Madras High Court
Chennai Financers Welfare Association vs State Of Tamil Nadu on 30 August, 2022
Author: Munishwar Nath Bhandari
Bench: Munishwar Nath Bhandari
W.P.No.23426 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.08.2022
CORAM :
THE HON'BLE MR.MUNISHWAR NATH BHANDARI, CHIEF JUSTICE
AND
THE HON'BLE MRS.JUSTICE N.MALA
W.P.No.23426 of 2022
and W.M.P.No.22380 of 2022
Chennai Financers Welfare Association
Rep. by Executive Committee Member,
Akash Jain, No.51, Hunters Road,
Choolai, Chennai 600 112. .. Petitioner
vs
1. State of Tamil Nadu,
Rep. by its Secretary to the Government,
Home Department, Fort St. George,
Chennai 600 009.
2. The Director General of Police,
Chennai 600 004, Tamil Nadu. .. Respondents
Prayer: Petition filed under Article 226 of the Constitution of India for
issuance of a Writ of Declaration to declare Section 4 of the Tamil
Nadu Prohibition of Charging Exorbitant Interest Act, 2003 and the
Circular dated 07.06.2022 passed by the Director General of Police as
unconstitutional and to forbear the respondents from taking coercive
action against the members of the petitioner Association/Financers
who advance money against Negotiable Instruments Act exceeding
Rs.10,000/- and/or against security.
Page 1 of 11
https://www.mhc.tn.gov.in/judis
W.P.No.23426 of 2022
For the Petitioner : Mr.AR.L.Sundaresan
Senior Counsel
for Mr.Muthucharan Sundresh
For the Respondents : Mr.P.Muthukumar,
State Government Pleader,
assisted by
Mr.M.Alagu Goutham,
Govt. Advocate
*****
ORDER
(Order of the Court was made by the Hon'ble Chief Justice) The writ petition has been filed to challenge the constitutional validity of Section 4 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 (hereinafter will be referred to as 'the Act of 2003') and also the Memorandum dated 07.06.2022 issued by the Director General of Police, Tamil Nadu.
2. The learned Senior Counsel for the petitioner submits that the Memorandum dated 07.06.2022 has been issued in ignorance of the provisions of the Act of 2003 so also the Tamil Nadu Money- Lenders Act, 1957. In view of the above and as the Memorandum Page 2 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 would have serious consequences on those involved in the trade of finance, the writ petition has been filed. It is along with the challenge to the constitutional validity of Section 4 of the Act of 2003 in reference to Section 5 of the Act of 2003. A person borrowing loan cannot be given two remedies, one penal remedy and at the same time, a civil remedy. After arguing the case at length, the learned senior counsel for the petitioner submits that if necessary clarification to the Memorandum dated 07.06.2022 is given, he would not be required to press the writ petition in respect of challenge to the constitutional validity of Section 4 of the Act of 2003 at present, however, keeping the rights reserved to challenge it in subsequent proceedings, if so required.
3. The learned counsel has given reference to the previous judgment of this Court in reference to the prosecution cases under the Act of 2003. Taking the facts of the case into consideration, this Court ruled that the prosecution cannot be allowed under Section 4 of the Act of 2003 and accordingly, an order was passed in favour of the petitioner therein. The present writ petition is, however, filed by the Association and thereby, an individual case Page 3 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 has not been cited, but taking note of that fact that the issue remains subject matter of many litigations and judgments therein, the present writ petition has been pressed now in reference to the Memorandum dated 07.06.2022. It is mainly for the reason that the Memorandum may be grossly misused by the police officer by registering cases carrying penal consequences under Section 4 of the Act of 2003 when those cases may not fall under the Act of 2003.
4. While issuing the Memorandum in reference to the Act of 2003, the clarification has not been given restricting its application in reference to any transaction other than referred under the Act of 2003. It is more so when there are many Acts prevalent in the State of Tamil Nadu in regard to the regulation of finances and interest which may be under the Act of 2003, the Money-lenders Act, 1957 and under Central Act, namely, The Negotiable Instruments Act, 1881. If a case falls under the Negotiable Instruments Act, the action cannot be initiated under the Act of 2003 and similarly, if it is governed by the Act of 1957, Section 4 of the Act of 2003 cannot be invoked. The aforesaid has not been Page 4 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 clarified in the Memorandum, thus, necessity arose to file the writ petition.
5. We have considered the submissions made by the learned senior counsel for the petitioner and perused the Memorandum under challenge, while allowing the petitioner to take up the issue of constitutional validity of Section 4 of the Act of 2003 in future proceedings, if so required.
6. Since the Memorandum dated 07.06.2022 has been challenged, the same is reproduced hereunder:-
Office of the Director General of Police/HoPF Tamil Nadu, Chennai - 600 004.
C.No.152/DGP-TN/HoPF/Camp/2022 Dated: 07.06.2022 MEMORANDUM Sub: Police - "Operation Kathuvatti" - Prohibition of Charging of exorbitant interest - Instructions issued.
Ref: Act No.38 of 2003 - Tamil Nadu Prohibition of Charging Exorbitant Interest Act 2003.
-o0o-
In order to curb the menace of Kanthuvatti, all the Commissioners of Police and District Superintendents of Police are instructed to take action under "Prohibition of Charging of Exorbitant Interest Act 2003" with immediate effect.
1) Take out all complaints pending in all police stations against people who Page 5 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 are collecting exorbitant interest;
2) Take legal opinion and register case;
3) Search the premises with advance information to the jurisdiction court and seize all the incriminating documents, including empty pro-notes, signed or blank cheques and other connected documents/valuable securities;
4) Thorough follow up and successful prosecution.
This special drive is named "Operation Kanthuvatti". Officers who have done examplary work in this operation will be recognized in a separate occasion.
Director General of Police Head of Police Force, Tamil Nadu.
7. A perusal of the Memorandum shows it to be under the Act of 2003 and therefore, would apply only in the framework of the said Act and not beyond the aforesaid Act. To analyse the issue further for clarification, as prayed by the petitioner, definitions given under Section 2(1), 2(3), 2(4), 2(5), 2(6), 2(7) and 2(9) are reproduced hereunder, apart from Sections 3 and 4 of the Act of 2003:-
2. In this Act, unless the context otherwise requires, -
(1) "daily vatti" means interest on daily basis which will work out to an interest rate more than that fixed by the Government under section 7 of the Money-lenders Act;
(2) ...
(3) "exorbitant interest" means and includes daily vatti, hourly vatti, kandhu vatti, meter vatti and thandal;
(4) "hourly vatti" means interest on hourly basis which will work out to an interest rate more than that fixed by the Government under section 7 of the Money-lenders Act;
(5) "kandhu vatti" means an interest which will work Page 6 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 out to an interest rate more than that fixed by the Government under section 7 of the Money-lenders Act;
(6) "loan" means an advance of money for daily vatti, hourly vatti, kandhu vatti, meter vatti or thandal;
(7) "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* (8) ...
(9) "thandal" means interest which will work out to an interest rate more than that fixed by the Government under section 7 of the Money-lenders Act, which is to be collected daily along with the part of the loan amount;
..."
3. No person shall charge exorbitant interest on any loan advanced by him.
4. Notwithstanding anything contained in the Money-lenders Act, whoever contravenes the provisions of section 3 or molests or abets 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 thirty thousand rupees."
8. Section 3 reproduced above restricts exorbitant interest on any loan advanced by the person and in case of violation, the consequences are given under Section 4 of the Act, which starts with a non-obstante clause and accordingly, excludes the Money- lenders Act, 1957 from the purview of Section 4 of the Act of 2003. It is, however, necessary to refer to the definitions of 'daily vatti', 'hourly vatti', 'kandhu vatti', 'meter vatti' and 'thandal'. All these Page 7 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 definitions make a reference to the interest rate fixed by the Government under Section 7 of the Money-lenders Act, 1957 and "exorbitant interest" has also been defined and includes 'daily vatti', 'hourly vatti', 'kandhu vatti', 'meter vatti' and 'thandal'. In view of the aforesaid, the extent of application of the Act of 2003 is to be in reference to the type of transaction given under the Act, namely, 'daily vatti', 'hourly vatti', 'meter vatti', etc. It is also when the rate of interest charged therein remains exorbitant and not otherwise. In the light of the aforesaid, the Memorandum dated 07.06.2022 would apply only when the case falls under the Act of 2003 and not under any other Act.
9. At this stage, the learned senior counsel for the petitioner submits that when a reference of Money-lenders Act, 1957 has been given which restricts the loan amount upto Rs.10,000/-, it may further be clarified that any loan amount over and above would not be governed by the Act of 2003. A specific reference of the definitions of 'daily vatti', 'hourly vatti', 'kandhu vatti', 'meter vatti', etc. has been given where reference of interest under Section 7 of the Money-lenders Act, 1957 has been given. Page 8 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022
10. We have considered the aforesaid aspect also but do not find that the Act of 2003 imposes its application only when the loan amount is less than Rs.10,000/- and not beyond that. The reference of Money-lenders Act, 1957 and especially Section 7 has been given only in reference to the rate of interest and not to make the said Act applicable in a case which falls in the framework of 'daily vatti', 'hourly vatti', etc. The provision of Section 4 otherwise starts with a non-obstante clause to exclude application of the Money-lenders Act, 1957, for the purpose of imposition of penalty. In the light of the aforesaid, we are not in a position to agree with the proposition advanced by the petitioner to put a ceiling on the transaction amount for an action under Section 4 of the Act of 2003. It is, however, with the exclusion of any transaction governed by any other Act other than the Act of 2003. It may be Negotiable Instruments Act, 1881, the Act of 1957 or any other Act. The Act of 2003 would apply only to those transactions which are strictly governed by its provisions. The clarification in reference to the Money-lenders Act, 1957 has been given on the ceiling of the amount which would not be applicable for the action under the Act Page 9 of 11 https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 of 2003. It is, however, with the clarification that if the transaction between the parties falls under the provisions of any Act other than the Act of 2003, they would be governed by the provisions of the Act under which the transaction has been made.
With the aforesaid clarification, the writ petition is disposed of. No costs. Consequently, W.M.P.No.22380 of 2002 is closed.
(M.N.B., CJ.) (N.M., J.) 30.08.2022 Index : Yes/No sra To:
1. The Secretary to the Government of Tamil Nadu, Home Department, Fort St. George, Chennai 600 009.
2. The Director General of Police, Chennai 600 004, Tamil Nadu.Page 10 of 11
https://www.mhc.tn.gov.in/judis W.P.No.23426 of 2022 M.N.Bhandari, CJ.
and N.Mala, J.
(sra) W.P.No.23426 of 2022 30.08.2022 Page 11 of 11 https://www.mhc.tn.gov.in/judis