DALTON A.C.J.—Ramalingam Pillai v. Wimalaratne.379
1933Present; Dalton A.CJ. and Koch A.J.RAMALINGAM PILLAI v. WIMALARATNE et al.
154—D. C. Kalutara, 341.
Money Lending Ordinance—Promissory note—-Novation of debt—Meaning ofcapital sum borrowed—Reopening of transaction—Ordinance No. 2 of1918, 5. 3 (1) (b) and s. 10 (I) (a).
In a money lending transaction a promissory note for Rs. 3,000 wasdrawn up in favour of the payee. The actual sum paid to the makerwas Rs. 380, while Rs. 2,350 represented the novation of a debt due fromthe.maker’s father. A sum of Rs. 270 was deducted as interest due inadvance. The capital sum borrowed was *set out in the margin asRs. 3.000.
Held, that the note had correctly stated the capital sum borrowedas required by section 10 (1) (a) of the Money Lending Ordinance.
Held, further, that, in the circumstances, a case had been made outfor .reopening the transaction between the parties under section 2 (1)of the Ordinance.
^PPEAL from a judgment of the District Judge of Kalutara.
H. V. Perera, for defendants, appellants.
M.T. de S. Ameresekere (with him N. E. Weerasooria and D. E.Wijewardena), for plaintiff, respondent.
Cur. adv. vult.
August 30, 1933. Dalton A.C.J.—
This was an action on a promissory note (exhibit P 1) for the sum ofRs. 3,000 to recover from the defendants Rs. 2,500 capital due thereon,and Rs. 356.25 interest, and further interest until payment. The notewas made by the second defendant in favour of the first defendant, andendorsed by the latter, and plaintiff brought the action as a holder in duecourse, but it is clear from the evidence that plaintiff lent money to thetwo defendants and that the transaction evidenced by the note was inpart at any rate a loan by him to them. It is conceded now in this appealthat he cannot sustain his earlier plea that the note was assigned to himby the first defendant for valuable consideration or that he was a holderin due course.
Subject to a variation in the rate of interest, the trial Judge has enteredjudgment for the amount as prayed for, from which decision the defend-ants have appealed.
The first point raised on the appeal is that the note P 1 is not enforce-able since it does not comply with the provisions of section 10 of theMoney Lending Ordinance, 1918. Plaintiff is a professional money-lender and licensed pawnbroker who has been in Ceylon fifteen years.He had had various money lending transactions between July 7, 1929, andMay, 1930, with the second defendant’s father.- a Veda Mohandiram, tosome of which the first defendant was also a party. On May 27, 1930,the two defendants went to plaintiff stating that the Veda Mohandiramhad been taken to Colombo seriously ill and that they wanted money forhis illness. Plaintiff states they wanted the money badly, but that he
DALTON A.C.J.—Ramalingam. PtUai v. Wimalaratne.
refused to lend them any unless they took over the Veda Mohan diram’sdebt. They were obviously in a difficult position, but they consented todo as plaintiff asked, although there is nothing to show they knew theamount of that debt or how it was made up. Plaintiff states he' lookedinto his books and found the Veda Mohandiram owed him Rs. 2,350.He then made out the promissory note for Rs. 3,000, which amount wasmade up of Rs. 2,350 the Veda Mohandiram’s alleged indebtedness to him,Rs. 380 which he paid to the two defendants in cash, and Rs. 270 which!he retained as interest paid in advance. The note was then made out asfor a loan by the first defendant to the second defendant, signed by the.latter and endorsed by the former, and retained by plaintiff. At thesame time plaintiff handed over to the second defendant notes by hisfather for Rs. 2,000, and Rs. 300 and a receipt for Rs. 50 (exhibits D 9,D 10, and D 11). The Veda Mohandiram died on June 2, 1930. Thenotes does not represent of course a true version of the actual transactionbetween the parties. The ground raised in the case that it was notenforceable was that the capital sum actually borrowed was not separately .and distinctly set forth upon the documents.
The note sets out in the margin that the capital sum borrowed wasRs. 3,000, and that Rs. 270 interest had been deducted or paid in advance.It is urged for appellants that the capital sum actually borrowed wasRs. 380 only, and that the sum of Rs. 2,350, the Veda Mohandiram’sliability taken over by them, was no part of the loan made to them. Itwas urged that the note was not given for a loan of money, so far as thesum of Rs. 2,350 was concerned, and that as the note did not set outRs. 380 as the capital sum actually borrowed as required by section 10, itwas not enforceable.
In support of his argument against this contention that the sum ofRs. 2,350 was part of the loan secured by the note Mr. Weerasooriareferred us to the case of Wade v. Wilson That was an action for debtfor penalties under an old statute (12 Ann. st. 2. c. 16) for taking morethan the legal interest for a loan of money. The facts there were asfollows:—One G owed F £600 on a bond, and F and his son owed defend-ant £1,200. F could not pay defendant more than half the £1,200because of G’s indebtedness to' him. The parties then agreed thatdefendant accept G with a surety as his debtor for £600 instead of F.G and his surety executed a promissory note in favour of the defendantfor £600 and next day the old securities, G’s bond to F and F’s note forthe original debt of £1,200, were respectively delivered up and cancelled.Amongst the points raised in the case it was argued that there was hereno loan of money by the defendant to G since none had been paid to orreceived by the latter, and that making himself the debtor of defendantinstead of F and giving his own note for the money did not constitutea loan. This objection was held to have no weight. Lord Kenyonstated the transaction was in substance a loan of money from thedefendant to G for which the new note was security. Although the cere-mony of handing over the money from the one to the other did not takeplace, and the other learned Judges agreed with him. Although the pointfor decision in that case was a question arising under a statute against
> 1 East 195.
DALTON A.CJ.—RamaUngam PiUai v. Wimalaratne.381
usury, I think the authority is, on the facts, an answer to the argumentbefore us that the promissory note (P 1) before us was not given assecurity for the loan of money in respect of the sum of Rs. 2,350. Further,all the essentials to effect a valid novation of the contract are in myopinion present here.
There was a further argument raised before us that even if the sum ofRs. 2,350 was part of the loan secured by the note, it was no part of thecapital sum actually borrowed as those words are used in section 10 (1) (a).It was urged that those words can only refer to the sum of money thatactually passed from lender to borrower. 1 am unable to agree withthat argument. For one thing, it is inconsistent with any deductionbeing permissible as provided in section 10 (1) (b), for, if any deduction ismade, on this argument, it cannot be included as part of the capital sumactually borrowed. What are required to be set out separately anddistinctly are the capital sum borrowed, the rate of interest per cent, perannum payable, and the amount of any sum deducted or paid at the timeof the loan for interest or other charges. The note must set out the realor actual amount of the capital sum which is borrowed and the otheritems separately and distinctly, so that the borrower may not be in anydoubt as to the amount of the loan, the amount of the interest and theamount of any deduction made. I do not see that section 10 (1) (a)means any more than that. If that is so, and if the sum of Rs. 2,350 ispart of the loan secured by the note, then the capital sum actuallyborrowed is Rs. 3,000, of which sum Rs. 270, as the note sets out, hasbeen deducted or paid in advance. In that event the note P 1 does notfail to comply with any of the provisions of section 10 (a), (b) or (c) ofthe Ordinance.
A further question raised on the appeal was as to whether the DistrictJudge was right in refusing the defendants’ prayer for the reopening ofthe transaction between the parties. On this question issues were raisedas to whether the second defendant was entitled to an accounting asregards the transactions between the plaintiff and his late father, andwhether the notes in the transactions between plaintiff and his late fatherdid not comply with the provisions of the law.
The learned Judge has held that it does not matter that the previousnotes did not comply with the requirements of the Money LendingOrdinance, for the reason, I understand, that the omission to do so wasnot due to any fraud. He adds that nobody would believe that the fullamount stated in the instalment notes was paid, and that the interestmust have been deducted in advance, for it is not likely that any Chettiarwould lend money without charging interest. I fear he has lost sight ofthe explicit requirements of the Ordinance. Further he has lost sight, Ithink, of the provisions of section 21 (b) of the Ordinance. I agree withhim to this extent, that the defendants, when they signed the note P 1,.knew to some extent what they were doing. He has overlooked, however,I think, the fact that they had no knowledge themselves of all the trans-actions between plaintiff and the Veda Mohandiram, or how the accountsstood, and had to accept plaintiff’s account as correct if they were toobtain the loan they were seeking. In this connection the legality of thetransaction represented by the note D 9 and of the previous transactions
DALTON J.—Tissera v. Ramaswamy Chettiar.
might also have to be considered. In view of the further proceedings Ido not wish to say more on that point than that. He has overlookedtoo, I think, the difficult position in which the defendants were at thetime, the emergency for which the money was required being admitted.Plaintiff was of course under no obligation to lend them money, but heundoubtedly took advantage of their difficulties to induce them to signthe note and take over the father’s liabilities, although he admits he hadno reason to think the father was going to die. In my opinion thedefendants have made out a case for the reopening of the transactionbetween them and the plaintiff under the provisions of section 2 of theOrdinance. The appeal must therefore be allowed, and the decree infavour of the plaintiff must be set aside, and the case will be sent backfor the purpose I have denoted. The costs already had in the lower Courtwill be in the discretion of the trial Judge after the further proceedings.The appellants, however, are entitled to the costs of this appeal.
Koch A.J.—I agree.
RAMALINGAM PILLAI v. WIMALARATNE et al