A.P. Sen, J.
1. The case has been referred to the Full Bench for reconsideration of the decision in Tulsirarn Ramdayal v. Badriprasad Jankiprasad, ILR (1948) Nag 203 = (AIR 1949 Nag 31) and that in Shrikishan v. Mahadeo, 1959 MP LJ 50.
2. There is no material point of fact which is now in dispute. The suit out of which this appeal arises, was brought by the appellants as trustees of Seth Kirodimal Charity Trust, for recovery of Rs. 1,50,000, as principal and Rs. 10,950 as interest, on the foot of a mortgage dated 18th November, 1953, as plaintiffs, against the respondents who had executed the same, to secure a loan advanced of Rs. 1,50,000. The loan carried interest @ 6% per annum, and it is not in dispute that upto 1st October, 1962, interest was regularly paid. Thus the respondents had in all paid Rs. 79,875 as interest. On 7th January 1964, the appellants filed the suit for recovery of Rs. 1,50,000 as principal and Rs. 10,950 by way of interest due from 1st October 1962 till the date of suit. The appellants explicitly admitted that they were money-lenders, and that they had not maintained any account of the loan, nor furnished to the respondents any statement of accounts in respect thereof, as required by Section 3 (1) (a) and (b) of the Act. The non-compliance of these provisions not being in dispute, the learned trial Judge, while passing a decree on the mortgage, disallowed the entire interest under Section 7 of the Act, including the one that had alreadybeen paid, i.e. amounting to Rs. 79,875, and the same was taken towards reduction of the principal and accordingly a decree was passed only for Rs. 70,125, the remaining amount of principal.
3. The referring Bench did not state, in so many words, the question on which the opinion of the Full Bench was invited, and, therefore. I would formulate the question as follows :
Where the moneylender has not complied with the requirements of Clause fa) or (b) of Section 3 (1) of the Money Lenders Act, 1934 (hereinafter referred to as the Act), whether the Court has power under Section 7 of the Act, to reopen the account so as to traverse the entire period from the date of the loan to the date of the suit, and under Clause (b) of Section 7 to disallow the whole or any interest found due, as may seem reasonable to it, in the circumstances of the case, in case of non-compliance of Section 3 (1) (a), and under Clause (c) of Section 7 exclude every period for which he has failed to furnish accounts, as required by Section 3 (1) (b), subject to proviso to the section. In ILR (1948) Nag 203 = (AIR 1949 Nag 31) (supra), Grille, C. J. and Hidayatullah J., answered the question in affirmative, while dealing with a case falling under Clause (c) of Section 7.
4. Section 3 of the Act, so far as material, reads:
'Section 3 (1). Every Money-lender shall--
fa) regularly maintain an account for each debtor separately of all transactions in respect of any loan advanced to that debtor;
(b) furnish such debtor every year with a legible statement of accounts signed by the money-lender or his agent of any balance or amount that may be outstanding against such debtor on such dates and in such areas as may be prescribed. Such statement of accounts shall include a]l transactions in respect of the loan entered into during the year to which the statement relates and shall be furnished, in the court language of the district in which the debtor resides, and in such manner, in such form, containing such details and on such date as may be prescribed.'
5. It is sufficient to say that breach of Section 3 (1) (a) and (b) of the Act was brought to the attention of the learned trial Judge. It became his duty to give it such effect on the rights of the parties as the law requires. The terms of Section 7 of the Act are clear and imperative. They are as follows:--
'Section 7. Procedure of Court in suits regarding loans: Notwithstanding anything contained in any other enact-ment for the time being in force, in any suit or proceeding relating to a loan--
(a) the court shall, before deciding the claim on the merits, frame and decide the issue whether the money-lender has complied with the provision of Clauses(a) and (b) of Sub-section (1) of Section 3;
(b) if the court finds that the provisions of Clause (a) of Sub-section (1) of Section 3 or of Section 6 have not been complied with by the money-lender, it shall, if the plaintiff's claim is established in whole or in part disallow the whole or any portion of the interest found due, as may seem reasonable to it in the circumstances of the case and may disallow cost; and,
(c) if the court finds that the provisions of Clause (b) of Sub-section (1) of Section 3 have not been complied with by the money-lender, it shall, in computing the amount of interest due upon the loan, exclude every period for which the money-lender omitted duly to furnish the account as required by that clause:
Provided that if the money-lender has, after the time prescribed in that clause, furnished the account and the plaintiff satisfied the court that he had sufficient cause for not furnishing it earlier, the court may, notwithstanding such omission, include any such period or periods for the purpose of computing the interest.
Explanation : A money-lender who has maintained his account and furnished his annual statements of accounts in the prescribed form and manner shall be held to have complied with the provisions of Clauses (a) and (b) of Sub-section fl) of Section 3 in spite of any errors and omissions if the court finds that such errors and omissions, are accidental and not material and that the accounts have been kept in good faith with the intention of complying with the provisions of those clauses.'
6. I do not entertain much doubt as to the meaning of Section 7. Its purpose, to my mind, is plain. It is to secure strict compliance of the requirement as to maintenance of accounts toy moneylenders under Clause (a) of Sub-section (1) of Section 3, and of furnishing statements of accounts to the debtors under Clause
(b) thereof in the manner prescribed.
7. The appellants' argument, based upon this section, was to the effect that though Clause (c) permits the Courts to reopen accounts, Clause (b) does not. Further, it is said that word 'due' in Clause (b) can only mean 'payable' and, therefore, the Court may only disallow the whole or any portion of the interest claimed in suit and not amounts paid and appropriated towards the interest. This result, it is argued, must follow due toabsence of an express provision enabling reopening of accounts. I am afraid, this line of reasoning breaks down at its initial stage.
8. The section is typical of the economy of language which is characteristic of the draftsman of the Act. The scheme underlying the section is clear. Where there is a plea that the moneylender has not complied with the provisions of Clauses (a) or (b) of Section 3 (1), then the Court must, under Section 7 (a), before deciding the claim on the merits, 'frame and decide the issue'. This is the function of Clause (a). If the Court finds in the affirmative then the defaulting money-lender is visited with the penalty mentioned in Clause (b) or Clause (c), as the case may be.
9. If the Court finds that the provisions of Clause (a) of Section 3 (1) or of Section 6 have not been complied with by a money-lender, the Court must, in that event, visit the defaulting moneylender with the penalty mentioned in Clause (b) i.e., disallow the whole or any portion of the interest found due. The juxtaposition of the words 'found' and 'due' cannot be lost sight of. The word 'found' must, in the context in which it appears be read as meaning 'found' by the Court at the trial. The authority which has to do the finding as to the amount of interest due on the loan is the Court and not anyone else. That finding cannot possibly be reached unless there is an accounting of all the repayments. This must necessarily entail in reopening of the accounts. In that connection, the definition of the word 'loan', as defined in Section 2 (vii), must be kept in view. It reads :
'Section 2 (vii) 'loan' (means an actual advance made within twelve years from the date of the last transaction) whether of money or in kind at interest and shall include any transaction, which the court finds to be in substance a loan,.............'
10. Under Clause (b), when the whole or any portion of the interest is disallowed, the Court has necessarily to credit such payment towards principal. In case of breach of Section 3 (1) (b), the Court has to compute the amount of interest due, and then to exclude every period for which the account was not furnished. In either event, the Court must reopen the accounts. The legislature, therefore, deliberately did not include a separate provision in Section 7 of the Act such as to be found in Section 3 of the Usurious Loans Act, 1918, as it would be a mere superfluity.
11. The question whether accounts could be reopened under Section 7 of the Act, and payments admittedly made towards interest could be appropriated towards the principal, came up for consideration before Grille, C. J., and Hidayatullah, J., in ILR (1948) Nag 203 = (AIR 1949 Nag 31) (supra).
12. In repelling the contention that the Court had no power to reopen accounts and that repayments appropriated by the creditors towards interest could not be treated as payments in reduction of the principal, Hidayatullah, J., speaking for the Court, observed :
'In our opinion no express words were necessary to give the power to reopen accounts as the operation involved in computing the interest due on the loan requires the Court to traverse the entire period from the date of the loan to the date of the suit, and to exclude such period or periods during which accounts were not furnished. The Court has first to determine the period or periods in which the account was not furnished and (subject to the proviso) to exclude from calculation such periods. The action of the parties is immaterial because the duty is laid on the Court to give effect to the Act. Once these periods are excluded, any repayment even if expressly made towards interest would go first towards the reduction of such interest as may be due and next towards the reduction of the principal sum regard being had to the circumstances of the case. The process undoubtedly involves the reopening of accounts to a limited extent. We respectfully agree with the observations of Bose, J., in the judgment under appeal as well as with the reasons given by him.'... ..... .....'A legislature is not limited to any particular set of words for achieving its purpose. If the clear meaning of the words is to allow a reopening of the accounts, the Courts must reopen the accounts and give relief in the light of the Act. This in our opinion is the position here. In computing the interest on the loan the Court has to traverse the entire period from the loan or the date of the Act, whichever is later, provided of course that the proviso to Section 8 is applicable to the loan if the loan was given prior to the date on which the Act came into force. The Act must be given an interpretation which will make it applicable to all cases alike. On the case of the appellants the Act will not benefit a debtor who made regular repayments, thus putting him in a worse position than the debtor who made no repayments at all. This could never be the intention.'
13. Their Lordships concluded by stating :
'Emphasis was laid on the word 'due' in Section 7 (c) and it was arguedthat it shows that the Courts can only take into account such interest as may be 'due' from time to time. We do not agree. The word 'due' is connected with the phrase 'upon the loan' which follows it and shows that the Court has to compute the amount of interest for the whole period, making allowance for repayments and excluding from calculation such period or periods as are hit by Section 7 (c).'
14. That construction of Section 7 (c), must, in my view, equally apply to Section 7 (b). The words 'found due' appearing therein, cast a duty upon the Court to ascertain the amount of interest which would accrue upon the loan, and then to disallow the interest thereon, in whole or in part, as the justice of the case demands.
15. In ILR (194:8) Nag 203 = (AIR 1949 Nag 31) (supra), Grille, C. J., and Hidayatullah, J., not only agreed with the observations of 'Vivian Bose, J., in the judgment under appeal, but also with the view of J. Sen, J., in Mishrilal v. Waman Prasad, Civil Revn. No. 454 of 1973, D/-30-8-1944 (Nag.) who expressed himself strongly in favour of the view taken by Vivian Bose J. They rightly distinguished the views expressed by Bobde J., in Pandurang Ganpat v. Punjaji Shyamji, ILR (1944) Nag 241 = (AIR 1944 Nag 151) and by Niyogi J., in Rambhau v. Harinath, Civil Revn. No. 201 of 1944, D/- 20-12-1945 (Nag.).
16. The principles laid down in ILR (1948) Nag 203 = (AIR 1949 Nag 31) (supra), were reiterated with approval by V. R. Sen J., and Naik J., in 1959 MPLJ 50.
17. The decision in ILR (1948) Nag 203 = (AIR 1949 Nag 31) (supra) has been followed uniformly in this Court for the last about 25 years, and thousands of money-lending transactions have been reopened by the Courts in exercise of the power under Section 7 of the Act, until its soundness was challenged in this case. The referring Bench was of the view that as there was no express power under Section 7 of the Act to reopen accounts such as to be found in Section 3 of the Usurious Loans Act, 1918, the amounts paid and appropriated towards interest could not be disallowed and such payments credited towards principal.
18. In making the reference, the Referring Bench observes :
'The relevant Clause (b) provides that if the requirements of Clause (a) of Section 3 (1) were not complied with, the Court shall disallow 'the whole or any portion of the interest found due'. The ordinary meaning of the expression 'interest found due' is the interest which has remained unpaid and would, in the absence of any provision to the contrary,require to be decreed in terms of the contract. It does not embrace within its ambit any amount of interest which has already been paid and appropriated. So, in AIR 1944 Nag 151, Bobde J., observed :
'Moreover, Section 7, ibid, did not empower the Court to reopen the repayments made and to reduce the rate of interest, as Section 3, Usurious Loans Act does.'
The same conclusion was reached by Niyogi J., in C. R. No. 201 of 1944, D/-20-12-1945 (Nag.). But a different view was taken by a Division Bench in Tulsi-ram Ramdayal v. Badriprasad Janki-prasad, ILR (1948) Nag 203 = (AIR 1949 Nag 31) and it was merely followed by another Division Bench in 1959 MPLJ 50.'
After referring to the decisions in ILR (1948) Nag 203 = (AIR 1949 Nag 31) (supra), and 1959 MPLJ 50 (supra), the Bench further observes :
'With great respect, we are unable to agree that express words are not necessary to give power to reopen accounts. If that were so, it would have been unnecessary to expressly give such power in Section 3 of the Usurious Loans Act, 1918. Again, we do not agree that the operation involved in computing the interest due required the Court to traverse the entire period from the date of loan including the period for which no interest was claimed. Finally, in our opinion, the consideration that a debtor, who had regularly paid interest, would be in a worse position than the one who had not so paid is not one that can override the grammatical construction of plain words in their ordinary meaning. In our view, the two Division Bench decisions require reconsideration because we think that Section 7 of the Money-lenders Act does not give power to the Court to interfere with what the parties had already done to implement the contract of loan.'
The reference is, to my mind, wholly misconceived.
19. The decision in AIR 1944 Nag 151 (supra), is distinguishable. There, the point to be decided was whether the debtor could recover interest he had willingly paid to the creditor in ignorance of or in spite of the Act. That is not the question in controversy here. So also, in Rambhau v. Harinath, C. R. 201 of 1944, D/-20-12-1945 (Nag.), Section 7 of the Act was not applicable to the facts of that case. It presupposes a suit filed by the creditors to recover their debts; that was not such a suit. The observations as to the scope of Section 7 of the Act of Bobde, J. and Niyogi J., in these cases were, therefore, clearly obiter.
20. In construing a welfare legislation, the Court should adopt a beneficent rule of construction; if a section is capable of two constructions, that construction should be preferred which furthers the policy of the Act, and is more beneficial of the debtors in whose interest the Act has been passed. In dealing with the interpretation of Section 7, we must keep in view the scheme of the Act In Gajanand v. Seth Brindawan, AIR 1970 SC 2007 their Lordships of the Supreme Court have examined the scheme of the Act, and stated that it was enacted--
'With the object of making better provision for the regulation and control of the transactions of money-lending so as to secure protection to ignorant debtors against the evil of fraud and extortion on the part of unscrupulous moneylenders without unduly interfering with freedom of private contract.' They also observed :
'The statutory scheme thus clearly seems to indicate that it is only the business of money-lending which is sought to be controlled and individual transactions of lending money do not fall within the mischief which was sought to be remedied by the Act. An individual transaction of lending money has not been declared to be void and as we construe the Act as a whole, interference with freedom of contract appears to have been limited only to the extent necessary for regulating and controlling the business of money-lending.'
21. The Act strikes at money-lending transactions in general, and the class of money-lenders in particular, who had become a very serious menace to society. It is a regulatory measure, and seeks to control the business of money-lending, by a system of checks and balances. It provides for registration of money-lenders, maintenance of accounts in prescribed form, furnishing of statements of accounts periodically to the debtors, issue of receipts, enforcement of the rule of 'damdupat' etc. It also empowers Courts to protect payment of decretal amount by instalments. The maintenance of accounts by the money-lenders for each debtor separately under Section 3 (1) (a), and the furnishing of statements of accounts under Section 3 (1) (b) to the debtors, in the manner prescribed, are made mandatory. The failure to comply with either of these requirements, visits the defaulting money-lender with the penalty mentioned in Section 7 (b) or (c). If the view expressed by the referring Bench were to be accepted, the whole object of the Act would be frustrated.
22. In all Money-lenders Acts, the 'scaling down of debts' is a normal feature. In Kasumu v. Baba-Egbe, (1956) 3 All ER 266, the Judicial Committee of the Privy Council had to interpret theeffect of Section 19 of the Nigerian Money Lenders Ordinance which was as follows :
'(2) Every money-lender shall keep a book (which shall be securely bound and paged so that leaves cannot be removed or inserted without apparent damage) in which he shall enter in connection with every loan made by him-- (a) the date on which the loan was made; (b) the amount of the principal; (c) the rate of interest; (d) all sums received in respect of the loan or the interest thereon, with the date of payment thereof, and shall produce such books when required to do so by any court.
(3) The entries in the said books shall be made forthwith on the making of the loan or the receipt of sums in respect thereof as the case may be.
(4) Any money-lender who fails to comply with any of the requirements of this section shall not be entitled to enforce any claim in respect of any transaction in relation to which the default shall have been made.'
23. Lord Radcliffe, speaking for their Lordships, stated :
'It was not lending of money or the circumstances in which it was lent that were the material matter, but the obtaining of profit from the use of money. When medieval conceptions began gradually to give way before the impulse of commercial and industrial activity, the sin of avarice turned into the offence of usury; but the usury prohibited was no longer the lending of money at profit but the lending of money at a rate of profit greater than that permitted by the statute. What the law penalised and made void was a particular kind of grasping contract; and it was evidently felt by equity judges at any rate that they were doing nothing that contravened the policy of the Acts if they insisted that the price of their remedies should be the return of the principal money and a reasonable rate of interest, so long as no effect was given to those elements of the loan in which the usury itself consisted. But the Usury Acts disappeared in 1854, and much of the Money-lenders Act, 1900, and the Moneylenders Act, 1927, is directed to enforcing measures of control that have no concern with the intrinsic nature of the contract made. Such requirements as that the money-lender must be registered or licensed, must use his authorised name, must procure a note or memorandum of the contract signed personally by the borrower, must keep a book in which is entered a contemporary record of the transaction strike indifferently at all money-lenders' loans, however moderate the terms of any particular transaction. When the governing statute enacts that no loan which fails to satisfy any of theserequirements is to be enforceable it must be taken to mean what it says, that no court of law is to recognise the lender as having a right at law to get his money back. That is part of the penalty which the statute imposes. There is no room to reform the terms of the loan, since the statute is not concerned with the vice of its content but with the vice of the conditions under which it was made. The provisions of Section 19 are not purposeless. They seem to assume that no loan that is not contemporaneously recorded can be established with sufficient certainty to be recognised at law.'
Under Section 7 of the Act, the penalty for breach is not so stringent, but ths underlying principle is the same.
24. I am strongly of opinion that this Court should not without reason depart from a long course of decisions. There is, indeed, no conflict of judicial opinion, and the view taken by the eminent Judges on the construction of Section 7 of the Act has been consistently followed and complied. The weight of authority in this Court since 1948 is so strongly in favour of the view in ILR (1948) Nag 203 = (AIR 1949 Nag 31) (supra), that we ought to follow it as if it were a settled cursus curiae.
25. Where the language of an Act is clear and explicit, as here, we must give effect to it whatever may be the consequences, for in that case the words of the statute speak the intention of the legislature. As Viscount Simon, while delivering the judgment of their Lordships of the Privy Council in King Emperor v. Benoari Lal Sharma, AIR 1945 PC 48, stated :
'Again and again this Board has insisted that in construing enacted words we are not concerned with the policy involved or with the results, injurious or otherwise, which may follow from giving effect to the language used.'
Where the language is explicit, its consequences are for the legislature, and not for the Courts, to consider. The argument from inconvenience and hardship is a dangerous one and is only admissible in construction where the meaning of the statute is obscure and there are alternative metohds of construction. (See Crates on Statute, 6th Edn., pp. 84-91).
26. Even assuming that the terms of Section 7 of the Act are ambiguous, the matter would be governed by the principles on which the rule of stare de-cisis is based. In AIR 1970 SC 2007 (supra), their Lordships of the Supreme Court, applied the rule in the construction of Section 11-F of the Act, because a certain interpretation put upon it by Vivian Bose J., in Sitaram Shrawan v. Bajya Parrya, AIR 1941 Nag 177, hasstood the test of time, and had been uniformly followed in this Court for the last about 30 years. In enunciating the principles their Lordships stated :
'Where the meaning of a statute is ambiguous and capable of more than one interpretation and one view accepted by the highest court has stood for a long period during which many transactions, such as dealings in property and making of contracts, have taken place on the faith of that interpretation, the Court would normally be reluctant to put upon it a different interpretation which would affect those transactions. To justify the reversal of a decision of the highest court which has prevailed for a considerable length of time there should be some exceptional reason when such reversal is likely to create serious embarrassment to those who had acted on the faith of what seemed to be the settled law.'
Their Lordships went on to say :
'Now, assuming that two views on the statutory scheme of the Act are possible and assuming the interpretation canvassed on behalf of the appellant to be preferable to that accepted in the impugned judgment we are unable to say that the construction adopted in the judgment under appeal is so clearly and patently erroneous that it should, in the larger interests of justice, be upset notwithstanding the fact that it is likely to disturb rights to property and under contracts founded upon this construction.'
They, then concluded, stating :
'Had the construction placed by the courts on Section 11-F and other provisions of the Act been considered by the Legislature to be contrary to the legislative intendment, one would have ordinarily expected an amendment clarifying its intention because the legislature must be fixed with the knowledge of the construction placed on the Act by the courts. No such action was taken by the Legislature. This circumstance is, of course, not conclusive but it is not wholly irrelevant and certainly deserves to be noticed as carrying some presumptive weight.'
The same principles, in my opinion, should govern the construction of Section 7 of the Act, as adopted in ILR (1948) Nag 203 = (AIR 1949 Nag 31) (supra), which has become part of the settled law.
27. I am, therefore, of the opinion that ILR (1948) Nag 203 = (AIR 1949 Nag 31) and 1959 UPLJ 50 were rightly decided. It must accordingly be held that the Court has power under Section 7 of the Money-lenders Act, 1934, to reopen the account so as to traverse the entire period from the date of the loan to the date of the suit, where the money-lender has not complied with the requirements of Clauses (a) or (b) of Section 3 (1) of theAct; and, under Clause (b) of Section 7 to disallow the whole or any interest found due, as may seem reasonable to it, in the circumstances of the case, in case of non-compliance of Section 3 (1) (a) and under Clause (c) of Section 7 exclude every period for which he had failed to furnish account as required by Section 3 (1) (b), subject to the proviso to Section 7.
Malik, J.
28. I agree with Sen, J.
Raina, J.
29. I have carefully perused the opinion recorded by my learned brother, A. P. Sen, J. With great respect, I regret I am unable to agree with the view expressed by him. I, therefore, proceed to record my reasons in detail.
30. This case has come up before this Full Bench on a reference by a Division Bench in a First Appeal against the decision of the Additional District Judge in a suit to enforce a mortgage.
31. The plaintiffs, who are trustees of 'Seth Kirodimal Charity Trust, Raigarh', had advanced a sum of Rupees 1,50,000 to Nandkishore, defendant No. 1, and his father Sheobux Rai (since deceased) on the basis of a simple mortgage vide registered mortgage deed (Ex. P-63), dated 18-11-1953, jointly executed by them in favour of the Trust. Sheobux Rai died in 1967 and his interest in the mortgaged property devolved upon the defendants who are his legal representatives. The loan carried interest at 6% per annum; and it was not disputed before us that upto October 1, 1962 interest was regularly paid. Thus, a total sum of Rs. 79,875 was paid as interest upto the said date. As the defendants did not pay any interest thereafter in spite of repeated demands and a legal notice (Ex. D-11), dated 25-11-1963, the plaintiffs filed the instant suit claiming a sum of Rs. 1,50,000 on account of principal and Rs. 10,950 as inte-, rest from 1-10-62 to 18-12-1963, total Rs. 1,60,950 and prayed for a preliminary decree for sale of the mortgaged property for the said amount.
32. The suit was resisted on various grounds but was ultimately decreed by the trial Court for a sum of Rs. 70,125. The Court disallowed the entire interest, including the amount that had already been paid, on the ground that the plaintiffs had not complied with the requirements of Clauses (a) and (b) of Sub-section (1) of Section 3 of the Madhya Pradesh Money-lenders Act, 1934. Being aggrieved thereby, the plaintiffs preferred this appeal out of which this reference arises.
33. For purposes of this reference it was not disputed before us that the plaintiffs were money-lenders and were as such governed by the Madhya Pradesh Money-lenders Act, 1934 (herein-after referred to as 'the Act'). It was also not disputed that the plaintiffs had failed to comply with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3 of the Act. On behalf of the plaintiffs-appellants it was urged before the Division Bench that even though the Court was competent to disallow interest claimed in the suit under Section 7 of the Act, it was not open to it to disallow the interest which had already been paid and was not in controversy in the suit. The view taken by the trial Court is supported by the decision of a Division Bench of the Nagpur High Court in AIR 1949 Nag 31 which was followed by a Division Bench of this Court in 1959 MPLJ 50. As the Division Bench hearing this appeal doubted the correctness of those decisions and was of the view that Section 7 of the Act did not empower the Court to interfere with what the parties had already done to implement the contract of loan, it referred the matter to this Bench for reconsideration of the said decisions.
34. Thus, the basic point for consideration before us is whether Section 7 of the Act empowers the Court to disallow interest, which had already been paid by the debtor to the money-lender and to adjust the same towards the principal on account of failure of the moneylender to comply with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3 of the Act.
35. Before we proceed to deal with this question, it would be pertinent to take note of the various decisions which have a bearing on the point. The Division Bench has referred to the decision of Bobde, J. in AIR 1944 Nag 151, This decision is of limited value so far as the point under consideration is concerned. It was held in that case that Section 7 of the Act does not empower the Court to reopen the repayments made so as to reduce the rate of interest or to call upon the money-lender to pay back to the debtor the amount of interest already received. In the instant case, there is no question of reduction of the rate of interest or of calling upon the plaintiffs to pay back any amount to the respondents. The only point for consideration is whether the interest, which had already been paid, could be disallowed and adjusted towards the principal amount for purposes of computing the amount due at the date of suit. In this connection the following observations in the concluding paragraph are pertinent :
'Section 7. Money-lenders Act, does not enunciate rights of the parties but prescribes powers of the Courts. For instance, Section 7 (c) in effect authorises the Courts to disallow interest in respect of a certain period. But, even so, theclaim for such interest has not been declared in any way illegal. Much less does Section 7 (c) invalidate the realizations already made.'
36. In Rambhau v. Harinath, Civil Revision No. 201 of 1944, decided on 20-12-1945 (Nag.), Niyogi, J., while dealing with a similar question, had observed that the Court has no power under Section 7 of the Act to interfere with what the parties did to implement the contract between themselves.
37. In AIR 1949 Nag 31 a Division Bench of the Nagpur High Court consisting of Grille, C. J. and Hidayatullah, J. (as he then was) considered this question in a Letters Patent Appeal from the judgment of Bose, J. The Bench, after duly considering the views expressed by Bobde, J. in AIR 1944 Nag 151 (supra) and by Niyogi, J. in Civil Revision No. 201 of 1944, dated 20-12-1945 (Nag.) (supra), held as under in paragraph 11 upholding the view of Bose, J. :
'The Court has first to determine the period or periods during which accounts were not furnished and (subject to the proviso) to exclude from calculation such periods. The action of the parties is immaterial because the duty is laid on the Court to give effect to the Act. Once these periods are excluded any repayment even if expressly made towards interest would go first towards the reduction of such interest as may be due and next towards the reduction of the principal sum regard being had to the circumstances of the case. The process undoubtedly involves the reopening of accounts to a limited extent. We respectfully agree with the observations of Bose, J. in the judgment under appeal as well as with the reasons given by him.'
The aforesaid decision was followed by a Division Bench of this Court in 1959 MP LJ 50; and it seems that thereafter the authority of the aforesaid decisions was not questioned until the present reference and they have been consistently followed so far.
38. We may observe at the outset that I feel overwhelmed by my respect and regard for the eminent Judges who propounded the view which is now being questioned before us. I, however, feel that I would be failing in my duty if I do not deal with the points raised before us dispassionately.
39. A preliminary question that arises for consideration in this case is whether it would be proper to interfere with a view which has, for several years, been considered as an authoritative pronouncement on the subject, or whether we should refrain from doing so on the principle of stare decisis. This doctrine of 'stare decisis' requires that rules of law,when clearly pronounced and established by the Court of last resort should not be lightly disregarded and set aside, but should be adhered to and followed. The principle underlying the stare decisis doctrine is that the law should be fixed, definite and known and, therefore, a decision on a question of law should be held to be binding not only on parties thereto but even on strangers. The Courts are, therefore, slow to interfere with the principles in former decisions, in the absence of any palpable mistake or error. The aforesaid doctrine is, however, not an inflexible one and applicable to all situations and its applicability depends largely on the nature of the question at issue and the circumstances attending its decision; [Words and Phrases, 'stare decisis'].
40. The doctrine has been accepted in India subject to certain reservations. It recently came up for consideration before their Lordships of the Supreme Court in AIR 1970 SC 2007. The following observations made by their Lordships in paragraph 13 are pertinent :
'Where the meaning of a statute is ambiguous and capable of more interpretations than one, and one view accepted by the highest court has stood for a long period during which many transactions such as dealings in property and making of contracts have taken place on the faith of that interpretation the Court would ordinarily be reluctant to put upon it a different interpretation which would materially affect those transactions.'
41. It would appear from the aforesaid observations that the basic reason for adhering to an earlier decision is that parties, who have, on the faith of a particular interpretation, entered into contracts or property transactions, should not feel frustrated by a different construction being put upon the statutory provisions governing the contracts or the transactions, as the case may be. In the instant case, there is no question of the debtor feeling frustrated by putting a different construction on the provisions of Section 7 of the Act. A debtor, when he takes a loan, does not know and cannot know whether his creditor, if a money-lender, is going to comply with the provisions of Section 3 of the Act; and he is not at all influenced by this consideration while entering into the transaction with his creditor. I, therefore, hold that the principle of stare decisis is not applicable to the present case and we are not precluded from coming to a different conclusion on the basis of the said principle.
42. In order to properly appreciate the contention of the learned counsel for the appellants, which found favourwith the Division Bench hearing the first appeal, it is necessary to examine the language of Section 7 of the Act, which is reproduced below :
'7. Procedure of court an suits regarding loans : Notwithstanding anything contained in any other enactment for the time being in force, in any suit or proceeding relating to a loan--
(a) the Court shall before deciding the claim on the merits, frame and decide the issue whether the money-lender has complied with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3;
(b) if the court finds that the provisions of Clause (a) of Sub-section (1) of Section 3 or of Section 6 have not been complied with by the money-lender, it shall, if the plaintiff's claim is established in whole or in part, disallow the whole or any portion of the interest found due, as may seem reasonable to it in the circumstances of the case and may disallow cost; and
(c) if the court finds that the provisions of Clause (b) of Sub-section (1) of Section 3 have not been complied with by the money-lender, it shall, in computing the amount of interest due upon the loan, exclude every period for which the money-lender omitted duly to furnish the account as required by that clause :
Provided that if the money-lender has, after the time prescribed in that clause, furnished the account and the plaintiff satisfied the court that he had sufficient cause for not furnishing it earlier, the court may, notwithstanding such omission, include any such period or periods for the purpose of computing the interest.
Explanation : A money-lender who has maintained his account and furnished his annual statements of accounts in the prescribed form and manner shall be held to have complied with the provision of Clauses (a) and (b) of Sub-section (1) of Section 3 in spite of any errors and omissions, if the court finds that such errors and omissions are accidental and not material and that the accounts have beenkept in good faith with the intention of complying with the provisions of those clauses.'
43. Shri M. Adhikari, learned counsel for the appellants, pointed out that what can be disallowed under Clause(b) and Clause (c) of Section .7 of the Act is the amount of interest due on the loan; and he urged that this expression could by no stretch of imagination include the interest which had already been paid and was no longer the subject-matter of the claim in suit. There appears to be a great deal of force in this contention, if we ,keep in view the object andscheme of the Act itself. The Act, as compared to the Usurious Loans Act, 1918 or the Central Provinces and Berar Debt Conciliation Act, 1933, and the Central Provinces and Berar Relief of Indebtedness Act, 1939, is neither an Act for scaling down the debt nor an Act for reducing the rate of interest claimed by the money-lender on the ground that it is excessive. Although the Act controls the quantum of interest which a moneylender may recover from the debtor through Court, it does not declare the interest which has already been paid by the debtor in accordance with the contract between him and the creditor as illegal. In other words, it does not interfere with the contract between the parties although it empowers the Court to disallow a particular relief as to interest on his failure to comply with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3 of the Act.
44. On a careful study of the judgment in Tulsiram Ramdayal v. Badri Prasad Janki Prasad, AIR 1949 Nag 31, I must with great respect confess my inability to agree with the view propounded therein that the interest already paid by the debtor can be disallowed under Section 7 and adjusted towards the principal, although we agree with several other observations in the said case. I agree that under the Act, the Court has power to reopen the accounts, for computing interest due on the loan, keeping in view the definition of the loan as contained in Clause (vii) of Section 2 of the Act. I also agree that Section 7 of the Act casts a duty on the Court to frame and decide the issue whether the moneylender has complied with the provisions of Clauses (a) and (b) of Sub-section (1) of Section 3 of the Act and to disallow interest and costs in accordance with the provisions of Clauses (b) and (c) thereof in case the finding is against the creditor; but it has to be borne in mind that what can be disallowed under Clause (b) of Section 7 is 'the whole or any portion of the interest found due'. Similarly under Clause (c) of the said section every period for which the money-lender omitted to furnish the account as required by Clause (b) of Sub-section (1) of Section 3 of the Act has to be excluded in computing the amount of interest due upon the loan.
45. For a proper construction of Clauses (b) and (c) of Section 7 of the Act, it is necessary to lay emphasis on the word 'due' and to assign proper meaning to it,
46. The word 'due' ordinarily means 'presently payable' vide Shroud'a Judicial Dictionary, Fourth Edition, Vol. 2, page 845. Although the word 'due' has more than one signification and isused on different occasions to express distinct ideas, it appears to me that in Section 7 it has been used as meaning payable'.
47. In Dasari Janakiramayya v. Nune Ranganayakamma, AIR 1953 Mad 174, Subba Rao, J. (as he then was) held, while construing the provisions of Madras Agriculturists' Relief Act, 1938, that the word 'due' ordinarily means 'payable' and connotes an existing obligation. When an obligation has been discharged and what is 'payable' has been paid, it ceases to be 'payable' thereafter and cannot be said to be 'due' any longer.
48. In Gwalior Red Chalk Corporation v. Additional Tahsildar, Pargana Gird, 1968 MPLJ 919 = (AIR 1969 Madh Pra 48) it was held while dealing with a case under Mines and Minerals (Regulation and Development) Act, 1957 that the word 'due' merely means 'payable' without reference to any time. Although it was emphasised in this case that the word 'due' covers sums which had fallen due prior to the coming into force of the Act, it is clear that the word 'due' connotes an existing obligation. Unless a certain amount is payable on the date of the suit, it cannot be treated as 'due' on such date. Where an amount which had fallen due in the past has already been paid, it ceases to be due.
49. It would be pertinent here to point out that in Clause (b) of Section 7 the position has been made clear by using the expression 'interest found due'. The word 'found' necessarily implies a finding by the Court itself and the Court is called upon to record a finding when there is a controversy about it. There can be no question of the Court recording a finding about interest which has already been paid and is as such not a part of the subject-matter of the claim itself. Similarly under Clause (c) of Section 7, the Court has to compute the amount of interest due upon the loan. The expression 'interest due' necessarily means the interest claimed as due upon the loan and cannot include interest which has already been paid and is no longer due. There may be a case where interest has been paid regularly and the creditor may, therefore, sue only for the principal. In such a case there is no question of computation of interest and as such Clauses (b) and (c) of Section 7 would not be attracted.
50. It appears to me that in AIR 1949 Nag 31, the learned Judges were very much influenced by the consideration that the Act must not be so construed as to deny the benefit thereof to a debtor who made regular payments and thus put him in a worse position than the debtor who made no payments at all(vide paragraph 12 of the Judgment). In my view this is not a correct approach.
51. The provisions of Section 7 of the Act have not been enacted to benefit the debtor. In my view they have been enacted to penalise the creditor who fails to comply with the provisions of Section 3 of the Act and the provisions being of a penal character must be construed narrowly.
52. Section 3 of the Act enjoins on the money-lender to maintain regularly an account for each debtor and also to send annual statement of account to such debtor. The object of these provisions is mainly to avoid the possibility of any fraud by any money-lender on illiterate debtors and also to keep the debtors fully aware of their liability from time to time. So far as the practice of charging exorbitant rate of interest is concerned, the Usurious Loans Act was enacted to deal with it The Moneylenders Act, on the other hand, made various provisions to regulate the conduct of money-lenders so as to prevent the debtors from being duped. For example Section 6 of the Act provides that a money-lender shall pass receipts for repayments made to him.
53. Section 7 of the Act, no doubt, provides for a penalty, which the Court may impose for the failure to comply with the provisions of Section 3 of the Act; but the penalty appears to be limited to disallowance of interest claimed by the money-lender keeping in view the scheme of the Act, it does not appear to be the intention of Section 7 of the Act to deprive the creditor of the whole or part of the principal of the loan by disallowing interest, which had already been paid, and adjusting it towards the principal. I agree with the view expressed by Bobde, J. in AIR 1944 Nag 151 that Section 7 of the Act does not enunciate the rights of the parties but prescribes powers of the Court. It authorises the Courts to disallow interest in respect of a certain period; but the claim for such interest has not been declared, in any way, illegal. In other words Section 7 does not and cannot invalidate the realisation already made.
54. If we pursue the logic of the decision in AIR 1949 Nag 31 it would mean that the contractual liability of the debtor to pay interest ceases where the creditor fails to comply with the provisions of Section 3 of the Act and if he has, by mistake, paid any amount of interest it can be recovered back or adjusted towards the principal. Such an intention of the Legislature cannot be inferred from the language of Section 7 of the Act and it cannot be construed as laying down that the liability of the debtor topay interest ceases on the failure of the creditor to fulfil the requirement of Section 3 of the Act. All that Section 7 lays down is that in case the money-lender fails to fulfil the requirement of Clauses (a) and (b) of Sub-section (1) of Section 3 of the Act, he cannot recover interest on the loan from his debtor through a court of law. That does not, however, mean that his right itself is extinguished by his failure to comply with the aforesaid provisions.
55. It is no doubt true that in construing Section 7 in the maner indicated above, a debtor who makes regular payments is at a disadvantage vis-a-vis one who is irregular or made no payments at ail but, in my view, that is not a relevant consideration for the reasons given above. This is also clear from the provisions of Sections 9 and 10 of the Act which lay down that the money-lender cannot recover an amount of interest greater than the principal. These sections do not take into account the interest which has already been paid. They only preclude the money-lender from recovering through the Court on account of interest a sum greater than the principal itself. Under these sections too a debtor, who has been irregular in payments or has not paid any interest at all is at an advantage over the one who has regularly paid the interest. This shows that the aforesaid consideration has not been a guiding factor while enacting the various provisions of the Act.
56-57. Money-lending by itself is not a vice. It serves a social purpose and that is why the Government has taken upon itself the rendering of this service to the community at large, by various means. Where the money-lender is honest and charges a very reasonable rate of interest, he is rendering a useful service to the community. It is not the object of the Money-lenders Act to penalise such a money-lender beyond measure, if by mistake or through inadvertence he has failed to comply with the provisions of Clauses (a) and (b) of Section 3 of the Act. It is open to the Court under Section 7 of the Act to disallow interest claimed by him. It would be a great hardship, as in this case, to disallow interest which had already been paid by adjusting it towards the principal. I am not taking this hardship into consideration for the purpose of construing the provisions of Section 7 of the Act. I have already construed that section as indicated above keeping in view the language thereof and the scheme of the Act as a whole. The hardship merely furnishes an additional reason for not adhering to the principle of stare decisis which I have already discussed above.
58. I would, therefore, answer the reference as under :
'The interest which has already been paid cannot be disallowed and adjusted towards the principal amount under Clauses (b) and (c) of Section 7 of the Act and the contrary view expressed on this point in AIR 1949 Nag 31 and 1959 MP LJ 50 is not correct.'
OPINION
BY COURT--59. In view of the majority the decisions in ILR (1948) Nag 203 = (AIR 1949 Nag 31) and 1959 MPLJ 50 must be held to be correct. It follows that the Court has power under Section 7 of the Money-lenders Act, 1934, to reopen the account so as to traverse the entire period from the date of the loan to the date of the suit, where the money-lender has not complied with the requirements of Clauses (a) or (b) of Section 3 (1) of the Act; and, under Clause (b) of Section 7 to disallow the whole or any interest found due, as may seem reasonable to it, in the circumstances of the case, in case of non-compliance of Section 3 (1) (a), and under Clause (c) of Section 7 exclude every period for which he had failed to furnish account as required by Section 3 (1) (b), subject to the proviso to Section 7.