1. This is an appeal by the original plaintiffs against the judgment dated 22nd October 1962 of the learned Civil Judge, S. D. , Sholapur, dismissing the plaintiffs' suit for recovery of Rupees 33,909.94.
2.The plaintiffs instituted the suit for recovery of the said amount, interest and costs. The plaintiffs are a partnership firm and it has been proved that they were registered under the Indian Partnership Act 1932. The defendants No. 1 are also a partnership firm. The defendant No. 2 is an admitted partner in the said firm. He is the person who executed the agreement, Ex. 42, which is the subject - matter of this litigation. The defendants Nos. 3, 4 and 5 have defined that they were partners in the firm of defendants No. 1 at the time of the accrual of the cause of action.
3.The agreement, Ex. 42, which is the subject - matter of this litigation was executed on 25th October 1957. Thereby the plaintiffs advanced to the defendant No. 1 a sum of Rs. 58,000/-. The defendant No. 1 contracted to sell to the plaintiffs 48,000 bundles of bidis at Rupees 2-12-0 per bundle. The price of these 48,000 bundles worked out at the agreed rate to Rs. 1,32,000/-. The bidis were to be supplied within a period of five years from the date of the agreement in a particular proportion every month. It was provided that if the defendants committed default in supplying bidis, the balance amount then remaining out of Rupees 1,32,000/- would be recoverable by the plaintiffs from defendants No. 1. The agreement also provided that for the amount due to the plaintiffs there would be a charge on the trade - mark label of the bidis under which trade mark the defendants marketed their goods.
4.Upto 29th June 1961, the defendants delivered to the plaintiffs 35,300 bundles of bidis. the plaintiffs alleged that the defendants No. 1 failed to deliver the remaining quantity. The defendants alleged that they had delivered 35,600 bundles but were unable to prove the delivery of the difference of 300 bundles. These bidis were of the value of Rupees 98,925.06. If this amount is deducted out of Rs. 1,32,000/- we get the figure of the claim of the plaintiffs in the suit of Rs. 33,909.04. This amount the plaintiffs claimed from the defendants No. 1 in terms of the agreement Ex. 42.
4 A.The defendant No. 2 died on 18th December 1961 and the defendants Nos. 2 (A) to 2 (L) were joined as his heirs and legal representatives. The defendants Nos. 2 (K) and 2 (L) denied that they were the heirs and legal representatives of defendant No. 2.
5.In the written statement defendants No. 1 contended that the agreement, Ex. 42, was brought about by undue influence, coercion and fraud, that the amount of Rs. 58,000/- was advanced as a loan by the plaintiffs to defendants No. 1 at an exorbitant rate of interest that the transaction was governed by the Bombay Money Lenders Act, 1946, and that defendants No. 1 were only liable to pay interest at 9 per cent, per annum. They further contended that the plaintiffs had been over - paid and that the plaintiff firm was not registered under the Indian Partnership Act, 1932, and therefore the suit was not maintainable. They also contended that Ex. 42 was a bond and was not sufficiently stamped and was therefore not admissible in evidence.
6.The trial Court held that the defendants Nos. 3 to 5 were not partners in the firm of defendants No. 1. The trial Court also held that the agreement Ex. 42 was a bond and was not properly stamped. It, however, appears that the said agreement was admitted in evidence, marked as an exhibit and referred to in the examination - in - chief and cross - examination. The trial Court further held that the agreement was not brought about by undue influence and was not void. The trial Court also held that the transaction embodied in the agreement, Ex. 42, was a money lending transaction and was an unconscionable and usurious bargain. In the result, the trial Court dismissed the plaintiffs suit with costs. The plaintiffs have, come in appeal against the said decision.
7.The first contention taken before us Mr. Gumaste appearing for the plaintiffs is that the suit transaction is not hit by any of the provisions of the Bombay Money Lenders Act and that even the provision of Section 25 of the said Act limiting the rate of interest does not apply to it. He contended that the transaction was purely a transaction for sale of bidis and advance payment made towards the price. He therefore contended that the plaintiffs' suit has been wrongly dismissed on this ground.
8.In order to appreciate this contention it is necessary to refer to a few provisions of the Bombay Money Lenders Act. Section 2(6) of the Bombay Money Lenders Act, 1946 defines any sum, by whatsoever name called, in excess of the principal paid or payable to a money - lender in consideration of or otherwise in respect of a loan, but does not include types of transactions enumerated in the said section. One of the kinds of loan, excepted from the said section is a loan to a trader except for the purposes of Sections 23 and 25. Section 2(9)(g) provides that Sections 23 and 25 will be applicable to loans even if they were to traders. Although the learned trial Judge has referred in his judgment to Section 23, in our opinion Section 23 has no application because in the suit no amount of interest which is higher than the amount of loan has been claimed. But it is clear that Section 25 would apply, if we hold that the amount of Rs. 58,000/- advanced by the plaintiffs to defendant No. 1 was a loan and the difference between Rupees 1,32,000/- and Rs. 8,000/- was interest and the limitation on rates of interest prescribed by Section 25 would be applicable to the said transaction. Section 25 of the Bombay Money Lenders Act 1946, provides that the State Government may from time to time by notification in the Official Gazette fix the maximum rates of interest for any local area or class of business of money - lending in respect of secured and unsecured loans. It is not in dispute that at the date of the suit transaction the rates of interest prescribed under Section 25 were 12 per cent, per annum for unsecured loans and 9 per cent per annum for secured loans.
9.We must now turn to the agreement, Ex. 42, for its construction so as to decide whether the dominant intention of the said agreement was to advance a loan by the plaintiffs to defendant No. 1 on interest.
10.The agreement, Ex. 42, is dated 25th October 1947. It recites that the plaintiffs as well as defendants No. 1 were both manufacturers of and traders in bidis. This recital reflects the anxiety of the plaintiffs to get out of the provisions of the Bombay Money Lenders Act and the definition of the word 'loan'. It also recites that defendant No. 1 on the date of the agreement received from the plaintiffs RS. 58,000/- and in lieu thereof the defendants No. 1 had agreed to 'repay the said amount with profits by supplying the goods described in the agreement'. We have later to see whether this 'profit' was to secure payment of interest and whether the supply of goods was repayment in kind and if so, whether repayment in kind would not fall in the definition of loan. Clause (2) of the agreement provides that the prevalent wholesale rate of bidis at the time of the agreement was Rs. 2-12-0 per bundle and that the amount of Rupees 1,32,000/- repayable by the defendant No. 1 to the plaintiffs was worked out at that rate for 48,000 bundles deliverable within a period of five years. Clause (4) of the agreement provides that bidis of the value of Rs. 26,400/- were to be supplied every year, out of which Rs. 11,600/- represented the principal and Rs. 14,800/- were 'profit'. This clause also provides that in this way within a period of five years, defendant No. 1 had agreed to repay the principal amount of Rs. 58,000/- received from the plaintiffs and that Rs. 74,000/- were 'the amount of profit'. Clause (9) provides that if the rate of bidis went down below Rs. 2-12-0 per bundle the defendant No. 1 would supply bidis at the lower market rate then prevailing and make up the total payment of Rs. 1,32,000/-. Neither this clause nor any other clause of the agreement provides that in case the market rate went up the bidis would be supplied at the higher market rate and consequently a smaller quantity would have to be supplied to make up the amount of Rupees 1,32,000/-. In other words the agreement provides for an escalation down of the market rate and not an escalation upwards. We might here comment on the anxiety of the plaintiffs to secure the minimum payment of Rs. 1,32,000/- even if the market rate went down. In case the market rate went up the plaintiffs would have been repaid even more than Rs. 1,32,000/-. Clause (7) of the agreement provides that if defendant No. 1 committed a breach of the agreement, the plaintiffs would be entitled to recover from the defendants No. 1 the amount of Rs. 1,32,000/- after deducting therefrom the price of the bidis delivered. This clause provides for the mode of recovery through Court but we are not concerned with the same. This clause uses the expression 'after deducting the amount paid by me (defendant No. 1) towards the repayment of the aforesaid amount of Rs. 1,32,000/-' (words in bracket and underlying supplied). Clause (8) of the agreement provides firstly that unless the agreement was fulfilled the defendants No. 1 and would not alienate or dispose of moveable and immoveable property or encumber the same; and secondly, the plaintiffs would have a charge on the bidi trade mark used by the defendants No. 1. This clause would show the anxiety of the plaintiffs to secure themselves for the advances made by them to defendant No. 1.
11 - 12. The anxiety of the plaintiffs to get out of the definition of the word 'loan' and the provisions of the Bombay Money Lenders Act, the provisions for 'repayment' of Rs. 1,32,000/- in lieu of Rupees Rs. 58,000/-, and the attempt to describe the difference as 'profit', the provision for escalation down of the price and not for escalation upwards, the anxiety to secure at least Rs. 1,32,000/- and if possible a larger amount, provision for recovery of the balance of Rs. 1,32,000/- in case of short deliveries, reference to the value of the goods delivered as 'amount paid', securing the repayment of amount by negative convenant against alienation of property and by creating charge on trade mark tend to show that the dominant purpose of the agreement, Ex. 42, is to secure the repayment of a loan advanced with usurious interest and not to secure sale of goods.
13.It would also appear to us from the terms of the agreement set out and discussed hereinabove that the difference of Rs. 74,000/- between the amount of advance, viz, Rs. 58,000/- and the amount repayable by the defendants No. 1 to the plaintiffs and which has been described in the agreement as 'profit' is nothing other than interest. The definition of the word 'interest' in sub - section (6) of S. 2 of the Bombay Money Lenders Act provides that interest includes any 'sum' by whatsoever name called. Mr. Gumaste for the plaintiffs contended that what the defendants No. 1 were to give was bidis of the value of Rs. 74,000/- and not money. The amount of payment in excess of advance was not a 'sum' and was therefore not interest. It, however, appears to us that the amount repayable is fixed in money and is a 'sum'. It may be that the plaintiffs were expecting goods at ascertainable prices in repayment of the sum. That, however, makes no difference to the fact that what had to be repaid was a particular sum of money. This is more so because the plaintiffs were not taking any risk even on account of a fall in prices. If the prices went down they were to get larger quantity of goods. The plaintiffs, however, provided benefit to themselves by not giving any advantage to defendant No. 1, if the prices went down. In case of sale of goods only price is charged and there is no question of charging any profit by the buyer to the seller. There is no explanation from the plaintiffs as to what this profit represented. To us it is clear that the 'profit' represented nothing other than interest. We have therefore come to the conclusion that the amount of Rs. 74,000/- called 'profit' in the agreement was nothing other than interest.
14.Mr. Gumaste also contended that the definition of the 'loan' in sub - section (9) of S. 2 of the Bombay Money Lenders Act meant an advance at interest whether of money or in kind. He contended that while advance could in kind the repayment could not be in kind. This argument is, however, based on the assumption that the repayment was in kind. In this case the repayment is provided for in money, the amount of Rs. 74,000/- is specified. It is only repayable by sale of bidis at particular prices and in case of breach the balance is payable in money. This would therefore not make the payment not in money. Repayment in money or in money's worth at ascertainable prices is repayment of a loan.
15.Mr. Gumaste contended that the agreement itself recited and there was no dispute about the fact that both the parties, viz. the plaintiffs on the one hand and defendants No. 1 on the other, were manufacturers of and traders in bidis and the Bombay Money Lenders Act would therefore have no application. This argument would be correct except for Sections 23 and 25 of the Bombay Money Lenders Act. We are not concerned with Section 23. Section 2(9)(g) expressly provides that Section 23 and 25 will be applicable to loan even if they were to a trader. Section 25 would, therefore, be applicable to the suit transaction and this section provides maximum rate of interest chargeable for secured and unsecured loans. This rate at the relevant time was 9 per cent per annum for secured loans and 12 per cent per annum for unsecured loans.
16.A Division Bench of the Bombay High Court sitting at Nagpur held on 3-2-1970in C. R. A No. 356 of 1969 that in construing a document one has to look at the dominant intention of the transaction. Mr. Gumaste contended that on a true construction of the agreement, Ex. 42, the dominant intention was sale of goods and not advancement of a loan and payment of interest. We have, however, discussed the terms of the agreement itself and, in our opinion, the dominant intention of the transaction is to advance a loan and to secure its repayment along with a high rate of interest. The sale of bidis might have been mutually beneficial to both the parties but the dominant intention was not an agreement of sale but an agreement for repayment of loan with interest. It may also have been the intention of the parties to give it a colour of a sale agreement so as to take it out of the operation of the Bombay Money Lenders Act. We have, however, to see the true intention of the transaction and as we have stated above it is clear to us that the nature of the transaction is money lending transaction. However, no other provision of the Bombay Money Lenders Act, 1946, will apply to it except the two sections referred to above in view of the fact that defendants No. 1 are traders.
17.Mr. Gumaste invited our attention to the judgment of a Division Bench of this Court in Suleman Haji Ahmed Umer v. Haji Abdulla Haji Rahimtulla 42 Bom LR 971, which brings out a distinction between a deposit and loan for the purposes of Arts. 57, 59 and 60 of the Indian Limitation Act, 1908. There the question was whether the amount was advanced was a deposit repayable on demand or a loan which must be repaid within 3 years of the time when it was repayable. In our opinion, this judgment is totally irrelevant for the purposes of our case.
18.Mr. Gumaste also invited our attention to the definition of loan in Section 2(2) of the Usurious Loans Act, 1918 (Act 10 of 1918) which provides that a 'loan' means a loan whether of money or in kind and includes any transaction which is, in the opinion of the Court in substance a loan. In this case the loan is of money. The Usurious Loans Act 1918 gives a wider definition and provides that if a transaction is in the opinion of the court in substance a loan, it is a loan. In this case we have already held that in our opinion the transaction was in substance a loan and therefore the said transaction would be a loan under the Usurious Loans Act, 1918. We are however concerned with the definition of the word loan in the Bombay Money Lenders Act and have come to the conclusion that the suit transaction was one of a loan advanced within that definition.
19.Mr. Gumaste also cited to us the judgment of the Supreme Court in Shri Ram Mills Ltd. v. Commr. of Excess Profits Tax : 23ITR120(SC) , where it has been held that a loan imports a positive act of lending coupled with an acceptance by the other side of the money as a loan. We have no quarrel with the proposition laid down in this judgment and we are bound by it. But as we have already shown that this was a positive act of lending of Rs. 58,000/- and it was accepted by defendant No. 1 as a loan, the transaction is a transaction of loan within the meaning of this definition. This apart from the fact that the Supreme Court was construing the word 'loan' in a case arising under the Excess Profits Tax Act, 1940 and not as defined under the Bombay Money Lenders Act, 1946.
20.Mr. Gumaste also cited a judgment of the Privy Council in Beninson v. Shiber AIR 1946 PC 145 but as we find that it has no application to the facts of the case before us we do not consider it necessary to discuss it.
21.Mr. Gumaste also took up through the evidence of the Managing Partner of the plaintiffs and a representative of the firm of defendant No. 1. In his evidence the Managing Partner of the plaintiffs has emphasized the fact that he is a bidi manufacturer and trader and so were the defendant No. 1 and that the plaintiffs were not money lenders ; whereas the representative of the defendant No. 1 has deposed that this was intended to be a transaction of loan and that the plaintiffs were demanding interest at 24 per cent per annum. These are the rival contentions in the evidence, but we think that the agreement has to be construed by its own terms and what we have held is on the construction of the agreement, Ex. 42 itself rather than on the rival contentions of the parties in the evidence.
22.The learned trial Judge held that the agreement, Ex. 42 was a bond, within the meaning of Section 2(c) of the Indian Stamp Act and was liable to be stamped with an ad valorem stamp duty due under Art. 15. We, however, find that the document had already been exhibited and used at the trial. Under Section 35 of the Indian Stamp Act once a document is so admitted in evidence and used it cannot be thereafter questioned at any stage of the same proceedings or even in appeal. We cannot, therefore, hold that it was open to the learned Judge to hold in the judgment that the instrument was inadmissible in evidence once it had been marked as an exhibit and admitted in evidence. The Supreme Court has also so held in the case of Javer Chand and Ors. v. Pukhraj Surana : 2SCR333 .
23.We asked Mr. Gumaste whether if interest was calculated on Rupees 58,000/- even at 12 per cent per annum which was the notified rate of unsecured loans at the time of agreement, any amount would be due by defendant No. 1 to the plaintiffs. He, however, stated that in that event nothing would be found due to the plaintiffs from the defendant No. 1. There is therefore no question of giving a decree to the plaintiffs for any amount.
24.The appeal therefore fails and is dismissed with costs.
25.Mr. Gumaste made an oral application that in case we decide against the plaintiffs, we should grant to them leave to appeal to the Supreme Court. The amount of the value of the subject - matter in dispute is undoubtedly over Rs. 20,000/- and the case turns on the interpretation of the Bombay Money Lenders Act, 1946, and construction of document, Ex. 42. It appears that the case is a fit one to appeal to the Supreme Court of India. We, therefore, grant a certificate to the plaintiffs under Arts. 133(1) (a) and (c) of the Constitution of India.
26. Appeal dismissed. Leave to appeal to Supreme Court granted.