Firm Chint Ram Sohan Lal vs Amar Singh

B. S. Yadav, J.

In this second appeal filed by the plaintifffirm it is not necessary to give in detail the facts of the case as the short point involved now is whether the plaintiff is a moneylender. Suffice it to say that the plaintiff had filed a suit for the recovery of Rs. 1732.05 on the basis of a baqi entry. According to plaint allegations, the defendant had borrowed varying amounts on different dates and when the accounts were settled, Rs. 1,130/ as principal and Rs. 153/ as interest were found due from him and for that total sum he had executed a baqi entry in favour of the plaintiff on 22nd February, 1971. In the suit the plaintiff claimed Rs. 1,283/ as principal amount and Rs. 449.05 as interest at the rate of Re. 1/ per cent month.

The defendant contested the suit and denied the allegations of the plaintiff and further pleaded that the plaintifffirm was doing the business of moneylending but it had no moneylending licence and, therefore, the suit was liable to be dismissed. The learned trial Court held that the defendant had executed the baqi entry in question after understanding the accounts. It was further held that the plaintifffirm was doing the business of money lending as defined in the Punjab Registration of MoneyLenders'' Act, 1938 (for short the Act) and, therefore, in view of Section 3 of this Act the suit was liable to be dismissed. Consequently, the suit was dismissed. Feeling aggrieved, the plaintiff filed an appeal which was heard by learned Additional District Judge, Bhatinda. Before him the only point that was urged on behalf of the plaintifffirm was that it was not a moneylender as defined in the Act. Additional District Judge did not agree with the submissions made on behalf of the plaintifffirm and confirmed the finding of the learned trial Court on that point and the appeal was accordingly dismissed. The plaintiff has now filed this second appeal.

The learned counsel for the appellants argued that the plaintifffirm cannot be said to be a moneylender as it has not come in evidence that it is carrying on a regular business of advancing loans to all and sundry and that, in fact, it is advancing loans only to its clients i.e. the persons who deal with its Commission Agency business. In support of his argument he has also relied upon Amar Singh v. Kuldip Singh and others, AIR 1952 Punjab 207 (D.B.). To appreciate this argument it will be necessary to go into the definition of moneylender as defined in Section 2(9) of the Act. That definition reads as follows :

"(9) ''MoneyLender'' means a person, or a firm carrying on the business of advancing loans as defined in this Act, and shall include the legal representatives and the successorsininterest whether by inheritance, assignment or otherwise of such person or firm; provided that nothing in this definition shall apply to

(a) a person who is the legal representative or is by inheritance the successorininterest of the estate of a deceased moneylender together with all his rights and liabilities; provided that such person only (i) winds up the estate of such moneylender; (ii) realises outstanding loans; (iii) does not renew and existing loan, nor advance any fresh loan;

(b) a bona fide assignment by a moneylender of a single loan to any other than the wife or husband of such assignor, as the case may be, or any person, who is descended from a common grandfather of the assignor.''''

That definition came up for interpretation in Amar Singh''s case (supra). Soni, J. who spoke for the Bench remarked as follows :

"Another case that was cited by Mr. Sibbal was, ''Sano Kashinath v. Patitto Sabuto'', AIR 1942 Pat. 384. In that case which was before a Division Bench Harries, C.J. quoted the case of ''Litichfield v. Dreyfus'', (1906) 1 K.B. 584, in which Farewell, J. said:

"But not every man who lends money at interest carries on the business of moneylending. Speaking generally, a man who carries on a money lending business is one who is ready and willing to lend to all and sundry, provided that they are from his point of view eligible. I do not, of course, mean that a moneylender can evade the Act by limiting his clientele to those whom he chooses to designate as ''friends'' or otherwise, it is a question of fact in each case.......So far as regards the few persons whom he has assisted since 1903, either by way of discounting bills of other persons for them or by discounting their own bills, it would be a straining of the language of the Act to hold that a man who so obliges friends is carrying on the business of a moneylender. The Act was intended to apply only to persons who are really carrying on the business of moneylending as a business, not to persons who lend money as an incident of another business or to a few old friends by way of friendship.

Another judgment was also referred to in that case. That case was a case of ''Edgelow v. Mac Elvee'' (1918) 1 K.B. 205, Mc. Cardie, J., in that case observed :

`A man does not become a moneylender by reason of occasional loans to relations, friends or acquaintances, whether interest be charged or not. Charity and kindness are not the basis of usury. Nor does a man become a moneylender merely because he may upon one or several isolated occasions lend money to a stranger. There must be more than occasional and disconnected loans. There must be a business of moneylending, and the ''business'' imports the notion of system, repetition and continuity....... The line of demarcation cannot be defined with closeness or indicated by any specific formula. Each case must depend on its own peculiar features. It is ever a question of degree''.

Another case that was referred to in that judgment was a Full Bench judgment of the Allahabad High Court ''in the matter of Bhairo Dutt'' AIR 1940 All. 1, in which it was held that an element of continuity and habit is essential to constitute the exercise of a profession or business. Investments of his savings by an Advocate do not necessarily amount to engagement in money lending business, the more so when such investments are few and far between and are mostly made to relations and friends. Harries, C.J., applying the principles of the rulings before him and on the facts of that case held that the person they were dealing with was not a moneylender. In that case over a period of thirty years four advances had been made and in each case there appears to have been special circumstances which caused the advance of money. Money did not appear to have been lent regularly, but they were merely isolated transactions and made in very special circumstances.

There is another case on the subject ''Newton v. Pyke'', (1909) 25 T.L.R. 127, in which the plaintiff had lent Pound 500 or Pound 600 as a friend, though he had charged interest. Some money had been advanced by the plaintiff to others in five other transactions. It was urged in arguments that on ten occasions the plaintiff had lent money perhaps at 60 per cent, and not to friends only. It was urged on behalf of the plaintiff that there was considerable social intimacy between the parties and that the money had been lent to a friend. Walton, J., quoted the case of ''Litchfield v. Dreyfus'', (19061 K.B. 584) already cited and said that it was a question of fact in each case. It seemed impossible, said the learned Judge, to lay down any definition or description which might be of any assistance but the learned Judge felt that it was not enough merely to show that a man had on several occasions lent money at remunerative rates of interest: there must be certain degree of system and continuity about the transactions. In that case the Judge felt great difficulty in coming to a decision, but, seeing that the moneylending transaction in which the plaintiff had been engaged for a long time before the date of the bill before him had been very few, and had been mostly, if not entirely with persons who could be described as friends or relations, and that the plaintiff had not advertised or announced or held himself out as a moneylender, he concluded that it would not be right to say that the plaintiff was a person whose business was that of moneylending at the time the bill was given.''''

The Division Bench came to the opinion that the plaintiff of that case was not a moneylender as the defendant was his relation and he had advanced money to him (i.e. defendant) to help him. Though there were 22 transactions of loan advanced to the defendant, it was held that it did not prove any system of moneylending to all and sundry and that it merely proved a wellplaced relation financing a relation and setting him up in business.

Thus in each case, upon the facts of its own, it will have to be decided if a certain person can be termed to be a "moneylender'''' or not.

Admittedly, the plaintifffirm is carrying on the business of Commission Agency. The facts which are relevant for the decision of this appeal have come in the statement of P.W. 1 Sohan Lal, one of the partners of the plaintifffirm. He has stated that the defendant used to bring grains to the shop of the plaintifffirm. He has further stated that loans are advanced only to the producers who bring grains for selling through agency business of the plaintifffirm and interest from such persons at the rate of 1 per cent and from some, at the rate of 1.5 per cent per month is charged but if a producer brings grains in large quantity and loan is advanced to him then interest is not charged from him. He has also stated that such producers, who come to his shop are hundreds in number. On the basis of these facts both the learned Courts below have held that the plaintifffirm has advanced loans to hundreds of persons. I am of the opinion that conclusion is not correct. For the convenience of its customers, the plaintifffirm is advancing loans to them. Thus it is not carrying on a separate business of money lending but lends money as an incident of its other business. There is no evidence on the file to show that the plaintifffirm had advanced money to any other person except its customers or had advertised itself as a moneylender. I am of the opinion that such advances of loans to the various customers will not make the plaintifffirm a moneylender. If the plaintifffirm did not help its clients in time of need, they would seek some other commissionagency for selling their agricultural produce. Thus the main interest of the plaintifffirm is in its commission agency business and to continue that business it is advancing loans to its constituents.

For the foregoing reasons I accept the present appeal, set aside the judgments and decrees of the learned Courts below and grant a decree for Rs. 1732.05 in favour of plaintifffirm and against the defendant. The plaintiff is also allowed further interest at the rate of 6 per cent p.a. on Rs. 1283/ from the date of the suit till realisation. The plaintiff will also be entitled to the costs throughout.