Modhusudano Mollana Vs. Kontaru Naiko
& Ors  INSC 145 (6 August 1965)
Orissa Money-Lenders Act, 1939 (Act 3 of
1939), s. 5(4) :
Orissa Money Lenders Rules, 1939, r.
5-Registration certificate under r. 5 providing for maximum capital to be
invested in business-No such provision in Act-Rule providing for maximum
capital whether valid.
The appellant filed a suit against the
respondents for the recovery of Rs. 8216 due on a promissory note executed by
respondent No. 1 for a sum of Rs. 6000. The plea taken in defence was that the
suit was not. maintainable because the registration of the appellant under s.
5(4) and r. 5 of the Orissa Money Lenders Act 1939 had become void on account
of the money lent being in excess of the maximum amount of Rs. 2,000 which the
appellant was authorised to invest in the business by his registration
certificate. The contention was not accepted by the trial court but the High
accepting it, dismissed the suit. In appeal,
before this Court, by special leave, it was urged on behalf of the appellant
that the main Act did not provide for any restriction on the amount of capital
that could be invested and that the rules went beyond the Act in making such a
HELD : In the absence of any specific
provision in the Act providing for the fixing of the maximum capital which a
money lender can invest in money-lending business, it was not open to the State
Government to frame a rule in that regard and the rules framed by it about
mentioning, in the application, the maximum capital for which the registration
certificate was wanted and the mention in the certificate of the amount of the
maximum capital for which the certificate is granted, do not lead to the
conclusion that the registration of the money-lender will become void if be
exceeds the limit of the maximum capital laid down in the registration
certificate. [348 D] Sant Saranlal v. Parsuram Sahu  1 S.C.R. 335, relied
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 167 of 1964.
Appeal by special leave from the judgment and
decree dated April 11, 1962 of the Orissa High Court in First Appeal No. 61 of
A. V. Viswanatha Sastri and T. V. R.
Tatachari, for the, appellant.
A. N. Sinha and B. P. Jha, for respondents
Nos. 1 and 2.
The Judgment of the Court was delivered by
Raghubar Dayal, J. This appeal, by special leave, is against the decree of the
High Court of Orissa reversing the decree of 346 the Court of the Subordinate
Judge, Berhampur and dismissing the plaintiff's suit for recovery of Rs. 8,216
due on a promissory note executed by Kontaru Naiko, defendant No. 1 for Rs.
The plaintiff money-lender obtained a
registration certificate under s. 5(4) and r. 5, of the Orissa Money- Lenders
Act, 1939 (Act III of 1939), hereinafter called the Act, and the rules
thereunder, on March 31, 1952. He obtained another registration certificate in
1955 which said that the maximum capital for which the certificate is granted
is Rs. 8,000.
The plaintiff advanced the loan to defendant
No. 1 on May 19, 1954 and sued for the recovery of the amount due on this loan.
It was contended for the defendant that the suit was not maintainable as the
maximum capital for which the plaintiff had required the registration
certificate in 1952 was Rs. 2,000 and under the provisions of the Act. and the
rules framed there under, he could not have advanced loan in excess of that
amount and that his doing so made the registration of the appellant as a
money-lender void and therefore the suit for recovery of Rs. 2,000 even was not
maintainable. These contentions were not accepted by the trial Court which
decreed the suit against the defendants with 'the direction that defendants
Nos. 2 and 3 sons of defendant No. 1, were not personally liable and were
liable to the extent of the assets of their father in their hands.
The High Court, however, took a different
view, accepted the aforesaid contentions of the defendants and dismissed the
The sole contention for the appellant is that
the High Court was in error in holding that the registration of the appellant
as a registered money-lender in March 1952 became void when he advanced a loan
in suit in excess of Rs. 2,000 in 1954 and that the High Court was also in
error in holding that he could not have advanced the loan in excess of the
maximum capital for which the registration certificate was wanted.
The relevant provisions of the Act may now be
'Capital', is defined in S. 2(c), to mean
that which a moneylender invests in the business of money-lending whether in
money or in kind. 'Registered money-lender', according to S. 2(m), means a
person to whom a registration certificate has been granted under S. S. Section
5 provides for the registration of moneylenders and a registration fee.
Sub-s. (1) thereof requires the applicant for
registration to mention in the application particulars mentioned in' that
sub-section and 'such other particulars as may be Sub-s. (3) empowers the
Provincial Government 3 47 to prescribe by rules for different classes of money-lenders
and for different areas a registration fee not exceeding Rs. 25 to be paid by
an applicant for registration. Sub-s. (4) empowers the Sub-Registrar to grant a
registration in the prescribed form to the applicant except where the
certificate previously granted to him has been cancelled under s. 18 and the
order of cancellation is in force.
Section 6 enacts that the registration
certificate granted will be in force for 5 years from the date on which it is
granted. Section 7 provides for the registered money-lender to maintain
accounts and to give receipts.
Section 8 which provides for suits for
recovery of loans by registered money-lenders reads :
"Suit for recovery of loan maintainable
by registered money-lenders only:-A money-lender shall not be entitled to
institute a suit for the recovery of a loan advanced by him after the date on
which this section comes into force unless he was registered under this Act at
the time when such loan was advanced :
Provided that a money-lender shall be
entitled to institute a suit to recover a loan advanced by him at any time in
the course of two years after the date on which the section comes into force,
if he is granted a certificate of registration under section 5 at any time
before the expiration of the said years." Section 9 provides for the
maximum rates at which interest may be decreed. Various other sections deal
with other matters which the legislature thought fit to provide for in order to
achieve the object of the Act which, according to the preamble, is to regulate
money-lending transactions and to grant relief to debtors in the State of
Rule 1, clause (c), of the Orissa
Money-Lenders Rules, 1939, defines 'maximum capital' to mean the highest total
amount of the capital sums which may remain invested in a money- lending
business on any day during the period of the registration certificate. Rule 3,
cl. (iii), requires every application for the registration of a money-lender to
mention the maximum capital for which the certificate is wanted. Rule, 4 lays
down the registration fees payable and fixes the fees according to the maximum
capital in respect of which an application for such certificate is made. Rule 5
provides that registration certificate would be in Form in and that during the
currency of a registration certificate application may be made for a
registration certificate of a higher 348 denomination and the provisions of rr.
3 to 5 shall, as far as may be, apply to it, credit being given to the
registration fee already paid by the applicant.
The question for decision in this case is
practically the same as came up for decision before this Court in Sant Saranlal
v. Parsuram Sahu(1) judgment. in which has been delivered today. The relevant
provisions of the Bihar Money- Lenders Act, 1938 and the Bihar Money-Lenders
(Regulation of Transactions) Act, Act mentioned above. What we have said in
that case appropriately covers the contentions of the panics in this case. We
do not therefore consider it necessary to repeat the discussion of the various
contentions in this case.
We hold that in the absence of any specific
provision in the Act in this case providing for the fixing of the maximum
capital which a money-lender can invest in money-lending business, it was not
open to the State Government to frame a rule in that regard and that the rules
framed by it about mentioning, in the application, the maximum capital for
which the registration certificate was wanted and the mention in the
certificate of the amount of the maximum capital for which the certificate is
granted, do not lead to the conclusion that the registration of the
money-lender will become void if he exceeds the limit of the maximum capital
laid down in the registration certificate.
We do not consider it necessary now to decide
the other point raised with respect to the retrospective operation of the
registration certificates of higher denomination obtained during the currency
of a registration certificate.
We accordingly allow the appeal, set aside
the decree of the Court below and restore the decree of the trial Court.
We direct the respondents to pay the costs of
the appellant in the High Court and this Court.
(1)  S.C.R.335. ......