Leading judgment on money lending law

Leading judgment on money lending law

I shall first take up the point whether the suit itself is barred under Section 4 of the Bihar Money-Lenders (Regulation of Transactions) Act, 1939 (Bihar Act VII of 1939). The relevant portion of that section reads as follows:--
"4. Suit for recovery of loan only maintainable by registered money-lenders --No Court shall entertain a suit by a money-lender for the recovery of a loan advanced by him after the commencement of this Act unless such moneylender was registered under the Bihar Money-Lenders Act, 1938 (Bihar Act 3 of 1938) at the tune when such loan was advanced ........."
Two important things are to be considered for the application of this section. The first thing is whether it is a suit for a money-lender; and secondly, whether it is for recovery of a loan. In the present case, no money was actually advanced by the plaintiff. He had to take a salami of Rs. 18,000.00 from the defendants, and the defendants had no ready money to pay the same. They, therefore, executed the mortgage bond in respect of this salami money. It is not argued on behalf of the appellant that the plain-tiff is a professional money-lender. It has been held in several cases that where money-lending is casual, then the provisions regarding registration as a moneylender do not apply, vide MANU/BH/0144/1947 : AIR 1949 Pat 400, Bhutnath Kumar v. Nilkantha, Narain Singh.
The business of money-lending imports a notion of system, repetition and continuity, and that is a test of determining whether the plaintiff is a professional money-lender. Occasional loans to relatives, friends or acquaintances do not make the lender a professional moneylender. There must be more than occasional and disconnected loans to justify a finding that the plaintiff is a professional money-lender so as to apply the bar of Section 4 of Bihar Act VII of 1939: Vide Dwarkadas Marwari v. Kalipada Dey. 1959 BLJR 145 and Lakhi Narayan Sao v. Sm. Bhagwati Kuer. MANU/BH/0103/1963 : AIR 1963 Pat. 350.
Equivalent Citation: AIR1970Pat167, 1969(17)BLJR950

IN THE HIGH COURT OF PATNA
A.F.O.D. No. 459 of 1963
Decided On: 19.05.1969
Sanwarmal Agarwalla Vs. Benoy Krishna Mukherjee and Anr.
Hon'ble Judges/Coram:
Anwar Ahmad and M.P. Varma , JJ.

1. This appeal has been directed against the preliminary decree passed by the Second Subordinate Judge. Dhanbad, in Title (Mortgage) Suit No. 16 of 1962 decreeing the plaintiffs suit with costs on contest against defendant No. 2 and ex parte against defendant No. 1. He directed the defendants to pay a sum of Rs. 33,882.88 paise to the plaintiff on or before the 22nd August, 1963, failing which the mortgaged property, or a sufficient portion thereof, was to be sold to satisfy the decree.
2. The case of the plaintiff, shortly stated, was that coal lands measuring 50 bighas lying in village Baromesia, P. S. Baghmara, in the district of Dhanbad, as described in Schedule "A" of the plaint, belonged to the plaintiffs. On the 31st December, 1949, both the defendants took settlement of those coal bearing lands from the plaintiff under a registered Indenture of Mining Lease, together with all inclines, quarries, houses, tools, machineries etc. This colliery was then known as "Central Sindhi Colliery", which name was subsequently changed into "South Muraidih Colliery. The defendants agreed to pay a salami of Rs. 18,000/-; but they were not in a position to pay so much in cash and so they executed a registered mortgage bond on the same date in favour of the plaintiff in consideration of the said amount of Rs. 18,000/-. Under this mortgage bond, the defendants hypothecated, by simple mortgage, the very same 50 bighas of coal lands as described in Schedule "A" of the plaint. They further agreed to pay the mortgage money to the plaintiff on or before the 30th June, 1950; and, in default thereof, the defendants made themselves liable to pay interest on the same amount at 6 p. c. p. a. from the 1st July. 1950 till realisation. In spite of repeated demands and notice, the defendants mortgagors did not pay any amount to the plaintiff, and so the plaintiff had to bring the suit for recovery of the principal amount of Rs. 18,000/-, together with interest at 6 p. c. p. a. from the 1st July to June 1962, amounting to Rs. 12.960.00. The plaintiff prayed that a mortgage decree for the above mentioned sum, together with costs and interest, pendente lite and further, be granted in his favour, and the said decretal amount be declared a charge on the leasehold coal lands. The plaintiff further prayed that, if the defendants fail to pay the decretal dues within the time fixed by the Court, the mortgaged property be put to sale and should the sale proceeds be insufficient to satisfy the decretal dues, a personal decree be passed against the defendants.
3. Both the defendants filed separate written statements. But at the time of hearing only defendant No. 2 contested the suit, and the lawyer for the defendant No. 1 endorsed "no instruction". In the written statement filed on behalf of defendant No. 1, it was contended that defendant No. 2 was never his adopted son; rather he was the karta of his joint family. He, along with defendant No. 2, purchased the lands in suit from one Satyaprasad Chatterjee under a registered deed of sale dated the 15th December, 1949; but when the defendants, along with other members of their families, entered into possession of the property in Suit, the plaintiff represented that he had interest in the property, and advanced a claim in respect of the said property. So, in order to buy peace and under the coercion of the plaintiff, the defendants were forced to execute the mining lease in question. The mortgage in question is without consideration, inasmuch as the very same property was also charged under the mining lease in question. According to defendant No. 1, defendant No. 2 had deceived him because he stopped sending return about the income etc., In respect of the colliery in question since after May, 1949, and for this he (defendant No. 1) had brought Title Suit No. 29 of 1960 against defendant No. 2. Another plea taken was that the plaintiff was not a registered money-lender, and so the suit was not maintainable.
4. In the written statement filed on behalf of defendant No. 2, practically the same averments were made. This defendant also contended that the mortgage bond was without consideration and was executed under undue influence and coercion. He also made out a case of payment of Rs. 11,000/- in several instalments to the plaintiff.
5. The learned Subordinate Judge came to the conclusion that the suit was not barred by Section 4 of the Bihar Money-Lenders Act (Bihar Act VII of 1939); that the mortgage bond was for consideration and that the mortgage money was realisable from the defendants. As against this judgment and decree, the present appeal has been filed.
6. In this Court, two additional grounds were taken on behalf of the appellant (i) that the impugned mortgage, being in violation of Rule 37 of the Mineral Concession Rules, 1949, was inoperative; and (ii) that, after the vesting of the estates and tenures in the State of Bihar, under the provisions of the Bihar Land Reforms Act, on the 1st January, 1956, the entire interest in the estate in question, including the interest of the plaintiff-respondent and the defendant-appellant, vested in the State of Bihar absolutely and free from encumbrance and, as such, a mortgage decree for sale was illegal.
7. I shall first take up the point whether the suit itself is barred under Section 4 of the Bihar Money-Lenders (Regulation of Transactions) Act, 1939 (Bihar Act VII of 1939). The relevant portion of that section reads as follows:--
"4. Suit for recovery of loan only maintainable by registered money-lenders --No Court shall entertain a suit by a money-lender for the recovery of a loan advanced by him after the commencement of this Act unless such moneylender was registered under the Bihar Money-Lenders Act, 1938 (Bihar Act 3 of 1938) at the tune when such loan was advanced ........."
Two important things are to be considered for the application of this section. The first thing is whether it is a suit for a money-lender; and secondly, whether it is for recovery of a loan. In the present case, no money was actually advanced by the plaintiff. He had to take a salami of Rs. 18,000.00 from the defendants, and the defendants had no ready money to pay the same. They, therefore, executed the mortgage bond in respect of this salami money. It is not argued on behalf of the appellant that the plain-tiff is a professional money-lender. It has been held in several cases that where money-lending is casual, then the provisions regarding registration as a moneylender do not apply, vide MANU/BH/0144/1947 : AIR 1949 Pat 400, Bhutnath Kumar v. Nilkantha, Narain Singh.
The business of money-lending imports a notion of system, repetition and continuity, and that is a test of determining whether the plaintiff is a professional money-lender. Occasional loans to relatives, friends or acquaintances do not make the lender a professional moneylender. There must be more than occasional and disconnected loans to justify a finding that the plaintiff is a professional money-lender so as to apply the bar of Section 4 of Bihar Act VII of 1939: Vide Dwarkadas Marwari v. Kalipada Dey. 1959 BLJR 145 and Lakhi Narayan Sao v. Sm. Bhagwati Kuer. MANU/BH/0103/1963 : AIR 1963 Pat. 350.
8. The next point which arises for consideration in this connection is as to which party has to establish that the bar of Section 4 of the Bihar Act VII of 1939 is not applicable to the present suit. Generally speaking, the onus lies on the party which asserts a particular fact or an exception to the general rule; and the learned Additional Subordinate Judge has referred to some of the cases decided by this Court, in paragraph 7 of his judgment. I need not refer to and critically examine those references; because, so far as this Court is concerned, the point is settled by a decision of the Full Bench in Srimati Fula Devi v. Mangtu Maharaj (MANU/BH/0075/1969 : 1969 Pat LJR 51 :AIR 1969 Pat 294 (FB)). After a review of various decisions concerning this point, their Lordships observed' that it must be held that the onus to prove, as a matter of law, that the suit is entertainable without registration, is on the plaintiff, in view of the bar under the first paragraph of Section 4. In view of this decision, it has to be examined whether this initial onus has been discharged by the plaintiff. Of course, in the plaint it was not stated that the plaintiff is not a professional money-lender, nor that for this transaction no registration under this Act was necessary. But, in his own evidence, the plaintiff (P. W. 2) has stated that he had no money-lending business. Learned counsel for the appellant has criticised this statement by advancing an argument to the effect that the plaintiff did not specifically say that, at the time when the mortgage bond was executed, he had no money-lending business. This statement he made on the 11th May, 1963, whereas the bond was executed on the 31st December, 1949. In my opinion, such a narrow interpretation cannot be put to this statement. The plaintiff was making this averment with reference to the objection raised on behalf of the appellant in paragraph 2 of his written statement. As a matter of fact, the defendant did not lead any oral evidence whatsoever on this point. Nobody on his behalf came to say that the plaintiff was a professional money-lender, so as to require registration under the Act. I therefore, feel no hesitation in holding that for the transaction in question the plaintiff need not have been registered under this Act.
9. Apart from this consideration, there is also another point in favour of the plaintiff-respondent. It has been argued on his behalf that this transaction does not represent a loan so as to attract the provisions of the Bihar Money-Lenders Act, The term loan has been defined in Section 2 (f) of the Act, and the relevant portion runs as follows:--
" 'loan' means an advance, whether of money or in kind, on interest made by a money-lender, and shall include a transaction on a bond bearing interest executed in respect of past liability and any transaction which, in substance, is a loan ............"
Here also, the "advance" must be made by a "money-lender". It has already been held that the plaintiff is not a money-lender in the sense so as to attract the provisions of Section 4 of the Act, Any way, the transaction itself cannot be said to be a "loan". This mortgage bond did not bear any interest for a number of years, and then it was not executed "in respect of past liability". Both the lease and the mortgage bond were contemporaneous documents. So this amount as mentioned in the mortgage bond cannot be said to be a "loan". 'In the case of Saradindu Sekhar Bannerjee v. Lalit Mohan Mazumdar, MANU/WB/0045/1941 : AIR 1941 Cal 538, it was held that such a transaction may be said to be a "debt" at best, and further that every "debt" is not a "loan". So. on this ground also, I do not think the provisions of the Bihar Money-Lenders Act, 1939 are attracted in the present case. In agreement with the decision of the learned Additional Subordinate Judge, it must, therefore, be held that the suit by the plaintiff is not hit by Section 4 of the Bihar Money-Lenders Act. 1939.
10. The second point urged by learned counsel for the appellant is that the lease itself, being in violation of Rule 37 of the Mineral Concession Rules, 1949, was void and ineffective. In my opinion, this argument does not carry any weight. Prima facie, if the lease is held to be void or inoperative, the appellant must give up possession under this lease and the property demised must revert to the lessor. It is nobody's case that any such controversy had ever arisen between the parties before the institution of this suit. Learned Counsel for the appellant has argued that this lease was created in violation of Rule 37 of the Mineral Concession Rules, 1949 (hereinafter referred to as the "1949 Rules"). This rule lays down that "the lessee may, with the previous sanction of the State Government ............ transfer his lease or any right, title or interest therein, "to a person holding a certificate of approval on payment of a fee of Rs. 100 to the State Government. . . " In 1954. a proviso was added to this rule, and it is to the effect that "no mining lease or any right, title or interest therein in respect of any mineral specified in Schedule IV shall be so transferred except with the previous approval of the Central Government." This lease was executed, as already stated, on the 31st December, 1949. The 1949 Rules came into force on and from the 25th October, 1949; but they had not been extended to the Chotanag-pur area. So, when the lease was initially executed, there was no necessity for a lessee or a sub-lessee, as in this case, to hold a certificate of approval. It has been shown to us that, under Notification No. 480-iiW-271/R, dated the 16th January, 1950 the provisions of Mines end Minerals (Regulation and Development) Act (hereinafter referred to as the "1948-Act") were extended to Chotanagpur Division, under the provisions of Section 92 of the Government of India Act, 1935. Learned counsel has argued that at least from that date the lessee must conform to the provisions of Rule 37 of the 1949 Rules. He has further argued that this leaae was registered in March, 1950, and till registration no title could pass to the lessee. He has drawn our attention to the case of Tilakdhari Singh v. Gour Narain 5 Pat LJ 715 -- MANU/BH/0024/1920 where it was observed that where an instrument which purports to transfer title to property requires to be registered the title does not pass until registration has been effected. Learned counsel for the plaintiff-respondent has argued that this question raises investigation of facts and ought to have been raised at the earliest stage when the suit was brought in the trial court. The plaintiff could have then secured evidence to show that he had not violated the provisions of Rule 37 of the 1949 Rules. He further pointed out that Rule 37 occurs in Chapter IV of the Rules which deals with the "Grant of Mining Lease in respect of land in which the minerals belong to Government", and, in his opinion, if any rule was to be made applicable to this transaction, it must be Rule 48, which occurs in chapter V dealing with "Grant of mineral concessions by private persons." So far as the present point is concerned, both these rules are practically the same. His further argument was that it was neither a prospecting licence nor a mining lease but Is a sub-lease, so to say. In my opinion, the term, "lease" also includes a "sublease" as discussed in various case laws". But the matter is not free from doubt I may further refer to the definition of "lease" in Section 2 (1) of the Bihar Land Reforms Act, 1950, which prescribes that "Lease" in relation to mines and minerals shall include a sub-lease or prospecting lease and an agreement to lease and sublet . . ." Under Section 4(1) of the 1948 Act (Act 53 of 1948), no mining lease was to be granted after the commencement of this Act, otherwise than in accordance with the rules made under this Act. Sub-section (2) of Section 4 provides that any mining lease granted contrary to the provisions of Sub-section (1) shall be void and of no effect. The law on the subject of mines and minerals has developed from time to time in the light of experiences gained. In 1957, another Act, namely, the Mines and Minerals (Regulation and Development) Act, 1957 (67 of 1957), was enacted. Under Section 4 (1) of this Act. "No person shall undertake any prospecting or mining operations in any area, except under and in accordance with the terms and conditions of a prospecting licence or as the case may be, a mining lease, granted under this Act and the rules made thereunder: Provided that nothing in this sub-section shall affect any prospecting or mining operations undertaken in any area in accordance with the terms and conditions of a prospecting licence or mining lease granted before the commencement of this Act which is in force at such commencement." Sub-section (2) lays down that "no prospecting licence or mining lease shall be granted otherwise than in accordance with the provisions of this Act and the rules made thereunder". So, clearly, this Act does not lay down that any mining lease in contravention of this section shall be void altogether. Under Section 21 of this Act penalty has been provided, and it lays down that "(i) whoever contravenes the provisions of Sub-section (1) of Section 4 shall be punishable with imprisonment which may extend to six months. . " I may further point out that, under Section 5 of the 1948 Act powers were given to the Central Government to make rules for regulating the grant of mining leases in respect of any minerals or in any area. The Mineral Concession Rules were made by the Central Government in exercise of its power under Section 5 of the 1948 Act. Argument of learned counsel for the appellant is that when the lease in question was registered in March, 1950, the 1949 Rules were extended to Chotanagpur Division and so if the lessee had no certificate of approval, the lease in his favour was void. From the discussion made above, it is clear that this Act was followed by another Act on the same subject' in 1957 in which no such stringent consequences were to follow, if the lease was not in conformity with the provisions of Rule 37 or Rule 48 of the 1949 Rules. Moreover, under Section 31 of the 1957 Act, the Central Government was authorised to relax the rules in special cases. No doubt, by Section 29 of the 1957 Act all rules made or purporting to have been made under the Act of 1948 were to be deemed to have been made in the 1957 Act and which were not inconsistent therewith. In other words, all existing rules were to continue when the 1957 Act came in force, though the 1948 Act was repealed by the 1957 Act (Vide paragraph 6 of the judgment of the Supreme Court in the Bihar Mines Ltd. v. Union of India MANU/SC/0028/1966 : AIR 1967 SC 887). On a consideration therefore, of these various rules and the provisions of the 1948 and 1957 Acts, referred to above, I am not inclined to hold that this plea, which has been raised on behalf of the appellant, is available to him.
11. The third argument advanced on behalf of the appellant is that, with the vesting of the estate, in which these mineral areas lie in the State of Bihar, the old lease came to an end and a new statutory lease came into being, as provided under Section 10 of the Bihar Land Reforms Act. If the mines were worked directly by the intermediary when the Bihar Land Reforms Act, 1950 came into force, the provisions of Section 9 of the Act would apply. This question came up for consideration before the Supreme Court in the case of MANU/SC/0028/1966 : AIR 1967 SC 887. There was a difference of opinion amongst the learned Judges, but the majority view was that the old lease came to an end and a new statutory lease came into effect. I may quote the following lines: (P. 891).
"The effect of the estate being deemed to be leased by the State Government is that the erstwhile lessee of the intermediary becomes actually the lessee of the State Government for all purposes from the date of the vesting of the estate in the State. He cannot be deemed to be a lessee of the intermediary whose title is lost under the original lease."
In that case the point at issue was whether the Mining Leases (Modification of Terms) Rules, 1956 were applicable to the mining leases in question. Of course, the minority view was that Section 10 continues the lease which was subsisting on the date of vesting. The terms and conditions of the lease are modified and the Government is substituted as lessor in place of the proprietor or tenure-holder. In other respects the old lease continues. Anyway, following the majority view, it must be held that the old lease which was created on the 31st December, 1949, came to an end on the date of vesting of the estate in the State of Bihar and a new statutory lease came into effect.
12. Learned counsel for the plaintiff-respondent has argued that this is a new point which has been taken for the first tune in this court in appeal and so it should be left out of consideration. In my opinion, this argument cannot be allowed to prevail, because, to resolve this question, no additional evidence, either documentary or oral, was required. It is purely a question of law, namely, the effect on the lease because of the provisions of the Bihar Land Reforms Act. This question relates to that part of the decree which indicates that a charge shall be created on the mortgaged property which shall be sold for the liquidation of the debt and that the plaintiff would be also entitled to a personal decree if the charged property proved insufficient to satisfy the dues. Under Section 4 (a) of the Bihar Land Reforms Act estates and tenures shall, "with effect from the date of vesting, vest absolutely in the State free from all incumbrances and such proprietor or tenure-holder shall cease to have any interests in such estate or tenure, other than the interests expressly saved by or under the provision of this Act." The interests of the proprietor or, tenure-holder in all sub-soils, including any rights in mines and minerals, are to vest in the State Government. In this view of the legal position, the remedy available to the plaintiff is not to enforce the mortgage bond and secure satisfaction of his debt by sale of the mortgaged property. His remedy is to follow the compensation in the first instance and then look forward as to what consequences would follow in future. As held in the case of Rajkishore Prasad Narayan Singh v. Ram Pratap Pandey (MANU/SC/0032/1966 : 1967 B. L. J. R. 331 :AIR 1967 SC 801) the remedy of such a mortgagee is to follow the compensation as well as the non-vested property of the proprietor for the satisfaction of his mortgage dues.
13. No other point was raised before us.
14. In the result, the judgment and decree of the court below are upheld and the appeal is dismissed with this modification only that the decretal dues will not be a charge on the mortgaged property and the same shall not be sold for the satisfaction of the mortgage dues. In the circumstances of the case, the parties shall bear their own costs of this Court,