Case: Sant Saranlal And Another Vs. Parsuram Sahu And Others

2. The facts of the case may be briefly stated. Sant Saranlal and Bhanuprakash Lal, plaintiffs Nos. 1 and 2 respectively, sued defendants Nos. 1 to (Sic) a registered money-lender under the Act and the registration certificate constituted a partnership business under the name and style of Banwarilal Kishanlal in 1947. Out of this amount, Rs. 3,500 had been lent prior to January 17, 1950 and the balance of Rs. 11,870 was lent between January 21, 1950 and May 14, 1951. The suit was contested on various grounds3. The trial Court found that the various amounts were advanced for the purposes of the firm. It found that plaintiff No. 2, Bhanuprakash Lal, was a registered money-lender under the Act and the registration certificate dated January 17, 1950 stated that he had been registered as a money-lender on that day to transact money-lending business upto a maximum of Rs. 4,999 only. It further held that the fixing of this limit to the money-lending business did not debar plaintiff No. 2 from suing for amounts in excess of Rs. 4,999 in case he had really advanced that amount. The trial Court accordingly decreed the suit for Rs. 11,870 plus interest pendente lite at 6 per cent per annum4. Defendant No. 1 alone filed an appeal against this decree. The High Court disagreed with the finding of the trial Court that the loans had been taken for the firm Banwarilal Kishanlal and held that they were taken by defendants Nos. 3 and 5 from plaintiff No. 2. It further held that out of the amount of Rs. 11,870 only Rs. 6,000 had been taken on loan by defendant No. 3 and the balance was taken on loan by defendant No. 5 against whom the plaintiffs had not sought a decree. It further held that in view of the various provisions of the Act and the rules framed thereunder the plaintiff could not get a decree for any sum over Rs. 4,999. The High Court accordingly allowed the appeal of defendant No. 1 and set aside the decree passed by the trial Court against defendants Nos. 1, 2 and 4 and passed a decree in favour of plaintiff No. 2 for Rs. 4,999 against defendant No. 3 alone. It also decreed simple interest at 6 per cent per annum from the date of the institution of the suit until realisation. It is against this decree of the High Court that the present appeal has been filed after obtaining certificate from the High Court.

Court's reasoning:
12. The correctness of this view of the High Court is questioned for the appellant on the ground that there is no provision in the 1938 Act or even in the 1939 Act which provides that a money-lender who has been registered under S. 5 of the Act can lend money up to the limit mentioned in the registration certificate. In fact it is urged that the Act nowhere provides that an overall limit to the loan advanced by a registered money-lender can be fixed by the Government. When the Act does not provide so, the Government cannot, by rule, fix such a limit. Rule 3 requiring the money-lender to mention in his application the maximum amount of loan, i.e., the total amount of loans which may remain outstanding on any day during the period of the validity of the registration certificate and R. 3 (3) providing for an application for the registration certificate to mention the amount of loans for which the certificate is wanted, cannot, therefore, be said to be rules made for carrying out the purposes of the Act but were rules made for fiscal purposes. The registration fee payable under R. 4 is graded according to the maximum amount of loans for which the certificate was wanted. We consider the contention for the appellant sound18. We are, therefore, of opinion that the High Court was in error in thinking that the object of the Act would be defeated if the registered money-lender could be held competent to lend money in excess of the maximum amount mentioned in the registration certificate19. We have referred to the fact that the Act does not anywhere provide for the fixing of the upper limit for the loans remaining outstanding at any particular time. The rule-making power of the Government does not extend to the fixing of such a limit. Section 27 empowers the State Government to prescribe inter alia the form of the registration certificate and the particulars to be contained in an application made for the purpose of being registered as a money-lender. It is significant to note that the rule-making power given to the State Government is not expressed in the usual form, i.e., is not to the effect that the State Government may make rules for the purposes of the Act. The rule-making power is limited to what is stated in Cls. (a) to (e) of S. 27 and these clauses do not empower the State Government to prescribe the limit upto which the loans advanced by a money-lender are to remain outstanding at any particular moment of time20. It is contended for the respondents that S. 5 (1) (e) provides that every application for being registered as a money-lender is to state such other particulars as may be prescribed and that, therefore, an application had to mention the amount of the loan for which the certificate iswanted.The power to prescribe certain particulars for the purpose of an application cannot be deemed to include the power to fix the maximum amount of loans which a money-lender can have outstanding on any day. Rule 3 (iii) requires the application to mention the amount of loan for which the certificate iswanted.Strictly speaking, there is nothing in this expression to suggest to the applicant money-lender that he has to mention the maximum amount of loans which is to remain outstanding on any particular day. The rule do not even say that the registration of a money-lender for advancing loans upto a maximum amount mentioned in the certificate would make him a registered money-lender for loans upto the amount only. The facts that the rules require the amount of loans for which the certificate is wanted and that the form of the registration certificate provides for mentioning the limit of the money-lending business upto which the money-lender can transact business, do not necessarily amount to a provision that the money-lender would be deemed to be a non-registered money-lender for the purposes of the amount of loan outstanding in excess of that limit. The money-lender when he advanced money in excess of the maximum limit may contravene the rule framed under the Act and if the Act provides any penalty for such contravention, may be liable for that penalty. In fact, Ss. 19 to 21 do not provide for penalty for contravening any rule21. It is urged for the respondents that the State Government was competent to fix the maximum amount of loans to be advanced by a registered money-lender in view of sub-s. (3) of S. 5 which provides that the State Government may, by rules, prescribe for different clauses of money-lenders and for different areas a registration fee not exceeding Rs. 25 to be paid by an applicant for registration. It is said that the State Government could create different classes of money-lenders according to the amount of money they want to advance in loans22. This provision does not empower the State Government to limit the maximum amount of loans to be given by money-lenders of any class. It could, however, as it actually did, prescribe different registration fees for different classes of money-lender according to the amount of money upto which they wanted to lend. The classification of money-lenders for the purposes of registration fee can be no justification for placing any limit on the maximum amount of loans they could have outstanding on a certain day, on penalty of being deprived of a right to sue for an amount lent in excess of such a maximum23. We, therefore, hold that the State Government is not competent to make a rule fixing a maximum amount of outstanding loans on any day and that the rules framed do not provide that a money-lender properly registered as such under the Act will cease to be a money-lender so registered if he advances a loan in excess of the limit mentioned in the registration certificate24. It has been urged for the respondent that the expression in S. 4 of the 1939 Act to the effect unless such money-lender was registered under the Bihar Money-Lenders Act, 1938 means unless such money-lender was properly registered under the Bihar Money-Lenders Act, 1938. There is nothing wrong in this view, but there is no impropriety in the registration of Bhanuprakash Lal a money-lender. His application must have been in accordance with the requirements of the Act and the rules. The registration certificate was issued to him in the ordinary course. Nothing has been shown why his registration as a money-lender be considered to be not proper registration or why it be held that he was not properly registered under the Act. The mere fact that he contravened any of the requirements of the licence or of any rule or even any provision of the Act does not mean that his registration as a money-lender under S. 5 of the Act was an improper registration25. Lastly, it may be said that the view taken by the High Court necessitates the adding of the words and the loans advanced do not wholly or partly exceed the maximum amount upto which he was permitted by the registration certificate to transact money-lending business in S. 4 of the 1939 Act. There is no reason why such an addition be made to S. 4 and make the provision much more restricted in character26. We, therefore, do not agree with the view expressed by the High Court and hold that a money-lender who has been registered under the Act can sue for the recovery of a loan advanced by him during the period his registration certificate is in force, even if at the time of advancing the loan he had exceeded the limit of the amount mentioned in the registration certificate as the amount upto which he could transact money-lending business. Under the provisions of the Act it is the de facto registration of the money-lender which entitles him to sue for the loan and not the contents of the registration certificate.