K.C. Das Gupta, J.
1. These two appeals are by the plaintiffs and the defendant in a suit to enforce two mortgages which were admittedly taken by the plaintiffs on two loans, one of the sum of Rs. 75,000/- in May 1932 and another of the sum of Rs. 60,000/- taken in four different instalments. The mortgage bonds for the identical lands were executed--one on the 3rd of May, 1932, and the other on the 2nd of August, 1933. The main defence raised was that the mortgagor was entitled to the protection of the Bengal Money-Lenders Act.
2. The question on the answer to which depends the decision whether or not the defendant is entitled to the protection of the Bengal Money-Lenders Act is whether the two loans or either of them was a commercial loan within the meaning of the Money-Lenders Act.
The learned Subordinate Judge came to the conclusion that the creditor had failed to discharge the burden that lay on him of proving that the loan was advanced solely for the purpose of business, and accordingly held that the interest was payable only at 8 per cent, per annum instead of the contract rate and further that the defendant was entitled to easy instalments. Accordingly he passed the decree for the sum of Rs. 70,225/10/6 on the first bond and Rs. 60,076/13/5 on the second bond as principal and interest thereupon at 8 per cent, per annum till the date of the institution of the suit and further interest for the suit period at 8 per cent, per annum on whole amount. He decreed the suit in preliminary form for Rs. 17,55,64-5-11 pies with corresponding costs and dismissed the balance of the claim with costs and directed that the balance of the dues be paid by the defendant in five equal yearly instalments, the first instalment being payable on the 10th of May, 1947, and ordered that unpaid instalments will bear interest till realisation at 6 per cent, per annum.
3. The appeal by the plaintiffs is directed mainly against the decision that the plaintiffs had failed to prove that the loans were commercial loans. The appeal by the defendant was directed against the order of five instalments--his case being that he is entitled to more instalments.
4. The principal question that is before us is whether the plaintiffs mortgagees have discharged the burden that lay on them of proving that the loans which were advanced were commercial loans. The principal evidence on this question consists on the one hand of the testimony of Pulin Krishna Roy, son of plaintiff 1 who advanced two-third of the loan on either occasion and the evidence of the mortgagor Rai Jatindra Nath Choudhury on the other. Pulin's evidence is sought to be corroborated by the evidence of his solicitor and his officer. Pulin has said that he asked Jatin Babu about the purpose for which he took the money and Jatin Babu said that he was taking it for the purpose of his business; and when Pulin asked about the nature of the business, and he said that he bad the business of the Katyani Stores and the Maya Engineering Works and it was for these businesses that he required money and it was for conducting these businesses that he was borrowing money from them.
What he says in effect is that he asked Jatindra about the purpose of the loan first when Jatindra came to his house for borrowing Rs. 10,000/- as accommodation loan till the mortgage deed was executed, and that thereafter when Jatindra wanted the second loan he again asked Jatindra about the purpose of the loan and Jatindra said on both occasions that he wanted it for the purpose of his business. Jatindra has flatly denied in his evidence that there was any enquiry from him as regards the purpose of the loan and that he made any statement to Pulin or to anybody else that he required the money for the purpose of business.
5. Before considering the question whether any such statement was made, it will be proper and convenient for us to consider whether in fact Jatindra's intention at the time when each loan was taken was that the whole of the loan should be used for purposes of business.
It is abundantly clear from the evidence of the plaintiff's officer Benimadhab Roy and Jatindra's own evidence that the first proposal for this loan transaction was made by Jatindra in September 1931; that he asked for a loan of rupees one lakh and that title deeds for the properties which he offered as security and which, were ultimately mortgaged were made over to Benimadhab in September 1931. I have no doubt in my mind that though the first mortgage bond was actually executed in May 1932, this was only the final stage of the transaction negotiations for which started in September 1931 and were never broken off. I find it difficult to believe the story of Pulin and Benimadhab that Benimadhab said nothing to his master about this first proposal on behalf of Jatindra for a loan, or that the negotiations were broken off soon after they commenced.
It is necessary, therefore, in my opinion to examine the evidence and discover the financial position of Jatindra in September 1931 as regards his assets and his needs for ready money. An examination of the account books makes it abundantly clear that Jatindra's zemindary property was in a very solvent condition and that considerable amounts were being sent up from his Nakipur office to the Tollygunj house where he lived, after meeting all expenses for the zemindary including development expenses. It is not possible therefore to accept as correct Jatindra's statement in Court that he required this money lor payment of revenue of the zemindary, for giving loans to tenants, for construction of sluice gate for drainage of water or for salaries of his officers. I am convinced that he had more than sufficient money in his hand for these purposes. It is worth mentioning in this connection that the learned Subordinate Judge has himself held that the defendant had more than half a lakh of rupees each year after defraying the local expenses for the Mahal.
Mr. Chakravarty appearing for the defendant before us has conceded that this estimate is approximately correct. This concession, in my opinion, could not be made by the learned Advocate in view of the state of the accounts.
6. We have to hold therefore that the defendant's account that he required the money for purposes of maintaining or developing his zemindary is clearly false. Clearly however he felt a pressing need for this money; otherwise he would not have gone to the length of mortgaging these valuable properties. The answer to the question why he took this loan becomes obvious when we remember that Jatindra was by nature an 'entrepreneur' keen about starting business. Several years before the date of these transactions he had started the Katyani Weaving Factory and then the Katyani Stores, the latter being a flourishing concern even before 1931. He actually started the Maya Engineering Works some time in 1932; we find that out of the ten thousand rupees which he took on a promissory note which was paid off from the funds received on the 1st mortgage he spent rupees seven thousand five hundred on the 21st April, 1931, in purchasing machinery with which ultimately the Maya Engineering Works was started. It is clear however from the evidence that long before this date of purchase of machinery in April 1932 the idea of starting such Engineering Works had formed a definite shape in his brain.
In reply to question 32 in his examination in chief he said:
'In this way some machinery came into my hands. Then I had a valuation made of the few machinery which came into my hands, through persons who buy second-hand machines and found that they do not offer even the 'cost price' at which I got the machinery. Then I thought within myself thus--let me enquire as to whether the Bhowaniput Bank would sell all those machinery which they have purchased and, if they sell the same, then I would offer a price according to the idea formed by me for appraising the prices of machinery, and if my offer be accepted, then I would myself try to conduct this indigenous industry; and if the offer be not accepted, then I would be obliged to part with the machine lying in my hands, at a loss, because no business could be carried on only with the machinery which I have got--machinery fit for all kinds of work were not there.'
The exact date on which he formed this idea has not been mentioned by him but it is reasonable to hold on a consideration of the circumstances that it was on forming such an idea of starting a business that he decided to stake his all on such business and for that purpose started looking about for a loan first of one lakh of rupees.
I am convinced that his intention in September 1931 as well as in May 1932 when the first mortgage bond was executed was that the entire money should be used for the purpose of the Maya Engineering Works. I am equally convinced on a consideration of the circumstances, the principal circumstance being that he needed no such loan for the purpose of his zemindary or any other known purpose, that the further loan taken by him on the second mortgage bond was also intended by him to be solely used for the Maya Engineering Works. Whether or not they were in fact so used, does not concern us.
7. It is now necessary to consider whether the evidence that he informed Pulin Roy or his officer that he wanted to use the loan for the Maya Engineering Works should be believed.
I have come to the conclusion that this evidence cannot be believed. It is important to notice that Benimadhab Roy admits that when the broker Haren first approached him for the loan on behalf of Jatindra in September 1931, neither did he ask nor did Haren state anything about the purpose of the loan, and this, in spite of the fact that Haren paid more than one visit, the title deeds being made over on the second visit. The story now put forward on behalf of the plaintiffs is that it was in April 1932 first that the enquiry about the purpose of the loan was made. It is difficult to understand why if such an enquiry was thought necessary, it could not be made earlier.
8. It seems to me that what the mortgagees were concerned with was the nature and sufficiency of the security offered and they did not care about the purpose of the loan. Pulin himself has admitted that a considerable portion of the money invested by the plaintiffs in money-lending business is given to zemindars for zemindary purposes. I do not think it likely in these circumstances that Pulin or anybody else on his behalf would take the steps of asking Jatindra about purpose for which he was taking the loan. In my opinion, to make such an enquiry would be considered unnecessary discourtesy by both Pulin and Jatindra, and it was not likely that Pulin who was not only a money-lender but a scion of a reputed zemindar family, would be guilty of such discourtesy which was unnecessary for the purpose of the loan transaction.
9. I therefore disbelieve Pulin's evidence on the point and have no hesitation in disbelieving also the evidence given by his officer Benimadhab who is a man of straw, and of Mr. P. C. De, the Solicitor, for the simple reason that I consider it highly improbable that such an enquiry would be made at all; and equally improbable that Jatindra would volunteer the statement that he intended to use the loan for the purpose of business.
10. My conclusion therefore is that while in Fact Jatindra intended to use the entire proceeds of the loans for the purpose of the business, he did not confide this to the creditors and when the creditors advanced the money, they had no reason to think that the money would be used for purposes of business.
11. The law is clear that in order that the loan may be considered a commercial loan, it is not sufficient to prove that it was the debtor's intention to use the entire proceeds of the loan for business but it is necessary also to prove that the creditor knew of that intention -- 'Joy Chand Lal v. Kamalaksha Choudhury' .
12. It must therefore be held that the plaintiffs have not discharged the burden that lay on them to prove that the loans or either of them was a commercial loan. The Subordinate Judge therefore rightly held that the defendant was entitled to the protection of the Bengal Money-Lenders Act. The plaintiffs' appeal must therefore fail.
13. The only question for consideration in the defendant's appeal is as regards the number of instalments. A ground was taken in the appeal that the Court below erred in law in allowing interest on unpaid instalments. It seems clear however that what the Court intended was that interest will be payable on instalments which are in default and not instalments which remain unpaid before falling due.
14. In the written statement as well as in the ground of appeal the defendant does not state the number of instalments which he considers reasonable. The learned Subordinate Judge directed payment in five instalments beginning with May 1947. The last instalment would have been payable under that order on the 10th May 1951. The appellant has obtained an order from this Court staying the execution of the decree on condition that a sum of Rs. 18,000/- every year was paid before 10th of July, seven such instalments have been paid and the position now is that Rs. 51,847-1-6 including costs still remains unpaid.
The evidence shows that the plaintiffs are very wealthy people, the money invested in loans only being admittedly 7 or 8 lakhs of rupees. Apart from this they have got considerable zemindary properties. The defendant though by no means so affluent as the plaintiffs, is also clearly a man of substance. The nett surplus from his zemindary properties appears from the? evidence to be over Rs. 50,000/- every year. Satisfactory evidence has not been given as regards his income from his business viz., the Maya Engineering Works and the Katyani Stores. It is not possible to take at Its face value his own uncorroborated testimony that his profits in recent years from the Maya Engineering Works have not yet made up the losses in the previous years.
15. On a consideration of the nature of the evidence I have come to the conclusion that while the plaintiffs are very wealthy persons, the defendant is also in affluent circumstances, though decidedly worse off than the plaintiffs. It seems to me on a consideration of all the circumstances including the fact that the defendant has already had six years after the date when the Court below had to decide about the number of instalments to be given, that it will be proper to order that the balance still due would be payable in three equal yearly instalments, the first instalment being payable by the 15th of April, 1954,
16. I would accordingly direct in modification of the order passed by the learned Court below that the defendant will pay the sum still due in three equal annual instalments viz.,
1. on the 15th of April, 1954,
2. on the 15th of April, 1955,
3. on the 15th of April, 1956,
and that in default of payment of any such instalment the plaintiffs shall after giving the defendant prescribed notice be entitled to apply for a final decree, the date of default being deemed to be the date fixed for payment of the whole amount under the preliminary decree.
17. The plaintiffs' appeal i.e., F. A. 199 of 1947 is dismissed and the defendant's appeal i.e. F. A. 256 of 1946 is allowed in part. The parties will bear their own costs in both the appeals. Let the records go down as soon as the decree is prepared.
18. I agree.