance states that whenever a question arises about the authority of the legislature to enact an Act, then the true nature and objective of the Act against which the complaint has been made are to be determined. Hence, an Act cannot be considered invalid merely because it causes an incidental effect on a matter that does not fall under its authority.
In the case of Prafulla Kumar vs. Bank of Commerce (1947), a challenge was raised regarding the validity of an enactment by the legislature of Bengal. The law involved in this case is the Bengal Money Lenders Act, 1940, which was brought into force so as to regulate the amount recoverable by money lenders from borrowers. The Act essentially dealt with money lending practices in Bengal. Its main objective was to set a bar or limitation on the amount that could be recovered by the lenders as principal and interest on the borrowing. However, it was challenged on the ground that it encroaches on the subject of List Ⅰ Entry 28 of Schedule ⅥⅠ of the Government of India Act, 1935, which includes in itself promissory notes. The ground of the challenge was that promissory notes are federal subjects; hence, the authority to make laws on them lies with the Federal (Central) Legislature and not Provincial (State) Legislatures. The Court addressed this issue by applying the doctrine of pith and substance and upheld the validity of the Act.
Doctrine of pith and substance
The most crucial part of this case is the application of the doctrine of pith and substance. The issue of conflict between the powers of the Federal and Provincial Legislative Authorities was answered in this case for the very first time with the help of this doctrine. Hence, before moving on with this case, it is essential to understand what the doctrine of pith and substance actually is.
Determining the pith and substance of a law means understanding the true nature and objective of that law. The doctrine of pith and substance is a legal principle that is used to determine the validity of a law on the basis of the legislative competence of the enacting authority. This doctrine is applied when a law is challenged on the ground that the legislative authority has overridden its competence and encroached upon a subject on which it had no authority to legislate.
According to this doctrine, the courts must analyse the true nature and objective of the challenged law. Once the intention and subject matter of the challenged law are determined, it should be determined whether the legislative authority had the competence to make such a law or whether it encroached upon a subject matter that does not fall within its authority. If the true objective of the law falls within the authority of the enacting authority, then the law is considered valid, even if it accidentally encroaches on a subject matter that falls within the authority of another legislative authority.
Hence, the doctrine of pith and substance states that it is the true nature and objective of the law which has to be seen while determining its validity and not the incidental effect it may have on some other subjects. Just because a law has an incidental effect on a matter out of its competence does not render the law invalid. It is important to determine the intention of the legislative authority behind the enactment of a law. This doctrine helps to avoid the practice of colorable legislation, which may be used by the legislature to implement a law on a subject matter that does not fall within its authority indirectly.
Details of the case
- Parties: Prafulla Kumar Mukherjee (Appellant) and Bank of Commerce Ltd., Khulna (Respondent)
- Date of judgement: 11th February, 1947
- Court: High Court of Bombay
- Bench: Wright, J.; Porter, J.; Uthwatt, J.; M. Nair, J.; J. Beaumont, J.
- Statutes involved: This case essentially revolves around the following statutes:
- The Bengal Money Lenders Act, 1940
- The Government of India Act, 1935
Background of Prafulla Kumar Mukherjee vs. Bank of Commerce, Ltd. (1947)
This case is a landmark event in the history of the Indian judicial system, as the decision was pronounced by applying the doctrine of pith and substance. The proceedings in this case started in the year 1941 before the High Court of Calcutta. The main issue that needed to be addressed was regarding the validity of the Bengal Money Lenders Act, 1940 (hereinafter referred to as the Act). The Act was enacted by the Bengal Provincial Legislature to regulate the money lending practices in the province of Bengal.
The main objective of the Act was to prevent lenders from recovering the principal amount and interest on it from borrowers at high rates. It prohibited the recoverable amount from exceeding a specific limit provided in the Act. This protected the borrowers from exorbitant rates of interest and safeguarded their rights.
The present case was initially approached before the High Court of Calcutta, which held that the Bengal Money Lenders Act, 1940, was repugnant to the federal law as it contained provisions on a subject on which the Provincial Legislature had no authority to make laws. Although the Act in question was enacted to deal with the money lending practice in the province of Bengal, but as per the Act, the loans were secured by promissory notes, which happened to be a subject on which only the Federal Legislature had the authority to enact laws.
The Government of India Act, 1935, in its Schedule ⅥⅠ List Ⅰ, which was the Federal Legislative List, had specifically laid down the subjects on which only the Federal Legislature had the authority to make laws. Entry 28 of this list contained matters related to cheques, bills of exchange, promissory notes, and other similar instruments. Hence, the Calcutta High Court held that since the Bengal Money Lenders Act, 1940, also includes provisions on matters related to promissory notes, it is invalid as the Provincial Legislature has encroached on its authority by enacting a law on a federal legislative matter. This matter was then appealed before the Privy Council in the High Court of Bombay.
Facts of the case
- The appellant was a borrower who had taken a loan from the Khulna Loan Bank, earlier known as the Khulna Loan Company, before the Bengal Money Lenders Act, 1940, was enacted.
- In 1940, the Bengal Money Lenders Act was enacted by the Bengal Provincial Legislature to regulate the money lending practices in the province. This Act imposed a limit on the amount recoverable as principal and interest by the money lenders. Hence, the rights of the borrowers were protected, and the Act provided them with a safeguard against exploitation by the money lenders.
- Later in 1942, the assets of Khulna Loan Bank Ltd. were transferred to the respondent by an order of the High Court of Calcutta dated May 12, 1941. This order was passed under Section 153A of the Indian Companies Act, 1913.
- The appellant approached the Privy Council on the grounds that the provisions of the Bengal Money Lenders Act, 1940, were applicable to him as well. Since the Act’s main objective was to curb the high rates of interest recovered by the money lenders in Bengal, the appellant contended that he also had a right to claim protection under the Act from the high rate of interest on his borrowing, which was earlier lended by Khulna Loan Bank Ltd. and later lied to the respondent.
Issues raised
The case raised several key issues before the Privy Council that needed to be addressed. The main issues were:
- Whether the Bengal Money Lenders Act, 1940, was valid?
- Whether the Bengal Provincial Legislature had the authority to legislate such an Act that included a matter listed in Schedule ⅥⅠ List Ⅰ of the Government of India Act, 1935?
- In case of a conflict between a provincial law and a federal law, which one would prevail?
The Privy Council addressed these issues very clearly for the first time by applying the doctrine of pith and substance. This case became a landmark for the application of this doctrine.
Arguments of the parties
Both parties presented their sides before the Privy Council, and the central point of the arguments presented by both parties was the validity of the Bengal Money Lenders Act, 1940.
Appellant
The appellant in this case was a borrower who had taken a loan originally from Khulna Loan Bank Ltd., which was secured by a promissory note. The transaction was made before the Bengal Money Lenders Act, 1940, came into force. Since the Act made it mandatory for the money lenders to recover the amount given as a borrowing, both the principal and interest amount, according to the specified limits provided in it, the appellant claimed that he also had the right to be protected under the said Act. This argument was supported by quoting Section 30(2) of the Act, which laid down that after the commencement of the Bengal Money Lenders Act, 1940, no borrower shall be subjected to paying interest higher than that specified in the provisions of the Act, even if the agreement was made prior to the commencement of this Act. This expressed that the Act had a retrospective effect, which meant that it would also be applicable to the transactions done before this Act was enforced. Hence, the appellant claimed protection in accordance with the provisions of the Act.
The appellant set out their contentions under the following four heads:
Firstly, it was stated that the power to make laws with respect to money lending also gives rise to the power to influence and affect the rights and liabilities of the money lenders as well as the borrowers who are involved in the money lending transaction, including promissory notes. The appellant contended that the Government of India Act, 1935, should be read as a whole, implying that both Entry 28 List Ⅰ and Entry 27 List Ⅱ of the Act should be interpreted harmoniously with each other. This should be done to reconcile both entry items and, hence, to read Entry 27 of the provincial list as an exception to Entry 28 of the federal list.
Secondly, the appellant argued that the Bengal Money Lenders Act, 1940, was in pith and substance, a law enacted to regulate money lending in Bengal province, and hence, it should not be rendered void, invalid, or repugnant merely because it had an incidental effect on any of the subject matter that fell under the authority of the Federal Legislature. The appellant supported his statement by applying the doctrine of pith and substance.
The doctrine of pith and substance states that when dealing with a matter of conflict between a subject matter of the Federal and Provincial Legislative Lists, the main objective and subject of the repugnant law against which a complaint has been made should be seen, not its incidental effect. This doctrine, therefore, is applied where a conflict between subject matters on the federal and provincial lists arises. It simply states that when a law appears to be exceeding its authority by incorporating provisions on matters that do not fall under its authority, the validity of such a repugnant law should be determined on the basis of its true nature and objective. The main subject matter of the law determines whether it is valid or not. A law cannot be held invalid merely because it affects another subject over which it has no authority to address.
The appellant contended that the Act was in pith and substance with money lending only. It was also stated that the Bengal Provincial Legislature did not abuse or overstepped its authority while enacting such an Act because the law essentially aimed to regulate money lending practices in the province. The main objective and subject of the Act was to prohibit money lenders from charging high rates of interest on borrowers.
The appellant supported his argument by stating that the Government of India Act, 1935, in its Schedule ⅥⅠ List Ⅱ, called the Provincial Legislative List, laid down the matters on which only the Provincial Legislature had the authority to make laws. Entry 27 of the Provincial Legislative List stated the matters related to trade and commerce within the province; markets and fairs; money lending; and money lenders. Hence, it was made clear that the Bengal Provincial Legislature had the authority to make any law on matters related to money lending and money lenders in the province.
The appellant contended that the Act was enacted with the aim of governing money lenders and money lending in the province and incidentally affected one of the matters of the Federal Legislative List. The Act’s incidental effect on a federal matter cannot be considered a reason for declaring it void. According to the doctrine of pith and substance, a law cannot be held to be void merely because it has an incidental effect on any other law. It is the true nature and objective of the law that are to be seen and analysed, not its incidental effect.
Thirdly, it was contended that the true constructed meaning of Entry 28 of the federal list implied that it was limited to the part of law dealing with negotiable instruments that had reference to their negotiability and did not cover the contractual relationship existing between the immediate parties to the bill of exchange or promissory note. The immediate parties here refer to the money lenders and the borrowers.
Fourthly, the appellant contended that if the Act in question dealt with contractual relationships, which was a subject of the concurrent legislative list, then it was also true that the Act was in conflict with existing Indian legislation, i.e., the Negotiable Instruments Act, 1881. However, the Bengal Money Lenders Act, 1940, had received the assent of the Governor General, because of which the provincial Act shall take precedence over the Indian law. Section 107(2) of the Government of India Act, 1935 states that if the provisions of a provincial law made on any subject of the concurrent legislative list are repugnant to the federal law or an existing Indian law, and if such a provincial law has received the assent of the Governor General or the emperor, then in such a case, the provincial law shall prevail.
Respondent
The respondent argued that the transaction of borrowing was between the appellant and Khulna Loan Bank Ltd., whose assets were later transferred to them by the order of the Calcutta High Court. It was contended that Section 2(1) of the Bengal Money Lenders Act, 1940, stated that ‘bank’ means any banking company as defined under Section 277F of the Indian Companies Act, 1913. The respondent argued that although they were involved in money lending as one of their functions, it was important to note that they were a banking company and the holders of promissory notes, which are subjects of the Federal Legislative List. Hence, they questioned the validity of the Bengal Money Lenders Act, 1940. The Respondent argued that the Act was ultra vires and hence should be considered void in the part where the matters of the Federal Legislative List are involved, which are promissory notes and banking.
Furthermore, it was argued that whether or not the Act was in pith and substance, the main question arising was whether a provincial Act was to be given precedence over the federal law or not. It was a matter of grave importance that was not dealt with before this case. Although the Bengal Money Lenders Act, 1940, was enacted specifically to cater to the problems arising from unfair money lending practices in the province, it was also true and important to note that the Act did cross its authority by encompassing provisions related to promissory notes, which were clearly established as a federal subject. The issue was that, whatever the object may be, the federal law is always superior in comparison to a provincial law.
The respondent argued that Section 107(1) of the Government of India Act, 1935, stated that if any provision of a provincial law is in conflict with any provision of the federal law that the Federal Legislature has the authority to enact, whether existing or enacted after the provincial Act, then the provincial Act shall stand void to the extent of the repugnancy and the federal law shall prevail. This section clearly provided that, in cases of repugnancy, the federal law shall take precedence over the provincial law.
The respondent argued by comparing the Government of India Act, 1935, with the British North America Act (1867) and the Australian Commonwealth Act (1900), stating that the main difference was that the latter two Acts did not contain any concurrent list and recognised no overlapping of powers. It was stated that Section 100 of the Government of India Act, 1935, contains the hierarchy of powers by stating that the federal list prevails over both the provincial list and the concurrent list, and the concurrent list, in turn, prevails over the provincial list. Hence, any interference with any federal law shall be considered ultra vires, and it cannot be said that mere incidental effect is an exception under the rule of pith and substance. The Government of India Act, 1935, strictly prohibits the Provincial Legislature from interfering with any matter on the Federal Legislative List.
Furthermore, it was contended that no question of exception should arise by stating that the federal list generally expressed the matter, whereas in the provincial list the matter was specifically dealt with. There is no space for any exception on the basis of the generality of the expressions used in the federal list. It was also contended that even if money lending was to be considered a contractual relationship, the Negotiable Instruments Act, 1881, should prevail as an Act of the Government of India, having precedence over the repugnant Act in cases of conflict.
Laws discussed in Prafulla Kumar Mukherjee vs. Bank of Commerce, Ltd. (1947)
This case mainly discusses Sections 100 and 107 along with Schedule ⅥⅠ of the Government of India Act, 1935. These Sections stated the distribution of powers of the Federal and Provincial Legislatures, whereas the Schedule ⅥⅠ envisaged three lists, namely the Federal Legislative List (List Ⅰ), the Provincial Legislative List (List Ⅱ) and the Concurrent Legislative List (List Ⅲ ). These lists contained the subject matters on which both the legislatures had the authority to enact any law, respectively.
Section 100 of the Government of India Act, 1935
Section 100 of the Government of India Act, 1935, laid down the subject matters on which the Federal and Provincial Legislatures had the authority to make laws.
- Section 100(1) granted the Federal Legislature the authority to enact any law on any subject matter contained in List Ⅰ of the Seventh Schedule.
- Section 100(2) allowed both the Federal and the Provincial Legislatures the authority to enact laws on any subject matter listed in List Ⅲ of the Seventh Schedule.
- Section 100(3) conferred exclusive authority on the Provincial Legislature to enact laws on the subject matters listed in List Ⅱ of the Seventh Schedule.
- Section 100(4) permitted the Federal Legislature to make laws with respect to the matters listed in the Provincial Legislative List, but this power does not extend to making laws specifically for a province or any of its parts. This meant the Federal Legislature could make laws on matters of List Ⅱ of the Seventh Schedule but only in general or national interest. In this way, the autonomy of the Provincial Legislature was protected.
Section 107 of the Government of India Act, 1935
This section talked about the inconsistencies arising between the federal laws and the provincial or state laws.
- Section 107(1) stated that if any provision of a Provincial law is repugnant to any Federal law, enacted by the Federal Legislature as per its competency, or to any existing Indian law enacted on any of the matters listed in the Concurrent Legislative List, then in such a case, the Provincial law shall be considered void to the extent of the repugnancy and the Federal law, whether passed before or after the Provincial law, or the Indian law, as the case may be, shall prevail.
- Section 107(2) stated that if any provision of a Provincial law is repugnant to a Federal law or an existing Indian law and such a Provincial law has been reserved for or has received the assent of the Governor-General or the emperor, then in such a case, the Provincial law shall prevail over the Federal law or the existing Indian law. But the Federal Legislature shall have the authority to enact any legislation on the same subject matter over time. Provided that such a provincial law shall not be easily overridden by any subsequent federal law without the prior approval or sanction of the Governor-General.
- Section 107(3) stated that if any provision of a law of a Federated State is repugnant to the Federal law that extends to that State, then the law of that State shall be considered void to the extent of repugnancy, irrespective of the fact whether the Federal law was passed before or after the repugnant State law.
Judgement of the case
The Privy Council was faced with extremely challenging and complex issues in this case. After hearing the facts and the arguments of both sides, there were a series of questions that were to be answered. The conflict of this nature between a provincial law and a federal law was never addressed before this case.
While addressing the questions or the contentions raised by the parties regarding the prevalence of the Negotiable Instruments Act, 1881 over the Bengal Money Lenders Act, 1940 on the basis of contractual relationship which is a concurrent subject, the Federal Court answered that the latter Act had already received the assent of the Governor General of India when it was enacted and as per Section 107(2) of the Government of India Act, 1935, it will automatically take precedence over the Indian legislation since, the section states that in case of conflict between a federal law and provincial law over a matter of concurrent list, if the provincial law has been given the assent of the Governor General or the emperor, then the provincial law shall prevail.
Hence, the question of the Negotiable Instruments Act, 1881, taking precedence was ruled out. There were three questions remaining to be answered by the Federal Court:
Did the Act in question deal in pith and substance with money lending
The Federal Court was of the opinion that the Act was in fact in pith and substance with money lending. Its main objective was to limit the liability of the borrowers by establishing a limit on interest rates and recoverable amounts. Although promissory notes were a federal subject, it was also to be noted that securing a loan against promissory notes was a common practice among money lenders. Hence, a promissory note was just an instrument for securing the transaction between the borrower and the money lender, not the main subject of the Act.
If the Act was in pith and substance, was it valid, even though it encroaches on the matters of the Federal Legislative List
This question was very difficult, and the respondents put a great deal of stress on it. While addressing this question, the lordships stated that the principles obtained in the Australian Commonwealth Act (1900) and the British North America Act (1867), which establish a clear separation of powers between the federal and the provincial legislature, cannot be applied here. It had been discussed various times in the past that although the Government of India Act, 1935, set out the hierarchy of powers between the federal and provincial legislatures, it was not possible to strictly follow this separation. It was definite that the overlapping of powers would occur at one point or another. This was the reason that a third list, i.e., the concurrent list, was included to deal with matters that would come under the authority of both the federal and provincial legislatures.
It is also implied from Section 100 and Section 107 of the Government of India Act, 1935, that the federal list shall prevail over both the provincial and concurrent lists, while the concurrent list shall prevail over the provincial list. If a matter on the concurrent list is dealt with by the Federal Legislature, it shall be binding, and if there is no federal legislation on that matter, then the provincial law shall be binding. Hence, it was not possible to make a clear cut or distinction between both legislatures.
The lordships were of the opinion that arguments should not be taken forward as the overlapping of subjects is bound to happen. In their opinion, when the subjects overlap, the effect of the legislation with respect to which the complaint is made should be seen. Along with that, the true nature and objective of that legislation should be determined. Hence, the validity of such cases should be based on the true nature and object of the Act.
After determining whether the Act is in pith and substance with money lending, does it matter how much it overlaps with the subject matter of the federal list
The extent to which federal matters are invaded needs to be considered in order to truly understand what the legislation actually deals with. The lordships deliberated that it was important to understand whether the invasion into the federal list was an incidental effect or whether the legislation was entirely concentrated upon a matter of the federal list. The invasion would be immaterial if the Act was in pith and substance with a matter of the provincial list and had an incidental effect on the subject of the federal list. It was important to determine whether the Act in question was entirely based upon banking or promissory notes or merely had an incidental effect on these matters. While analysing this question, it was found that the Bengal Money Lenders Act, 1940, was in pith and substance with money lending and was not enacted to deal with the matters of promissory notes or banking. The Act even excluded certain banks for which it would not be applicable. This was an indication that the Act was enacted with the objective of dealing with money lenders and money lending practices in the Bengal province. Hence, it was unnecessary to consider that the invasion was a material matter just because of its mere effect on subjects on the federal list.
The Federal Court concluded its judgement by holding that the Bengal Money Lenders Act, 1940, was neither in whole nor in any part invalid. The Act was in pith and substance with money lending, and the Provincial Legislature had the authority to enact such an Act as the subject came under the Provincial Legislative List. The court ordered the respondents to bear the cost of the appellant that was incurred throughout the proceeding.
Rationale behind this judgement
The rationale behind this judgement was the application of the doctrine of pith and substance. It was the first time that the doctrine was applied in a case in India. The Federal Court had come across similar questions regarding the conflict between federal law and provincial law in the case of Subramanyan Chettiar vs. Muttuswami Goundan (1940), in which the Madras Agriculturists Act, 1938, was challenged. The Act reduced the debts of agriculturists, including the debts issued on promissory notes. The Federal Court held that since the judgement had already been obtained on promissory notes before the Act was passed, the debt can be reduced under the Act, and there was no necessity to address the issue of promissory notes specifically.
A similar conclusion was reached by the Federal Court in the cases of Bank of Commerce Ltd. vs. Amulya Krishna Basu (1947) and Bank of Commerce Ltd. v. Brojo Lal Mitra (1944). In these two cases also, the Federal Court gave its decision without directly addressing the conflict between federal subjects and provincial laws related to promissory notes. However, in the case of Prafulla Kumar vs. Bank of Commerce, the Federal Court directly addressed this conflict by applying the doctrine of pith and substance. This doctrine states that if a conflict arises between a provincial law and a federal law, it is the true nature and characteristic of the law that is to be seen. The doctrine protects the provincial laws from being declared as invalid or void just because they affect any federal matter incidentally.
According to this doctrine, if a provincial law has any effect on any of the federal matters, it cannot be declared void, as overlapping of the powers of different legislatures is bound to happen, and if the provincial laws are considered void every time due to such overlapping, it will be very difficult for Provincial Legislatures to enact any law for their provinces. The Federal Court in this case held that even though there is a clear hierarchy of powers of legislatures mentioned in the Government of India Act, 1935, it cannot be the sole criteria for rendering a law invalid. India is a country where it is not possible to maintain a strict distinction of powers. The overlapping of powers will occur from time to time, and whenever such a conflict arises, the most crucial question to ask is: what is the pith and substance of the law or the matter related to which the complaint is made. Therefore, the pith and substance are to be seen, and not just the hierarchy or priority of the federal list.
Analysis of Prafulla Kumar Mukherjee vs. Bank of Commerce, Ltd. (1947)
In this case, the conflict between provincial laws and federal subjects was addressed directly by the privy council for the first time. This case became a landmark because it was for the first time that the doctrine of pith and substance was applied in a case in India. This case laid down the questions that have to be asked every time a provincial law encroaches on any subject of the Federal Legislative List. Although the Government of India Act, 1935, had given a clear priority to the Federal Legislative List over provincial and concurrent lists by stating that in every conflict, the federal law shall prevail, this case overturned this priority by giving importance to the objective and subject matter of the law, which is complained to be ultra vires.
The Federal Court in this case clearly stated that although it is true that priority has to be given to the federal law, at the same time, it is also important to analyse whether the Act in question is entirely based on the subject of the federal list or if it is merely affecting it incidentally. An incidental effect cannot be considered material to declare an Act ultra vires. Hence, in this case, the Bengal Money Lenders Act, 1940, which was alleged to be ultra vires for including provisions on promissory notes, a federal matter, was held valid as it was in pith and substance with money lending in Bengal province. The Court found that the Act incidentally affected promissory notes and was not enacted to deal with any federal matter. This case established that in cases of conflict between provincial laws and federal subjects, it is not only the priority of lists that is to be given importance but also the true subject matter and nature of the law in question.
Conclusion
In the case of Prafulla Kumar Mukherjee vs. Bank of Commerce, Ltd. (1947), the constitutional validity of the Bengal Money Lenders Act, 1940, was challenged on the ground that it encroached on a federal subject by including provisions on promissory notes. It was alleged that the Bengal Provincial Legislature had no authority to enact such an Act, which deals with promissory notes, a federal subject mentioned in List Ⅰ Entry 28 of Schedule ⅥⅠ of the Government of India Act, 1935. While dealing with the case, the Federal Court applied the doctrine of pith and substance for the first time and observed that the Bengal Provincial Legislature did not overstep its authority while enacting the Act, as the Act was made in pith and substance with money lending practice in the province, and money lending is a subject of the provincial list mentioned in Entry 27 List Ⅱ of the Government of India Act, 1935. It was also held that the Act was enacted with money lending as its main subject matter, and it incidentally affected a federal matter with no intention of making any law on promissory notes. Hence, the Act was declared to be valid in the judgement given by the Federal Court.
Frequently Asked Questions (FAQs)
What is the doctrine of pith and substance?
The doctrine of pith and substance is applied when there is a conflict between the subject matter of the federal and state lists. This doctrine states that if a provincial Act seems to conflict with the subject matter of a federal list or vice versa, then the true nature and effect of the Act should be seen. Any Act cannot be declared invalid just because it has an incidental effect on any matter that does not fall under its authority.
Why was the validity of the Bengal Money Lenders Act, 1940, questioned?
The validity of the Bengal Money Lenders Act, 1940, was questioned before the privy council because it contained provisions regarding promissory notes, which came under the Federal Legislative List of the Government of India Act, 1935. This meant that only the Federal Legislature had the power to make laws in regard to promissory notes, and the Act in question was enacted by the Bengal Provincial Legislature.
What was held in the case of Prafulla Kumar vs. Bank of Commerce?
In this case, the Privy Council held that the Bengal Money Lenders Act, 1940, was valid as it was in pith and substance with money lending, which was a subject of the Provincial Legislative List under Schedule ⅥⅠ of the Government of India Act, 1935.
References
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