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Pratap Singh Vs. Firm Devchand Kishanlal and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMadhya Pradesh High Court
Decided On
Case NumberSecond Appeal No. 117 of 1973
Judge
Reported inAIR1984MP141
ActsMadhya Pradesh Money Lenders Act, 1934 - Sections 2, 3(1), 6 and 7
AppellantPratap Singh
RespondentFirm Devchand Kishanlal and ors.
Appellant AdvocateR.S. Garg, Adv.
Respondent AdvocateR.G. Waghmare and ;S.M. Jhavar, Advs. and ;G.M. Chaphekar, Adv. as amicus curiae
Cases ReferredGhanshyam Das v. Ghasilal
Excerpt:
.....of the well recognised right of the creditor to appropriate the payments first towards the accrued interest and the balance towards the principal, and the case of settlement of account between the money lender and the debtor. in the judgment under appeal as well as with the reasons given by him......to the date of the settled account in order to give benefit to a debtor under section 7 of the money lenders act. ?'2. the material facts are these : on 15-9-1964 dulesingh, father of the defendant settled his earlier accounts with the plaintiffs and signed khata entry acknowledging his liability to pay a sum of rs. 2.899.70 p. to the plaintiffs. dulesingh, thereafter obtained a further loan of rs. 134.50 p. and signed the khata entry for a sum of rs. 3034.20 p. the plaintiffs filed the present suit for recovery of rs. 4100.00 which was inclusive of interest amounting to rs. 1065.00.3. the defendant contested the suit. he inter alia pleaded that the plaintiffs were money lenders and had not complied with the provisions of section 3 of the money lenders act. the accounts were.....
Judgment:

Vijayvargiya, J.

1. This Bench is constituted to decide the following question referred to a Larger Bench by a learned single Judge of this Court :

'Whether the accounts are settled and a fresh entry is made after settlement of accounts, whether the court can reopen the accounts prior to the date of the settled account in order to give benefit to a debtor under Section 7 of the Money Lenders Act. ?'

2. The material facts are these : On 15-9-1964 Dulesingh, father of the defendant settled his earlier accounts with the plaintiffs and signed Khata entry acknowledging his liability to pay a sum of Rs. 2.899.70 p. to the plaintiffs. Dulesingh, thereafter obtained a further loan of Rs. 134.50 p. and signed the khata entry for a sum of Rs. 3034.20 p. The plaintiffs filed the present suit for recovery of Rs. 4100.00 which was inclusive of interest amounting to Rs. 1065.00.

3. The defendant contested the suit. He inter alia pleaded that the plaintiffs were money lenders and had not complied with the provisions of Section 3 of the Money Lenders Act. The accounts were therefore liable to be reopened and interest and costs were liable to be disallowed.

4. The trial court accepted the plea of the defendant and after reopening the accounts for the last 12 years before the date of the Khata entry disallowed the interest and adjusted repayments made by the debtor towards the principal amount. After this adjustment the trial Court passed a decree for Rs. 254-83 p. in favour of the plaintiffs. On appeal the appellate Court accepted the contention of the plaintiffs that the accounts settled on 15-9-1964 could not be reopened under the Money Lenders Act. The appellate court, therefore, decreed the plaintiffs' claim for the principal amount of Rs. 3034.20 p. with corresponding costs and interest pendente lite. The defendant preferred this second appeal to this court. On behalf of the appellant it was contended before the learned single Judge that the appellate court committed an error of law in holding that the accounts which were settled on 15-9-1964 could not be reopened. The learned counsel for the plaintiffs supported the view taken by the first appellate court

5. The learned single Judge observed that there was a conflict of view in the single Bench decisions of this court on the aforesaid question. He referred to certain decisions in which the view taken was that settled accounts cannot be reopened for disallowing interest under Section 7 of the Money Lenders Act and certain decisions in which a contrary view was taken.

6. In view of the conflicting single Bench decisions and according to learned single Judge there is no authoritative decision by a Larger Bench of this Court he referred the aforesaid question for decision by a Larger Bench of this Court. That is how this question has come up for decision before this Bench.

7. At the outset it would be useful to refer to the relevant provisions of M. P. Money Lenders Act 1934 (Act No. 13 of 1934) (for short 'the Act').

8. The object of the Act as disclosed from its preamble is to make better provision for the regulation and Control of the transaction of money-lending.

9. The term 'loan' has been defined by Section 2 (vii) of the Act to mean an actual advance made within twelve years from the date of the last transaction whether of money or in kind at interest and shall include any transaction, which the Court finds to be in substance a loan. The rest of the definition excluding certain transactions from the term loan is not relevant for our purpose.

10. Section 3 (1) (a) of the Act requires the money lender to regularly maintain an account for each debtor separately of all transactions in respect of any loan advanced to that debtor. Section 3 (1) (b) of the Act requires the money lender to furnish such debtor every year statement of account in the prescribed manner containing the details specified in that sub-section.

11. Section 6 of Act provides that every money lender who receives repayment from his debtor on account of any loan advanced to him shall forthwith give a receipt therefor.

12. Section 7 of the Act which deals with the procedure of Court in suits regarding loans, reads as follows:--

'(7). Procedure of Court in suits regarding loans.--

Notwithstanding anything contained in any other enactment for the time being in foree, in any suit or proceeding relating to a loan :--

(a) the Court shall before deciding the claim on the merits, frame any decide the issue whether the money lender has complied with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3:

(b) if the Court finds that the provisions of Clause (a) of Sub-section (1) of Section 3 or of Section 6 have not been complied with by the money lender it shall if the plaintiff's claim is established in whole or in part disallow the whole or any portion of the interest found due, as may seem reasenable to if in the circumstances of the case and may disallow costs, and

(c) if the court finds that the provisions of Clause (b) of Sub-section (1) of Section 3 have not been complied with by the money lender, it shall in computing the amount of interest due upon the loan, exclude every period for which, the money lender omitted duly to furnish the account as required by that clause.'

The proviso to the section is not material.

13. The learned counsel for the plaintiffs contended that under the general law a settled account is binding on the parties and it cannot be reopened unless on proof of coercion, fraud, misrepresentation and the like which may invalidate a contract and that there is no reason to make a departure in the case of a loan governed by the provisions of the Act. He further contended that ii the account between the money-lender and the debtor is settled and the agreed balance is struck even if any omission was made by the money lender in the maintenance of accounts and furnishing of statement of account to the debtor as required by Section 3 of the Act the benefit thereof will be deemed to have been waived by the debtor and the Court has no power to reopen the settled account. He also contended that when an account is settled and the debtor acknowledges to pay the balance it ceases to be a loan and thereafter is not governed by the provisions of the Money Lenders Act and is not liable to be reopened thereunder.

14. The contentions of the learned counsel for the plaintiffs are not well founded, when a such for the recovery of money is filed in a Court and the suit relates to a loan as defined by the Act the (provisions) are attracted. Section 7 of the Act casts a duty on the (court to) follow the procedure laid down therein. The section provides that notwithstanding anything contained in any other enactment for the time being in force in any suit or proceeding relating to a loan the Court, shall before deciding the claim on the merits, frame and decide the issue whether the money lender has complied with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3 of the Act. It further provides that if the Court finds that the provisions of Clause (a) of Sub-section (1) of Section 3 and/or Section 6 of the Act, which respectively relates to the maintenance of account and giving of receipts for repayment, have lot been complied with by the money lender it shall if the plaintiffs' claim is established in whole or in part disallow the whole or any portion of the interest found due as may seem reasonable in the circumstances of the case and may disallow costs. It further provides that if the Court finds that the provisions of Clause (b) of Sub-section (1) of Section 3 have not been complied with by the money lender, it shall in computing the amount of interest due upon the loan, exclude, every period for which the money lender omitted duly to furnish the account ag required by that clause.

15. Now the provisions of Section 7 of the Act are explicit. A mandate is given to the Court to follow the procedure laid down therein. The provisions of Section 7 of the Act are operative notwithstanding anything contained in any other enactment for the time being in force which include the provisions of the Contract Act. Thus, the provisions of Section 7 of the Act are attracted even if the accounts between the money-lender and the debtor are settled and the Court is duty bound to find out whether the provisions of Section 3 (1) (a) and (b) and Section 6 of the Act are complied with by the money lender and if not to give effect to the consequences as laid down in that section. The money-lenders Act is a beneficent piece of legislation aimed at preventing the exploitation of the debtors at the hands of the money lenders. The provisions of the Money Lenders Act therefore have to be construed so as to advance the object of the Act rather than to thwart it.

16. Thus, in our opinion on a plain reading of Section 7 of the Act, the Court in any suit or proceedings relating to a loan has to follow the procedure laid down therein and notwithstanding the settlement of account between the money lender and the debtor to reopen the account to find out whether within 12 years from the date of the last transaction the money lender has complied with the provisions of Section 3 (1) (a) and (b) and Section 6 of the Act and in case of non-compliance thereof to give relief to the debtor as provided therein.

17. We find support to the view taken by us from the Full Bench decision of this Court in Rajaram Bhiwaniwala v. Nandkishore 1975 MP LJ 225 : (AIR 1975 Madh Pra 104). In that case it was held that the Court has power under Section 7 of the Act to reopen the account so as to traverse the entire period from the date of the loan to the date of the suit where the money lender has not complied with the requirements of Clause (a) or (b) of Section 3 (1) of the Act and under Clause (b) of Section 7 to disallow the whole or any interest found due; as may seem reasonable to it in the circumstances of the case, in case of non-compliance of Section 3 (1) (a), and under Clause (c) of Section 7 to exclude every period for which he had failed to furnish account as required by Section 3 (1) (b) subject to the proviso to Section 7.

18. It is true that the question involved before the Full Bench was whether the appropriation of payments made by the mortgagor to the mortgage towards interest were liable to be reopened and appropriated towards the principal amount if the Court found that the mortgage had not complied with the provisions of Section 3 (1) (a) and (b) of the Act and the Full Bench was not called upon to decide the question whether in similar circumstances a settled account can be reopened under the aforesaid provisions. However, there is no material difference between the case of appropriation of payments made towards interest with the consent of the debtor or in exercise of the well recognised right of the creditor to appropriate the payments first towards the accrued interest and the balance towards the principal, and the case of settlement of account between the money lender and the debtor. Both of them stand on the same footing for purposes of the Act. If the account has been settled between the parties and if it is found that provisions of Section 3 (1) (a) and (b) of the Act were not complied with by the money lender there is no reason why the debtor should be deprived of the beneficent provisions of Section 7 of the Act.

19. As far back as in the year 1949 a Division Bench of this Court in Tulsiram Ramdayal v. Badriprasad (AIR 1940 Nag 31) while repelling the contention that the Court has no power to reopen the accounts and that repayments appropriated by the creditor towards interest could not be treated as payments in reduction of the principal, observed as follows :--

'In our opinion no express words were necessary to give the power to reopen accounts as the operation involved in computing the interest due on the loan requires the Court to traverse the entire period from the date of the loan to the date of the suit, and to exclude such period or periods during which accounts were not furnished. The Court has first to determine the period or periods in which the accounts was not furnished and (subject to the proviso) to exclude from calculation such periods. The action of the parties is immaterial because the duty is laid on the court to give effect to the Act. Once these periods are excluded any repayment even if expressly made towards interest would go first towards the reduction of such interest as may be due and next towards the reduction of the principal sum regard being had to the circumstances of the case. The process undoubtedly involves the reopening of accounts to a limited extent. We respectfully agree with the observations of Bose, J. in the judgment under appeal as well as with the reasons given by him.

A legislature is not limited to any particular set of words for achieving its purpose. If the clear meaning of the words is to allow courts must reopen the accounts and give relief in the light of the Act. This in our opinion is the position here. In computing the interest on the loan the Court has to traverse the entire period from the loan or the date of the Act, whichever is later, provided of course that the proviso to Section 8 is applicable to the loan if the loan was given prior to the date on which the Act came into force. The Act must be given an interpretation which will make it applicable to all cases alike. On the case of the appellants the Act will not benefit a debtor who made regular repayments, thus putting him in a worse position than the debtor who made no repayment at all. This could never be the intention.'

We are in respectful agreement with the above observations.

20. Thus, in our opinion notwithstanding the settlement of account between the money lender and the debtor in a suit relating to a loan the Court is enjoined to decide the question whether the money lender has complied with the provisions of Section 3(1)(a) and (b) and Section 6 of the Act and in case of non-compliance of any of the said provisions by the money lender to give relief to the debtor as provided in Section 7 of the Act. The duty is laid on the Court to give effect to the provisions of the Act notwithstanding anything contained in any other enactment for the time being in force. The action of the parties is immaterial.

21. The second contention for the learned counsel for the plaintiffs that after the settlement of accounts between the parties the transaction ceases to be a loan and therefore the provisions of the Money Lenders Act are not attracted to it, is untenable. It is difficult to appreciate how the transaction which is initially a transaction of loan ceases to be so after settlement of the accounts. The learned Counsel for the plaintiffs was unable to point out any provision of law or any authority in support of his contention. At the most the account can be characterised as a fresh transaction as held by a Division Bench of this Court in Ghanshyam Das v. Ghasilal (1969 MPLJ 501).

22. We are thankful to Shri G. M. Chakkar, Advocate who assisted us on our request.

23. As a result of the discussion aforesaid our answer to the question referred to us is that when the accounts are settled and a fresh entry is made after settlement of accounts, the Court can reopen the accounts prior to the date of the settled account in order to give benefit to a debtor under Section 7 of the Act. The appeal may now be placed before the learned single Judge for disposal on merits. There shall be no order as to costs of this reference.


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