ORDER
SHEET GA391of 2015 With CS243of 2012 IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE M/S.ARJUN SHYAM & Co.(P) LTD.Versus M/S.SAGAR TRADING Co.& ORS.BEFORE: The Hon'ble JUSTICE SOUMEN SEN Date : 11th August, 2015.
Appearance: Mr.S.Deb Adv.Mr.R.N.Basak, Adv.Mr.Bidyut Dutt, Adv.…for the defendants.
Mr.S.Mallick, Adv.…for the plaintiff.
The Court : This is an application under Chapter XIIIA of the Original Side Rules of our High Court.
The claim in the suit is arising out of money lent and advanced.
The plaintiff says that the defendant no.1 has failed and neglected to pay the loan and the interest.
The plaintiff says that the defendant no.1 in acknowledgement of its liability has issued three cheques aggregating to a sum of Rs.37,32,940/-.
The defendant no.1 has also issued another cheque dated 12th October, 2011 for Rs.67,500/- in favour of the plaintiff towards payment of interest for the second loan amount.
The three cheques aggregating to Rs.37,32,940/-, however, were dishonoured on presentation.
The defendants in spite of notices have failed and neglected to pay the aforesaid sum or any portion thereof.
Under such facts and circumstances, the plaintiff has filed a suit.
In the suit this application has been taken out for summary judgment for a sum of Rs.39,64,376/-.
Mr.S.Deb, learned Counsel appearing on behalf of the defendants, has raised a preliminary point with regard to the maintainability of the application as also the maintainability of the suit.
Mr.Deb has referred to Proviso to Rule 3 of Chapter XIIIA of the High Court Original Side Rules and Section 8 of the Bengal Money-Lenders Act, 1940.
Mr.Deb submits that in absence of any licence under Section 8 of the Bengal Money-Lenders Act, 1940, the contract is not enforceable and it is forbidden by law.
He submits that in the event the suit is allowed to proceed in absence of any money lending licence it would defeat the provisions of the Bengal Money-Lenders Act, 1940, which the Court shall not permit.
Apart from the aforesaid, no further argument is advanced with regard to the merits of the dispute.
Mr.Deb, in amplifying his argument with regard to the Original Side Rules, has referred to paragraph 3 of the affidavit in support of Master’s Summons and submitted that it would be evident from the said paragraph itself that this application has been filed beyond the times stipulated under the proviso.
It is submitted that even if one gives a liberal interpretation to the said proviso, the time to file the application would have expired by 16th January, 2015, if one takes into consideration the order passed on 6th January, 2015 directing the parties to disclose the documents and the defendants were directed to file their written statement within two weeks thereafter.
Mr.S.Mallick, learned Counsel appearing on behalf of the plaintiff, submits that on a meaningful interpretation of the said proviso it would mean that the period of ten days shall be computed from the date of filing of the written statement.
In the instant case, the written statement was filed on 27th January, 2015 and the summons have been taken out within a period of ten days therefrom.
In dealing with the submission made with regard to the Bengal Money Lenders Act, 1940, the learned Counsel has referred to two Division Bench judgments of the Gujarat High Court and a Single Bench judgment of the Bombay High Court and submits that having regard to the fact that the plaintiff is a non-banking financial institution and is holding a licence from the Reserve Bank of India, the claim of the plaintiff cannot be defeated on the ground that the plaintiff does not hold any licence under the Bengal Money-Lenders Act, 1940.
Let me fiRs.consider the objection raised with regard to the maintainability of this application on the ground that the said application is barred under the proviso of Rule 3.
Chapter XIIIA of the Original Side Rules lays down a special procedure.
The proviso to Rule 3 says that for a defendant who has filed written statement, an application under Chapter XIIIA shall not be permissible unless summon is taken out within ten days after receipt of notice of entering appearance.
The period of ten days as prescribed in the proviso would apply only when the defendant has filed a written statement after entering appearance.
The important date, to my mind, is the time when the written statement is filed and the plaintiff is having notice of filing of such written statement.
It may so happen that the defendant has entered appearance and filed a written statement, but no notice of entering appearance has been served upon the plaintiff or that notice of entering appearance may have been given but the plaintiff is not informed or served with a written statement.
In such a situation, the plaintiff would be required to file an application within ten days only after receiving the notice of filing written statement otherwise for a defendant who has entered appearance, but did not file a written statement, there is no restriction as to time to take out summons under the Rules.
In the instant case, there cannot be any dispute that before 27th January, 2015, the plaintiff could have filed an application under Chapter XIIIA of the Original Side Rules.
The question arises as to whether upon filing of the written statement on 27th January, 2015 the plaintiff would be precluded from taking an application within a period of ten days from the date of filing of the written statement.
If an interpretation is given that for a defendant who had filed written statement after one year of entering appearance and the time to file an application for summary judgment, in such a situation, would be counted from the notice of entering appearance, it would lead to absurdity and contrary to the said Rules.
In my view, the objection raised with regard to the maintainability of this application being barred under proviso of Rule 3 is not sustainable.
The other defence raised in the application is that the suit is barred under the Bengal Money-Lenders Act, 1940.
Let me examine the submissions made on behalf of the parties.
Mr.Deb has referred to Section 8 of the Bengal Money-Lenders Act, 1940.
The said Section reads as under :“8.
Money-lending business not to be carried on except under licence.After such date not less than six months after the commence of this Act as the State Government shall by notification in the Official Gazette, appoint in this behalf, no money-lender shall carry on the business of money-lending unless he holds an effective licence.
Explanation- An effective licence for the purposes of this Act comprises a licence issued to a person who is not disqualified for holding a licence.” There is another Section which, although has not been referred to, but may be of some importance i.e, Section 13 of the Bengal Money-Lenders Act, 1940.
The said Section is reproduced hereinbelow:“13.
Stay of suit when money-lender does not hold licence.- (1) No Court shall pass a decree or order in favour of a money-lender in any suit instituted by a money-lender for the recovery of a loan advanced after the date notified under section 8, or in any suit instituted by a money-lender for the enforcement of an agreement entered into or security taken, or for the recovery of any security given, in respect of such loan, unless the Court is satisfied that, at the time or times when the loan or any part thereof was advanced, the money-lender held an effective licence.
(2) If during the trial of a suit to which sub-section (1) applies, the Court finds that the money-lender did not hold such licence, the Court shall, before proceeding with the suit, require the money-lender to pay in the prescribed manner and within the period to be fixed by the Court such penalty as the Court thinks fit, not exceeding three times the amount of the licence of the licence fee specified in section 10.
(3) If the money-lender fails to pay the penalty within the period fixed under sub-section (2) or within such further time as the Court may allow, the Court shall dismiss the suit : if the money-lender pays the penalty within such period, the Court shall proceed with the suit.
(4) The provisions of this section shall apply to a claim for a set-off or on behalf of a money-lender.
(5) In this section, the expression ‘money-lender’ includes an assignee of a money-lender, if the Court is satisfied that the assignment was made for the purposes of avoiding the payment of licence fee and penalty which may be ordered to be paid under this section.” Mr.Deb submits that since the petitioner is not holding any licence under the Bengal Money-Lenders Act, 1940, the plaintiff would not be entitled to proceed with the suit.
Unless the petitioner obtained the licence which may be during the pendency of this proceeding no decree can be passed in favour of the plaintiff.
Mr.Mallick submits that since the petitioner is a non-banking financial company (NBFC) and holding a licence under Section 45 IA of the Reserve Bank of India Act, 1934, the petitioner is not required to hold a licence under the Bengal Money-Lenders Act, 1940.
The learned Counsel has relied upon the judgments in Sundaram Finance Limited versus State of Gujarat- Through Secretary reported at LAWS(GJH)-2012-975; Radhe Estate Developers versus Mehta Integrated Finance Co.LTD.reported at AIR2012Guj 7 and L & T Finance Limited versus M/S.Saumya Mining LTD.and others in AP No.290 of 2014 decided on July 8, 2014 and submitted that in view of the ratio of the said decisions the objection raised is not sustainable.
Bengal Money-Lenders Act, 1940 was enacted for the purpose of regulating transaction of money-lending in Bengal.
The preamble to the Section says that to make further and better provision for the control of money-lenders and for the regulation and control of money-lending the said Act was enacted.
The regulatory provisions of the Bengal Money-Lenders Act, 1940 do not apply to commercial loan and it was considered necessary to bring commercial loans within the purview of the said provisions in order to make statutory provisions relating to money-lender and money-lending business more comprehensive and to protect the interest of borrowers of commercial loans.
In view thereof, amendment in 1981 was made to the said Act to include commercial loans within the ambit of Bengal Money-Lenders Act, 1940.
There cannot be any doubt that in view of Sections 8 and 13 of the Bengal MoneyLenders Act, 1940, an embargo is placed to a Court of passing a decree or order in favour of a money-lender who did not have a valid licence when the loan was advanced.
When the said fact was brought to the notice of the Court during the trial, the Court shall not proceed with the suit but the Court under the said provision shall only direct the money-lender to pay the penalty within the specified period.
If the money-lender pays the penalty as directed by the Court, the Court shall proceed with the suit.
If he does not then automatically the suit was not dismissed.
Accordingly, there is no bar to file a suit before the Court without having a money-lending licence under the said Act but there is a clear bar to proceed with the suit without having such licence but the Court under such situation has jurisdiction under Section 13(2) to require the moneylender to obtain the said licence before proceeding with the suit.
This has been the consistent view of our High Court which would be evident from the following decisions:i) Swaika Vanaspati Products LTD.versus Canbank Financial Services LTD.reported at 2000 (2) CLJ185 ii) Arpit Impex Private Limited versus Arunodaya Plantations LTD.reported at 2002 (2) CLJ169 iii) Anand Mehata & Co.& Anr.
versus Angel’s Consultants Private Limited & Anr.
reported at 2007 (3) CHN880 An isolated and occasional money lent and advanced without any regularity in the business of giving loan an advance would not attract the definition of money-lender under Section 2(9) of the Bengal Money-Lenders Act, 1940 and, accordingly, such person is excluded from its scope.
(Arpit Impex Private Limited versus Arunodaya Plantations LTD.reported at 2002 (2) CLJ169 Sr.Sitaram Poddar versus Sr.Bhagirath Choudhary & ORS.reported at 2001 (2) CLJ394 In the instant case, Mr.Deb submits that since an issue is raised that the petitioner is a money-lender and he does not possess a valid licence under the provisions of the said Act, the suit is ex facie barred by law.
This defence disclosed in the affidavit raises a triable issue for which the application for summary judgment is to be dismissed.
In the teeth of such objection it is now necessary to consider as to whether a person or institution who holds a licence under Section 45 IA of the Reserve Bank of India Act, 1934 is entitled to maintain a suit on money lent and advanced without requiring him to hold a licence under the Bengal Money-Lenders Act, 1940.
That the said legislature is entitled to enact the Bengal Money-Lenders Act, 1940 in relation to money-lending and money-lenders cannot be disputed but the question would arise if there is an encroachment upon the activity of an NBFC duly registered under the Reserve Bank of India Act, 1934, which permits an entity/person or an institution to do non-banking financial business as provided in the said Act to recovery such money merely because the said institution and/or person does not hold a licence under the Bengal Money-Lenders Act, 1940.
Would the plaintiff be disentitled to maintain an action for recovery of money lent and advanced since it does not have the licence under the Money-Lenders Act, 1940 but a licence under the Reserve Bank of India Act, 1934.
“Money-lender” is defined under Section 2(13) of the Bengal Money-Lenders Act, 1940 which reads:“S.2(13).“money-lender” means a person who carries on the 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, 1871.” The Reserve Bank of India Act, 1934 is enacted under Entry 38 of List I of the VIIth Schedule, the Indian Companies Act is enacted under Entry 43 of List I of the VIIth Schedule to the Constitution of India.
It is worthwhile to note that even banking is an exclusive subject in the domain of the Parliament by virtue of Entry 45 of List I of the VIIth Schedule to the Constitution of India.
However, Entry 30 of List II authorizes the State Legislature to enact on money-lending and money-lendeRs.Provisions of Chapter III of the RBI Act are intended to protect the depositORS.whereas the provisions of Money-Lenders Act are essentially to protect borroweRs.There is apparently no conflict between the provisions of Chapter III-B of the R.B.I.Act and the provisions of the Bengal Money-Lenders Act.
Chapter III-B of the RBI Act relates to ‘provisions relating to nonbanking institutions receiving deposits and financial institutions’.
Section 45-I deals with the ‘definitions’.
Under clause (a) of Section 45-I while ‘business of a non-banking financial institution’ is defined, which includes ‘financial institution’ as defined under clause (c) of Section 45-I.
It also includes ‘non-banking financial company’ as defined under clause (f) of Section 45-I.
Clause (aa) to Section 45I defines ‘non-banking institution’.
All the aforesaid definitions, being relevant for determination of the issue, are quoted hereunder: “45-I.
Definitions.
– In this Chapter, unless the context otherwise requires, (a) ‘business of a non-banking financial institution’ means carrying on the business of a financial institution referred to in clause (c) and includes business of a non-banking financial company referred to in clause (f).(aa) “company” means a company as defined in Section 3 of the Companies Act, 1956 (1 of 1956) and includes a foreign company within the meaning of section 591 of that Act; (c) “financial institution” means any non-banking institution which carries on as its business or part of its business any of the following activities, namely:(i) the financing, whether by way of making loans or advances or otherwise of any activity other than its own; (ii) the acquisition of shares, stock, bonds, debentures or securities issued by a Government or local authority or other marketable securities of a like nature; (iii) letting or delivering of any good to a hirer under a hirepurchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972 (25 of 1972).(iv) the carrying on of any class of insurance business; (v) managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto; (vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, monies in lumpsum or otherwise, by way of subscriptions or by sale or units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person, but does not include any institution, which carries on as its principal business, (a) agricultural operations, or (aa) industrial activity; or Explanation.
– For the purposes of this clause, “industrial activity” means any activity specified in subclauses (I) to (xviii) of clause (c) of section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964).(b) the purchase, or sale of any goods (other than securities) or the providing of any services; or (c) the purchase, construction or sale of immovable property, so however, that no portion of the income of the institution is derived from the financing of purchases, constructions or sales of immovable property by other persons; (e) ‘non-banking institution’ means a company, corporation, or co-operative society; (f) ‘non-banking financial company’ means – (i) a financial institution which is a company; (ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; (iii) such other non-banking institution or class of such institutions, as the Bank may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.” Reserve bank of India has power to determine the policy and issue directions in the public interest to regulate the financial system of the country to its advantage, or to prevent the affairs of any non-banking financial company being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the non-banking financial company.” The RBI may prohibit the NBFCs from accepting deposits under Sections 45K and 45MB and has also the power to file petitions for winding up of the NBFCs under Section 45MC.
The RBI has the power to inspect the NBFCs under Section 45N.
Chapter V of the RBI Act empowers the RBI to take penal action, inter alia, against the NBFCs for non- compliance of the provisions of the RBI Act and the directions, ordeRs.guidelines, etc.issued thereunder by the RBI from time to time.
The RBI has also power to impose fine on the NBFCs, inter alia, for non-compliance of the directions issued by it.
The provisions of the RBI Act very clearly demonstrate that the power to determine the policy with respect to the rates of interest and to prescribe the rates of interest with respect to the loans and advances granted by the financial institutions whenever it is considered necessary by the RBI is vested in it.
RBI has been constituted as the Central Banking Authority and regarded as banker of banks.
So far, the RBI has not prescribed the rate of interest or the ceiling on the rate of interest that may be charged by the NBFCs to their borroweRs.However, the RBI has issued directions/guidelines in respect to the Fair Practices Code and the methodologies for determination of the rate of interest that may be charged by the NBFCs to their borroweRs.Chapter IIIB of the RBI Act has an overriding effect over any law inconsistent therewith for the time being in force or any instrument having effect by virtue of any such law.
For the purpose of money lending business a money-lender would be required to have a licence under Section 8.
The non-banking financial companies are not covered by the definition of ‘money-lenders’.
A non-banking financial company means a non- banking financial institution which is the company and which has its principal business amongst others is lending in any manner.
Once an NBFC holds the licence by virtue whereof the said NBFC can carry on business anywhere in the country unless a State legislature specifically requires an NBFC to obtain a licence under the State legislation, in my view, the claim of an NBFC to realize money cannot be defeated.
It is not in dispute that the petitioner is holding a licence and is registered as a non-banking financial institution.
The petitioner has produced the required certified issued by the Reserve Bank of India under Section 45 IA of the Reserve Bank of India Act, 1934.
Even otherwise, the transaction would not come within the purview of the Bengal Money-Lenders Act, 1940 having regard to the fact that the advance was made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881.
In this regard reference may be made to the definition of “loan” under Section 2(3) of the Bengal Money-Lenders Act, 1940 which reads:“S.2(e).an advance made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881, other than a promissory note.” In the instant case, the loan was granted by the plaintiff to the defendant No.1 by three several cheques.
The defendant does not dispute that the defendant had received such payments by cheques.
The said cheques were duly encashed by the defendant No.1.
In view of the aforesaid, I am unable to hold that the defendant is able to raise any triable issue in the affidavit for which a trial is necessary.
Under such circumstances, the application is allowed.
There shall be a summary decree for a sum of Rs.37,32,940/-.
The other claims in the application are relegated to suit.
(SOUMEN SEN, J.) sp2.