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2010 DIGILAW 182 (CHH)

RUKMANDHWAJ PATEL v. CHANDRASHEKHAR SHARMA

2010-07-12

N.K.AGARWAL

body2010
ORDER 1. This is defendant's appeal under Section 96 of the Code of Civil Procedure (briefly, 'the Code') against the judgment and decree dated 3-2-2009 passed by 1st Additional District Judge, Raigarh in Civil Suit No. 5-B/2008 whereby and where under, the respondent's suit has been decreed. 2. Facts of the case in brief are as under:- i. There is no material point of fact which is now in dispute. The suit out of which this appeal arises was brought on 27-3-2008 by the respondent/plaintiff for recovery of Rs. 1,50,000/-as principal, Rs. 99,000/- as interest and Rs. 1,000/- as notice expenses on the basis of promissory note dated 16-6-2005 executed by the appellant in favour of the respondent/plaintiff. The loan carried interest at the rate of 24% per annum. ii. The plaintiff procured the money- lending licence during the pendency of the suit which was valid from a date subsequent to the filing of the suit, had not maintained any account of the loan nor furnished to the appellant any statement of account in respect thereof are also not in dispute. iii. The appellant took a specific defence that the respondent/plaintiff is a money-lender doing money-lending business without licence; has not complied with the requirement of Clause (a) or Clause (b) of Section 3(1) of the Act of 1934 (for short, hereinafter referred to as the Act) and thus the suit is liable to be dismissed. iv. The trial Court on the basis of evidence adduced and material placed by the parties passed a decree in favour of the plaintiff for Rs. 2,50,000/- however declined to grant future interest and cost of the suit. 3. Shri Verma, learned counsel for the appellant assailed the decree on two grounds: first that as per Section 11 (H) of the Act, no suit for recovery of a loan advanced by money lender shall proceed in a civil court until the court is satisfied that he holds valid licence. 4. In the instant case, admittedly, the plaintiff was not holding any valid licence on the date of transaction or on the date of filing of the suit. 4. In the instant case, admittedly, the plaintiff was not holding any valid licence on the date of transaction or on the date of filing of the suit. The licence was procured by the plaintiff during the pendency of the suit which was valid from a date subsequent to the filing of the suit and, therefore, for the present transaction, it is not in conformity with the provision and therefore, learned trial Court has erred in decreeing the suit. 5. Secondly as the plaintiff had not maintained any account of loan nor furnished to the appellant any statement of account in respect thereof, as required under Section (1)(a) and 3(1)(b) of the Act, therefore the trial Court has erred in awarding the amount of Rs. 99,000/- as interest over the principal amount of Rs. 1,50,000/-. 6. On the other hand, Shri Devendra Patel, learned counsel appearing for the respondent supported the decree and vehemently argued that learned trial Court has passed the decree in conformity with the provisions contained in Section 11 (F), (G) and (H) of the Act of 1934 and the appeal deserves to be dismissed. 7. I have heard learned counsel for the parties and perused the impugned judgment and decree of the trial Court. 8. The questions arise for consideration of this Court are:- i. whether the suit of plaintiff/money lender is liable to be dismissed if he does not hold registration certificate relating to the period when the money lending transactions were entered into or whether it is sufficient if the plaintiff/ money lender produces . during the pendency of the suit a registration certificate relating to the period subsequent to the money lending transactions? ii. Where the money-lender has not complied with the requirement of Clause (a) or Clause (b) of Section 3(1) of the Act, whether the Court has power under Section 7 of the Act to reopen the account so as to traverse the entire period from the date of the loan to the date of the suit and under Clause (b) of Section 7 to disallow the whole or any interest found due, as may be seem reasonable to it, in the circumstances of the case, in case of non-compliance of Section 3(1)(a) and under. Clause (c) of Section 7 exclude every period for which he had failed to furnish account as required by Section 3(1) (b) subject to proviso to section 7. 9. According to Section 2(v) of the Act, "Money-lender" means a person, who in the regular course of business, advances a loan as defined in this Act and shall include, subject to the provisions of Section 3, legal representatives and the successors in interest whether by inheritance, assignment or otherwise of the person who advanced the loan and money-lending shall be construed accordingly. Section 3 of the Act obliges every money-lender to (a) regularly maintain an account for each debtor separately of all transactions in respect of any loan advanced to that debtor; and (b) furnish to him annual statements of account in the manner therein provided. Under Section 7 of the Act, the Court trying any suit or proceeding relating to a loan is required before considering the claim on merits, to frame and decide the issue whether the money-lender has complied with the aforesaid two provisions of Section 3. If it is found that a separate account as enjoined was not maintained, the Court has to disallow the whole or such portion of interest found due as may, in the circumstances, appear reasonable and it may also disallow the costs. Section 11-F, 11-G and 11-H of the Act which are relevant reads as under:- "11-F. Bar to carry on business without registration certificaie- (1) No person shall carry on the business of money-lending in any district unless he holds a valid registration certificate in respect of that district. (2) Whoever contravenes the provisions of subsection (1) shall be punishable with fine which may extend to two hundred rupees or if he has previously been convicted of an offence under that sub-section, with fine which may extend to five hundred rupees. 11-G. Composition of offences - The sub Divisional officer may accept from any person who has committed an offence against sub-section (I) of section 11-F or section 11-FF a sum of money not exceeding five hundred rupees by way of compensation for such offence. (2) On payment of such sum of money, no further proceedings shall be taken against such person in respect of such offence, and if in custody he shall be discharged. (2) On payment of such sum of money, no further proceedings shall be taken against such person in respect of such offence, and if in custody he shall be discharged. 11-H Suit not to proceed without registration certificate, etc.- No suit for the recovery of a loan advanced by a money-lender shall proceed in a civil court until the court is satisfied that he holds a valid registration certificate or that he is not required to have a registration certificate by reason of the fact that he does not carryon the business of money-lending in any of the district of Chhattisgarh. Provided that this Section shall not apply to a suit instituted before the 1st October 1940." 10. A bare reading of the above provision would reveal that it is not necessary for validity of the contract of loan that the money-lender must be registered on the date of transaction. He however cannot obtain a decree on his ioan unless he possesses a valid registration certificate on the date on which the decree is to be passed though the transaction of money-lending are not affected for want of registration certificate. 11. While dealing with the identical issues, the Full Bench of M.P. High Court in case of Smt. Janki Bai Vs. Ratan Melul has held if money-lender does not have and cannot produce a registration certificate covering the Gate on which he advanced the loan, his suit for recovery of that loan is, for that reason alone not liable to be dismissed. It will be sufficient compliance of Section ll-H of the Act if during the pendency of the suit he produces registration certificate which is valid at the time of its production. 12. The above judgment passed by the Full Bench of High Court of Madhya Pradesh in Smt. Janki Bail (supra) has been affirmed by the Supreme Court in Gajanan and others Vs. Seth Brindaban2 in para 12 of its judgment: 13. In view of above, I have no hesitation to hold that under Section 11 (H) of the Act of 1934, a loan advanced by an unregistered money-lender can be recovered by him if he subsequently obtains a registration certificate relating to a period subsequent to the money-lending transaction during the pendency of the suit. 14. In view of above, I have no hesitation to hold that under Section 11 (H) of the Act of 1934, a loan advanced by an unregistered money-lender can be recovered by him if he subsequently obtains a registration certificate relating to a period subsequent to the money-lending transaction during the pendency of the suit. 14. So far as second question is concerned, sub-section (2) of Section 3 speaks of the items due by way of interest which are to be shown separately from the principal sum. This evidently means that the amount of interest accruing due from year to year is required to be entered in the account books. The Court has power under Section 7 to reopen the account so as to traverse the entire period from the date of the loan to the date of the suit where the money lender has not complied with the requirement of Clause (a) or (b) of. Section 3(1) of the Act; and under Clause (b) of Section 7 to disallow the whole or any interest on it as may seem reasonable to it in the circumstances of the case, in case of non-compliance of Section 3(l)(a) and under Clause. (c) of Section 7 exclude every period for which he had failed to furnish account as required by Section 3(1) (b) of the Act subject to proviso to Section 7. 15. Answering the identical question, the Full Bench of High Court of Madhya Pradesh in case of Rajaram Bhiwaniwala Calcutta Vs. Nandkishore and other; has taken the same view. 16. Now coming to the facts of the case, it is clear that the respondent had not complied with the requirement of section 3 of the Act. Therefore, looking to the facts and circumstances of the case, in the considered opinion of this Court, learned trial Court has erred in awarding Rs. 99,000/- on account of interest. The decree to the extent deserves to be and is hereby set aside. 17. No other point has been raised. 18. In view of above, the appeal is allowed in part. The judgment and decree passed by learned trial Court is modified. The respondent/plaintiff is only entitled for a decree of Rs. 1,51,000/- in stead of Rs. 2,50,000/-. The amount shall carry interest at the rate of 6% from the date of suit till its realization. 19. Parties shall bear their own costs. Appeal Partly Allowed.