Mohd. Bin Salem vs Umaji

Qamar Hasan, J.—I agree with the judgment of my learned brother P. Jaganmohan Reddy, and I have nothing to add.

Mohd. Ahmed Ansari J.

(Per Majority)

The facts of the case, giving rise to the three questions referred to this Full Bench, can be shortly narrated. The appellant does money-lending business, and on Khurdad 11, 1354F-(15-4-1945) a sum of money was borrowed from him by the respondent, who executed a pro-note. On that date the appellant had no licence under the Hyderabad Money-lenders Act, No. V of 1349 F., which had become operative earlier on Shehrewar 15, 1349 F. (21-7-1940). The appellant on Farwardi 16, 1356 F., (16-2-1947) instituted the suit for the recovery of the loan and did not then produce any licence authorising him under the provisions of the Act to do money-lending.

A licence, however, appears to have been produced before the appellate Court, which purported to have been issued in 1356 F. (1946-47), the year in which the suit had been instituted. In spite of the failure to produce a licence the trial Court decreed the suit under S. 9, Money-Lenders Act as it stood on the date of the transaction. The Section then provided that if a money lender had no licence, but had proved the loan the Court should disallow the entire or part of the interest and may disallow the whole or part of the costs. Before the filling of the suit, the Hyderabad Money-Lenders Act had been amended on Khurdad 11, 1355 F. (15-4-1946) and in particular the direction about disallowing whole or part of the interest and costs of the case in S. 9 was substituted by the provision about dismissing the suit on the failure to have a licence.

The lower appellate Court, taking the view that this change was procedural, and governed all suits instituted after the amendment, allowed the appeal and dismissed the suit. Having regard to the importance of the questions raised the second appeal against the decree of the appellate Court way referred by the Single Judge, who originally heard it, to a Division Bench, which referred the case to a Bench of three Judges. The aforesaid Full Bench has sent the following three questions to this Bench consisting of five Judges:

Where at the time of the transaction a money-lender within the meaning of the Money-Lenders Act does not possess a licence but produces one during the course of the suit or appeal, is his suit liable to be dismissed in view of the provisions of S. 9 read with the Rules framed thereunder?

If the suit is not liable to be dismissed what is the procedure to be adopted by the Court under such circumstances?

Whether the amendment to S. 9, Hyderabad Money-Lenders Act affects substantive rights so as not to operate retrospectively or whether it is only a procedural matter?

It is clear that the three questions together raise the effects of the failure of a moneylender to have a licence on the dates of the loan, of filing the suit and during the trial. If I reach the conclusion that after the amendment the failure of being a registered money-lender on the date of the loan affects the legality of the transaction then later licences would not materially affect the result of the suit to recover the debt. The amendment to S. 9 would then be of substantive nature and it would not retrospectively operate on the earlier transactions. On the other hand, if the amendment be held to be procedural only then it would have to be determined whether the failure to have a licence on the date of the suit is curable by any subsequent procurement of a licence. If I hold it to be curable, must the production of such a licence be only before the date of the decree of the trial Court or can it be produced at later stages of the case?

I need not point out that the majority view in the case of -- ''Shamshir Ali v. Ratnaji'', AIR 1952 Hyd 58 (FB) (A), is that the failure is curable by the production of a licence at any period after the suit had been instituted. In that case the promissory-note sued upon was of Dai 10, 1356F. (10-11-1946), the suit was filed on Amardad 10, 1356F. (10-6-1947) and the licence filed in Court was dated Farwardi 7, 1357F. (7-2-1948). Both the lower Courts had dismissed the suit and the majority of the Full Bench allowed the revision petition. If the majority judgment in the case be taken as correct, it would mean that the failure to have a licence neither affects the legality of the transaction nor its enforcement; but the production is only a condition precedent to the passing of a decree.

The decision therefore, does not proceed on the amended provision in S. 9, Money-Lenders Act being analogous to 8. SO, Indian Civil P. C., nor to S. 69, Partnership Act, nor to S. 6. Pensions Act; for there are innumerable authorities that the compliance by the plaintiff with any of the aforesaid Sections of the Acts which is subsequent to the institution of his suit does not cure his non-compliance on the date the suit was filed. Therefore the two views taken in ''Shamshir Ali''s case (A)'' will have to be examined afresh in order to answer the three questions referred to this larger Bench.

It would be difficult to deny the soundness of the rule that if a contract is illegal under a statute, either expressly or impliedly it is void. No doubt where the intention of the Legislature is expressly clear that such a contract should not be enforced, no difficulty arises. The question is different when a statute merely imposes a penalty on the parties to a contract without declaring it to be either illegal or void. In such cases the principle followed by Courts is given in Anson''s Law of Contract, (19th Edition) at page 206, in the following words :

The effect in such a casa depends on the proper construction of the particular statute. But where the words of the statute leaves room for doubt as to its intention, it is material to ask whether the object of the Act in imposing the penalty is merely to protect the revenue or whether its object or one of its objects is to protect the general public or some class of the general public by requiring that the contract shall be accompanied by certain formalities or conditions, as for example, registration in the case of a moneylender. In the latter case, it is probable that the act for the doing of which the penalty is imposed is impliedly prohibited by the statute and therefore illegal.

The observations of Buckley J., in -- ''Victorian Daylesford Syndicate Ltd. v. Dott'', (1905) 2 Ch 624 (3), are similar. He says at p. 629:

The next question is whether the Act is so expressed that the contract is prohibited so as to be rendered illegal. There is no question that a contract which is prohibited, whether expressly or by implication, by a statute is illegal, and cannot be enforced. I have to see whether the contract is in this case prohibited expressly or by implication. For this purpose statutes may be grouped under two heads -- those in which a penalty is imposed against doing an act for the purposes only of the protection of the revenue and those in which a penalty is imposed upon an act not merely for revenue purposes but also for the protection of the public ....

The money-lender has to be registered, and has to trade in his registered name obviously and notoriously for the protection of those who deal with him. The purpose is a public purpose and therefore upon all the authorities the act for the doing of which a penalty is imposed is an act which is impliedly prohibited by the statute and is consequently illegal.

The passage in Anson''s states first a general principle and then mentions the case of a money-lender as an example of the application of the general rule. So also the observations of the learned Judge in the case cited above first gives a general principle of construction followed by Courts and then applies it to the statute relating to the English money-lenders. Neither can be explained away on the ground that the principle is peculiar to English law and has not been followed in this country; for I shall presently cite a similar passage from Pollock''s Contract quoted at page 139 of the 7th Edition of the Indian Contract Act by Pollock and Mulla, which had been accepted as correctly stating the law by Parsons J. in -- ''Bhikan Bhai v. Hiralal'', 24 Bom 622 at p. 625 (C) though the particular case was held to fall in the latter class mentioned in the passage. It reads as follows :

When conditions are prescribed by statute for the conduct of any particular business or profession and such conditions are not observed, agreements made in the course of such business or profession are void, if it appears by the context that the object of the Legislature in imposing the condition was the maintenance of public order or safety or the protection of the persons dealing with those on whom the condition is imposed. But they are valid if no specific penalty is attached to the specific transaction and if it appears that the condition was imposed for merely administrative purpose, e.g., the convenient collection of the revenue.

There are other authorities laying down the same principle. In -- ''Boistub Churn v. Wooma Churn'', 16 Cal 436 (D), the plaintiff had not taken out a licence for the sale of fermented liquors under the Bengal Act, 7 of 1878, he sold certain quantity to the defendant and sued for the price. It was held that as the Act was not framed for the protection of the revenue alone but embraced other important objects of public policy, the agreement entered into by a person who had not obtained a, licence was void, and money could not be recovered under it. Wilson J., observed:

Two tests have been applied in many of the cases, First in a number of cases it has been said and the view has been acted upon, that in an Act intended only for the raising of revenue and the protection of that revenue, a clause imposing a penalty may well be construed, not as prohibiting a transaction in such a sense as to make it illegal and void, but as providing a means of enforcing the liability of the person on whom the penalty is imposed ....

Another test has been applied in various cases in order to determine whether the penalty imposed by an Act was intended to create a prohibition so as to invalidate a specific act of dealing in violation of the law in which the penalty is imposed in general terms for the carrying on of a trade, or for the omission of some preliminaries which the law imposes on the opening of a trade, or some such general purposes as that or whether the penalty is imposed on each specific act of dealing. In the latter class of cases the Courts have been prone to construe the penalty as creating a prohibition, and, therefore, vitiating each transaction.

Then in -- ''Marudamuthu Pillai v. Rangasami Mooppan'', 24 Mad 401 (E), the plaintiff had entered into an agreement with the defendant that they should be partners in the business of vending arrack and toddy, the plaintiff having a licence for toddy and the defendant having a licence for arrack. At the time this contract was entered into there existed a rule of the Government under the Abkari Act that no person having a toddy licence should be interested in arrack business and vice versa. The Court held the contract to be void and followed the Calcutta authority.

Again in -- ''Behari Lall Shaha v. Jagodish Chunder Shaha'', 31 Cal 798 (F), a suit was filed to recover money on basis of an agreement. The plaintiff had alleged that he was carrying on business of a vendor of liquor and being desirous of relinquishing the business in a particular shop he entered into an agreement to sell the stock-in-trade of the shop, and thereafter the defendant was to carry there the business. The defendant carried on the business; but some money agreed upon was not paid & also certain debts were not discharged which the plaintiff had to pay. The suit was filed to recover the amounts and it was dismissed on the ground that the contract was void because the prohibition by the Excise Act relating to the sale of liquor without a licence was based upon the principle of public policy and was not confined to the protection of the revenue.

So also in -- Rabiabibi Vs. Gangadhar Vishnu Puranik, ), the defendant had a licence from Government for the manufacture of salt and without obtaining permission from the Collector he entered into an agreement to lease the pans to the plaintiff for one year. The suit for the specific performance was dismissed on the ground that the effect of the agreement would be to enable the plaintiff to manufacture salt without a licence in the guise of a sub-lease although that was forbidden by law and by the terms of the lease.

Authorities are to be found where money under sub-lettings by licensees under the Forests, the Tolls, and the Ferries Acts, notwithstanding conditions in the licences prohibiting such transfers without the sanction of the Collector were held recoverable on the ground that the prohibition related to the convenient collection of the revenue. The case of -- ''Abdullah v. Allah Diva'', AIR 1927 Lah 333 (H) is an instance of this class. The learned Judges at p. 334 of the Report say that the principles of English law on this point which are followed in India have been stated by Pollock and Mulla and then quote the passage already referred to in this judgment.

I am, therefore, of the opinion that if it appears from the several provisions of the Hyderabad Money-Lenders Act that the object of the Legislature in imposing the condition of having a licence when doing the business of money-lending is the protection of the persons dealing with money-lenders, then the amendment of S. 9 about dismissing the suit on failure to have a licence would implied invalidate the transaction, entered into when the money-lender was not registered. To my mind, the crucial point in the cast is whether the several provisions of the Hyderabad Money-Lenders Act are meant for the protection of the persons dealing with money-lenders or are they merely of administrative nature? had taken the view in ''Shamshir Ali''s case (A)'' that the Act was one whose object was to protect the persons dealing with the money-lenders and after further considerations I still adhere to the former view.

I am convinced by further analysis of the various Sections of the Act and the Rules framed thereunder that the object could be no other Sub-section (7) of S. 2 of the Act defines the "money-lenders" as the person who carries on such lending as his usual business. Under sub-s. (1) of S. 3, an officer nominated by the Government for the purpose is to maintain a register and by sub-s. (2) each money-lender is to apply in a prescribed form for the registration of his name.

Under the proviso later added to the sub-section if the officer has reasonable grounds about the conduct of any particular money-lender being unsatisfactory he can refuse to issue or renew the licence. Sub-section (4) of the aforesaid Section fixes the period of the licence to be four years, and under Cl. (a) of Sub-s. (5) a moneylender is restrained from doing his business in any district without having obtained a licence.

Clause (b) of the aforesaid sub-section makes any infringement punishable. Then under R. 13 framed under S. 15(1) of the Act every moneylender is bound to apply for the registration of his name within three months of the passing of the Act. Section 5 casts a duty upon the creditor to keep a regular and separate account for each debtor, and to furnish him in each year with his account under his own or agent''s signature and the account should disclose the amounts due from the debtor with details of the transactions during the year. Under S. 8 receipt is to be given for the amount repaid without delay and by S. 10 the rates for simple loan must not exceed nine per cent. Section 13 renders the money-lender or his agent liable to imprisonment for two years or fine if he be found guilty of harassing his debtor.

These being the important provisions of the Act the legislature on Khurdad 11, 1355F. (15-4-1946) amended S. 9 of the Act by directing the dismissal of the suit, if the plaintiff-money-lender be found to be without licence. If the absence of licence at the time of the transaction sued upon be held curable by the production of a later licence, I do not see how persons who had earlier dealings with an unregistered money-lender can be protected. Then after the amendment the Courts cannot disallow the interests or costs, and the suit is bound to be decreed fully.

The rule of interpreting such statutes would have to be rejected on grounds other than those found in the Act. On the other hand, the conclusion that absence of licence invalidates the transaction is strengthened by the reasoning that the business contemplated under the licence is prospective, as the licence authorises a holder to do the business for the period of tour years following the date of the licence. The form of the licence given in the Rules framed under S. 15(1) of the Act clearly indicates this. Therefore, if a licence under the Act cannot be issued for the past transactions how could its production save a transaction not covered by the period for which it was given?

After all Courts are not concerned with future conducts of persons but have to determine liabilities that have been incurred on the dates the suits are filed. Nothing can be built on the words directing the Court to enquire into the plaintiff being a money-lender or having a licence. They do not exclude enquiry into his being a licence holder at the time of the loan.

Again in the amendment to S. 9 if I were to construe the present tense in the amendment to mean that the person suing for the money must establish his being a licence-holder and moneylender on the date the Court was enquiring into these facts, it would follow that the expiry of the licence earlier to the commencement of the enquiry but subsequent to the filing of the claim would be fatal to the plaintiff''s case. Re must in all cases get a licence for the purposes of completing the enquiry which need not be confined to the pendency of the suit in the trial Court but would also cover its appellate stages.

So also the heir of a deceased money-lender, even if he be a Government employee, must resign his post and get a licence in order to recover the debt owed to his deceased ancestor, who was a licensed money-lender when the money was borrowed.

It appears to me, therefore, that the present tense having regard to the other provisions of the Act requiring a licence for doing the money-lending business, refers to the date on which the loan was given. The amendment casts a duty upon the Court to enquire into the compliance with the provisions of S. 3 of the Act and one of the provisions of the aforesaid Section is that the money-lender can do the business only if he has a licence.

Then there is nothing in the amendment of S. 9 to lead me to the conclusion that the object of the Act and its amendment was something analogous to the objects for which S. 80, Civil P. C., S. 69, Partnership Act or S. 6, Pensions Act, were framed. If anything, the object amending S. 9 is to bring about compliance with the earlier statutory provision of S. 3 of the Act which is about doing the business only when the person is registered. It therefore follows that by directing dismissal the Legislature impliedly invalidated the loan given when the creditor had no licence.

I do not say that this rule of interpretation cannot be excluded where there be in the Act itself some thing indicating that the Legislature intended the penalty provided in the enactment for its infringements to be sufficient without the transaction being made illegal. But to lead to such conclusion there must be some definite indication in the Act such as one finds in the Punjab Money-Lenders Act and also in C. P.''s Act. The position under the Hyderabad Money-Lenders Act was similar before the amendment was introduced, for under S. 9 as it then stood suits could not be dismissed for failure to have licence. The position appears to have been radically changed by the amendment. In these circumstances there is no bar for applying the recognised principle of interpretation of such statutes to the Hyderabad Money-Lenders Act and my answer to question No. 3 is that the Amendment affects substantive right and does not operate retrospectively.

It would follow from the answer to question No. 3 that the absence of a licence as regards loans given after the amendment to S. 9 of the Act does not create any relationship of creditor and debtor. The contract is void and subsequent obtaining of a licence cannot resurrect something which had no earlier legal existence. Therefore the production of a subsequent licence at any stage in cases for loans after the amendment would not change the original legal position of the plaintiff, and such suits are liable to dismissal on the ground that the amended provisions of S. 9 read with the Rules framed under the Act, impose a condition for the protection of the borrowing public, and the failure of having a licence had invalidated the transaction.

As regards the loans prior to the amendment the production of a subsequent licence is equally unnecessary for the enforcement of the rights to recover the principal amounts. The right to recover the debt under the old Section had already accrued and no subsequent change in law can divest what had already become vested in the money-lender. Therefore a subsequent licence does not affect the main right to recover the debt, and may be material only for purposes of getting costs and interest in suits for loans borrowed earlier to the amendment. This is my answer to Question No. 1.

In connection with Question No. 2 I would point that before the amendment to S. 9 Courts were not required to enquire into whether the money-lender had complied with the provisions of S. 3 and the factum of his having licence was necessary only for the purposes of disallowing interest and costs. Licences subsequent to the loan but prior to the amendment would entitle the money-lender to the statutory rates of interest on his existing loans and would create a vested right which could not be divested by the amendment. The money-lender in order to recover such loans and interest at the statutory rate upto the date of the suit can produce such a licence at any stage during the trial of the case and its production would be governed by the Rules of Procedure.

So far as the production of such a licence at the appellate stage is concerned it would depend upon the rule authorising the appellate Court to receive new evidence if the appellate Courts are inclined to admit the evidence there is no bar to their doing so. Where the right to get interest at the statutory rate has not accrued and the business of money-lending without licence becomes prohibited, it follows that subsequent licenses would not create a right to recover interest at the statutory rate as a money-lender.

Therefore licenses got after the amendment cannot be of any material assistance to the plaintiff in a suit to recover loans prior to the amendment. Their production at any stage of the suit or appeal should not be allowed because such subsequent licences do not create any right to receive statutory interest even for loans given prior to the amendment. As regards costs nobody has vested right in them even under the unamended S. 9 and Courts may admit such licenses only as give to the money-lender the right to recover interest. My answer to Question No. 2 is therefore that the Courts should only admit licences subsequent to the loan but prior to the amendment. Otherwise it would unnecessarily burden the record of cases instituted for recovering loans prior to the amendment to S. 9.

Srinivasachari J. (Dissenting):

This reference has been made by the Pull Bench with regard to a question arising under the Hyderabad Money-Lenders Act, Act 5 of 1349 F. This Act came into force on 15th Shehrewar 1349 F. and it repealed a Regulation which was in force viz. the Regulation of 1347 F. relating to money-lenders. The object of this Act as the preamble would show was to regularise and put in an orderly form money-lending transactions in the State and with a view to effectuating this object a control was to be exercised by the Government on transactions relating to money-lending.

In this case it would appear that a pro-note was executed by the defendant on 11th Khurdad 1354 F. for a sum of Rs. 1034/-. The plaintiff brought a suit on the basis of this promissory note on 16th Farwardi 1356 F. It may be mentioned here that before the filing of the suit an amendment was introduced in S. 9, Money-Lenders Act on 11th Khurdad 1355 F. which enacted that if a money-lender who satisfied the requirements of a ''money-lender'' as defined in the Money-Lenders Act, failed to get himself registered as a money-lender the Court would dismiss his suit.

Inasmuch as this amendment had come into force at the time when the suit was pending in the trial Court an issue was raised as to the effect of the amendment and the trial Court held that this amendment could not be said to have a retrospective effect, in the result it acted under the provisions of the Act as it stood before the amendment and disallowed the whole of the interest and half of the costs and decreed the suit to the extent of Rs. 1034/-. The matter was taken up in appeal by the plaintiff.

While the District Judge who heard the appeal concurred with the findings of fact arrived at by the trial Court he held that on an interpretation of the amended section the Court had no other go but to dismiss the suit. He, therefore, dismissed the suit. The matter came up before the High Court and the learned Single Judge who heard the appeal thought that the matter was one of sufficient importance to be heard by a Division Bench.

The Division Bench held that in view of a decision of the Full Bench of this Court which had to deal with a case arising under the Money-Lenders Act a further consideration was necessary by a Full Bench. The Full Bench having regard to the fact that it was a matter affecting a large class of people and inasmuch as there was diversity of opinion on the question as to whether the amendment to S. 9, Money-Lenders Act, was to have a retrospective effect thought it desirable to refer to a Bench of five Judges certain questions of law. Hence this reference.

The questions that have been referred to the Fuller Bench are:

(i) Whether at the time of the transaction a money-lender within the meaning of Money-Lenders Act does not possess a licence but produces one during the course of the suit or appeal, is his suit liable to be dismissed in view of the provisions of S. 9 read with the rules framed thereunder?

(ii) If the suit is not liable to be dismissed what is the procedure to be adopted under such circumstances?

(iii) Whether the amendment to S. 9, Hyderabad Money-Lenders Act affects the substantive right so as not to operate retrospectively or whether it is only a procedural matter?

(a) The relevant provisions of the Money-Lenders Act which for the purposes of this reference need consideration are Ss. 3, 5 and 9. Section 3 states that an officer may be appointed for this purpose by the Government and he shall maintain a register of money-lenders and he shall fill up the details as mentioned in the form prescribed and such register shall be regarded as a public document under the Evidence Act. It is also provided by this section that it shall be obligatory upon every money-lender to put in an application for being registered as a moneylender on payment of the prescribed fee. Such a licence that may be granted by the officer concerned shall be in force for a year.

(b) Sub-section 5 of S. 3 which is important for the purposes of this reference is to the effect that a money-lender shall not be competent to transact any money-lending transaction without procuring a licence and if he contravened the provisions of this sub-section 5 (viz. transacting business without procurement of a licence) he shall be liable to fine which may be up to Rs. 50/- and in certain cases even more.

(c) Section 5 casts a duty upon a moneylender to maintain a regular account of his debtor and it also ordains that the money-lender shall send every year a statement of account to the debtor with his signature.

(d) Section 9 as it stood before the amendment of 11th Khurdad 1355 F. was to the following effect:

Notwithstanding anything contained in any law in force, in every suit relating to the loan (1) it shall be the duty of the Court to frame an issue with regard to the following matters and decide the same, viz.,

(a) Whether the lender is a money-lender within the definition of the Money-Lenders Act under S. 2, sub-s. 7 of the Act;

(b) Whether he had conformed to the provisions of S. 5(a) and (b) (provisions relating to maintenance of account and sending statement of account); and

(c)x x x x

If it is proved that the person is a ''money-lender'' and it is found that he does not possess a licence or that he has not conformed to the provisions of S. 5(a) and (b) ...... and the claim is established the Court shall disallow the whole or a portion of the interest and shall disallow the whole or a portion of the costs.

An amendment was introduced in 1355 F. by virtue of Amending Regulation 16 of 1355 F. The result of the amendment was that while if the money-lender contravened the provisions of Ss. 3 and 5, that is to say, if he failed to maintain a regular account of his debtors or if he failed to send an annual statement of account to the debtor as contemplated by the Act the Court was competent to disallow the whole or a portion of interest and costs, but if he failed to get himself registered the Court would dismiss his suit. The net result of this was that a more drastic result was to follow for contravention of the provision relating to registration.

We are now concerned in this case with the provision relating to registration alone as in this case it would appear that the licence to carry on business as a money-lender was produced by the plaintiff on 6th Farwardi 1356 F. that is to say, after the date of the pronote but before the filing of the suit.

It may be useful to refer to analogous provisions in similar enactments in other States. We have enactments similar to the Hyderabad Money-Lenders Act in the Madhya Pradesh, Madras and the Punjab. The provisions relating to the maintenance of account by a money-lender and sending the annual statement of account to the debtor which is provided for in S. 5 of the Hyderabad Act, finds a place in S. 3(a) and 3(b), C. P. Money-Lenders Act and S. 3, Madras Debtors Protection Act, Act 7 of 1935. Likewise S. 3, Punjab Regulation of Accounts Act enacts that the money-lender shall maintain en account and also send a statement of account. It would appear that in these enactments the penalty for not maintaining accounts or not submitting accounts periodically to the debtor is the disallowance of costs and interest as we find in the Hyderabad Money-Lenders Act.

The provision relating to the registration of money-lenders is to be found in the Punjab Registration of Money-Lenders Act, Act 3 of 1938 and according to this section which more or less corresponds to S. 9. Hyderabad Honey-Lenders Act, the suit is liable to be dismissed, unless the money-lender is registered and holds a valid licence, at the time of the institution of the suit or presentation of the application for the execution or at the time of decreeing the suit or deciding the application for execution (vide S. 3).

This section as it has been enacted makes it sufficient compliance with law if the moneylender produces a licence either at the time of the institution of the suit or at the time of the decreeing of the suit and in that event his suit is not liable to be dismissed. Section 9, Hyderabad Money-Lenders Act has been referred to by me already and the section does not make it clear as to whether the suit is liable to be dismissed at all costs even if a licence were produced at the hearing or any subsequent stage of the suit.

Analysing S. 9 it comes to this that where a suit is pending before a Court, the Court shall frame a preliminary issue (i) as to whether the plaintiff is a money-lender (ii) whether he has conformed to the provisions of S. 3 and S. 5 of the Act. Leaving for a moment S. 5 which relates to the maintenance of the accounts and sending an annual statement of account, the words in S. 9 in so far as it relates to registration of money-lenders are to the following effect:

If it is proved that he is a money-lender and it is also found that he is not a registered moneylender the Court would dismiss his suit.

The words according to their apparent tenor would mean if at the time when the Court is called upon to determine this issue it finds that the person is not in possession of a licence the Court should dismiss the suit. The section does not say that "if the Court finds that at the time of the transaction the plaintiff was not in possession of a licence"; for then it would mean that the Court would have to see as to whether at the time when he entered into the transaction he had a licence or not. These words are not there.

We would, therefore, not be justified in importing into this section words which are not there. Taking the plain meaning it only means that at the time when the Court proceeds to consider this question if it finds that he is not in possession of a licence the Court will dismiss the suit. The particular words of the section have to be interpreted.

We are familiar with other enactments wherein it has been stated that no suit could be instituted before the person instituting the suit conforms to certain provisions of the law. For example S. 80, Civil P. C. says that no suit could be instituted unless notice of the suit had been given to the Government and two months had expired after the service of the notice. Section 6, Pensions Act (Act 23 of 1871) says that

A Civil Court .... shall take cognizance of any such claim upon receiving a certificate from such Collector .... but shall not make any order or decree in any suit whatever ....

Section 69(2), Partnership Act says that no suit shall be instituted unless the partnership is registered. In all these cases it would appear that the law imposes a condition for the enforcement of a right and does not affect the right itself. In English Law under 6 and 7 Vict., Chap. 73 a solicitor shall not be entitled to commence or maintain any action until the expiration of one month after, he shall have delivered a bill in the manner provided. In the English Medical Act of 1853 a person could not recover charges for medical or surgical advice or for any operation or any medicine unless he proved that he was registered under the Act. In these cases there is a statutory duty imposed to perform an act before a right could be enforced.

A distinction has to be drawn between a bar to the institution of the suit and to the cognizance of a claim. The provision in S. 9, Money-Lenders Act cannot be regarded as a provision similar to provision in the Pensions Act or Civil P. C. or the provision in the English Medical Act for there is no bar to the institution of a suit in those Acts. I may point out that the provision in the Money-Lenders Act in S. 9 does not say that a person is not competent to file a suit unless he has got himself registered. A suit could be filed no doubt but it is stated that if it is found that he is not in possession of a licence his suit is liable to be dismissed. The question therefore is as to whether, as has been provided for in the Punjab Registration of Money-Lenders Act, the production of a licence at the time of the institution of the suit or at the time of the decree would be enough to avert a dismissal.

With a view to achieving the objects of the Act the maintenance of a regular account by the money-lender and the sending periodically of a statement of account showing how much amount is due in order to apprise the debtor of the position of his indebtedness, are insisted upon. Likewise a provision that one who wants to do money-lending business should get himself registered has been engrafted in the Act and a penalty imposed for non-compliance with the rule relating to registration. This has been done in order that money-lenders may be brought within the clutches of the law if they happen to contravene any of the provisions and stipulations contained in the Money-Lenders Act. That this is the object of this legislation has also been stated by this Court in the majority judgment in AIR 1952 Hyd 58 (FB) (A).

With this background when we study the scheme of this Act, we find that S. 3 makes it obligatory upon every money-lender to get himself registered as a money-lender as provided for in S. 3(5) of the Act. A machinery is provided by which an officer is appointed to register all money-lenders and such registration is made on an application made by the money-lender in this behalf. Section 3(5) (a) says that a money-lender shall not be competent to carry on his money-lending business without obtaining a licence as contemplated by S. 3, sub-Ss. 1 to 4. Sub-section (b) S. 5 says that if a money-lender contravenes sub-s. (5) (a) that is to say, carries on money-lending business without obtaining a licence he is liable to be fined.

As I have pointed out the object of this legislation being to safeguard the interests of debtors as against unscrupulous money-lenders we have to interpret the provisions relating to the dismissal of the suit when a money-lender does not possess a licence at the time of the transaction or at the time of the institution of the suit. The object of the provision being primarily to bring pressure upon money-lenders to get themselves registered, in order to enforce the same, a penalty has been imposed.

Therefore, in my opinion where there is a (penalty for non-registration provided for in sub-s. 3(5) (b) it cannot be said that the suit is liable to be dismissed regardless of the fact that the money-lender is in possession of a licence at the time of the institution of the suit or at the time of the passing of the decree, for to interpret it otherwise would be going against the express purpose of the legislation.

If, for example a suit is filed by an heir in order to collect a debt owing to the estate of the deceased, if there is an objection to the passing of a decree in his favour the passing of the decree would be stayed until the claimant applied and obtained a succession certificate to the estate of the deceased. It is only to safeguard the interests of the debtors that this has been insisted upon.

In the English Medical Act of 1858, to which I have already referred to there is a provision being S. 32 which says that:

After 1-1-1859 no person shall be entitled to recover any charge in any Court of law for any medical or surgical advice .... unless he shall prove ''upon the trial'' that he is registered under this Act.

Here it would be found that the medical practitioner could prove even ''upon the trial'' that he is registered under the Act. This would also show that a person would not be deprived of his right to recover the money if he is able to satisfy the Court that he has got himself registered as required by the Act. There is nothing to prevent the Court from taking cognizance of the claim. On the above reasoning I would interpret a provision like this to mean that if the suitor can satisfy the Court that he is registered the suit is not liable to be dismissed.

It would appear that according to the decision in ''Shamshir Ali v. Ratnaji (A)'' already referred to, the transaction cannot be rendered void by reason of the fact that the transaction is entered into by a money-lender who is not registered. A transaction entered into by a moneylender not having a licence has not been held to be of such a nature that if permitted it would defeat the provision of any law, where the transaction has not been held to be unlawful and where the contravention of the provision is visited with a penalty. I am not prepared to interpret S. 9 as meaning that the Court would dismiss the suit at all costs where it finds there was no licence possessed by the plaintiff. The Legislature in my opinion did not mean to go so far as to deprive the unregistered money-lenders of their right to recover the money at all events.

I would interpret S. 9 as has been laid down in S. 3, Punjab Registration of Money-Lenders Act viz., that the Court would dismiss the suit if the money-lender failed to produce a licence at the time of the institution of the suit or at the time of the passing of the decree.

Therefore, my answer to question 1 is that where at the time of the transaction a money-lender does not possess a licence but produces one during the course of the suit or appeal his suit is not liable to be dismissed.

I do not think it is necessary to give a separate answer to question No. 2 having regard to the view that I have taken that if the licence is produced at any period that I have mentioned the suit is not liable to be dismissed. It is only where it is not produced at all that the Court would dismiss the suit.

Before considering the third question I might refer to the state of the law in other States.

(a) In the Punjab Registration of Money-Lenders Act which contains a provision more or less similar to S. 9, Hyderabad Money-Lenders Act a saving clause has been introduced being S. 9 under which no suit or application for execution pending at the time of the commencement of the Act is liable to be dismissed. It is a genera saving clause whereby the provisions of the Act would not apply to suits and applications for execution, before the Act came into force.

(b) In the Madras Debtors Protection Act it has been stated by S. 7 that the provisions of the Act shall not apply to any loan advanced before the commencement of the Act.

Prima facie an amendment would deal with future and not with past events unless there is a provision that it would apply to past acts also and it could not under any circumstance apply to rights accrued before the amendment came into force. In my opinion the right to recover an amount due under a contract is a substantive right and therefore an amendment which affects procedural law cannot affect rights already accrued. It is well known that the duty of those who are to administer law is to guard against the giving to a Statute a retrospective operation unless such intention is clear from the Statute. If it touches a right in existence at the passing of the Act then the amendment cannot be held to have a retrospective effect.

Lord Macnaughten in the famous case of -- ''Colonial Sugar Refining Co. v. Irwing'', 1905 AC 369 (I) refers to a right in existence. It is rather difficult to state precisely where procedure ends and substantive law begins. Procedural law is otherwise known as adjectival law, whose object is to aid and protect the rights given, by substantive law.

The question is as to whether this amendment is an amendment in the procedural law and as such would have a retrospective effect. The real test when deciding whether a particular provision of law is to be given retrospective effect or not is, not to consider merely whether the law is a law of procedure on substantive law but also whether the law in question affects or impairs existing rights including rights of action which are substantive rights. If a law destroyed an existing right or even placed any restriction on it no retrospective effect would be given to it unless the Statute expressly enacted to that effect. That the right of action is a substantive right has been settled by a course of decisions. I would refer to Salmond on Jurisprudence, Edn. 8, F. 496, where the learned author says:

Whether I have a right to recover certain property is a question of substantive law -- but in what Courts I must institute my proceedings are questions of procedural law.

Although the provision in S. 9 may appear to be a provision of procedural law if it seeks to negative his right to recover his money such provision cannot be regarded as a mere matter of procedure and as such could not have any retrospective effect, I might herein refer to the case of -- ''Wright v. Greenroyd'', (1861) 31 LO, QB 4 (J) wherein a question of interpretation of S. 32, English Medical Act of 1858 arose. Section 32 was to the following effect:

After 1-1-1859 no person shall be entitled to recover any charge in any Court of law for an medical or surgical advice .... unless he shall prove upon the trial that he is registered under this Act.

This provision was not regarded as a mere procedural provision although in form it appeared to be so.

Therefore, my answer to question No. 3 is that the amendment to S. 9, Hyderabad Money-Lenders Act affects substantive rights and as such cannot operate retrospectively.

Palnitkar J. :

I agree with the opinion of my learned brother Srinivasa Chari J.

Jaganmohan Reddy J. (Per majority):

I was one of the members of the Division Bench which referred the case to a Full Bench and in the refering order of my brother Qamar Hasan to which I was a party, we had clearly indicated the reasons which impelled us to refer the case to a Full Bench.

We had before us the decision in AIR 1952 Hyd 58 (FB) (A) in which by a majority it was held that money-lending transactions without a licence were not void and that an unregistered money-lender can obtain a decree validly inasmuch as the Hyderabad Money-Lenders Act (hereinafter referred to as the Act) was merely to regulate and supervise money-lending transactions and had not in so many terms prohibited money-lending without licence, nor was there any provision in it similar to sub-s. (4) of S. 11, Assam Money-Lenders Act, which made money-lending transactions in contravention of the provisions of the said section illegal.

It was further held that the mere fact that sub-s. (5) of S. 3 of the Act imposed a penalty of imprisonment or fine for the contravention of the provisions relating to the necessity of obtaining a licence does not make the transaction illegal.

(29) It appeared to us that the Full Bench in ''Shamsheer Ali''s case (A)'' did not fully consider the effect of the amended S. 9. In view of this provision and having regard to the facts in ''Shamsheer Ali''s case (A)'', namely, that the transaction was one entered into after the amendment of S. 9, the omission to fully consider the aforesaid provisions was likely to create considerable difficulties in deciding the case before us. We observed with respect to ''Shamsheer Ali''s case (A)'' as follows:

It would thus appear that the emphasis in the Full Bench case was not so much on the examination of the provisions of S. 9 of the Act as on the consideration of the question whether the failure to obtain a licence for money-lending brought the contract within the mischief of S. 24, Hyderabad Contract Act corresponding to S. 23, ''Indian Contract Act. No doubt there are certain observations in the majority opinion based on -- ''Gunda Malliah v. Sanam Lingayya'', 31 Deccan LR 485 (K) and -- ''Vallabji v. Tulsiram'', File No. 654 of 1354 F. (Hyd) (L) an unreported case which lend support to the view that the production of licence at the time of or even after the institution of the suit would save the suit from dismissal in toto. But these observations appear to have been made in support of the argument that money-lending transaction entered into without obtaining a licence was not void or illegal.

For the reasons aforesaid we referred the case to the Full Bench which in its turn referred the following Questions to the Fuller Bench :

(1) Where at the time of the transaction a money lender within the meaning of the Money-Lenders Act does not possess a licence but produces one during the course of the suit or appeal, is his suit liable to be dismissed in view of the provisions of S. 9 read with the rules framed thereunder?

(2) If the suit is not liable to be dismissed what is the produce to be adopted by the Court under such circumstances?

(3) Whether the amendment to S. 9, Hyderabad Money-Lenders Act affects substantive rights so res not to operate retrospectively or whether it is only a procedural matter?

I need not restate the facts in so far as they are relevant to this reference as these have been fully set out in the judgments of my brothers Ansari & Srinivasa Chari which I have had the advantage of perusing.

The first question implies the determination of (a) whether it is necessary for the moneylender to possess a licence under S. 3 of the Act at the time when he has entered into the money-lending transaction or whether it will be sufficient if he obtains the licence subsequently before the suit is filed or even thereafter up to the date of the decree; and (b) whether his suit is to be dismissed if he does not possess a licence on the date of the transaction.

I may at once say that in determining this question no reliance can be placed upon the provisions of Statutes in other States which are not in pari materia. It is a rule of construction that Statutes in pari materia are only relevant for the purpose of interpreting or ascertaining the meanings of words and phrases given in subsequent statutes.

In -- ''Re: Foster v. Great Western Rly. Co.'', (1882) 8 QBD 515 at p. 522 CM) Bret L. J. when considering whether S. 28 of the Regulation of Railways Act, 1873 is to be construed in the same manner as O. 45 of the Rules of the Supreme Court observed that:

......it was substantially identical; it gives a power to judicial tribunal and therefore is in pari materia. For these reasons I think S. 28 should be construed in the same manner as O. 45 and that the same rule is applicable to the Chancery and Common Law Divisions of the High Court........

It would appear that before calling in aid in the construction of the words and phrases used in one Act meanings given to them in an earlier Act is pari materia both Acts must be substantially identical. It was observed by Homer J. dealing with what are Statutes in pari materia in the case of -- ''The United Society v. Eagle Bank'', (1829) 7 Conn 457 at p. 470 (N):

The word pari must not be confounded with the word ''similies''. It is used in opposition to it as in the expression ''mages pares sunt quam similis'' intimating not likeness merely but identity. It is a phrase applicable to the public Statutes or general laws made at different times and in reference to the same subject.

Section 9, Hyderabad Money-Lenders Act, cannot in my view, with great respect, be interpreted in the manner laid down in S. 3, Punjab Registration of Money-Lenders Act as it is not in pari materia. Section 3 of the last mentioned Act is as under:

Notwithstanding anything contained in any other enactment for the time being in force, a suit by a money-lender for the recovery of a loan, or an application by a money-lender for the execution of a decree relating to a loan, shall, after the commencement of this Act, be dismissed, unless the money-lender--

(a) at the time of the institution of the suit or presentation of the application for execution; or

(b) at the time of decreeing the suit or deciding the application for execution--

(i) is registered; and

(ii) holds a valid licence, in such form and manner as may be prescribed; or

(iii) holds a certificate from a Commissioner granted under S. 11, specifying the loan in respect of which the suit is instituted or the decree in respect of which the application for execution is presented; or

(iv) if he is not already a registered and licensed money-lender, satisfies the Court that he has applied to the Collector to be registered and licensed and that such application is pending; provided that in such a case, the suit or the application shall not be finally disposed of until the application of the money-lender for registration and grant of licence pending before the Collector is finally disposed of.

It will thus be seen that there is a definite provision in the aforesaid Act which permits a money-lender to be registered or to hold a licence etc., either at the time of the institution of the suit or at the time of decreeing the suit or at the time of the presentation of the application for execution or at the time of deciding the application for execution.

There are no such specific provisions in the Hyderabad Act. Section 9 clearly lays down that the Court shall dismiss the suit if it is proved that the plaintiff is a money-lender as defined in S. 2(vii) and has not obtained a licence under S. 3. These are not provisions in pari materia and no construction of S. 9, Hyderabad Act, can be based upon any specific provision of the Punjab Registration of Money-Lenders Act which the Legislature in pursuance of the object to be achieved in Punjab has provided for in S. 3.

Sub-sections (4) and (5) of S. 3 of the Act in turn laid down that no money-lender shall carry on his business as a money-lender in any district without obtaining a licence and that a licence granted under the said sub-section snail be in force for one year from the date of issue. If any person does any money-lending business without obtaining a licence he is liable to imprisonment for a term which may extend to six months, or fine or with both.

Rules 13 and 16 of the Rules made under S. 15, Hyderabad Money-Lenders Act, make it obligatory upon every money-lender to get himself registered and obtain a licence within three months from the date of the coming into force of the rules and thereafter to get his licence renewed before the date of expiry of the licence already obtained. The combined effect of the provisions is that at no point of time after the termination of three months from the enforcement of the rules can a money-lender transact money-lending business without a licence and if he does transact such business without a licence he contravenes the provisions of the Money-Lenders Act and exposes himself to punishment. He cannot for the purposes of S. 9 be said to be a licensed money-lender.

The reference in sub-s. (2) of S. 9 to the money-lender being licensed in accordance with the provisions of S. 3 clearly postulates that a money-lender should on the date of the suit transaction be carrying on money-lending business after obtaining a licence and if he does not do so he will not be deemed to have been licensed in accordance with the previsions of S. 3.

A reference to sub-s. (1) of S. 9 would show that the statutory issues would have to be framed not only relating to the fact whether the plaintiff is a money-lender but also whether he has been carrying on his business after obtaining a, licence in accordance with S. 3 and whether such money-lender has been sending statements of accounts to the borrower and maintaining his accounts regularly.

When sub-s. (1) makes it obligatory on the part of the Court to frame issues relating to these matters, it is, I think, not unreasonable to construe that the money-lender in order to obtain a decree should be licensed at the time of entering into the transaction with the borrower. The contention that even though the moneylender did not obtain a licence at the time of the transaction, he can obtain and produce a licence at any time up to the date of the decree to avoid his suit being dismissed, is not in consonance with sub-s. (1) of S. 9 which by necessary implications requires the money-lender to be a licensed money-lender on the date of the suit transaction, as otherwise it would be meaningless to determine the question whether the plaintiff subsequent to the suit, transaction was either a money-lender or has been doing money-lending business after obtaining a licence in accordance with the provisions of the Act.

I could envisage a case where the plaintiff though a licensed money-lender on the date of the suit transaction gives up the business of money-lending altogether and is not a licensed money-lender on the date of the suit can is then be contended that the direction in sub-s. (1) of S. 9 to frame an issue as to whether the plaintiff is a money-lender is only to ascertain whether he is so on the date of the suit. If that is the intention his suit will be dismissed notwithstanding the fact that he has complied with the provisions of the Act on the date of the suit transaction.

It would I think be imputing to the Legislature an unreasonableness by placing the aforesaid construction on the provisions of S. 9. In my view the framing of the statutory issues under sub-s. (1) and the findings thereon have a direct bearing on the maintainability of the suit under sub-s. (2) of S. 9.

It may further be pointed cut that the obligation to maintain accounts regularly and to send statements of accounts to the borrower would arise only by reason of the plaintiff being a money-lender within the meaning of S. 2(vii) on the date of the transaction. Therefore the acceptance of the contention that the moneylender could produce a licence at any time would equally negative the obligation of sending statements of accounts which could on a parity of reasoning be submitted even on the date of the decree--a construction which runs counter to the specific provisions of the Act.

The obligation to send accounts arises from the date of the transaction and that is the reason why the proviso to sub-s. (2) of S. 5 exempts a widow or minor who has become entitled to a loan which was advanced by a money-lender from maintaining and furnishing account.; under sub-s. (1) for a period of one year from the date when such right accrued. The provisions of the Money-Lenders Act read as a whole leave no doubt that the money-lender should be licensed at the time of the suit transaction and not subsequently.

In Shamshir Ali''s case (A)'', although the transaction was, as I have already stated entered into by an unlicensed money-lender after the amendment though at the time of the suit he had a licence it was held that the transactions of an unlicensed money-lender are not void and that he could recover the money. My brother Shripat Rao with whose judgment Naik C. J. agreed, observed at p. 62 of AIR 1952 Hyd 58 (FB) (A), as under:

it is well settled that each statute must be judged by itself as a whole, regard being had not only to its language but also to the objects and purposes for which it was enacted. ''If a statute does not declare a contract made in violation of it to be void and if it is not necessary to hold the contract void in order to accomplish the purpose of the statute the inference is that it was intended to be directory and not prohibitory of contract'' (Crawford p. 524).

Applying this dictum to Act 5 or 1349-F. and assuming that its purpose is to compel money-lenders to maintain regular accounts and allow opportunity to the supervising authorities to check their accounts, it is clear that it is unnecessary to hold a contract entered into without licence as void in order to accomplish the said purpose of the Act. Moreover Act 5 of 1349-F does not declare a contract of money-lending made in violation of it to be void. The inference, therefore, is that if the penal clause was intended to make such contracts illegal it should have specifically said so.

In the absence of any such words in the amendment we cannot hold the contract to be void and cannot declare money-lending without licence opposed to public policy.

However apt these observations may be in respect of a transaction entered into before the amendment of S. 9 which, as it then stood, merely vested the Court with a power to disallow costs and interest in suits filed by money-lenders who had not taken out a licence, I may with the utmost deference and great respect point out that the test laid down cannot be validly applied to transactions entered into after the amendment of the several provisions of the Act including S. 9.

It may be that the preamble to an Act as observed in ''Shamshir Ali''s case (A)'' gives an indication of the legislative intent of the instrument which is being construed but where radical amendments are effected in an Act showing a different intention to that expressed in the preamble, the fact that the preamble has not been amended does not in any way indicate that the legislative intention is unchanged.

I am conscious of the observations of the Nagpur High Court in -- ''Patiram v. Baliram'', AIR, 1954 Nag 44 (O) that notwithstanding the insertion of S. 11-A to 11-J it can safely be inferred from the fact that the preamble was kept unaltered the Legislature did not want to go beyond what was intended when the Act was passed in 1935. On the particular provisions of the Act as I will presently show, no exception can be taken to these observations but with great respect I do not think they can be taken as having laid down a general rule that whenever a preamble is left unaltered it follows as a logical corollary that the object is unchanged notwithstanding the radical nature of the amendments that may have taken place.

Where the wording or object of a Statute gives rise to doubts as to its proper construction the preamble affords a key to it. Though a preamble can throw a useful light as to what a Statute intends, it is a well settled rule that it cannot for any purpose control, restrict, extend, alter, qualify, detract from or add to the provisions where those provisions are expressed in clear and unmistakable terms.

In my view it is always permissible to take into consideration the state of things existing at the time the Statute was passed and the evils which it was designed to remedy as appearing from the provisions of the Act itself. The Legislature is to be presumed to know the state of the law at the time the Act or Regulation was passed and the change it sought to effect; in other words, the state of the law as it was before the passing of the Act can be taken as a guide to ascertain the mischief which the Legislature sought to remedy or secure.

An examination of the provisions of the amendment Regulation 16 of 1355 F. would show that it was designed to safeguard not only the borrowers from unscrupulous money-lenders, particularly from those who by employing harsh and lawless methods without having recourse to Courts of law had become a source of menace to public peace but also to make money-lending without a licence punishable and the transactions unenforceable. Section 2-A was added in order to debar stranger money-lenders from doing money-lending business. Existing stranger money-lenders holding valid licences could recover loans previously contracted by recourse to the civil Courts under the Act.

If the stranger money-lender carried on the business of money-lending in contravention of this provision or recovered his previous debts otherwise than through the Court, he was liable to imprisonment up to one year or with fine or with both. Offences of contravention of this section were made cognizable and bailable and the Taluqdar was given power to try such cases subject to an appeal to the Sessions Judge. It was also provided that the Court trying such offences, shall, unless it is proved to the contrary, presume the accused to be a stranger and that he was carrying on the business of money-lending in contravention of the section.

A new proviso was added to sub-s. (2) of S. 3 of the Act empowering the licensing authority to refuse the grant of a licence or to renew it after recording its reasons for such refusal if such authority believed that the money-lender is an undesirable character, subject to a right of one appeal. The punishment for carrying on the business of money-lending without a licence has been made more severe by amending cl. (b) of sub-s. 5 of S. 3 and instead of a fine extending up to Rs. 50/- the offence was made cognizable and punishable with rigorous imprisonment upto six months or fine or with both. The Taluqdar was empowered as before to try such cases but an appeal was provided to the Sessions Judge.

Sub-section (6) of S. 3 of the Act which empowered the Taluqdar to compound cases of money-lenders carrying on money-lending business without a licence was deleted. Section 4 of the Act which dealt with the cancellation of the licence where the money-lender has contravened the provisions of Ss. 5, 6 or 8 in more than two suits, has had his suit dismissed in whole or in part on the ground that the suit document showed an amount in excess of the amount which has been actually advanced and for other causes specified in the said section, was amended to provide also for the cancellation of licences in the event of a money-lender or his agent being convicted of an offence of molestation.

Sections 5 and 6 were likewise amended to empower the licensing authorities to inspect or authorise any one to inspect the books of accounts of a money lender or a pawn-broker, as the case may be.

Section 9 of the Act was amended in two important particulars: (1) Sub-section 1 which had previously made it necessary for the Court to frame and decide issue as to whether the money-lender was a money-lender within the definition of S. 2(vii) of the Act and whether he has complied with cls. (a) and (b) of sub-s. 1 of S. 5 and sub-ss. 1 and 2 of S. 6 relating to regular maintenance of accounts and supply of statements to the debtor by the money-lender as well as by the pawn-broker was amended to make provision for the framing of an issue as to whether the moneylender has obtained a licence and was carrying on the business of money-lending within the district after obtaining a licence: (2) Subsection 2 (a) which before its amendment had only empowered the court to disallow interest and costs wholly or in part if the money-lender had not obtained a licence in conformity with the provisions of the Act was substituted by a new sub-s. (2) which laid down that the Court shall dismiss the suit if it is proved that the plaintiff is a money-lender as defined in S. 2(vii) of the Act and is not licensed in accordance with the provisions of S. 3.

The previous sub-s. 2(b) was made into a new S. 2-A empowering the Court to disallow interest and costs in whole or in part if it is proved that the provisions of cl. (a) of sub-s. 1 of S. 5 or of sub-s. 1 of S. 6 or of S. 8 had not been complied with. Sections 10 and 11 were amended so as to reduce the rate of interest on secured and unsecured loans from 9 per cent, and 12 per cent, to 6 per cent. & 9 per cent, and 9 per cent, and 12 per cent, instead of 12 per cent, and 18 per cent, respectively. Lastly the amendment of S. 13 provided for an enhanced punishment for molestation of a debtor from 3 months imprisonment or fine which may extend to Rs. 500/- to one of rigorous imprisonment for a term which may extend to two years or with fine. Taking the amendments as a whole it would appear that the intention of the amending regulation was to secure two main objects:

(1) To debar strangers (i.e. Non-mulkies) from transacting any business from 18th Khurdad 1355 F. and the cancellation of licences of such strangers without any refund of licence fees or payment of compensation therefor. Provision was however made for the recovery through a competent Court of the loans made prior to the 18th Khurdad by the non-mulki money-lenders who obtained licences under the Act. As already noticed the contravention of these provisions is made punishable. It may be that the validity of some of these provisions relating to non-mulki money-lenders might be challenged as being in conflict with Chap. III of the Constitution but that matter is not before us for consideration.

(2) To prohibit transactions by moneylenders who had not obtained licences. The contravention of this and other provisions was made punishable with imprisonment or fine or both and suits by such money-lenders who had no licences were to be dismissed.

(41) It has been urged that in AIR 1954 Nag 44 (O), the Nagpur High Court relying on AIR 1952 Hyd 58 (FB) (A) held that the Legislature in S. 11-F. C. P. Money-Lenders Act 14 of 1934 as applied to Berar on 1-4-1935 did not declare invalid the transaction of a money-lender who had not obtained a registration certificate, and it was not necessary for the validity of a contract of loan that the money-lender must be registered on the date of the transaction. It was further observed that the money-lender 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 transaction of money-lending is not affected for want of registration certificate the money-lender is exposed to penalty provided for in S. 11-F of the Act for carrying on business without a valid registration certificate. With respect to the effect of the aforesaid Act before its amendment it was observed at p. 46 of the judgment as follows :

The Act which was passed in the year 1934 and came into force on 1-4-35 did not contain the provisions regarding registration of moneylenders now found in Ss. 11-A to 11-J. The provisions of the Act as they existed in 1935 left the part of loan transaction concerning the principal untouched and deprived the moneylender only of the interest and costs when certain conditions were not fulfilled. Their object as will appear from the preamble was to make better provision for the regulation and control of the transactions of money-lending. There was nothing in the preamble or in the provisions to suggest that the money-lending transaction was prohibited under any circumstances. It was by the C. P. and Berar Money-Lenders (Amendment) Act, 1940 (Act 14 of 1940) that Ss. 11-A to 11-J were inserted, and it is significant that no change was made in the preamble at that time.

The judgment of the Nagpur High Court does not really assist us in construing S. 9 of the Act not being in pari materia with S. 11-H of the C. P. and Berar Money-Lenders Act which provides that no suit for recovery of the loan advanced by a money-lender shall proceed in a civil Court until the Court is satisfied that he holds a valid registration certificate.

I have not been able to consider the exact wording of S. 11-H as it is not available, but taking it as it appears from the judgment itself it postulates the plaintiff satisfying the Court that he holds a licence -- perhaps at or on the date of the suit. The interdict would appear to be limited to the progress of the suit by the money-lender without the Court being satisfied that he holds a valid licence.

The word ''proceed'' means to move, pass or go forward or onward; as such to say that no suit by a money-lender shall proceed would imply that the suit can only progress when he satisfies the Court that he is the holder of a licence. It envisages the filing of a suit and a temporary stay probably permitting him to proceed with the suit if he can become a holder of a licence even after it has been filed. At any rate it was clearly pointed out in that judgment that S. 11-H does not authorise a Court to straightway dismiss the suit if a valid registration certificate is not produced. It is this difference between the provisions of S. 11-H, C. P. and Berar Money-Lenders Act and S. 9 of the Act that makes the judgment of the Nagpur High Court distinguishable.

A further distinction may also be noted namely that it appears from p. 47 of the report that under the C. P. and Berar Money-Lenders Act the registering authority was not called on to decide whether the applicant is a fit person to carry on the business; it is a matter of supreme indifference to him whether the person applying is financially sound or is otherwise a desirable money-lender. While this may be so, as I have already pointed out under the proviso to S. 3(2) of the Hyderabad Act the licensing authority is empowered to refuse or grant or renew a licence if it believed the money-lender to be an undesirable character.

It is said that the use of the disjunctive ''or'' in the penal clause ''imprisonment or fine'' in the Money-Lenders Act makes the clause only directory and not mandatory; the non-compliance thereof cannot make money-lending transactions illegal or void. With great respect the question is not whether a discretion vests in the presiding officer to fine or imprison an offending money-lender because both are punishments and any act which is punishable is an offence within the meaning of cl. 2 of S. 40, Indian Penal Code.

It is the object of the Legislature in imposing it that is material, namely whether it has been imposed to prohibit the particular act or whether it was for a different object such as for the purposes of revenue.

The legal effect of transactions forbidden by law are stated by Pollock on Contract, Edn. 6, p. 281 in a passage which has been cited by Pearson J. in 24 Bom 622 (C) as well as by my learned brother Shripat Rao in -- ''Teegula Babiah v. Mohd. Abdus Subhan Khan'', AIR 1954 Hyd 156 (FB) at p. 158 (P) to which my learned brother Ansari and myself were parties. Pollock observed:

When conditions are prescribed by statute for the conduct of any particular business or profession, and such conditions are not observed, agreements made in course of such business or profession (e) are void, if it appears by the context that the object of the Legislature in imposing the condition was the maintenance of public order or safety or the protection of the persons dealing with those on whom the condition is imposed; (f) are valid if no specific penalty is attached to the specific administrative purposes, e.g. the convenient collection of the revenue.

A detailed examination of the provisions of the Hyderabad Money-Lenders Act after the amendment in 1355 F. in the light of the aforesaid test has persuaded me to the conclusion that the object of the enactment was to serve a public purpose and the mischief it sought to secure was to protect borrowers from unscrupulous and usurious money-lenders by prohibiting them from lending monies without obtaining licences on pain of imprisonment as well as by empowering Courts to dismiss suits of such money-lenders.

On the aforesaid view it is obvious that though the transactions by an unlicensed moneylender on and after the date of the amendment of S. 9 are void, transactions that took place before the amendment cannot be affected.

The third question viz., whether the amendment to S. 9 of the Act affects substantive rights or only deals with procedural matters can also be answered by a reference to the nature of the right itself. It has been contended on the analogy of S. 214, Indian Succession Act that sub-s. (2) of S. 9 of the Act does not bar a suit from being filed but only bars a decree from being granted if a licence is not produced; as such it deals with a procedural matter.

In the first place the provision in the Money-Lenders Act is not analogous to S. 214 which states specifically that no debt is recoverable unless a succession certificate is produced. It enables the certificate to be produced at any time even after the filing of the suit; but under the Act the Court is empowered to dismiss the suit if it finds that the person is an unlicensed money-lender on the date of the suit transaction, which precludes the taking out and producing of a licence at any time after the transaction. It is, however, clear that the right to recover any property is a question of substantive law. Salmond in his Jurisprudence, Edn. 8 observes at p. 496 as under.

Whether I have a right to recover certain property is a question of substantive law, for the determination and the protection of such rights are among the ends of the administration of justice; but in what Courts and within what time I must institute proceedings are questions of procedural law, for they relate merely to the modes in which the Courts fulfil their functions. What facts constitute a wrong is determined by the substantive law; what facts constitute proof of a wrong is a question of procedure.

He further pointed out at p. 497 that

although the distinction between substantive law and procedure is sharply drawn in theory, there are many rules of procedure, which, in their practical operation, are wholly or substantially equivalent to rules of substantive law. In such cases the difference between these two branches of the law is one of form rather than of substance. A rule belonging to one department may by a change of form pass over into the other without materially affecting the practical issue. In legal history such transitions are frequent, and in legal theory they are not without interest and importance.

Salmond cites three examples of the aforesaid principle, one of which is the rule of evidence that a contract can be proved only by a writing which corresponds to a rule of substantive law, that a contract is void unless reduced to writing. In the former case the writing is the exclusive evidence of title; in the latter case it is part of the title itself. In the former case the right exists but is imperfect, failing in its remedy through defect of proof. In the latter case it fails to come into existence at all. But for most purposes this distinction is one of form rather than of substance. These observations may be generally true, but care must be taken in applying them, as there are many matters which may be exclusively procedural and do not in any way affect the right but only bar the remedy such as for instance, limitation of actions.

The fact that the Court is empowered to dismiss a suit by a money-lender who was unlicensed at the time when he entered into the transaction which may appear to be an evidential fact is, practically equivalent to saying that the transaction by the money-lender is void unless he has obtained a licence. If a transaction was valid, and a money-lender without a licence could recover the loan advanced by him, a subsequent disability imposed on an unlicensed moneylender, cannot unless it is intended to be retrospective, affect a right already vested. In an unreported Division Bench case of -- ''Akkay Rajayya v. Masker Chinna Linga Reddy, No. 249 of 1356 F.'', decided on 25-6-57 F. (25-3-1948) (Hyd) (Q) 1 had held that the right to recover the money was a substantive right and the amendment did not operate retrospectively.

''In re: Pulborough School Board Election; Bourke v. Nutt, (1894) 1 QB 725 (R), a member of the Board was declared to be a bankrupt under the law in force which did not disqualify him from acting as a member of the Board but later the Act was amended to disqualify declared bankrupts from being members of the School Board; it was held that the subsequent amendment did not affect the already vested rights. Lopes L. J. said at p. 737 :

Every statute it has been said which impairs vested rights acquired under existing laws or creates a new obligation or imposes a new duty or attaches a new disability in respect of transactions already past, must be presumed to be intended not to have retrospective effect.

For these reasons stated above my answers to the reference are as follows :

Question 1: A money-lender''s suit is liable to be dismissed under the amended S. 9 of the Act if he does not possess a licence at the time of the suit transaction.

Question 2: In view of the answer to question (1) this does not arise.

Question 3: The amendment to S. 9 of the Act affects substantive rights and the provisions relating to dismissal of suits apply to transactions entered into after the amendment and not before.

PER CURIUM: ''The following answers be sent to the Full Bench''.

Question No. 1: A Money-lender''s suit is liable to be dismissed under the amended S. 9 of the Act if he does not possess a licence at the time of the suit transaction.

Question No. 2: In view of the answer to question No. 1 this does not arise.

Question No. 3: The amendment to S. 9 of the Act affects substantive rights and the provisions relating to dismissal of suits apply to transactions entered into after the amendment of S. 9 and not before.