Mangilal vs Jadavchand

V.R. Newaskar, J.—This is an appeal under Clause 10 the Letters Parent against the judgment of a Single Judge of this Court.

Material facts for consideration of the question raised in this appeal are as follows: Appellant Mangilal is an agriculturist debtor where as Respondents Jadavchand and Amichand sons of Kundansa are creditors who carried on business of money lending. The Appellant started proceedings u/s 16(1) of the Madhya Bharat Money Lenders Act for accounts of the debts owed by him to the Respondents and for determination of the amount still payable by him to them. The allegations of the Plaintiff were that in Samvat Year 2005 Appellant''s son Natthu had pledged certain ornaments with the Respondents. In the Samvat Year 2010 the Respondents entered the transaction in the name of the Appellant in place of that of his son. The principal amount which had been borrowed on the basis of the pledge transaction was Rs. 625. When the Appellant, however, wanted to redeem the pledged articles he was told that the amount recoverable from him was Rs. 1,200. The Appellant went to the Respondents several times in order to see accounts but the same were not shown. The Respondents, it is alleged, had not sent annual accounts to the Appellant as was incumbent upon them under the Madhya Bharat Money Lenders Act. They therefore were not entitled to charge any interest in respect of the period for which no accounts had been sent. In view of this right of the Appellant he asked for accounts and for determination of the amount still payable by him to the Respondents. A declaratory decree to that effect was claimed.

On behalf of the Respondents it was contended that there had been an account between the parties on Chet Badi 2 Samvat Year 2010 & Rs. 1,330 were found due from the Appellant and his son Natthu. This amount was paid and a fresh transaction of pledge was entered into. Under the said transaction the Appellant and his son borrowed Rs. 300, by pledging a gold chain and a pair of Gokhrus, Rs. 450, by pledging two gold rings, one gold Putli-Ka-Har one Bajatti and Rs. 500, by pledging a silver Kandora and a pair of anklets. Out of these subsequent transactions pledge ornaments pertaining to the transaction of Rs. 500, had been redeemed whereas money due on the other two transactions was still due from him. It was also asserted that as the Appellant and his son failed to pay the amount due in respect of these two transactions in spite of notice given to them on 22-7-1958 the same were sold away and their dues were recovered. The suit of the Appellant was consequently incompetent.

The trial Court held that the Respondents had sold the ornaments after the Plaintiff''s suit u/s 16(1) of the Madhya Bharat Money Lenders Act had been filed. It was incompetent for them, according to that Courts, to frustrate the decree of a Court by selling away the ornaments and making their own adjustment. The suit was consequently held to be competent. The trial Court thereafter went through the accounts and found that the Appellant was liable to the principal amount of Rs. 775 only but was in no way liable to pay interest amounting to Rs. 373-75 nP although there was an agreement to pay interest as the Respondents had failed to comply with the requirement of sending annual accounts to the Appellant. It also over-ruled one of the contentions raised on behalf of the Respondents that the Appellant''s son Natthu was a necessary party and that in his absence the suit was incompetent. In consequence of these findings a declaration was grafted in favour of the Appellant that he was liable to the Respondent to the extent of Rs. 775 only upto 28-3-1928 and that after that date the Respondents would be entitled to claim interest at the rate of 37 N.P. percent per month subject to the condition of their sending annual account.

The creditors preferred appeal against this decision and raised the question regarding the competency of the present suit u/s 16 of the Madhya Bharat Money Lenders Act and regarding non-liability of the agriculturist debtor to pay interest in a suit of this description for failure on the part of the moneylender to send annual accounts. Both these contentions were overruled by the appellate Court and the appeal was dismissed.

A second appeal was preferred against that decision and the only question raised in the High Court in second appeal was whether u/s 13 of the Madhya Bharat Money Lenders Act any relief would be available to an agriculturist-debtor in a proceeding u/s 16 of the said Act While dealing with this question the learned Single Judge took into account the provisions contained in Sections 13, 15 and 16 and some other provisions of the Act and held:

It is clear that Section 13 gives power to the Court not to allow interest or costs for non-observance of certain rules as provided therein; but that is the power, it is clear, given to the Court when a money lender seeks to realise the money through it. A careful reading of Clauses (a), (b) and (c) would clearly indicate that it contemplates a money lender going to the Court for realisation of his dues, though the general part of this section says that the provisions of Section 13 would be applicable to any suit or proceedings relating to the loan.

Dealing with the competency of the Court in giving relief to the agriculturist-debtor u/s 13 of the Act the learned Judge held:-

If the legislature wanted that in making the accounts the contravention of Section 9 has also to be taken into account and a similar penalty which is provided in Section 13 has to be imposed then it could have mentioned it. In the second part of this section it has been specifically mentioned that Section 15 would be made applicable mutatis murandis to the decree that will be passed under it. It is therefore clear that the legislature was aware that Section 16 is independent and in order to apply Section 15 a specific mention has been made in the second part.

He held that Section 16(1) is independent of Section 16(2) and the Court dealing with a suit u/s 16(1) is not concerned with anything else than making accounts.

The appeal was consequently allowed and the judgment and the decree of the Court below was set aside and the case was remanded to the trial Court for disposal according to law and for passing a decree in conformity with the observations made in the judgment. Leave was, however, granted to file appeal under Clause 10 of the Letters Patent and the matter has been placed before us for consideration of the question whether in a suit u/s 16(1) of the Madhya Bharat Money Lenders Act it is competent for the agriculturist-debtor to contend that in making accounts he should not be held liable for interest in respect of the period for which the accounts had been sent by the money-lender as is required u/s 9(1)(b) of the Act in view of the powers vested in the Court u/s 13(c) of that Act.

In order to appreciate the correctness of the view taken it will be necessary to refer to certain provisions of the Madhya Bharat Money Lenders Act.

As the preamble of the Act indicates, the Act is designed ''to make provision for the regulation and control of the transactions of money-lending in the State of Madhya Bharat''. Although the Act is capable of being extended to money-lenders advancing loans to other sections of the community besides agriculturists it was applied in the first instance to those when advanced loans to the latter class. Various provisions in the Act, including Section 3 which requires every money lender to register himself as such and which provides for the consequences of his failure to do so, Section 9 which requires a money-lender to regularly maintain an account of each debtor, furnish him every year with a statement of accounts signed by the money lender, Section 11 which indicates non-binding character of the statement thus supplied so far as the debtor is concerned, Section 13 which requires, every Court dealing with any suit or proceeding relating to a loan, before deciding the claim on merits, to frame and decide the issue whether the money-lender has complied with the obligations imposed upon him by Section 9(a) and (b) of the Act and on finding that he has not so complied with those u/s 9 (a) to disallow whole or any portion of interest which the Court might consider reasonable and on finding that he has not complied with those u/s 9(b) to exclude every period for which non-compliance is found in computing interest, Section 15 which requires the Court not to allow interest to an extent greater than the actual sum advanced and lastly Section 16 which entitles a debtor to secure declaratory determination as to the amount due from him on taking accounts, all go to indicate that the Act is primarily designed to protect the particular class of debtors who need special protection from unscrupulous money-fenders who used to take advantage of financial stringency of the debtors and their ignorance and used to extort interest at exorbitant rate and otherwise secure undue advantage from them. Only provision which to a certain extent seems to reduce a certain trouble or inconvenience to the moneylender is the provision in Section 16(2) of the Act which enables the money lender to get the declaratory decree which a debtor has secured u/s 16(1) converted into a money-decree without having to file a separate suit on payment of Court-fee stamps. This provision in no way is indicative of the fact that the Act is designed any way to benefit the money-lender.

Thus the whole scheme of the Act is that it is designed for the protection and benefit of a debtor and as the Act at present stands, an agriculturist debtor. It is therefore not correct to refer mercy to the words in the preamble and to conclude that the Act is not primarily intended for the protection on a debtor.

In order to consider how far the protective and ameliorating provisions of Section 13 can be available in a suit of a debtor u/s 16(1) we may with advantage quote both these sections.

Section 13:

notwithstanding anything contained in any other enactment for the time being in

force in any suit or proceeding relating to a loan:

(a) the Court shall, before deciding the claim on the merits, frame and decide the issue whether the money-lender has complied with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 9 ;

(b) if the Court finds that the provisions of Clause (a) of Sub-section (1) of Section 9 have not been complied with by the money lender, it shall, if the Plaintiff''s claim is established in whole or in part, disallow whole or any portion of the interest found due, as may seem reasonable to it in the circumstances of the case, and may disallow costs; and

(c) if the Court finds that the provisions of Clause (b) of Sub-section (1) of Section 9 have not been complied with by the money-lender, it shall, in computing the amount of interest due upon the loan, exclude every period for which the money-lender omitted duly to furnish the account as required by that clause and may disallow costs either wholly or partly:

Provided that if the money-lender has, after the time prescribed in that clause, furnished the account and the Plaintiff satisfies the Court that he had sufficient cause for not furnishing it earlier, the Court, may, not withstanding such omission, include any such period or periods for the purpose of computing the interest.

Explanation-...........

Explanation 16:-

(1) Any agriculturist who owes any debt to his creditors, may sue for accounts of such debts and of money paid by him to his creditors and for determination of the amount, if any, still payable by him to the creditors on a Court fee stamp of Rs. 2 up to a sum of Rs. 500 and Rs. 5 for a sum exceeding Rs. 500.

(2) If the creditor, against whom and laboratory decree has been passed under

Sub-section (1), pay into the Court such Court fees as are required under the law for the time being in force for the declared amount, such declaratory decree shall be converted into a money decree against the debtor and the provisions of Section 15 shall apply mutatis mutandis to such decree.

It seem from the terms of Section 13 that the provision is meant to have overriding effect over other enactments on the subject. Clause (a) of Section 13 imposes an obligation upon a Court, dealing with any suit relating to a loan, as defined in the Act, due from a debtor to whom the Act applies, to frame and decide the issue whether the money-lender has complied with the provisions of Clauses (a) and (b) of Section 9. Clauses (b) and (c) of Section 13 indicate what the Court ought to do in case of non-compliance with the obligations imposed by Section 9 (a) and (b) respectively. Proviso only relieves a money-lender of the rigor of the obligation with reference to time on showing that he had sufficient cause in not following the time schedule. The words in the opening clause of Section 13 namely ''in any suit or proceeding relating to a loan'' no doubt suggest that the section is applicable not only to a suit by the money-lender but applies equally to a suit by a debtor. The words are perfectly general but their meaning can be cut down by anything indicating clear and unequivocal contrary intention Then we find in the operative Clause (b) as also in the proviso which in a was brings in the second of the two operative Clauses (b) and (c). But both these places the word ''money lender'' is used in the first instance and then with reference to him, instead of repeating the word, the word Plaintiff is used.

Next question then to be considered is whether the scope of generality of expression ''in any suit or proceeding relating to a loan'' is or is not cut down by the use of the limiting word ''Plaintiff'' Apparently it is and consequently Section 13 will not apply to a suit u/s 16(1).

Section 16 is made up of two clauses. Clause (1) entitled a debtor having any debt to his creditor, according to the latter''s claim, to sue for an account of such debt, of money paid by him to his creditor and to get his exact liability determined through Court At the close of such determination the decision remains merely as declaratory of the liability of the debtor and the right of the creditor. However Clause (2) enables a creditor determination converted into a money decree on payment of requisite Court fee in respect of a suit filed by him subject to restrictions contained in Section 15. At the stage of Clause (1) it is the debtor who is the Plaintiff. Once the rights and liabilities interse between the creditor and the debtor are determined there is no more a lis between them except as regards the limitations of Section 15 which are applicable even at the stage of execution and apart from the circumstance that the lender is required to pay Court fee there is no other indication to suggest that he become a Plaintiff at that stage of the litigation.

Since under Clause (1) of Section 16 what the Court on taking accounts is required to do is to determine the extent of a debtor''s liability to his creditor, this has to be done completely and finally and anything which a lender is not be entitled to claim and the Court may not justifiably award cannot be included in such determination.

I would very much wish to hold that it is really in congruous that if a suit is filed by a money-lender for the recovery of his debt his non-compliance with the obligations imposed by Section 9 will result in cutting down his claim as indicated in Section 13 but if the debtor sues for determination of his liability the lender''s failure to discharge his obligations u/s 9(a) and (b) will not have any such effect. The provisions in Section 13 which operate to reduce the claim of the creditor are punitive in nature and are intended to prevent a creditor from avoiding the compliance of salutary requirement of Section 9(a) and (b) which are meant for the protection of the debtor. And there is hardly any reason to hold that the tendency of a money-lender to avoid compliance with S. 9(a) and (b) should be curbed by the punitive provisions of Section 13 only with reference to one kind of suit or proceeding and not the other.

The object of the Act is as already indicated to control and regulate transactions of money-lending with a view to relieve the debtors of the hardship caused by their financial stringency and ignorance. This control and regulation is intended to be brought about by imposing certain obligations upon the creditors with reference to accounts and providing for conferral of power upon a Court 10 cut down interest and costs which the lender may otherwise claim. It is further brought about by preventing the creditor from claiming more than double the amount actually advanced and also by entitling him to secure determination of his liability.

It thus appears that there is hardly any reason to hold that the provisions of Section 13 should apply in one kind of suit and not the other. Can it be said that there is greater need in securing compliance of Section 9 when the lender goes to Court to get his right determined then when the debtor goes for such determination. If the lender has avoided compliance with his obligation regarding accounts it ought to work evenly in every determination of his claim through Court whether it by on a suit by a creditor or debtor. Thus the object of the Act as indicated by the preamble and other provisions suggest that Section 13 ought to apply to any suit relating to a loan and not only to a suit by the lender. This however indicates the reason which ought to govern the provision u/s 13. But since there is specific reference to the word Plaintiff with reference to a money-lender shall we be justified in ignoring it while determining applicability of Section 13 with reference to a debtor''s suit for account u/s 16.

Now under the general law a debtor is not entitled to file a suit merely for determination of his liability to his creditor. The only kind of suit contemplated is one by a creditor against a debtor. The Madhya Bharat Money-Lenders Act seems to have been drafted after the Money Lenders Act Gwalior State, Samvat 2003. There are certain additions to it and Section 16 and Section 18 are those additions. Since under the Gwalior Act only one kind of suit was conceivable and that was by a money-lender it was immaterial whether the word used for him was ''money-lender'' or ''the Plaintiff''. But when in the Madhya Bharat Money Lenders Act not only a suit by a money lender was contemplated but also one by a debtor for determination of his liability. It was necessary to use an expression in Section 13 which would be applicable to both the kinds of suits. But this was not done. The effects of this omission is that the Court can act u/s 13 for non-compliance by the money-lenders of the obligations imposed by Section 9(a) and (b) only in a suit where the moneylender is the Plaintiff and not where he, comes as a Defendant in a suit by the debtor. No principle of interpretation can help us in getting over this limitation upon the power of the Court by Section 13. The reason is, that although to begin with words of wider connotation are used in the expression any suit or proceeding relating to a loan'' its amplitude is curtailed by the operative provisions contained in Sub-section (b) and the proviso of Section 13.

Therefore even if the reason of the matter may so require and very much wish we may it is not possible to hold that in, the matter of determination of the debtor''s, liability in a suit u/s 16 the Court can exercise power of disallowing interest and cost for noncompliance with Section 9(a) and (b). It was only for the legislature to step in and remedy the defect and make Sections 13 and 16 conformable to the general intent of the Act and the machinery by which that intent is designed to be carried out. This it can do by using the word money lender instead of Plaintiff in Clause (b) and the proviso in Section 13.

As the matters at present stand we must agree with the view taken by the learned single Judge that Section 3, is inapplicable to a suit of a debtor for accounts under section. 16(1). It is not necessary for our purpose to say whether Section 16(1) is independent of Section 16(2) but it seems that the two provisions are complementary, but that can in, no way help to place a different construction upon Section 13

The appeal consequently ought to fail and is hereby dismissed with costs.

P.K. Tare, J.

24 I agree with my learned brother that Section 13 of the Madhya Bharat Money Lenders Act, 1950 is inapplicable to a suit filed by the debtor u/s 16(1) of the Act. This is the anomalous result on account of a flaw in the legislation which cannot be cured by any amount of forensic quibbling or ingenious interpretation or judicial legislation. Therefore, the anomaly has to be suffered.

As regards the interpretation of Section 16 of the Act, I also agree with my learned brother that the two Sub-sections of the said Act are complementary and are not independent of each other. As such, Section 15 of the Act will undoubtedly be applicable to a suit filed u/s 16(1) of the Act when the creditor pays the requisite court-fees and gets the declaratory decree converted in to an executable one. But even, so, Section 13 of the Act cannot be said to be applicable, Therefore, I agree with my learned brother that this appeal is liable to be dismissed and the decision of the learned single Judge is liable to be upheld. The costs shall be borne as directed by my learned brother