P.A. Chowdary, J.
1. The appellant in this Second Appeal No. 812 of 1987 was the plaintiff in O.S. No. 42 of 1984 on the file of the Subordinate Judge's Court, Narasapur. The appellant is the Indian Bank. It was constituted by the Banking Companies (Acquisition and Transfer of Undertakings) Act (Act No. 5 of 1970) passed by our Parliament. It lent monies to the defendants and sued them (the present respondents) is O.S. No. 42 of 1984 on the file of the Subordinate Judge's Court, Narasapur, for recovery of a sum of Rs. 13,500. The plaintiff advanced the above sum of money under the Agricultural Short-term Productions Loan Scheme and the defendents borrowed a sum of Rs. 6,000 from the plaintiff-bank. The defendants executed a promissory note on June 2, 1978. Additionally, the repayment of the said amount was fully secured by hypothecation of the defendants' crops, present and future, grown over an area of Ac. 5.00 of land in R.S. No. 228 of Bangiligudem village, and belonging to the defendants. The promissory note was renewed on April 22, 1981, for a sum of Rs. 8,985.50. According to the original terms of agreement entered into between the plaintiff-bank and the defendents, the principal amount would carry interest at five per cent. per annumover and above the official rate of the Reserve Bank of India subject to a minimum of 14 per cent. per annum with quarterly rests. At the time of renewal of promissory note an April 22, 1981, the rate of interest payable by the defendants was enhanced to seven per cent. per annum over and above the rate of interest of the Reserve Bank of India, subject to a minimum of 16 per cent. per annum with quarterly rests. The plaintiff-bank sued the defendants for the latters for the latter's failure tohonour the terms of agreement and to repay the amount according to the above stipulations.
2. The defendants admitted the borrowings of the principal sum and execution of the promissory note and the hypothecation of the crops above referred to. The fact that the agreement stipulated for payment of interest at the above rates with quarterly rests was never in dispute. Their only defence was based on the provisions of the A.P. Agriculturists Relief Act, 1938 (Act No. 4 of 1938) (hereinafter called 'the Rajaji Act') and also the Usurious Loans Act (Act No. 10 of 1981), as amended by the Tamil Nadu Act, 8 of 1937, and the protection which those Acts afford to them. According to the defendants, those two Acts had forbidden the plaintiff-bank from charging compound interest from the agriculturists.
3. It is at no stage denied by the plaintiff-bank that if above-said Rajaji Act applied to the transaction in question, the plaintiff-bank would not be entitled to charge the defendants interest compounded every quarter. In that event, the plaintiff could only charge and collect simple interest. Under the provisions of the Usurious Loans Act, as amended by the Madras Act, 8 of 1937, the court would be entitled to relieve the agriculturist from the burden of compound interest. It is on the above legal basis that the defendants pleaded that they would not be liable to pay compound interest and that would be liable to pay only simple interest. But the plaintiff-bank countered these defences and claimed that the Rajaji Act and the Usurious Loans Act were inapplicable to the monies advanced by the plaintiff-bank for the reason that the plaintiff was a bank constituted by the constituted by the Banking Companies Act, No. 5 of 1970 which is a special Indian law according to them. Section 4(e) of the above-mentioned Rajaji Act admittedly exempted loans advanced by banks constituted by a special Indian law from the purview of the Rajaji Act. The plaintiff-bank also contended that the applicability of the Usurious Loans Act was excluded by the provisions of section 21A of the Banking Laws (Amendment) Act (Act No. 1 of 1984), which came into force with effect from February 5, 1984.
4. On the basis of the above pleadings, the trial court framed the necessary and also somewhat unnecessary issues too. Of them all, the first issue as to whether the interest claimed by the plaintiff-bank is excessive and not enforceable and is liable to be scaled down as pleaded by the defendants, correctly brought out the real contest between the parties. As we notice, that is the only issue with which this second appeal is concerned.
5. The trial court, in O.S. No. 42 of 1984 and the Court of District Judge, West Godawari, in A.S. No. 3 of 1986, answered the above issue in favour of the defendants and against the plaintiff-bank. In doing so, the courts below relied upon two judgments of this court. A division Bench of this court consisting of myself and Kondandaramayya J. in Indian Bank v. Krishna Murthy, AIR 1983 AP 347, and a learned single judge in Satyanarayana v. Andhra Bank Ltd. : AIR1985AP77 , upheld the view now accepted and adopted by the two courts below. In Krishna Murthy's case, AIR 1983 AP 347, the Indian Bank sued an agriculturist for the recovery of compound interest giving rise to the question whether the Indian Bank was constituted by a special Indian law, within the meaning of section 4(e) of the Rajaji Act. The judgment in Krishna Murthy's case, AIR 1983 AP 347, was delivered on April 1, 1983, by me on behalf of the Division Bench holding that the exemption granted by section 4(e) of the Rajaji Act to the loans advances by 'any corporation formed in pursuance of an Act of Parliament of the United Kingdom or of any special Indian law or Royal Charter or Letters Patent' was not applicable to the Indian Bank constituted by Act 5 of 1970. The decision in Krishna Murthy's case, AIR 1983 AP 347, held that those words 'special Indian law' refer to enactments of Imperial Parliament. That judgment in Krishna Murthy's case, AIR 1983 AP 347, read the language of section 4(e) of the Rajaji Act in the light of the fact that this country was held by the British during the relevant period and that the British Parliament had authority to enact laws specially applicable to India. Under the Government of India Act, 1935, the protection of the British financial interests in this country was made the special responsibly of the Governor and the Governor-General. It was, therefore, held that the language of section 4(e) referred not to any law made by any of the Indian Legislatures, but to an Act of the British Imperial Parliament having special application to India. It was pointed out that the Indian Legislature would not call its own special Indian laws and that in any case, in a law of the Indian Legislature constituting a bank, there is nothing so special. Such a law is like any other law. Those words were held to refer to special laws made by the British Parliament having application to India as different from a general law of the Imperial Parliament having application to the several British colonies. In Krishna Murthy's case, AIR 1983 AP 347, it was also pointed out that the collection of the words used in section 4(e) of the Rajaji Act pointed to a British legislative activity. As a result of that judgment of this court in Krishna Murthy's case, AIR 1983 AP 347, all the banks in general and the Indian Bank in particular constituted by Act, No. 5 of 1970 of our Parliament were held to be governed by the Rajaji Act and were accordingly forbidden from charging agriculturists compound interest. It was subsequent to the above decision in Krishna Murthy's case, AIR 1983 AP 347, that Act 1 of 1984 had been enacted by Parliament as an amendment to the Banking Registration Act (Act No. 10 of 1949) with effect from February 15, 1984. Section 21A of the Banking Regulation Act read as follows :
'Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.'
6. The applicability of Satyanarayana v. Andhra Bank Ltd. : AIR1985AP77 , came to be decided by my brother, Kodandaramayya J. after Act 1 of 1984 was passed by Parliament. In that case, this court held that the fields of operation of the Rajaji Act and Act No. 1 of 1984 were different. It was pointed out that while the purpose of the Rajaji Act was to provide relief to the indebted agriculturists as a class, the purpose of Act 1 of 1984 was to deny relief on individual basis. Whether, in an individual case, the interest charged by the bank was excessive or not was the concern of Act 1 of 1984. It was, therefore, held in Satyanarayana's case : AIR1985AP77 , that the prohibitions contained in Act 1 of 1984 would not apply to suits covered by the Rajaji Act which is applicable to the grant of class relief. On that basis, the court held that the ruling given by the Division Bench in Krishna Murthy's case, AIR 1983 AP 347, would still be applicable and operative to loans advanced by banks to agriculturists even after Act 1 of 1984.
7. The lower courts followed the above judgments and decreed the plaintiff's suit allowing only simple interest.
8. By the time this second appeal has come up for hearing in this court, the Supreme Court had pronounced on November 11, 1987, its judgment in Bank of India v. Vijay Transport : [1988]1SCR961 , wherein it was held that Act 5 of 1970 by which the bank of India was constituted was a 'special Indian law' and that the bank was, therefore, entitled to the exemption granted by section 4(e) of the Rajaji Act. The Supreme Court has thus overruled the judgment of this court in Krishna Murthy's case, AIR 1983 AP 347, to the extent the latter denied to the Indian Bank immunity from the prohibitions of the Rajaji Act against charging agriculturist compounded interest.
9. Sri P. L. N. Sarma, for the appellant-bank has argued that the judgments of the lower courts based as they were on the above-mentioned Krishna Murthy's case. AIR 1983 AP 347, now overruled by the Supreme Court, should be reversed in view of the decision of the Supreme Court in the above transport case [1988] 63 Comp Cas 428. If exemption under section 4(e) of the Rajaji Act is available to the plaintiff-bank, the further question relating to the scope of section 21A of Act 1 of 1984 will not arise for consideration. The scope of Act 1 of 1984 would, however, have to be examined in the event that the exemption granted by section 4(e) of the Rajaji Act for any other reason is held by this court as not available to the plaintiff-bank. As the Supreme Court neither considered the constitutional validity of section 4(e) of the Rajaji Act nor the scope of Act 1 of 1984, consideration of those two questions is still open to this court.
10. Mr. Sarma has, therefore, canvassed for the view that Act 1 of 1984 has the universal effect of reading the prohibitions of the Rajaji Act and the Usurious Loans Act ineffective and inoperative.
11. These arguments make it necessary for this court to consider the first question of the constitutional validity of section 4(e) of the Rajaji Act and next the scope of section 21A of Act 1 of 1984. Simply put, the question about the Rajaji Act is whether section 4(e) of the Rajaji Act, to the extent it denies benefit of relief from agricultural indebtedness granted to those agriculturists who borrow from a bank, is constitutionally valid. Section 4(e), undoubtedly makes a classification between the agricultural borrowers from the banks on the one hand and the agricultural borrowers from ordinary creditors on the other. The question is whether this classification made by section 4(e) between agriculturist debtors of banks and non-banks is constitutionally valid and permissible. As consideration of that question involves the constitutionality of a provision of a State enactment, notice has been given of this matter to the learned Advocate-General of the State. The learned Advocate-General appeared and argued in support of the validity of section 4(e) of the said Act. I record my appreciation of his help rendered to the court.
12. The first issue in this second appeal is of considerable moment both for the agriculturists as a class and the State, but more for the agriculturist than for the State. Let it be noted that can the agriculturist be legally charged compound interest by the banks is not a metaphysical and speculative enquiry. It is a question of life and death for the agriculturist. The recent spate of suicides committed by the young agriculturists of Guntur and Prakasam Districts sometimes in tragic compact with their young wives and children being unable to pay the banks the quarterly compounded interest only highlights the tragic dimensions of this question. For ages, the Indian agriculturist has been the victim of vagaries of monsoon and predatory debt-laws. Particularly after the being of the rapacious rule of the East India Company in this country, his position has suddenly grown worse. He has not only been, as in the past, a helpless victim either of drought or food that deny him the fruits of his labour and capital, but he has also now been exposed to the company's jurisprudence of usury and loot. In the long history of this country, only the Britishers and earlier, Md. Ghazani resorted to daylight robbery of this country. Exactly, one hundred years ago, Lord Dufferin instituted an inquiry into the economic conditions of the agricultural masses. Thereafter, several commissions have been appointed and have reported on the deplorable economic conditions of the agriculturists. But, none of them offered any permanent relief to them. The dishonorable East India Company turned the Indian agriculturist into a beast of burden forced to work on the farm and produce goods and services so vitally needed by the community of its maintenance and sustenance but without himself being paid in return anything beyond his bare subsistence. He has been living for ages on starvation diet. The agriculturist has been made to live and work primarily for the town and the city. Our national struggle for freedom led by the Mahatma to which article 51A of our Constitution, with resounding reference, had raised its voice of protest against this unjust and deplorable economic conditions of the agriculturist obtaining in India. Removal of rural indebtedness was one of the avowed objects of our national struggle for freedom. None did portray the extent of that tragedy more fully and describe it more vividly and feelingly than the great Mahatma who symbolized in himself the Indian villager and for whose uplift he worked and died. He declared to a British Court of law in India that :
'Little do town dwellers know how the semi-starved masses of India are slowly sinking to lifelessness. Little do they know that their miserable comfort represents the brokerage they get for the work they do for the foreign exploiter, that the profits and the brokerage are sucked from the masses. Little do they realize that the Government established by law in British India is carried on for this exploitation of the masses. No sophistry, no juggler in figures can explain away the evidence that the skeletons in many village present to the naked eye. I have no doubt whatsoever that both England and town dwellers of India will have to answer, if there is a God above, for this crime against humanity which is perhaps unequal in history.' (From The World of Law, volume II, page 464, Ed, by London).
13. The A.P. Agriculturists Relief Act (Act IV of 1938) is one of the first measures taken by the Congress Government of Madras to redeem those pledges and promises made by the national movement to the agriculturists. Its long title describes it as an Act enacted to provide relief to the agriculturists in the Madras Province from their indebtedness. The Statement of Objects and Reasons of the Act accepts that 'It is the duty of any modern Government which is alive to its responsibility to the people to relieve the producers of the people's food from such an intolerable burden'. The Rajaji Act, therefore, sought to relieve the producers of the people's food from such intolerable burden by forbidding the money lenders from charging the agriculturists compound interest and permitting the money-lenders to charge only simple interest. The Act has thus conferred great benefits on the agriculturists. It is on these provisions of the Act that the defendants-agriculturists rely upon. However, section 4(e) of the Act has exempted from the scope of the above provisions certain debts and liabilities owed by the agriculturists to the banks, liabilities due to 'any corporation formed in pursuance of an Act of Parliament of the United Kingdom or due to any corporation formed in pursuance of any Special Indian Law or Royal Charter or Letters Patent' are declared to be exempted from the operation of the general provisions contained in the Act. Insertion of such a provision was made by the ultimate political authority which the Britishers held over us in those days under the 1935 Act. The question now is whether the granting of such exemption is permissible under out Constitution. When the Agricultural Debt Relief Act is enacted with the avowed object of providing relief to the agriculturists as a class, can section 4(e) of that Act single out the agriculturists indebted to the banks for the purpose of throwing additional burden on them It cannot be denied that the agriculturists suffer equally from the burden of indebtedness whether that burden is thrown upon them by a lending bank or by an ordinary money-lender. The burden of indebtedness cant change from a change in the status of money-lender. Prima facie, therefore, one can find no justification in such classification which is clearly irrational. It is clear that section 4(e) permits the bank to charge its agricultural debtors compound interest while the Act as a whole forbids other money-lenders the charging of such interest from the agriculturists. The question is whether this classification made by the Act between the agricultural debtors of the bank on the one hand and the agricultural debtors of ordinary creditors on the other is constitutionally permissible. Can the Act single out the agricultural debtors of the banks as different from other agricultural debtors for the purpose of according differential treatment
14. The above question clearly calls for ascertainment of the scope and applicability of article 14 of our Constitution. Forty years of our constitutional culture has impressed our welt-an-schau-ung with the concept of equality and its ethos. Equal protection is one of the most important constitutional principles that has sunk deep into our jurisprudential sub-consciousness and reared by our constitutional declarations. The claims to equality which are daily asserted in our courts and outside eloquently attest to that fact. The argument based on violation of principles of equal protection of laws cannot, therefore, be mocked at as the skeptical Justice Holmes did in Buck v. Bell (71 L.Ed. 1000) as the last resort in a constitutional argument. In our courts, it is mostly the first of such arguments. The real difficulty, however, arises in applying this principle to the concrete facts of life where, in reality, many differences and inequalities exist. But the application of this great principle is not impossible. Going by the gnomic utterances of the best known judicial sages of America from where we have bodily lifted this concept, it is possible to carve out specified areas for the application of this fundamental constitutional principle. Mathews J. declared in Yick Wo v. Hopkins (30 L Ed 220) 'the equal protection of laws is a pledge of the protection of equal laws.' In Southern Railway Company v. Green (54 L Ed 536), the American Supreme Court declared 'the equal protection of the laws means subjection of equal laws applying to all in the same situation.' I find the particular meaning which the American Supreme Court gave to this concept in Barbier v. Conally (28 L Ed 923) to be wholly apposite to the facts of our case. In that case, the American Supreme Court gave the meaning of this concept in these following words :
' ..... that no impediment should be interposed to the pursuits of any one except as applied to the same pursuits of others under like circumstances; that no greater burdens should be laid upon one than are laid upon others in the same calling and condition.'
15. In Lindsley v. Natural Carbolic Gas Co. (55 L Ed 369) the American Supreme Court summarised the modern concept of equal protection of laws. According to that tabulation, the 14th Amendment does not take away from the State its power to classify in the adoption of police laws. It avoids what is done only when it is done without any reasonable basis and, therefore, is purely arbitrary. In Dalmia's case, : [1959]1SCR279 , our Supreme Court formulated a similar set of rules in the interpretation and application of article 14 of our Constitution. Dalmia's case declared that while article 14 forbids class legislation, it does not forbid classification; but remembering the fact that classification is only a subsidiary rule insisted that permissible classification must satisfy the two conditions, viz., (1) the classification must be founded on an intelligible differential which distinguishes persons that are grouped together from others left out of that group, and (2) the differential must have a rational relationship to the object sought to be achieved by the statute in question. We have to examine the classification in section 4(e) of the Rajaji Act for its constitutional validity from the above angle. The question whether the classification made by section 4(e) of the Rajaji Act between the two class of debtors mentioned above is constitutionally valid must be answered by applying the above test laid down by the courts. Is there any intelligible differentia which distinguishes agricultural borrowers from banks from the other agricultural borrowers from non-banks and does it have any rational relationship to object of the Rajaji Act. We have already noticed that the sole object sought to be achieved by the Rajaji Act is to grant relief to the agriculturists as a class from their indebtedness. In applying article 14, we must accept this legislative declaration of the purpose of the Rajaji Act. It is because the Act found that the agriculturists are ruined by the usurious interest rates charged by the money-leanders, that the Act had forbidden charging of compound interest and permitted charging of only simple interest. These provisions of the Act are based upon legislative understanding of the common needs of the agriculturists. An agriculturist who gets his crop only once a year, as large majority of them do, and who depend mainly on the monsoon will not be in a position to pay interest on the principal every quarter. It is for that reason that the Rajaji Act forbids the charging of compound interest. The agriculturist is as much ruined by the charging of compound interest by the bank as he is ruined by the charging of compound interest by others. From the point of view of the object of the Rajaji Act, we cannot, therefore, find any intelligible differentia which justifies the above classification made by section 4(e) of the Act between the agricultural borrowers from banks and agricultural borrowers from others. I, therefore, hold that according to the above principles enunciated by our Supreme Court, there is no reasonable classification founded upon any intelligible differential between the two classes of borrowers.
16. The observations in Barbier v. Conally (28 L Ed 923) that no impediment should be interposed to the pursuits of one except as applied to the same pursuits of others under like circumstances and that no greater burden should be interposed to the pursuits of one except as applied to the same pursuits of others under like circumstances and that no greater burden should be laid upon one than is laid upon others in the same calling and condition clearly forbid the singling out of the agricultural borrowers from the bank for this hostile discrimination. What justification can there be in asking such a borrower alone to pay compound interest I see none. I am, therefore, of the opinion that section 4(e) of the Rajaji Act to the extent it makes the above discrimination is void as being opposed to article 14 of the Constitution.
17. The judgment of the Supreme Court in State of Rajasthan v. Mukan Chand, : [1964]6SCR903 , directly covers this case and fully applies to its facts. In the Rajasthan case, the Supreme Court was confronted with the question of validity of a portion of section 2(e) of the Rajasthan Jagirdars' Debt Reduction Act which excluded certain debts due from the jagirdars to the Central Government, State Government, scheduled banks, local authorities, co-operative societies, etc., form the purview of the Act that reduced the Jagirdars' liability to pay debts. In examining the validity of such an exemption granted by section 2(e) of the Rajasthan Act which is similar to the exemption granted in our case by section 4(e) to the debts owed to the banks, the Supreme Court found that there is no ration al relationship in the classification between the exempted and non-exempted debts with the purpose of the Rajasthan Jagirdars' Debt Reduction Act which is to reduce the debt liability of the ex-jagirdars whose jagirs had been resumed by the State. The Supreme Court held that the question to whom the jagirdar owed a debt was irrelevant and what was relevant was only the fact that the jagirdar owed a debt. It examined the question whether the classification made by the Act between the debts owed by, the jagirdars to the banks and the Government and the other debts owed by the jagirdars is based upon any intelligible differentia. The Supreme Court found in the above Rajasthan case that taking out the debts due to the Central Government, banks, etc., by the jagirdars from the purview of the Act had no rational relationship to the object sought to be achieved by the Rajasthan Act which was to reduce the debt burden of the ex-jagirdars. In para. 8 of its judgment, the Supreme Court, while finding that the exemption granted to the debts owing to the Central and State Governments had no rational relationship to the object sought to be achieved by the Rajasthan Jagirdars' Debt Reduction Act, observed as follows (at page 1635) :
'It is now well settled that in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentiation which distinguishes persons or things that are to be put together from others left out of the group, and (2) that the differentiation which distinguishes persons or things that are to be put together from others left out of the group, and (2) that the differentia must have a rational relationship to the object sought to be achieved by the statute in question. In our opinion, condition No. 2 above has clearly not been satisfied in this case. The object sought to be achieved by the impugned Act was to reduce the debts secured on jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act. The jagirdar's capacity to pay debts had been reduced by the resumption of his lands and the object of the Act was to ameliorate his condition. The fact that the debts are owed to a Government or local authority or other bodies mentioned in the impugned part of section 2(e) has no rational relationship with the object sought to be achieved by the Act.'
18. I am of the humble opinion that every line of the above extracted part of the judgment of the Supreme Court in the Rajasthan case applies fully to the facts of our case. In the Rajasthan case, the Supreme Court rejected the argument that the exemption granted to debts owed to bank subserved a public purpose. It confined itself only to the consideration of the question whether the exemption was based on any rational relationship to the object sought to be achieved by the Rajasthan Act. It was on that basis that the Supreme Court in the Rajasthan case held the exemption to be unconstitutional and violative of article 14 of the Constitution. If the debts due to the scheduled banks in the Rajasthan case could not be treated as forming a separate class for the purpose of granting exemption, I am of the opinion that it must follow that the debts due to the plaintiff-Indian Bank in our case cannot also be treated as a separate class entitled to exemption. Logically, it must be held that in both cases the exemption granted to the debts owed to the banks bears no rational relationship to the object sought to be achieved by the Act which is to grant debt relief to the debtors. I am of the opinion that, is the face of this clear pronouncement of the Supreme Court in the Rajasthan case, it is impossible to uphold the exemption granted by section 4(e) of the Rajaji Act to bank loans.
19. The Constitutional law determines the validity of a legislative enactment more often by consideration of conditions existing at the time of its enactment. In Block v. Hirch (65 L Ed 865), the American Supreme Court held 'that changed conditions may render the enforcement of a regulation which may have reasonable when it was enacted.' This principle of law is accepted by our courts. Today, agriculture is financed largely by banks. It is estimated that more than 80% of the agricultural loans in this State are advanced by banks. Thus, bank loans play a major role in agricultural financing. If the bank loans are today exempted from the purview of the Rajaji Act and the banks are permitted to charge compound. In this context, it is worthy of note that in para. 9 of its judgment in the Rajasthan case, the Supreme Court had disapproved the contention that private money-lenders alone are a curse to the rural economy while the banking institutions are a blessing. In fact, the Supreme Court did not approve of the judgment of the Hyderabad High Court in Jamnalal Ramlal Kimtee v. Kishendas and State of Hyderabad, AIR 1955 Hyd 194, which was based on some such reasoning. The Supreme Court disapproved of the Hyderabad decision for its failure to examine the question whether the differentia made by the Hyderabad Act had any rational relationship to the object sought to be achieved.
20. The above discussion would clearly show that section 4(e) of the Rajaji Act, to the extent it grants exemption to the bank loans, could not be upheld as constitutional.
21. The learned Advocate-General had, However, relied upon the judgment of the Madras High Court in Krishnamurthy v. Venkateswaran, : AIR1952Mad11 , and also on the judgment of the Madhya Pradesh High Court in Chandmal Ratichand Jhabua v. State of Madhya Pradesh, : AIR1967MP52 , and the judgment of the Kerala High Court in Catholic Bank of India Ltd. v. George Jacob, : AIR1968Ker3 [FB], in support of his contention that the granting of such exemption cannot be considered as unsonstitutional.
22. In the Madras case, the Division Bench did not have the benefit of the judgment of the Supreme Court in the Rajasthan case. In para. 19 of its judgment, it did not specifically consider the question of validity of the exemption granted by section 4(e) of the Rajaji Act to the loans advanced by banks to agriculturists. Its finding is confined only to the loans owed by the agriculturists to the co-operative societies. What is more, its justification of the exemption even in relation to co-operative loans was based upon the theory that it was in the public interest which we have noted to have been rejected by the Supreme Court in the Rajasthan case. It did not consider the question from the perspective of the purpose of the Rajaji Act. I, therefore, could not find this case to be of much use.
23. In Chandmal Ratichand Jhabua v. State of M.P., : AIR1967MP52 , the question with which we re now concerned did not fall for decision. That is the reason why the Division Bench easily distinguished the judgment of the Supreme Court in the Rajasthan case on the ground that the object of the Madhya Bharath Scheduled Tribes Debt Relief Regulations, 1962, was not to reduce the burden of debt but to protect the tribal people from the sharp practices of private money-leanders. It observed in para 11 of its judgment (at page 54) :
'The instant regulations, however, stand altogether on a different footing. Their purpose is not generally to reduce the burden of the debt on the members of the scheduled tribe.'
24. If at by implication, the Madhya Pradesh judgment can be taken only as supporting the view that section 4(e) of the Rajaji Act cannot be upheld. That case can never be of any use to the argument of the Advocate-General.
25. In Catholic Bank of India Ltd. v. George Jacob, : AIR1968Ker3 [FB] the Kerala Full Bench mostly adopted the reasoning of the Madhya Pradesh decision. In para 36 of its judgment, the Full Bench distinguished the judgment of the Supreme Court in the Rajasthan case on the ground that the Kerala Act was enacted to give relief to the indebted agriculturists of the State who are exposed to exploitation by the money-lenders. It also assumed that the banking companies charge reasonable rates of interest. I am of the opinion that to that extent, it is clearly going contrary to the observations of the Supreme Court in the Rajasthan case. To that extent, I cannot follow those observations of the Kerala High Court.
26. One thing that must be noted running as a common thread in all these judgments is the common observations made in all these judgments supporting and strengthening the philosophy and purpose behind the Rajaji Act which is to grant relief to agriculturists from their indebtedness. Here, it must be recalled that the Usurious Act, as amended by the Madras Act, raises a universal presumption against charging farmers compound interest. It may also be noted that entry 30 of List II of our Constitution, to which is specifically added the words 'relief from agricultural, indebtedness', expressly empowers the State Legislatures to make necessary laws on the topic of granting relief of agricultural indebtedness. Article 48 of the Constitution directs the State to endeavor to organise agriculture on modern and scientific lines. The newly added part of entry 30 and the whole of article 48 are inserted by our Constitution for the protection of agriculture as an occupation. Agriculture cannot prosper so long as compound interest is allowed to be charged, no matter who charges it. If charging of compound interest by private money-lenders is, by universal opinion, a curse on agriculturists, it cannot become less oppressive and less ruinous merely because the compound interest is charged by an artificial legal person classed as a banking company which has neither a soul to be damned nor a body to be whipped. It would be mocking at common sense to hold that the degree of interest burden can vary depending upon the person that places that burden and not upon the quantum of burden. From the above entry 30 read with article 48 of our Constitution, it must be inferred that our Constitution has intended the State Legislatures to enact laws forbidding imposition of intolerable debt burdens on agriculturists. A bank does not cease to be a money-lender merely because it is a bank. Relief of agricultural indebtedness cannot be used as a legislative matter for the Legislature to enact a law deliberately permitting the imposition of a debt burden on agriculturists. Considering the fact that the Indian Bank is 'State' within the extended meaning of that word under article 12 of our Constitution, it should be held to be bound by the obligations of article 19(1)(g) of the Constitution and forbidden from agriculturists. The bank cannot be permitted to abridge the agriculturist's right to carry on the occupation of agriculture by charging compound interest. It is not at all in the interests of general public to cripple agriculture and destroy the agriculturists who supply our food. Nor is it reasonable to charge compound interest from agriculturists. If the constitutional charter envisages a legal regime whereunder the agriculturists should not be charged compound interest, as evidenced by the above provisions of the Constitution, the State itself charging the agriculturists compound interest would be doubly unconstitutional.
27. For all the above reasons, I am of the opinion that section 4(e) of the Rajaji Act, to the extent it grants exemption to bank loans from the purview of that Act, is unconstitutional.
28. For all the above reasons, I am of the opinion that section 4(e) of the Rajaji Act cannot be construed as standing in the way of the defendatns being granted the relief from the claim of the plaintiff-bank to charge compound interest.
29. If section 4(e) of the Rajaji Act is thus out of the defendants' way, the plaintiff's suit could be decreed only for simple interest. But, before we can do so, the argument of the plaintiff-bank that Act 1 of 1984 has the effect of interdicting the operation of the Rajaji Act as well as the Usurious Loans Act has to be examined.
30. This question was earlier considered by my learned brother Kodandaramayya J., sitting singly, in Satyanarayana's case [1984] 2 APLJ 290; AIR 77, and also by him sitting in a Division Bench in Andhra Bank v. Bonu Narasamma [1988] 63 Comp Cas 328 (AP); [1986] 2 APLJ 165. The same matter was also considered by a subsequent Division Bench of which Kodandaramayya J. was also a member in K. C. Venkateswaralu v. Syndicate Bank, : AIR1986AP290 , and also by another Division Bench in Yogendranath Raj v. State Bank of India [1987] 1 APLJ 316; [1988] 63 Comp Cas 405 (AP). The first two judgments dealt with the question to what extent Act 1 of 1984 had interdictred the Rajaji Act. A perusal of the last two cases which had exclusively dealt with the question to what extent Act 1 of 1984 had interdicted the Rajaji Act. A perusal of the last two cases which had exclusively dealt with the question of the applicability of the Usurious Loans Act of the loans advanced by banks to agriculturists after the commencement of Act 1 of 1984 leaves me with the impression that these decisions did not bear in mind the clear distinction between the Rajaji Act and the Usurious Loans Act and the Usurious Loans Act and the necessity and need to consider the overriding effect of Act 1 of 1984, if any, relation to the Rajaji Act. The first two decisions held that the fields of operation of Act 1 of 1984 and the Rajaji Act are different and that, therefore, Act 1 of 1984 had no effect of interdicting the operation of the Rajaji Act. However, the discussion in Satyanarayana's case : AIR1985AP77 , was overladen with the consideration of the Usurious Loans Act also which was, strictly speaking, extraneous to its decision. The conclusion in Satyanarayana's case : AIR1985AP77 , was approved in Narasamma's case [1988] 63 Comp Cas 328 (AP) but was not referred to at all in Venkateswaralu's case, : AIR1986AP290 . In Venkateswaralu's case, : AIR1986AP290 , the applicability of the Rajaji Act was never raised before the Division Bench. What was considered by the Division Bench was only the applicability of the Usurious Loans Act. The Division Bench in Venkateswaralu's case, : AIR1986AP290 , of which Kodandaramayya J. was also a member held that the rate of interest charged by the banking companies to an agriculturist cannot be reopened because of section 21A of the Banking Regulation Act. The Division Bench held that 'the Usurious Loans Act is no longer applicable to any debt to a banking company' and accordingly dismissed the agriculturist's appeal. This judgment was explained by the decision in Yogendranath Raj's case [1987] 1 APLJ 316; [1988] 63 Comp Cas 405 as not being applicable to the debts which have been incurred prior to the commencement of Act 1 of 1984. Yogendranath Raj's case [1987] 1 APLJ 316; [1988] 63 Comp Cas 405 had, however, cast a doubt on the decision in Satyanarayana's case : AIR1985AP77 , to the extent that the latter held that the filed of operation of the Usurious Loans Act and Act 1 of 1984 are totally different. In Yogendranath Raj's case [1987] 1 APLJ 316; [1988]63 Comp Cas 405, the Division Bench observed (at page 418 of 63 Comp Cas) :
'.... a learned single judge of this court (Kodandaramayya J.) has held in M. Satyanarayana v. Andhra Bank Ltd. : AIR1985AP77 , that, notwithstanding section 21A, agriculturists are entitled to the Usurious Loans Act (i.e., the Madras Amendment). The learned judge is of the opinion that, while the Banking Regulation Act, including section 21A, deals with the subject of banking (entry 45 in List I of the Seventh Schedule to the Constitution), the Madras Amendment is a law relating to relief of agricultural indebtedness (entry 30 in List II of the Seventh Schedule to the Constitution), the Madras Amendment is a law relating to relief of agricultural indebtedness (entry 30 in List II of the Seventh Schedule), and that 'viewed in this background, the operation of the Central Act and the State Act are quite independent and intended to achieve different objects altogether. On the above reasoning, the learned judge held that section 21A does not, and cannot have the effect of repealing the said Madras (Amendment) Act - a State law covering the field of agricultural indebtedness, which is a State subject. We do not propose to go into the correctness of the said decision which also appears to have been affirmed in the recent Bench judgment of P. Rama Rao and P. Kodandaramayya JJ. (Andhra Bank Ltd. v. B. Narasamma [1988] 68 Comp Cas 328 (AP)) referred to above. We have certain reservations about the correctness of the said decision, but we do not think it necessary to go into the said aspect herein.'
31. From the above, it appears to me clear that the judgment in Satyanarayana's case : AIR1985AP77 , was understood by the subsequent Benches of some of which Kodandaramayya J. was a member as not dealing with the applicability of the Rajaji Act, but only dealing with the applicability of the Usurious Loans Act as amended by the Madras Act. This formulation of the problem really misses the real issue of the controversy.
32. It must be noted that Act 1 of 1984 is essentially a procedural enactment which has nothing to do with the question of validating unlawful interest rates. That Act is based upon the assumption that interest rates have already accrued according to law. The Usurious Loans Act, as amended by the Madras Act, is also a procedural enactment. It is possible to contend that the operation of the Usurious Loans Act is overridden by the operation of Act 1 to 1984. But the substantive claims of agriculturists are based on the Rajaji Act under which charging of compound interest has been made a forbidden act for the banks. Under the Rajaji Act, no compound interest could ever legally accrue in favour of any bank that has advanced loans to agriculturists. In view of this legal prohibition, the question of courts allowing compound interest under Act 1 of 1984 or not allowing compound interest under the Usurious Loans Act cannot arise. The rate of interest mentioned in Act 1 of 1984 as well as the rate of interest mentioned in the Usurious Loans Act should be understood as referring only to the rates of interest mentioned in the Usurious Loans Act should be understood as referring only to the rates of interest allowed by law and which parties are free to stipulate. If the charging of compound interest is forbidden, as it is under the Rajaji Act, the term of contract providing for charging compound interest cannot be saved from the vice of invalidity by the operation of Act 1 of 1984. It follows, therefore, that the real question the courts have to consider in a case like this is whether the Banking Laws (Amendment) Act (1 of 1984) enacted by Parliament has the effect of overriding the Rajaji Act.
33. I may mention that no one before me had ever argued that the provisions of the Rajaji Act are overridden by Parliament's enactment of Act 1 of 1984. No one had even adverted to that question. But that being the real question, I cannot shirk my responsibility of answering that question. In doing so, I am of the clear opinion that such an argument would not even be plausible because the grant of relief from agricultural indebtedness is expressly mentioned as an exclusive State subject in the Seventh Schedule to our Constitution. We must note that in our Constitution, there is a treble enumeration of the Legislative items on which the Federal and State Legislative powers can each operate and enact laws. As these items are found expressed in general terms, they sometimes freely overlap each other. The first rule of interpretation of such legislative item is to read all of them together in the light of their legislative history. Only that way, the true scope of each of those legislative items can be determined in the light of the other. By resorting to the simplistic method of reading the federal legislative items in isolation without reference to the State subject and then applying the supremacy clauses of articles 245 and 246 of our Constitution to the federal laws, the true intention of the Constitution can be subverted. 'The meaning of a sentence may be more than that of the separate words, as melody is more than notes and no degree of particularity can ever obviate recourse to the setting in which all appear and which are collectively created', warned Justice Learned Hand. It is well known that these legislative items as many other parts of our Constitution dealing with the structure of the State are heavily borrowed by our Constitution-makes from the Goverenment of India Act, 1935. Under that Act, the item of relief of agricultural indebtedness was conspicuous by its absene. There, the item of money-lending and money-lenders alone was made a part of item 27 of List II of the provincial list along with trade and commerce and markets and fairs. Then, there was no express entry in the 1935 Act empowering the then provincial legislatures to make laws granting relief of agricultural indebtedness. Yet the Privy Council, exhibiting true constitutional vision, upheld the Bengal Debt Relief Act in Prafulla Kumar Murkerjee v. Bank of Commerce Ltd., Khulna [1947] IA 23; AIR 1947 PC 60, repelling the argument of federal supremacy. The Constituent Assembly clearly realised the need for an express provision relating to the matter of granting relief to agriculturists from their indebtedness. It had, therefore, inserted a new and specific item 'relief of agricultural indebtedness' as a part of item 30 of the State List, under our present Constitution after detaching the item of money-lending and money-lendres from the composite item of trade and commerce and markets and fairs. If one is not deaf to this message of legislative history of item 30 of the State List, and if one is not blind to its lessons, it will be clear that the Constituent Assembly consciously intended that the States, under the Constitution, should have the exclusive jurisdiction on all matters relating to the grant of relief of agricultural indebtedness. If so much is clear, will it be permissible to hold that such a law which can be traced to item 30 of the State List of our Constitution can be overridden by a federal law like Act 1 of 1984 made by Parliament under the generic item 45 of List I which deals with banking. One may agree that banking includes money-lending and charging interest. But, from that it does not follow that this facet of banking, namely, grant of relief of agricultural indebtedness which is included specifically in item 30 of the State List is also included in item 45 of List I of our Constitution. In my considered opinion, item 45 of List I of the Seventh Schedule must be so read and so interpreted as to exclude from its ambit and scope what is designedly to be legislated upon. It may be noted that the Constituent Assembly refused to make this Legislative item, even a concurrent item (see my judgment is State Bank of India's case, : AIR1986AP291 . Act 1 of 1984 cannot, therefore, be interpreted, in my opinion to cover a legislative area which has been specifically given to and deliberately made over by the Constituent Assembly to the authority of the State Legislature. Otherwise, a major consitutional exercise would be rendered futile. The true scope of the item 'banking' in the federal list must, therefore, be confined to the banking operations other than those which deal with the grant of relief to the agriculturists. It is for that reason, I held in my judgment of relief to the agriculturists. It for that reason, I held in my judgment in the matter of State Bank of India, : AIR1986AP291 , that Act 1 of 1984, to the extent it attempts to interdict the Rajaji Act, will suffer from the vice of constitutional invalidity. It is not merely because I was swayed by the enormity of injustice involved in charging the agriculturists compound interest, that I held Act 1 of 1984 to be void as the learned judges of the Division Bench in Narasamma's case [1988] 63 Comp Cas 328 (AP), had observed, without being fully aware of these complex constitutional issues, but because of these constitutional considerations. Regarding the observations of the learned judges of the Division Bench in Yogendranath Raj's case [1987] 1 APLJ 316; [1988] 63 Comp Cas 405, which declared, without discussing the Rajaji Act and without giving any reasons, that 'the competency of Parliament to enact the said provision would near have been in doubt'. I have nothing more to say. I am still of the clear opinion that Act 1 of 1984 cannot be interpreted as interdicting the Rajaji Act. If it was interpreted as interdicting the Rajaji Act, Act 1 of 1984 would itself be liable to be declared as unconstitutional for federal reason alone. But that is not only ground on which I held in State Bank of India's case, : AIR1986AP291 , that Act 1 if 1984 was unconstitutional. Act 1 of 1984 turns the courts into collecting agencies for the banks. It is not a case of mere denial of jurisdiction to courts. This I held to be partisan and opposed to article 14. It is not necessary to repeat all those arguments which I elaborated in State Bank's case, : AIR1986AP291 , which I declare to be part of this judgment. I only regret to say that this portion of my judgment is State Bank of India's case, : AIR1986AP291 , had escaped the attention of both the Division Benches.
34. I am of the opinion that what I said of the Rajaji Act cannot be said about the Usurious Loans Act under which there is no legal impediment for charging compound interest. Under the Usurious Loans Act charging of compound interest would not initially become void. The Usurious Loans Act examines the matter on the assumption that the interest had already accrued lawfully, but in an unfair transaction and then seeks to scale it down. Both the Usurious Loans Act and Act 1 of 1984 dealt with situations of voidable transactions, whereas the Rajaji Act dealt with void transactions. It is unfortunate that none of none of these considerations were presented before the above Division Benches.
35. The Division Bench of this court in Yogendranath Raj's case [1987] 1 APLJ 316; [1988] 63 Comp Cas 405, relying on the decisions reported is LIC of India v. Kota Ramabrahman, : [1977]3SCR683 and Workmen of Firestone Tyre and Rubber Co. of India Ltd. v. Management : (1973)ILLJ278SC , held that the Usurious Loans Act will apply only to a debt incurred prior to the commencement of Act 1 of 1984. In my opinion, the principle of LIC of India's case : [1977]3SCR683 , is more applicable to a case where the interest had not lawfully accrued. But for the sake of certainty of law, I agree with the conclusion of the judgment of the Division Bench in Yogendranath's case [1987] 1 APLJ 316; [1988] 63 Comp Cas 405 to the extent it holds that Act 1 of 1984 has no application to the debts which have been incurred prior to Act 1 of 1984 which would be governed by the provisions of the Usurious Loans Act. That would be clearly dispositive of this case when the debts were incurred prior to Act 1 of 1984. It may be noted that a similar view has been taken of the scope of Act 1 of 1984 by the Madras High Court in Muthian v. Syndicate Bank, : AIR1987Mad248 .
36. In Yogendranath's case [1987] 1 APLJ 316; [1988] 63 Comp Cas 405 (AP), the Division Bench observed 'having regard to the object and the purpose underlying the Usurious Loans Act and the Madras Amendment thereto, we are of the opinion that the court should be inclined to sustain and continue the said relief, unless the statute says to the contrary, either expressly or by necessary implication.' I agree to that extent.
37. But the judgment of the Karnataka High Court in H. P. Krishna Reddy v. canara Bank, : AIR1985Kant228 and Bank of India v. Karnam Ranga Rao, : AIR1986Kant242 , clearly show the limited applicability of Act 1 of 1984. The ratio of these cases fully accords with the view taken in Satyanarayana's case [ : AIR1985AP77 . Jagannath Shetty J. (as he then was) in the above two Karnataka cases, held that Act 1 of 1984 forbids the courts from reporting the transaction only on the ground of excess of interest. He held that that provision has no application has no application to the reporting of the loan transaction on other grounds. In those two Karnataka cases, the Division Bench reopened and scaled down the compound interest charged by the bank on the ground that the charging of compound interest to an agriculturist by the bank was contrary to the directions of the Reserve Bank of India itself. I am, therefore, of the opinion that the observations made by the Division Bench in Yogendranath Raj's case [1987] 1 APLJ 316; [1988] 63 Comp Cas 405 that 'we have certain reservations about the correctness of the said decision, but we do not think it necessary to go into the said aspect herein' are not correct.
38. For the above reasons, I hold that Act 1 of 1984 has no effect at any time of overriding the Rajaji Act or the Usurious Loans Act in this case.
39. I am summaries my findings as follows :
(a) Section 4(e) of the Rajaji Act, to the extent it exempts loans advanced by the banks to agriculturist from the operation of the Rajaji Act, is discriminatory and violative of article 14 of the Constitution.
(b) The consequence of my finding No. 1 is that the banks are forbidden from charging compound interest and such provision is null and void and the compound interest could never lawfully accrue in favour of the bank. I am, therefore, of the opinion that a court is bound, notwithstanding Act 1 of 1984, to deny the bank its help for recovery of compound interest from agriculturists.
(c) I am of the opinion that the operation of the Rajaji Act is not in any way interdicted by Act 1 of 1984. It is fully operative even after Act 1 of 1984. The Usurious Loans Act also operates after the commencement of Act 1 of 1984 even in relation to debts incurred prior to Act 1 of 1984.
40. In view of the above, I dismiss the second appeal.
41. Second Appeal No. 832 of 1987.
42. Following the above judgment, I also dismiss this second appeal.