Calcutta High Court

Kamalesh Mohta vs Karnani Constructions & Ors on 10 September, 2024

                 IN THE HIGH COURT AT CALCUTTA
                              ORIGINAL SIDE
                       COMMERCIAL DIVISION




Present:

The Hon'ble Justice Krishna Rao



                       GA (COM) No. 1 of 2024

                                   With

                       GA (COM) No. 2 of 2024

                                     In

                      CS (COM) No. 650 of 2024



                              Kamalesh Mohta

                                   Versus

                    Karnani Constructions & Ors.




           Mr. Sourojit Dasgupta
           Mr. Aasish Choudhury
           Ms. Uma Bagree
                                                  ... for the plaintiff.


           Mr. Varun Kothari
           Mr. Udit Agarwal
           Mr. Vivek Choubey
           Mr. Rahul Parasramporia
                                            ... for the defendant nos. 1 to 3.
                                            2


             Mr. Altamash Alim
             Mr. S.S. Bhutoria
             Mr. Amit Sureka
                                                ... for the defendant no. 4.


Hearing Concluded On : 23.08.2024

Judgment on                 : 10.09.2024

Krishna Rao, J.:

1. The plaintiff has filed an application being G.A. No. 1 of 2024 for grant

of interim order. The defendant no.4 has filed an application being G.A.

No. 2 of 2024 for deletion of the name of defendant no.4 form the cause

title of the plaint.

2. The plaintiff has filed the suit against the defendants for a decree of

sum of Rs. 47,93,646/- along with interest.

3. Initially, when the plaintiff has filed the suit, the plaintiff has also

prayed for ad-interim order but this Court refused to grant ad-interim

order and now the defendant nos. 1, 2 and 3 have filed affidavit-in-

opposition and the defendant no. 4 has filed an application for deletion

of his name from the plaint on the pretext that the defendant no. 4 has

already retired from the partnership of the defendant no.1 firm.

4. The defendants have approached the plaintiff for financial

accommodation of Rs. 20,00,000/- and have jointly assured the

plaintiff that they will repay the said amount within two years and the

said amount will also carry an interest at the rate of 12% per annum.

The defendant no.1 also assured that on each and every financial year,

on the principal amount, as well as on interest the defendants shall

deposit TDS.

5. Pursuant to the discussion between the parties, the plaintiff has

disbursed total amount of Rs. 20,00,000/- in favour of defendants in

two instalments on 3rd December, 2010 and 27th December, 2010 from

the bank account of the plaintiff with Karur Vysya Bank, Burrabazar

Branch, Kolkata to the Indian Overseas Bank, Ranibazar Branch,

Bikaner. On receipt of total amount, the defendants paid interest at the

rate of 12% per annum amounting to Rs. 67,333/- on 31st March,

2011. The defendants have also deposited TDS on the said interest

amount on each and every financial year. The defendants have also

issued statements of balance confirmation at the end of each financial

year with effect from 31st March, 2011 to 31st March, 2023.

6. Plaintiff says that on and from 31st March 2022, the defendants

stopped paying interest. The plaintiff has issued notice upon the

defendants calling upon the defendants to pay interest as well as the

outstanding amount but inspite of receipt of notice neither the

defendants paid the amount nor have sent any reply to the said notice.

7. Plaintiff says that the plaintiff came to know that the defendants are

habitual defaulters and the business of the defendants is running at

loss. He submits that the defendants have refused and failed to repay

the various financial accommodations which the defendants had

obtained from various parties for the purpose of making unjust

enrichment at their expense including the plaintiff .

8. The plaintiff says that the plaintiff came to know that in order to

defraud their creditors in the market, the defendants are in the process

of siphoning of funds lying at their respective bank accounts only with

the intention to defeat the very purpose of filing of the present suit by

the plaintiff. The plaintiff further came to know that the defendants are

in the process of alienating/ transferring/ encumbering their respective

immovable properties. The plaintiff says that if an order of injunction is

not passed by securing an amount of Rs. 34,16,034/-, if any decree is

passed in future in favour of the plaintiff, the said decree will remain in

paper and the plaintiff will not be in a position to execute the said

decree.

9. Per contra, Learned Counsel appearing for the defendant nos. 1, 2 and

3 submits that there was no loan transaction between the plaintiff and

the defendant nos. 1, 2 and 3 and submits that nothing is payable or

due against the plaintiff.

10. Learned Counsel appearing for the defendant nos. 1, 2 and 3 submits

that the plaintiff company had invested an amount of Rs. 74,00,000/-

in the defendant no. 1 company and became a partner of the said firm.

He submits that the defendant no. 1 was awarded a work order from

Northern Railways, Amritsar for which the plaintiff through its man

and agent was looking after the said work for execution but the

defendant no. 1 incurred loss of Rs. 33,00,000/- in the said work, after

which the plaintiff decided to exit the partnership. The defendants say

that upon settling the accounts, it was found that a sum of Rs.

15,00,000/- is due and payable to the plaintiff by the defendant no. 1

after taking into account, the losses suffered by the defendants during

the execution of the work by the plaintiff on behalf of the defendants.

11. The defendants say that the defendant no. 1 has already paid an

amount of Rs. 15,00,000/- to the plaintiff by way of online transfers

which the plaintiff had completely supressed the said material facts in

the present case. The defendants say that the claims made by the

plaintiff is barred by laws of limitation and the balance confirmation

relied upon by the plaintiff is an unsigned and unstamped document

which cannot be termed as admission on behalf of the defendants. He

submits that the TDS deduction relied upon by the plaintiff of 31st

March, 2020, is not in respect of the alleged transaction of the plaintiff.

12. Learned Counsel appearing for the defendant nos. 1, 2 & 3 during the

hearing of the present application has relied upon certain documents

and submitted that from the said documents, it reveals that the work

order which was issued by the Railway Authorities have been forwarded

to the plaintiff for execution which established that the plaintiff had

worked with the defendant no. 1 as partner.

13. The defendant no. 4 has filed an application for deletion of its name

from the cause title of the suit on the ground that the defendant no. 4

has already retired from the partnership of the defendant no. 1

company on 1st April, 2015. The defendant nos. 1, 2 and 3 in their

affidavit have also admitted that the defendant no. 4 has already retired

as partner from the defendants company.

14. Heard the Learned Counsel for the respective parties, perused the

materials on record. Initially, when the plaintiff has filed the suit, the

plaintiff has prayed for ad interim injunction but the same was refused

and this Court directed the parties to exchange their affidavits so that

the matter can be heard on merit. Now all the parties have filed their

pleadings.

15. It is the case of the plaintiff that the plaintiff has provided financial

accommodation of Rs. 20,00,000/- to the defendants and the

defendants had agreed to return the said amount within two years on

demand with interest @ Rs. 12% per annum. The defendant nos. 1 to 3

have denied with regard to the receipt of Rs. 20,00,000/-. The

defendants have made out a case that the plaintiff has become the

partner of the defendant company on payment of Rs. 74,00,000/- and

some of the works which were awarded by the Railway Authorities to

the defendant no. 1 company was assigned to the plaintiff for execution

but in the said work, the defendants have suffered loss of Rs.

33,00,000/-. It is also the case of the defendants that after settling the

accounts of the plaintiff an amount of Rs. 15,00,000/- was due and

payable to the plaintiff and the defendants have paid Rs. 15,00,000/-

by way of online transfers and as such nothing remains to be paid to

the plaintiff.

16. The document which the defendants no. 1, 2 and 3 have relied upon to

establish that the work awarded by the Railway Authorities to the

defendant no. 1 company, on perusing the said documents, it was

found that the Deputy Chief Engineer (Construction) Northern Railway

had made communication with M/s. Karnanri Construction (JV) dated

25th October, 2010 and 27th October, 2010 and the address of the said

company is mentioned as New Lane, Ganga Shahar, Bikaner but in the

present case, as per the cause title, the address of the defendant no. 1

is Flat No. 409, Kamal Apartments, C-6, SJS Highway, Bani Park,

Jaipur. The defendants are relying upon the email to establish that the

said work order was forwarded by the defendant no. 1 to the plaintiff

but there is no document to show that the said work was assigned to

the plaintiff for execution. Though the defendant no. 1 has taken the

stand that an amount of Rs. 15,00,000/- has been online transferred in

the name of the plaintiff company but no document has been filed to

establish the said defence of the defendant nos. 1, 2 and 3. The

defendants have handed over the statements of account of the

defendants of Yes Bank wherein an amount of Rs. 5,00,000/- is

transferred in the account of the plaintiff but in the affidavit-in-

opposition, no such statement is made that on 8th February, 2021, an

amount of Rs. 5,00,000/- is transferred in the account of plaintiff, in

contrary it is the specific case of the defendants that Rs. 15,00,000/-

was online transferred in the account of the plaintiff. The defendants

have taken the stand that the account confirmation does not bear the

signature of the parties but the confirmation of account relied by the

plaintiff has been communicated through the emails between the

parties and the defendants have not denied the said emails. The

defendants have also taken the plea that the suit filed by the plaintiff is

barred by limitation but it is found that the last confirmation of

accounts communicated between the parties through email in the

month of September, 2023, thus it cannot be said that the suit is

barred by limitation at the interlocutory stage.

17. The defendants have made out a case of Rs. 74,00,000/- but it is the

specific case of the plaintiff that the plaintiff has provided financial

accommodation of Rs. 20,00,000/- to the defendants and not Rs.

74,00,000/-. In the affidavit-in-replay also the plaintiff has denied with

regard to the amount of Rs. 74,00,000/- and categorically stated that

the plaintiff has lent and advance of Rs. 20,00,000/- only to the

defendants.

18. The defendant nos. 1, 2 and 3 have also taken stand that the plaintiff

without any licence under Bengal Money Lenders Act, 1940 cannot lend

and advance any amount and relying upon sub-section (1) of Section

13 of Bengal Money Lenders Act, 1940 submitted that no decree can be

passed in favour of the plaintiff.

The defendant nos. 1, 2 and 3 relied upon the judgment in the

case of Swaika Vanaspati Products Ltd. -vs- Canbank Financial

Services Ltd. reported in 2000 SCC OnLine Cal 234 wherein the

Division Bench of this Court held that:

"5. After we have very carefully gone through the aforesaid observations of the learned Single Judge in Shib Kumar Todi, and on the basis of the abstract proposition of law laid down by him in para 38 of the judgment, we feel that the learned Single Judge perhaps based his observations by reading sub-section (1) of Section 13 of the Act in total isolation and that he did not properly appreciate and take into account clear legislative intent as duly incorporated in sub-sections (2) and (3). The learned Single Judge, according to us, thus did not reconcile the legislative policy as contained in sub-sections (2) and (3) with the embargo as contained in sub-section (1). According to us, the legislature by placing the embargo in sub-section (1) about the Court not being competent to pass a decree in a suit filed by an unlicenced money lender, at the same time expressed its clear intent that the embargo can be lifted and the unlicenced money lender can be brought at par with a licenced money lender by providing that the Court shall call upon such unlicenced money lender-plaintiff to pay the penalty and that if the penalty is paid, the suit shall proceed. The language employed in sub-

section (3) is indeed crystal clear. It says that if the penalty is not paid the suit shall be dismissed. It also says that if the panalty is paid the Court shall proceed with the suit. If, in the suit (which sub- section (3) says will proceed), the Court ultimately cannot pass a decree in favour of the plaintiff, what is the idea of the Court proceeding with the suit? Proceeding with the suit cannot be a mere ritual, an empty formality. Whenever the Court proceeds with a suit, ultimately the result, the logical and has to be the passing of a decree. Therefore, when the legislature provides that if the penalty is paid, the Court shall proceed with the suit, it is based on a clear intent that not only will the suit be maintainable, it shall also proceed and that, ultimately depending upon its merits, the decree

shall be passed. With utmost respect we say, hold and declare that the ratio laid down by the learned Single Judge of this Court in Shib Kumar Todi v. Amal Chand Champalal is not a good law and that it is required to be overruled. We, accordingly, declare that the ratio in Shib Kumar Todi's case as being contrary to the provisions of law as contained in Section 13 of the Act and overrule the aforesaid judgment."

19. In the case of Sitaram Poddar -vs- Bhagirath Choudhary reported in

2011 SCC OnLine Cal 845, the Division Bench of this Court held that:

"7. The short point in this appeal is whether the learned Trial Judge was justified in dismissing a suit for recovery of money lent and advanced on the ground that the lender had no registration and licence as money-lender and that before institution of the suit no notice was issued to the defendants giving notice for one month?

8. Section 2(9) of the Bengal Money-Lenders Act, 1940, defines a lender as a person, who advances a loan and includes a money-lender. Section 2(13) of the said Act defines a money- lender. Money-lender means a person, who carries on 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. Under section 2(14) of the said Act, money-lending business and business of money lending mean the business of advancing loans either solely or in conjunction with any other business.

9. The Patna High Court while interpreting the provisions of section 4 of the Bihar Money- Lenders (Regulation and Transaction) Act, 1939 holds that the business of money-lending imports a notion of system, repetition and continuity, and that is a test of determining whether the plaintiff is a professional money-lender. Occasional loans to relatives, friends or acquaintances do not make the lender a professional money-lender. There must be more than occasional and disconnected loans to justify a finding that the plaintiff is a professional money-lender (Bhutnath Kumar v. Nilkantha

Narayan Singh, reported in AIR 1949 Patna 400 and Sanwarmal Agarwalla v. Benoy Krishna Mukherjee, reported in AIR 1970 Patna 167).

10. The Rajasthan High Court in Gaurishanker v. Magharam, reported in AIR 1974 Rajasthan 238 while interpreting section 2(10) of the Rajasthan Money-Lenders Act, 1964, holds that an element of continuity and habit is essential to constitute the exercise of a profession or business. It is the professional money-lender and not the casual money-lender, who alone is contemplated by section 2(10) of the said Act.

11. The Madhya Pradesh High Court in Parmanand Jain v. Firm Babulal Rajendra Kumar Jain, reported in AIR 1976 Madhya Pradesh 187 holds that money-lender means a person, who in the regular course of business advances a loan. The words "in the regular course of business"

signify a certain degree of system and continuity of transactions. Every person, who has advanced a loan, therefore, is not a money-lender.

12. In Binapani Roja v. Rabindranath Sarkar, reported in AIR 1959 Calcutta 213, this Court holds that the word 'loans' in section 2(14) of the Bengal Money-lenders Act, is in plural.

Therefore, in order to establish that the plaintiff is carrying on business of money-lending, it must be proved that he has lent money on more than one occasion.

13. While interpreting the provisions of sub-

sections (9), (13) and (14) of the Bengal Money- Lenders Act, 1940, this Court in Satyanarayan Kamal Kumar v. Birendra Pro Singh, reported in AIR 1979 Calcutta 197 holds that money-lender is a person, who carries on business of money-

lending in a regular course of business, but mere lender is not so.

14. Supreme Court of India in Gajanan v. Seth Brindaban, reported in AIR 1970 SC 2007 while interpreting the provisions of C.P. and Berar Money-Lenders Act, 1934, holds that money-lender means a person, who in the regular course of business advances a loan and excludes isolated transactions of money-lending.

15. Supreme Court of India in Ka Icilda Wallang v. U. Lokeridra Suiam (dead) by Lrs., reported in AIR 1987 SC 2047 while interpreting the provisions of Assam Money-Lenders Act, 1934, holds that few disconnected and isolated transactions would not make the plaintiff a person engaged regularly in money-lending business.

16. Supreme Court of India in P. Vaikunta Shenoy & company v. V.P. Had Sharma, reported in AIR 2008 SC 416, while interpreting the provisions of Karnataka Money-Lenders Act, 1962, holds that the purpose of the Act was to prevent the malpractice of oppression by money-lenders to take advantage of people's poverty. In the money-

lending business, the object of money-lender is to earn interest of the loan he has advanced.

Therefore, a purposive interpretation has to be given to the definition of money-lenders.

17. Therefore, one or two isolated or occasional acts of lending money will not constitute a money-lending business; instances of occasional lending of money even at a remunerative rate of interest are not sufficient to constitute business of money-lending. Every loan is a debt, but every debt is not loan. Thus, by laying stress on the business trait of the lending, the Bengal Money-Lenders Act, 1940 contemplates a professional money-lender and it is in relation to such a professional money- lender that the provisions as to a licensee and registrations are applicable.

20. Considering the cases i.e. Swaika Vanaspati (supra) & Sitaram

Poddar (supra), this Curt finds that the Hon'ble Division Bench in the

case of Swaika Vanaspati Products Ltd. (supra) has not considered

the point whether one or two isolation transactions can be said to be

the business of money lending.

In the case of Sitaram Poddar (supra), the Honble Division

Bench of this Court considering several orders passed by various High

Courts and Judgment passed by the Hon'ble Supreme Court in the

case of Ka Icilda Wallang -vs- U. Lokeridra Suiam (Dead) by Legal

Heirs reported in AIR 1987 SC 2047 and in the case of P. Vaikunta

Shenoy & Company -vs- V.P. Had Sharma reported in AIR 2008 SC

416 held that one or two isolated or occasional acts of lending money

will not constitute a money lending business. Instances of occasional

lending of money even at a remunerative rate of interest are not

sufficient to constitute business of money lending.

21. In the case of Harleen Jairath -vs- Prabha Surana & Anr. reported

in 2019 SCC OnLine Cal 2372, the Hon'ble Division Bench of this

Court held that:

"49. There cannot be an absolute proposition that in a money claim no order of injunction or attachment or receiver could be made. Order 38 to Order 40 of the Code of Civil Procedure does not restrict the power of the court to pass any order that a court is empowered to pass just because it is a money claim. We have already discussed the circumstances when the court can exercise any of such power.

50. If there were doubts about exercising power under any of the aforesaid provisions, it can be safely stated that the court has inherent power to pass an order of injunction or attachment upon an unimpeachable liquidated claim being demonstrated and upon it being established that the respondents are taking steps to improperly deny the realization of the claim. When a huge sum of money is claimed and the plaintiff prima facie establishes such amount he would be entitled to secure his interest keeping in view the amount involved in the suit."

22. Considering the submissions made by the Counsels for the respective

parties and after perusing the materials on record, this Court finds that

the plaintiff has made out a prima facie case and balance of

convenience and inconvenience are in favour of the plaintiff. It is found

that the defendants have not denied with regard to receipt of an

amount of Rs. 20,00,000/- from the plaintiff but the defendants had

not brought any evidence on record to prove that the said amount has

been returned to the plaintiff. On the other hand from the confirmation

of accounts exchanged between the parties as well as TDS deduction,

supports the case of the plaintiff. The defendant has also not brought

any document on record to prove that the plaintiff was the partner of

the defendant nos. 1, 2 and 3.