Sano Kashinath Chowdhury vs Patitto Sabuto and Others

Harries, C.J.—This is an appeal by a judgment-debtor from an order of the learned Subordinate Judge of Berhampore dismissing his application for sealing down a decree under the provisions of the Orissa Money-lenders Act. In the year 1911 the appellant executed a mortgage bond in favour of the respondents for Rs. 14,000. It is said that Rs. 12,000 had been borrowed in cash and the balance of the consideration, namely Rs. 2000, represented interest due on an earlier transaction. The judgment-debtors paid nothing towards the mortgage, and in the year 1926 a mortgage suit was brought for Rs. 45,590. In the year 1928, a preliminary decree was passed, and in the year 1936 the decree was made final. Towards the end of 1938, the decree-holders proceeded to enforce their decree, and on 5th December 1938, the mortgaged property was put up for sale and purchased by the decree-holders themselves for Rs. 60,000. It is to be observed that on this date over one lakh of rupees was due from the judgment-debtor on the mortgage decree. Before confirmation of the sale, the judgment-debtor made an application under the Orissa Money-lenders Act praying the Court to re-open the transaction and to limit the amount of the decree to Rs. 24,000. It was contended that as Rs. 12,000 only was advanced, no sum could be allowed in respect of interest greater than Rs. 12,000. Therefore, it was said, the decree should be reduced to a decree for Rs. 24,000.

There can be no doubt that the application was made at a very late stage, but even so, the Court below held that it was an application which would have succeeded but for the fact that the Orissa Money-lenders Act had no application whatsoever to this transaction. The Court below held that the decree-holders were not money-lenders as defined by the Act, and therefore the Act had no application to this transaction or to the mortgage decree now sought to be re-opened. The application of the judgment-debtor purported to be made under Sections 10, 11 and 16, Orissa Money-lenders Act. Section 10(1), provides:

Notwithstanding anything to the contrary contained in any other law or in anything having the force of law or in any contract, no Court shall, in any suit brought by a money-lender in respect of a loan advanced before or after the commencement of this Act, pass a decree for an amount of interest for the period preceding the institution of the suit which, together with any amount already realized as interest through Court or otherwise, is greater than the amount of the loan originally advanced.

It is to be observed that in the present case the decree had been passed long before the Orissa Money-lenders Act came into force but Section 10 is made applicable to this case by reason of Section 16 of the Act. In any event this section can only apply in a suit brought by a money-lender. Section 11 deals with the power of the Court to re-open transactions, arid, that section also is limited to cases of suits brought by a money-lender in respect of loans advanced before the commencement of the Act. Section 16 makes the provisions of Sections 10 to 15 applicable to appeals and proceedings in execution arising in respect of decrees passed on 1st April 1936 or-thereafter. It will be seen that all the sections under which this application was made refer to suits by money-lenders, and it is clear that the sections have no application unless the suit is a suit by a moneylender. A "money-lender" is defined in Section 2(4)(j) in these terms:

Money-lender means--

(1) Except in Sections 9 to 16, a person who advances a loan in the regular course of business of money-lending with a capital of more than a sum of rupees one thousand, and

(2) in Sections 9 to 16, a person who advances a loan in the regular course of business of money-lending irrespective of the amount of capital invested in the said business.

The question to be decided in this appeal is whether the decree-holders are money-lenders and whether the loan in question was a loan made in the regular course of business of money-lending. The appellant gave evidence and stated that the respondents did carry on the business of money-lending and that this loan was made in the regular course of such business. On the other hand, Patito Sabuto gave evidence on behalf of the respondents to the effect that his family had never carried on any money-lending business and that they had only made four loans between the year 1905 and the present day. He states that the loan made to the appellant was made in special circumstances. The appellant is related to the respondents and was in serious trouble as the result of litigation. To help him the respondents advanced him money from time to time, and on some occasions had actually to borrow the money in order to lend it to the appellant. Patito Sabuto also mentioned three other loans which were made between 1922 and 1925 two to tenants and one to a relation. The learned Judge was satisfied that these four loans constituted all the money-lending transactions ever carried out by the respondents'' family. Would such transactions make them persons carrying on a money-tending business?

The fact that a person carries out isolated transactions of a particular kind does not mean that he carries on business of such a kind. For example, individuals frequently during their lives buy stocks or shares and sell the same. Such buying and selling, however, does not make them stock brokers. They cannot be said to carry on the business of buying and selling shares. Similarly, a person may from time to time lend money to his friends or to persons close to him. If he makes a habit of it for profit, then such lending may well become a business, but if the transactions are few and isolated, then the lending may well not be business. Whether the lending over a period of years will amount to carrying on business or not must depend on the particular facts of each. case. Where the instances of lending are few and spread over for a long period of time and further when it is found that there is some particular reason why each loan should have been made, then such would strongly suggest that the lender was not carrying on the business of money-lending. The question whether or not a person carries on the business of money-lending has been considered in England in a number of cases. In Litchfield v. Dreyfus 1906. K.B. 584, Farewell, J., said:

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

In this particular case Farewell, J. was considering the definition of ''money-lender'' in the English Money-lenders Act, 1900, which defines a money lender as "every person whose business is that of money lending, or who...holds himself out in any way as carrying on that business." A similar view was taken by MoCardie J. in Edgelow v. MacElwee 1918.1 K.B. 205. He observed:

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

The view taken by these eminent English Judges was adopted by a Full Bench of the Allahabad High Court in In Re: Bhairo Dutt Bhandari, An Advocate, in which it was held that an element of continuity and habit is essential to constitute the exercise of a profession or business. Investments of his savings by an advocate do not necessarily amount to engagement in money-lending business, the more so when such investments are few and far between and are mostly made to relations and friends. Nevertheless, if investments by way of loan are made as a matter of regular business and for gain, there can be no escape from the conclusion that such investments constitute engagement in money-lending business.

Applying these principles to the facts of the present case, I have no hesitation in holding that the Court below was right in coming to the conclusion that it had not been proved that the decree-holders were money-lenders as that term is used in the Orissa Money-lenders Act. They had over a period of more than thirty years made four advances, and in each case there appears to have been some special circumstance which caused them to advance the money. They do not appear to have lent money regularly but merely entered into these isolated transactions and then only in very special circumstances. In my view the evidence did not prove that they were in any way carrying on the business of money-lending, and, therefore, it could not possibly be said that the loan in question was advanced to the appellant in the regular course of money-lending business. In the result, therefore, I hold that this appeal fails, and I would dismiss it with costs.

Manohar Lall, J.

I agree.