Calcutta High Court
Ritu Poddar vs M/S. Stellar & Anr on 11 September, 2024
IN THE HIGH COURT AT CALCUTTA
(Ordinary Original Civil Jurisdiction)
ORIGINAL SIDE
Present:
The Hon'ble Justice Krishna Rao
G.A. No. 2 of 2023
In
CS No. 175 of 2022
Ritu Poddar
Versus
M/s. Stellar & Anr.
Mr. Rajarshi Dutta
Mr. Sarbajit Mukherjee
Mr. A.P. Agarwalla
... For the plaintiff.
Mr. Jishnu Chowdhury
Mr. Ritoban Sarkar
Mr. Abhidipto Tarafder
Mr. Barnik Ghosh
... For the defendants.
Hearing Concluded On : 21.08.2024
Judgment on : 11.09.2024
2
Krishna Rao, J.:
1. The plaintiff has filed the present application being G.A. No. 2 of 2023
in C.S. No. 175 of 2022 under Chapter XIIIA of the Original Side Rules
of this Court for passing of final judgment for recovery of amount of
Rs.15,00,000/- along with interest at the rate of 15% per annum
against the defendants.
2. Upon request of the defendants, the plaintiff agreed to provide loan of
Rs.10,00,000/- to the defendants and the defendants agreed to repay
the said amount within 92 days along with interest at the rate of 15%
per annum. The plaintiff has transferred an amount of Rs.10,00,000/-
by way of RTGS and on receipt of the said amount from the plaintiff, the
defendant no. 2 has executed a money receipt on 11th July, 2018.
3. The defendants paid a sum of Rs. 34,027/- to the plaintiff on 10th
October, 2018 as interest from 11th July, 2018 upto 10th October, 2018
after deduction of TDS of Rs. 3781/-. As per request of defendants, the
time to repayment of loan was extended from time to time but the
defendants have paid further interest of Rs. 18,863/- on 30th
November, 2018, Rs. 33,287/- on 28th February, 2019 and Rs.
11,466/- on 30th March, 2019 i.e. upto 31st March, 2019 after
deduction of TDS.
4. On 1st April, 2020, the defendants issued Cheque No. 001887 for Rs.
10,00,000/- in favour of the plaintiff. The plaintiff has presented the
said cheque on 20th June, 2020 but the same was dishonored with the
endorsement "Funds Insufficient". The plaintiff has issued notice to the
defendants on 13th July, 2020, calling upon the defendants to pay the
amount along with interest. On receipt of notice, the defendants have
sent reply denying the claim of the plaintiff.
5. The defendants say that the application filed by the plaintiff is barred
by limitation and this Court has no jurisdiction as cause of action arose
outside of the jurisdiction of this Court. They submit that the claim
made by the plaintiff is barred by limitation as the alleged transaction
was made on 11th July, 2018 and the plaintiff has filed suit in the year
2022.
6. The defendants say that this Court would be stopped from passing a
decree unless the Court satisfied that at the time when the loan was
advanced, the plaintiff had an effective license under the West Bengal
Money Lenders Act, 1940. The defendants further say that the plaintiff
has filed the suit without any balance sheet, bank statement or any
other documents to prove the case of the plaintiff.
7. The plaintiff has paid Rs. 10,00,000/- by transferring the said amount
from the account of the plaintiff i.e. HDFC Bank, at Central Plaza, 2/6
Sarat Bose Road, Kolkata - 700 020. The defendants have also paid
interest to the plaintiff till 31st March, 2019 in the same bank account
of the plaintiff outside the jurisdiction of this Court.
8. The defendant has issued cheque in favour of the plaintiff dated 1st
April, 2020 for Rs.10,00,000/- of the ICICI Bank, Gorky Terrace
Branch, Kolkata - 700 017 which is within the jurisdiction of this Court
but the same was dishonored with the remark "Funds Insufficient" on
20th June, 2020, thus part of cause of action arose within the
jurisdiction of this Court.
9. It is the case of the plaintiff that as per request of the defendants, the
plaintiff has paid the said amount as loan to the defendants. In the
plaint nowhere it is mentioned that the plaintiff has provided the said
loan amount to the defendants during business transaction or the
defendants have not produced any evidence to show that the
defendants have taken the same amount from the plaintiff during the
course of business or the transaction between the plaintiff and the
defendants is connected with business transaction.
10. In the case of Ladymoon Towers Private Limited -vs- Mahendra
Investment Advisors Private Limited reported in 2021 SCC OnLine
Cal 4240, the Coordinate Bench of this Court held that:
"20. The definition section of the 2015 Act
only contemplates a "commercial dispute" and not
any other form of dispute where the basis of
disagreement between the parties has a non-
commercial cause. The gradation of disputes in
Section 2(1)(c) taking into account all possible forms
of agreements from which a "commercial dispute"
may arise, makes it clear that the framers of the
statute gave emphasis on the commercial flavour of
the transaction as opposed to agreements entered
into between parties without a commercial purpose.
The qualification of the person being a Merchant,
Banker, Trader or Financier imparts an
unimpeachable commercial flavour to the
transaction and the resulting dispute. The
Insolvency and Bankruptcy Code, 2016, for
example, defines a dispute from a broader
perspective as any suit or arbitration proceedings
relating to an existing debt - Section 5(6)(a). The
commercial purpose would generally mean a
transaction by which a person's commercial or
economic interests may be advanced and would
result in an economic benefit to that person. It
would not include an agreement where profit-
making is an incidental outcome of the transaction
or may happen by accident. Although, a "hand
loan", for example, is given by a person or entity to
another with the expected outcome of the principal
sum being returned with interest, the essential
commercial flavour in such a loan may be lost by
reason of the informal terms under which the
money is lent and advanced and the consequent
uncertainty which may result therefrom. The
requirement of fixing the transaction within the
ambit of Section 2(1)(c)(i), namely, between the
named classes of persons can be construed being
in aid of what the Act intends to cut down, namely,
unnecessary wastage of time on ascertaining
whether a dispute is a commercial dispute. The
exhaustive categories of agreements in 2(1)(c)(i) -
(xxii) leaves no doubt that the 2015 Act seeks to
bring within its fold an inclusive range of disputes
where the underlying purpose of the transaction is
a commercial interest of the parties.
21. Since it has been found that none of the
criteria mentioned in Section 2(1)(c)(i) of the Act has
been met by the factual conspectus in the present
case, C.S.99 of 2020 is directed to be de-listed from
the Commercial Division and transferred to the
appropriate list governing the hearing of ordinary
suits. Although the defendant has failed to act in
accordance with the timelines prescribed under The
Commercial Courts Act, 2015 and now seeks to
take advantage of the comparatively liberal time
frames of a regular suit, the defendant cannot be
pinned down to the rigours of the 2015 Act if it is
found that the suit does not arise out of a
commercial dispute under the provisions of the
2015 Act."
In the present case also though the defendants have raised
objection that the suit filed by the plaintiff is commercial in nature but
has not satisfied this Court under which provision of Section 2(1)(c) of
the Commercial Courts Act, 2015 attracted. The plaintiff has made out
a simple case of money lent and advanced. The defendants have not
brought any evidence on record to say that the suit is of commercial in
nature and the transactions between the plaintiff and the defendants
are in connection with any business.
11. The plaintiff has provided loan of Rs. 10,00,000/- to the defendants as
per the request of defendants on 11th July, 2018 and on receipt of the
said amount, the defendant no. 2 executed an acknowledgement. The
defendants have paid interest till 31st March, 2019 by depositing in the
account of the plaintiff and on 1st April, 2020, the defendants issued
cheque of Rs.10,00,000/- which was dishonored on 20th June, 2020
and the plaintiff has filed the suit in the month of July, 2022 thus it
cannot be said that the suit is barred by limitation.
12. The defendants have taken the plea that the plaintiff is not having
license under the West Bengal Money Lenders Act, 1940 and no decree
can be passed. The defendants have 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:
"3. Even though a plain reading of sub-
section (1) of Section 13 clearly suggests that no
Court can pass a decree or order in favour of a
money lender in any suit instituted by such a
money lender for recovery of a loan unless the
Court is satisfied that at the time when the loan
was advanced, the money lender held an effective
licence. There is, thus, a clear embargo upon the
Court passing a decree or order in a suit in favour
of a money lender/plaintiff who at the time the loan
was advanced did not hold an effective licence.
What is noteworthy is that the embargo that relates
to the passing of the decree has, in point of time,
relation to the period when the loan is advanced.
Sub-section (2) of Section 13 then creates an
exception to the aforesaid embargo by providing
that if during the trial of a suit to which sub-section
(1) applies, the Court finds that the money
lender/plaintiff does not have a licence, the Court
shall, before proceeding with the suit, require the
money lender/plaintiff to pay penalty which may
be three times the licence fee as specified in Section
10 of the Act. As per sub-section (3) of Section 13, if
the plaintiff-money lender thus pays the penalty,
the Court shall proceed with the suit. This is the
plain meaning as we can cull out by a combined
reading of sub-sections (1), (2) and (3) of Section 13.
In sum and substance, therefore, the position of
law as emerges from a combined reading of these
three provisions is that even though there is no
embargo or prohibition as such about the
maintainability or the filing of a suit with respect to
a loan by an unlicenced money lender, the Court in
such a suit is precluded from passing a decree, or
an order in favour of such a money lender with
respect to such a loan if the money lender does not
hold a valid licence as per the Act. If, however,
during the course of the trial, the Court finds that
the money lender does not have a licence, an
obligation is cast upon the Court to call upon the
plaintiff-money lender to pay penalty which cannot
be more than three times the licence fee, as
prescribed in Section 10 of the Act. The expression
"the Court shall, before proceeding with the suit,
require the money lender to pay" clearly suggests
that the lagislature intended that in every case
where the suit has been instituted by an
unlicenced money lender, it shall be mandatory for
the Court to give an opportunity to the money
lender/plaintiff to pay the penalty and, as per the
provisions contained in sub-section (3) of the Act, if
the money lender avails of this opportunity and
pays the penalty, the Court shall proceed with the
suit. Undoubtedly, however, if the money lender
fails to pay the penalty the Court shall dismiss the
suit. The legislature, therefore, very clearly,
unequivocally and distinctively provided that if the
penalty is not paid, the suit would be dismissed; if
the penalty is paid, the Court shall proceed with
the suit. The intention was very clear. The suit is
maintainable and it can be filed even by an
unlicenced money lender but no decree can be
passed by a Court in such a suit and that the Court
is bound to afford an opportunity to the money
lender to cure the defect which had arisen because
of the non-licensing of the money lender by paying
the penalty which cannot be more than three times
the amount of licence fee. In this back drop,
therefore, let us consider the observations,
reasoning and ratio of the learned Single Judge of
this Court in the case of Shib Kumar Todi v. Amal
Chand Champalal (supra).
4. In para 38 of the judgment in Shib Kumar
Todi, the learned Single Judge took the view that if
a loan was given by a money lender when the
money lender did not hold a licence, the loan was
to never ripen into a decree in Bengal. This
observation appears to be the foundation of the
ratio that he ultimately laid down. To understand
the basis of this ratio, the observations of the
learned Single Judge in paras 39, 40, 41 and 42 of
the judgment may also be quoted. These read:--
"39. The point then arises, as to what is
the use of the plaintiff being permitted to pay
penalty, within the meaning of sub-section (2)
of Section 13, if the plaintiff can, upon
payment of such penalty, only proceed with
the suit, but has to step short of having a
decree passed in his favour?
40. The other point, of at least equal, and,
in my opinion, of greater perplexity is, that it is
difficult to follow, as to what the legislature
was intending to achieve, by enacting a
detailed Act, as to control of money lending
business, if it merely intended that, prior to
obtaining a decree, the money lender will have
to pay three times the licence fee which,
according to the present rate, work out to only
Rs. 75/-. No money lender granting any
substantial loan would bother to obtain any
licence if the only penalty were that he would
have to pay seventy five rupees prior to
obtaining a decree.
41. I am, therefore, faced with two
unsavoury choices. I must either construe sub-
sections (2) and (3) of Section 13 as being of
practically no value to the plaintiff, or I must
alternatively construe the entire Act to be of no
value of the regulating (3) would enable the
plaintiff to proceed, but proceed fruitlessly. In
the other line of construction, the Government
would be permitted to make rules and
regulations, regarding money lending
business, but only to be defeated, by any
money lender who is prepared to pay a
penalty of seventy five rupees, prior to
obtaining a decree in any suit of his against a
borrower.
42. To speak very plainly, I would rather
make a nonsense of sub-sections (2) and (3) of
Section 13, than make a nonsense of the
entire scheme of the Act.
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.
13. The plaintiff has relied upon judgment in the case of Sitaram Poddar
vs. Bhagirath Choudhary reported in 2011 SCC OnLine Cal 845
wherein the another 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."
14. In the case of Swaika Vanaspati (Supra), the Hon'ble Division Bench
has declared the ratio of in the case of Shib Kumar Todi -vs- Amal
Chand Champalal reported in 1992 SCC OnLine Cal 165 wherein
the Learned Single Judge of this Court held that:
"38. The mere material consideration for a
construction of s. 13 would, in my opinion, be that
no decree can be passed in favour of a plaintiff
money lender unless he held an effective licence at
the time of loan. Once that time is passed, and the
loan has been given, the difficulty is no longer
curable. The loan shall never ripen into a decree in
Bengal. The prohibition of s. 13(1) is clear and
wholly effective."
In the case of Shib Kumar Todi (supra), the Learned Single Judge
came to the conclusion that the plaintiff was a money-lender within the
meaning of the West Bengal Money Lenders Act, 1940 when he
advanced the loan in the year 1985. In the said case, the plaintiff has
admitted that there might be one or two other cases of his having
granted loan.
The Hon'ble Division Bench in the case of Swaika Vanaspati
Products Ltd. (supra) has not considered the point whether one or two
isolating 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.
15. In the present case, it is the specific case of the plaintiff that as per the
request of the defendants, the plaintiff has lent and advance amount of
Rs. 10,00,000/- to the defendants. The defendants have not produced
any evidence that the plaintiff is running the business of money
lending. In affidavit-in-opposition of the present application also it is
not the contention of the defendants that the plaintiff has lent and
advanced of any money to some other persons also.
16. In support of the case, the plaintiff has relied upon account statement
of HDFC Bank from 1st April, 2018 to 31st March, 2019 wherein in
reveals that on 11th July, 2018, the plaintiff has transferred an amount
of Rs. 10,00,000/- in the account of defendants. Corroborating the
same, the defendant no. 2 has acknowledged the receipt of
Rs.10,00,000/- and paid interest at the rate of 15% per annum. In the
TDS Certificate also it reveals that TDS have been deducted while
paying interest of the said amount by the defendants to the plaintiff. In
reply to the legal notice dated 13th July, 2020, the defendants have
stated that part payment of the amount has already been made but no
document was disclosed to the said stand. The defendants have also
issued cheque of Rs. 10,00,000/- to the plaintiff which has dishonored
and the defendants have not explained the said cheque.
17. This Court also finds that the defendants have filed an application
being G.A. No. 1 of 2023 praying for extension of time to file written
statement. By an order dated 13th June, 2023, disposed of the said
application by allowing the defendants to file written statement by 23rd
June, 2023, subject to payment of costs. While disposing of the said
application, this Court made it clear that filing of written statement will
not stand in the way of the plaintiff in taking out an application for
summary judgment.
18. Considering the above, this Court finds that the defendants do not have
defence and the defence which the defendants have raised is sham and
moonshine.
19. In view of the above, the plaintiff is entitled to get decree of Rs.
10,00,000/- along with interest at the rate of 15 % per annum from 1st
April, 2019, till the realization of the decretal amount.
20. G.A. No. 2 of 2023 is disposed of. Accordingly, C.S. No. 175 of 2022
is also disposed of. Decree be drawn accordingly.
(Krishna Rao, J.)
