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IN THE HIGH COURT OF JUDICATURE OF BOMBAY
BENCH AT AURANGABAD
SECOND APPEAL NO. 119 OF 1991
Ramprasad Bhagirath Agrawal
R/o Kannad Dist-Aurangabad APPELLLANT
VERSUS
Uttamchand Danmal Pande
R/o Kannad Dist-Aurangabad RESPONDENT
.....
Mr. S.V.Gangapurwala, Advocate for the appellant
Mr. D.L.Agrawal, Advocate for the respondent
.....
[CORAM: V.R. KINGAONKAR, J.]
ig Reserved on : 15.10.2008
Pronounced on : 21.10.2008
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JUDGMENT :
1. By this appeal, appellant impugns judgment
rendered by learned Additional District Judge,
Aurangabad, in an appeal (RCA No.279/1989) reversing
money decree rendered by learned Civil Judge (Senior
Division) in Special Civil Suit No.4/1978.
2. The appellant, who is original plaintiff, and
respondent are inhabitants of same town. The
appellant’s case before the trial court was that, out
of friendship with the respondent, he advanced amounts
of Rs.10,000/- each on 5th July 1975 and 12th July
1975 to him. The respondent executed separate demand
promissory notes each at the time of advancement of
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the amounts, on both the occasions. Though he made
repeated demands, yet the respondent did not pay the
amounts. He, therefore, issued demand notice dated
9th July 1977, which was duly served upon the
respondent on 11th July 1977. The demand notice drew
blank. Neither it was replied nor was complied with.
Consequently, he filed suit for recovery of the
advanced amounts along with interest @ 1.5 % p.m. and
notice charges, totalling to Rs.28,450/-.
3. By filing written statement (Exhibit-23) the
respondent denied the suit claim and averments made by
the appellant.
ig He asserted that the appellant was
dealing in money lending business. He asserted that
earlier he had borrowed money from the appellant, on
several occasions, at exorbitant rate of interest.
According to him, though he executed the promissory
notes in question, on two occasions, yet he repaid the
amounts. He asserted that he was arrested during
emergency period, during which the appellant exploited
the situation, exerted influence on his son and got
antedated promissory notes under duress from him and
also a promissory note for Rs.3000/-. He contended
that the promissory notes are without consideration.
He denied liability to pay the amounts. He further
disputed the claim of interest on the ground that it
is highly excessive. He submitted that appellant was
engaged in money lending business without license and
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as such the suit was liable to be dismissed.
4. The parties went to trial over certain issues
struck below Exhibit-24. They adduced oral and
documentary evidence in support of rival contentions.
The trial court held that the promissory notes
(Exhibit-43 and Exhibit-44) were duly proved by the
appellant. The trial court came to the conclusion
that the transaction was not of money lending. The
trial court further held that since the promissory
notes did not show agreement of interest, the
transactions are not covered under the Bombay Money
Lenders
Act, 1946. The suit was, therefore, decreed.
The first appellate court held that the transactions
indicated money lending. The first appellate court
relied upon provisions of the Bombay Money Lenders
Act, 1946 as well as view taken by this Court in
“Dharamdas Motibhai Wani V/s Shidya Jatrya Bhil” (1971
MhLJ 608). Hence, the appeal was allowed and the suit
was dismissed.
5. The second appeal was admitted by the then
Hon’ble Judge, treating grounds No.10, 13 and 14 of
the appeal memo as substantial questions of law. I
deem it proper to redraft the substantial questions of
law instead of reproducing the grounds of appeal memo.
The substantial questions of law may be stated as
follows-
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1. Whether the first appellate court
committed patent error while interpreting the
provisions of Section 2 (9) (f) of the Bombay
Money Lenders Act, 1946?
2. Whether in the facts and circumstances of
the present case, in absence of agreement to
charge interest on the advanced amounts, the
transactions could be treated as loans and
particularly when there is omission in the
promissory notes (Exhibit-43 and Exhibit-44)
as
regards rate of interest and that in view
of admissions of the respondent regarding
execution of the promissory notes, the money
decree ought to have been confirmed by the
learned Additional District Judge?
6. Mr.Gangapurwala would submit that the view
taken by Single Bench in “Dharamdas Motibhai Wani V/s.
Shidya Jatrya Bhil” (1971 MhLJ 608) is not in keeping
with proper interpretation of the provisions of the
Bombay Money Lenders Act, 1946 and Section 80 of the
Negotiable Instruments Act, 1881. He would submit
that if exclusion of the negotiable instruments, as
contemplated under sub clause “f” of section 2 (9) is
to be considered, then even other negotiable
instruments like cheque, demand draft etc. may fall
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within the purview of Section 2 (2) and will have to
be treated as instances of money lending business. He
also invited my attention to Section 2 (6), which
defines the expression “interest”. He would submit
that since execution of the promissory notes
(Exhibit-43 and Exhibit-44) was duly proved, the money
decree ought not to have been disturbed by the first
appellate court. As against this, Mr.D.L.Agrawal
supports the impugned judgment.
7. Before I proceed to consider relevant legal
provisions of the Bombay Money Lenders Act, it is
worthy
to be noted that several documents were placed
on record by the respondent / defendant in support of
his contention that the plaintiff / appellant was
dealing in money lending business. The first
appellate court did not consider those documents. As
a matter of fact, it was necessary for the first
appellate court to consider the import of such
documents, which are placed on record. The respondent
produced on record certified copies of judgments
(Exhibit-36 and Exhibit-37) in Small Causes Suit
No.7/1971 and Small Causes Suit No.13/1971. He also
placed on record copies of plaints and other suits
filed by the appellant. It appears that the appellant
had filed a suit against son of the respondent for
recovery of Rs.3,000/-. There are several other
transactions, which are apparent on face of record.
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The appellant admitted that he had advanced amount to
one Topanlal and also advanced certain amount to one
Bandu, as per documents (Exhibit-38 and Exhibit-39).
These are the attending circumstances. The trial
court seems to have considered these transactions.
However, it was held that out of the said transactions
four were advanced without interest and, therefore,
they could not be said to have been done in regular
course of business of money lending.
8. The demand notice (Exhibit-46) shows that the
appellant demanded interest of Rs.7200/- up to end of
June 1977 from the date of the relevant transactions @
1.5% p.m. He did not explain in the demand notice
that the interest was sought by way of damages. In
his pleadings, for the first time, he asserted that
the amount of Rs.8400/- was sought towards interest by
way of damages. The oral evidence of the parties
comprise of their own statements and version of DW-2
Shankarlal. The appellant stated that he gave hand
loan on both the occasions under the promissory notes
(Exhibit-43 and Exhibit-44). He stated further that
there was no agreement to charge interest. He denied
loan transactions with other persons against whom he
had filed similar suits. His version reveals that in
proceedings initiated by one Fakirchand s/o Dhannalal
at Tehsil office, he was required to return utensils
of said Fakirchand. The version of the appellant
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shows that he did not maintain any record about the
other transactions made with the respondent. Though
he maintained regular account registers of his
business, yet the same were not produced before the
trial court.
9. A Single Bench of this Court in “Dharamdas
Motibhai Wani V/s. Shidya Jatrya Bhil” (1971 MhLJ
608) held:
“In my opinion, whether interest is or is not
claimed in the suits is totally irrelevant to
the
determination of the question whether
these were or were not advances at interest.
The plaintiff cannot by giving up interest in
the suit take the transaction out of the
provisions of the Money-lenders Act.”
10. The learned Judge proceeded to consider
definition of the expression “loan” as used in section
2, sub section (9) of the Act. It is held that since
sub clause (f) excludes other negotiable instruments,
except promissory note. The advance made on basis of
the promissory note, therefore, would not stand
excluded from the relevant provisions of the Bombay
Money Lenders Act 1946. The learned Single Judge held
that in view of Section 80 of the Negotiable
Instruments Act, the interest could be charged whether
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it was agreed or not between the parties. And,
therefore, the loan advanced on basis of promissory
note would be an advance at interest. With the
result, it falls within the mischief of the provisions
of Bombay Money Lenders Act, 1946 and hence Section 10
thereof is attracted.
11. It appears, no doubt, that the other
negotiable instruments may also be used while
advancing loans and interest could be charged
notwithstanding absence of any agreement between the
parties. However, such instruments, expect the
category
of promissory notes, may not come within the
ambit of the definition of the word “loan” as used in
section 2 (9) of the Bombay Money Lenders Act, 1946.
The definition of the word “loan” used in sub section
9 will have to be interpreted having regard to
intention of the legislature. Various kinds of
advances made have been excluded under sub clauses (a)
to (f2). For example, under sub clause (f2) an
advance made bona fide by any person carrying on any
business, not having for its primary object the
lending of money is excluded from the purview of the
definition of expression “loan”. The advance made in
such a case need not be specifically without execution
of any negotiable instrument. Though it is not so
provided under sub clause (f2) yet having regard to
the other provisions like sub clauses (ee) and (f) it
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will have to be said that such advances in respect of
sum exceeding Rs.3,000/- shall not be on basis of a
promissory note, if they are to be kept outside the
purview of the Bombay Money Lenders Act.
12. The definition of expression “business of
money lending” as stated in Section 2 (2), covers
business of advancing loans. It is argued by learned
advocate Mr.Gangapurwala that isolated transactions
cannot fall within the ambit of the Bombay Money
Lenders Act, 1946, unless it is shown that the person
deals in series of transactions of advancing loans, as
a
part of his business. He would invite my attention
to the sub-section (6) of Section 2. He would submit
that the expression “interest” does not include any
sum charged in accordance with the provisions of any
other law. He would submit that the amount claimed by
the plaintiff was recoverable towards damages or under
the provisions of the Section 80 of the Negotiable
Instruments Act. Hence, it could not be regarded as
“interest” charged under sub-section (6) of section 2
of the Act. According to Mr.Gangapurwala, if the
provisions of sub section 2, sub-section (6) and sub-
section (9) are read together, then the transactions
in question would not come within the ambit of the
Bombay Money Lenders Act.
13. Mr.Gangapurwala seeks to rely on “Sohel
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Janmuhammed Memon & Ors V/s. State of Maharashtra”
2006 ALL MR (Cri) 2703. It was a case in which the
transaction of advancement of loan on strength of
bills of exchange was subject matter of the criminal
charge. A Single Bench of this Court held that it was
excluded in view of Section 2 (9) (f) of the said Act.
He also seeks to rely on “Sureschandra Nandlal V/s
Lala Gopikrishna Gokuldas Agencies” 1996 (4) ALL MR
325. It was a case in which the suit was founded on a
cheque issued by the defendant. A Single Bench of
this Court held that where the money was advanced
without charging any interest, the transaction could
not be that of a lending and, therefore, provisions of
BML Act were not attracted to such transactions.
There is no difficulty in holding that loan advanced
on basis of a cheque would not come within the
mischief of Section 2 (2) (9), in view of the specific
exclusion made in sub section (9) (f).
Mr.Gangapurwala further seeks to rely on “Bhanushankar
Jatashankar Bhatt V/s Kamal Tara Builders Pvt. Ltd.,
and another” (AIR 1990 BOM 140). In the given case it
was held that Section 2 (9) (f) and (f1) are
constitutionally valid. He also relied on “Ganesh
Madhavrao Hawaldar V/s Mithalal Kishaolal Dave” 1999
(1) MhLJ 110.
14. The definition of word “loan”, as used in
section 2 (9) does not exclude an advance of amount at
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interest whether it would be agreed or would be
provided under Statute. It is further clarified by
the expression “whether of money or in kind” before
stating the exclusion clauses, shown in sub-clause (a)
to (f2). Therefore, it is not necessary that the
advance of amount must be accompanied by an agreement
of interest between the parties. It may be that under
the provisions of law, may be like section 80 of the
Negotiable Instruments Act, it is recoverable. It
need not be reiterated that exclusion available under
sub-clause (f) of sub-section (9) is limited to the
extent of other negotiable instruments, except that of
a
promissory note. The transactions incorporated in
both the promissory notes (Exhibit-43 and Exhibit-44)
will have to be, therefore, treated as money lending
transactions. Whether the interest was claimed by way
of damages or not, is not the significant aspect. The
fact remains that whatever was the label attached to
it, the plaintiff claimed amount of interest under the
demand notice as well in the plaint.
15. The evidence on record shows that appellant
(plaintiff) was dealing in money lending transactions.
There were several other instances of his trading in
money lending. Considered together, and having regard
to the provisions of Section 2 (2) and sub section (9)
(f) of the BML Act, it will have to be said that the
suit filed by him was for recovery of loan advanced in
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the course of money lending transaction. The
provisions of section 10 of the BML Act before it was
amended w.e.f. 19.07.1975 required the court to stay
the suit on application of the money lender after
granting him time to produce money lending license.
It also provided under sub-section (5) of section 10
that the suits in respect of loans advanced by a money
lender before commencement of the date of the Act
could be saved. The trial court wrongly interpreted
this provision so as to mean that the transactions
before amendment of the BML Act w.e.f. 19.07.1975
were saved. The saving clause referred to the
transactions
which were before commencement of the
original Act of 1946 and has no reference to saving of
such transactions done before date of implementation
of the amended Act.
16. Section 10 of the BML Act would make it
manifest that unless the Court is satisfied that the
money lender held a valid license, no decree can be
rendered in his favour. If the court is satisfied
that the money lender did not hold a valid license to
deal in money lending business, it is mandatory to
dismiss the suit. In the present case, the appellant
did not hold a valid license for the purpose of money
lending. Obviously, dismissal of the suit by the
first appellate court is justified. I find it
difficult to deviate from the view taken by the
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learned Single Judge in “Dharamdas Motibhai Wani v/s
Sdhidya Jatrya Bhil” 1971 MhLJ 608. Considering the
totality of the circumstances and the forgoing
discussion, I do not find any substance in the appeal.
17. In the result, the appeal is dismissed with
costs.
[ V.R. KINGAONKAR ]
JUDGE
drp/sa119-91
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