Karnataka High Court
Keshava Shetty vs Smt T C Sowbhagya on 18 April, 2017
Author: L.Narayana Swamy
Bench: L. Narayana Swamy
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 18th DAY OF APRIL, 2017
BEFORE
THE HON'BLE MR. JUSTICE L. NARAYANA SWAMY
RFA NO.1839 OF 2005
BETWEEN:
Keshava Shetty
S/o Hanumantha Shetty,
Junior Assistant,
KEB Mandya,
Residing at 1st Cross,
Nehru Nagara, Mandya - 571 401.
... Appellant
(By Sri. D.R. Sundaresha, Advocate)
AND:
1. Smt. T.C. Sowbhagya
W/o Late T. Ramakrishna,
Aged about 40 years,
2. T.R. Sandeep Kumar
S/o T.K. Ramakrishna,
Aged about 23 years,
3. T.R. Gayathri
D/o T.K. Ramakrishna,
Aged about 22 years,
4. T.R. Geetha
D/o T.K. Ramakrishna,
Aged about 20 years,
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All are residing at KEB Sl.No.122,
2nd Stage, North East of Mahadevapura,
Udayagiri Extension, Mysore-570 019.
... Respondents
(By Sri.Veerabhadra Swamy H.P., Advocate)
This RFA is filed under section 96, Order 41 Rule 1 of
CPC, against the Judgment and Decree dated 10.08.2005
passed in O.S.No.47/1997 on the file of the Addl. Civil Judge
(Sr.Dn.) and CJM, Mandya, dismissing the suit for recovery of
money.
This appeal is coming on for Hearing this day, the Court
delivered the following:
JUDGMENT
The plaintiff is the appellant. He has filed a suit in O.S. No.47/1997 on the file of Addl. Civil Judge (Sr. Dn) at Mandya which came to be dismissed by its order dated 10.08.2005, against which, this appeal is filed. The suit was filed for recovery of money of Rs.1,03,650/- (Rupees One Lakh Three Thousand Six Hundred and Fifty only).
2. The case of the plaintiff-appellant is that the first defendant is legally wedded wife of Sri. T.K. Ramakrishna. Defendant Nos. 2 to 4 are his children and defendants No.1 to 4 are legal representatives of deceased T.K. Ramakrishna. The deceased, husband of the first defendant had borrowed a loan 3 of Rs.70,000/- from the plaintiff by executing On Demand Pro- Note and has agreed to repay the same with interest at 2% per month. Since, the husband of the first defendant had not paid the loan amount, the plaintiff has filed a suit after issuing legal notice to the defendants.
3. On Demand Pro-Note is marked as Ex.P.1, Consideration Receipt is marked as Ex.P.2, the signatures of T.K. Ramakrishna are marked as Ex.P.1(a) and 2(a), signatures of PW.2 are marked as Ex.P.1(b) and 2(b), signatures of PW.3 is marked as Ex.P.2(c) and signature of witness is marked as Ex.2(d). The plaintiff himself was examined as PW.1, PW.2 is a scribe to the document and PW.3 is an attesting witness.
4. On the death of T.K. Ramakrishna, a suit has been filed against his wife and three children who are the defendants No.1 to 4. Defendant No.1 herself was examined as DW.1 and no documents have been marked.
5. After service of notice on the defendants, defendants filed written statement and contended that the plaintiff has committed an act of fraud and created the document as per Ex.P.1 and further it is submitted that the plaintiff is carrying 4 the business of money lending without any valid license under the provisions of the Karnataka Money Lenders Act.
6. On the basis of the pleadings, the Court below framed the following issues:-
1. Whether the plaintiff proves that the deceased T.K. Ramakrishna borrowed loan of Rs.70,000/-
from plaintiff on executing on demand pro-note with consideration receipt?
2. Whether the plaintiff proves that deceased T.K. Ramakrishna had agreed to pay interest at 2% per month?
3. Whether the plaintiff proves that defendants are liable to pay Rs.1,03,650/- with future interest at 2% p.m. to him?
4. What order?
Addl. Issue No.1
1. Whether the defendants prove that plaintiff is money-lender doing money lending business without having valid money lending licence? Issue Nos.1 to 3 are answered in Negative and Issue No.4 has been answered as per final order. Additional Issue No.1 is answered in Affirmative.
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7. The learned counsel for the appellant submits that the Court below has committed an error in reaching conclusion that the plaintiff is carrying on the business without having any valid licence. It is his submission that the plaintiff was not carrying on the business for the purpose of the Karnataka Money Lenders Act (hereinafter called "the Act"). The deceased T.K. Ramakrishna, the plaintiff, PW.2 and PW.3 are employees of the KEB. As and when the financial assistance is required the plaintiff used to lend the money to his colleagues without there being any interest. Though the interest is mentioned in Ex.P.1 - On Demand Pro-Note, the plaintiff is entitled for principal amount. The defendants though alleged the plaintiff has committed an act of fraud, no cogent documents are produced to prove the act of business by the plaintiff. The burden is heavily on the defendants to prove the case and ingredients of fraud has not been established before the Court, despite the Court held that the plaintiff committed an act of fraud. On these grounds, the suit was dismissed.
8. It is in the written statement that it is admitted fact, the plaintiff is working in KEB and it has come in the evidence 6 that he has salaried income and he has no other source of income. Under this circumstance, it is presumed legally that the plaintiff was not carrying on the business of money lending. The activity of the plaintiff does not attract the regular business. The contention of the plaintiff that he is not doing regular business cannot be accepted. Under the circumstances, no imagination can be presumed that the plaintiff is doing regular money lending business.
9. It is the case of the defendants in their written statement and as well as in their evidence that the signature on Ex.P.1 - On Demand Pro-Note is not the signature of late T.K. Ramakrishna. If that is the case, the burden is heavily on the plaintiff to prove his case.
10. It is the submission of the learned counsel that PW.2 and PW.3 are the scribe witness and employee of KEB respectively and they have deposed before the Court that Ramakrishna has executed an On Demand Pro-Note and it has been written in his presence. When these two independent 7 witnesses have deposed against Ramakrishna, there is no occasion for the learned judge to disbelieve the same.
11. I have heard the learned counsel for the appellant. None appears for the respondents. I have gone through the judgment and LCRs available on file. The additional issue has been framed and it is the opinion of the learned Judge that the plaintiff is carrying on money lending business without a valid licence. In order to find out whether licence is required for the purpose of said business and on the basis of submission made by the learned counsel for the appellant, the points that arise for my consideration are as follows:-
1) Whether the Court below is right in
answering additional issue against the
plaintiff?
2) Whether the Court below committed an
error in dismissing the suit?
12. Section 2 sub-section 2 of the Act defines the "business of money-lending" means the business of advancing loans whether or not in connection with or in addition to any other business. The definition says that advancing loan is a business.
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13. Section 2 sub-section 6 of the Act is in respect of "interest" includes the return to be made over and above what was actually lent, whether the same is charged or sought to be recovered specifically by way of interest or otherwise, but does not include any sum lawfully charged by a money-lender for or on account of costs, charges or expenses in accordance with the provisions of this Act, or any other law for the time being in force.
14. Section 2 sub-section 7 of the Act is in respect of "licence" means a licence granted under this Act.
15. Section 2 of sub-section 9 of the Act defines the "loan" means an advance at interest whether of money or in kind, and includes any transaction which the Court finds in substance to amount to such an advance, but does not include- (a) a deposit of money or other property in a Government Post Office Bank or in a Karnataka Government Savings Bank or in any other bank or in a company or with a co-operative society.
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16. Section 2 sub-Section 10 of the Act is in respect of "money-lender" which means (i) an individual; or (ii) an undivided Hindu family; or (iii) a company; or (iv) an unincorporated body of individuals, etc.,
17. Section 2 of sub-section 20 of the Act is in respect of "trader" means a person who in the regular course of business buys and sells goods or other property, whether movable or immovable.
18. Section 11 of the Act is in respect of "Suits by money- lenders not holding licence"
(1) After the expiry of six months from the date on which this Act comes into force, no Court shall pass a decree in favour of al money-lender in any suit to which this Act applies, filed by a money-lender, unless the Court is satisfied that at the time when the loan or any part thereof to which the suit relates was advances, [and on the date such suit was filed] the money-lender held a valid licnece.
(2) x x x (3) x x x (4) x x x (5) Nothing in this section shall affect-
(a) suits in respect of loans advanced by a money-lender before the date on which this Act comes into force;
(b) the powers of an official receiver, an administrator or a Court under the provisions of the Mysore Insolvency Act, 1925, or other corresponding law in force in any area of the State, or of a liquidator under the Companies Act, 1956, to realize the property of a money-lender.10
19. From the provisions of this Act, it is clear that the business means advancing the loans with interest and perform as a part of business and in order to establish this one, the evidence on behalf of PW1, 2, and 3 are very material evidence. The Court below examined the evidence of PW.1 who has deposed in his cross-examination at page-5 says that ------------
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Extraction which is in Kannada in judgment will be extracted after correction.
20. In addition to the evidence of PW.1, the plaintiff produced Ex.P.1 On demand pro-note and same has been examined by the Court below. I have gone through the same in which the interest has been mentioned at 2% per month that means a person who has taken the principal amount he has to return the same with interest at 2% per month. Advancing the loan for the purpose of interest it is a income in the said business. Under these circumstances, the Court below has rightly held that the plaintiff is doing the business transactions without having obtained the licence under the Act. Section 11 of the Act very clear that no Court shall pass a decree in favour of money lender in any suit to which this Act applies, filed by 11 the money lender unless the Court is satisfied that at the time when the loan or any part thereof to which the suit relates was advanced the money lender shall hold a valid licence. In order to carry out business like this, he has to obtain the licence from the competent authority under the provision of the Act. Though, the learned counsel for the appellant submits that the plaintiff was an employee and he was having only salaried income with which it is sufficient to say that he was not carrying the business, cannot be accepted. The plaintiff in his cross-examination stated that he has advanced three loans to different employees. On two occasions the money was advanced by the plaintiff himself to his colleagues and same was repaid to him and in the cross-examination he has deposed that he has filed a suit in respect of other two loans. In addition to the said evidence, the plaintiff has levied 2% interest per month which is an income derived out of money advanced to late Ramakrishna.
21. The Court below has also gone through the judgment reported in 1985 KARNATAKA 912 between BASAPPA AND OTHERS V/s GAREMANE KAMANNA, wherein, it has been 12 observed that without a valid money lending licence, one cannot do money lending business and the licence is always towards prospective and not retrospective. The money lending licence must be there at the time of transaction and also at the time of filing the suit, otherwise, the plaintiff-money lender cannot file a suit for recovery of amount based on pro-note. Another decision reported in ILR 1991 KARNATAKA 1928 in the case of MESSRS MANAKCHAND MOTILAL v/s. STATE OF KARNATAKA which reads as follows:-
"KARNATAKA MONEY LENDERS ACT, 1961 (Karnataka Act No.12 of 1962) AS AMENDED BY ACT NO.41 of 1985-Sections 7A & 7B KARNATAKA PAWN BROKERS ACT, 1961 (Karnataka Act No.13 of 1962) AS AMENDED BY ACT NO.41 of 1985- Sections FOURTH ACCUSED & 4B- Amendments: object-
Classification of Money Lenders & Pawn Brokers reasonable with rational nexus to object to be achieved- Slab system for fixing amount of deposit has rational basis-Deposit to be computed on basis of money invested not aggregate loan advanced- Once amount security deposit, state to pay interest thereon at Bank rate on fixed deposit of one year- Every money 13 lender not pawn broker, but every pawn broker, money lender: pawn broker to take money lenders licence not violative-Adjustment of deposits: moving over to higher slab in succeeding year calling for higher deposit, only balance over and above deposit already made payable: if business closed down, deposit amount to be refunded notwithstanding no specific provision- Amendments not violative of Articles 14 & 19(1)(g) of Constitution of India".
22. In the light of the above judgments, cross- examination and pleadings and also in the light of the Provisions of the Act, the learned judge held that the plaintiff does not have a valid licence to carry on the business and also held that a person unless he obtains the valid lincence from the competent authority for doing business he cannot approach the Court for relief of recovery of money. Section 11 of the Act very much clear that unless licence is produced this Court cannot grant any reliefs. It is clear that merely extending loan to his colleagues that itself is not a business. The plaintiff has not proved that Ramakrishna has put signature on the pro-note. While filing the suit, Ramakrishna who has executed pro-note 14 was no more. The suit was filed against the wife and children of the deceased. When, such is the case, the burden shifts on the plaintiff to prove. Nothing prevented the plaintiff to prove the signature of Ramakrishna by any other person. The plaintiff has not proved his case in proper perspective. The plaintiff has not established that he has obtained licence for doing money lending business. The Court below has rightly appreciated the evidence both oral and documentary evidence available on record and the Court below is right in dismissing the suit. The evidence produced by the plaintiff is insufficient to prove his case. Hence, I answered Issue No.1 and 2 as observed above. The findings of the Court below is sound and proper. Accordingly, appeal is dismissed.
Sd/-
JUDGE NM