Desai Bhao vs Karviram Gouda

Siadatali Khan, J.—This is a second appeal in a civil suit. The Munsiff Court, Sindhnoor Taluk, Raichur District, by judgment dated 24th June 1950 dismissed the plaintiff''s suit for non-compliance with Section 9 of the Money-Lenders Act, 1349 Fasli. On appeal the District Court, Raichur, reversed this judgment partly on 8th February 1951 by decreeing the principal only. Hence this second appeal by the defendant praying that the entire suit should be dismissed. I heard the arguments of the learned advocates of the parties and record my opinion below.

The loan was advanced on 27th Thir 1355 Fasli; 22nd Ardibehisht 1356 Fasli was the date fixed for repayment; the suit was filed on 3rd Meher 1358 Fasli; and the plaintiff obtained the licence on 12th Bahman 1359 Fasli. The Court of first instance held that as the amended Section 9 came into force on 11th Khurdad 1355 Fasli and as the plaintiff was not a licensed money lender at the time of filing the suit it cannot be decreed under the amended S. 9 and, therefore, dismissed it. The learned advocate for the plaintiff-respondent cited the case of ''Gandur Malliah v. Satham Lingiah'', 3 Nazaer Osmania 606, where it was held that though the plaintiff had not taken a licence at the time of lending the money; yet as he had obtained it before filing the suit, it was enough. He pointed out that in this suit also though the plaintiff had not obtained the licence at the time of the loan yet he had obtained it before judgment and that should be enough. I am afraid, I cannot agree to this, for in the precedent cited, note was taken of the fact that S. 8 of the Moneylenders Regulation 1347 Fasli contained the provision that failure to take a licence would entail the dismissal of the entire suit; but in the corresponding S. 9 of the Money-lenders Act 1349 Fasli it was provided instead that for failure of taking a licence interest and costs should be disallowed but the Court may in its discretion decree the principal sum. It was held that as the law itself was somewhat lenient inasmuch as it lessened its rigour by allowing a decree of the principal sum, it was enough if the licence was taken before the filing of the suit. Moreover S. 8 (1) (b) of the 1347 Fasli Regulation prescribed that licence should be taken in accordance with the Rules to be framed; and it is a fact that rules were framed in Shehrewar 1350 Fasli. Thus it is clear that in the beginning emphasis could not be laid on taking of licence contemporaneously with the loan. Evidently these were the grounds on which a licence taken not at the time of the loan but at the time of filing the suit was considered sufficient. All this was changed by the amended S. 9 of the Moneylenders Ac; 1349 Fasli by which it is provided that if any money-lender were to fail in obtaining a licence, the entire suit should be dismissed. In the circumstances the above-mentioned precedent stands distinguished. Moreover, there have been other cases decided after that precedent; for example, reference may be given to ''Govindsingh v. Wali Mohd.'', AIR 1951 Hyd 44 and ''Mohd. Bin Salam v. Fakir Mohd.'', ILR (1951) Hyd 349. In both these cases it is held that under S. 3, cl. (2) of the Hyderabad Money-lenders Act it is mandatory for every person to obtain licence ''before'' doing money-lending business and failure to do so is made punishable with fine or imprisonment or both; and that consequently the money-lender cannot recover the money lent by invoking the aid of S. 66 of the Hyderabad Contract Act (corresponding to S. 65 of the Indian Contract Act).

Before I allow this appeal, I will advert to some comments in ''Mohd. Bin Salam v. Fakir Mohd.'', ILR 1951 Hyd 349, referred to above. This case is decided by a Single Judge of this High Court. There the learned Judge has commented on the case of ''Baburao v. Nathuram'', 40 Deccan L R 304, that as it was held in that case that the amendment to S. 9 is merely a matter of procedure, he is with the due respect not in agreement with that ruling. He held further that it was decided in that case ''40 Deccan L R 304'', that as the amendment to S. 9 of the Money-lenders Act is merely an amendment of procedure, it affects only transactions subsequent to the amendment. I have carefully perused ''40 Deccan L R 304'', and I am afraid, I found the observations of the learned Judge to be incorrect; for in two places on page 306 - line 1 and line 10 - it has been expressly held that the argument that the amendment to S. 9 is a matter of procedure is not correct; and reference was also given to an unreported case of ''NUSKU CHANNA GANGAREDDY'', which held that the amendment to S. 9 was an amendment to a substantive right.

In the circumstances, it seems to me that there was some misapprehension which caused the abovementioned observations by the learned Judge. The very fact that it was held in ''40 Deccan L R 304'', that the amended S. 9 applies to ''transactions subsequent'' to the amendment shows that it was held in that case that the amendment was not a matter of procedure but related to matters of substantive right; for an amendment to a matter of procedure is always retrospective and an amendment to that of a substantive right always dates from the time of coming into force of the amendment unless a contrary intention is expressly mentioned in the Act itself. This is a principle as old as the mountains and hardly needs any reference; it is embodied in the Hyderabad General Clauses Act and applied by the Hyderabad Judicial Committee in ''38 Deccan L R 409''. Hence the very fact that the learned Judge quoted from ''40 Deccan L R 304'', to the effect that the amendment applies to ''transactions subsequent'' to the amendment shows that what was held in ''40 Deccan L R 304'', was that the amendment to S. 9 was not an amendment to a matter of procedure but an amendment to a matter relating to a substantive right. Once it is clear that the amendment to S. 9 relates to matter of substantive rights it follows that the amended S. 9 can only apply to ''transactions subsequent'' to the amended section and does not apply to ''transactions antecedent'' to it; and I find that what was held in ''40 Deccan L R 304'', as well as in ''Mare Bin Salam v. Mathura Pershad'', 40 Deccan L R 163, was not more than that. It seems, therefore, rather strange, and I say this with great respect, that the learned Judge has expressed his approval with ''Mare Bin Salam v. Mathura Per-Shad'', 40 Deccan L R 163, and not with ''Babu Rao v. Nathuram'', 40 Deccan L R 304.

It appears to me that the learned Judge has greatly emphasized and rightly too, the restrictive and mandatory nature of the provision of S. 3 (2), (5) of the Hyderabad Money-Lenders Act, 1349 Fasli, holding that as money-lending without a licence is made an offence, a transaction without a licence becomes wholly void. With this I agree with due respect; but it appears to me that the learned Judge is under a misapprehension, about the amendment to S. 3 of the Money-lenders Act being prior to the amendment to S. 9, for he has remarked that:

Evidently the attention of the Legislature was not drawn to this aspect of the matter that by S. 3 of the Act money-lending business without licence being obtained, is made an offence. Yet the Legislature originally thought it fit to impose some disability on the defaulting money-lender by providing that he should be deprived of his costs and interest. However, the present amendment which provides for dismissal of the suit altogether is in conformity with the view that money-lending business without licence being obtained is an offence and that consequently the moneylender cannot enforce the contract.

As a matter of fact the amendments to S. 3, and S. 9 were both made by Jareeda dated 11th Khurdad 1355 Fasli Volume 1, page 1551. In any case the restrictive and mandatory nature of S. 3 cannot be deemed to give retrospective effect to amended S. 9. Supposing the amendment to S. 3 had been antecedent to the amendment to S. 9, even then we would have been compelled to hold that the amendment to S. 9 being an amendment to a matter relating to substantive right can only take effect from the day of its coming into force; but as S. 3 has made an offence of money-lending without a licence, it will be the governing section and it will vitiate all transactions from the date of the enforcement of S. 3. In that event there would have been disparity between S. 3 and S. 9 as the effect of S. 3 would be to render all transactions without a licence illegal and void, and effect of S. 9 prior to amendment would be to render transactions valid but interest and costs void. Any way, the Legislature has been guilty of no such illogical formulation; for before the 1355 Fasli amendment to S. 3, it has not made money-lending without a licence an offence and S. 9 then directed only that interest and costs should not be allowed, and after the said amendment while S. 3 has rendered money-lending without a licence an offence and, therefore, illegal and void, S. 9 also directed that the entire suit should be dismissed. I have made the above observations so that there should not be any misapprehension as to the intention and the actual decision of ''40 Deccan L R 304, which was also decided by me.

And lastly, what is the correct effect of making money-lending without a licence an offence? In both the cases cited above ''Govind Singh v. Fakir Mohamad'', AIR 1951 Hyd 44 and ILK (1951) Hyd 349, it is held that the loan cannot be recovered by invoking the aid of S. 65 of the Indian Contract Act. No authority has been cited. I have in a Full Bench case of ''Molchand v. Mir Riazuddin'', 40 Deccan L R 25, of this Court held that S. 66 of the Hyderabad Contract Act (corresponding to S. 65 of the Indian Contract Act) leaves no room for denying the return of the benefit derived under a void contract, and have also cited the Privy Council case of ''Harnath Kunwar v. Inder Bahadur Singh'', 45 All 179 (PC), where their Lordships of the Privy Council have held that

an agreement discovered to be void is one discovered to be not enforceable by law and, on the language of the section, would include an agreement that was void in that sense from its inception.

and have held the plaintiff entitled to recover the compensation. The difficulty in applying this S. 66 to the loans under the Money-lenders Act felt by the learned Judges, viz., that it will render the Money-lenders Act infructuous, in my opinion, does not arise at all; for the amended S. 9 expressly provides that the entire suit should be dismissed; and the Money-lenders Act being a special Act will prevail lover S. 65 and S. 66 of the respective Contract Acts.

In the circumstances I accept this appeal, reverse the judgment of the District Court, restore the judgment of the Court of first instance by which the entire suit has been dismissed.

Appeal allowed.