B.C. Varma, J.
1. This appeal is by the defendant No. 1 against the judgment and decree directing him to pay a sum of Rs. 7,764.06 to the respondent-plaintiff. The suit against the other two defendants was dismissed by the trial Court. There is no appeal against them.
2. The plaintiff, who is admittedly a moneylender, made certain advances to the defendants from time to time. Accounts were settled on 10-11-1969 between the plaintiff and the appellant and a sum of Rs. 7,764.06 was found due to the plaintiff. The liability to pay this amount was acknowledged in writing by the appellant on the same day in the plaintiff's books. The plaintiff alleges that it was agreed that compound interest shall be payable by the defendant. In para 10 of the plaint, he pleaded that statements of accounts were submitted for the Samvat years 2027 and 2028 and for no others. He made a total claim of Rs. 11,005.21 inclusive of interest. The appellant pleaded in defence that the debts incurred by him from time to time amounted to Rs. 8,757.37 as against which he has repaid a sum of Rs. 8,090.69. The rate of interest was denied. Agreement to pay compound interest was specifically challenged. It was asserted that the plaintiff did not comply with the mandatory provisions contained in Section 3 of the M. P. Money Lenders Act and was, therefore, liable to be visited with penalty as prescribed under Section 7 thereof. The appellant asserted that in that event he was entitled to reopen the entire transaction, the payments made by him are liable to be appropriated towards the principal debt and his liability then is limited to Rs. 666.67.
3. The trial Court held the plaintiff entitled to only Rs. 7,764.06 which is the sum acknolwedged by the appellant as due from him on accounting done on 10-11-1969. The plaintiff was held entitled to compound interest at Re. 1/-p. c. p. m. upto 10-11-1969 only and not thereafter on the finding that he did not comply with the provisions of the M. P. Money Lenders Act (hereinafter called the Act) after 10-11-1969. The defendant No. 1 appeals, but the plaintiff is content with the decree awarded by the trial Court.
4. The only point urged by Shri K. M. Agrawal, learned counsel for the appellant, is that the plaintiff failed to maintain proper account of the debt and further failed to furnish every year a statement of account signed by the plaintiff (moneylender) or his agent. He, therefore, contends that the entire account is liable to be re-opened and the repayments made by the appellant are liable to be appropriated towards the principal debt as the plaintiff is liable to be visited with penalties provided under Section 7 of the Act. Shri N. S. Kale, counsel for the respondent-plaintiff, meets this argument by saying that the plaintiff has subtantially complied with the provisions of the Act and very strict compliance of the provisions is not contemplated. He says that from the conduct of the defendant, an agreement to pay compound interest must be inferred. He thus supports the judgment of the lower Court,
5. We may first dispose of the question whether the appellant agreed to pay compound interest at the rate of Re. 1/-p. c. p. m. Exs. D-1 to D-14 are the various acknowledgements made by the defendant at the close of every accounting year. In each of them, there is a promise to pay balance and interest of Re. 1/- p. c. p. m. Yet none of these documents says that compound interest was agreed to be paid. Even in the final accounting done on 22-10-1968 (Ex. D-14), there is no recital evidencing agreement to pay compound interest, True it is that Exs. D-1 to D-13 recite that interest is payable on the entire sum due till then including interest due in the previous year, yet in our opinion noagreement to pay compound interest can be spelled out from that. Besides examining himself and his Munim, the respondent-plaintiff has not examined any independent witness to prove this agreement. These self-serving statements do not inspire confidence. We, therefore, disagreeing with the lower Court, hold that there was no agreement to pay compound interest.
6. The next question is whether the respondent plaintiff has complied with the provisions of Section 3 of the Act; and if not, what are its consequences. The manner in which the accounts have been maintained is well exhibited by the statements of accounts contained in Exs. D-1 to D-14. It is pertinent to see that from Exs. D-2 to D-14, it is not possible to know the principal and interest separately. According to the respondent, it is so because the amount of interest due in the previous year was also to carry interest and, therefore, that was also shown as principal sum in the following year. May be that this was the plaintiff's method of maintaining accounts, yet the fact remains that interest due in the previous year has not been separately shown in the following year. These accounts further show that none of them is signed either by the plaintiff himself or by any of his agents. They are also not in the form prescribed in in the Act. In paragraph 10 of the plaint, the plaintiff states that only for two years he furnished the statements of Accounts to the defendant. For the remaining years, the plaintiff's explanation in the witness-box is that the defendant used to come to his shop where the statements were given to him personally. Support is lent to this statement by examining the two Munims, Gayaram (P. W. 2) and Baikunthlal (P. W. 3) and by the circumstances that these statements have come from defendant's custody. These circumstances only disclose that the appellant used to be summoned at the respondent's shop at the close of every year of accounting and was made to acknowledge the dues which according to the respondent remained outstanding against the appellant. It appears that the documents Exs. D-1 to D-14 were obtained more in order to serve as acknowledgments than as statements of accounts. The statement of the respondent in para 10 of the plaint makes such inference more probable, Even if these are all taken to be statements of accounts delivered to the appellant, they do not comply with the requirements of Section 3 of the Act. They are not signed by the respondent or anyone on his behalf nor interest is shown separately from the principal sum. It cannot, therefore, be said that the respondent has complied with the provisions of Section 3 of the Act.
7. The Money Lenders Act is a piece of welfare legislation brought about with a view to relieve the debtors out of the clutches of the moneylenders. Adverting to the object of this Act, the Supreme Court in Gajanan v. Brindaban, AIR 1970 SC 2007 observed in para 5 as under :
'This Act which came into force on April 1, 1935, was enacted with the object of making better provision for the regulation and control of the Transactions of money lending so as to secure protection to ignorant debtors against the evil of fraud and extortion on the part of unscrupulous moneylenders without unduly interfering with freedom of private contract.'
In Rajaram v. Nandkishore, 1975 MPLJ 225, a Full Bench of this Court by majority judgment observed that in construing a welfare legislation, the Court should adopt a beneficial rule of construction. If two views are possible, the one more beneficial to the debtors should be preferred as the Act has been passed to safeguard their interest. Adverting to the scheme of the Act, this is what was said in paragraph 2l of the Report.
'21. The Act strikes at moneylending transactions in general, and the class of moneylenders in particular, who had become a very serious menace to society. It is a regulatory measure and seeks to control the business of moneylending, by a system of checks and balances. It provides for registration of moneylenders, maintenance of accounts in prescribed form, furnishing of statements of accounts periodically to the debtors, issue of receipts, enforcement of the rule of 'damdupat' etc. It also empowers Courts to order payment of decretal amount by instalments. The maintenance of accounts by the moneylenders for each debtor separately under Section 3 (1) (a), and the furnishing of statements of accounts under Section 3 (1) (b) to the debtors, in the manner prescribed, are made mandatory. The failure to comply with either of these requirements, visits the defaultingmoneylender with the penalty mentioned in Section 7 (b) or (c)'.
These two decisions, which are binding on us, leave no manner of doubt that the compliance of the provisions of Section 3 of the Act is mandatory and requires of a moneylender a strict compliance thereof at least in respect of such requirements as are expressly embodied in the section itself. It is true that Explanation to Section 7 of the Act makes certain relaxations in favour of the moneylender, but they refer only to accidental slips or omissions, not material omissions, and that too only when accounts have been maintained in good faith with an intention to comply with the provisions of the Act. All the same, the Explanation does not relieve the moneylender of the maintenance of accounts and 'furnishing statements in the manner prescribed. It is only when this compliance is done that the Courts in special circumstances have excused accidental slips or omissions on the part of moneylenders. Thus, in Niranjan v. Nathusa, S. A. No. 378 of 1955, D/- 18-1-1956: 1956 Nag LJ (Notes) 115, Hidaya-tuallah, C. J. (as he then was) held that where the transaction was simple, only one repayment was made, interest charged was quite clear, then if notices to the debtor were not in the prescribed form, there was substantial compliance of the provisions. There the omission to fill certain columns of the form was ignored as they were really not applicable. Similarly, in another case a statement delivered personally and not by registered post as prescribed by rules was held to be substantial compliance. A Division Bench of the Nagpur High Court in Pyarelalsa v. Champalal 1947 Nag LJ 385 did say that there may not be compliance according to the strict letters of the law. All the same, the Bench emphasised that the spirit of the law must be carried out.
8. A review of all the authorities cited before us shows that no Court has so far said that non-compliance of the requirements of Section 3 of the Act can be condoned. No case was cited before us to say that an unsigned statement delivered to the debtor is due compliance or is a substantial compliance of the requirements. Likewise permitting the interest and principal to be shown together and not separately shall, in our opinion, defeat the very object of the Act. Non-compliance of such obligation must result in depriving the moneylenders of the costs and interest. We, therefore, in view of our finding aforesaid, hold that the respondent (moneylender) has failed to comply with the mandatory provisions contained in Section 3 of the Act and is not entitled to any interest and costs.
9. Now the only question that remains to be considered is whether the accounts can be re-opened and, if so, for what period. The question has been answered by the Full Bench of this Court in Rajaram v. Nandkishore, 1975 MP LJ 225, where it has been specifically answered that non-compliance with the provisions of Section 3 of the Act would permit a Court to reopen the entire accounts of dealings. In that event the amount repaid shall have to be appropriated towards the principal. Applying that dictum to the present case, we find that Rs. 8,090.60 shall have to be appropriated as repayments towards the debt of Rs. 8,757.37. In that event, only a sum of Rs. 666.67 p., remains due for payment. We hold accordingly.
10. In the result, the appeal substantially succeeds and is allowed to the extent indicated above. The decree passed by the lower Court stands modified and it is directed that the appellant (defendant) shall pay only a sum of Rs. 666.67 p. to the respondent-plaintiff. Rest of the respondent's claim is dismissed. We direct the parties to bear their costs of this appeal. Counsel's fee as per schedule, if certified.