Venkatarama Sastry, J.
1. The defendants 1 to 4 are the appellants in this appeal. This appeal is preferred against the decree in O. S. 45/65 on the file of the 1st Addl. Chief Judge, City Civil Court Hyderabad.
2. The suit was instituted by the respondent for the recovery of a sum of Rs. 55,125/- on the basis of a registered simple mortgage bond dated 4-10-1961, executed by the appellants herein in his favour. The bond was originally executed for rupees one lakh out of which the appellants paid a sum of Rs. 50,000/- on 29-6-65 leaving a balance of Rs. 50,000/- as due to the plaintiff. According to the terms of the mortgage bond the appellants agreed to pay monthly interest to the plaintiff under the mortgage bond and paid it punctually till January, 1965 and thereafter committed default. The plaintiff therefore issued for the balance of the principle and the interest that accrued till the date of the suit. The suit was filed on 15-10-65. The hypothecate under the mortgage bond is a house property comprised in Municipal No. 5-0-665, Gunfoundry. Hyderabad specified in Schedule-A. The interest provided under the bond was at 95 per annum. The bond was executed and registered at Hyderabad, and the defendants appellants were residents of Hyderabad and the suit, therefore, came to be instituted in the Hyderabad Court.
3. The defendants admit the execution of the mortgage and the receipt of consideration. They however pleaded that the loan was taken for the investment by the defendants for their business, particularly for the acquisition of the land known as 'Karbala Maidan' Secunderabad, that the plaintiff should wait till the complete sale of entire Karbala Maidan, that the plaintiff is aware of the steps taken by the defendants for the sale of the said property but has unnecessarily come to Court in a haste and, therefore, the suit was premature. They also pleaded that in any event having regard to the payment of interest every month, the rate of interest charged is excessive and the debt is liable to be scaled down. They further pleaded as follows:-
'These defendants understand that the plaintiff is a money-lender within the meaning of 'Money Lenders Act' and the suit was therefore not maintainable'
The defendants therefore, pray for the dismissal of the suit.
4. On these pleadings the lower Court framed the following issues:-
1. Whether there was any understanding that the money under the mortgage bond was payable only after the sale of the defendants' property known as 'Karbala Maidan'?
2. Whether such a plea is tenable in view of the registered mortgage bond 4-10-61?
3. Whether the suit is premature?
4. Whether the suit is barred as offending the provisions of the Hyderabad Money Lenders Act?
5. Whether the interest charged is excessive?
6. To what relief?
5. Issues 1, 2, 3 and 5 were not pressed by the defendants and were therefore found against the defendants. The only relevant issue that was taken up by the lower Court was issue No. 4. The burden of establishing that the suit is barred by the provisions of Hyderabad Money Lenders Act, being on the defendants the first defendant examined himself as D.W. 1 and filed Exs B-1 to B-28. The plaintiff has examined himself as P. W. 1 his clerk as P. W. 2 his power of attorney agent as P. W. 4 and the Tahsildar as P. W. 3. Exs A-1 to A-24 have been marked on his behalf.
6. On a consideration of the entire evidence and the relevant case law cited before it, the lower Court held that the plaintiff is not a money lender within the meaning of Section 2 (7) of the Hyderabad Money Lenders Act and the suit is not liable to be dismissed under Section 9 of the said Act for non-compliance of Sec. 3 thereof. The lower Court therefore found the issue No. 4 in favour of the plaintiff and ultimately passed a preliminary mortgage decree for the suit amount with costs.
7. In this appeal, preferred by the defendants, Sri C. Seetharamaiah, learned counsel appearing for the defendants appellants has raised the contention that the plaintiff is a money lender within the meaning of Section 2 (7) of the Act and the provisions of Section 9 would apply to this case, in a smuch as the plaintiff had no licence under this act, for this item of money lending business done at Hyderabad and therefore the suit has to be dismissed. He has relied upon various transactions culled out by him from the evidence as indicative of the money lending business carried on by the plaintiff, which bring him within the definition of Money Lender. We shall presently consider the said documents and their effect.
8. Before considering the relevant documents in the case, it is pertinent to note the relevant provisions of the Money Lenders Act, on which reliance is placed by the learned counsel for the appellants. The Money Lenders Act. Act No. V of 1349 F. Was passed by the erstwhile Hyderabad Government and its preamble is as follows:-
'Whether it is expedient to regulate the transactions of money lending and to make better provision for its control; it is hereby enacted as follows:-
9. Section 2 (4) defines the loan as follows:
'Loan' means a loan secured or unsecured, advanced on interest in cash or in kind and shall include every transaction which is in substance a loan but shall not include the following:
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(g) a loan advanced by one trader to another trader in the ordinary course of business, in accordance with practice in trade.'
10. Section 2 (7) defines the money lender as follows:-
'(7) 'Money lender' means a person including a pawn broker, who within the meaning of this Act, only advances loan in the ordinary course of his bossiness or does so along with other business, and shall also include the legal representative of such person and the person claiming to be his representative on the ground of succession or assignment or otherwise.'
11. Section 3 provides for registration of money lender,. Sub-section (5) (a) of Section 3 is as follows:
'No money-lender shall carry on in any district the business of money lending without obtaining a licence provided for in sub-section (2)
(b) if any person contravenes the provisions of clause (a) he shall be punished with rigorous imprisonment for a term which may extend to six months or with fine or with both. The fine imposed shall in case of default be recoverable as arrears of land revenue. The Taluqdar shall have power to award punishment, under this clause. An appeal against his order shall lie to the Sessions Judge.
(c) An offense under this sub-section shall be cognisable and bailable.'
12. Section 5 provides for the maintenance of accounts and the furnishing of statements thereof to debtors by money lenders. Section 6 applies to additional accounts to be maintained by pawn brokers. Section 9. Which provides for the procedure of court is as follows:
'Notwithstanding anything contained in any law for the time being in force, in every suit relating to loan.
(1) The Court shall frame and decide the issues wither the money leader is a money lender as defined in sub-section (7) of Section 2 and whether he has complied with the provisions of Section 3 and of clauses (a) and (b) of sub-sec. (1) of Section 5, and sub-sections (1) and (2) of Section 6.
(2) If it is proved that the plaintiff is a money lender as defined in sub-section (7) of Section 2 but does not hold a licence granted under Section 3 the Court shall dismiss his suit.
(2-A) If it is proved that the money lender has not complied with the provisions of clause (a) of sub-section (1) of section 5 or of sub-section (1) of Section 6 or of section 8 and the plaintiff's claim is established in whole or in part, the Court may, in the circumstances of the case, disallow the whole or any portion of the interest due and may disallow the cost wholly or in part.
(3) If is proved that the money lender has not furnished the debtor with a statement of account in accordance with the provisions of clause (b) of sub-section (1) of Section 5 or sub-section (2) of Section 6 the court shall in computing the amount of interest, exclude the interest in respect of every period for which the money-lender has not furnished the debtor with the statement of account.'
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13. From a reading of the above provisions it is clear that the object of the Act is to serve the public purpose and protect the borrowers from unscrupulous and usurious money lenders by prohibiting them from lending moneys without obtaining licence on pain of imprisonment as well as by empowering courts to dismiss the suits of such money lenders (vide the Full Bench decision in Mohd. Bin Salem, v. Umaji. AIR 1955 Hyd 113)
14. In order to attract the provisions of this Act. It should be first established that the plaintiff is a money lender and the loan was advanced in the ordinary course of business. The burden of establishing this fact is on the defendants. Their Lordships Subba Rao C. J. (As he then was) and Srinivasa Chari. J have held in Munagala Yadgiri v. Pittala Veeraiah (1958 (1) Andh WR 413) as follows:-
'Under this Act, a professional money lender who has not obtained a licence, cannot maintain a suit in a civil court for recovery of the amount due to him. The court shall dismiss his suit. But a person who seeks to non-suit the plaintiff, should necessarily allege and establish that the plaintiff is a professional money lender.'
15. This view was followed by another Division Bench of this Court in (Narasayamma v. Andhra Bank. AIR 1969 Andh Pra 272). The question, therefore, that arises in this case is whether the plaintiff is a 'money lender' within the meaning of this Act. It is the contention of the defendants that the plaintiff is a money lender and the loan was advanced in the ordinary course of business, whereas it is the case of the plaintiff that he is not a money-lender and that he had no business of money lending and that the loan was not advanced in the ordinary course of such money lending business. In deciding whether a particular transaction is one, which took place in the ordinary course of business or not, it has been held in several decisions that a stray or casual transaction by a person not possessing the licence would not amount to a transaction done in the ordinary course of business. As to what constitute business of money lending has been discussed in Halsbury's Laws of England (Vol 27 3rd Edition. Page 18) in the following terms:
'In order to establish the he is carrying on the business it is not sufficient to prove that he has occasionally lent money at remunerative rates of interest it is necessary to prove some degree of system and continuity in his money lending transactions and something more than loans to friends or relatives. In considering whether a person is carrying on a business of money-lending all loans made by him must be taken into account.'
16. In Newton v. Pyke. (1908) 25 TLR 127) it was held that in order to fall within the definition of money lender it was not enough merely show that the man had on several occasions lend money at remunerative rates of interest, there must be certain degree of system and continuity about the transaction. Lord Morris held in Grainger & Soon v. Gough. 1896 AC 325 at p. 343 thus:
'There can be no definition of the words 'exercising a trade'. It is only another mode of expressing 'carrying on a business'; but it certainly carries with it the meaning that the business or trade must be habitually or systematically exercised, and that it cannot apply to isolated transaction.'
17. The following view expressed by Mc. Gardie. J. In Edgelow v. Mac Elwee (1918 ) 1 KB 205 at p. 206 may also helpfully be noted in this connection :
'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 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.
18. A Division Bench of this Court also held in Varalaxmi v. Syed Kasim Hussain (1962) 2 Andh WR 137 that in order to fall within the definition of 'money lender' it was not enough merely to show that a man had on several occasions lent money at remunerative rates of interest; there must be a certain degree of system and continuity about the transactions. The definition envisages only those classes of persons whose regular business is to advance moneys and not those who advances money casually. In Sataram Shrawan v. Bajya Parnya, (AIR 1941 Nag 177) Vivian Bose, J., dealing with the meaning of the word 'regular' held as follows '-
'The word 'regular' shows that the plaintiff must have been in the habit of advancing loans to persons as a matter of regular business. If only an isolated act of money lending is shown to the Court it is impossible to state that the constitutes a regular course of business. It is an act of business but not necessarily an act done in the regular course of business'.
19. In Narain S.W. Mills v. E.P. Tax Commissioner, : 26ITR765(SC) S.R.Das J., dealing with Section 10 of Excess Profits Tax Act held:
'the word 'business' connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. On the other hand, a single and isolated transaction has been held to be conceivably capable of falling within the definition of business as being an adventure in the nature of trade provided the transaction bears clear indicia of trade'.
20. In State of Andhra Pradesh v. H.A.Bakshi & Brothers : 7SCR664 it was held by Shah, J. As follows'-
'The expression 'business' though extensively used is a word of indefinite import; in taxing statutes it is used in the sense of an occupation, or profession which occupies the time attention and labour of a person normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure'.
21. These two decisions of the Supreme Court were followed in Directors & D., Calcutta v. Board of Revenue (AIR 1967 SC 1826) and it was held :
'That the Director was not carrying on the business of buying or selling goods within the meaning of Section 2 (c) of Bengal Finances (Sales Tax) Act when he was selling a part of the war material which was left in surplus and the transactions of sale were not liable to be taxed under the provisions of the Act'.
22. In Gajanan v. Brindaban : 1SCR657 it has been held by their Lordships of the Supreme Court:
'That a person registered as money lender in one district and who entered into an isolated transaction of money lending on a mortgage in different district can proceed without registration certificate, since a money-lender under under the C.P. & Berar Money Lenders' Act means a person, who in the regular course of business advances a loan and excludes isolated transactions of money lending'.
23. Their Lordships approved the decision in (AIR 1941 Nag 177) and held :
'That an individual transaction of lending money has not been declared to be void and as we construe the Act as a whole, interference with freedom of contract appears to have been limited only to the extent necessary for regulating and controlling the business of money lending '
24. In that view their Lordships held' taking into view the scheme and the provisions of the Act that a single and casual transaction of loan in a different district that the none in which the plaintiff had held the licence does not in any way prevent the plaintiff from recovering the said sum'. It is no doubt true that not only the Full Bench decision of the Hyderabad High Court in AIR 1955 Hyd 113 (FB) but also the decision of their Lordships of the Supreme Court in Kaloji Talusappa v. Khyanagouda : AIR1970SC1420 interpreting the very same Section 9 of the Hyderabad Money Lender Act clearly establish that if it is found that the plaintiff was carrying on business as a money-lender on the date of the transaction without a licence the Court is bound to dismiss the suit.
25. In view of the above authorities it has to be seen whether the plaintiff in this case is a money lender within the meaning of Section 2 (7) of the Act (After discussing the evidence in the rest of this para and paras 26 to 35 ) the judgment proceeded ):
26. On a review of the entire evidence in this case the position may be summed up thus. The plaintiff advanced at Hyderabad three loans on mortgages in 1952 and 1953 to Jai Narain Misra, and in 1954 to Pyarelal. A sum of Rs. 76,000 /- was lent for interest to Radio and Electricals in 1954. Beyond these there were no advances till we come to the suit transaction on 4-10-1961. The other loans are only accommodation loans and bear no interest. For a long spell of about 71/2 years till the date of the suit transaction there was no advance by the plaintiff for interest. There were no further advances for interest even thereafter. The defendant as D. W. 1 admits that he is not aware of any advance by the plaintiff in 1966 and 1967. Thus there is only one casual or stray transaction of advance to the defendants in 1961. Such stray or casual act cannot be called an act done in the ordinary course of business. ( See : 1SCR657 ). The habit system and continuity that is required to satisfy the test of regular or ordinary course of business in this case. It is not possible to connect the similar stray transactions of 1952, 1953 and 1954 to this suit transaction of 1961 so as to hold that it is the normal course of money lending business for the plaintiff. In our opinion such a disconnected stray act cannot be taken as a link in the chain to call it a normal course of business, especially when they are removed by seven and half years from the suit transaction. A money lender in the normal course would have many transaction of money lending each year and therefore a continuity of such transactions over these years should have been present. Moreover if the plaintiff was a professional money lender he could have easily secured a licence at Hyderabad as well and got it renewed from year to year. In order to attract the provisions of S. 3 (5) ( a ) of the Money Lenders Act, the plaintiff should be a money lender I. E., a person advancing monies in the normal course of business in a district without holding a licence. It does not prohibit and therefore does not invalidate an isolated transaction of lending money. We are satisfied on the evidence, as we believe the plaintiff's evidence in this regard that the plaintiff has not been doing any money lending business at Hyderabad. He is not therefore a money lender within the meaning of Section 2 (7) of the Money Lenders Act.
27. On this finding Section 3 (5) (a) and Section 9 are not attracted to this case and the suit of the plaintiff must be held to have been rightly decreed. Section 9 being penal in nature has to be strictly construed and the burden of the defendants is very heavy. We are convinced on the evidence and the probabilities that the defendants have not successfully discharged that burden in this case.
28. In the result this appeal is dismissed with costs.
29. Appeal dismissed.