1. This is defendant's appeal from the judgment and decree dt. 30-1-1997 whereby the plaintiffs suit had been decreed in part namely for a sum of Rs. 77,019-43 ps. only with costs and future interest at 6% p.a. from the date of suit till the date of realisation of entire decretal amount. It may be mentioned here that the plaintiff originally had made a claim in the suit for a decree for a sum of Rs. 1,05,000-00. But the suit had been decreed only for Rs. 77,019-43 ps. with interest as mentioned above.
2. The plaintiff alleged that, as per plaint allegations, he was carrying on business as commission agent and the defendant was having areca garden. The defendant used to receive money from the plaintiff now and then and the defendant had been delivering are canuts to the plaintiff at his premises for sale on commission. According to the plaintiff's case, he used to advance money from time to time and the defendant used to take advance amount and whenever defendant was in need of money, he used to send chit for money and the plaintiff used to make advance of money and defendant was delivering are canuts. According to the plaintiffs case, the defendant was acknowledging the amounts borrowed from him on the books maintained by the plaintiff and the defendant was due Rs. 72,044-43 ps., as per ledger account regularly maintained by the plaintiff. So, plaintiff filed the suit and alleged that the defendant is liable to pay interest at 23% p.a. as per trade, usage, agreement and contract, but the plaintiff has charged interest only at 18% p.a. on the entire amounts due from the defendant.
3. The defendant filed the written statement and denied the plaintiff's case and among other pleas, the defendant has raised a plea to the effect that the money-lending transaction between the plaintiff and the defendant though styled as advances, but is nothing than loan to defendant for ordinary use. Hence, plaintiff is doing money-lending business and therefore, as plaintiff has not taken any licence requisite under the Karnataka Money-lenders' Act either on the date of transaction of loan or on the date of filing of the suit, so suit was liable to be dismissed on this ground as being not maintainable. The defendant has taken the plea that the plaintiff has not furnished any accounts under Sections 20, 21 and 23 of the Karnataka Money-lenders' Act and so, he is not entitled to interest and costs. No doubt, defendant has also mentioned that the plaintiff has been doing commission agent business as well.
4. The Trial Court, on a consideration of the pleadings of the parties, framed as many as 15 issues i.e., 13 issues and 2 additional issues which read as under.-
1. Whether plaintiff proves that it is a registered partnership firm and P. Vaikunta Shenoy is its Partner and competent to file this suit?
2. Whether plaintiff proves that the defendant had a mutual, current and open account in his firm?
3. Whether plaintiff proves that defendant used to take advance from firm?
4. Whether plaintiff proves that defendant was acknowledging the amounts received by him on the books mentioned by the plaintiff?
5. Whether plaintiff proves that defendant was due Rs. 72,044-43 ps. as on 13-9-1990?
6. Whether plaintiff proves that defendant is liable to pay interest at 23% p.a.?
7. Whether plaintiff proves that he is entitled to Rs. 32,955-57 ps. towards interest as claimed in the plaint?
8. Whether defendant proves that he is liable to pay interest not more than 6% p.a. as stated in para 9 of his writtenstatement?
9. What is the amount due by defendant to the plaintiff?
10. Whether provisions of Karnataka Money-lenders' Act is applicable to the suit transaction?
11. If yes, whether defendant proves that plaintiff is a moneylender?
12. If yes, whether plaintiff proves that he has complied with the provisions of Karnataka Money-lenders' Act?
13. For what reliefs the parties are entitled?
Additional Issues.-
1. Whether defendant proves that provisions of Karnataka Agricultural Produce Marketing Committee Regulation Act is applicable to the facts of this case?
2. Whether defendant proves that the suit claim is barred under Section 84(1) of the K.A.I.M.C.R. Act, read with Rule 55 of K.A.P.M.R. Rules?
5. The Trial Court answered issue Nos. 1 to 6 in affirmative and with reference to issue No. 7, it had held that the plaintiff was entitled to claim Rs. 4,975 towards interest and that a sum of Rs. 77,019-43 ps. is due to the plaintiff by defendant. It answered issue No. 8 in affirmative and issue Nos. 10 and 11 in negative and held that issue No. 12 does not survive. It also answered additional issue Nos. 1 and 2 in negative and decreed the plaintiffs suit for a sum of Rs. 77,019-43 ps. against the defendant with costs and future interest at the rate of 6% p.a.
6. The defendant felt aggrieved by the judgment and decree of the Trial Court and has come up before this Court by way of appeal under Section 96 of the Civil Procedure Code.
7. The main contention that has been raised by the learned Counsel for the appellant is that, as per own plaint allegations and depositions of the plaintiff, plaintiff appears to be doing the money-lending business as well in addition to his alleged business of commission agent and there is no proof and no evidence nor any allegation in the plaint to the effect that the plaintiff has been holding the licence under Section 7 of the Karnataka Money-lenders' Act on the date of transactions and on the date of suit. The learned Counsel for the appellant contended that in absence of any allegations in the plaint that the plaintiff held the money lenders' licence required under the Act on both dates namely, on the date of transaction in question and on the date of filing of the suit and there being no evidence to the effect that the plaintiff had licence on both the dates, the Trial Court acted illegally and in contravention of provisions of Section 11 in decreeing the plaintiffs suit.
8. These contentions of the learned Counsel for the appellant have hotly been contested by the learned Counsel for the respondent.
The learned Counsel for the respondent firstly contended that the defendant did not appear in the witness-box and he has not proved by his evidence that the plaintiff is a money-lender. He submitted that the defendant admits that the plaintiff is a commission agent. He submitted that being a commission agent, there was no need to take money-lending business or licence under the Karnataka Money-lenders' Act, and on failure of the defendant to establish, the Trial Court had rightly held that there was no question of Act being applicable and/or suit being barred. The learned Counsel for the respondent further contended that the decree passed by the Court below cannot be said to be illegal.
9. Other contentions raised on merits of the case I need not go into. The main contention is that the plaintiffs suit is barred by Section 11 of the Karnataka Money-lenders' Act, and no decree could be passed by the Trial Court in plaintiffs favour. The question to be considered is, whether the Court below acted illegally in decreeing the plaintiffs suit in view of Section 11 of the Karnataka Money-lenders' Act? It will be appropriate at this stage to refer to the provisions of the Karnataka Money-lenders' Act, 1961.
Section 11 of the Karnataka Money-lenders' Act reads as under.-
'Section 11. Suits by money-lenders not holding licence.--(1)
After the expiry of six months from the date on which this Act comes into force, no Court shall pass a decree in favour of a money-lender in any suit to which this Act applies, filed by a money-lender, unless the Court is satisfied that the time when the loan or any part thereof to which the suit relates was advance, and on the date such suit was filed the money-lender held a valid licence'.
(emphasis supplied)
Sub-section (5) of Section 11 provides that,
'(5) Nothing in this section shall affect-
(a) suits in respect of loans advanced by a money-lender before the date on which this Act comes into force;
(b) the powers of the official receiver, an administrator or a Court under the provisions of the Karnataka Insolvency Act, 1925 or other corresponding law in force in any area of the State, or of a liquidator under the Companies Act, 1956, to realise the property of a money-lender'.
10. That Section 5 of the Act prohibits the carrying of money-lending business in the State of Karnataka except under and in accordance with the terms and conditions of the licence and after the commencement of the Karnataka Money-lenders (Amendment) Act except on payment of security deposit as provided under Section 7A. The Section 5 creates an absolute bar to the carrying of money-lending business without licence, and it is necessary under Section 11 of the Act for a money-lender to have a valid licence not only on the date on which he advances themoney, but also on the date on which he files the suit -- Basappa and Others v Garemane Kamanna.
11. The question as raised before this Court by the learned Counsels for the parties is and has been that whether has the respondent/plaintiff been a money-lender and was he doing the business of money-lending and if yes, was the suit liable to be dismissed? Before I proceed further, I think it proper to make reference to certain definitions given in the Act. Section 2 is the definition clause and it will be appropriate to quote the following.-
'Section 2.--In this Act, unless the context otherwise requires,--
(2) 'business of money-lending' means the business of advancing loans whether or not in connection with or in addition to any other business'.
(emphasis supplied)
Section 2(9} defines what is meant by loan. Section 2(9) reads as under.-
'(9) 'Loan' means an advance at interest whether of money or in kind, and includes any transaction which the Court finds in substance to amount to such an advance, but does not include-
(a) a deposit of money or other property in a Government Post Office, Bank or in a Karnataka Government Savings Bank or in any other Bank or in a company or with a co-operative society;
(b) a loan to, or by, or a deposit with, any society or association registered under the Karnataka Societies Registration Act, 1960 (Karnataka Act 17 of 1960);
(c) a loan advanced by Government or by any local authority authorised by Government;
(d) a loan advanced by a co-operative society;
(e) an advance made to a subscriber to, or a depositor in, a provident fund from the amount standing to his credit in accordance with the rules of the fund;
(f) a loan to or by an insurance company as defined in the Insurance Act, 1948 (Central Act IV of 1938);
(g) a loan to or by a bank;
(h) an advance of not less than three thousand rupees made on the basis of the negotiable instrument as defined in the Negotiable Instruments Act, 1881 (Central Act XXVI of 1881) other than on the basis of a promissory note;
(i) except for the purposes of Sections 26 and 28,--
i) a loan to a trader;
(ii) a loan to a money-lender who holds a valid licence;
(iii) a loan by a landlord to his tenant financing of crops or seasonal finance of not more than fifty rupees per acre of land held by the tenant'.
(emphasis supplied)
Sub-section (10) defines 'money-lender' as under.-
'(10) 'Money-lender' means-
(i) an individual; or
(ii) an undivided Hindu family; or
(iii) a company; or
(iv) an unincorporated body of individuals; who or which-
(a) carries on the business of money-lending in the State; or
(b) has his or its principal place of such business in the State, but shall not include a bank; (or any other financial institution which the State Government may, by notification specify in this behalf)'.
Money-lender is one, he may be an individual or an undivided Hindu family or it may be a company or an unincorporated body of individuals if it carries business of money-lending in the State of Karnataka or has his or its principal place of business in the State. But, according to the definition, Bank is not included nor any financial institution will be included within this expression which the State Government may specify in that manner.
12. Money-lending business, as the definition clause indicates, means business of advancing loans, whether loan is advanced in connection with any other business of money-lender or advance of loan business is done in addition to other business or even it may not be in connection with other business. Business of money-lending means business of advancing loan. An isolated transaction of advancing loan may not come within the framework of expression 'business'. It indicates that the expression business carries with itself i.e., advancing of loan must consist of series of transaction either with individuals or with different persons. The expression 'loan' has been defined to mean giving of advance at interest, whether giving of advance is in the form of money or in kind and includes any transaction which in substance amounts to such advance. No doubt clauses (a) to (i) of sub-section (9) of Section 2 provides exceptions where advances may not amount to a loan. If a case comes within the framework of either of clauses (a) to (i), then it may not amount to a loan. Otherwise advance on being made at interest, whether it is in the form of cash or in kind, that will amount to a loan. If a person is found to be carrying on business of money-lending, then under Section 5 he has to obtain a licence and no person is entitled to carry on business of money-lending in the State of Karnataka exceptafter obtaining the licence and under and in accordance with the terms and conditions of the licence granted under Sections 7 and 7A of the Act. So, first question to be considered in this case is, whether the plaintiff is a money-lender or not. This is a question of fact. No doubt, burden was on the defendant, as contended by the plaintiffs Counsel, to prove that the plaintiff was a money-lender. But, when the evidence had been led and when it is proved that the plaintiff is a money-lender, whether it is by cross-examination of plaintiff opponent's witness or by any other manner, the question of burden of proof loses its importance.
13. The plaintiff's case is that the defendant used to receive money in advance from the plaintiff now and then, vide paragraph 2(1) of the judgment of the Trial Court. No doubt, he further says after the sale of arecanut belonging to defendant, the plaintiff used to adjust the amount from sale of arecanut towards the money due from the defendant. It means plaintiff was advancing money to the defendant times again and again and there was no question of any isolated transaction. But, transaction used to be times again. Further, plaintiff has stated in his examination-in-chief that he was running the account of advance and arecanut supplied. He further mentions that the account relating to defendant was written at page 123 of the ledger book of the plaintiffs firm for the year 1987-88. It means that the register used to contain the entries not only relating to advance taken by the defendant, there were other entries also relating to other advances made to other persons by the plaintiff. In paragraph No. 10 of his examination-in-chief, the plaintiff very clearly states,
'We used to pay the amount in advance to persons who assure us regarding supply of are canuts to our firm. The amounts so advanced were borrowed by the firm from O.D. accounts. The Bank used to charge interest at 23%.'
In course of cross-examination, the plaintiff has again mentioned that the advances were made with interest and it is his statement in the course of cross-examination that,
'It is difficult to say that in one year to how many persons we paid loans. From the year 1972 definitely wo have been giving loans.We include interest on the said loan. At the fixed rate, they (the loanees) have to pay interest. For payment of interest we did not obtain any documents from the loanees'.
(emphasis supplied)
At the end, it is also mentioned that,
'In the ledger book, it can be seen that the interest from which date is due.'
It is further stated that,
'In respect of respondent-Harish, how much interest is credited, about this can be seen in that account'.
So, this evidence of plaintiff itself along with the plaint allegations clearly proves that the plaintiff used to give advance at interest to not only defendant, but to many persons whosoever required the same andwho were agreeable to supply their are canuts. It means, advances were given in connection with their business of taking their are canuts. But, when advances were made with interest and loans were given, it is immaterial whether it was in connection with or not in connection with any other business. When it was given, it means that it was given in connection with and as part of the business of money-lending. The learned 'Counsel for the plaintiff submitted that the advances given to the defendant would come within the framework of expression 'loan to a trader'. He submitted that he used to sell not only his agricultural produces, but also used to collect them from others and then used to sell the same and so this may not come under the expression 'loan'. There is no such a case of the plaintiff in the pleadings that the defendant used to collect or purchase are canuts of others and then used to supply to the plaintiff nor any such a case has been shown. The learned Counsel submitted that there is evidence of plaintiff on this aspect and a statement of the plaintiff that the defendant used to supply are canuts to the plaintiffs firm by collecting the same from small growers in the village. It is well-settled principle of law that no amount of evidence has to be looked into in respect of a plea which has not been taken in the pleadings. This well settled principle of law has been laid down in the case of Siddik Mahomed Shah v Mt. Saran and Others. Their Lordships have observed as under.-
'The spiritual adviser, who is the appellant wishes to keep them first upon the ground already specified which their Lordships have already disposed of and, secondly, upon the ground that it was a gift made by the widow herself but that claim was never made in the defence presented and the learned Judicial Commissioners therefore, very truly find that no amount of evidence can be looked into upon a plea which was never put forward'.
(emphasis supplied)
This principle has been followed later on in very many cases of their Lordships of the Supreme Court as well.
14. In this view of the matter, when this plea was not raised by the plaintiff even by filing the rejoinder nor by amendment to the plaint, this cannot be looked into. Because had this plea been raised, then an issue ought to have been framed. But the plaintiff did not raise this plea at all. In this view of the matter, in my opinion, there is no case worth consideration that the defendant used to collect or' take the produce of others and then used to supply it. It is only indicated that according to the plaintiff, the defendant used to supply his are canuts to the plaintiff. So it does not come within the definition of 'trader'. The agriculturist who produces certain product and then sells them does not become a trader. A trader is one who in the regular course of business buys and sells goods. But so far as defendant is concerned, he cannot be termed to be a trader. So, exception contained in Section 2(9) in the definition of loan is not applicable. It is the principal clause of definition of loan that is given in Section 2(9) is applicable, but not the exceptions.
15. Thus when I consider the entire evidence and the materials on record, particularly admission of the plaintiff, the above referred to evidence clearly reveals that the plaintiff has been carrying on the business of advancing loans and there must be series of transactions as he himself says that he had been advancing loans to many persons and used to charge the interest. That being the position that the plaintiff has been carrying business of money-lending, may it be in addition to his business of commission agent, the plaintiff cannot escape from the liability of Sections 5 and 11. A person who has got no money-lending licence is not entitled to carry on business of money-lending in the State of Kar-nataka. This is a social welfare legislation which is made to protect the persons of weaker sections from exploitation. This has to be given proper effect to obtain that object which Article 46 of the Constitution ordains and assures.
16. Looking to the whole set of circumstances that as the plaintiff has been carrying on money-lending business, it was bounden duty of the plaintiff to have obtained money-lending licence. If he had the licence, he should have stated that on the date of transaction, he had the licence, and also on the date of filing of the suit he had money-lending licence and should have produced the same. The plaintiff not having done so, the Trial Court had no jurisdiction to decree the plaintiffs suit. Even if for a moment if I take for arguments sake only that the plaintiff had advanced the money and they were not returned or that was due, the Trial Court could not decree the suit. The suit really should have been dismissed and the decree as such, being in contravention of Section 11 of the Karnataka Money-lenders' Act, has to be set aside.
Thus considered, the appeal is hereby allowed and the decree passed by the Trial Court is hereby set aside.
Costs of the appeal have to be borne by the parties themselves.