By TIOL News Service

NEW DELHI, FEB 16, 2018: The issue is - Whether the provisions of Sec 21A of the Banking Regulation Act would not operate in a State where there is a State Debt Relief Act to grant relief to farmers. YES is the SC's verdict.

Facts of the case

The PIL was filed under Article 32 of the Constitution of India, assailing the constitutional validity of Section 21A of the Banking Regulation Act, 1949. Such section was introduced into the Banking Regulation Act by the Banking Laws (Amendment) Act of 1983 with effect from 15.2.1984.

Section 21A interdicts the reopening by courts of a debt between a banking company and its debtor, on the ground that the rate of interest charged by the banking company, in respect of a loan transaction, is excessive. The section seeks to keep out of harm’s way the Usurious Loans Act, 1918 and any other State legislation relating to indebtedness, and then declares that no such loan transaction shall be reopened by any court on the ground of charging of excessive rates of interest. The writ petition had been filed by certain public spirited citizens, who relies on the report of the Parliamentary Standing Committee on Agriculture for the year 2006-2007 to say that Section 21A should be abolished, insofar as it applies to rural indebtedness.

According to the petitioners, a total number of 2,56,913 farmers had committed suicide in India between the years 1995 to 2010, and that was because, and directly linked to, usurious rates of interest being charged from them by banks, which could not be interfered with by courts because of Section 21A.

Decision

The Court declared Section 21A of the Banking Regulation Act to be valid as it is part of an enactment which, in pith and substance, is relatable to Entry 45, List I of the Seventh Schedule to the Constitution. However, insofar as Section 21A incidentally encroaches upon the field of relief of agricultural indebtedness, set out in Entry 30, List II, it will not operate only in States where there is a State Debt Relief Act which deals with the subject matter of relief of agricultural indebtedness, where the State Debt Relief Act covers debts due to “banks”, as defined in those Acts. In States where the State Debt Relief Act does not apply to banks at all, or applies only to certain specified banks, Section 21A will, in the former situation, apply in such States, and, in the latter situation, apply only in respect of loans made to agriculturists where such loans were given by banks other than the banks specified or covered by the concerned State Debt Relief Act, as the case may be.

Reasoning

1. From the point of view of a State Debt Relief Act, as the legislation is referable to the special entry “relief of agricultural indebtedness” under Entry 30, List II, as opposed to the Banking Regulation Act, under the general entry of “banking” in Entry 45, List I, any incidental encroachment by the Parliamentary statute on Entry 30, List II, r/w the State Debt Relief Acts made thereunder, would make Section 21A yield to the State Debt Relief Acts, to the extent that they cover relief of agriculturists from debts due to banks. Where Section 21A of the Banking Regulation Act incidentally trenches upon the State Debt Relief Acts, enacted under Entry 30, List II, so far as relief of agricultural indebtedness is concerned, where there is State legislation on the same subject matter which directly clashes with Section 21A, Section 21A will have to give way to the State Debt Relief Acts insofar as relief from agricultural indebtedness due to banks is concerned. The non-obstante clause in Section 21A cannot override a State Debt Relief Act in that situation, as Parliament cannot give itself supremacy over State legislation where none exists under the Constitution. If this were not the case, the exclusive power of the States to make laws within List II would become illusory, and “Parliamentary paramountcy” would trap many a beneficent State legislation made within its exclusive domain, contrary to the statement of law laid down by the Privy Council in Prafulla Kumar case, and contrary to principle (4) laid down by Jayakar, J. in In Re CP & Berar Sales case, both of which have been consistently followed by several judgments of the Court.

2. All the other entries of the State List give exclusive power to the States to legislate on the subject matters mentioned therein. This threefold scheme contained within List II itself would be violated. If Parliamentary legislation were to invade an exclusive sphere of the State, and were to prevail over State legislation made within the States’ exclusive powers, all the entries of List II would be subjected to entries of List I, which is not the constitutional scheme. Further, only one entry, namely, Entry 12 of List II, specifically excepts ancient and historical monuments and records, if Parliament declares them, by law, to be of national importance. The argument, therefore, that Section 21A is made by Parliament at the national level and is of national importance and must, therefore, prevail over State legislation made within the exclusive subject matters of List II, would again fall foul of the constitutional scheme, in that all the entries of List II would then be subject to Parliamentary law, which is of national importance. Also, Entry 30, List II cannot be read to refer to relief of agricultural indebtedness other than what is specified in List I, as that would be reading into Entry 30 words that are conspicuous by their absence, but which are found in Entries 32 and 63, List II. All this would go to show that where the States have exclusive legislative competence under certain entries of List II, legislation made thereunder cannot be effaced by legislation made under List I, which incidentally trenches upon State legislation made under an exclusive power.

3. Where a matter is not argued at all by the respondent, and the judgment is one of reversal, it would be hazardous to state that the law can be declared on an ex parte appraisal of the facts and the law, as demonstrated before the Court by the appellant’s counsel alone. That apart, where there is a detailed judgment of the High Court dealing with several authorities, and it is reversed in a cryptic fashion without dealing with any of them, the per incuriam doctrine kicks in, and the judgment loses binding force, because of the manner in which it deals with the proposition of law in question. Also, the ratio decide ndi of a judgment is the principle of law adopted having regard to the line of reasoning of the Judge which alone binds in future cases. Such principle can only be laid down after a discussion of the relevant provisions and the case law on the subject. If only one side is heard and a judgment is reversed, without any line of reasoning, and certain conclusions alone are arrived at, without any reference to any case law, it would be difficult to hold that such a judgment would be binding upon the Court. In the circumstances, we are of the opinion that the judgment in Yasangi Venkateswara Rao cannot deter us in our task of laying down the law on the subject.

(See 2018-TIOLCORP-04-SC-MISC)