Madras High Court
A.Gunasekaran vs P.Velusamy on 23 October, 2013
Author: K.B.K.Vasuki
Bench: K.B.K.Vasuki
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.10.2013 CORAM: THE HON'BLE Ms.JUSTICE K.B.K.VASUKI Crl.O.P.No.15010 of 2009 and M.P.No.1 of 2009 A.Gunasekaran .. Petitioner Vs. P.Velusamy .. Respondent Criminal Original Petition is filed under Section 482 of the Code of Criminal Procedure, praying to call for the records and to quash the private complaint proceeding pending against him in CC.No.331/2008 on the file of the Judicial Magistrate, Palladam. For Petitioner : Mr.P.M.Duraiswamy For Respondent : Mr.P.Suresh O R D E R
The petitioner herein is the accused in CC.No.331/2008 on the file of the Judicial Magistrate, Palladam, arising out the private complaint filed by the respondent/complainant for proceeding against the accused under Section 138 of Negotiable Instruments Act.
2.The complaint proceeds as if the accused approached the complainant on 10.5.2007 and borrowed Rs.2 lakhs for his family expenses and agreed to pay interest at 24%pa to the complainant and the accused has, on the same date also executed a promissory note for the above amount in favour of the complainant. Thereafter, the accused failed to pay interest for the borrowed amount, which compelled the complainant to demand entire amount with interest on 3.10.2008 on which date, the accused issued a cheque for Rs.2,66,000/- towards discharge of his liability as demanded in the promissory note. When the same was presented for collection, it was returned dishonoured for want of sufficient funds and the accused was informed the same through statutory notice and inspite of the same, he failed to pay the amount, which is the cause of action for filing the present complaint.
3.After having entered appearance, the accused has come forward with this petition to quash the proceedings pending against him in CC.No.331/2008 on the sole ground that as the interest chargeable at 24%pa is prohibited under Section 3 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 (hereinafter shortly referred to as Tamil Nadu Act 38/2003) r/w Section 7 of the Money Lenders Act 1957 and G.O.Ms.No.406 Co-opeation Department dated 5.7.1979, it cannot be enforced in any court of law. It is contended herein that the relevant provisions of law under section 138 of the Negotiable Instruments Act can be attracted only when the accused fails to discharge either in full or in part any legally enforceable liability and as the debt of Rs.2,66,000/- admittedly represents both principal and interest at 24%pa which is exorbitant and objectionable under interest Act, the same cannot be legally enforced against the accused, as such, ingredients for the offence under section 138 are not attracted against the accused.
4.Both the parties for and against the legal objection so advanced herein, cited the following authorities:
On the side of the petitioner:
(i)AIR (39) 1952 Madras 579 (C.N. 537) (Chandra Sreenivasa Rao v. Korrapati Raja Rama Mohana Rao and another) On the side of the respondent:
(i)CDJ 2010 MHC 1963 (Indiabulls Financial Services Limited v. M/s.Jubilee Plots and Housing Pvt. Ltd and others; and
(ii)CDJ 2012 MHC 2307 (Sri Kalpatharu Financiers by its Partner K.Selvaraj v. V.Natarajan.
5.Heard both sides and perused the records.
6.In the case cited on the side of the petitioner, our High Court dealt with the question as to whether amount advanced under a promissory note for the purpose of celebrating a marriage contrary to the provisions of the Child Marriage Restraint Act of 1929, is recoverable. The issue was decided in the light of Sections 10 and 23 of the Indian Contract Act and under the provisions of the Child Marriage Restraint Act. It is held by our High Court that the word 'object' in Section 23 of the Contract Act was not used in the same sense as 'consideration' but was used as distinguished from consideration and means 'purpose or design'. If then the purpose of the parties was to defeat the provisions of the Bankruptcy Law, there can be no doubt that the assignment or transfer would be inoperative under the provisions of Section 6 of the Transfer of Property Act. Our High Court by following other judgments, as referred to in the same judgment, observed that if the object of the transfer of the property is immoral, the transfer is void and there cannot be any conveyance of any interest effected by the transfer. The issue raised therein was appreciated in the light of such principle and was ultimately decided that as the act of a guardian or parent in celebrating the marriage of his minor or ward is also against public policy, and as the object of the loan is also to enable the guardian to perform an act contrary to the public policy, the purpose of the borrowing is unlawful within the meaning of Section 23 of the Indian Contract Act and therefore, the promissory note is not enforceable.
7.Insofar as other two cases cited on the side of the respondent are concerned, they arise out of the Tamil Nadu Money Lenders Act and Tamil Nadu Prohibition of Charging Exorbitant Interest Act 2003, having the identical issue. The learned brother Judge M.Jayapaul J has in para 20 of the judgment in the first case held that both the Tamil Nadu Money Lenders Act, 1957 and the Tamil Nadu Prohibition of Charging Exorbitant Interest Act would not apply to money lenders, who advance loans on the basis of negotiable instruments exceeding Rs.10,000/-. The same view was upheld by the Division Bench in the second case cited on the side of the respondent and it is held therein that a person referred to in Section 3 of Act 38 of 2003 and the 'money lender' as referred to in Section 2(8) is not applicable to the loan transaction between two parties where the loan is on the basis of a negotiable instrument and the provisions of the two acts are not applicable to the case on hand.
8.There can be no dispute about the legal position laid down in the judgments cited on both sides. In the present case, the specific allegation raised in the complaint is that the accused borrowed money for his family expenses and having agreed to repay the amount with interest at 24%pa, executed a pro note for the amount in question. The complainant has also along with the complaint, stated the list of documents, first of which is the xerox copy of the pro note dated 10.5.2007 executed by the accused in favour of the complainant.
9.It is sought to be contended by the learned counsel for the respondent as the borrowal is supported by pro note, both the provisions of law under the Money Lenders Act and Tamil nadu Act 38 of 2003 are not applicable to the loan transaction in hand in the present case. This Court finds much legal force in the contention so raised on the side of the respondent. Though an argument is sought to be advanced on the side of the accused that the definition of 'loan' and 'money lender' in this case is different and distinct, this court is not inclined to accept such contention at this stage on the following reasons.
10.Section 2(6) of Money Lenders Act defines 'loan' means an advance whether of money or in kind at interest and includes any transaction which the Court finds in substance to amount to such an advance, but does not include (i)..to (v)..., (vi) an advance made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act 1881 exceeding rupees ten thousand. Section 2(8) defines 'money lender' means a person whose main or subsidiary occupation is the business of advancing and realising loans, but excludes a bank or a co-operative society. Section 7 provides for "interest and charges allowed to money lenders". It says no money lender shall charge interest on any loan, at a rate exceeding such rate as the Government may, by notification, fix from time to time. Thus, the combined appreciation of definition under Sections 2(6)(vi), 2(8) and 7 would undisputedly explain that the loan transaction involved in the present case does not fall within the ambit of Money Lenders Act.
11.Like wise, Section 2(6) of the Tamil Nadu Act 38 of 2003 defines 'loan' means an advance of money for daily vatti, hourly vatti, kandhu vatti, meter vatti or thandal. Section 2(7) provides 'meter vatti', means an interest which will work out to an interest rate more than that fixed by the Government under section 7 of the Money Lenders Act, for every day on the loan amount not paid within the stipulated time. Section 3 prohibits charging of exorbitant interest', under this provision, no person shall charge exorbitant interest on any loan advanced by him. Section 4 provides for 'Penalty' which says notwithstanding anything contained in the money lenders Act, whoever contravenes the provisions of Section 3 or molests or abet the molestation of any debtor for recovery of any loan shall be punishable with imprisonment for a term which may extend to three years and also with fine which may extend to third thousand rupees. Section 12 provides for 'application of provisions of Tamil Nadu Money Lenders Act', and says subject to the provisions of this Act, the provisions of the Money Lenders Act, insofar as they are applicable to Money Lenders shall mutatis mutandis apply to a person referred to in section 3 of this Act.
12.The combined reading of the Sections 2(6), 3, 4 and 12 would lead to an interpretation that the definition of 'loan' and 'money lender' as defined under the Money Lenders Act is also applicable to 'loan' and 'a person' as referred to under Section 3 of the Tamil Nadu Act 38/2003. Non-obstante Clause in Section 4 is applicable only to penalty and the penalty imposed under section 4 is to be construed as in addition to penalty cause as provided under the Money Lenders Act. Similar view was expressed by the Division Bench of our High court in the judgment cited above. In the event of such interpretation, the advance made on the basis of negotiable instrument exceeding Rs.10,000/- would not fall under the definition of 'loan' and fall outside the purview of the Act and the defence advanced by the accused for seeking quash is not available to the accused and no valid ground is made out to quash the proceedings at the threshold. In view of such finding rendered herein, the authority cited on the side of the petitioner herein is not applicable to the facts of the present case. However, the petitioner is at liberty to raise all the defence available to him including that of the ground raised herein at appropriate stage before the trial court.
13.In the result, this Criminal Original Petition is dismissed, with liberty given to the petitioner to raise all the defence available to him including that of the ground raised herein at the appropriate stage before the trial court. The trial court is directed to deal with the same and dispose of CC.No.331/2008 on merits and in accordance with law, without influencing any of the observations if any made in this order, as expeditiously as possible, preferably within three months from the date of receipt of the copy of this order. Consequently, connected Miscellaneous Petition is closed.
23-10-2013 rk Index:Yes/No Internet:Yes/No To
1.Judicial Magistrate, Palladam.
K.B.K.VASUKI, J.
rk Crl.O.P.No.15010 of 2009 23-10-2013