Report No. 63
3.3. Part B States.-
It appears that the Act has not been extended to the areas which comprised the former Part B States. The Part B States Laws Act is silent about the Interest Act. Perhaps, at the time when the Part B States Laws Act was enacted, it was thought that the subject-matter of the Interest Act falls within the legislative entry relating to money-lending (which is in the State List). This assumption-if any such assumption was made-requires re-consideration. The subject-matter of the Act really falls within the residuary entry, as already pointed out1. The expressions "debt" and "creditor", used in section 1, are not confined to money-lending.
It must be stated that the text of the operative provision-section 1-is not confined to transactions between money-lenders and borrowers, whatever other limitations may flow from the language of section 1. Broadly speaking, interest can be awarded, under section 1, on a debt or sum certain, if the other conditions of the section are satisfied, and it is not necessary that there should be an element of money-lending in the origin of the debt or sum certain.
In fact, legislation dealing with the relief of agricultural indebtedness or regulating the business of money-lending can impose substantive or procedural restrictions relevant to the charge of interest, by virtue of the specific power given to the States in that behalf by the State List. A law made in exercise of that power i.e., the power relating to money-lending-would normally be reserved for the assent of the President, so that it may not be challenged as repugnant to Central legislation on a subject in the Concurrent List. This does not mean that the subject-matter of the Interest Act itself falls within the State List.
Incidentally, we note that in the India Code2, the Interest Act is printed in Volume 6, Part 6, page 3, under the heading of "'money-lending". Presumably, it was assumed that the Act principally deals with transactions of borrowing and lending. But, as we have already pointed out3, such an assumption would not be strictly accurate or well founded.
1. Paras. 3.1 and 3.2, supra.
2. India Code, Vol. 6, Part 6, p. 3.
3. Paras. 3.1 and 3.2, supra.