Kerala High Court
Monarch Investments St. Thomas Road, ... vs State Of Kerala And Ors. on 17 November, 1988
Equivalent citations: AIR1989KER177, AIR 1989 KERALA 177, (1989) 1 BANK CLR 446, (1989) 1 KER LT 51, (1992) 74 COMCAS 818
JUDGMENT Bhaskaran Nambiyar, J.
1. The provisions of the Kerala Money Lenders Act are in challenge in this batch of writ appeals and writ petitions. A learned single Judge rejected the claim and dismissed the writ petitions. Hence the appeals. The Act has been subsequently amended. Thus the new writ petitions.
2. Money Lenders including pawn brokers are the appellants or the writ petitioners.
Licence under the Act to carry on the business of money lending gives the money tenders a status and symbol which they would always gladly welcome. Rightly, therefore, there is no complaint against the insistence of a licence to conduct the business. But it is contended;
(1) that the fixation of a uniform licence fee of Rs. 1,000/- under Section 4(2) of the Act, not geared to the business turnover of the money lender is arbitrary;
(2) that the insistence of security on a graduated scale under Section 4(2A) is un-reasonable and arbitrary violating Article 19(1)(g) and Article 14 of the Constitution and (3) that the forfeiture of security as an additional penalty under Section 16A of the Act with no guidelines for the exercise of that power is arbitrary and opposed to Article 14.
3. It is, therefore, necessary to advert to the object and the scheme of the Act and to the relevant statutory provisions and amendments.
4. Money lending business in Kerala is statutorily controlled by the Kerala Money Lenders' Act, 1958. It was intended to regulate the business of money lending, restrict the interest to be charged by the money lenders and to safeguard the interests of the borrowers. Under Sections 3 and 4 of the Act, money lending business can be carried on or continued only under a licence obtained under the Act in the prescribed form on payment of a licence fee of rupees one hundred An application for licence can be refused (a) if the applicant has not complied with the provisions of the Act or the rules for making an application; (b) if the applicant has made wilful default in complying with or knowingly acted in contravention of any requirement of the Act or (c) that the applicant has (i) knowingly participated in or connived at any fraud or dishonesty in the conduct of or in connection with the business of money-lending; or (ii) been found guilty of an offence under Chapter XVII or Chapter XVIII of the Indian Penal Code( Central Act XLV of 1960); or (iii) been found guilty of an offence under Section 11 or Section 13 on two or more occasions; or (d) that the application is made within six months of the cancellation of the licence. Every money lender is also bound to exhibit over his shop or place of business, his name with the word "money-lender" and its equivalent in the regional language. The interest that couid be charged by him is also regulated by the Act This Act was amended in 1963 by the Amendment Act 33 of 1963 and subsequently by Act 11 of 1974 and later by the Kerala Finance Act, 1983, Act 19 of 1983. The material amendments made in 1983 are relevant for our purpose. Section 4(2) was substituted thus:--
"(2) Every licence shall be granted in such form as may be prescribed and shall be subject to the following conditions and to such other conditions as may be prescribed, namely : --
(i) payment of a licence of one thousand rupees;
(ii) payment of security as provided in Sub-section (2A).
Sections 4(2A) and 4(2B) were inserted which read: -
"(2A) Every licensee specified in column (1) of the Table below shall, within such time and in such manner as may be prescribed, deposit in the Government Treasury in respect of each licence held by him, the amount specified in the corresponding entry in column (2) of the said Table, by way of security for the due observance of the conditions of the licence.
Explanation,-- For the removal of doubts, it is hereby declared that a money lender who has branch or branches in the State of Kerala of his principal place of business situate outside the State shall be liable to deposit the security under this sub-section in respect of the branch or each of the branches, as the case may be.
TABLE (1) (2)
1. A licensee who lends less than one lakhs rupees in an year Five thousand rupees
2. A licensee who lends one lakh rupees or above but less than five lakh rupees in an year Ten thousand rupees.
3. A licensee w ho lends five lakh rupees or above but less than ten lakh rupees in an year Twenty-five thousand rupees.
4. A licensee who lends ten lakh rupees or above in an year Fifty thousand rupees.
(2B) For the purposes of Sub-section (2A), the amount lent by a licensee for the year for which the security is to be paid shall be deemed to be the aggregate amount lent, by him during the previous year:
Provided that in the case of a new licensee or a person who was a licensee only for a portion of the preceding year, the amount of security shall be determined on the basis of a declaration in the prescribed form as to the amount which he is likely to lend during the year, filed before the licensing authority in the prescribed manner".
A provision for forfeiture of security was also added which runs thus: --
"16A. Forfeiture of security :-- (1) The licensing authority may at any time, by order in writing forfeit to the Government the whole or any portion of the security furnished under Sub-section (2A) of Section 4.
(a) if the licensee carries on the business of money lending in contravention of any of the provisions of this Act or the rules made thereunder or the conditions of the licensee; or
(b) if the licensee is convicted of an offence under Section 9 or Section 11 or Section 13; or
(c) if the licensee maintains false accounts.
(2) Before forfeiting to the Government the whole or any portion of the security under Sub-section (1), the licensing authority shall give the licensee a notice in writing stating the grounds on which it is proposed to take action and requiring him to show cause against it within such time as may be specified in the notice.
(3) Every order of the licensing authority under this section shall be communicated to the licensee in such manner as may be prescribed".
In 1987 there was a further amendment under, Act 16 of 1987, under which Section 4(2A) was amended reading thus:--
" Explanation-- For the removal of doubts, it is hereby declared that a money-lender whose principal place of business is situate outside the State of Kerala and who has within the State of Kerala a branch office or branch offices or a liaison office or any other office by whatever name called, of his principal place of business shall be liable to deposit the security under this sub-section in respect of such branch or each of the branches or liaison office or any other office, as the case may be.
TABLE (1) (2)
1. A licensee who lends less than one lakh rupees in an year Five thousand rupees.
2. A licensee who lends one lakh rupees or above but less than five lakh rupees in an year Ten thousand rupees.
3. A licensee who lends five lakh rupees or above but less than ten lakh rupees in an year Fifty thousand rupees.
4. A licensee wholends ten lakh rupees or above, but less than twenty-five lakh rupees in an year One lakh rupees.
5. A licensee who lends twenty-five lakh rupees or above, but less than fifty lakh rupees in an year One lakh and fifty thousand rupees.
6. A licensee who lends fifty lakh rupees or above in an year Two lakh rupees".
A new provision, Section 11A was also added empowering an authority to demand additional security. This Section reads thus: --
"11A. Power to demand additional security:-- (1) Notwithstanding anything contained in Section 4, the Licensing Authority may demand from tht money-lender additional security at any time, if in the opinion of such authority there is excess of liabilities over the assets of the money-lender at that time.
Provided that, while determining the excess of liabilities over assets, the security furnished by the money-lender under Sub-section (2A) of Section 4 of this Act shall be treated as assets of the money lender:
Provided further that in respect of the loans advanced by the money-lender against security in any form, the Licensing Authority shall have power to revalue or determine the adequacy of the security or securities or revalue any assets for the purpose of determination of excess of liabilities over the assets.
(2) The additional security to be furnished by the money-lender under Sub-section (1) shall be equal to the amount of such excess of liabilities over the assets.
(3) The additional security referred to in this section shall be furnished in any of the following forms: --
(a) by deposit in the Government Treasury; or
(b) by deposit with such authority, of Government securities including National Savings Certificates; or
(c) by deposit in Post Office Savings Bank or a Scheduled Bank or a Co-operative Bank and pledging of the pass book thereof, with such authority; or
(d) by guarantee from a bank approved in this behalf by such authority agreeing to pay to the State Government on demand, the amount, of such additional security; or
(e) by surety bonds from sureties acceptable to such authority, for the amount of such additional security.
(4) The additional security furnished by the money-lender shall be retained till, in the opinion of the Licensing Authority, there exists excess of liabilities over the assets of the money-lender.
(5) The additional security retained under Sub-section (4) shall be utilised for the payment of the liabilities of the money-lender in connection with his business as money- lender, at the time of the winding up of the business or cancellation of the licence, as the case may be.
(6) Any money-lender from whom additional security is demanded under this section and who carries on business without furnishing such security within thirty days of such demand, shall be punishable with imprisonment which may extend to six months or with fine which may extend to two thousand rupees or with both".
5. Thus, the business of money lending in Kerala can be conducted only on the strength of licences granted under the Act The licence fee has, however, been enhanced from Rs. 100/- to Rs. 1000/- with effect from 1-4-1983. Apart from the licence fee, the money- lender has also to furnish security "for the due observance of the conditions of the licence" from April, 1983 onwards. The security to be furnished is in a graduated scale depending on the amount lent in a year, Rs. 5,000/- being the minimum security to be furnished by a licencee who lends less than one lakh rupees in an year, and rupees fifty thousand being the maximum security by a licencee who lends ten lakhs rupees or above in a year. A provision was also inserted in Section 16A, newly added, for forfeiture of security. These provisions were upheld by the learned single Judge by the decision now challenged in these appeals on 31st July, 1985. Subsequently, the Act was amended in 1987 enhancing the security to be furnished by certain classes of licencees, the maximum security being raised to two lakhs of rupees by a licencee who lends fifty lakhs of rupees or above in a year but maintaining the minimum security of Rs. 5,000/-. A new provision enabling the authorities to demand additional security was inserted under Section 11A. It is unnecessary to refer in detail to the other provisions of the Act in these cases, as the contentions raised before us lie in a short compass.
6. The first contention that is advanced is that the fixation of a uniform licence fee at Rs. 1,000/- irrespective of the volume of business carried on by a money-lender is arbitrary and violative of Article 14 of the Constitution. There is no case for the moneylender appellants or petitioners that this levy is excessive or oppressive and lies beyond their financial resources. Their ability to pay the fee is thus not in doubt It is common knowledge that the State or local bodies insist on licenses from those who desire to engage in business. Licensing as a part of the regulation of trade or business is invariably the legislative index of statutory control and is an accepted legal concept in commercial jurisprudence. A restraint on the carrying on any business by the regulatory process of licensing also enables the State for the imposition of condition and the fixation of fee, for the grant of licence. The licence fee may be a fixed sum for a particular trade or business, and considering the nature of the trade, whether it is injurious or dangerous to the public, a higher licence fee may be fixed for such trade or business. In those cases the licence fee is fixed not merely for the purpose of regulating the business, but also for the purpose of restricting or discouraging that particular trade. The amount of licence fee usually does not exceed the cost of issuing the licence and the expense of inspecting or regulating the business, especially in those cases where the licensing 'is for the purpose of promoting the trade or business. A higher licence fee for a trade inherently dangerous or generally injurious to public interest is aimed "to keep out of business those who are undesirable and to keep within reasonable limits the number of those who may engage in it'. A higher degree of regulation is justified for the smooth functioning of the private financial enterprises.
7. We have support for these principles in the decision of the Supreme Court in Har Shankar v. Dy. ET. Commr., AIR 1975 SC 1121 where Their Lordships have approved the passages from the American Jurisprudence thus :--
"While on this question, we may with advantage cite a passage from "American Jurisprudence" (Vol. 30, pages 642, 645) which is based on the decisions in Gundling v. Chicago, (1899) 44 Law ed 725; Phillips v. Mobile, (1907) 52 Law ed 578 and Richard v. Mobile, (1907) 52 Law ed 581. It says :
" The familiar principle that the imposition of license fees on useful and honourable occupations must not exceed the cost of issuing the license, plus the expense of inspecting and regulating the business licensed..... is not necessarily applicable to a liquor license. The liquor traffic is not something which is licensed for the purpose of promoting it. Indeed, license fees may be exacted in amounts intended to discourage participation in the business The courts have quite generally refused to hold that the license fee imposed, merely because it is large, is a tax, where the object is to control, regulate, and restrict, and not to encourage the liquor traffic, the revenue being the result of the system and not the motive for its adoption. ..... The higher the fee imposed for a license, it is sometimes said, the better the regulation, as the effect of a high fee is to keep out of the business those who are undesirable, and to keep within reasonable limits the number of those who may engage in it."
8. Broadly stated, money lending is business. But it has to be remembered that money lenders usually charged heavy interest, impose very onerous conditions for the grant of loans, and the poor debtor may, in almost all cases be compelled to sell his produce or part with his land Money lending as a business thus forms part of a pernicious trade requiring greater monetary regulation and control than those imposed on the normal trade or business. We do not denounce all money lenders, and as the Supreme Court stated in Fatehchand Himmatlal v. State of Maharashtra, (1977) 2 SCC 670 : (AIR 1977 SC 1825) :--
"May be, some stray money-lenders may be good souls and to stigmatise the lovely and unlovely is simplistic betise. But the legislature cannot easily make meticulous exceptions and has to proceed on broad categorisations, not singular individualisa-tions. So viewed, pragmatics overrule punctilious and unconscionable moneylenders fall into a defined group....."
"Every cause claims its martyr and if the law, necessitated by practical considerations, makes generalisations which hurt a few, it cannot be helped by the Court. ....."
" In this perspective, we see no constitutional flaw in the Act on the score that the sheep have not been divided from the goats, ....."
9. Money-lenders whether described as belonging to a "narrow noxious category" or ''as oppressive and back breaking", whether there are honest money lenders or unscrupulous money-lenders form a special class whose business require greater statutory control and supervision, and whose "freedom to fleece" has to be restrained in public interest When the statute aims to discourage large scale money lending and to reduce the number of persons engaged in this class of business, it cannot be held that the fixation of fee at Rs. 1,000/- for the licence under the Act is arbitrary or violative of Article 14 of the Constitution Licence fee in this case need not thus be geared to the volume of business carried on by the money-lender and a fixed licence fee for all money-lenders, whether he advances loans, or receives deposits, or he is only a pawn broker, is well within the permissible limits of classification. Even otherwise we are not satisfied that on the materials placed before us the licence fee demanded has no reasonable relation to the services rendered under the Act. We, therefore, reject the first contention.
10. The more serious contention that was pressed strongly was regarding the validity of Sections 4(2A) and 4(2B) inserted by the Amendment Act of 1983. It is urged that it is for the first time in 1983 that the Act compels security to be furnished by the licencee in addition to the payment of the license fee and these provisions, according to the petitioners and appellants, constitute unreasonable restrictions on their right to carry on the business of money lending and infringe Article 19(1)(g) of the Constitution. According to them, a graded scale of security is demanded under the Act which does not take note of relevant factors such as the amount invested in the business, the amount utilised for fending, the damages and risks involved in the business etc. If was said that the fixation of security in 1983 and the enhancement of the security in 1987 have not followed any rational basis and the present fixation only cripples the business-of honest money lending. This contention was sought to be pressed into service with several illustrations suggesting that the security tobe furnished is the last straw on the earners back. It was stated that the security to be furnished under the Act is on the basis of the aggregate of the amount lent in the previous year and if a sum of rupees one lakh is lent ten times in the same year, security has to be furnished for ten lakhs the next year and the security itself would be rupees two lakhs as amended in 1987, double the capital itself. It is said that there is no restriction in the number of times the same amount can be lent, for the sum available to be lent will naturally depend on the shorter period fixed for repayment and the promptitude in repayment Thus the one lakh capital invested and lent to different persons in the same year attracts a liability to furnish security of double the amount invested and this, it is contended, is plainly unreasonable, intended not to regulate money lending business but to prohibit the trade, which is not the object and intent of the provisions of the Act. We are afraid that this contention is advanced without understadning the true concept of the security demanded under the Act and the correct interpretation of Sections 4(2A) and 4(2B).
11. It has to be remembered that what is demanded under the Act is security from the money-lender, security to enable him to obtain a licence to commence his business as a money-lender and security which he has to furnish when the licence is renewed from time to time. Section 4 itself states that the security is demanded for "the due observance of the conditions of the licence". Security thus is insisted as an assurance for the fulfilment of the obligations as a money-lender and as a protection against economic vicissitudes inherent in this business. The stability of the financial system and the mutual recognition and trust generated between the money-lender and the borrower contribute to the efficiency of these private credit institutions of moneylenders. It is not sufficient if the money-lender professes himself to be stable, but the public should also be aware of the stability of these financial institutions. The insistence of security specified under the Act as a condition for the grant or renewal of a licence is the "public perception of stability" of this financial system.
12. The second aspect regarding security is that it is only in the first instance, when the money-lender commences his business that he makes an estimate of the amount that is likely to be lent that year and furnishes security on that basis, for, in subsequent years, the amount lent during the previous year forms the basis for furnishing security.
13. The third aspect is that the Act provides for furnishing additional security under Section 11A inserted in 1987. This additional security is demanded when the authority is of the opinion that there is excess of liabilities over the assets of the money-lender at any particular time. The security furnished under Section 4 is treated as an asset of the money-lender for this purpose. The additional security to be furnished has to be equal to the amount of such excess of liabilities over the assets and is retained till, in the opinion of the Licensing Authority, there exists excess of liabilities over the assets of the money lender. The additional security so retained shall be utilised for the payment of the liabilities of the moneylender in connection with his business as money-lender, at the time of the winding up of the business or cancellation of the licence, as the case may be. The additional security can be furnished either by deposit in the Government Treasury or in Government securities including National Savings Certificates or by deposit in Post Office Savings Bank or a Scheduled Bank or a Cooperative Bank and pledging of the pass book thereof or by providing bank guarantee or by surety bonds from sureties acceptable to the licensing authorities. The provisions, therefore, of furnishing security and additional security under the Act have to be treated as one integrated scheme, the securities in both the cases being intended to achieve the same object of protecting the borrowers and safeguarding the stability of the money lending institutioa Thus the initial security itself under Section 4 is to cover the liabilities which may not exceed the assets. When once the liabilities exceed the assets, Section 11A is immediately attracted and the liability to furnish additional security arises. There is thus no difference in the character of security required under Section 4 a'nd the additional security demanded under Section 11A of the Act.
14. The third aspect to be noticed is that the security under Section 4 is on the amount lent in the previous year, the higher the amount, the greater the security subject to the maximum ceiling of two lakhs under the 1987 Amendment. Section 4(2B) however, states that for the purposes of Sub-section (2A), "the amount lent by a licencee for the year for which the security is to be paid shall be deemed to be the aggregate amount lent by him during the previous year". It is based on this provision that the contention is advanced that the recycling of the same amount as loan to different persons in the same year can take the aggregate amount lent by him exceed even the capital utilised for lending. This Sub-section (2B) speaks "of the amount lent by the licencee for the year for which the security is to be paid" and by a statutory fiction "the aggregate amount lent" during the previous year is reckoned as the amount lent in that year. When the amount lent in an year is the basis for the security to be paid, and the total amount Lent for that year has to be taken note of, it seems to be clear that it is the total amount utilised for lending in the previous year that furnishes the guide for the security for the current year. Thus if one lakh alone was utilised for the purpose of lending, the fact that the same amount was lent to different persons the same year does not increase the total amount lent; the total amount lent remains at rupees one lakh. "The aggregate amount lent" in Sub-section (2B) has thus to be understood as the aggregate amount utilised for lending It is not the aggregate amount of the total turnover, nor is it the amount intended to be invested in the business of lending. It is the actual amount invested and utilised for lending, that constitutes "the aggregate amount lent" contemplated under this sub-section. The authorities under the Act are thus bound to demand security under Section 4(23) on the above basis on the interpretation given to the expression "the aggregate amount lent" and if in any case, security demanded from any money-lender under Section 4 has been on any other basis, it will be open for the petitioners, and other similarly situate to move the authorities, or the authorities may take action suo motu to revise the amount of security needed under Section 4. The apprehension of the petitioners/ appellants that the implementation of Sections 4(2A) and 4(2B) will seriously affect their business is thus not justified and these provisions cannot be characterised as unreasonable restrictions on the right to carry on the business of money fending.
15. On behalf of the pawn brokers, it was contended that the Act insists that articles pawned have to be insured and there is thus no necessity to compel them to furnish security also. Pawn brokers also are included in the definition of money lender and a licence is granted only to a money-lender. It is the licence as a money-lender that enables him to be a pawn broker as well; but when he acts as a pawn broker, he has to submit himself to further restrictions under the Act A pawn broker may at any time, cease to be a pawn broker and function as an ordinary moneylender also. To say, therefore, that a licencee as a money-lender need not furnish security when he is only a pawn broker, will be opposed to the pattern of licensing and security insisted under the Act. Moreover, the insurance of the article pawned does not protect the pawner from the misdeeds or manipulations of the pawn broker. Security to be furnished by the pawn broker is a licensing mechanics generating confidence in the pawn broker and his business and is part of the regulatory treatment of the business of money lending, The security to be furnished by the pawn broker thus stands on the same footing as the security to be given by the money-lenders generally. We, therefore, reject the second contention that Sections 4(2A) and 4(2B) are unreasonable restrictions infringing Article 19( l)(g) of the Constitution.
16. The last contention is that Section 16A empowering forfeiture of security is arbitrary and unreasonable violating both Articles and 19(1)(g) of the Constitutioa This section provides that under certain circumstances, the licencing authority may, at any time, by order in writing forfeit to the Government the whole or any portion of the security furnished under Sub-section (2A) of Section 4. Apart from the forfeiture of security authorised under this provision, the Act provides for penalty for carrying on business without licence or in violation of the conditions of licence or whenever there is contravention of any of the provisions of the Act or the rules made thereunder. Special penalties are also provided against pawn brokers. The security to be furnished by the money-lender under the Act, as noticed already is a buffer against unexpected loss. It has to be retained in trust till the business is wound up or the licence is cancelled and has to be utilised for payment of the liabilities of the money- lender. The security continues to be a security till the liability of the money-lender is wiped off. If, however, the security is forfeited before the business is wound up or the licence is cancelled and before the liabilities of the money-lender are discharged, the security is no longer available to be proceeded against for recovery of any loss sustained by the borrowers, depositors or pawnees. Forfeiture of the security thus frustrates the very object and intent of the Act and defeats the integral scheme of the regulatory process of money lending While Section 11A enables the security to be locked in trust till the payment of the liabilities of the money-lender, Section 16A, on the other hand, empowers the licensing authority to forfeit the security. The statutory trust created under the Act for the security thus vanishes when the security, after forfeiture becomes the property of the Government to be dealt with in any way it likes. Realising that this power of forfeiture gives an uncanalised and unguided power to the authority to utilise the forfeited security for any purpose, even unconnected with the business of money lending, the additional counter states thus : --
"By making the deposit the money does not become the property of the Government It is only on forfeiture for the contravention of any of the provisions of the Act or rules the money becomes the property of the Government. The idea behind such a provision is, in case any private financial institution comes to the end and the starter escapes from the customers, the Government will be in a position, to certain extent, to reimburse the losers. Though no specific provision is made in the Act, the forfeiture of the security is not intended to be a ppropriated by the Government as a penalty, but to be used for reimbursing the losers who deal with such money lenders."
17. The counter affidavit, therefore, rightly proceeds on the footing that the forfeited security becomes the property of the Government The Act is silent as to how the amount has to be utilised; nor are there any guidelines discernible from the scheme and provisions of the Act for the exercise of the discretion of the Government in the disposal of the forfeited security. The result is that the amount can be spent by the Government in any manner it chooses. It is in this context that the Objects and Reasons for the amendment in 1983 inserting Section 16A oecome relevant. Section 16A was inserted by an amendment of the Finance Act. The Statement of Objects and Reasons specifically mention that these proposals have been mainly brought forward to raise additional resources to fund the 320 crores plan for 1983-84 as suggested by the Planning Commission and it was asserted that the financial proposal for 1983-84 could be implemented only after a suitable amendment of the Kerala Money Lenders Act, 1958 as well. The purpose behind the amendment, the inclusion of a forfeiture clause was thus to augment the revenue of the State and not to regulate the business of money lending Section 16A is thus an unreasonable restriction vitally affecting the large number of persons dealing with the money-lenders, unnecessary for the regulation of the business of money lending and has no rational basisior the object sought to be achieved under the Act. We shall also usefully refer to the decision of the Supreme Court in Badri Prasad v. Collector, Central Excise, AIR 1971 SC 1170 where their Lordships were considering the validity of the provisions of the Gold (Control) Act Section 71 of the Act provided for confiscation of gold on failure to comply with Section 16 relating to declaration of the gold articles and ornaments in their possession, custody or control The Supreme Court held thus : --
"There does not however seem any justification for an order of confiscation of gold under Section 71 of the Act merely because of a failure to comply with Section 16 relating to declaration. It is no doubt true that the owner is to be given a hearing in terms of Section 79 and he has a right of appeal under Section 80 but the provision of Section 73 which allows the levy of a fine in lieu of confiscation not exceeding twice the value of the thing in respect of which confiscation is authorised appears to be unduly harsh. In this connection, a reference may be made to Section 18 of the Wealth-tax Act and the penal provisions contained therein. Under the Wealth-tax Act the penalty in case of failure to furnish the return without reasonable cause is a sum equal to two per cent of the tax for every month during which the default continues but not exceeding in the aggregate 50 per cent of the tax. It will be noticed that the fine there is imposed only on failure to pay the tax but in case of gold in respect of which no declaration has been made under Section 16 or the factum of pawn of which has not been communicated in writing to the Administrator, the owner ipso facto becomes liable to pay an unconscionably high penalty. Section 71, therefore, appears to place an unreasonable restriction on the right of a person to acquire, hold and dispose of gold articles or gold ornaments. It may be applied indiscriminately and cannot, therefore, be upheld as saved by Clauses (5) and (6) of Article 19 of the Constitution."
Following the same reasoning, it seems to us to be clear that the forfeiture of security as a penalty is unconscionably high and is an unreasonable restriction on the right of the persons to carry on the business of money lending. We, therefore, hold that Section 16A is arbitrary and violative of Article 14 of the Constitution and unreasonable, offending Article 19(1)(g) of the Constitution. The security demanded from the money-lender has to continue as security till the business is wound up and the liabilities of the money-lender are settled.
18. In the result, we declare that Section 16A of the Kerala Money Lenders Act is ultra vires and unconstitutional violating Articles 14 and 19(1)(g) of the Constitution and reject the challenge to the constitutionality of subsections (2)(ii), (2A) and (2B) of Section 4 of the Act. We direct that the authorities under the Act shall have due regard to the interpretation given by us to the expression ''aggregate amount lent" in Sub-section (2B), in demanding or revising the sucurity under Section 4. The appeals and writ petitions are disposed of accordingly and without costs.