Gajanan & Ors Vs. Seth Brindaban
 INSC 141 (20 July 1970)
20/07/1970 DUA, I.D.
CITATION: 1970 AIR 2007 1971 SCR (1) 657 1970
SCC (2) 360
C.P. Money Lenders, Act 13 of 1934, ss. 11F
and 11H-Act debarring carrying on of money lending business in any district
without valid registration certificate in respect of that district-Certificate
held for one district-Isolated transaction in another district whether void for
contravention of Act-Stare Decisis-English authorities, value of.
The plaintiff (,respondent herein) was doing
money-lending business in Yeotmal District in former Central Provinces (now
Madhya Pradesh) and had obtained the requisite licence under the C. P. Money
lenders' Act, 1934 for that district in August, 1947. The licence was regularly
renewed thereafter. In 1947 the plaintiff gave a loan to the defendants in
Chanda District against the security of property situated in that District. In
1950 he filed a suit for foreclosure. The trial court held that since the
transaction in question was in contravention of ss. 1 IF & 11H of the C. P.
Money Lenders' Act the suit was not maintainable. The High Court however
decided in favour of the plaintiff on the view that an isolated transaction in
another district does not come within the mischief of the Act. With certificate
appeal was filed in this Court. The appellant relied on the decision of the
House of Lords in Cornelius v. Philips.
HELD: (i) The case of Cornelius v. Phillips
was distinguished by the Nagpur High Court in Pati Ram v. Baliram. The Madhya
Pradesh High Court also in Janki Bai's case distinguished Cornelius v. Phillips
observing that it would be unsafe to call in aid the decision relating to the
interpretation of s. 2 of the English Act For construing s. 1 IF of the C. P.
Act. The Bombay High Court in Hajarimal's case took the same view. It was
correctly held in these cases that the provisions of the English Act construed
in Cornelius and of the C. P. Act were not completely identical. [665 G-H; 666
F] (ii) From the scheme of the Act and the definition in s. 2(v) it is evident
that for a person to be a money-lender he must, in the regular course of
business, advance a loan.
There is a long catena of authorities on the
statutes regulating and controlling money-lenders in which the expression
money-lender has been so construed as to exclude isolated transaction or
transactions of money-lending. [667 F-668 C] (iii) Section 11 F on plain
reading only prohibits the carrying on of the business of money-lending in any
district without holding a valid registration certificate in respect of that
district. It does not prohibit and, therefore, does not invalidate an isolated
transaction of lending money.
Such an isolated transaction is outside the
rigour of the prohibition. The fact that a registered money-lender in one
district has entered into an isolated transaction of lending money in another
district in which he is not registered would not make any difference in this
respect and such isolated transaction would not be hit by the prohibitory
mandate. 'Section 11-H also operates only against the suits by money-lenders on
loans advanced by them and would similarly exclude from its purview a suit on
an isolated transaction not entered into by a money-lender in the regular 13
Sup. C 1/70-13 658 course of business. Interference with freedom of contract
appears to have been limited under the Act only to the extent necessary for
regulating and controlling the business of money-lending. Section 11C which
provides for composition of offences also suggests that individual transactions
are not considered void. The view of law taken by the Nagpur and M. P. High
Courts in Patiram, Hajarimal and Janki Bai was thus in conformity with the
statutory intendment and must be held to be correct. [668 G669 D] (iv) People
in arranging their affairs are entitled to rely on decision of the highest
court which appears to have prevailed for a considerable length of time and it
would require same exceptional reason to justify its reversal when such
reversal is likely to create serious embarrassment; for those who have acted on
the faith of what seemed to be the settled, law. Where the meaning of the
statute is ambiguous and capable of more interpretation than one, and one view
accepted by the higher court has stood for a long period during which many
transactions such as dealing in property and making of contracts have taken
place on the faith' of that interpretation, the court would ordinarily be
'reluctant to put upon it a different interpretation which would materially
affect those transactions. Therefore, the established view in the matter of the
interpretation of s. 11-F of the C.P. Act on which the High Court relied in the
present case could not be departed from, since it is not so patently erroneous
that it must be upset. The fact that contravention of s. 11-F(i) of the Act is
made a penal offence is an additional factor against the propriety of
over-ruling the established view Further the legislature made several
amendments in the Act in 1965 but did not amend s. 11-F; it may, therefore, be
rightly inferred that the view taken by the Courts in its interpretation was
not considered to be contrary to the legislative intendment.
[669 E-F; 670 A-F] On the above view of the
law the present appeal must be dismissed.
Cornelius v. Phillips  A.C. 199
Patiram v. Baliram 1953 N.L.J. 517, 522;
Hajarimal v. Hari Narayan (1965) 67 Bom. L.R. 816; and Janki Bai v. Ratan Melu
A.I.R. 1962 M.P.: 117 (FB) approved and applied.
Whiteman v. Sadler 1918 A.C. 199, Wasudeo
Bhairulal v. Ramchandra (1958) 60 Bom. L.R. 1247, Sitaram Sharwan v. Bajya
Parnay A.I.R. 1941 Nag. 177; Hari Prasad v. Sobhanlal M.F.A. 124 of 1956 dated
December 18, 1957-1958 M.P.L.J.
Note no. 11 Gurmukh Rai v. Hari Har Singh
S.A. No. 39/1961/d/26.3.1964-M.P.L.J. note 102 , Chaith Ram v., Baparimal C.R.
374/1959/ d/1.7.1960 -1960 M.P.L.J. note 198 and Kishanlal v. Laxmibai S.R.P.
109/1962d 20.7.1962-1963 M.P.L.J. 119referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1982 of 196(6.
Appeal from the judgment and decree dated
October 21, 22, 1965 of the Bombay High Court, Nagpur Bench in Appeal No. 43 of
1960 from original decree.
V. M. Tarkunde, V. N. Swami and A. G.
Ratnaparkhi, for the appellants.
M. C. Chagla, Rameshwar Nath and Swaranjit
Sodhi, for the respondent.
659 The Judgment of the Court was delivered
by Dua J. This is an appeal with certificate under Art. 133(i) (a) of the
Constitution by Gajanan and his two sons Janardhan and Nanaji who figured as
defendants 1, 4 and 5 respectively in the suit instituted by Seth Brindaban,
respondent in this appeal. It is directed against the judgment and decree of
the Bombay High Court (Nagpur Bench) dated February 7, 1966 allowing the
plaintiff's appeal in part against the dismissal of his suit by the trial
court, and granting him a decree for Rs. 1,60,000 against the appellants. The
other two defendants, Rajeshwar and Narhari, were also the sons of Gajanan; the
dismissal of the suit against them was upheld by the High Court. The suit for
foreclosure of three mortgages was instituted on December 1, 1950. The
plaintiff claimed a decree for foreclosure of the mortgages : the mortgage
amount due was stated to be Rs. 1,07,269/2/with future interest. The suit was
contested on various grounds but the main point with which we are concerned in
this appeal was raised in the amended written statement allowed by the court on
December 15, 1959, nine years after the institution of the suit.
According to the amended plea : (i) the plaintiff
being a money lender within the meaning of C. P. Money Lenders' Act, (XIII of
1934) and no certificate under s. 1 IF of that Act having been secured by him
the transaction in dispute was void and the suit was, therefore, incompetent,
(ii) production in court of moneylender's licence was necessary for the
maintenance of the suit; and (iii) the plaintiff had not maintained proper
accounts of the money lending business and had not given Diwali notices to the
defendant in respect of this debt and this omission disentitled him to claim
Seven additional issues were framed on the
They are mainly concerned with the provisions
of the Moneylenders' Act. The trial court repelled the plaintiff's submission
that the case was governed by the Bombay Moneylenders' Act. It was contended on
his behalf that with effect from February 1, 1960 the provisions of C.P. &
Berar Moneylenders' Act had ceased to apply to the territory in quest-ion and
in its place the Bombay Moneylenders' Act was made applicable. The Bombay Act
was thus claimed to govern this case. Disagreeing with this submission the
trial court held the Bombay Act to be prospective only and, therefore,
inapplicable to pending cases. The present suit which had been instituted in
1950 in respect of a transaction of 1947 was accordingly held to be governed by
the provisions of the C.P. & Berar Moneylenders' Act. The plaintiff was
found to have contravened ss. 11 F and 11 H of the C.P-. Act and, therefore,
disentitled to maintain the suit. He was also held disentitled to claim
interest as he had not sent statement of accounts as 660 required by that Act.
As regards the liability of defendants 2 and 3, they were held not to be bound
by the mortgages, but it was observed that a simple money decree could be
passed against them provided the claim was otherwise legally enforceable. In
case the plaintiff's claim deserved to be decreed then in the trial court's
view there had to be three decrees because there were three mortgages covering
three separate properties. The share of defendant No. 5 was also held to be
bound by the three mortgages dated September 12, 1947. The registration of
documents at the instance of the court was found to be proper and lawful. The
decision in the previous suit was held to operate as res judicata. The suit, as
observed earlier was dismissed on the ground of violations of the C.P. Act.
On appeal to the High Court the following
seven points fell for determination :
"(1) Was the appellant a moneylender
within the meaning of the C. P. and Berar Moneylenders' Act and was he required
to obtain a moneylender's licence for Chanda District because the transaction
pertains to property in Chanda district ? (2) Were the documents duly attested
vis-a-vis respondents 2 and 3 who had appended their signatures to the
documents ? If it is held that the documents were not attested so far as
defendants 2 and 3 are concerned, what will be the effect on the liability of
defendants 2 and 3 ? (3) Could a personal decree for payment of money be passed
against defendants 2 and 3 ? (4) Is the appellant entitled to claim interest
because of his failure to send statements of account as required by section 3
(b) of the C. P. and Berar Moneylenders Act ? Was the appellant liable to
maintain accounts as provided by section 3 (a) of the Moneylenders Act ? (5)
Are the three instruments validly registered or the registration void ? (6) Are
the findings on issues 1 to 6 in the present suit barred on the principle of
res judicata because the subject matter of these issues was also the subject
matter of identical issues in the previous litigation finally decided between
the, parties ? 661 (7)Could a decree be passed against respondent No. 5 after
he attained majority, respondent No. 5 not having himself executed the
instruments sued upon?" On behalf of the plaintiff (appellant in the High
Court) it was stated that he had made an application for the certificate but
had not yet obtained the same. The High Court held that s. 11H of the C.P.
& Berar Moneylenders' Act did not apply to the case. It, however. observed
that the court would have normally granted time to the plaintiff to produce the
necessary certificate if the Act had been held applicable. In the opinion -of
the High Court the plaintiff was doing money lending business in Yeotmal
District and had obtained the requisite licence for that district in August,
1947 which was thereafter regularly renewed. The transaction in question was
held to be an isolated transaction which did not clothe the plaintiff with the
character of a moneylender carrying on the business of moneylending in Chanda
District. It further observed that though the transaction in question related
to property at Chanda and payment was also made at Chanda, the amount was paid
from the Wani shop where the accounts were maintained.
This was in Yeotmal District for which the
plaintiff held the necessary certificate. On this view the High Court disagreed
with the conclusion of the trial court. The High Court further added that it
was not the defendants' case that the plaintiff had been carrying on money
lending business in Chanda District after 1950 or in 1959 or even in April,
1960 when the suit was decided. The three documents executed by the court were
also held to be duly executed and duly registered so as to be binding on
defendants 1, 4 and
5. In regard to defendants 2 and 3, the High
Court felt that even a money decree could not be passed against them and the
suit against them must fail in its entirety. The conclusion of the trial court
that the decision in the previous suit operated as res judicata was upheld. In
the final result the plaintiff was held entitled to a decree for the principal
sum of Rs. 80,000 on the basis of the three mortgages and a further sum of Rs.
80,000 by way of interest, the total amount being Rs. 1,60,000. This decree was
made against defendants 1, 4 and 5. They were given six months' time to pay up
the amount with further interest at 6% per annum on the principal amount till
realisation. If the amount was not paid the mortgages were to stand foreclosed.
The suit against defendants 2 and 3 was dismissed without costs.
On appeal in this Court the principal
question raised centers round the provisions of the C. P. & Berar
This Act which came into force on April 1,
1935 was enacted with the object of making better provision for the regulation
662 and control of the transactions of moneylending so as to secure protection
to ignorant debtors against the evil of fraud and extortion on the part of
unscrupulous moneylenders without unduly interfering with freedom of private
It was framed broadly on the lines of the
Punjab Regulation of Accounts Act (No. 1 of 1939) but it embodied, in addition,
the principle of Damdupet so that the creditors were not encouraged to postpone
unconscionable enforcement of their claims. The courts were also. empowered to
fix installments for execution of decrees. "Moneylender" as defined
in cl. (v) of s. 2 means a person who in the regular course of business
advances a loan as defined in this Act and it includes his legal
representatives and successors in interest. "Loan" as defined in cl.
(vii) means an actual advance whether of money or in kind at interest and it
includes any transaction which the Court finds to be in substance a loan. It
does not include inter alia an advance made on the basis of a negotiable
instrument other than a promissory note. In 1940 this Act was amended by C.P.
& Berar Act XIV of 1940 and ss. 1 1 -A to 11-J were added. In the
definition of "moneylender" also it was added in the end : "and
money lending shall be construed accordingly".
According to s. 11-B every person carrying on
or intending to carry on the business of money lending is required to get
himself registered by an application made to the Sub Registrar of -any
sub-District of the District or anyone of the districts'in which he carries on
or intends to carry on such business. The registration certificate does not
entitle the bolder thereof to carry on the business of money lending in other
districts for which he does not hold such certificate. Section 11F debars a
person from carrying on the business ofmoneylending in any district unless he
holds a valid registration certificate in respect of that district. Sub-section
(2) of this section makes contravention of this section a penal offence
punishable with fine extending to Rs. 100/and in case of a previous conviction
the fine may extend to Rs. 200/-.
According to S. 11H no suit for the recovery
of a loan advanced by a moneylender is to proceed in a civil court until the
court is satisfied that be holds a valid registration certificate or that be is
not required to have such a certificate by reason of the fact that he does not
carry on the business of money lending in any of the districts of Madhya
Pradesh. The question which arises for consideration in this case is whether
the suit out of which this appeal arises is incompetent and whether the
transaction of money lending is void and, therefore, unenforceable in courts of
On behalf of the appellants strong reliance
was placed on the decision of the House of Lords in Cornelius v.
Phillips(1). In that case, distinguishing and
explaining an earlier decision of the (1)  A.C. 199, (2)  A.C. 514,
663 House of Lords in Whiteman v. Sadlor (2) s. 2 (2) of the Moneylenders' Act,
1900 (63 & 64 Vic. c. 51) was held to have the effect of rendering void a
transaction of money lending carried out at an hotel at some distance from the
moneylender's registered address in contravention of s. 2(1)(b). The
transaction was held to amount to a carrying on of his business by the
moneylender. Relying on the ratio of this decision it was urged before us on
behalf of the appellants that the transaction in question in the present case
must be held to be void and, therefore, unenforceable in courts of law. A
similar argument on the authority of this decision was raised before a Bench of
the Nagpur High Court in Patiram v. Baliram(1) but was not accepted. The case
of Cornelius v. Phillips 2 ) was distinguished and it was observed :
"The learned counsel for the applicant
then relied on the House of Lords decision in Cornelius v. Phillips(2) which
was a case under the English Moneylenders' Act. The question which had arisen
in that case was the same as the question in this case, namely whether the
transaction was void or it only exposed the moneylender to liability for
criminal proceedings without rendering the transaction void. It was decided in
that case that the transaction amounted to a -carrying on of his business by
the moneylender at an address other than his registered address in
contravention of section 2 sub-section (1) b) of the Moneylenders' Act, 1900
and that the effect of the Act was to avoid the transaction. A comparison of
the English Moneylenders Act, 1900 and the Central Provinces ,and Berar
Moneylenders Act, 1934 will clearly show that the two differ on several
important points. The definition of "moneylender" in the two Acts is
not the same.
The former contains provisions regarding
"registered name" and " registered address" which are not
to be found in the letter.
Section 2 (1 ) (c) of the former expressly
prohibits individual agreements which is not the case with the latter. So the
cases decided under the English Moneylenders Act cannot be of much help in
deciding cases under the Central Provinces and Berar Moneylenders' Act. We may
here quote the warning given by their Lordships of the Privy Council in Lasa
Din v. Mt. Gulab Kunwar(3).
'It is they think, always dangerous to apply
English decisions to the construction of an Indian Act.' (1) 1953 N.L.J. 517,
522. (2)  A.C. 199.
(3) A.T.R. 1932 P.C. 207, 211.
664 We, therefore, do not propose to discuss
the other cases under the English Moneylenders Act cited by the learned counsel
for the applicant.
After referring to s. 11B and to Maxwell on
Interpretation of Statutes the court observed :
"This special statute which trenches on
the contractual rights must be construed strictly against those who seek to
avail of it. There are no reasons to suppose that the Legislature intended that
every transaction of money lending made after the amendment came into force
till the lender was able to obtain a registration certificate was invalid and
unenforceable thereby enriching the debtor at the cost of the creditor without
any fault of the latter. The learned counsel has not brought to our notice any
compelling reasons to accept his construction which manifestly leads to
injustice to the moneylenders." (p. 523) The final conclusions of the
court were expressed in these words "It will be clear from all this
discussion that section 11 F applies to the business of money lending and not
to an individual transaction of lending money and that the condition is
attached and the penalty is imposed for the convenience of collection of the
revenue, and the legislature, did not declare an individual transaction of
money lending made by the moneylender who had not obtained a registration
certificate invalid. It is not necessary for the validity of the contract of
loan that the moneylender must be registered on the date of the transaction.
He, however, cannot obtain a decree on his loan unless he possesses a valid
registration certificate on the date on which the decree is to be passed.
Though the transactions of money lending are not affected for want of a
registration certificate, a moneylender is exposed to the penalty provided by
-section 1 IF of the Act for carrying on the business without a valid
registration certificate. We may cite Shanshir Ali v. Ratnaji(1) in
support." The appellants' counsel also tried to distinguish the Full Bench
decision of the Nagpur Bench in Hajarimal v. Hari Narayan(2) (which overruled
Wasudeo Bhairulal v. Ramchandra(3) by submitting that the Full Bench had left
open the (1) A.I.R. 1952 Hyd. 58 (F. B.) (2) (1965) 67 Bom, L.R. 816.
(3) (1958) 60 Bom. L.R. 1247, 665 question of
the transaction entered into by a moneylender in contravention of s. 1 IF being
void and opposed to public policy. It is true that this precise question was
not considered by the Full Bench to be necessary to decide in that case but the
court added :"Assuming that the transaction is void, the plaintiff may be
able to obtain relief under s. 65 of the Contract Act." Earlier in the
course of -the judgment the learned Chief Justice speaking for the Full Bench
had also observed "The principal reason for the contrary view taken in
Wasudeo Bhairulal v. Ramchandra,(1) is that as s. 11-F prohibits a moneylender
from carrying, on the business of moneylending without a valid registration certificate
and also provides a penalty for the contravention of this provision, a suit on
a moneylending transaction entered into by an unregistered moneylender cannot
be maintained. With respect, it may be pointed out that the Legislature itself
has not barred a civil suit in respect of such a transaction. The only obstacle
which it has placed in the way of a plaintiff in such a case is that the suit
shall not proceed until a valid registration certificate has been produced. The
Legislature has also in sub-s. (2) of s. 11-F specified the penalty for
contravention of the provisions of sub-s. (1) of s. 11-F, that is, for carrying
on nioncylending business without a certificate. It has not prescribed any
additional penalty such as that a suit to recover a loan advanced by an
unregistered moneylenders shall not lie or shall be dismissed. It is not open
to a Court to subject a person to any penalty other than what the Legislature
has prescribed." The decision of the Full Bench of the Madhya Pradesh High
Court in Janki Bai v. Ratan Melu ( 2) was also referred to with approval. In
Janki Bai's case ( 2 also the decision of the House of Lords in Cornelius v.
Phillips 3 ) was distinguished and it was expressly observed that it would be
unsafe to call in 'aid the decision relating to the interpretation of s. 2 of
the English Act for construing s. 11-F of the C. P. Act. In regard to the true
meaning of s. 11-F the Full Bench, after an elaborate discussion summed up its
view thus :
"The considerations having a bearing on
the construction of s. 11-F of the Act may now be summed up.
(1) (1958) 60 Bom. L.R. 1247.
(2) A.I.R. 1962 M. P. 117 (F.B) (3) 
666 The registration of a moneylender does
not afford to his debtors any additional protection not available under the
other provisions of the Act. An unregistered moneylender can be punished only
for the collective act of carrying on the business of moneylending and not for
every loan advanced by him without a registration certificate. In a
moneylender's suit, his failure to obtain a registration certificate is not
regarded as a vital consideration and is, for that reason, not required to be
tried before considering the case on merits. On the other hand, S. 11 -H of the
Act envisages that a loan -advanced by an unregistered moneylender can be
recoverable by him if he subsequently obtains a registration certificate which
is in force at the time of the suit.
These considerations clearly indicate that
section 1 1-F was not enacted for the protection of persons dealing with
moneylenders. Its only object appears to be the protection of the revenue. This
conclusion is further supported by the fact that the annual fee payable for a
registration certificate was subsequently raised from Rs.
4/8/to Rs. 12/-. Therefore, on the basis of
the principles already stated, a loan advanced by an unregistered moneylender
cannot be regarded as impliedly prohibited by s. 11 -F." Section 11-F was
also held in this decision not to bar individual advances.
The principal question which arises is
whether the view of law as taken by the Nagpur High Court in the Pati Ram case
in 1953, by a Full Bench of the Madhya Pradesh High Court in the Janaki Bai
case in 1961 and by the Full Bench of the Bombay High Court sitting at Nagpur
in the Hajarimal case in 1965 is so clearly erroneous that this Court should
upset their interpretation of the C. P. Act.
In considering this question we must keep in
view the warning given by the Privy Council in Isadas that while construing
Indian statutes it is dangerous to apply English decisions to the construction
of Indian enactments. Now, the C.P. Act as originally enacted in 1935 was not
modelled on the English Act of 1900. Indeed, the English Act which was
construed by the House of Lords in Cornelius in 1917 was amended in 1927 when
ss. 2 and 3-interpreted in Cornelius-were repealed. This was long. before 1935
when the C. P. Act was enacted broadly, as already pointed out, on the lines of
the Punjab Regulation of Accounts Act 1 of 1930 with the addition of the rule
of Damdupat and extended power of courts to fix installments for execution of
667 decrees. We are also inclined to think, in agreement with the decisions of
the Nagpur High Court in Pati Ram and Halarimal and of the Madhya Pradesh High
Court in Janaki Bai, that the provisions of the English Act construed in
Cornelius and of the C. P. Act, with which we are concerned, are not completely
identical. The statutory schemes of the two enactments do seem to us to differ
materially. This has been discussed at some length in the aforesaid decisions
of the Nagpur and Madhya Pradesh High Courts and we do not consider it
necessary to enter on an exhaustive discussion and cover the same ground again
as we are inclined to agree with the final conclusions arrived at in those
Turning to the scheme of the Act which
concerns us let us see if the transaction of money lending which is the subject
matter of the suit out of which this appeal arises is void and, therefore,
unenforceable in courts of law and if for that reason the suit is incompetent.
We have already referred to the broad outlines of the Act. We may now examine
its scheme more closely to see if the impugned transaction is hit by its
prohibitory provisions and the progress of the present suit barred. Before
considering its statutory scheme it may be pointed out that though this Act
having been initially enacted in what was then known as the Central Provinces
and was named "The Central Provinces Moneylenders' Act, 1934" it was
later extended to what is now known as the State of Madhya Pradesh with slight
formal modifications not affecting the substance of the statutory scheme. Now
it is described as the "M. P. Moneylenders' Act, 1934 Moneylender as
defined in s. 2 (v) of the Act means a person who, in the regular course of
business advances a loan as defined in this Act and it includes, subject to the
provisions of s. 3, the legal representatives and successors-in-interest of the
person who advanced the loan;
and the expression "money lending"
is also to .be construed accordingly. 'By virtue of s. 2 (ix)
"Sub-Registrars" appointed under the Indian Registration Act are to
function under the present Act. Section 11-A enjoins -every Sub Registrar to
maintain a register of moneylenders in the prescribed form. Section 11-B
renders it obligatory for every person who carries on or intends to carry on
the business of money lending to get himself registered by an application to
the Sub-Registrar of the sub-district in which he carries on or intends to
carry on such business.
The application is required inter alia to
specify the district or districts in which the applicant carries on or
intend,-, to carry on business of money lending. Section 11D provides that the
registration certificate granted under s. 11-B shall not entitle the holder
thereof to carry on the business of money lending in other districts. Section
11-F which bars persons from carrying on business of money lending without
registration certificate also provides a penalty for the, contravention of this
provision, 668 Section 11-G provides for composition of offences covered by s.
11 -F (i). According to s. 11 -H no suit for the recovery of a loan advanced by
a moneylender is to 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
such certificate by reason of the fact that he does not carry on the business
of money lending. From the scheme of these provisions it is evident that for a
person to be a moneylender he must, in the regular course of business, advance
a loan. There is a long catena of authorities on the statutes regulating and
controlling money-lenders in which the expression "moneylender" has
been so construed as to exclude isolated transaction or transactions of money lending.
Vivian Bose, J., while dealing with the Act, which concerns us, in Sitaram
Sharwan v. Bajya Parnav(1) said :
"The word 'regular' shows that the
plaintiff must have been in the habit of advancing loans to persons as a matter
of regular business.
If only an isolated act of money lending is
shown to the court it is impossible to state that that constitutes a regular
course of business. It is an act of business, but not necessarily an act done
in the regular course of business." This decision was followed by T. C.
Shrivastava J., of the Madhya Pradesh High Court in Hari Prasad v. Sobhanlal(2)
and by Shiv Dayal J., of the same High Court in Gurmukh Rai v. Hari Har
Singh(3). The same view was taken by K. L. Pandey J., of the same High Court in
Chaith Ram v. Baparimal(1).
In this case both s. 2 (v) and s. I I -H of
the Act came up for construction. In Sitaram Sharwan(5) it was also held that
the person seeking advantage of the Moneylenders' Act his to prove that the
plaintiff is a moneylender. To the same effect is the decision by 'T. C.
Shrivastava J., in Kishanlal v. Laxmibai(6).
Section 11-F on its plain reading only
prohibits the carrying on of the business of moneylending in any district
without holding a valid registration certificate in respect of that district.
It does not prohibit and, therefore, does not invalidate an isolated
transaction of lending money.
Such an isolated transaction seems to us to
be outside the rigour of the prohibition. The fact that a registered money
lender in one district has entered into an isolated (1) A.I.R. 1941 Nag. 177.
(2) M.F.A. 124 of 1956 decided on December
18, 1957-1958 M.P.L.J. Note no. 11.
(3)S.A.No. 39/1961 d 26.3.1964-M, P.L.J. note
(4)C.R. 374/1959 d/1 .7 .1960-1960 M.P.L.J.
(5) A.I.R. 1941 Nag. 177.
(6)C.P. 109/1962 d/20.7.1962-1963 M.P.L.J.
119, 669 transaction of lending money in another district in which he is not
registered would not make any difference in this respect and such isolated
transaction would not be hit by the prohibitory mandate. Section 1 1 -H also
operates only against the suits by moneylenders on loans advanced by them and
would similarly exclude from its purview a suit on an isolated transaction not
entered into by a moneylender in the regular course of the business of money
lending. The statutory scheme thus clearly seems to indicate that it is only
the business of money lending which is sought to be controlled and individual
transactions of lending money do not fall within the mischief which was sought
to be remedied by the Act. An individual transaction of lending money' has not
been declared to be void and as we construe the Act as a whole, interference
with freedom of contract appears to have been limited only to the extent
necessary for regulating and controlling, the business of money lending.
Section 11-G which provides for composition of offences also suggests that
individual transactions are not considered void. We are, therefore, of the
opinion that the view of law taken by the Nagpur and M. P. High Courts in Pati
Ram and Hajarimal and Janaki Bai is in conformity with the statutory intendment
and is, therefore, correct.
There is also another aspect which may
legitimately be kept in view. People in arranging their affairs are entitled to
rely on a decision of the highest court which appears to have prevailed for
considerable length of time and it would require some exceptional reason to
justify its reversal when such reversal is likely to create serious
embarrassment for' those who had acted on the-faith of what seemed to be the
settled law. Where the meaning of a statute is ambiguous and capable of more
interpretations than one, and one view accepted by the highest court has stood
for a long period during which many transactions such as dealings in property
and making of contracts have taken place on the faith of that interpretation
the court would ordinarily be reluctant to put upon it a different
interpretation which would materially affect those transactions.
In the case before us the construction placed
by the Nagpur and Madhya Pradesh High Courts on the relevant provision of the
C. P. Act seems to have been accepted all these years beginning with Sita Ram
Sharwan in 1941 (except for a short period between 1958 and 1962) and rights to
property and under contracts seem to have been founded on the faith of -that
construction. A Division Bench of the Bombay High Court sitting at Nagpur in
Wasudeo, of course, dissented in 1958 from the view of the Division Bench of
the Nagpur High Court in Pati Ram without referring the point of dissent to a
larger Bench. But a Full Bench of the Madhya Pradesh High Court disagreed with
the 670 Wasudeo case, vide Janaki Bai.. It, therefore, seems obvious that
titles and transactions must have been founded on the view of law which, by and
large, stood almost uniformly as enunciated in Sitaram Sharwan in 1941 and
later in Pati Ram and it would, in our opinion, be unjust to disturb them by
adopting the interpretation suggested on behalf of the appellant on the
authority of the English decisions. Now, assuming that two views on the
statutory scheme of the Act are possible and assuming the interpretation
canvassed on behalf of the' appellant to be preferable *to that accepted in the
impugned judgment we are unable to say that the construction adopted in the
judgment under appeal is so clearly and patently erroneous that it should, in
the larger interests of justice, be upset notwithstanding the fact that it is
likely to disturb rights to property and under contracts founded upon this
construction. The fact that contravention of s. 11-F(i) of the Act is made a
penal offence is an additional factor against the propriety of over-ruling and
upsetting the established view unless we feel convinced that the established'
view is clearly erroneous. As already discussed, we are not so convinced but
are on the other hand inclined to agree with the established view.
There is still another circumstance which may
appropriately be noticed. Sections 1 1 -C I I -F (i) and 1 1 -G (i I of the Act
were amended by M. P. Act 40 of 1965. Had the construction placed by the courts
on s. 11-F and other provisions of the Act been considered by the Legislature
to be contrary to the legislative intendment, one would have ordinarily
expected an amendment clarifying its intention because the Legislature must be
fixed with the knowledge of the construction placed on the Act by the courts.
No such action was taken by the Legislature. This circumstance is, of course,
not conclusive but it is not wholly irrelevant and certainly deserves to be noticed
as carrying some presumptive weight. As the appellant was not carrying on the business
of money lending in Chanda District, the single transaction in dispute in that
district was not covered by the Act and the suit could proceed in the normal
way without a registration certificate.
On the view we have taken the only question
which remains to be noticed relates to the argument that there should be three
mortgage decrees instead of one. This matter is one of procedure and form and
it does not materially. affect the substantive rights of the parties. We are,
therefore, disinclined on this ground to direct modification of the impugned
decree. The appeal accordingly fails and is dismissed but without costs.