Gujarat High Court
Manish Kiritkumar Shah vs L S Ramnani on 28 December, 2016
Author: Biren Vaishnav
Bench: Biren Vaishnav
R/CR.MA/10883/2008 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 10883 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE BIREN VAISHNAV
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
==========================================================
MANISH KIRITKUMAR SHAH,MANAGING DIRECTOR,MANBA FINANCE, &
1....Applicant(s)
Versus
L S RAMNANI, INSPECTOR OF MONEYLENDERS & 1....Respondent(s)
==========================================================
Appearance:
MR RUSHABH R SHAH, ADVOCATE for the Applicant(s) No. 1 - 2
MR RUTVIJ OZA, ADDL PUBLIC PROSECUTOR for the Respondent(s) No. 2
RULE SERVED BY DS for the Respondent(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 28/12/2016
Page 1 of 13
HC-NIC Page 1 of 13 Created On Thu Dec 29 00:50:48 IST 2016
R/CR.MA/10883/2008 CAV JUDGMENT
CAV JUDGMENT
1. This Criminal Miscellaneous Application has been filed by the applicants - original accused against whom a criminal case being Criminal Case No. 242 of 2008 has been registered in the Court of the Metropolitan Magistrate, Court No.20, Ahmedabad.
2. The Inspector of Moneylenders has filed such complaint against the accused Manba Finance Ltd, a company registered under the Companies Act, 1956 for breach of provisions of Sections 5, 18, 19, 25 and 32(1) of the Bombay Money Lenders Act, 1946. According to the complainant, the accused company was, therefore, liable for prosecution under Sections 32(2) and 34(a) and 34(b) of the Bombay Money Lenders Act 1946. The learned Metropolitan Magistrate Court No.20 issued process vide order dated 20/2/2008.
2.1 According to the version as narrated in the complaint, after serving notice under Section 13(A) of the Bombay Money Lenders Act, 1946 (hereinafter referred to as "The Act"), the Inspector inspected the Books of Accounts, Loan Accounts and other documents of the accused Company. On such inspection, it was found that the Company has been registered as a "Company" under the Companies Act of 1956. The Registered Office is at Mumbai and a branch thereof is in Ahmedabad. The Company, according to the complaint advances loan for purchase of Vehicles.
2.2 If the averments in the complaint are perused, it is the case in the complaint that the Company had applied for a Page 2 of 13 HC-NIC Page 2 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT license on 4/7/2007 under the Bombay Money Lenders Act, 1946. However, thereafter on 27/08/2007, the applicant withdrew the application and therefore no fresh license was issued to the Company. The complaint thereafter explains in detail the procedure that the Company undertakes to advance loans to its customers who are prospective vehicle owners. Dealers from whom the customer is to purchase a vehicle are paid a part of the consideration of the price of the vehicle know as Margin Money and for the remaining amount a proposal for Loan is prepared known as the "Proposal for Finance of Motor Vehicle under the Loan Scheme". A hypothecation agreement is entered into whereby the vehicle's ownership remains with the purchaser, however, the Company has the first charge. Thereafter, a letter of continuity is issued, payment authorisation is made, a security letter is issued and the Registration Book carries a hypothecation in favour of the company. A Promissory Note and post dated cheques towards equal monthly installments are obtained and therefore admittedly the entire transaction is an act of advancing a loan as a money lender by the Company at an interest on the basis of a Promissory Note and therefore the money advanced is a "loan"as defined under Section 2(f) of the Act. Instances have been cited in the complaint where loans have been advanced for the purchase of an auto rickshaw to a person who drives such auto rickshaw as part of his avocation, a customer who has obtained loan for purchase of a Hero Honda Passion Motorcycle for his personal use and a Hero Honda Splendor Bike for his personal use.
2.3 The case in the complaint therefore is that, the company Page 3 of 13 HC-NIC Page 3 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT being in the business of money lending, which means the business of advancing loans at an interest exceeding a prescribed rate, as is shown from the narrative of individual accounts as instances of loan transactions, gives out loans not to a trader and therefore there is a breach of the provisions of the Act exposing the company to prosecution under the penal provisions of the Act.
3. Shri Rushabh Shah, learned advocate for the applicant has vehemently contended that the loan advanced by the Company is a "loan" to a "trader" and therefore the same does not come within the purview of definition of "loan" as defined under Section 2(9) of the Act in view of the fact it falls within the exception of sub-clause (g) of clause (9) of Section 2 as a loan to a trader. According to Shri Shah, on the reading of the grounds stated in the petition, it is apparent that the loan is advanced to traders who carry out a transport business and therefore the same is not a loan and therefore cannot come as a loan under the purview of the Act and therefore the assumption of jurisdiction by the Inspector is unwarranted and without authority of law.
3.1 Reliance is placed on the decision of this Court annexed as ANNEXURE B to the petition. In the submission of Shri Shah, the case on hand is identical to the one which this Court decided in Criminal Miscellaneous Application No. 255 of 2001 in the case of Sundaram Finance (SFL) And Others vs State Of Gujarat, where the Court held that when the loans are advanced by a Company incorporated under the Companies Act, 1956 for purchase of vehicles for business purposes and the beneficiary of such a loan is purchasing Page 4 of 13 HC-NIC Page 4 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT such vehicles for transport business, the beneficiary of loan being a trader, the transaction cannot be termed as a loan as defined under Section 2(9) of the Act. In the submission of Shri Shah, the applicant is also advancing loans for such vehicles and therefore the decision would apply in the facts of the case and therefore the complaint ought to be quashed as the provisions of the Bombay Money Lenders Act,1946 are not attracted.
3.2 Reliance is also placed on the decision of this Court in the case of Shriram Transport Finance Company Ltd vs. State of Gujarat and Others rendered in Criminal Misc. Application No. 15243 of 2008 to contend that the Applicant is a Non- Banking Financial Company (NBFC) and therefore it is exempted from the provisions of the Act. No other contention has been raised by the learned advocate except making out a case of non-applicability of the Act as
(a) the accused company is not in the business of money lending by advancing loans as the loans so advanced are advanced to traders and therefore as per section 2(9)(g) of the Act, the same does not come under the definition of "loan" and therefore covered by the decision rendered in the case of Sundaram Finance (Supra) and
(b) in the case of Shriram Transport (supra), a non- banking financial institution holding a license under the Reserve Bank of India Act is not under the control or purview of the Bombay Money Lenders Act, 1946. Nothing is produced on record to show that the applicant is a Non Banking Financial Company with a license so granted under the Reserve Bank of India Act as an NBFC. There are no averments to that effect in the Page 5 of 13 HC-NIC Page 5 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT application too. In fact when the complaint and the present application are closely read, the case is only based on the fact of the question of whether the money advanced can be termed as a "loan".
(c ) that the Company is registered as a Finance Company under the Companies Act,1956 is the only other averment as made in the Complaint and the Petition.
4. Shri Rutvij Oza, learned Additional Public Prosecutor, on the other hand, has read the complaint to contend that the averments in the complaint prima-facie make out a case of breach of provisions of the Act. He submitted that the judgement of Sundaram Finance is not applicable and in fact the case is covered by the decision of this Court in the case of Bagmar Finance Limited versus State Of Gujarat reported in 2009(2) GLR 1528. The case of Sundaram Finance (supra) cited by the applicant is not applicable and in fact it is the case of Bagmar Finance (Supra) that applies.
4.1 According to Shri Oza, even otherwise the case of Shriram Transport (supra) which is based on the decisions of this Court in case of Radhe Estate Developers and Sundaram Finance Limited reported in 2011(2) GLH 584 and 2010(2) GLR 1529 cited by the learned advocate for the applicant are not applicable to the facts of the case as the case on hand is not that of a Non Banking Financial Institution. According to Shri Oza, even the subsequent decision in the case of Sundaram Finance Limited vs. Page 6 of 13 HC-NIC Page 6 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT State of Gujarat reported in 2012 (CJ) Gujarat 1095 rendered by the Division Bench in Special Civil Application No. 6223 of 2011 dated 6/09/2012 which has been heavily relied upon by Shri Rushabh Shah would not apply.
4.2 In the submission of Shri Oza, therefore, the application should be dismissed as it is not a case which deserves interference under the exercise of powers under Section 482 of the Code of Criminal Procedure,1973 and the machinery under the penal provisions of the Act must be permitted to act in due course without being intercepted at the threshold.
5. It is light of these submissions that the case on hand needs to be examined. Averments made in the complaint examined in light of the factual instances of loans cited therein show that, one Udayraj Ramdeo Kori, a Rickshaw Driver has obtained a loan of Rs.85,000 for a CNG Auto Rickshaw. 30 monthly installments of Rs.3896/- have been shown as EMIs totalling to an amount of Rs.1,16,880/-. The Auto Rickshaw is a source of his personal avocation of occupation. Similarly one Sanjay Navinbhai Mudaliar had obtained a loan for an Auto Rickshaw for self-employment. Mafatlal Pratapji is another beneficiary of the loan who has purchased a Hero Honda Passion Motorcycle for which a loan of Rs 37,000 is sanctioned at an EMI of Rs 1335/- and the total amount due with interest therefore is Rs.48,060/. Ankur Bharatbhai Shah has secured a loan for purchase of a Hero Honda Splendour for Rs.34,000 and the EMI is Rs.1397/- per month and therefore the amount due would be Rs.41,910/-.
5.1 Loan cum Hypothecation Agreement, Letter of Page 7 of 13 HC-NIC Page 7 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT Continuity, Promissory Note, Registration Book of each of such customers have been relied upon by the Inspector to support his case and to show that the amount of money advances is a loan and therefore the company, a company registered under the Companies Act,1956 is a company advancing loans for vehicles and operating without a license. Application for a license was made on 4/7/2007 and subsequently withdrawn on 27/8/2007. The complaint therefore states that no fresh license has therefore been issued to the Company. Nothing has been stated in the application to dispute this fact in the complaint.
5.2 All these transactions are, therefore, loans advanced at a rate of interest beyond the prescribed limit under the Act making the Company responsible for the breach of the provisions of the Money Lending Act.
6. Sundaram Finance (supra) rendered in Criminal Miscellaneous Application No.255 of 2001 was a case where the complainants were themselves loanees who were traders in transport business and had sought advances for purchase of trucks for transport business. It was not in dispute that such loans were for the purpose of business. Under such circumstances, the Court held that, in view of Section 2(9)(g) of the Act such transactions were not "loans" as defined and therefore the Act did not apply. Mr Shah in his submission that the applicant Company also has advanced loans for transport business and therefore covered by this decision is not right to state so. The instances cited by the complainant in the complaint are evidently cases where the loan amount was sanctioned and the recipients thereof had Page 8 of 13 HC-NIC Page 8 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT purchased vehicles for self sustainment and for personal use and not as "traders" as defined under Section 2(18) of the Act. The case on hand therefore is, on the contrary and therefore covered by the decision of this Court rendered in the case of Bagmar Finance (supra). Paragraph 10 to 14 of the decision in Bagmar Finance (supra) is reproduced hereunder:
"10. In the present case, it is the case on behalf of the petitioners that loan has been given to person for purchasing Rickshaw therefore, same is given to "TRADER'. It is further submitted by Mr. Gupta, learned Advocate appearing for the petitioners that looking to the definition of 'LOAN' and 'TRADER' it cannot be said that while giving finance/loan to person for purchasing Rickshaw provisions of Moneylender Act are attracted and therefore, license is not required. Mr. Gupta, learned Advocate for the petitioners has relied upon definition of 'TRADER' by submitting that person who has taken loan / finance for purchasing Rickshaw can be said to be contractor. Therefore, petitioners are not required to obtain any license as required under the Act. Aforesaid submission is required to be rejected outright. Person who has taken loan/finance for purchasing Rickshaw cannot be said to be 'contractor' at all. Such person cannot come within the definition of 'TRADER'. 'Trader' means person who in the regular course of business buys and sells goods or other property, whether movable or immovable and therefore, Rickshaw driver cannot be said to be person who in the regular course of business buys and sells goods or other property, whether movable or immovable. Certainly he cannot be said to be 'contractor'. It is the contention on behalf of the petitioners that when loan is given to person to buy Rickshaw it can be said to be 'loan to trader' and therefore, provisions of the Act would not be attracted and/or license is not required cannot be accepted. Giving finance / loan to a person to purchase Rickshaw can be said to be within the definition of 'LOAN' Page 9 of 13 HC-NIC Page 9 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT attracting Section 5 and other relevant provisions of the Act for which license is required. It cannot be disputed that the petitioner no.1 cannot be said to be 'moneylender' within the definition of 'MONEYLENDER' under the Act. It is admitted position that petitioner no.1 has not obtained any license as required under the Act. Therefore, it appears that petitioners have committed breach/contravention of the provisions of the Act for which the petitioners are to be tried.
11. Learned Advocate for the petitioners has relied upon the decision of the Hon'ble Supreme Court in the case of Sundraram Finance Ltd.(supra), however, the said decision would not be helpful to the petitioners as controversy before the Hon'ble Supreme Court was with respect to definition of sale in Section 2(f) of Hire Purchase, Sale of Goods Act and Travancore - Cochin General Sales Tax Act.
12. Now so far as the reliance placed upon decision of this Court rendered in Criminal Misc. Application No. 255 of 2001 is concerned, said judgment will not be applicable to the facts of the present case as admittedly in the said case it was found that complainant had taken financial assistance from the Company and said loan was utilized for transport business. Therefore, on facts considering definition of 'TRADER' learned Single Judge found that 'LOAN' given to such person was not 'LOAN' attracting the provisions of the Act which required license. In the present case, as stated above loan/finance is not for transport business and person who has taken loan cannot be said to be 'TRADER' or 'Contractor'. Therefore, the contention on behalf of the petitioners that the petitioners have not committed any offence and/or are required to obtain license under the Act, cannot be accepted. Now so far as the contention on behalf of the petitioners that there is non- compliance of Section 200 of the Cr.P.C. in as much as original complainant is not examined on oath is concerned, same also has no substance. It cannot be disputed that original complainant is a Government Public Servant and, therefore, considering Section 200 of the Cr.P.C., when the Page 10 of 13 HC-NIC Page 10 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT complaint is made in writing, the Magistrate need not examine the complainant and the witnesses, if a public servant acting or purporting to act in the discharge of his official duties or a Court has made the complaint. Under the circumstances, it cannot be said that requirement of Section 200 are not complied with. In the facts and circumstances of the case, it cannot be said that the learned trial Court has committed any error in taking cognizance.
So far as the contention on behalf of the petitioners that petitioner no.2 is concerned, impugned complaint deserves to be quashed and set aside as there is no whisper in the complaint that he was in charge and responsible for the affairs of the company at the time when alleged offence was committed is concerned, same has also no substance as there are specific averments in the complaint that petitioner no.2 is responsible Director of the Company.
13. Now so far as the contention on behalf of the petitioners that 'hire purchase agreement' cannot be equated with 'loan agreement' is concerned, same has also no substance. As held by the Hon'ble Supreme Court in the case of Sundraram Finance Ltd.(supra), 'hire purchase agreement' can be said to be 'loan agreement'. It is not in dispute that agreement entered into between petitioner no.1 - Company and the person who has taken loan/finance is for recovery of loan amount with interest but in installments. Therefore, it can be said that same is to advance loan with interest and attracting provisions of the Act. Now so far as the contention on behalf of the petitioners that condition under Section 35 of the Act has not been complied with has also no substance. In para -14 of the complaint there are specific averments which are required under Section 35 of the Act.
14. In view of above facts and circumstances of the case and observations, it cannot be said that the petitioners have not advanced loan as contemplated under the provisions of the Act which requires license under the Act. Admittedly, in the present case license is not obtained and the Page 11 of 13 HC-NIC Page 11 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT petitioners are doing business of money lending attracting provisions of Money lenders Act. Therefore, when the impugned complaint / criminal case has been filed same is not required to be quashed and set aside in exercise of powers under section 482 of the Cr.P.C."
7. The decision in the case of Bagmar Finance (supra) therefore answers the twin contentions against the applicant namely that the loan cannot be said to have been advanced to a trader and that a hire purchase agreement is a loan agreement. Contents of the Agreement produced at Annexure C to the application make it evident that the agreement is a loan agreement.
8. As far the decisions in the case Shriram Transport (supra) and Sundaram Finance Limited vs. State of Gujarat reported in 2012 CJ(Guj) 1095 and Radhe Estate (supra) are concerned, they are in the context of Non Banking Financial Companies registered and holding a license under the Reserve Bank Of India Act. Even from the averments in the application filed, it can be seen that it is not even the case of the accused that as they are holding licenses under the Reserve Bank of India Act as a Non Banking Financial Institution, they are not governed under the Bombay Money Lenders Act,1946. In absence of such pleadings and in view of the categorical averment in the complaint stating that an application for license made under the Money Lenders Act was applied for and then withdrawn and hence a new license (fresh license) was not issued, would not help the applicant, as the judgements cited hereinabove by learned advocate for the applicant would not be applicable to the facts of this case.
Page 12 of 13HC-NIC Page 12 of 13 Created On Thu Dec 29 00:50:48 IST 2016 R/CR.MA/10883/2008 CAV JUDGMENT
9. Accordingly the application seeking a prayer to quash the Criminal Complaint being Criminal Case No. 242 of 2008 filed before the Court of the Metropolitan Magistrate, Court No. 20, Ahmedabad is not entertained and the prayer to seek quashing of the same is rejected. Application accordingly stands rejected. Rule is discharged. Interim relief, if any, stands vacated.
(BIREN VAISHNAV, J.) divya Page 13 of 13 HC-NIC Page 13 of 13 Created On Thu Dec 29 00:50:48 IST 2016