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1987 Supreme(All) 524
HIGH COURT OF ALLAHABAD
N.N. MITHAL, J.
Gauri Shanker Rai - Appellant
Versus
Kailash Rai - Respondent
First Appeal No. 223 of 1983
Decided on : Nov 23, 1987
R.P. Goel, R.N. Singh
A money lender who ceases to carry on the business of money lending after the enforcement of the Uttar Pradesh Regulation of Money-Lending Act, 1976, is still required to submit a statement of account under Section 26(1) to recover loans advanced prior to the Act's commencement.
Headnote:
Uttar Pradesh Regulation of Money-Lending Act, 1976 - Applicability to Money Lent by Person Ceasing Business After Act's Enforcement - Interpretation of Sections 3(6), 7, 10, and 26 - Legal Obligation to Submit Statement of Account - Bar on Recovery of Loans - Key Legal Principle: A money lender who ceases to carry on the business of money lending after the enforcement of the Act is still required to submit a statement of account under Section 26(1) to recover loans advanced prior to the Act's commencement.
Fact of the Case:
Plaintiff, a money lender, sued defendants to recover a loan advanced in 1975. Defendants contended that the plaintiff was not competent to sue without a license under the Uttar Pradesh Regulation of Money-Lending Act, 1976, and had failed to submit an account to the concerned authorities.
Finding of the Court:
The court held that the plaintiff was a money lender who had been carrying on the business of money lending prior to the Act's enforcement. The court found that the plaintiff had not obtained a certificate of registration or submitted a statement of account as required by the Act. Therefore, the court held that the plaintiff's claim was barred under Section 26(4) of the Act.
Issues: 1. Whether the plaintiff was a money lender carrying on business before and after the enforcement of the Uttar Pradesh Regulation of Money-Lending Act, 1976. 2. Whether the plaintiff was required to obtain a license under the Act and submit a statement of account. 3. Whether the plaintiff's claim was barred under Section 26(4) of the Act.
Ratio Decidendi: The court interpreted Sections 3(6), 7, 10, and 26 of the Uttar Pradesh Regulation of Money-Lending Act, 1976. The court held that the definition of 'money lender' in Section 3(6) includes a person who carries on the business of money lending, even if they cease to carry on the business after the Act's enforcement. The court further held that Section 26(1) imposes a statutory duty on money lenders who were carrying on the business before the Act's commencement to submit a statement of account in Form 10. Failure to submit the statement bars the money lender's claim under Section 26(4).
Final Decision: The court allowed the appeal and held that the plaintiff's claim was barred under Section 26(4) of the Uttar Pradesh Regulation of Money-Lending Act, 1976.
N. N. Mithal, J.
1. Defendants' appeal raises just a short question though of considerable importance regarding applicability of the provision of The Uttar Pradesh Regulation of Money-Lending Act, 1976 to money lent by any one who decides not to carry on such business after the enforcement of the Act.
2. The plaintiff brought a suit for recovery of money due on a loak advanced on 20-8-1975 re-payable with 12% interest. The plaintiff also claimed that he was not a money lender either from before the Act or thereafter as he was mainly an agriculturist.
The defendants denied these allegations and contended that as a money lender he was not competent to sue in the absence of requisite licence under the Act, besides this he had failed to submit account also to the concerned authorities. Some other pleas were also raised but these are no longer relevent for the appeal nor any was raised.
3. Following ten issues were struck by the trial court:-
1. Whether defendant borrowed Rs. 20000.00 on 12-6-1975 on interest at the rate of Re. 1/- per cent per month and executed sarkhat in question in plaintiff's favour ?
2. Whether plaintiff is a money lender ? If so, its effect ?
3. Whether defendants are small farmers ? If so, are they entitled to the benefit of Sec. 10 of U. P. Act No. 4 of 1977 as alleged in para II of W. S.
4. Whether disputed Sarkhat was obtained for the purpose as alleged in paras 13 and 14 of W. S., its effect ?
5.To what relief, if any, is the plaintiff entitled ?
6. Whether plaintiff is a money lender as contemplated by law ? If so whether the suit is not maintainable for want of money lending licence ?
7. Whether defendant is a small farmer ? Its effect ?
8. Whether this court has no jurisdiction to try this suit as alleged by the defendants ?
9. Whether it was incumbent upon the plaintiff to have obtained a money lending licence as provided by section 18 (c) of U. P. Act 1 of 1979 ? Its effect ?
10. Whether disputed debt was borrowed for legal necessity ? If not its effect ?
4. Issues Nos. 2, 6 and 9 were discussed together holding that no licence was needed as plaintiff was not money lender and his claim was not barred under any of its provisions and the court decreed the suit.
Sri R. P. Goel, for the appellants, directed the thrust of his submissions on the applicability of U. P. Regulations of Money Lending Act, 1976 as regards the plaintiff and the transaction in question. Before referring to the evidence it will be far better to have a general idea about the various provisions of the Act itself.
5. This Act was enacted in the interest of the general public to provide for the regulation of money lending transactions and for registration of money lenders and matters connected therewith. The Act received the President's assent on 17th of July, 1976 and came into force with effect from 1st Sept. 1976. 'Money lender' as defined in section 3 (6) of the Act means a person who carries on the business of money-lending. Business of money-lending, according to section 3 (2) means the business of advancing loans, whether or not in connection with or in addition to any other business. 'Loan' in section 3 (5) is defined as follows :
"Loan means an advance at interest whether of money or in kind and including any transaction which is in substance a loan, but does not include sale of any goods by a dealer in such goods whether on credit or on hire purchase."
6. Section 7 occurring in Chapter III which relates to registration of money lenders reads as follows :
"Section 7 (1) Any person carrying on the business of money lending on the date of commencement of this Act wishing to carry on such business after such commencement (or any person wishing to commence such business after the said date) in any part of Uttar Pradesh may apply to the Registrar within the local limits of whose jurisdiction he has his principal place of such business, and where his principal place of business is situated outside Uttar Pradesh, to any Reg
