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Satyanarayan Kamal Kumar Vs. Birendra Pr. Singh and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Civil
CourtKolkata High Court
Decided On
Case NumberSuit No. 1839 of 1968
Judge
Reported inAIR1979Cal197
ActsCode of Civil Procedure (CPC) , 1908 - Section 15 - Order 6, Rule 7; ;Bengal Money-Lenders Act, 1940 - Sections 2(9), 2(13), 2(14) and 40(1); ;Contract Act, 1872 - Section 126; ;Sale of Goods Act, 1930 - Section 4
AppellantSatyanarayan Kamal Kumar
RespondentBirendra Pr. Singh and anr.
Appellant AdvocatePushpa Chowcharia, Adv.
Respondent AdvocateSujit Audhya, Adv. for Defendant No. 2
Cases Referred(Sundaram Finance Ltd. v. State of Kerala
Excerpt:
- .....suit is maintainable both as a commercial suit for buying and selling of goods as well as a pure money suit. in 1968, the pecuniary limit was over rs. 10000/- so far as this court is concerned. mrs. chowcharia, appearing for the plaintiff has submitted that whether a court has jurisdiction to try a suit or not should be ascertained from the averments of the plaint only. if the plaint shows that the court trying the suit has jurisdiction, the defendant is not entitled to displace the jurisdiction on the basis of the allegations in the written statement. in support, she relied on : [1964]3scr964 (vasudev gopalkrishna tambwekar v. board of liquidators, happy home co-operative society ltd.). in this case the society in an arbitration proceeding claimed that the respondent had ceased to be.....
Judgment:
ORDER

Pratibha Bonnerjea, J.

1. The plaintiffs suit is on a hire-purchase agreement dated 24-7-67 in respect of a 1962 model Willys Jeep bearing registration No. WBB 9796 against the defendant No. 1 as the hirer and against the defendant No. 2 as the guarantor, for recovery of arrears of hire, interest and damages. The plaintiff alleged that the defendants, in breach of the terms of the said agreement had removed the vehicle to Tarwa, in the District of Varanashi and failed to pay the agreed hires. The agreement was terminated by the plaintiff by notices dated 4-12-67 and 19-12-67, In this suit, the plaintiff also claimed possession of the said vehicle or in lien the present market value of Rs. 6498/-.

2. Only the defendant No. 2 contested the suit. In the written statement he alleged that prior to 24-7-67, there was an oral agreement between the plaintiff and the defendant No. 1 for purchase of this vehicle and the plaintiff had given loan to the defendant No. 1 in that connection. These alleged oral terms were set out in the written statement. The defendant No. 2 was not a party to that agreement. The defendant No. 2, however, admitted having signed the written agreement dated 24-7-67 subsequently as a guarantor but on certain oral terms mentioned in paragraph 3 (d) of the written statement. According to him the real transaction between the plaintiff and the defendant No. 1 was a loan transaction within the meaning of Bengal Money-Lenders Act. The plaintiff is carrying on money lending business without holding any Money-Lending Licence. Hence the hire-purchase agreement in suit is null and void. He further alleged that in breach of the oral terms of guarantee, the plaintiff allowed the defendant No. 1 to remove the vehicle from Calcutta without the guarantor's written permission and as such he was discharged from all liabilities under the guarantee agreement. The last defence was that the real transaction being loan transaction below the pecuniary jurisdiction of this Court, the Court has no jurisdiction to try the suit. It has been alleged that plaintiff is not a registered firm and the notice of termination was invalid and insufficient. Following issues were raised :--ISSUES :

1. Is the plaintiff a registered firm as alleged in the plaint

2. Did the plaintiff carry on business as money-lender and financier as alleged in paragraph 2 of the written statement of the defendant No. 2

3. Did the defendant fail and neglect to pay the instalments in tenns of the agreement dated 24th July, 1967 in spite of demands as alleged in paragraph 6 of the plaint

4. (a) Was there any oral agreement between the plaintiff and the defendant No. 1 as alleged in paragraph 3 (d) (i), (ii) and (iii) of the written statement

(b) If so, does it amount to a condition precedent as alleged in paragraph 3 (d) (iv) of the written statement

5. Did the defendants remove the vehicle from Calcutta without the knowledge and consent of the plaintiff as alleged in paragraph 7 of the plaint

6. Was the notice of termination invalid or insufficient as alleged in paragraph 7 of the written statement

7. Has this Hon'ble Court jurisdiction to entertain, try and determine this suit as alleged in paragraph 11 of the written statement?

8. To what relief, if any, is the plaintiff entitled Issue No. 7

3. It has been submitted on behalf of the defendant, that this Court has no jurisdiction to entertain the present suit because the transaction in suit was not a commercial transaction relating to buying or selling of goods as alleged in the suit. The transaction in suit was a loan of Rs. 5500/- below the pecuniary jurisdiction of this Court and as such the suit should be dismissed on that ground. On behalf of the plaintiff it has been submitted that the suit is on a hire-purchase agreement and the claim in the suit is for Rs. 10671/- consisting of arrears of hire of Rs. 1239/-, market value of the vehicle of Rs. 6498/- and the mesne profit of Rupees 2880/-. The suit is maintainable both as a commercial suit for buying and selling of goods as well as a pure money suit. In 1968, the pecuniary limit was over Rs. 10000/- so far as this court is concerned. Mrs. Chowcharia, appearing for the plaintiff has submitted that whether a court has jurisdiction to try a suit or not should be ascertained from the averments of the plaint only. If the plaint shows that the court trying the suit has jurisdiction, the defendant is not entitled to displace the jurisdiction on the basis of the allegations in the written statement. In support, she relied on : [1964]3SCR964 (Vasudev Gopalkrishna Tambwekar v. Board of Liquidators, Happy Home Co-operative Society Ltd.). In this case the society in an Arbitration Proceeding claimed that the respondent had ceased to be a member on account of default of payment of loan and demanded vacant possession. The respondent therein alleged before the Arbitrators that there was a relationship of landlord and tenant between the parties and as such only the Small Cause Court was competent to adjudicate on the dispute between the parties in view of the provisions of Section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act. The Arbitrators did not accept the contentions of the respondents and made the Award in favour of the society. A decree followed that Award after certain proceedings. At the stage of execution, the respondents took out a chamber application for stay of execution on the ground that the Award was made without jurisdiction and obtained an order in his favour. The society preferred an appeal and the order appealed from was set aside by the appeal Court, holding there was no relationship of landlord and tenant between the parties. The matter came up to the Supreme Court and at para. 10 of this report at p. 374 it was held :--

'The exclusive jurisdiction of the Court of Small Causes arises only if the person invoking the jurisdiction of the Court alleges that the other party is a tenant or a landlord and the question is one which is referred to in Section 28, Where the person so invoking does not set up the claim that the other party is a tenant, or a landlord, the defendant is not entitled to displace the jurisdiction of the ordinary Court by an allegation that he stands in that relation qua the other and on that ground the Court has no jurisdiction to try the suit or proceeding or an application.'

4. The plaint in the suit proceeds on the basis of one hire-purchase agreement dated 24-7-67. Reading the plaint as it is, nobody can say that this Court has no jurisdiction to try this suit. I humbly agree with the observation in : [1964]3SCR964 and hold that this court has jurisdiction to try this suit. The allegations in the written statement are irrelevant for determining existence of jurisdiction.

Issue No. 2

5. On behalf of the defendant No. 2 it has been submitted that the plaintiff is a money-lender and is carrying on money-lending business without licence. In support of his contention, the counsel for the defendant No. 2 relied on Section 2 Sub-sections (2), (8), (9), (12), (13), (14) and (22) of the Bengal Money Lenders Act. It would be significant to note that Section 2 Sub-sections (2), (8), (12) and (22) have nothing to do with the definition of 'money-lender'. Section 2(9) defines the word 'lender' which includes a 'money-lender' and the words 'Money-lender' and 'money-lending business' have been defined in Sections 2(13) and (14) which are as follows :--

2(9) 'Lender' means a person who advances a loan and includes a money-lender;

2(13) 'Money-lender' means a person who carries on the business of money-lending in (West Bengal) or who has a place of such business in (West Bengal), and includes a pawnee as defined in Section 172 of the Indian Contract Act, 1872;

2(14) 'Money-lending business' and 'business of money-lending' means the business of advancing loans either solely or in conjunction with any other business;

6. The above definitions clearly establish that 'money-lender' is a person who carries on business of money lending in the regular course of business but mere 'lender' is not so. It has been submitted that the plaintiff's witness Todi has admitted in his evidence that the plaintiff had given two loans to the defendant No. 1 on two separate occasions. Even then, the plaintiff cannot come under the definition of money-lender as there is no evidence on record that it carries on business of money-lending in the regular course of its business. The persons who have entered into one or two isolated transaction or transactions of advancing money will come under the definition of 'lender' as defined under Section 2(9) of the Act. In my view, the plaintiff also comes under the definition of 'lender'. Under the circumstances, the plaintiff as a 'lender' is not required to obtain a money-lending licence as the same is required for those money lenders who carry on money lending business regularly. The case that the plaintiff has been carrying on business of money lending without obtaining a money lending licence has not been suggested to the plaintiff's witness Todi by the defendant when he was in the witness box. The defendant also failed to prove that the plaintiff carries on money lending business in regular course. This issue is, therefore, decided against the defendants. Issue No. 4 (a) and (b)

7. In paragraph 3 (c) (d) and (e) of the written statement, the defendant No. 2 alleged that he had agreed to sign the agreement dated 24-7-67 as a guarantor on the basis of a tripartite oral agreement set out in paragraph 3 (d) (i) to (iv) of the written statement and those terms were the conditions precedent to the attachment of his liability or obligation under the said guarantee. In his evidence, however, the defendant No. 2 admitted that all the terms of guarantee were in writing and were incorporated in the written agreement of 24-7-67 (Q. 18-23). In view of this evidence of the defendant No. 2 it is clear that the defendant No. 2 abandoned and/or departed from his pleadings in paragraphs 3 (c) (d) and (e) of the written statement. The defendant No. 2 failed to prove the oral agreement alleged in the written statement and tried to set up a case that Todi had represented to him that all the terms were recorded in the agreement of 24-7-67 and he had signed on that basis. This alleged 'representation' has not been pleaded in the written statement and it is an absolutely new case set up for the first time at the hearing. Finding this difficulty, the counsel for the defendant No. 2 has submitted that the plaintiff is a 'lender' within the meaning of Section 2(9) of the Bengal Money Lenders Act and as such the provisions of Section 40(1) and (4) of the Act will apply in this case. The said provisions are as follows:

Section 40(1) : No lender shall take from a borrower or intending borrower any note, promise to pay, power of attorney, bond or security which does not state (the address of the borrower, the date and place of the transaction,) the actual amount of the loan, the rate of interest charged and the time, if any, within which the principal is stipulated to be repaid in full, or which states any of such particulars incorrectly, nor shall he take from any borrower or intending borrower any instrument in which any entry is left blank for completion at a later date.

(4) Notwithstanding anything contained in any law for the time being in force, any note, promise to pay, power of attorney, bond, security or document referred to in Sub-section (1) or Sub-section (3) shall be void and unenforceable.

8. According to the counsel for the defendant No. 2 the agreement of guarantee is a promise to pay. He has also submitted that the agreement dated 24-7-67 does not contain the correct figure of loan or interest and as a result the document has become void due to the operation of the provisions of Section 40(4) of Bengal Money Lenders Act. This is an absolutely new case set up for the first time at the stage of argument. This case does not find any place in the written statement. In any event, it is clear from the document itself that even if the plaintiff is a 'lender' within the meaning of Section 2(9) of the Act, the plaintiff has not taken any of the documents mentioned in Sub-section (1) of Section 40 of the B. M. Act. The words 'promise to pay' may mean a promissory note under the Negotiable Instruments Act. Under Section 4 of the said Act a promissory note means an unconditional undertaking, signed by the maker to pay a certain sum of money. But in this case, the guarantee agreement is alleged to be conditional on fulfilment of certain conditions precedent. Hence this guarantee cannot be construed as a promissory note or an allied document and/or unconditional undertaking. The words 'promise to pay' are also found in Section 25(3) of Indian Contract Act where a time barred debt can be revived by virtue of such express promise to pay. The guarantee agreement in suit is certainly not an agreement of that nature. A guarantee is a collateral engagement to answer for the debt, default or miscarriage of another person. Section 126 of the Indian Contract Act defines the contract of guarantee as follows :--

Section 128: A 'contract of guarantee' is a contract to perform the promise, or discharge of liability of a third person in case of his default. The person who gives the guarantee is called the 'surety''; the person in respect of whose default the guarantee is given is called the 'principal debtor,' and the person to whom the guarantee is gicen is called the 'creditor.' A guarantee may be either oral or written.

9. The liability of the guarantor is conditional upon the default committed by the principal debtor. This conditional liability does not come under the expression 'promise to pay'. In my opinion, Section 40, sub-s. (1) of Bengal Money Lenders Act does not include a 'guarantee'. By accepting this guarantee the plaintiff has not accepted any document within the meaning of Section 40(1) of the B. M. Act from the defendant No. 2. Morerover, this being an absolutely new case set up at this stage of argument for the first time I am unable to accept this submission on behalf of the defendant No. 2. Under the circumstances I am also not dealing with the cases cited by the counsel for the defendant No. 2 on this point. These issues are also answered against the defendants. Issues Nos. 5 and 6

10. It is an admitted position that the defendant had removed the vehicle from Calcutta. According to the plaintiff, removal of the vehicle by the defendant No. 1 was with the connivance of the defendant No. 2, and according to the defendant No. 2, it was with the connivance of the plaintiff. These mutual allegations have been recorded in the correspondences which passed between the plaintiff and the defendant No. 2 and are part of Ext. A. The main object, so far as the defendant No. 2 is concerned is to prove that by allowing the defendant No. 1 to remove the vehicle from Calcutta, without the written permission of the defendant No. 2, the plaintiff has committed breach of one of the vital terms of the oral agreement of guarantee which is a condition precedent to the attachment of any liability under the said agreement. But I have already held that the defendant No. 2 has failed to prove this alleged oral agreement of guarantee and/or the condition precedent by admitting in his evidence that all terms agreed between the defendant No. 2, the plaintiff and the defendant No. 1 were incorporated in the agreement dated 24-7-67 and/or at least, the defendant No. 2 signed the said agreement on that representation. In view of the above, the fact of removal of the vehicle out of Calcutta, by the defendant No. 1 has lost all its force, so far as this case or defendant No. 2 is concerned. Under clause 2 (c) of the agreement dated 24-7-87, the defendant No. 1 was under the obligation to keep the plaintiff informed about his change of his address as also the change of the place where the vehicle is kept. The plaintiff's letter dated 4-12-67 (page 9 of Ext. A) proved that the plaintiff had full knowledge that the defendant No. 1 had removed the vehicle to his native place without paying the agreed hire. It appears from the said letter although the plaintiff came to know of this fact, the removal was not with plaintiff's consent as otherwise, the defendant No. 1 would not have been able to remove the vehicle without paying the hires due. However, this fact of removal of the vehicle has hardly any importance any more as already held by me. The real cause of action in the suit is nonpayment of agreed hire. Under clause 5 of the agreement dated 24-7-67, the plaintiff was entitled to terminate the agreement with or without notice on the ground inter alia, default of payment of hire. The plaintiff alleged in paragraph 10 of the plaint that this agreement was terminated by a written notice dated 4-12-67 addressed to the defendant No. 2. This notice was not disclosed nor proved by the plaintiff. It was submitted on behalf of the defendant No. 2 that there was no such notice, the agreement was not terminated and as such there was no cause of action for filing this suit. It should be noted that in paragraph 9 of the written statement while dealing with the allegation of notice of termination dated 4-12-67, the defendant No. 2 relied on the said notice. Hence it cannot be said that the defendant No. 2 challenged the existence or receipt of the notice, what he has denied is the validity and sufficiency of the document. Moreover, in paragraph 8 of the plaint, the plaintiff had alleged service of notice dated 20-11-67 on the defendant No. 1 terminating the said agreement. In dealing with the same, the defendant No. 2 in paragraph 7 of his written statement, denied the plaintiff's right to terminate the same and challenged the validity and sufficiency of the said notice. The existence of this document or receipt of this notice by the defendant No. 1 was not denied. The receipt of both the notices dated 20-11-67 and 4-12-67 having been admitted in the written statement, it was for the defendant No. 2 to establish the invalidity or insufficiency of the said notices. No submission was made on that point on behalf of the defendant No. 2 excepting denial of receipt of the same which is contrary to the pleading in the written statement. I am unable to accept this submission of the counsel for the defendant No. 2.

Issue No. 1

11. The plaintiff has proved that it is a registered partnership. Issue No. 3

12. In the written statement, the defendant No. 2 alleged that the plaintiff has advanced Rs. 5500/- to the defendant No. 1 and the hire-purchase agreement dated 24-7-67 is in fact a financial transaction and not a genuine hire-purchase. The plaintiffs witness Todi admitted in his evidence that at the time of agreement dated 24-7-67, the defendant No. 1 had paid the entire price in respect of the vehicle due under a prior hire-purchase agreement. Only the overdue interest and collection charges were outstanding when the defendant No. 1 approached the plaintiff for advance of Rs. 5500/- for repair of the vehicle. The plaintiff granted the said loan but it was agreed that the same would be treated as the purchase price under tha fresh agreement dated 24-7-67. This loan of Rs. 5500/- is admitted by the defendant No. 2. The evidence of both the parties makes it quite clear that the transaction in fact was a financial one with the vehicle as a security and not a real hire-purchase or sale. In a case reported in (1976) 37 STC 231 (Mad). Dugar & Co. v. State of Tamil Nadu the question aro.se whether the transaction was a sale or a hire-purchase. In that case Dugar & Co. advanced loan against the security of motor cars to a customer who signed a sale note in respect of the said vehicle in favour of Dugar & Co. Thereafter a hire-purchase agreement was executed recording Dugar & Co as the owner and the borrowers as the hirer wherein the money advanced were to be repaid by instalments. Registering Authorities under Motor Vehicles Act endorsed the agreement to the effect that the registration of the vehicle was subject to a hire-purchase agreement. This transaction was treated by the Revenue Authorities as 'sale' and sales tax as well as penalty were levied. The order was confirmed by the Appellate Assistant Commissioner and the Tribunal. On Revision, the Madras High Court held that the transaction was not of sale but was a financial agreement. Under almost similar circumstances, hi : AIR1967Cal256 (Shyamsunder Bubna v. Manindra Nath Ghosh), this High Court held that it was not a hire-purchase agreement but a financial agreement and paused a decree for money only. On almost similar facts, the Supreme Court held in : [1966]2SCR828 (Sundaram Finance Ltd. v. State of Kerala) as follows :--

'The true effect of a transaction may be determined from the terms of the agreement considered in the light of the surrounding Circumstances. In each case, the Court has unless prohibited by statute, power to go behind the document and to determine the nature of the transaction, whatever may be the form of the document.'

As per majority Judgment it was further held at p. 1180:

'That the intention of S in obtaining the hire-purchase and the allied agreements was to secure the return of loans advanced to their customers, and no real sale of the vehicle was intended by the customer to S and consequently, there was no re-sale by S to the customer, at the termination of the arrangement. The transactions were merely financing transactions. They were not thus exigible to sales tax.'

13. I respectfully agree with the aforesaid cases and hold that the real transaction between the parties was a financial transaction repayable by agreed instalments.

14. The counsel for the defendant No. 2 submitted that the agreement dated 24-7-67 being void in view of the provisions of Section 40, Sub-sections (1) and (4) of the B. M. Act, nothing is due and payable by the defendants to the plaintiff. He, however, does not deny that the admitted loan of Rs. 5,500/- remained unpaid. The plaintiffs witness Todi has given evidence that the defendant No. 1 has not paid any instalment. In the premises, the issue No. 8 is answered in favour of the plaintiff.

15. There will be a decree against the defendants for Rs. 5500/- with interim interest at the rate of 6% per annum, interest on Judgment at the rate of 6% per annum until realisation and costs.


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