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PETITIONER: SANT SARANLAL AND ANOTHER

       Vs.

RESPONDENT: PARSURAM SAHU AND OTHERS

DATE OF JUDGMENT: 06/08/1965

BENCH:

ACT: Bihar  Money Lenders Act (3 of 1938), s. 5 and  Bihar  Money Lenders  (Regulation of Transactions) Act (VII of 1939),  s. 4-Moneylender   lending  money  in  excess  of   amount   in registration certificate-Suit for recovery-Maintainability.

HEADNOTE: The  appellants sued the respondents for recovery  of  money advanced  to them, and the suit was decreed.  On  appeal  by one  of the respondents, the High Court held that  only  the 2nd  appellant  had lent the money, that out  of  the  money lent,  Rs. 6000 was borrowed by the 3rd respondent  and  the balance by the 5th respondent against whom a decree was  not sought,   that  the  2nd  appellant  was  registered  as   a moneylender  under  s. 5(4) of the Bihar  Moneylenders  Act, 1938  and r. 5 of the rules made thereunder, and that  since the   registration  certificate  mentioned  that  he   could transact money-rending business up to a maximum of Rs. 4999, he could get a decree only for that sum. In their appeal to this Court, the appellants contended that the  High  Court erred in holding that a  registered  money- lender could not recover by suit loans advanced in excess of the   maximum   amount   mentioned   in   the   registration certificate. HELD : A money-lender who has been registered under the  Act can  sue for the recovery of a loan advanced by  him  during the period his registration certificate is in force, even if at the time of advancing the loan he had exceeded the  limit of  the amount mentioned in the registration certificate  as the  amount  up  to which he  could  transact  money-lending business,  because,  under s. 4 of the  Bihar  Money-lenders (Regulation  of Transactions) Act, 1939, it is the de  facto registration  of the money-lender under the 1938  Act  which entitles him to sue for the loan and not the contents of the registration certificate. [344 D-F] The  mere  ground that a certain construction of a  rule  or consideration  of  its  effect will defeat  the  purpose  or object  of the Act is not a good ground for taking away  the rights of the money-lender to sue for the recovery of a debt due  to  him-,  when the Act itself  contains  no  provision authorising  any limit to the loan which a  moneylender  may lend. [340 E] There is no justification for holding that the object of the Act  would be defeated if the registered money-lender  could be  held  competent to lend money in excess of  the  maximum amount mentioned in the certificate.  The various provisions of  the  Act  indicating  the  kinds  of  relief  which  the legislature considered necessary to provide for the good  of debtors  and  the  absence of any  discretion  in  the  Sub-

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Registrar  to  refuse registration for whatever  figure  the money-lender wants the certificate, indicate that the  limit of  the loans to be advanced does not figure as a factor  in either regulating the money-leading transaction or in giving relief to a debtor. [341 G; 342 A-C] The State Government is not competent to make a rule  fixing the  maximum  amount under its rule-making  power,  and  the rules  framed 336 do  not,  in  fact, provide  that  a  money-lender  properly registered  as such under the Act will cease to be a  money- lender so registered, if he advances a loan in excess of the limit  mentioned in the certificate.  The classification  of money-lenders  according to the amount of money up to  which they  wanted to lend, for the purposes of registration  fee, can be no justification for placing any limit on the maximum amount of loans. [343 F, G]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 248 of 1964. Appeal  from the judgment and order dated March 31, 1960  of the Patna High Court in First Appeal No. 65 of 1954. N.   C. Chatterjee and A. K. Nag, for the appellants. R.   C. Prasad, for respondent No. 1. The Judgment of the Court was delivered by Raghubar Dayal, J. The sole point urged in this appeal under certificate  from  High  Court  is  whether  a  money-lender registered  under the Bihar Money-Lenders Act,  1938  (Bihar Act  III of 1938), hereinafter called the Act, can  sue  his debtor  for a loan in excess of the amount mentioned as  the maximum amount up to which he could transact business  under the registration certificate issued to him. The facts of the case may be briefly stated.  Sant  Saranlal and Bhanuprakash Lal, plaintiffs Nos. 1 and 2  respectively, sued defendants Nos.  1 to 4, for the recovery of Rs. 15,370 said  to  have  been  advanced to  them  who  constituted  a partnership business under the name and style of  Banwarilal Kishanlal  in 1947.  Out of this amount, Rs. 3,500 had  been lent prior to January 17, 1950 and the balance of Rs. 11,870 was  lent  between January 21, 1950 and May 14,  1951.   The suit was contested on various grounds. The trial court found that the various amounts were advanced for  the purposes of the firm.  It found that plaintiff  No. 2, Bhanuprakash Lal, was a registered money-lender under the Act and the registration certificate dated January 17,  1950 stated that he had been registered as a money-lender on that day  to transact money lending business up to a  maximum  of Rs.  4,999  only.  It further held that the fixing  of  this limit to the money-lending business did not debar  plaintiff No. 2 from suing for amounts in excess of Rs. 4,999 in  case he  had  really  advanced  that  amount.   The  trial  Court accordingly  decreed the suit for Rs. 11,870  plus  interest pendente lite at 6% per annum.                             337 Defendant  No. 1 alone filed an appeal against this  decree. The High Court disagreed with the finding of the trial Court that  the  loans  had been taken  for  the  firm  Banwarilal Kishanlal and held that they were taken by defendants Nos. 3 and 5 from plaintiff No. 2. It further held that out of  the amount  of Rs. 11,870 only Rs. 6,000 had been taken on  loan by  defendant  No. 3 and the balance was taken  on  loan  by defendant No. 5 against whom the plaintiffs had not sought a decree.   It  further  held  that in  view  of  the  various

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provisions  of the Act and the rules framed thereunder,  the plaintiff could not get a decree for any sum over Rs. 4,999. The  High Court accordingly allowed the appeal of  defendant No.  1  and set aside the decree passed by the  trial  Court against  defendants Nos. 1, 2 and 4 and passed a  decree  in favour  of plaintiff No. 2 for Rs. 4,999  against  defendant No.  3  alone.  It also decreed simple interest  at  6%  per annum  from  the date of the institution of the  suit  until realisation.   It is against this decree of the  High  Court that  the  present  appeal has been  filed  after  obtaining certificate from the High Court. The only point urged by Mr. Chatterjee, for the  appellants, is  that the High Court erred in holding that  a  registered moneylender  could  not recover by suit  loans  advanced  in excess  of the maximum amount mentioned in the  registration certificate. To appreciate the contention, it will be helpful to refer to the  various  provisions  of the Bihar  Acts  affecting  the question under determination. The Act of 1938 was enacted to regulate money-lending  tran- sactions  and to grant relief to debtors in the Province  of Bihar.   ’Loan’, according to cl. (f) of s. 2  means,  inter alia,  an  advance whether of money or in kind  on  interest made  by a money-lender.  ’Money-lender’, according  to  cl. (g) means a person who advances a loan.  ’Registered  money- lender’ according to cl. (j) means, inter alia, a person  to whom a registration certificate has been granted under s. 5. Section  3  empowers  the State  Government  to  exempt  any moneylender or class of money-lenders or any class of  loans from  the  provisions of the Act.  Section 4  provides  that every  Sub-Registrar  shall maintain a  register  of  money- lenders in such form and containing such particulars as  may be  prescribed,  and such register would be deemed to  be  a public  document within the meaning of the  Indian  Evidence Act.  Section 5 deals with the registration of money-lenders and  registration fee.  An application for being  registered as  a  money-lender  is to be made by a  person  and  is  to contain the particulars mentioned in sub-s. (1).  Clause (e) of sub-s. (1) of s. 5 mentions ’such other particulars 338 as may be prescribed’.  The application is to be accompanied by the prescribed registration fee and an application  which does not contain the particulars specified in sub-s. (1)  is to  be  rejected summarily.  Sub-s. (3)  provides  that  the State  Government  may, by rules,  prescribe  for  different classes   of  money-lenders  and  for  different   areas   a registration fee not exceeding twenty-five rupees to be paid by  an  applicant  for registration.  Sub-s.  (4)  makes  it incumbent  on  the Sub-Registrar to whom an  application  is presented,  to  grant the registration  certificate  in  the prescribed  form to the applicant.  The Sub-Registrar is  to refuse  grant  of  a certificate only  where  a  certificate previously granted to the applicant had been cancelled under s.  19  and  the  order of  cancellation  is  in  force.   A registration certificate granted under s. 5 remains in force for  five years from the date on which it is granted  unless cancelled earlier under s. 19. Section  7  lays down the duties of  the  registered  money- lenders to maintain accounts and to give receipts.   Section 19  provides  for  the  cancellation  of  the   registration certificate  in certain circumstances.  Section 20  provides for penalty for the contravention of the provisions of s. 7. Section  27,  empowers the State Government  to  make  rules prescribing   the  form  of  the  registration   certificate mentioned  in sub-s. (4) of s. 5 and the particulars  to  be

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contained in an application made under sub-s. (1) of s. 5. - The Bihar Money-Lenders Rules, 1938, hereinafter referred to as the rules, defines in cl. (c) of r. 1 ’maximum amount  of loans’  to mean the highest total amount of loans which  may remain  outstanding  on  any day during the  period  of  the validity of the registration certificate.  Rule 2 prescribes the  form  in which the register of money-lenders is  to  be kept.   Rule  3  prescribes the further  particulars  to  be mentioned  in  the application for registration and  one  of these   particulars  is  the  amount  of  loans  for   which certificate  is wanted.  Rule 4 lays down  the  registration fee payable.  It is according to the maximum amount of loans in respect of which an application for certificate is  made. Rule  6 provides that the registration certificate would  be in  Form  IT.   The  relevant portion of  Form  11  for  the purposes of this appeal is :               "I  hereby  certify  that  .  .  .  has   been               registered as a money-lender under sub-section               (1) of section 5.... to transact money-lending               business   up   to  the  maximum   amount   of               rupees . . . on this ... day of ..." In  1939,  the Bihar Money-Lenders (Regulation  of  Transac- tions) Act, 1939 (Bihar Act VII of 1939), hereinafter called the                             339 1939  Act,  was  enacted to provide for  the  regulation  of money-lending  transactions in the province of Bihar and  to remove  doubts  which had arisen regarding the  validity  of certain provisions of’ the 1938 Act.  Section 4 of the  1939 Act is as follows :               "Suit  for recovery of loan only  maintainable               by  registered money-lenders :-No Court  shall               entertain  a  suit by a  moneylender  for  the               recovery  of a loan advanced by him after  the               commencement   of   this  Act   unless   such.               moneylender  was  registered under  the  Bihar               MoneyLenders Act, 1938, at the time when  such               loan was advanced:               Provided   that   such   a   suit   shall   be               entertainable  if the loan to which  the  suit               relates  was advanced by the  money-lender  at               any  time before the expiration of six  months               after the date of commencement of this Act and               if he is granted a certificate of registration               under  section  5 of the  Bihar  Money-Lenders               Act,  1938, at any time before the  expiration               of the said six months." Of  the two plaintiffs, Bhanuprakash Lal, plaintiff  No.  2, who,  is held to have lent the money, obtained  registration certificate  under  s. 5 (4) and r. 5 on January  17,  1950. The certificate said that he had been registered as a money- lender under sub-s. (1) of s. 5 of the 1938 Act on that  day to  transact money-lending business up to a maximum  of  Rs. 4,999 only.  The High Court accepted the contention for  the respondent  that  in view of the terms of  the  registration certificate and r. 3 (3 ) of the rules, Bhanuprakash must be considered  to have been registered as a  moneylender  under the Act for advancing loans whose total amounts  outstanding on  any  day  during  the period  of  the  validity  of  the registration certificate was not to exceed Rs 4,999, that in case  the  amount of any loan on the date  it  was  advanced exceeded  the total of the loans outstanding that  day,  the money-lender  would  not be considered to  be  a  registered money-lender for the amount lent in excess of Rs. 4,999  and therefore,  in view of s. 4 of the 1939 Act, could  not  sue

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for such excess amount.  The High Court accordingly  granted a  decree to plaintiff No. 2 for Rs. 4,999 only and did  not decree  his suit for the difference between Rs.  6,000,  the amount actually lent, and the limit of the loan mentioned in the  registration certificate.  ’Me High Court was  of  this view as it thought that allowing the money-lender to sue for the excess amount would defeat the purpose and object of the Act. 340 The correctness of this view of the High Court is questioned for  the appellant on the ground that there is no  provision in the 1938 Act or even in the 1939 Act which provides  that a moneylender who has been registered under s. 5 of the  Act can lend money up to the limit mentioned in the registration certificate.   In  fact  it is urged that  the  Act  nowhere provides  that an over-all limit to the loan advanced  by  a registered  money-lender  can be fixed  by  the  Government. When the Act does not provide so, the Government cannot,  by rule,  fix such a limit.  Rule 3 requiring the  money-lender to  mention in his application the maximum amount  of  loan, i.e., the total amount of loans which may remain outstanding on  any  day  during  the period  of  the  validity  of  the registration  certificate  and  r.  3(3)  providing  for  an application for the registration certificate to mention  the amount of loans for which the certificate is wanted, cannot, therefore,  be  said to be rules made for carrying  out  the purposes of the Act but were rules made for fiscal purposes. The registration fee payable under r. 4 is graded  according to the maximum amount of loans for which the certificate was wanted.  We consider the contention for the appellant sound. The  mere  ground that a certain construction of a  rule  or consideration  of  its  effect will defeat  the  purpose  or object  of the Act is not a good ground for taking away  the right  of the moneylender to sue for the recovery of a  debt due  to  him  when  the Act  itself  contains  no  provision authorising  any limit to the loan which a money-lender  may lend at a time or may not exceed by lending further loan  if the amounts outstanding at the particular point of time  had exceeded the limit laid down.  Further, the preamble of  the Act  would not justify the inference that if the  contention for  the appellant is accepted, the object of the Act  would be defeated.  The preamble is :               "Whereas  it is expedient to  regulate  money-               lending  transactions and to grant  relief  to               debtors in the Province of Bihar . . . " The money-lending transactions are to be regulated in  order to grant relief to debtors.  What reliefs were to be granted to debtors is apparent from the contents of the Act  itself. The  debtor  is  not granted relief by  any  provision  with respect  to  the  amount of loan he can borrow.   He  is  to borrow  an  amount he actually requires.  He  is  not  given relief by statutorily curtailing his requirement for a  loan but  by enacting provisions which tend to protect  him  from being  charged exorbitant interest from any  malpractice  at the time of advancing money, from not account-                             341 ing payments made by him and from other matters against  his interests.   Several  sections  of  the  Act  indicate   the measures  for  the relief of the judgment debtor  which  the legislature  thought proper to enact.  Section 7  lays  down the duties of registered money-lenders to maintain  accounts and  give  receipts.  None of the duties mentioned  in  this section  points  to the registered moneylender  not  lending money  in excess of any amount fixed for him as the  maximum total  amount  of the loans lie could advance at  any  time.

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The  duties do not even require him to maintain  an),,  such register of account as would indicate to him at any point of time  what  the total outstanding amount of  the  loans  is. Surely he cannot be expected to check up his accounts,  find out  the total amount of loans outstanding at any  point  of time  and  then  to advance or not to advance a  loan  to  a borrower. Chapter IV deals with penalty and procedure and consists  of ss.  19  to  21.  Section 19 provides  for  cancellation  of registration certificate on the report of the court trying a suit to the Collector when the court is of opinion that  the registered  money-lender has been guilty of fraud or of  any contravention  of the provisions of the Act or is  otherwise unfit to carry on the business of money-lending.  Section 20 provides penalty for the contravention of the provisions  of s.  7, and s. 21 provides penalty for the  moneylender’s  or his agent’s taking from a debtor at the time of advancing  a loan  or  deducting out of the principal of  such  loan  any salami,  batta,  gadiana or other exactions  of  a.  similar nature by whatever name called or known. Section 23 makes any contract for the payment of the  amount due on a loan at any place outside the State of Bihar  void, and s. 24 provides for the deposit of money due on a loan in court  if the money-lender refuses to receive it or  refuses to issue a receipt for the same. These various provisions of the Act amply indicate the kinds of  relief  which the legislature  considered  necessary  to provide  for  the good of debtors and to achieve  which  the money-lending transactions were to be regulated. Sub-s.  (4) of s. 5 of the Act provides that on. receipt  of an application for registration as a money-lender, the  Sub- Registrar  must  -rant  a registration  certificate  in  the prescribed  form to the applicant except when a  certificate which had been previously granted to the applicant had  been cancelled  under s. 19 and the order of cancellation  be  in force  at the time he applied for registration  again.   The absence of any discretion in the Sub-Registrar 342 who  has authority to register persons as  money-lenders  to refuse  registration in view of the  applicant’s  mentioning any  fancy figure for the mount of loans for which he  wants the  certificate well indicates that the limit of the  loans to be advanced do not figure as a factor of any significance in  either  regulating the money-lending transaction  or  in giving relief to a debtor.     We  are therefore of opinion that the High Court was  in error  in  .thinking  that the object of the  Act  would  be defeated  if  the  registered  money-lender  could  be  held competent  to  lend money in excess of  the  maximum  amount mentioned in the registration certificate.     We  have  referred  to the fact that the  Act  does  not anywhere  provide for the fixing of the upper limit for  the loans  remaining  outstanding at any particular  time.   The rule-making power of the Government does  not extend to  the fixing  of  such  a limit. Section  27  empowers  the  State Government   to  prescribe  inter  alia  the  form  of   the registration certificate and the particulars to be contained in  an application made for the purpose of being  registered as a money-lender.  It is significant to note that the  rule making power given to the State-Government is not  expressed in the usual form, i.e., is not to the effect that the State Government may make rules for the purposes of the Act.   The rulemaking power is limited to what is stated in clauses (a) to  (e) of s. 27 and these clauses do not empower the  State Government  to  prescribe the limit up to  which  the  loans

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advanced by a money lender are to remain outstanding at  any particular moment of time.     It  is  contended for the respondents that s.  5(1  )(e) provides  that every application for being registered  as  a money-lender  is to state such other particulars as  may  be prescribed and that therefore an application had to  mention the amount of the loan for which the certificate is  wanted. The power  to prescribe certain particulars for the  purpose of  an application cannot be deemed to include the power  to fix the maximum mount of loans which a money-lender can have outstanding   on  any  day.   Rule  3  (i/i)  requires   the application  to  mention the amount of loan  for  which  the certificate is wanted.  Strictly speaking, there is  nothing in this expression to suggest to the applicant  money-lender that  he has to mention the maximum mount of loans which  is to  remain outstanding on any particular day. The  rules  do not  even  say that the registration of a  money-lender  for advancing  loans  up to a maximum amount  mentioned  in  the certificate  would  make him a registered  money-lender  for loans up to that amount only.                             343 The  facts  that the rules require the amount of  loans  for which  the  certificate is wanted and that the form  of  the registration  certificate provides for mentioning the  limit of  the money-lending business up to which the  money-lender can  transact  business,  do not  necessarily  amount  to  a provision that the moneylender would be deemed to be a  non- registered  money-lender for the purposes of the  amount  of loan outstanding in excess of that limit.  The  money-lender when  he advanced money in excess of the maximum  limit  may contravene  the  rule framed under the Act and  if  the  Act provides  any penalty for such contravention, may be  liable for that penalty.  In fact, ss. 19 to 21 do not provide  for penalty for contravening any rule. It  is urged for the respondents that the  State  Government was  competent  to  fix the maximum amount of  loans  to  be advanced’ by a registered money-lender in view of sub-s. (3) of  s. 5 which  provides that the State Government  may,  by rules, prescribe 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.  It  is  said that the State Government could create different classes  of money-lenders according to the amount of money they want  to advance in loans. This  provision  does not empower the  State  Government  to limit   the  maximum  amount  of  loans  to  be   given   by moneylenders  of  any  class.   It  could,  however,  as  it actually  did,  prescribe different  registration  fees  for different  classes of money-lenders according to the  amount of   money   up  to  which  they  wanted  to;   lend.    The classification   of  money-lenders  for  the   purposes   of registration  fee  can be no justification for  placing  any limit  on  the  maximum  amount of  loans  they  could  have outstanding  on a certain day, on penalty of being  deprived of  a  right to sue for an amount lent in excess of  such  a maximum. We therefore hold that the State Government is not competent to make a rule fixing a maximum amount of outstanding  loans on  any day and that the rules framed do not provide that  a money-lender properly registered as such under the Act  will cease  to be a money-lender so registered if he  advances  a loan  in excess of the limit mentioned in  the  registration certificate. It has been urged for the respondent that the expression  in s. 4 of the 1939 Act to the effect ’unless such money-lender

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was  registered  under the Bihar  Money-Lenders  Act,  1938’ means  ’  unless such money-lender was  properly  registered under the Bihar Money-Lenders Act, 1938’.  There is  nothing wrong in this view, 344 but   there  is  no  impropriety  in  the  registration   of Bhanuprakash  Lal as a money-lender.  His  application  must have   been  in accordance with the requirements of the  Act and  the rules.  The registration certificate was issued  to him  in the ordinary course. Nothing has been shown why  his registration  as  a money-lender be considered  to  be   not proper   registration  or  why it be held that  he  was  not properly  registered under the Act.  The mere fact  that  he contravened  any of the requirements of the licence   or  of any rule or even any provision of the Act does not mean thet his registration as a money-lender under s. 5 of the Act was an improper registration.     Lastly,  it may be said that the view taken by the  High Court  necessitates the adding of the words ’and  the  loans advanced do ’not wholly or partly exceed the maximum  amount up   to   which  he  was  permitted  by   the   registration certificate  to transact moneylending business’ in s.  4  of the  1939 Act.  There is no reason why such an  addition  be made to s. 4 and make the provision ’much more restricted in character.     We therefore do not agree with the view expressed by the High  Court  and  hold  that a  money-lender  who  has  been registered under the Act can sue for the recovery of a  loan advanced   by  him  during  the  period   his   registration certificate  is in force, even if at the time  of  advancing the loan he had exceeded the limit .of the amount  mentioned in   the  registration  certificate  as the  ’amount  up  to which  he could transact money-lending business.  Under  the provisions of the Act it is the de facto registration of the money-/ender which entitles him to sue for the loan and  not the contents of the registration certificate.     We therefore allow the appeal and order that the  decree of the Court below be modified to the effect that  plaintiff No. 2 alone is entitled to a decree for Rs. 6,000 as against defendant  No.  3 alone and that plaintiff No.  2  would  be entitled to simple interest at 6% per annum from the date of institution of the suit until realisation of the amount.  We further   order   that  plaintiff  No.  2   will   get   his proportionate costs, from defendant No. 3 of the trial Court and full costs of the High Court and this ’Court. Appeal allowed.                             345