HIGH COURT OF HIMACHAL PRADESH AT SHIMLA OSA No. : 8 of 2003 Reserved on: 8.8.2008. Decided on: 14.8.2008 Vijay Kumar Sud ……… Appellant. Versus Sunil Mehra and others. ………Respondents. Coram: The Hon’ble Mr.Justice Deepak Gupta, Judge. The Hon’ble Mr.Justice V.K. Ahuja, Judge. Whether approved for reporting? Yes. For the appellant: Mr.J.S. Bhogal, Senior Advocate, with Mr.Suneet Goel, Advocate. For respondent No.1: Mr.S.C. Sharma, Advocate. Per V.K. Ahuja, J.: This is an appeal filed by the appellant against the judgment and decree of the court of learned Single Judge, dated 13.9.2002, vide which the suit filed by the appellant for recovery of Rs.12,44,000/-, alongwith future interest, was dismissed. Briefly stated the facts of the case are that defendant had business dealings with Hanwant Dass Sud, the predecessor-in-interest of the plaintiffs. During the course of such dealings, the defendant had taken loans from the deceased Hanwant Dass Sud on 4.6.1995, 26.7.1995, 9.10.1995, 9.11.1995 and 14.12.1995, respectively in the sum of Rs.1,00,000/-, Rs.50,000/-, Rs.1,00,000/-, Rs.1,00,000/- and Rs.50,000/- and had promised to repay the loans alongwith ___________ 1.Whether reporters of Local papers may be allowed to see the judgment? Yes. interest at the rate of 3.5% per month. It was alleged that defendant executed demand promissory notes for the consideration received by him agreeing to repay the loan amount on demand. In addition, the defendant also took cash loans from the deceased and issued three cheques. Thus, the principal amount taken by the defendant from the deceased amounted to Rs.7,00,000/-. It was further alleged that the deceased Hanwant Dass Sood had applied to the Collector for being registered as money-lender under the Registration of Money Lenders Act, but he died during the pendency of his application on 13.12.1996. After the death of the deceased Hanwant Dass Sud, the plaintiffs, who are his legal representatives, requested the defendant to repay the amount alongwith interest, which was not paid, hence the suit for the recovery amounting to Rs.12,43,500/-. The defendant contested the suit by raising preliminary objections in regard to the maintainability, cause of action and limitation. On merits, it is denied that the promissory notes and cheques were issued for the consideration. It is also denied that the deceased or his legal representatives were registered as money-lender and hence pleaded that the suit is liable to be dismissed. On the pleadings of the parties, the following issues were settled by the learned Single Judge: 1. Whether the suit is not maintainable? OPD 2. Whether the plaintiffs have no cause of action as alleged? OPD 3. Whether the suit is time barred? OPD 4. Whether deceased Hanumant Dass was not a registered money lender? If so its effect? OPD 5. Whether the defendant executed the demand promissory notes and issued the cheques for consideration, as alleged? OPP 6. Whether the defendant is liable to pay the suit amount or any part thereof? OPP 7. Whether the defendant is liable to pay future interest? If so, in what amount and at what rate? OPP 8. Relief. In support of these issues, plaintiffs led evidence. However, no evidence was led by the defendant, which evidence was closed by order of the Court. On conclusion of the trial, the learned Single Judge decided Issue No.4 as against the plaintiffs holding that the deceased Hanwant Dass Sud or his legal representatives were not registered as money-lenders and the application for registration as money-lender was not pending and accordingly, issue No.4 was decided against the plaintiffs. Issues No.1, 2 and 3 were decided against the defendant. Issue No.5 was partly decided in favour of the plaintiffs and Issues No.6 & 7 were decided against the plaintiffs and consequently, the suit of the plaintiffs was dismissed. We have heard the learned counsel for the parties and have gone through the record of the case. The learned counsel for the appellant had mainly assailed the findings of the learned Single Judge under Issues No.4 and 5. It was submitted that the application filed by late Hanwant Dass Sud for registration as money-lender was pending and once the application was pending, the suit could not have been dismissed but it was to proceed till the application was decided by the Collector. It was further submitted that this definition of money-lender does not apply to the legal representatives of the deceased since they are not required to be registered in case they do not continue with the work of money-lending and they filed the suit to realize the outstanding loan and do not renew any existing loan or advance any fresh loan. Thus, it was submitted that the plaintiffs were not required to be registered under the Money Lenders Act and, therefore, the findings under issue No.4 are liable to be reversed. In regard to the findings under issue No.5, the learned counsel for the appellant also challenged the findings of the learned Single Judge, which, though held that the promissory notes are for consideration, but in regard to the cheques, it was held that these were not issued to discharge any liability and those findings, as against the plaintiffs, are liable to be reversed. Before we consider the first question as to whether registration was necessary or not, we may refer to the term money-lender as used in Himachal Pradesh Registration of Money-Lenders’ Act, 1976. Section 2(9) of the said Act reads as under: “(9) “money-lender” means a person, or a firm, carrying on the business of advancing loans and includes the legal representatives and the successor-in-interest whether by inheritance, assignment or otherwise, of such person or firm, provided that nothing in this definition shall apply to – (a) a person who is the legal representative or is by inheritance the successor-in-interest of the estate of a deceased money-lender together with all his rights and liabilities if such person - (i) winds up the estate of such money-lender; (ii) realizes outstanding loans; (iii) does not renew any existing loan, or advance any fresh loan;” According to the provisions of Section 3 of the said Act, suits and applications by money-lenders are barred unless money-lender is registered and licensed. Section 3 of the said Act reads as under: “3. Suits and applications by money-lenders barred, unless money-lender is registered and licensed. - Notwithstanding anything contained in any other enactment for the time being in force, a suit by a money-lender for the recovery of a loan, or an application by a money-lender for the execution of a decree relating to a loan, shall, after the commencement of this Act, be dismissed, unless the money- lender, at the time of the institution of the suit or presentation of the application for execution, or at the time of decreeing the suit or deciding the application for execution, - (a) is registered; and (i) holds a valid license, in such form and in such manner as may be prescribed; or (ii) holds a certificate from a Commissioner granted under section 10, specifying the loan in respect of which the suit is instituted, or the decree in respect of which the application for execution is presented; or (b) if he is not already a registered and licensed money-lender, satisfies the court that he has applied to the Collector to be registered and licensed and that such application is pending: Provided that in such a case, the suit or application shall not be finally disposed of until the application of the money- lender for registration and grant of license pending before the Collector is finally disposed of.” It is, therefore, clear that it is not necessary that when the suit was filed, the money-lender should have been a registered money-lender but he can get himself registered at the time of institution of the suit or presentation of the application for execution or at the time of decreeing the suit or deciding the application for execution. In case, he had already applied to the Collector and he satisfies that he had applied to the Collector and such application is pending, the suit or application shall not be finally disposed of unless the application of the money-lender for registration and grant of license pending before the Collector is finally disposed of. Coming to the facts of the present case, it has been clearly held by the learned Single Judge, while referring to the testimony of PW-3, that the deceased had applied for the registration as money-lender and his application was pending with the Collector, Shimla at the time of his death. It was also observed that earlier also, an application filed in 1991, was returned and fresh application was moved in the year 1994. However, it was held by the learned Single Judge that it was neither pleaded in the plaint nor any cogent or reliable evidence has been led to prove that the plaintiffs have wound up the estate of the deceased and had not renewed any existing loans of the deceased. Therefore, the learned Single Judge held that the plaintiffs do not fall within the exception provided under Sub Section (9)(a) and are thus money lenders for the purpose of the Act. It was further held by the learned Single Judge that PW-2 has admitted receipt of such application, but has stated that it was filed after the compliance of requirements and, therefore, it was observed that no such application was pending. Therefore, the suit was liable to be dismissed in view of the provisions of Section 3 of the Act. However, our attention has been drawn to the testimony of PW-3 Vijay Kumar, son of the deceased Hanwant Dass Sud and one of the plaintiffs, wherein he has stated that after the death of the deceased Hanwant Dass Sud, the plaintiffs are not carrying on the business of money lending. He was not cross examined on this part of the statement, which goes unrebutted. Thus, this fact stands established that the plaintiffs, who are legal representatives of the deceased Hanwant Dass Sud, are not carrying on the business of money lending. Therefore, once it is held that they are not doing the business of money lending, it has to be held that they fall within the exception of Section 2(9) of the Act, meaning thereby that they have wound up the estate of money-lending and have filed the suit only to recover the outstanding amounts. Therefore, the bar contained in Section 3 of the Act that no money-lender can file the suit unless and until he is registered under the provisions of the Act does not apply to the present plaintiffs. The plaintiffs being not money-lender as per the definition and falling within the exception can maintain the suit and, therefore, we accordingly hold that the findings of the learned Single Judge under Issue No.4 to the contrary are liable to be set aside. Coming to the question that only the consideration was proved in regard to the promissory notes and not the cheques, the promissory note and cheques fall under the provisions of Negotiable Instruments Act, 1881 and once the execution of a negotiable instrument has been proved from the statements of the plaintiff and his witnesses, which prove the signatures of the defendant, the onus shifts upon the respondent/defendant to prove that there was no existing debt or liability on them, which they have to discharge. Once the execution has been proved, it is for the other party to rebut that these pro-notes and cheques were without consideration and this has not been proved by the defendant since he did not step into the witness box and had not led any evidence to prove that these negotiable instruments were without consideration and therefore, the findings of the learned Single Judge holding that the cheques have not been proved for consideration are liable to be reversed under issue No.5, which are reversed accordingly. The plaintiffs are, therefore, entitled to recover the principal amount of Rs.7.00 lacs being the amount mentioned in the promissory notes and cheques. As far as the interest is concerned, in three of the promissory notes, the rate of the interest mentioned is 3% per month. In two promissory notes, the rate of interest mentioned is 3.5% per month. No rate of interest has been proved in respect of the amount which is the subject matter of the cheques. The plaintiff, while appearing as PW-3, has admitted that one month’s interest was deducted at the time when the loans were advanced. The plaintiffs have not led any evidence to show that interest was not paid by the defendant till the death of late Hanwant Dass Sood. Therefore, the plaintiffs are entitled to interest w.e.f. 13.12.1996. As far as the rate of interest is concerned, we are of the considered opinion that the rate of interest mentioned in the pro-notes i.e. 3% per month in three cases and 3.5% per month in two cases i.e. 36% and 42% per annum, respectively, is highly excessive. According to the plaintiffs, they are not in the business of money lending. The rate of interest mentioned in the pro-notes is so excessive that it shocks our judicial conscience. We are, therefore, not inclined to grant this rate of interest. As far as cheques are concerned, no rate of interest is mentioned therein. There is nothing on record to show that what was the rate of interest, if any, agreed to in respect of the amount loaned to the defendant by the deceased Hanwant Dass Sood through the cheques. The plaintiffs have also failed to lead any evidence to show that the defendant had not paid interest till the death of their father Hanwant Dass Sood. No records have been produced in this regard. However, from the evidence, it is apparent that no amount was paid after the death of Shri Hanwant Dass Sood, which took place on 13.12.1996. The plaintiffs are, therefore, entitled to interest on the loan amount from the said date. In our considered opinion, the plaintiffs are entitled to simple interest at the rate of 12% per annum on the amount which is the subject matter of the pro-notes and at the rate of 6% per annum on the amount which is the subject matter of the cheques. In view of the above discussion, the suit of the plaintiffs is decreed and the plaintiffs are held entitled to recover an amount of Rs.7.00 lacs from the defendant. The plaintiffs are held entitled to simple interest at the rate of 12% per annum on a sum of Rs.4.00 lacs from 13.12.1996 till the date of realization from the defendant. The plaintiffs are also held entitled to simple interest at the rate of 6% per annum on the amount of Rs.3.00 lacs being the consideration of the cheques from 13.12.1996 till realization. The Plaintiffs are also held entitled to the costs of the litigation throughout. The appeal is accordingly allowed. The judgment and decree of the learned Single Judge is set aside and the suit of the plaintiffs decreed with interest and cost in the aforesaid terms. Decree sheet be drawn up accordingly. (Deepak Gupta), Judge. August 14, 2008. (V.K. Ahuja), (TILAK) Judge.