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Present: Jayewardene A.J.
WIJEYSINGHE v. DON GIRIGORIS.
210—C. B. Colombo, 13,344.
Mo-ney Lending Ordinance—Promissory note—Sum borrowed wronglystated—Action on the note—Ordinance No. 2 of 1918, ss. 10 and 13.
A promissory note in which the sum borrowed is wrongly statedis not void, and an action can be brought on such note.
In such a case the court has power under section 2, sub-sections(1) and (2), of the Money Lending Ordinance to ascertain what sumwas actually borrowed and is due from the debtor to the creditor.
PPEAL from a judgment of, the Commissioner of Requests,Colombo. The plaintiff as payee sued the defendant, the
maker of a promissory note to recover a sum of Rs. 220. The notebore on the margin the particulars required by section 10 of the
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Money Lending Ordinance, No. 2 of 1918. The defence was that thesum actually borrowed on the note was only Re. 80. The learnedCommissioner held that the plaintiff had lent only a sum of Rs. 80,as stated by the defendant, and dismissed his action altogether.
S. J. V. Chelvanayagam, for plaintiff, appellant.—On a questionof fact, the learned Commissioner has found that the first entry onthe margin, of this promissory note is false, and has, therefore, dis-missed this action under section 10 of the Money Lending Ordinance(No. 2 of 1918). Section 10 only requires certain entries to be madeon the margin, and once such entries have been made the provisionsof that section are complied with. Whether those entries are trueor false, does not matter. (Vide section 10, sub-section (4)).
If they are false, then the Court can act under section 2 (1) (c),but not dismiss the action under section 10.
H. V. Perera (with Rajakariar), for defendant, respondent.—Section 10 (1) (a) says the capital sum actually borrowed. So, if theentry on the margin gives any sum other than that actually borrowed,section 10 applies, and the dismissal of the plaintiff’s action is right.
[ Ja ye wabdene A.J.—But look at the schedule which says“ Capital sum borrowed.”] Even if the dismissal is not justifiedunder section 10, it is under section 13. If the taking of a fictitiouspromissory note is penalized, then no action can be maintained onthe contract.
iS. J. V. Chelvanayagam, in reply.—The law may penalizethe making of a particular contract and yet not avoid it. ThisOrdinance nowhere makes such a note void. In fact it prescribesthe procedure on such transactions in section 2. Otherwise section2 will be of no effect. Besides, this Ordinance is not meant to alterthe law of promissory notes in any way. Its scope is to give onlyequitable remedies. (See Kadiresan Chetty v. Amolis.1)
January 19, 1926. Jayewakdene J.—
This case raises questions of some importance in the constructionof the Money Lending Ordinance, No. 2 of 1918. The plaintiff, aspayee, sued the defendant, the maker, to recover a sum of Rs. 220due on a promissory note. The note bore on the margin the parti-culars required by section 10 of the Ordinance. The defence wasthat the amount actually borrowed on the note was only Rs. 80.The learned Commissioner, after , trial, held, that the plaintiff hadonly lent a sum of Rs. 80, as alleged by the defendant. He did not,1 (1921) 23 N. L.n. 162 (163).
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however, give judgment for the plaintiff for the sum of Rs, 80,but dismissed his action altogether. The plaintiff appeals, and itis contended for him that the learned Commissioner has erred inholding that only a sum of Rs. 80 was lent on the note, and that inany .case the Commissioner should have entered judgment in hisfavour for the sum which he held, had been actually lent to thedefendant. On the question of fact, I see no reason to interferewith the finding of the Commissioner.
The question of law is a difficult one. The learned Judge thinksthat the note is unenforceable under section 10 inasmuch as itdoes not state correctly the actual sum borrowed. Learned Counselfor the respondent sought to justify the dismissal of the actionboth under section 10 and under section 13 of the Money LendingOrdinance.
I shall first consider the effect of section 13. It provides asfollows:—x
“ 13. Any person who shall take as security for any loan apromissory note or other obligation in which the amountstated as due is to the knowledge of the lender fictitious,or in which the amount due is left blank, shall be guiltyof an offence, and shall be liable on conviction to a fine notexceeding five hundred rupees, or in the event of a secondor subsequent offence, either to a fine not exceeding onethousand rupees, or to simple imprisonment for a periodnot exceeding six months.”
Now, according to the finding,of the learned Commissioner,the amount stated as due was to the knowledge of the lender ficti-tious, and further, the evidence shows that at the time of the makingof the note the parties entered into a collateral transaction, that is,the plaintiff obtained from the defendant a receipt admitting thathe had received a sum of Rs. 220. This receipt was, no doubt,intended to disguise the true nature of the transaction, andjfcoshow that Rs. 220 had been borrowed, when, in fact, the defendanthad only received Rs. 80. Therefore, the note is also a “ fictitious ”one within the meaning of sections 13 and 14 of the Ordinance.The plaintiff’s case clearly falls within the provisions of section 13,and he has committed the offence created by that section. It iscontended for the defendant that inasmuch as section 13 makesit an offence for a lender to obtain a note in which the amountstated as due is fictitious and renders him liable to the penaltiesprescribed by the section, the note must be treated as void andunenforceable in law. I am unable to agree with this contention.In my opinion the section has refrained, and I think, purposelyrefrained from declaring a “ fictitious ” note void. If such a note
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is held to be void, a bona fide holder for value would not be ableto sue on it, and I do not think that it was the intention of theLegislature to invalidate a negotiable instrument as it may passinto the hands of persons who are absolutely ignorant of thecircumstances affecting its validity. Otherwise, a radical alterationwould be made in the law relating to negotiable instruments.Further, section 2 of the Ordinance, which enables the court tore-open transactions entered into between a lender and a borrower,authorizes the court, in adjusting accounts between the parties,to take into consideration notes in which the amount borrowedis not correctly stated (see section 2, sub-section (1) (c)). Thiscould not be so if the note is void. The principles applicable tothe construction of statutory provisions similar to those of section13 have been laid down by the English Court of Appeal in the caseof MeUiss v. The Shirley Local Board1 where Lord Justice Cottonenunciated them in the following terms :—
“ Although a statute contains no express words making void acontract which it prohibits, yet when it inflicts a penaltyfor the breach of the prohibition, you must consider thewhole act as well as the particular enactment in questionand come to a decision, either from the context or thesubject matter, whether the penalty is imposed withintent merely to deter persons from entering into thecontract, or for the purpose of revenue, or whether it isintended that the contract shall not be entered into soas to be valid in law.”
In my opinion, section 13 has been enacted merely to deterlenders from inserting fictitious amounts as due on promissorynotes and other obligations, and not with the object of invalidatingsuch contracts altogether. A very similar question arose undersection 547 of the Civil Procedure Code under which both thetransferor and transferee of property belonging to the estate of adeceased person, before issue of probate or grant of administration,were declared to be guilty of an offence and liable to pay a fineof Rs. 1,000. And in the case of Hassen Hadjiar v. Levane Marikar 2it was held by this court, notwithstanding that the parties weredeclared to be guilty of an offence and subject to punishment,that the transfer itself was not invalidated. The reasoning inthat case applies to the present case. In my opinion, the penaltiesexpressly prescribed by section 13 are exhaustive and, therefore,I hold that under section 13 the promissory note is not void.
1 [1885) 16 Q. B. D. 451.* (1912) 15 N L. R. 275.
Jayewab-DENE A. J.
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The question whether such a note is not enforceable undersection 10 is, however, a more difficult one. That section runsas follows (I give the material parts only):—
“ 10. (1) In every promissory note given as security for theloan of money after the commencement of this Ordinance,there shall be separately and distinctly set forth upon thedocument—
" (a) The capital sum actually borrowed ;
“ (6) The amount of any sum deducted or paid at or aboutthe time of the loan as interest, premium, or chargespaid in advance ; and
“ (c) The rate of interest per centum per annum payablein respect of such loan.
“ (2) Any promissory note not complying with the provisionsof this section shall not be enforceable
" (3) The setting forth of the particulars required by sub-section(1) shall not affect the negotiability of any promissorynote.
' “ (4) Any promissory note setting forth the said particularssubstantially in the form given in the schedule to thisOrdinance shall be deemed to be in compliance with thissection.”
and section 11 declares that nothing in section 2,8, or 10 of this Ordi-ance shall impair the rights of any bona fide holder for value of anypro-note without notice of any matter affecting the enforceabilityof such note.
As I have stated above, the note in question purports to complywith the requirements of this section, but it gives the sum borrowedincorrectly. The question to be decided is whether where theamount borrowed is separately and distinctly set forth but is foundto be incorrect the note ceases to be enforceable under the section.The Money Lending Ordinance was, no doubt, passed for theprotection of the borrower from oppression, and its object was asBertram C.J. said in Kadiresan Chetty v. Arnolis (supra) “ to assistCourts of Law in discharging the equitable jurisdiction conferred onthem by the Ordinance,” but section 10 was intended to compelthe lender, or it may be the borrower also, to comply with therequirements of that section, and in my opinion, a note wouldbe unenforceable under the ? ection, only when it did not givethe particulars required by it separately and distinctly ” as shownin the schedule. But the insertion of facts incorrectly in theparticulars would not render a note unenforceable provided theform has been complied with. The note in question, on the faceof it, complies with the requirements of section 10 and is primd
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facie enforceable. Then, does the fact that at the trial, and aftera contest, it is proved that the particulars have been incorrectlyentered up render it unenforceable ? The use of the word “ enforce-able ” is significant. The meaning of this word was discussed inthe case of Jamal Mohideen & Co. v. Meera Saibo 1 where thiscourt was called upon to interpret section 9 of “ The Registrationof Business Names Ordinance, No. 6 of 1918 ” which containedthe words “ the right of that defaulter …. shall not beenforceable …. by action or other legal proceedings
.. .. ” and it was held that the words “ the rights shall not be
enforceable by action ” meant that “ the defaulter shall not beentitled to bring any action to enforce his rights.” The Courtalso pointed out that the words “ enforceable ” could not beconstrued as the word “ maintainable ” used in section 547 of theCivil Procedure Code was construed by Wood Benton C.J. inHassen Hddjiar v. Levane Marikar (supra). If a pro-note, thereforecontains the particulars required by section 10, it would be enforce-able in law, that is, an action can be brought on it, and the subsequentdiscovery that the particulars contain false statements would notaffect its enforceability. Therefore, when a note made after thecommencement of .the Ordinance is brought into Court to be suedupon, the Court has to be satisfied that it “ sets forth separatelyand distinctly ” the particulars required by section 10, if tl^eparticulars are duly set forth the note would be enforceable, andit is immaterial whether the particulars are truly set forth or not.No doubt the section requires “ the capital sum actually borrowed ”to be stated, but it is noticeable that in the schedule towhich reference is made in sub-section (4) of section 10 and whichgives the form of a note under the section the word “ actually ” isomitted. As pointed out above, the effect of section 13 is not toinvalidate a pro-note, but to subject the lender to a penalty, andthus deter him from acting contrary to the requirements of theOrdinance. And section 14 makes a lender who fails to give theparticulars under head (6) correctly and under head (c) truly andstraight forwardly, guilty of the offence created by section 13. Themaking of a false statement with regard to the particulars requiredunder head (a) are nowhere penalized. This may be due to the factthat the sum actually borrowed is generally the same as the sumstated to be due in the body of the note, and a false statementwith regard to the latter is penalized by section 13. If my construc-tion of that section is correct, then, a false statement under head
or (c) does not avoid the note, nor would it make a noteunenforceable, which amounts to the same thing. Further, as Ihave pointed out above, section 2 does not treat pro-notes, in whichthe amount stated to be due is to the knowledge of the lenderfictitious, as void or unenforceable, for, when such, a note has1 (1920) 22 N. L. B 268.
•lA'i EWAR-DENE A.J.
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been taken as security by a lender, the Court can inter alia relievethe borrower from payment of any sum in excess of the sum adjudgedby the Court to be fairly and reasonably due in respect of principal,interest, and charges.
This shows that notes like the one in question in this case arenot wholly and absolutely unenforceable. It is the duty of theCourt, in such cases, to adopt the procedure laid down in section2, sub-sections (1) and (2), and ascertain what sum was actuallyborrowed and is due from the debtor to the creditor. As BertramC.J. remarked in the case already referred to, “ by declaring thatcertain particulars should be entered on the margin of such notes,the Legislature did not intend in any way to affect the liabilitieson such notes.”
It is conceded that if the note is not unenforceable under section10 or void under 13, the plaintiff would be entitled to recover theamount actually lent by him. 0
I would, therefore, set aside the judgment and direct that decreebe entered in the plaintiff's favour for the sum of Rs. 80, withcosts of appeal. The plaintiff will, however, pay the defendanthis costs in the lower Court.
WIJEYSINGHE v. DON GIRIGORIS