2004 Supreme(SC) 1588

2005(1) Supreme 533
Supreme Court of India
(From Bombay High Court)
Ashok Bhan & A.K. Mathur, JJ.
Sona Chandi Oal Committee and Ors. —Appellants
versus
State of Maharashtra —Respondent
Civil Appeal No. 992 of 2003
Decided on 16-12-2004
Counsel for the Parties :
For the Appellants : G.L. Sanghi, Sr. Advocate, Vipin Sanghi, E.C. Agrawala, Rishi Agarwala, Mukesh Agarwal and Manu Krishnan, Advocates.
For the Respondent : Mukesh K. Giri and Ravindra Keshavrao Adsure, Advocates.

Important pointInspection fee charged under Section 9A of the Bombay Money Lenders Act is for the direct service rendered to the money lenders and the fee charged is regulatory in nature to control and supervise the functioning of the money lending business.

Headnote:Bombay Money Lenders Act, 1946 As amended by Maharashtra Act No. 7 of 1992—Sections 9A and 6—Bombay Money Lenders Rules, 1959—Rules 11, 16, 17—Levy of inspection fee for ­renewal of money lender’s licence—­Validity of Section 9A challenged—­Appellants who are licensed money lenders seek striking down of Section 9A of the Act and consequent thereto the quashing of the demand notice for payment of inspection fee—State ­alleged that the inspection fee is charged not for rendering services but also for regulating and controlling money lending business—High Court upheld validity of Section 9A holding that there was nexus between the fee charged and the service rendered and that the fee charged was regulatory in nature—It was observed that the levy was meagre and not even sufficient to meet the expenses incurred for the staff looking after the money lending business—Whether the fee of the nature impugned is, as a matter of fact, a tax in guise of fee—(No)—Whether it is so excessive or unreasonable as to loose the character of fee—(No).

       Held : The Bombay Money-Lenders Act, 1946 was enacted during pre-independence­ period by the elected Government to control and regulate money lending. Money lenders were fleecing the poor peasants, tenants, agricultural labourers and ­salaried workers who were unable to repay loans. The agricultural debtors were loosing their lands, crops or other securities to the money lenders. To arrest this exploitation, the Money-Lenders Act was enacted to improve the economic conditions of the bulk of the rural population and the poorer sections of the population in towns and cities. Under the Act it was made mandatory first to take a licence to do the business of money lending on payment of a licence fee of Rs. 200/-. Inspection fee is levied for renewal of licence and for that purpose it is necessary that the records maintained by the money lenders should be thoroughly examined in order to satisfy whether all the registers are maintained properly in accordance with the rules and it is only after the satisfying that no irregularities are committed, the money lender becomes entitled to get the renewal of his licence. ‘Inspection fee’ has been defined in Section 2(5-A) of the Bombay Money-Lenders Act, 1946 to mean the fee leviable under Section 9A in respect of inspection of books of account of a money-lender. Section 2(7) defines the ‘licence’ to mean licence granted under this Act and according to Section 2(8) ‘licence fee’ means fee payable in respect of a licence. Renewal of licence is not automatic and can be refused on the grounds specified in Section 8. In order to ensure that the money lenders comply with the provisions of the Act and the Rules on which renewal of the licence can be refused under clauses (b) and (c) of Section 8, inspection of the records maintained by the money lenders is absolutely necessary and must. (Para 23)

       This is the direct service rendered to the money lenders as the renewal of licence depends upon the inspection of their accounts which is required to be carried out under the Act. This apart the fee charged is regulatory in nature to control and supervise the functioning of the money lending business to protect the debtors the vast majority of which are poor peasants, tenants, agricultural labourers and salaried workers who are unable to repay their loans. The object of the Act is to control the money lending business and protect the debtors from the malpractices in the business by detecting illegal money lending. This exercise is a must to carry out the object of the Act for which lot of infrastructure is required. The duty of the staff and the officers of the Department is to visit the places of money lending business, inspect the accounts and other ­matters relating to the business, to find out illegal money lending, carry out raids in suspicious cases and do regular inspection as provided in the Act. The Act serves a larger public interest. (Paras 24 and 25)

       Receipts from inspection fees and licence fees under the Act form a very small part of the total receipts of the Co-operative Department which are to the tune of Rs. 21 crores. The licence fees and inspection fee under the Act are not even sufficient to meet out the expenses incurred on the staff looking after the money lending business. Since the Act is a social legislation with the intention to protect the debtors from the malpractices in the business the State is performing its duties even though the revenue under the Act is not even sufficient to meet the expenditure on the staff performing duties under the Act. In view of these submissions it cannot be held that the fees are either arbitrary or excessive. (Para 26)