Karnataka High Court
Mr. Mohammed Iqbal vs Mr. Mohammed Zahoor on 12 July, 2007
Equivalent citations: ILR2007KAR3614, 2008(1)KARLJ338, AIR 2007 (NOC) 2437 (KAR.) = 2007 (5) AIR KAR R 520, 2007 CRI. L. J. (NOC) 924 (KAR.) = 2007 (5) AIR KAR R 520 2007 (5) AIR KAR R 520, 2007 (5) AIR KAR R 520, 2007 (5) AIR KAR R 520 2007 CRI. L. J. (NOC) 924 (KAR.) = 2007 (5) AIR KAR R 520, 2007 CRI. L. J. (NOC) 924 (KAR.) = 2007 (5) AIR KAR R 520
Author: Ram Mohan Reddy
Bench: Ram Mohan Reddy
ORDER Ram Mohan Reddy, J.
1. Since common question of law and that of fact arise for decision making, with the consent of the Learned Counsel for the parties, petitions are clubbed together, finally heard and disposed of by this common order.
2. Facts in brief are: Respondent instituted SC 15043/2004, 16234/03 and 16233/03 for recovery of money from the petitioner. The plaintiff asserted that the defendant borrowed Rs. 50,000/- on 30.12.2001, as hand loan agreeing to pay Rs. 1000/- until the principle sum was repaid. The defendant's bank cheques drawn on Union Bank of India, Shivajinagar branch, when bounched, impelled the plaintiff to institute the suits as well as proceedings under the Negotiable Instruments Act, 1881.
3. Defendant entered appearance and filed written statement denying the plaint averments. The plaintiff examined himself as PW-1 and another witness as PW-2 and exhibited 11 documents Exs. P-1 to P-11 while the defendant examined himself as DW-1 and another witness as DW-2 but did not exhibit any documents. The trial court, in the premises of the pleadings of the parties, framed points for consideration and on appreciation of the evidence both oral and documentary decreed the suit with costs and current interest at 6% p.a. from the date of suit till the date of realization, by judgment and order dated: 24.6.2006.
4. Sri Rego, Learned Counsel for the petitioner submits that the court below though tried the tree suits jointly, separate judgment and orders were made in each suit, Learned Counsel advances the following two contentions-
(i) that the trial court failed to appreciate that the loan transanction admittedly in excess of Rs. 20,000/- contrary to the procedure and mode of giving and taking loans, under Section 269-SS of the Income Tax Act, 1961, for short the Act, being an illegal transaction disentitled the plaintiff to recover the suit claim;
(ii) that the petitioner having instituted OS 16318/03 on the file of the Additional City Civil Judge, Mayo Hall, to direct the respondent herein, to return the cheques, subject matter of S.C.I5043/04; 16234 & 16233/2003, which was prior in point of time and had not attained a finality, the plaintiff, was disentitled to recover the suit claim.
5. Section 269-SS of the Act under chapter XX B provides for -"Requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax"' and reads thus:
269-SS. Mode of taking or accepting certain loans and deposits.- No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor) any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,-
a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or
b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregrate amount remaining unpaid; or
c) the amount or the aggregate amount referred to in Clause (a) together with the amount or the aggregrate amount referred to in Clause (b), is twenty thousand rupees or more:
Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,-
a) Government;
b) any banking company, post offie savings bank or cooperative bank;
c) any corporation established by a Central State or Provincial Act;
d) any Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956);
e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:
Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.
Explanation,- For the purpose of this section,-
i) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in Section 51 of that Act;
ii) "cooperative bank" shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);
iii) "loan or deposit" means loan or deposit of money.
6. The Apex Court in the case of the Asst. Director of Inspection Investigation v. Kum. A B Shanthi while upholding the constitutional validity of Section 269SS observed thus:
The object of introducing Section 269 is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizure unaccounted money is unearthed and the tax payer would usually give the explanation that he had borrowed or received deposits from his relatives or friends sand it is easy for the so-called lender also to manipulate his records later to suit the plea of the tax-payer. The main object of Section 269-SS was to curb this menance.
7. In the light of the observations of the Apex Court, it cannot but be said that Section 269-SS only provided for the mode of acceptance payment or repayment in certain cases so as to counteract evasion of tax. Section 269-SS does not declare all transactions of loan, by cash in excess of Rs. 20,000/- as invalid, illegal or null and void, while as observed by the Apex Court, the main object of introducing the provision was to curb and unearth black money. To construe Section 269-SS as a competent enactment declaring as illegal and unenforceable all transactions of loan, by cash, beyond Rs. 20,000/-, in my opinion, cannot be countenanced.
8. Yet another reason for this opinion is Section 271-D which reads thus:
271-D. Penalty for failure to comply with the provisions of Section 269-SS. (1) If a person takes or accepts any loan or deposit in contravention of the provisions of Section 269-SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted.
2) Any penalty imposable under Sub-section (1) shall be imposed by the Joint Commissioner.
In that if a person takes or accepts any loan or deposit in contravention of Section 269-SS is liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted, as may be imposed by the Joint Commissioner.
9. Section 273B of the Act reads thus:
273-B. Penalty not to be imposed in certain cases.- Notwithstanding anything contained in the provisions of Clause (b) of Sub-section (1) of Section 271, Section 271-A (Section 271-AA), Section 271-B (Section 271-BA), (Section 271-BB, Section 271-C, Section 271-D, Section 271-E, (Section 271-F (Section 271-G) Clause (c) or Clause (d) of Sub-section (1) or Sub-section (2) of Section 272-A, Sub-section (1) of Section 272-AA) or (Section 272-B or) Sub-section (1) of (Section 272-BB or Sub-section (1) of Section 272-BBB or) Clause (b) of Sub-section (1) or Clause (b) or Clause (c) of Sub-section (2) of Section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.
10. This Section provides that notwithstanding anything contained in Section 271D no penalty shall be imposed on the person or assessee, for failure to comply with Section 269SS, if it is proved, that there was reasonable cause for such failure to obtain a loan otherwise than though account payee cheque or demand draft. The Apex Court in Asst. Director's case supra, having considered the import of Section 273B observed thus:
If there was a genuine and bonafide transaction and if for any reason the tax payer could not get a loan or deposit by account payee cheque or demand draft, for some bonafide reasons, the authority vested with the power to impose penalty has got discretionary power.
11. The contravention of Section 269SS though visited with a stiff penalty on the person taking the loan or deposit, nevertheless, the rigor of Section 271D is whittled down by Section 273B, on proof of bonafides. It cannot therefore be said that the transaction of the nature brouht before this court could be declared illegal, void, and unenforceable.
12. Reliance is sought to be placed on the observation of the Privy Council in Surajmull Nagoramull v. Triton Insurance Co. Ltd. 1925 Council 83, which reads thus:
No court can enforce as valid, that which competent enactments have declared shall not be valid, nor is obedience to such an enactment, a thing from which a court can be dispensed by the consent of the parties or by a failure to plead or to argue the point at the outset.
This observation was followed by the Apex Court in the case of Badri Prasad v. Nagarmal while permitting a new point to be raised with regard to contravention of legal provision. In the light of the observations of the Supreme Court supra as to the purpose of enactment under Section 269-SS of the Act, coupled with the fact that the Trial Court, considered and rejected the plea that the transaction was void, though such a plea was not taken in the written statement, I am afraid the aforesaid decisions have no applicability to the facts and circumstances of this case.
13. The Trial Court on a proper appreciation of the evidence both oral and documentary recorded a finding of fact that the plaintiff extended the loan which the defendant-petitioner received ans was liable to repay the said sum. In addition the Trial Court concluded that the petitioner's cheques for repayment of the said sum, bounced, resulting the suits for recovery as well as criminal prosecution under the Negotiable Instruments Act. It may be that the petitioner instituted OS 1631/03 for return of cheques much prior in point of time to the filing of the small cause suits for recovery of money, that by itself and nothing more, cannot be said that the plaintiff is disentitled to recover his monies by instituting the suits. The second contention too must necessarily fail.
14. In my opinion, the judgments and orders impugned in these revision petitions are not shown to suffer from any legal infirmity occasioning grave injustice to the petitioner, calling for interference.
Revision petitions are without merit and are accordingly rejected.