Mahadeo Krishnarao v. Shrikisan Gopalji — 1958 DIGILAW 190 (MP)

JUDGMENT V.R. Sen, J. This is a first appeal by the Defendants against the judgment and decree of the Court of Civil Judge, Class I, Betul. The facts which are not in dispute are these: The Defendants borrowed Rs. 4,500 from the Plaintiff on 1-5-1943. They agreed to repay the debt at Re. 0-12-0 per cent per mensem compound interest on the 15th May 1945. As a security for the debt the Defendants executed a mortgage-deed (Exh. P-3) on the same day in favour of the Plaintiff. It is not necessary to describe the property which was mortgaged for the purposes of this appeal. The mortgage-deed provided that in the event of default in payment the property was to be foreclosed. 2 The Defendants paid Rs. 3,000. The details of payment are shown below: Rs. 405 on 19-6-1944 Rs. 405 on 27-6-1945 Rs. 1,200 on 12-5-1949 Rs. 990 on 19-6-1950 These payments were towards interest according to the Plaintiff. The Defendants have also made an endorsement on the mortgage-deed that these payments were towards interest. The case of the Plaintiff is that no payment was made towards the principal of the debt and that the total amount due from the Defendants till the date of the suit was Rs. 5,870-5-0. The Defendants admitted the claim to the extent of Rs. 1,500 on account of principal and interest for two years 1950 and 1951. The main plea in defence was that the Plaintiff, who was a moneylender, had not complied with the provisions of Section 3(1)(b) of the C.P. and Berar Moneylenders Act. He had not furnished annual statement of accounts in the prescribed form duly signed by him within one month from the date of Diwali. The statement of accounts was furnished only for the years 1950 and 1951. The Plaintiff therefore was not entitled to claim interest in respect of the period during which he failed to send accounts. The payments which the Defendants have made purporting to be on account of interest should be appropriated towards principal as the Plaintiff did not maintain accounts as required by the Act. Costs should be disallowed. According to the Defendants, the rate of interest was excessive. The trial Court held that the Plaintiff had furnished accounts for the years 1950, 1951 and 1952 only. He maintained the accounts of the Defendants after the year 1949-50. Costs should be disallowed. According to the Defendants, the rate of interest was excessive. The trial Court held that the Plaintiff had furnished accounts for the years 1950, 1951 and 1952 only. He maintained the accounts of the Defendants after the year 1949-50. The Plaintiff was entitled to interest at the agreed rate. The Plaintiff was not entitled to claim interest for the period before 1950. The Court further held that it had no power to call upon the Plaintiff to refund the payments already made towards interest. The Court allowed simple interest at the agreed rate of 9 per cent per annum. It upheld the claim of the Plaintiff to the extent of Rs. 5,398-2-0 with corresponding costs, directing payment within six months of the date of the decree. In case of default, the property was to beforeclosed. The main contention on behalf of the Defendants is that the lower Court was wrong in holding that it had no power to re-open the accounts. Its interpretation of Section 7 of the Act was erroneous. Costs should have been disallowed. The argument on behalf of the Plaintiff is that the annual accounts used to be duly submitted and that the provisions of the Moneylenders Act were not applicable as the Plaintiff was not a moneylender. The Defendants had made payments voluntarily and they cannot now ask that the payments should be appropriated towards the principal of the debt. Costs are a matter of discretion and it cannot be said that the discretion has been wrongly exercised by the lower Court. There is no substance in the contention that the Plaintiff is not a moneylender. It is true that the Plaintiff in the witness-box stated that he did not carry on the business of moneylender. His evidence cannot be accepted in view of the clear admission in paragraph 5 of the plaint that he was a registered moneylender under the C.P. Moneylenders Act. There is a further statement in the same paragraph that he had served statements of annual accounts on the Defendants as required by the Moneylenders Act. The next question is whether accounts were duly sent in accordance with the provisions of Section 3(b) of the Act. The evidence of the Plaintiff is vague and unsatisfactory. All that he says is that his father gave annual notice of interest to the Defendants. The next question is whether accounts were duly sent in accordance with the provisions of Section 3(b) of the Act. The evidence of the Plaintiff is vague and unsatisfactory. All that he says is that his father gave annual notice of interest to the Defendants. He used to keep an account of interest after his father died in 1951. Radhakishan Bobde (P. W. 2) had to admit in cross-examination that he could not give details of the statements of accounts alleged to have been sent to the Defendants. The Plaintiff has not produced any postal acknowledgments to show that the accounts were sent of the years prior to 1950. The Defendant No. 1 has stated that he received accounts of the years 1950, 1951 and 1952 and that he had not received accounts of the remaining years. It would thus be clear that the finding of the lower Court that the Plaintiff furnished accounts only from 1950 onwards is correct. The main question which arises for consideration is whether the payments admittedly made towards interest can be appropriated towards the principal in view of the failure of the Plaintiff to comply with the provisions of Section 3(1)(b) of the Act. The material provisions are as follows: 3(1) Every moneylender shall-- (a) * * * * (b) furnish such debtor every year with a legible statement of accounts signed by the moneylender or his agent of any balance or amount that may be outstanding against such debtor on such dates and in such areas as may be prescribed. Such statement of accounts shall include all transactions in respect of the loan entered into during the year to which the statement relates and shall be furnished, in the court language of the district in which the debtor resides, and in such manner, in such form, containing such details and on such date as may be prescribed. Such statement of accounts shall include all transactions in respect of the loan entered into during the year to which the statement relates and shall be furnished, in the court language of the district in which the debtor resides, and in such manner, in such form, containing such details and on such date as may be prescribed. * * * * Notwithstanding anything contained in any other enactment for the time being in force, in any suit or proceeding relating to a loan-- (a) the Court shall, before deciding the claim on the merits, frame and decide the issue Whether the moneylender has complied with the provisions of clauses (a) and (b) of Sub-section (1) of Section 3; (b) if the Court finds that the provisions of clause (a) of Sub-section (1) of Section 3 or of Section 6 have not been complied with by the moneylender, it shall, if the Plaintiff's claim is established in whole or in part, disallow the whole or any portion of the interest found due, as may seem reasonable to it in the circumstances of the case and may disallow costs; and (e) if the Court finds that the provisions of Clause (b) of Sub-section (1) of Section 3 have not been complied with by the moneylender, it shall, in computing the amount of interest due upon the loan, exclude every period for which the moneylender omitted duly to furnish the account as required by that clause: * * * * Section 7 enjoins on the Court to decide whether the moneylender had complied with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3. It is clear from the language of Section 7(a) that the issue about the Plaintiff's compliance has to be decided even if the Defendant fails to raise an objection in that behalf. The consequences which flow from the non-compliance of Clause (a) or (b) or both are enumerated in Clauses (b) and (c) of Section 7. In view of the terms of Section 7(c), we are of opinion that the Court is not precluded from reopening the accounts and disallowing interest for the period during which there was non-compliance and reducing the debt by the amount paid on account of interest to which the Plaintiff is held not entitled. In view of the terms of Section 7(c), we are of opinion that the Court is not precluded from reopening the accounts and disallowing interest for the period during which there was non-compliance and reducing the debt by the amount paid on account of interest to which the Plaintiff is held not entitled. If the Defendants had not paid any amount on account of interest, the Court would have disallowed interest for the period prior to the Diwali of 1949. Why should Section 7(c) operate to their disadvantage merely because they have made payments, as here? The question whether accounts could be re-opened came up for consideration in Letters Patent appeal Tulsiram v. Badriprasad 1948 NLJ 223 : ILR 1948 Nag. 203. It was held that under Section 7 of the Central Provinces Moneylenders Act the Court has power to re-open the account so as to traverse the entire period from the date of the loan to the date of the suit and to find out such period or periods in which the account was not furnished under Section 3(1)(b) of the Act and subject to the proviso to the section to exclude such periods from calculation. The observations of their Lordships which have a bearing on the contention canvassed before us may be reproduced here: In our opinion no express words were necessary to give the power to re-open accounts as the operation involved in computing the interest due on the loan requires the Court to traverse the entire period from the date of the loan to the date of the suit, and to exclude such period or periods during which the accounts were not furnished. The Court has first to determine the period or periods in which the account was not furnished and (subject to the proviso) to exclude from calculation such periods. The action of the parties is immaterial because the duty is laid on the Court to give effect to the Act. Once these periods are excluded, any repayment even if expressly made towards interest would go first towards the reduction of such interest as may be due and next towards the reduction of the principal sum regard being had to the circumstances of the case. Once these periods are excluded, any repayment even if expressly made towards interest would go first towards the reduction of such interest as may be due and next towards the reduction of the principal sum regard being had to the circumstances of the case. * * * * If the clear meaning of the words is to allow a reopening of the accounts, the Courts must reopen the accounts and give relief in the light of the Act. This in our opinion is the position here. In computing the interest on the loan the Court has to traverse the entire period from the loan or the date of the Act, whichever is later, provided of course that the proviso to Section 8 is applicable to the loan if the loan was given prior to the date on which the Act came into force. The contention of the Appellants in that case that the Court cannot re-open the accounts where interest has been paid willingly by a debtor was repelled. The view of Bobde J. In Pandurang v. Punjaji 1944 NLJ 123 : ILR 1944 Nag. 241 cited by the learned Counsel for the Plaintiff cannot be accepted in view of the clear terms of Section 7(c) of the Act and the decision of the Division Bench. On making calculation as per our direction contained in paragraph 10 above, the accounts of the parties stand as follows: Principal of the loan Rs. 4,500-0-0 Repayments up to 12-5-1949 Rs. 2,010-0-0 Balance due Rs. 2,490-0-0 Interest on the above sum for the period Diwali of the year 21-10-1949 to Rs. 149-6-0 Total amount due Rs. 2,639-6-0 B.F. Rs. 2,639-6-0 Repayments made on 19-6-1950 Rs. 990-0-0 Balance due to the Plaintiff on 19-6-1950 Rs. 1,649-6-0 Interest at 9 per cent per annum compound for the period to the date of suit, i.e., 24-12-1952 Rs. 408-10-0 Total amount due Rs. 2,058-0-0 The next question is what interest should be allowed to the Plaintiff during the pendency of the suit and the appeal. The interest for this period is in the discretion of the Court under Rule 11 of Order XXXIV of the Code of Civil Procedure: (see Jaigobind Singh v. Lachmi Narain, AIR 1940 FC 20). It would not be in keeping with the spirit of the Madhya Pradesh Moneylenders Act if interest were allowed at full contractual rate. The interest for this period is in the discretion of the Court under Rule 11 of Order XXXIV of the Code of Civil Procedure: (see Jaigobind Singh v. Lachmi Narain, AIR 1940 FC 20). It would not be in keeping with the spirit of the Madhya Pradesh Moneylenders Act if interest were allowed at full contractual rate. In our opinion, under the circumstances of this case, interest at 6 per cent per annum simple would be quite reasonable and adequate for the period 24-12-1952 to 14-8-1958. The interest at this rate works out at Rs. 697. The amount to which the Plaintiff would thus be entitled would be Rs. 2,755. The last question is regarding costs. It has not been found that the Plaintiff had not complied with the provisions of Section 3(1)(a) of the Madhya Pradesh Moneylenders Act, and consequently Section 7(b) has no application. The parties will be liable for costs in proportion to their failure and success in both the Courts. The appeal is thus partly allowed, A fresh preliminary decree for foreclosure shall now be drawn up accordingly. The amount shall be payable within six months from today, i.e., on or before 14th February 1959. Appeal allowed.