Gujarat High Court
Legal Heirs Of Patel Mafatlal Maganlal vs Atmaram & Company on 17 July, 2025
NEUTRAL CITATION
C/SA/146/2002 JUDGMENT DATED: 17/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SECOND APPEAL NO. 146 of 2002
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE SANJEEV J.THAKER Sd/-
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Approved for Reporting Yes No
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LEGAL HEIRS OF PATEL MAFATLAL MAGANLAL & ORS.
Versus
ATMARAM & COMPANY & ORS.
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Appearance:
MS KJ BRAHMBHATT(202) for the Appellant(s) No. 1,1.1,1.2,1.3,1.4,1.5,1.6
DELETED for the Respondent(s) No. 3
MR. ARCHIT P JANI(7304) for the Respondent(s) No. 1,5
SHIVANG P JANI(8285) for the Respondent(s) No. 2
UNSERVED EXPIRED (N) for the Respondent(s) No. 4
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CORAM:HONOURABLE MR.JUSTICE SANJEEV J.THAKER
Date : 17/07/2025
ORAL JUDGMENT
1. The present Second Appeal has been filed under Section 100 of the Code of Civil Procedure, 1908 ('CPC', for short) challenging the judgment and decree dated 06.07.2002, passed by the 3rd Extra Assistant Judge, Mehsana in Regular Civil Appeal No.17 of 1999, whereby judgment and decree 31.12.1998 passed by the trial Court i.e. Civil Judge (J.D.) in Regular Civil Suit No.140 of 1993 (Original Special Civil Suit No.405 of 1989) has been quashed and set aside.
2. For the sake of convenience, the parties are referred to as their original status referred in the suit.
Page 1 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined 3.1 The brief facts arising in the present appeal are that the plaintiff
being legal heirs of Patel Mafatlal Maganlal, had filed the suit on the ground that deceased Patel Mafatlal Maganlal was doing business of Shroff and Commission Agent and it is the case of the plaintiff that defendant nos.2 to 5 being partners of defendant no.1 had taken loan for their partnership business from deceased Patel Mafatlal Maganlal on 17.11.1986 and executed a promissory note for an amount of Rs.33,100/- with interest @ 1.5% on due amount of Rs.33,100/- and that defendants have paid amount of Rs.5,000/- and as the remaining amount was not repaid by the defendants, the plaintiffs filed Civil Suit No.140 of 1993 for recovery of the said amount.
3.2 The defendant appeared in the said suit and the the main contention that had been raised by the defendant was that, in view of the fact that plaintiff does not have license under the Money Lenders Act, the suit was required to be dismissed.
3.3 It is the case of the defendant that the defendant does not have any knowledge regarding promissory note. The trial Court framed issues vide Exh.20, which reads as under:
"(1) Whether plaintiff proves that deft. no.2. has executed a suit promissory note for Rs.33,500/- on 17/11/86 in favour of the deceased Patel Mafatlal Maganlal on behalf of deft. no.1 for reasons tated in the plaint ?
(2) Whether plaintiff proves that the deft. Have paid Rs.5,000/- on 6/11/89 against suit promissory note, plaintiff no.1 & 2 have passed receipt for this amount and plaintiffs are in possession (of) carbon copy of the receipt which because the signature of deft.no.2 as person making payment ?Page 2 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025
NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined (3) Whether plaintiff proves that they are entitle to recover interest at the rate of 18% p.a. from the deft.?
(4) What is found due ?
(5) Whether the deft.proves that a money lending licence is required as contended ? If yes, what is its effect to the suit ? (6) Whether the suit is in time limit ?
(7) Whether the cause of action has arisen to the plaintiff to file a suit against the deft.?
(8) Whether the present suit is in present form tenable at law? (9) Whether this Court has jurisdiction to entertain this suit ? (10) What order and decree ?
3.4 The trial Court, after framing the issues and after hearing the parties, held that defendant no.2 executed promissory note for Rs.33,100/- on 17.11.1986 and that the defendant has paid Rs.5,000/- on 06.11.1989 and that the plaintiff is entitled for an amount of interest @ 18% p.a. and the trial had held that money lenders' license was not required and that suit is within period of limitation and the trial Court directed the defendant to pay Rs.44,750/- with running interest @ 18% p.a. from filing of the suit till its realisation.
3.5 Being aggrieved by the said order, the defendants filed Regular Civil Appeal No.17 of 1989 and the first appellate Court, after reappreciating the evidence, allowed the appeal on the ground that the trial Court erred in beliving that the license under the Money Lenders' Act was not required and that the trial Court further erred in believing that plaintiff has proved his books of account and in view of the said fact Page 3 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined an appeal was allowed. Against the said order, the present Second Appeal is filed.
4. The coordinate Bench of this Court while admitted the said appeal vide order dated 11.02.2003 has framed following substantial questions of law.
(1) Whether the Appellate Court has erred in holding that a licence under the Act was required ?
(2) Whether, in the facts and circumstances of the case, it was necessary for the plaintiff to prove the books of account ?
SUBMISSIONS OF THE PLAINTIFF - APPELLANT :
5. Learned advocate for the plaintiff has mainly argued that the license under the Money Lenders Act was not required in view of Section 2(9)(g) of the Act wherein it has been specifically stated that the loan does not include a loan towards trader except for the purpose of Section 23 and 25 of the Act. Moreover, learned advocate for the plaintiff has also relied on Section 2(9)(g) of the Act wherein it has been stated that as plaintiff is a trader and in view thereof there is no requirement of license under the Money Lenders Act for giving loan to the defendants. Learned advocate for the plaintiff has also argued that in view of the fact that plaintiff has relied on promissory note and the fact that the said promissory note has been admittedly proved by the plaintiff, the fact that the plaintiff has not produced his books of account cannot be entertained. Moreover, the fact remains that the defendant is partnership firm and the defendant has not produced his books of account and defendant has only Page 4 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined filed written statement at Exhs.39 and 79. It has also been argued that the defendant has neither produced any documentary evidence, nor has led any oral evidence and, therefore, adverse interference requires to be drawn against the defendant and, therefore, first appellate Court could not have quashed and set aside the order passed by the trial Court only on the ground that license under the Money Lenders Act was not obtained by the plaintiff and, therefore, appellate Court could not hold that license under the Act was required. Moreover, plaintiff has examined himself vide Exh.31 and has proved the promissory note and the receipt issued for an amount of Rs.5,000/- and in view of the fact that defendant being partnership firm have not produced any documentary evidence more particularly books of account of the defendant partnership firm and the plaintiff has proved the book of account and, therefore, the appellate Court could not have come to the conclusion that plaintiff has not proved book of account and, therefore, present Second Appeal is required to be allowed and the judgment and order passed by the first appellate Court is required to be quashed and set aside and the judgment and decree passed by the trial Court is required to be upheld.
SUBMISSIONS OF THE DEFENDANT - RESPONDENT:
6.1 Per contra, learned advocate for the defendant has mainly argued that plaintiff has admitted in his evidence that plaintiff was doing business of Shroff and as Commission Agent. Moreover, it has also come on record that plaintiff has earlier also given loan to traders and, therefore, it can be clearly established that the plaintiff was doing business of lending money and, therefore, license under the Money Lenders Act was compulsory and in absence of the same plaintiff could Page 5 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined not have filed the present suit for recovery of amount. Moreover, it has also been argued that first appellate Court has rightly held that in absence of license under the Money Lenders Act, the plaintiff could not have filed suit for recovery of the said amount.
6.2 Learned advocate for the defendant has relied on judgments rendered in the case of Ramanlal Punjalal Shah vs. Pari Shulabhai Haribhai reported in 1994 (2) GLR 1475, more particularly para:10 of the said judgment, which reads under :
"10. In the instant case, the partner of the plaintiff firm Keshavlal Bhurabhai Exh. 31, in his examination-in-chief has stated that "Our firm does money lending business. We lend money for the purpose of business. We had lent Rs. 5,000/- to the defendant on 12-3-1970. At that very time, the defendant had given cheque to us. The cheque was post-dated and it was negotiable on 10-4-1970". He has further stated that "....There was an oral talk that the defendant will pay interest at the rate of 18% per annum Further, the defendant has not given any interest to me. In the plaint, I have claimed interest at the rate of 9%." In the cross-examination, he has in clear terms admitted that "I have not got any money lending licence. I have not got any licence under Shops and Establishments Act." The appellant Ramanlal Punjalal Shah has deposed that "The plaintiff did money lending work. I had borrowed money from the plaintiff three or four times. I had taken the loan on payment of interest at the rate of 3% per mensum. I paid one month''s interest on Rs. 5,000/- at the rate of 36% per annum and took Rs. 4,550 in cash. The original cheque is at Exh. 32. I could not pay the loan amount within a month. I wrote a letter to the plaintiff. I also sent Rs. 450/- being interest for one month. I sent this amount through a Veterinary Officer Dr. Modi. The plaintiff did not accept interest and demanded loan amount."
This is in substance the evidence on record. In view of this evidence, it is clear that the respondent-plaintiff is a money lender and has advanced a loan with interest and in view of the admission, the respondent does not possess a valid licence so also, the licence under Shops & Establishments Act. Further, it is also an admitted position Page 6 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined that on 3-4 occasions in the past, the respondent had advanced a loan to the appellant. In view of the fact that the respondent did not have a licence, the question of production before the Court or applying for the stay of hearing of the suit to enable him to produce the licence does not arise. In this view of the factual position on record, it is clear that the respondent is a money lender and doing business of money lending without having any valid licence and without licence, he is not entitled to carry on business as required u/s 5 of the Act. In view of this position, the learned Judge ought to have dismissed the suit u/s 10 of the Act. However, the learned trial Judge was of the view that in view of the admitted fact that the defendant had borrowed the money for the purpose of business as the defendant had undertaken cargo contract of milk from Ajod Dairy from Ahmedabad and he had borrowed money for the purpose of said business and therefore, the provisions of Bombay Money Lenders Act do not apply. Even though it may be that the defendant might have income from agriculture. In my view, the said finding is contrary to the evidence on record and the provisions of law. In my opinion the learned trial Judge has totally misread the evidence of the patties. It does not transpire from the evidence of Keshavlal Exh. 31 that the amount was lent to the appellant for the purpose of carting contract of milk from Ajod Dairy from Ahmedabad. As per his evidence, the plaintiff firm lent money for the purpose of the business and the appellant-defendant had taken a contract of transporting milk of Ajod Dairy and as he knew the appellant, he had lent Rs. 5,000/- on 12th December. Similarly, from the evidence of the appellant, it does not transpire that he had taken money from the respondent for the purpose of his business. In absence of any writing to the effect that the amount was borrowed for the purpose of business of carting contract, in my opinion, it is not correct to say that the appellant has borrowed the amount for the contract of transporting of milk. The fact that in past also, on three to four occasions, the appellant had taken loan from the respondent would suggest that apart from the business purpose, the respondent used to lend amount to the appellant and therefore, it is not correct to say that the suit transaction was only for the work undertaken by the appellant of transportation of milk.
Page 7 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined 6.3 In view above facts, it has been argued that in absence of license
under the Money Lenders Act, suit of the plaintiff could not have been filed and the first appellate Court has rightly decided the said issue and in view of the said fact, present Second Appeal is required to be dismissed.
ANALYSIS :
7. Having heard learned advocates for the parties and having perused the documents, following undisputed facts emerged.
7.1 The suit that has been filed by the plaintiff is for recovery of an amount of Rs.44,750/- and the plaintiff has come forward with the case that the defendant no.2 has executed a promissory note of Rs.33,500/- on 17.11.1986 in favour of the father of plaintiff viz. deceased Patel Mafatlal Maganlal and the said issue has been decided in affirmative and the only issue on which the first appellate Court has quashed and set aside the judgment and decree of the trial Court is only on the fact that the father of the plaintiff was not having license under Money Lenders Act and the appellate Court has also quashed and set aside the judgment and decree of the trial Court on the ground that trial Court in believing that the plaintiff has proved the book of account. In this background, if the evidence of both the parties are taken into consideration, the defendant has neither produced any documentary evidence nor given any oral evidence, the fact remains that defendant is partnership firm and the defendant no.2 has executed a promissory note in favour of deceased Mafatlal Maganlal and thereafter repaid the amount of Rs.5000/- towards the said amount and the said promissory note specifically states that rate of interest 18% (1.5% ) p.a. and the defendants have not produced any documentary evidence and the defendants having not produced their books of account and have Page 8 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined not stated anything to contradict and have raised suspicion on the said books of account, the trial Court has rightly passed the judgment and decree relying on the promissory note and the receipt of payment of Rs.5,000/-.
7.2 In view of the fact that defendant has not produced and given any evidence and have not stated anything on record as to how entries made in the books of account are of suspicion nature, the only contention raised by the defendant before the appellate Court was that in view of the evidence of the plaintiff, it can be stated that books of account were not maintained properly and the books of account could not be capable of being identified with the defendant and that certain entries have been erased, the fact remains that plaintiff had entered the witness box and, therefore, in view of the fact that plaintiff is relying on promissory note and receipt of payment, there is nothing on record to show that said books of account are of suspicious character and, therefore, judgment of the first appellate Court is required to be quashed and set aside and decree passed by the trial Court is required to be confirmed.
7.3 The first issue that has been raised by this Court is "Whether the Appellate Court has erred in holding that a licence under the Act was required ?"
7.3.1 The statutory object of the Bombay Money-Lenders Act, 1946 is to regulate those engaged in the vocation of money-lending as a structured and continuing commercial activity. It does not purport to Page 9 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined govern occasional or isolated transactions devoid of professional regularity or economic design. The scheme of the Act predicates its application upon the existence of a "business" of lending, a term which in legal parlance imports repetition, continuity, and an organized mode of profit-making. A transaction undertaken merely as a private financial arrangement--without commercial frequency or systemic engagement-- does not satisfy the threshold required to attract the statutory obligations, including the necessity of a licence under the Act.
7.3.2 In the case at hand, there is no material on record to support the contention that the plaintiff was operating as a money-lender in the ordinary course of trade. The plaintiff's position that he has never engaged in money-lending as a profession remains unrebutted. The defendant, upon whom the burden squarely lies, has failed to establish even prima facie that the plaintiff habitually advances loans to members of the public for interest or gain. No evidence--oral or documentary-- has been produced to suggest that the loan in question formed part of a larger pattern or scheme of financial dealings undertaken for commercial return. The advancement of a single loan, without more, cannot be elevated to a "business" so as to attract the statutory rigors of registration or compliance under the 1946 Act.
Moreover, the judgment relied upon by the defendant in the case of Ramanlal Punjalal Shah vs. Pari Shulabhai Haribhai (supra) will be of no assistance to the defendant as in the said case the partner of the plaintiff had admitted in his examination-in-chief that the firm does money lending business and in the present case there is nothing on record that the business carried out by deceased Patel Mafatlal Maganlal was Page 10 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined exclusively that of money lending and, therefore, license under the Money Lenders Act was not required.
Therefore, the Issue No.1 framed by this Court is answered in the affirmative and in view of the fact that deceased father of the plaintiff was not operating his money later on in ordinary course of trade, it was not required for him to give Rs.44,700/- pursuant to the promissory note that he requires license under the Money Lenders Act.
7.4 With respect to the Issue No.2 i.e. "Whether, in the facts and circumstances of the case, it was necessary for the plaintiff to prove the books of account ?", the fact that entire suit of the plaintiff was based on the promissory note and that the receipt that was issued pursuant to the payment was made regarding promissory note. Moreover, there is nothing on record, show that entries are of suspicious character and/ or do not conspire confidence in the Court of justice, neither the defendants have entered the witness box nor have they produced any book of accounts, though defendant is partnership firm. Therefore, from the documentary proof, the plaintiff has proved the books of account and, therefore, the said substantial question of law is also answered in the affirmative for the reason that from the record it can be established that plaintiff has proved the books of account.
7.5 In light of the above, the appellate court's invocation of Section 10 of the Act and its finding that the suit was barred for want of a money- lending licence are misplaced and contrary to settled legal principles. The Page 11 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025 NEUTRAL CITATION C/SA/146/2002 JUDGMENT DATED: 17/07/2025 undefined mere act of lending money, even with interest, does not ipso facto constitute one a "money-lender" within the meaning of the statute unless such acts are carried on with a degree of commercial continuity. Occasional financial transactions, even if motivated by interest, do not fall within the ambit of the Act unless embedded within a habitual course of trade. The trial court's conclusion that the plaintiff does not fall within the regulated class under the statute is sound in law and merits affirmation
8. Under the circumstances, this Second Appeal is allowed. judgment and decree dated 06.07.2002, passed by the 3rd Extra Assistant Judge, Mehsana in Regular Civil Appeal No.17 of 1999 is quashed and set aside and the judgment and decree dated 31.12.1998 passed by the trial Court i.e. Civil Judge (J.D.) in Regular Civil Suit No.140 of 1993 (Original Special Civil Suit No.405 of 1989) is hereby confirmed. Decree be drawn accordingly.
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(SANJEEV J.THAKER,J) MISHRA AMIT V. Page 12 of 12 Uploaded by MISHRA AMIT V.(HC00187) on Fri Jul 18 2025 Downloaded on : Sat Jul 19 00:15:08 IST 2025