H.R. Halappa and Others vs H. Devaraju

V. Jagannathan, J.—In order to attract the provisions of the Karnataka Money Lenders Act, 1961 (''the Act'' for short), should the activity of money lending be carried on as a "profession" or is it sufficient that the activity falls under the expression "business" is the point that arises for consideration in this second appeal.

Briefly stated the facts are, the plaintiff, whose legal representatives are the appellants herein, filed the suit against the respondent-defendant for recovery of money based on a promissory note said to have been executed by the defendant and the amount borrowed by the defendant is Rs. 20,000/- and it was to be repaid with 2% monthly interest. The defendant borrowed the amount from the plaintiff on 10.1.1990 but, did not pay the amount back with interest and hence, the suit by the plaintiff.

The defendant contested the said suit by taking up the stand that the promissory note in question is inadmissible in view of the material alterations and insufficient stamp and secondly, the plaintiff was engaged in money lending business without having a valid licence as required under the Act. Hence, he sought for dismissal of the suit.

The trial court formulated necessary issues and the parties led the evidence and thereafter, on appreciating the evidence on record and upon hearing the learned Counsel for the parties, the learned trial judge answered the issue relating to the defendant borrowing Rs. 20,000/- from the plaintiff by executing a promissory note and held the issues pertaining to the defence raised by the defendant in the negative and the suit of the plaintiff was decreed with 10% interest being payable per annum by the defendant within six months from the date of the judgment.

The defendant appealed to the lower appellate court contending that as the plaintiff did not possess valid licence as required under the Act, the suit of the plaintiff ought to have been dismissed only on this score in view of Section 11 of the Act. The lower appellate court accepted the said contention put forward and held that the plaintiff is engaged in the "business" of money lending and as he had no valid licence, the trial court ought to have dismissed the suit. According, the lower appellate court allowed the appeal filed by the defendant and the suit of the plaintiff was dismissed.

I have heard the learned Counsel Shri M.S. Purushothama Rao for the appellants and the learned Counsel for the respondent Shri Shivachandra Naik and perused the entire records of this case.

The first submission of the learned Counsel for the appellants is that, in order to attract the provisions of the Money Lenders Act, it has to be proved that the plaintiff was carrying on the activity of money lending as a "profession" and, as the plaintiff was engaged in agricultural activity, one or two instances of money lending to needy persons cannot be construed as to mean that the plaintiff carrying on the profession of money lending and, as such, the Act does not apply to the instant case.

It was also contended that, in order to engage oneself in the activity of money lending, the said activity will have to be carried on a whole-time basis and it cannot be part of an activity of a person, who is engaged otherwise in another activity, like agriculture. In this connection, the learned Counsel referred to the definition of "Money Lending" as contained in Section 2(10) of the Act and placed reliance on the decision reported in ILR 1979 Kar 2138 to submit that only when the activity is carried on as a profession with a profit motive that the question of complying with the requirement of holding valid licence as required under the Act arises and not otherwise.

The learned Counsel also referred to the evidence of the parties in this connection and to the finding of the lower appellate court and submitted that the lower appellate court only took note of the evidence of D.W. 1 and the documents Exs.D-2 to D-6 to arrive at the conclusion that the plaintiff is engaged in money lending activity and the said procedure followed by the lower appellate court, therefore, is incorrect.

On the other hand, the learned Counsel for the respondent contended that the evidence on record amply demonstrates the fact of the appellant being engaged in the business of money lending and the appellant himself has admitted while examined as P.W. 1 about the activity of money lending being carried on by him for over five to six years and also charging interest on the money advanced to the need persons. In addition, the evidence of D.Ws. 1 to 3 and the documents produced by the defendant confirm the fact of the appellant being engaged in the activity of money lending.

It is then submitted by the learned Counsel that, in order to attract the provisions of the Act, one does not have to involve himself in money lending activity as a whole-time business or occupation, but the said activity could be in addition to any other occupation of the person concerned. It is then argued that all that is required to bring a case within the purview of the Act is that the person concerned is engaged in the "business" of money lending and the Act does not require the activity to be carried on as a "profession". He also relied on the very same ruling referred to by the appellants'' counsel and submitted that once there is profit motive, it is established that the activity carried on comes within the expression "business" and, in the instant case, the evidence on record discloses that the plaintiff was in the habit of advancing loans to several persons and had been charging interest between 1.5% to 2% per month and, as such, the said activity of the plaintiff comes squarely within the ambit of Money Lenders Act. As no licence was held by the plaintiff, the lower appellate court has rightly dismissed his suit.

Having thus heard the submissions of the learned Counsel for the parties and as this matter is being heard at the stage of admission itself and as the records have been called for, the substantial question of law that arises for consideration is whether the lower appellate court was justified in holding that the suit of the plaintiff is not maintainable in view of the bar contained u/s 11 of the Karnataka Money Lenders Act.

From the submissions made by the learned Counsel for the parties and the evidence placed, it is established that the plaintiff advanced a loan of Rs. 20,000/- to the defendant and Ex.P-1 is the promissory note evidencing the said transaction. The fact that the defendant did not repay the loan amount is also not in dispute. Therefore, the only question that requires to be answered is whether the suit of the plaintiff could have been decreed in the absence of the plaintiff holding a valid licence as required under the Act.

Section 11 of the Act reads as under:

Suits by money-lenders not holding licence. - (1) After the expiry of six months from the date on which this Act comes into force, no court shall pass a decree in favour of a money-lender in any suit to which this Act applies, filed by a moneylender, unless the court is satisfied that at the time when the loan or any part thereof to which the suit relates was advanced and on the date such suit filed the money-lender held a valid licence.

(2) to (5) xxx xxx xxx

As far as the argument advanced by the learned Counsel for the appellants is concerned, the first point to be considered is whether the activity should be carried on as a "profession" to attract the Act. Though it is contended by the learned Counsel for the appellants that one has to carry on the activity as a "profession" and further that the person engaged in the money lending activity has to involve himself wholly in that activity and no others is concerned, a perusal of the definition of "Money Lender" and business of money lending does not give room to take the view that the activity will have to be carried on, on the lines of any other "profession".

Section 2(10) of the Act reads as under:

(10) "money-lender" means:

(i) an individual; or

(ii) an in divided Hindu family; or

(iii) a company; or

(iv) an unincorporated body of individuals;

who or which:

(a) carries on the business of money-lending in the State; or

(b) has his or its principal place of such business in the State, but shall not include a Bank or any other financial institution which the State Government may, by Notification specify in this behalf;

Section 2(2) of the Act is to the following effect:

Definitions. - In this Act, unless the context otherwise requires,:

(1) ...

(2) "business of money-lending" means the business of advancing loans whether or not in connection with or in addition to any other business;

xxx xxx xxx

It is, therefore, clear from the very definitions of the aforesaid expressions that the emphasis is on the term "business" but not "profession". It may not be out of place at this juncture also to refer to the dictionary meanings of the terms "profession" and "business". The Oxford Advanced Learner''s Dictionary of Current English provides the following meaning to the words "profession" and "business":

Business: buying and selling; commerce; trade.

Profession: occupation.

Therefore, reading together the dictionary meanings assigned to the above expressions and taking note of the definitions as contained in Sections 2(10) and 2(2) of the Act, it can very well be said that all that is required to attract the provisions of the Act is that the person must engage himself in the business of money-lending. Secondly, so far as the contention of the learned Counsel for the appellants that one has to engage himself whole-time in money lending activity is concerned, no such inference can be drawn from a reading of the aforesaid definitions contained in the Act.

The very expression "business of money-lending" used in Section 2(2) of the Act makes it clear that the said activity of money-lending can be carried on in connection with or in addition to any other business. Therefore, the Act does not prohibit a person from engaging himself in money-lending business in addition to any other activity of his. The second contention put forward, therefore, also has to fail for the said reason.

Coming to the evidence on record, though it is contended that the plaintiff was not in the business of money-lending, the evidence speaks otherwise. P.W. 1, who is the plaintiff, has admitted in the course of his cross-examination that he had been giving loans to various persons for over 5 to 6 years and had been collecting interest from them. The said evidence of P.W. 1 is also supported by the evidence of the other witnesses for the defendant viz., D.Ws. 1 to 3.

On behalf of the defendant, several documents have been produced through D.Ws. 1 to 3 and these documents are the promissory notes obtained by the plaintiff from various persons and D.W. 1 is none other than the scribe, who used to prepare the promissory notes at the instance of the plaintiff.

Therefore, the evidence on the whole and in particular the admission of P.W. 1 itself is sufficient to draw the inference that the plaintiff had been in the business of money-lending for several years and he even goes on to admit that he advanced loan of Rs. 50,000/- to several persons and collected the amount with interest and also admit that he did not possess any licence as required under the Act.

In the face of the aforesaid evidence, the lower appellate court has arrived at the conclusion that it has been established from the evidence on record that the plaintiff had been engaged in the money-lending business with several persons. The said finding of the lower appellate court is in accordance with the above evidence placed on record by the parties themselves. As such, I see no perversity of finding in the view taken by the lower appellate court.

As the plaintiff was not possessing any valid licence as required under the Act, Section 11 of the said Act comes into operation and the said Section provides that, after the expiry of six months from the date of coming into force of the said Act, no court shall pass decree in favour of a money-lender in any suit to which the Act applies unless the court is satisfied that at the time the loan or any part of it was advanced, the money-lender held a valid licence.

As the plaintiff did not possess a valid licence as required u/s 11 of the Act, the trial court could not have decreed the suit of the plaintiff. The lower appellate court has rightly set aside the judgment of the trial court by dismissing the suit of the plaintiff. I, therefore, answer the substantial question of law raised for consideration in favour of the view taken by the lower appellate court.

For the aforesaid reasons, the appeal stands dismissed.