S. SANNAPPA v. BADA KENCHAPPA — 1987 DIGILAW 369 (KAR)

D. P. HIREMATH, J. ( 1 ) THE plaintiff in O. S. 31/1975 before the Munsiff, Hosadurga is the appellant in this second appeal and he lost his suit for the recovery of loan advanced by him to the defendant, in both the courts below. The original suit was for recovery of Rs. 3000/- being the principal amount lent by him to the defendant on a pronote dated 3. 2. 1972 with interest at Rs. 180/- at 10% per annum till the date of suit. " ( 2 ) THE defendant denied the execution as well as consideration under the pronote and further contended that the plaintiff was a money lender and therefore, he could not lend money without valid licence, alternatively prayer for instalments is also made. ( 3 ) THE trial court addressed itself to the following issues : "1. Whether the plaintiff proves the execution of the suit pronote by the defendant ? 2. If so, the defendant is entitled to 10-equal annual instalments to pay the suit debt ? 3. Does the defendant proves that, the plaintiff is a money lender ? ( 4 ) IT may be mentioned here that the plea that the plaintiff was a money lender was taken at a later stage by additional written statement and therefore, the Jast issue was framed as additional issue on 30-3-1976. ( 5 ) THE trial court, however, did not give its findings on the issues framed by it at the first instance, but treated issue No. l as preliminary issue and found that the plaintiff is a money lender as defined under S. 2 (10) of the karnataka Money-Lenders Act, 1961 (hereinafter referred to as 'the Act of 1961'- ). It then observed in para-7 of its judgment that when the evidence was closed by both sides, the plaintiff has presented an application under sec. ll of the Act of 1961 read with Sec. 151 C. P. C. , praying for granting time to obtain the money lending licence and to stay the hearing of the suit in the interest of justice. Though some grounds were stated in his application for not obtaining a licence that became only irrelevant after the plaintiff himself came forward with an application to stay the suit as required under Sec. 11 (2) of the Act of 1961. Though some grounds were stated in his application for not obtaining a licence that became only irrelevant after the plaintiff himself came forward with an application to stay the suit as required under Sec. 11 (2) of the Act of 1961. ( 6 ) IT was argued before the trial Court about the applicability of the Karnataka Money Lenders (Amendment) Act, 1976. The trial court also found that the provisions of. law as stood before this amendment applied to the facts of the case and accordingly, considered the provisions of Sec. 11 (2) of the Act of 1961. It then found that the plaintiff cannot seek time and permission of court to obtain money lenders licence fot money lending transactions made by him during the year 1972 and having said so, it rejected the application and dismissed the suit, ( 7 ) R. A. 17/1977 filed before the Civil Judge at Chitradurga, did not however go in his favour and the first appellate court also agreed with the view of the trial court and further held that he ought to have obtained money lenders licence within six months after coming into force of the act of 1961 and as he did not do it, the plaintiff-appellant was not entitled to the benefit of the provisions of Sec. 11 (2) of the Act of 1961. ( 8 ) IN this second appeal, it is urged on behalf of the appellant that the courts below went wrong in not properly interpreting the scope of Sec. 11 (2) of the Act of 1961. The substantial question of law set-down during admission is as follows :"whether the courts below, while deciding the preliminary issue raised in the suit, have disposed of the suit and the appeal in accordance with sec. 8 of the Karnataka Money lenders (Amendment) Act, 1976 (Karnataka Act No. 77 of 1976) ?" ( 9 ) DURING arguments, it was urged on behalf of the appellant that both the courts below have not properly construed the scope and provisions of Sec. 11 of the act. Now, that the plaintiff came forward with I. A. 1i when the suit was pending before the trial court, it is unnecessary to again determine whether he is a money lender or not by appreciating the evidence over and again. Now, that the plaintiff came forward with I. A. 1i when the suit was pending before the trial court, it is unnecessary to again determine whether he is a money lender or not by appreciating the evidence over and again. Though he contended in the first instance that the lending was to a single person implying thereby that he was not doing money lending as business as required under the Act, perhaps, he appears to have realised later that this stand of his was no more available in the face of the evidence that was led. Therefore, the Court has to start from the point where application was filed by the plaintiff as required under Sec. 11 of the act of 1961 permitting him to obtain a money lenders licence. As interpretation of Sec. 11 (2) is involved, it would be beneficial to reproduce the whole of Sec. 11 as it stood prior to the amendment of 1976. It says"sec. LL STAY OF SUITS BY money-LENDERS NOT HOLDING LICENCE :- 1. After the expiry of six months from the date on which this Act comes into force, no Court shall pass a decree in favour of money-lender in any suit to which this act applies, filed by a moneylender, unless the Court is satisfied that at the time when the loan or any part thereof to which the suit relates was advanced the money-lender held a valid licence. 2. If during the trial of any such suit, the Court finds that the money-lender had not held such licence, the court may, on the application of the money-lender, stay the hearing of the suit and require him to produce within a period of three months a licence on payment to the registrar of all the arrears of the licence fees payable by him under this Act for the period commencing from the date on which he started the business of money-lending or the expiry of six months from the date on which this Act comes into force whichever is later, together with such penalty, not exceeding five hundred rupees as the Court may direct: provided that when the court is satisfied that the failure of the money-lender to obtain a licence was due to any reasonable cause, the Court may direct that no penalty as aforesaid or part of such penalty shall paid by the money-lender. 3. 3. The Court may, on sufficient cause being shown, from time to time extend the period during which the money lender shall be required to produce a licence. 4. If the money-lender fails to produce the licence required under sub-section (2) within the period specified therein or within such period as may be extended under sub-section (3), the Court shall dismiss the suit. If the money-lender produces such licence within the aforesaid period, the Court shall proceed to hear the suit". ( 10 ) THE trial court as well as the first appellate court appeared to have had no doubt in their mind that this suit instituted on 3-2-1975 was governed only by the provisions of the Act of 1961 and not by the provisions of the amendment Act, 1976 which came into force on 27-10-1976. Sec. 8 of the Amendment Act is only a saving Section applicable to pending suits which were pending on the date when this amendment act came into force. It says that notwithstanding the amendment of Sec. 11 of the principal Act made by Section 3 of this Act all suits and all further proceedings arising therefrom pending on the date of commencement of this act shall be disposed of in accordance with the principal Act as if the said Act had not been amended. The principal Act referred to in this section is undoubtedly the Act of 1961. ( 11 ) REFERRING to sub-section (1) of Sec. ll of the Act, it can be seen that there is a bar created against a Court in passing a decree in favour of a money-lender after the expiry of six months from the date on which the Act came into force if he held no licence for money-lending. Sub-section (2) must be read along with sub-section (1 ). This is a second stage in the course of the trial and what the court should do has been cleariy laid down in sub-sec. (2 ). Plain reading of sub-section (2) shows that it is the duty of the court to stay the hearing of the suit after it finds that the plaintiff is a money lender, on an application filed by him, to enable him to obtain a licence and produce t within a period of three months from the date of that order or within such period as may te extended by the Court. Sub-secticn (4) as pointed out earlier states what should be the course to he adopted by the court in case a licence is produced or is not produced as the case may be. ( 12 ) WHILE the learned counsel for the appellant has urged that both the courts below ignored this sub-sec. (2) of the Act of 1961, the learned counsel for the respondent interpreted this subsection (2) that no such decree could be passed on an application to obtain money-lenders licence which is made after the expiry of six months after the commencement of the Act. He also urged that there is no provision under the Act for obtaining a licence retrospectively, that is, for the period prior to the filing of the suit. In this behalf, the latter part of sub-section (2) has been referred to and it must be said that this latter part relates to the arrears of the licence fees payable by the money-lender under this Act for the period commencing from the date from which he started the money-lending or the expiry of six months from the date on which this Act comes into force whichever is later and not from the date of obtaining of the licence. It is for the competent authority to collect fees and issue licence to consider for which period the licence fee should be realised. ( 13 ) MY attention was drawn by the respondnet's counsel to a decision of this Court in the case of BASAPPA AND OTHERS v GAREMANE KAMANNA (1985 (1) klj 207) and at page 209 of the judgment, this Court observed that it becomes necessary for a money lender to have a valid licence not only on the date on which he advances the money, but also on the date on which he files the suit. In the instant case, though the plaintiff produced the - licence dated 8-10-1976, which was prior to the date of the institution of the suit, nevertheless on the date he advanced the money i. e. , on 26-3-1974, he did not have the licence. But, the learned judge amply made it clear that in the case before him sub-section (2) of Sec. ll of the Act of 1961, as it stood prior to the amendment, cannot be applied, because the suit was filed on 5-11-1977, by which date sub-section (2) had been omitted. But, the learned judge amply made it clear that in the case before him sub-section (2) of Sec. ll of the Act of 1961, as it stood prior to the amendment, cannot be applied, because the suit was filed on 5-11-1977, by which date sub-section (2) had been omitted. Therefore, the respondent cannot derive any assistance from this decision and this court now has to see the scope and effect of Sec. 11 (2) of the Act of 1961 and see whether the licence could be obtained even for the period during which this, transaction took place. ( 14 ) EVEN a casual reading of Sec. 11 (2) makes it amply clear that the money-lender was bound to pay the arrears of licence fees as stated therein and then obtain a licence. This obviously means that the Registrar was competent to issue licence and also issue licence for the previous period even though it amounted to granting of licence with retrospective effect. In a way, this is almost in the nature of comp'ounding clause. ( 15 ) MY attention was also drawn by the appellant's counsel to the provisions of Sec. 6 of the act. It states that where an application is made after the expiry of the period prescribed by rules in respect of such application, it shall be accompanied by a licence fee at double the rates specified above. ( 16 ) RULE 5 (2) of the rules framed under the Act of 1961, states that an application for grant of a licence for the first time may be made on any date (emphasis applied) an application for renewal of licence may be made on any date within two months prior to the expiry of the licence. Therefore, for the first time when the money lender had to apply for licence, there was no limitation prescribed. Precisely, for this reason, Sec. 11 (2) of the Act requires the money-lender to obtain a licence in a pending suit. if it transpired during trial that he was a money lender as defined under the Act. In this view of the matter, the view taken by the courts below that Sec. 11 (2) of the Act of 1961 is not applicable is only erroneous and is a result of mis-direction. In the result, the appeal has to be allowed and the same is allowed. In this view of the matter, the view taken by the courts below that Sec. 11 (2) of the Act of 1961 is not applicable is only erroneous and is a result of mis-direction. In the result, the appeal has to be allowed and the same is allowed. The judgments and decrees of the courts below are set-aside. The suit is remitted to the trial court with a direction to register it in its original number, allow application I. A. No. 2 filed by the plaintiff-appellant for permission to obtain a licence as required under Sec. 11 (2) of the Act as it stood prior to the amendment in the year 1976 and dispose of the suit after following scrupulously the provisions of Sec. 11 of the karnataka Money-lenders Act, 1961, on merits. Both parties shall appear before the trial court on 14-12-1987 and records shall be transmitted to the trial court without any delay. --- *** --- .