# GAJANAN AND ORS v. SETH BRINDABAN

- **Citation:** [1971] 1 S.C.R. 657
- **Court:** Supreme Court of India
- **Decided:** 1970-07-20
- **Bench:** J. M. Shelat, I. D. Dua
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gajanan-and-ors-v-seth-brindaban-5109
- **Pages:** 14

## Headnote

651
C. P. Money Lenders, Act 13 of 1934, ss. llF and llH-Act debarring
carrying on o.f money lending business in any district without valid regis·
tration certificate in respect of that dis1rict--Certificare 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 plaintiij gave a loan to the defendant' 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. llF & llH 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 witl!in 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. Philip.r.
HELD: (i) The case of Cornelius v. Phillips was distinguished by the
Nagpur High Court in Pa ti 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 interpreta·
tion of s. 2 of the English Act 'for construing s. llF 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-ll; 666 Fl
(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 attthorities
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 CJ
(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 ar. 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. Seotion
11 ·H ·also operates only against the suits by money-lenders on Joans 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 Sllj!. C 1/70-13
658'
SUPRLlfE COURT REPORTS
[1971] 1 S.C.R.
course of business. Interference with freedom of contract appears to have
been limited under the Act only to the eXtcnt necessary for regulating and
controlling the business of moncy·lcnJing.
Section 11 C which provides
for composition of offences also suggests that inUividual transactions are
not considered void.
The view of law taken by the Nagpur and M. P.
High Courts in Patira111, llajari11ud and Jank/ Bai was thus in conformity
with the statutory inten<lmcnt and must be held to be correct. [668 G·
669 DJ
(iv) People in <trranging their affairs are entitled to rc·ly on decision
of the highest court which appears to have prevailed for a considerable
length of time and it woulJ rC'quirc san1c- exceptional reason to iustify
its reversal when such rev

## Text

A
B
c
D
E
F
G
H
GAJANAN AND ORS.
v.
SETH BRINDABAN
July 20, 1970
[J. M. SHELAT AND I. D. DUA, JJ.J
651
C. P. Money Lenders, Act 13 of 1934, ss. llF and llH-Act debarring
carrying on o.f money lending business in any district without valid regis·
tration certificate in respect of that dis1rict--Certificare 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 plaintiij gave a loan to the defendant' 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. llF & llH 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 witl!in 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. Philip.r.
HELD: (i) The case of Cornelius v. Phillips was distinguished by the
Nagpur High Court in Pa ti 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 interpreta·
tion of s. 2 of the English Act 'for construing s. llF 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-ll; 666 Fl
(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 attthorities
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 CJ
(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 ar. 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. Seotion
11 ·H ·also operates only against the suits by money-lenders on Joans 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 Sllj!. C 1/70-13
658'
SUPRLlfE COURT REPORTS
[1971] 1 S.C.R.
course of business. Interference with freedom of contract appears to have
been limited under the Act only to the eXtcnt necessary for regulating and
controlling the business of moncy·lcnJing.
Section 11 C which provides
for composition of offences also suggests that inUividual transactions are
not considered void.
The view of law taken by the Nagpur and M. P.
High Courts in Patira111, llajari11ud and Jank/ Bai was thus in conformity
with the statutory inten<lmcnt and must be held to be correct. [668 G·
669 DJ
(iv) People in <trranging their affairs are entitled to rc·ly on decision
of the highest court which appears to have prevailed for a considerable
length of time and it woulJ rC'quirc san1c- exceptional reason to iustify
its reversal when such reversal is likely to create serious cmbarrassn1ent
for those who have acted on the faith of what 'ecmc<l to be the settled
law.
Where the n1eaning of the statute .is an1biguous and capable
of
n1orc interpretation than one, and one view ;.1ccrptcd by the higher court
ha~. stood for a long period during which many transactions such
as
dca!ing in property and making of contracts have taken place on the faith
of that inte1pretation,
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. Jl·F of the C.P. Act on which the High Court relied ie
the present case could not be departed fron1, si:1cc it is not so patcn!ly
erroneous that it must be upset.
The fact that contravention of s. 11-F(i)
of the Act is made a pen.al offence· is an
additional factor against
the
propriety of over-ruling the
e,;tablishe<l view.
Further the
legislature
made several amendments in the Act in 1965 but di<l 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
intenJmcnt, [669 E-F; 670 A-Fl
On the above view of the Jaw the present appeal must be dismissed,
Cornelius v, Phillips [1918] A.C. 199 distinguished.
Patira111 v. Ba/iircun 1953 N.L.J. 517, 522: Hajari11ud v. H<1ri Narayan
(1965) 67 Born. L.R. 816; and J11nki B11i v. Ratan Me/11 A.I.R. !96Z M.P.
117 (FB) approved and applied.
·
. Whit<•nian v. Stuller 1918 A.C. 199, Wasu<leo Bhail'lllal v. Ramc!rnndra
A
B
c
D
E
(1958) 60 Born. L.R, I 247. Sirnr<1111 Slwnwin v, B<1iJ'<1 Par1wy A,LR. 1941
F
Nag, 177; Hari Prasad v, Sohlrnn/a/ M,F,A. 124 of 1956 <lated December
'18, 1957-1958 M,P.LJ. Note no. 11 Gurmukh Rai v, Hari Htir Singh
S.A,
No, 39/ I 961/<l/26,3, 1964-M.P,LJ,
note 102 , Cllllith Rum
v.
Baparimal C,R. 374/1959/ <l/ L7.1960 -1960 M.P,L.J;
note 198
and
Ki.1·/11111/a/ v, Laxmibai S,R,P. I09/1962<l 20.7,1962-1963 M.P.L.J, 119refcrrc<..I to.
C!V!L APPELLATE JUR!SDlCTION : Civil Appeal No. 1982 Of
G
1966.
Appeal from the judgment and decree dated October 21, 22,
1965 of the Bombay High Court. Nagpur Bench in Appeal No. 43
of 1. 960 from original decree.
V. M. Tarkzmde, V. N. Swami and A.G. Ratnaparkhi, for the
appellants.
·
M. C. Chagla, Rameshwar Nath and Swaranjit Sodhi, for the
respondent.
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GAJANAN v. BRINDABAN (Dua, J.)
659
The Judgment of the Court was delivered by
Dua J.
This is an appeal with certificatie under Art. 133\i)
(a) of the Constitution by Gajanan and his two sons Janardhan
and Nanaji who figμred as defendants l, 4 and 5 respectively in
the suit institute;! by Seth Brindaban, respondent in this appeal.
It is directed against the judgment and decree of the Bombay
High Court (Nagpur Benchl dated Fe~ruary 7, 1966 allowmg
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 agamst
the
app~lants. The other two
defendants, Rajeshwar and
Narhari, were also the sons of Gajanan; the dismissal ot 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. l,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. l lF 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
moneylending bnsiness and had not given Diwali notices to the
defendant in respect of this debt and this omission disentitled him
to claim interest.
Seven additional issues were ,framed on the amended pleas.
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 question 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 Bomb3y Act to be prospective
only and, therefore, inapplicable to pending cases.
The present
suit which had been instituted in l 950 in respect of a tnnsaction
of 1947 was accordingly held to be governed by the provisions
of the C.P. & Berar Moneylenders' Act. The plaitniff was found
to have contravened ss. 1 IF and llH of the C.P. Act and, therefore, disentitled to maintain the suit. He was also held disentitled
to c !aim interest
as he had not sent statement of accounts as
660
$Ul>REM.ll COURT REPORTS
(1971) 1 S.C.R ..
required by that Act.
As regards the liability of defendants 2
A
and 3, they were hekl not to be bound by the mortgages, but it
was observed. that a simple money decree couid 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
B
defendant No. 5 was also held to be bound by the three. mortgages
dated September 12, 194 7. 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 violatiors of the C.P. Act.
c
On appeal to the High Court the following seven points fell
for determination :
"(l) Was <he appellant a moneylender within the
meaning of the C. P. and Berar Moneylenders' Act and
was he required to obtain a moneyknder's licence for
D
Chanda District because the 'transaotion 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 conE
cerned, what will be the effect on the liability of defendants 2 anC: .3 ?
(3) Could ~ 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 staiements 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 (al of the Moneylenders Act ?
( 5) Are the three instruments validly registered or
is 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 there issues was also
the subject
matter of identical issues in the
previous litigation
finally decided between the parties ?
F
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GAJANAN V. BRINDABAN (Dud, J.)
( 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?"
66!
On behalf of the plainiiff (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. 1 lH
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 moneylending business in. Yeotmal District
and had obtained the requisite licence for that 4istrict 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 moneylemder 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 shoo 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 ~onclusion 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 aliio
held to be duly executed and duly registered so as to be binding
on defendants l, 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 the1n 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
Pll).intiff 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 stnnd foreclosed.
The suit against defendants 2 and 3 was
dismissed without costs.
On appeal in this Court the principal question raised centres
round the provisions of the. C. P. & Berar Moneylenders' Act.
This Act which came into force on Aoril 1, 1935 was enact·
ed with the object of making better provision for the regulation
662
SUPREME COURT REPORTS
[1971) 1 S.".:.R.
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 contract. It was framed
broadly on the lines of the Punjab Regulation of Accounts Act
(No. 1 of i939) 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 instalments 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 respresentatives and successors
in interest.
"Loan" as defined in cl. (vii) means
an actual
a<lvance 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 ori 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. 11-A
to 11-J were added.
In the definition of "moneylender" also it
was added in the end : "and moneylending shall be construed
accordingly".
According to s. 11-B every person carrying on or
intending to carry on the business of moneylending 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 holder thereof to carry on the business
of moneylending in other districts for which he does not hold such
certificate.
Section 11 F debars a person from carrying on the
business of moneylending in any district unless he holds a valid
registration certificate in respect of that district. Sub-iection (2)
of this section makes contravention of this section a penal offence
punishable wih fine extending .to Rs. 100/- and in ease of a previou~ conviction the fine may extend to Rs. 200/-.. According
'to s. 1 lH no suit for the recovery of a Joan advanced by a moneylender is to proceed in a civil court until the court is satisfied that
he holds a valid re11:istration certificate or that he is not required
to have such a certificate by reason of the fact that he does not
carrv on the business of money lending in any of the districts of ,
Madhya Pradesh. The question which arise• for consideration in
this case :s whether the suit out of which this. aopeal ari~es is
incomoetent and whether the transaction of moiiey lending is
void and, therefore, unenforceable in courts of Jaw.
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(;
On behalf of the appellants strong: reliance wa~ olaced on the
decision of the House of Lords in Cornelius v. Phil/ins('). In
H
that case. distinguishing and explaining- an earlier decision of the
(1) [1918] A.C. 199.
(2) [1910] A.C. 514.
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GAJANAN v. BRlNDABAN (Dua, J.)
663
House of Lords in Whiteman v. Sad/?re) s. 2(2) of the Money·
lenders' Act, 1900 ( 63 & 64 Vic. c. 51) was held to have the
effect of rendering void a transaction of moneylending 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, un·
enforceable in courts of law. A similar argument on the auth,1rity of this decision was raised before a Bench of the Nagpur
High Comt in Patiram v. Bali ram I') but was not accepted. The
case of Cornelius v. Phillips(') was distinguished and it was
obser~d:
"The learned counsel for. the applicant then relied
on the House of Lords d~ision in Cornelius v. Phillips(') which was a case under the English Moneylenders' Act.
The qvestion 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 w~s d~cided in
thnt 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 re,R;arding "registered name"
and
"registered address" which are not to be found in the
letter. Section 2(1 )(cl 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 helo in d~ciding
cases under the Central Provinces and Berar Moneylenders' Act.
We may here quote the warning
~iven
hv their Lordships of the Privy Council in l,asa Din v.
Mt. Guiab Kunwar(•).
'It is they think, alwavs dangerous to apoly English
decisions to the construction of an Indian Act.'
(I) 19S3 N.L.J. S17. S22.
(2) (1918] A.C. t99.
(3) A.T.R. 1932 P.C. 207, 211.
' !
664
SUPREME COURT REPORTS
[1971] l 8.C.R ..
We, therefore, do not propose to discuss the other cases
under the English Moneylenders Act cited by the learned couns~l
for the applicant.
After referring to s. 1 lB and to Maxwell on Interpretation of
Statutes the court observed :
A
"This special statute which trenches on the ~ontracB
tual rights must be construed strictly against those who
seek. to. avail of it. There are no .rea_sons to suppose that
the Legislature i!Jtended
that every
transaction of
moneylending made after the amendment came into
force till the lender was able to obtain a registration
certificate was invalid and unenforceable thereby enrichc
ing the debtor at the cost of the creditor without any
fault of the latter.
The learned counsol has not
brought to our notice any c'1mpe!Jing reasons to accept
his construction which manifestly leads to injustice to
the moneJllenders." (p. 523)
The final conclusions of the court were
expressed in
these
D
words:
"It will be clear from all this discussion that section
llF applies to the business or moneylending and not to
an individual transaction of lending money and t!1at 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
moneylending 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 moneylending are not
affected for want of a registration certificate, a moneylender is exposed to the penalty provided by section llF
of the Act for carrying on the business without a valid
registration certificate: We may cite Shanshir Ali v.
Ratnaji(') in support"
·
E
F
G
· The appellants' counsel also tried to distinguish
the Full
Bench decision of the Nagpur Bench in Hajarimal v.
Harl
Narayan(') (which overruled
Wasudeo
Bhairulal v.
Ramchandra(') by submitting that the Full Bench had left open the
H
0) A.J.R. 1952 Hyd. 58 (F. B.)
. (2) (1965) 67 Born. L.R. 816.
(3) (1958) 60 Born. L.R. 1247.
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GAJANAN v. BRINDABAN (Dua, J.)
665
question of the transaction entered into by a moneylender . in
contravention of s. 1 lF being void and opposed to public pohcy.
It is true that this precise question was not considered by the
Full Bertch 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,(') is that
as
s. 11-F prohibits a moneylender from carryinp,; 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 tJy an unregistered moneylender
cannot be maintained.
With respect, it may be pointed
out that the Legislature i¥elf has not barred a civil suit
in respect of such a tra~saction. The only obstacle
which it has placed in the way of a plaintiff in such a
case is that the suit shall 1 not proceed until
a valid
registration certificate has il;n 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 moneylending business without a certificate.
It fos 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 prescribeil"
The decision of the Full Bench of the Madhya Pradesh High
Court in lanki Bai v. Ratan Melu('l was also referred to with
approval.
In Janki Bai'.1· case(') also the decision of the House
of Lords in Cornelius v. Phiilips( 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 c?nstruing s. 11-F of the C. P. Act.
In regard to the true
meanmg of s. 11-F the Full Bench. after an elaborate discussion
summed up its vi•w thus :
"The ccnsiderations having a bearin" on the construction of s. 11-F of the Act may now be summed up.
<1) (1958) W Bom. LR. 1247.
(2) A.LR. 1962 M. P. 117 (f.B.)
(3) [1918] A.C. 199.
666
SUPREME COURT REPORTS
(1971) l S.C.R.
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 moneyiending and
not for every loan advanced by h;m withoμt a registration certificate.
In a moneylender's suit, his failure to
obtain a registration certificate is not re,garded as a
vital consideration and is, for that reason, not required
to be tried before considering the case on merits. On
the c'ther hand,
s. l 1-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
11-F was not enacted for the protection of persons dealing with .moneylenders.
Its only object appears t'.l 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 unregisiered moneylender cannot be regarded as impliedly
prohibited by s. l J-F."
Section 11-F was also held in this decision not to bar individual
advances.
The principal question which arises is whether the vfew of
law as taken by the Nagpur High Court in the Pali 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 Hajarima/ case in 1965 is so
clearly e1 roneous that !his Court shotlld 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 lsadas 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
alreadv 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 instalments for execution of
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GAJANAN v. BRINDABAN (Dua, J.)
667
decrees.
We are also inclined to think, in agreement with the
decisions of the Nagpur High Court in Pati Ram and Ha1arimal
and of the Madhya Pradesh High Court in Janaki Bat, that the
provisions of the English Act construed in Com~lius and of the
C. P. Act, with which we are concerned, are not compieteiy 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 an ived at in
those cases.
Turning to the scheme of the Act which concerns
us let us see if the transaction of money lending which is the sub·
ject matter of the suit out of which this appeal arises is void and,
therefore, unenforceable in courts of law and if for that rwson
the suit is incompetent. We have already referred to the broad
outlines of the Act.
We may now examine its 1cheme more
closely to see if the impugned transacti0n is ilit by Its prohibitory
provisions and the progres~ <>f the present suit barred.
Before
considering its statutory 5cheme it may be pointed out that though
this Act having been initially e:iacted in what was then known
as the Central Provinces and was named "The Central Provin~ts
Moneylenders' Act, 1934" it was later extended to what is now
known as the State of Madhya Pradesh with slieht formal modifications not affecting the substance of the statuto1y sch~me. 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 o 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 "moneylendmg" 1s also 10
be construed accordingly. By virtue of s. 2(ix) "Sub-Registrars"
appointed under the Indian Registration Act are to funclion under
the present Act.
Section 11-A enjoins every Sub·Registrar to
maintain a register of moneylenders in the μrescribed
form.
Section 11-B renders it obligatory for every oerson who carries
on or intends to carry on the business of moneylending to get
himself registered by an application to the Sub-Rci,istrar of the
sub-district in which he carries on or intends to ~arry on such
business.
The application is required inter a/ia to specify thr
district or districts in which the apolkant carries on or intends "
to carry on business of moneylendinj!'.
Section 11 -D provides ·
that the registration certificate granted under s. 11-B ~hall not
entitle the holder theFeof to carry on the business of moneylending in other districts. Section 11-F which bars per1cns from
carrying on business of moneylending without rc,51.itration certificate also provides a penalty for the contravention of this provision.
6G8
SUPREME COURT REPORTS
[1971] l S.C.R
Section l l-G provides for composition of offences covered by
s. l l-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 moneylending.
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 aufhodties on the
statutes regulating and controlling moneylenders in which the
expression "moneylender" has been so construed as to exclude
i~olated t rnnsaction or transactions of money lending. Vivian Bose, -
J., while dealing with the Act, which concerns u~. in
Sitaram
Sharwan v. Bajya Parnav (1) said :
"The word 'regular' shows that the plaiatilf must
have bee.~ in the habit of advancing loans to persons
as a matter of regular business. If only an isolated &ct
of moneylending is shown to the court it is impossible
to state that that constitutes a regular course of busi·
ness. Ids 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(') and
by Shiv Dayal J., of the same High Court in Gurmukh Rai v. Hari
Har Singh('). The same view was.taken by K. L. Pandey J., of
the same High Court in Chai th Ram v. Baparimal ('). In this
case both s. 2(vl and s. 11-H of the Act came up for construction.
In Sitaram Sharwan(') it was also held that the perso'.I
seeking advantage of the Moneylenders' Act h:is to prove that the
plaintiff is a moneylender. _ To the same effect is the decision by
T. C Shrivastava J., in Kishanla/ v. Laxmibai(").
Section 11-F on its plain reading only prohibils the carrying
on of the business of money!ending in any district without holding
a valid registration certificate in respect of ~hat district.
It does
not prohibit and, thei;efore, does not invalidate an isolated transaction of lending money. Such an isolated tranrnction 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
(I) A.LR. 1941 Nag. 177.
(2)
M.F.A. 124 of 1956 decided on December 18, 1957-1958 M.P.L.J.
Note no.
11.
(J) S.A.No. 39/1961 d 26.3.1964-M, P.L.J. note 102.
(4) C.R. 374/1959 d/l ·7·1960--1960 M:P.L.J. note 198.
(5J A.J.R. 1941 Nag. 177.
(6J C.P. 10911962 d/20·7·1962-1963 M.P.L.J. 119.
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'GAJANAN v. BRINDABAN (Dua, I.)
669
transaction of lending money in another district in which he is not
regiscered would not make any difference in this respect and such
isolated transactio,1 would not be hit by the prohibitory mandate.
Section 11-H also operates only against the suits by moneylenders
on loans advanced by them and would similarly eJ(clude trom its
purview a suit on an isolated transaction not entered into by a
moneylender in the regular course of the busine;s of moneylending. Tlie statutory scheme thus clearly seems to indicate that
it is only the business of moneylending which is sought to be controlled and individual trans.actions 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 iimited only to the
extent necessary for regulating and controlling the business of
moneylending.
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 N agBJ!r and M. P. High Courts in Pali 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 arc entitled to rely on (_!
decision of the highest court which appears to have prevailed for
considerable length of time and it w~mld require some exceptional
reason to justify its reversal when such rev.ersal 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 imcrpretations than
one, and . one view accepted by the highest c::iurt 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 ordinanly be reluctant to
put upon it a different interpretation which
would
materially
affect those transactions.
In the case before us the construction piaced bv the Nagpur
&nd Madhya Pradesh High Courts on the relevant provi,ion of
the C. P. Act seems to have been accepted all these )'ears beginning with Sita Ram Sharwan in 1941 (except for a short period
between 1958 and 1962) and rights to propaty 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 W asudeo, of course, dissented 1n l 958 from the vie"'
of the Division Bench of the Nagpur High Court in l'ati Ram
without referring the ooint of dissent to a larger Bench. But a
Full Bench of the Madhya Pradesh High Court disagreed with the
670
SUPREME COURT REPORTS
( 1971] 1 S.C.R.
Wasudeo case, vide Janaki Bai .. It, therefore, seems obvious that
titles and transactions must have been founded on the view of
law which, J>y 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 di.sturb them by adopling 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 a~uming 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 adgpted in the judgment under appeal is so clearly
and patently erroneous that it should, in the larger intrests of
justice, be upset notwithstanding the fact lha1 it)s likely to disturb rights to property and under contracts founded upon this
construction.. The fact that contravention of s. l 1-F ( i l of the
Act is made a penal offence is an additional factor against the
propriety of over-ruling and upsetting the es:ablished view unless
we feel cominced 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 m2,y appropriately
be noticed. Sections 11-C, 11-F(i) and 11-G(i) .:if the Act were
amended by M. P. Act 40 of 1965. Had the cJnstruction 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 musr be fixed with the
knowledge of the construction placed on th~ 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 tlie buiness of
moneylending in Chanda District, the single transaction in dispute
in that district was not covered by tlie 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 tc
~irect modification of the impugned decree.
The appeal accordmgly fails and is dismissed but without costs.
G.C.
Appeal dismissed.
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