Case: Radha Kissan Chamria &amp; Others Vs. Keshardeo Chamria &amp; Another

him in cash. For securing these sums he executed a mortgage in favour of Fateh Chand. The mortgage covered other properties besides the shares purchased. Later, Fateh Chand brought a suit on both the mortgages and obtained a decree. Subsequently, in July 1939, he purchased the mortgaged properties in execution of that decree. Thereafter, the Bengal Money Lenders Act was passed and Akimuddin promptly made an application for re-opening the compromise decree and for reliefs under that Act. The question arose whether the second of the two mortgages, (Ex.2) was in respect of a loan. The Court held that that mortgage was in substance a loan. In his Judgment Mitter J., observed as follows : If in a transaction there is no. actual advance but only a notional advance- what a Court of law would deem to be an advance - with a view to earn interest, the transaction would be regarded as loan for the purpose of the Act. A renewed bond where interest is capitalised would thus be a loan although at its execution no. money is actually advanced. In order to determine the question whether a particular transaction amounts to a loan, the substance and not the form must be looked to and the facts and circumstances attending it must be taken into consideration. If the conclusion be that it was really an interest bearing investment it would be a loan."Having set out the tests for determining what made a transaction in substance a loan the learned Judge proceeded to examine the facts of the case to see if the tests were satisfied and observed as follows :"I will now examine the facts of the case we have before us, Fateh Chand Mahersi is admittedly a money lender. The interest which is provided for in Ex.2 (Mortgage for securing Rs. 2, 330) is the interest which he usually charged in money lending transactions. It is 15 per cent. per annum with yearly rests- a rate which he charged in his first mortgage (Ex.1) for Rs. 7000 which admittedly represented a loan transaction. In his books of accounts he entered the transaction as a loan transaction. The unpaid price was shown in these accounts to have been wiped off by the advance from the loan account. In these circumstances I think that it can be held that the price was paid off by a notional advance made by Fateh Chand to Akimuddin, the real intention of the former being investment of money at his usual rate of money-lending. I accordingly hold that the mortgage Ex. 2 amounts in substance to a loan transaction.Mitter J., therefore, was clearly led to the conclusion to which he arrived by consideration of the fact that the parties had treated the moneys secured by the mortgage as a loan and not as unpaid price which they originally were. This was clearly established by the fact that Fateh Chand had made entries in his accounts showing that the purchase money due to him had been paid off and the same amount had become due to him on a loan. It may be that when money is due from one party to another not on an advance actually made but on other accounts a debt comes into existence but, as said by Sen J., in this very case a debt is not necessarily a loan. The parties, however, may agree to treat the money as a loan and then the transaction may in substance be a loan for the purpose of the Bengal Money Lenders Act. But there is no. such agreement here. There is nothing to show that it had been intended that the original character of the moneys, namely, as unpaid price had been changed into a loan. In our view, therefore, Fateh Chands case does not assist the appellants.8. The other case on which Mr. Chatterjee relied, namely, Nimrode Barani Debya v. Sisir Kumar Mukherjee, 47 Cal W N 205 : (A I R 1942 cal 616 ) (B) does not carry the matter further. In that case the petitioners predecessors-in-interest owed some money to the opposite party on account of the price of the sale of some land. The purchase money was discharged partly in cash and partly by a promissory note. The note was renewed from time to time and the last renewal was by the petitioners themselves. The question was whether the last promissory note represented in substance a loan transaction. Hendeson J., who delivered the judgment in this case observed as follows :"The real nature of the present transaction was that the purchase money was paid partly in cash and partly by the hand-note. If the real cause of action in the present case were merely the unpaid purchase money with a reasonable rate of interest, it would have been paid off long ago. It is not the case of the seller being willing to take part payment but the case of a seller insisting upon full payment partly in cash and partly in something else. I am, therefore, of opinion that this transaction was in substance a loan."Here also, therefore, the judgment proceeded on the basis that the original debt was not a loan and was only a part of unpaid purchase money but the parties had treated the purchase money as paid off in its entirety and the amount equivalent to the unpaid purchase money as being due by the purchaser to the vendor by way of a loan. On such basis, the transaction may in substance be a loan. We have already stated that there is no. evidence of such treatment in this case. We find nothing here to show that the moneys originally due as price had come to be treated as a loan. The appellants, therefore, cannot contend that they are "borrowers" or are being made to pay in respect of a "loan" as these terms are defined in the Act. They cannot, therefore, claim any benefit under S. 30 of the Act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]st question is what is the transaction in this case which is in substance a loan?On this question all that Mr. Chatterjee said was that the consent decree was itself such a transaction. He said that what had happened was that there was the agreement for sale under which Durga Prasad as the vendor was entitled to receive the stipulated price from the purchaser Radha Kissen, Moti Lal and Anardeyi and the compromise decree was really a transaction by which Durga Prasad agreed to treat the moneys due to him on account of price as a loan by him to the purchasers and repayable as such at a certain rate of interest and in a certain number of instalments.We agree with the learned Judge of the High Court that there is no. evidence of any agreement between the parties leading to the compromise decree. Both the Courts below have held that there was no. agreement as stated by Mr. Chatterjee. That is a question of fact and we in this Court are unable to disturb such a concurrent finding of fact. The agreement contained in the compromise decree itself is, of course, there. But looking at its terms we are unable to hold, as the High Court was unable to do, that it shows that the price due was by agreement treated as a loan by the vendor to thewe have no. other facts than those appearing on the face of the compromise decree and these facts do not, in our view, amount to an agreement to convert the outstanding purchase money into a loan by the vendor to the purchasers. All that we have here is an agreement by the vendor to accept payment of a portion of the moneys payable under the agreement for sale immediately and the balance in certain instalments and to be paid interest on the purchase money at the same rate which was provided in the agreement for sale. The compromise decree, no. doubt, vested the property agreed to be sold in one of the purchasers and created a charge on it for the purchase money unpaid for the time being. The vendor under the agreement for sale had thus been converted into an unpaid vendor who had conveyed to the purchasers the property agreed to be sold and had been given a charge on the property for the unpaid purchase money. An unpaid vendor who has transferred the property has a similar charge under S. 55 (4) (b) of the Transfer of Property Act. The only thing that was new in the compromise decree was that the moneys were payable in a number of instalments instead of at once. That cannot show that the price due had become a loan. The compromise decree does not in our opinion therefore alter the intrinsic nature of the moneys due to the vendor. They were and remained unpaid purchase moneys and had not at all been converted from that character into an support of his contention Mr. Chatterjee referred us to two decisions of the High Court at Calcutta. The first was Fateh Chand Mahesri v. Akimuddin Chaudhury, 47 Cal W n 52 : (AIR 1943 Cal 108  ) (A).We are unable to see that this case helps Mr.J., therefore, was clearly led to the conclusion to which he arrived by consideration of the fact that the parties had treated the moneys secured by the mortgage as a loan and not as unpaid price which they originally were. This was clearly established by the fact that Fateh Chand had made entries in his accounts showing that the purchase money due to him had been paid off and the same amount had become due to him on a loan. It may be that when money is due from one party to another not on an advance actually made but on other accounts a debt comes into existence but, as said by Sen J., in this very case a debt is not necessarily a loan. The parties, however, may agree to treat the money as a loan and then the transaction may in substance be a loan for the purpose of the Bengal Money Lenders Act. But there is no. such agreement here. There is nothing to show that it had been intended that the original character of the moneys, namely, as unpaid price had been changed into a loan. In our view, therefore, Fateh Chands case does not assist the appellants.8.The other case on which Mr. Chatterjee relied, namely, Nimrode Barani Debya v. Sisir Kumar Mukherjee, 47 Cal W N 205 : (A I R 1942 cal 616  ) (B)does not carry the matteralso, therefore, the judgment proceeded on the basis that the original debt was not a loan and was only a part of unpaid purchase money but the parties had treated the purchase money as paid off in its entirety and the amount equivalent to the unpaid purchase money as being due by the purchaser to the vendor by way of a loan. On such basis, the transaction may in substance be a loan. We have already stated that there is no. evidence of such treatment in this case. We find nothing here to show that the moneys originally due as price had come to be treated as a loan. The appellants, therefore, cannot contend that they are "borrowers" or are being made to pay in respect of a "loan" as these terms are defined in the Act. They cannot, therefore, claim any benefit under S. 30 of the Act.