Back
High Court Of Madhya Pradesh
G. P. Singh and S. M. N. Raina, JJ.
PARMANAND JAIN - Appellant
Versus
FIRM BABULAL RAJENDRA KUMAR JAIN - Respondents
First Appeal 153 Of 1971
Decided On : 03/25/1976
(2) Money - lenders Act, 1934 (MP) - S. 2 (viii) - loan-meaning of-every debt is not loan-price of goods sold by Pakka Adatia - is not loan-but a pro-note written for the price-it becomes a loan.
The definition of loan must be read in the background of the legal concept of loan. Although a loan creates a debt, but every debt is not a loan. The concept of debt is much wider than that of loan. AIR 1966 SC 495 & AIR 1953 SC 485, referred to. [Para 7
If the legal nature of transaction is not lending money, the transaction cannot be regarded as a loan although it may carry out the same economic function which is performed by entering into transaction of loan (1961) 3 All ER 1163 (PC), (1964) 2 All ER 588 & (1938) 3 AllER 275 referred to. [Para 8
The essence of the definition of loan under the Money-lenders Act is that it should be an actual advance whether of money or in kind at interest. The inclusive clause in the definition that loan shall include "any transaction which the Court finds to be in substance a loan" in the context only means that even when apparently there is no actual advance of money or in kind at interest, a transaction would be a loan if in substance it amounts to an actual advance of money or in kind at interest. The definition does not depart from the basic conception of a loan and transactions which in law create relationships different from lender and borrower are not included within it. AIR 1946 PC 145 & (1861-73) AllER Rep. 261, (1932) 1 KB 691 & AIR 1967 SC 1118 referred to. [Para 9
Where the defendant was a Pakka Adatia and sold the goods of the plaintiff, the relationship of seller and buyer came into existence. This relationship created a debt in favour of the plaintiff but did not amount to a loan even though the plaintiff allowed the unpaid price to remain with the defendant and the defendant paid interest on it.
But if the defendant executes a promote for price of the goods after settling the accounts, the amount becomes a loan, within the meaning of the definition of loan in the Money-lenders Act. [Para 10
(3) Money-lenders Act, 1934 (MP) - S. 2 (v) - money lender - must be advancing loan 'in regular course of business'.
Money lender as defined in the Act, means ‘a person who in the regular course of business advances a loan". The words "in the regular course of business" signify a certain degree of system and continuity of transactions. Every person who has advanced a loan, therefore, is not a money-lender. 1975 JLJ 475 relied on. [Para 11
A person selling his agricultural produce in the Pakka Adat of the defendant, and getting a pro-note executed for the amount of price remaining with the defendant is not a moneylender. [Para 12
(4) Stamp Act, 1899 - Ss. 44, 35 & 29 - defendant liable to bear the expenses of stamp - plaintiff paying penalty - can realise it as costs of the suit from the defendant - Civil P.C. 1908 - S. 34.
The plaintiff had to pay Rs. 1210 as duty and penalty under section 35 of the Stamp Act for making the document admissible in evidence. The plaintiff claimed that he is entitled to recover this amount from the defendant under section 44 of the Act.
Held: As provided in section 29 of the Act, the expenses for providing the proper stamp on a bond is to be borne by its executor. In accordance with sub-section (I) of section 44 the plaintiff is entitled to recover the duty and penalty paid by him under section 35 from the defendant and this amount can be included as costs in the suit as provided in sub-section (3) of the same section. 32 MPLC 209 relied on. [Para 14
(5) Hindu Law - Joint Hindu Family-debt-liability of the son for debt incurred by further-is to the extent of his share in the joint property.
If is now well settled law that debts incurred by the father in the course of a business started by him are not ayyavahrika debts and the sons are under a pious obligation to discharge such debts.
The son although not personally liable can be made liable for the payment to the extent of his share in the joint family property, if any. AIR 1967 SC 727 relied on. [Para 15
Key Points: - The definition of loan under the Moneylenders Act is an actual cash or in-kind advance at interest, including in-substance loans via transactions that amount to an actual advance (!) (!) (!) (!) . - The inclusive clause allows in-substance loans where no actual cash changes hands, but the transaction yields an actual loan, with case law illustrating this through accounting and renewal of hand-notes (!) (!) (!) . - A moneylender is someone who advances loans in the regular course of business; mere lending on isolated occasions does not suffice to be a moneylender (!) (!) (!) . - Regular course of business implies system and continuity; various authorities emphasize repetition and habit of moneylending rather than isolated acts (!) (!) (!) . - A son can be liable to the extent of his share in joint family property for debts incurred by the father’s business, even if not personally liable; if no partition exists, the son may bear liability to the extent of share (!) . - In the specific case, the plaintiff (Parmanand Jain) was not held to be a moneylender; the two loans through hand-notes did not establish regular moneylending business, and Rajendra Kumar’s liability is limited to joint family share, if any (!) (!) (!) .
( 1 ) THIS judgment shall also dispose of First Appeal No. 153 of 1971. The facts giving rise to these appeals are that the plaintiff Parmanand Jain filed a suit on 9th October, 1968 for recovery of a sum of Rs. 10,041 against the defendants choudhary Babulal and his son Rajendra Kumar. The plaintiff alleged that the defendants borrowed from him on 24th November 1967 a sum of Rs. 9,081 at 12 per cent interest. It was further alleged that the defendant Babulal executed a hand-note on the same date in the plaintiff's favour. The plaintiff in addition to the principal amount of Rs. 9,081 claimed interest amounting to Rs. 954 upto the date of the suit at 12 per cent and Rs. 6 as notice charges. The decree against Rajendra Kumar was claimed on the basis that the defendants carried on a joint business of Adhat in the name of Babulal Rajendra Kumar and the loan was taken for this business. The defendant Rajendra Kumar pleaded that he had nothing to do with the suit transactions and that the business carried on by Babulal was this separate business. The defendant Babulal pleaded that the plaintiff carried on the business of moneylending, that the plaintiff used to deposit in the defendant's shop cash from time to time, and that on 24th november 1967 the account of the deposits made by the plaintiff was gone into and Rs. 9,081 were found due against the defendant. According to Babulal's case, the hand-note was executed for this amount which was found due after accounting and that nothing in cash was advanced as loan on that date to the defendants. It was also pleaded that the hand-note amounted to a bond and being understamped was invalid. It was further pleaded that the amount of the bond included interest to which the plaintiff was not entitled as he never sent annual accounts to the defendant as required under the law.
( 2 ) THE trial Court held that no cash was advanced to the defendants on 24th november 1967, and that the amount of Rs. 9,081 was found due after the previous accounts between the parties were gone into. It was also held that the plaintiff was a money-lender and that as he did not send annual accounts as required under the Money Lenders Act, he was not entitled to any interest. The court further held that the hand-note amounted to bond. The document was, however, admitted after payment of duty and penalty. As regards Rajendra kumar, the Court held that he was also liable. In view of these findings, the trial Court decreed the suit for the sum of Rs. 9,081 with interest pendente lite at the rate of 4 per cent on the condition that the plaintiff should produce a valid registration certificate under the Money Lenders Act within two months from the date of the decree. The parties were directed to bear their own costs. It is against this decree that the plaintiff has filed First Appeal No, 111 of 1971 and the defendants have filed First Appeal No. 153 of 1971. As both the parties have come up in appeal, the entire controversy is again open in this Court.
( 3 ) THE first question to be decided in this case is whether the plaintiff is a money lender. The plaintiff has examined himself as P. W. 1. His statement is that he is a farmer and that he used to sell his agricultural produce in the Adhat of the defendants who carried on Adhat business. The sale price of the agricultural produce sold by him in the Adhat used to remain lying with the defendants on which they paid interest. The plaintiff has further stated that he used to obtain from the defendants from time to time as much money as he needed from his account. The plaintiff has also stated that he does not do any money lending business. As regards the transaction in suit, the plaintiff's case is that two days before 24th November 1967 the parties settled their accounts and the; plaintiff received Rs. 9,081 which he advanced as loan on that date to defendants and the defendant Babulal executed the hand-note Ex. P-1 promising to repay that amount at 12 per cent
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
