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  • ss. 5 and 25(3) of the Bombay Money-Lending Act.
  • provisions of the Bombay Money-lenders Act
  • s. 5 of the Bombay Money-lenders Act,
  • Bombay Money-lenders Act
  • s. 5. Section 10
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  • ss. 5 and 25(3) of the Bombay Money-Lending Act.
  • provisions of the Bombay Money-lenders Act
  • s. 5 of the Bombay Money-lenders Act,
  • Bombay Money-lenders Act
  • s. 5. Section 10
Smart Summary

Factual and Procedural Background

The accused was convicted under sections 5 and 25(3) of the Bombay Money-Lending Act for money-lending transactions carried out between January 6, 1948 and October 24, 1948. During this period, he charged interest rates exceeding the maximum prescribed by the Provincial Government. The Act had come into force in the Mahad Taluka on November 17, 1947, where the accused conducted his business. The conviction under section 34 was based on his failure to comply with the licensing requirement under section 5, which prohibits carrying on money-lending business without a license. The accused challenged his conviction through a revision application.

Legal Issues Presented

  1. Whether the accused's carrying on money-lending business without a license constituted an offence punishable under section 34 of the Bombay Money-Lending Act by virtue of contravening section 5.
  2. Whether charging interest at a rate exceeding the maximum fixed by the Provincial Government constituted an offence under section 25(3) of the Act for the period in question.
  3. The interpretation and applicability of section 10 in relation to penalties for carrying on money-lending business without a license.

Arguments of the Parties

Appellant's Arguments

  • Section 10 of the Act precludes imposing penalties on a person carrying on money-lending business without a license, as it only bars Civil Courts from passing decrees in favor of unlicensed money-lenders.
  • The Legislature contemplated that a license could be obtained after money-lending business had commenced, as evidenced by the accused’s application for a license on May 5, 1948.
  • If section 10 is properly interpreted, carrying on business without a license would not constitute an offence under section 34, leading to the conclusion that no penalty should be imposed for such conduct.
  • Regarding section 25(3), the appellant argued that since this subsection expressly refers to section 34 for penal consequences, but section 5 does not, section 34 should not apply to contraventions of section 5.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court analyzed the statutory provisions and their legislative intent to resolve the issues. It held that section 5 prohibits any money-lending business without a license and that contravention of this provision invokes the penal consequences under section 34 because section 5 itself does not specify a penalty. The court rejected the appellant's reliance on section 10, clarifying that section 10 only affects the ability of money-lenders to obtain decrees in Civil Courts and does not negate the penal provisions for unlicensed money-lending business. The court emphasized the legislative purpose of the Bombay Money-Lenders Act to regulate and control money-lending and to prevent excessive interest rates, which necessitates penal provisions for unlicensed lending.

Regarding section 25(3), the court noted that this subsection was introduced by Act LVII of 1949 to expressly make charging interest above the prescribed maximum a punishable offence under section 34. Since the accused's transactions occurred in 1948, before the enactment of section 25(3), the court found that the conviction under this subsection could not be sustained. The court distinguished between sections 5 and 25 by noting that section 5 imposes a mandatory prohibition on unlicensed money-lending, while section 25 originally only voided agreements charging excessive interest without penal consequences until subsection (3) was enacted.

Holding and Implications

The court's final decision was to uphold the conviction of the accused under section 5 of the Bombay Money-Lenders Act but to set aside the conviction under section 25(3) because it was not in force at the time of the offence.

The conviction under section 5 is confirmed. The conviction and sentence under section 25(3) are set aside, and the fine paid for the offence under section 25(3) is to be refunded. The accused is acquitted of the offence under section 25(3).

This decision directly affects the accused by maintaining the penalty for unlicensed money-lending while relieving him of liability for charging excessive interest before the relevant penal provision was enacted. No new precedent beyond the interpretation of the statutory provisions in this case was established.

    Parashuram Laljishet Gujar v. The State Of Bombay

    Chagla, C.J:—

    By this revision application the accused challenges his conviction under ss. 5 and 25(3) of the Bombay Money-Lending Act. The facts are not in dispute. Between January 6, 1948 and October 24, 1948 the accused had several money-lending transactions in respect of which he charged interest at a rate exceeding the maximum prescribed by the Provincial Government under the Act. This Act came into force in the Mahad Taluka on November 17, 1947, and the accused carried on his business in that Taluka. The penal section under which the accused has been convicted is s. 34 which provides that whoever fails to comply with or acts in contravention of any provision of this Act, shall if no specific penalty has been provided for in this Act, is punishable in the manner laid down in that section. Turning to s. 5 it provides that no money-lender shall carry on the business of money-lending except in the area for which he has been granted a license and according to the terms and conditions of such license. It is not disputed that the accused has contravened the provisions of s. 5 because he has carried on business of money-lending without a license. Therefore reading ss. 5 and 34 it seems to me clear that he having failed to comply with and having acted in contravention of the provisions of s. 5, the penal provisions of s. 34 would apply as no specific penalty is provided in s. 5 itself.

    Now, what has been very ingeniously argued by Mr. Chitre before me is that s. 10 of the Act makes it clear that no penalty was to be imposed upon a person carrying on money-lending business without a license. S. 10 deals with suits filed by money-lenders and it lays down that no Civil Court shall pass a decree in favour of a money-lender who does not possess a valid license in respect of the loan on which the suit is based, and the section provides for suits being adjourned in order to enable the money-lender to obtain the necessary license, and the section finally provides that if the money-lender fails to produce the license then the Court shall dismiss the suit. According to Mr. Chitre the only effect of not obtaining a license is that no decree can be passed in favour of such a person under s. 10. Mr. Chitre further points out that s. 10 itself contemplates that a license may be obtained after a money-lender has done money-lending business, and Mr. Chitre says that in fact in this case the accused has applied for a license on May 5, 1948. Therefore Mr. Chitre says that if the Legislature contemplated the issuing of a license to money-lenders who did money-lending business without a license, surely it would not be that his doing money-lending business without a license would constitute an offence, within the meaning of s. 34. If this argument were to be accepted, it would lead to the startling result that a money-lender may do money-lending business without a license and he would come to no grief at all unless he files a suit for recovery of his loan under s. 10. So long as he finds obliging customers who will return the loans to him, he could flagrantly defy the provisions of the Bombay Money-lenders Act and carry on his business and no ill can happen to him. It is obvious that the Bombay Money-lenders Act is an Act which was intended to put down a very serious evil in our society. It was intended to keep control over money-lending transactions and to see that excessive rate of interest was not charged by money-lenders, and the only way that such control can be maintained is by providing penalties for doing money-lending business without a proper license from the State. Therefore, in my opinion, s. 10 has nothing whatever to do with s. 5. Section 10 refers only to those cases where the money-lender comes to Court for obtaining a decree and the Court, instead of summarily dismissing his suit if he has no license, gives him an opportunity to obtain a license. S. 5 is a bar against doing any money-lending business at all without a license and if that provision is contravened s. 34 becomes applicable and the person doing money-lending business without a license commits an offence for which he can be punished.

    Turning to s. 25, that section deals with fixing of the maximum rates of interest by the Provincial Government and sub-s. (2) of s. 25 provides that any agreement for payment of interest at a rate exceeding the maximum fixed by the Provincial Government shall be void and no Court shall in any suit to which the Act applies award interest exceeding the rate fixed by Government. Sub-s. (3) was added to this section by act lvii of 1949 and that sub-section is that if any money-lender charges or receives from a debtor interest at a rate exceeding the maximum rate fixed by the Provincial Government under sub-s. (1), he shall, for the purpose of s. 34, be deemed to have contravened the provisions of the Moneylenders Act. Mr. Chitre argues that in s. 25 the Legislature specifically refers to s. 34 when it intended that a contravention of the provisions of s. 25 should be made penal and to which s. 34 should apply, and inasmuch as there is no similar provision in s. 5, s. 34 is not applicable. Now, the difference in the language between s. 5 and s. 25 is obvious. S. 5 contains a mandatory provision prohibitting any money-lender from carrying on business without a license. S. 25 does not contain any such provision. It merely provides for fixing the maximum rate of interest by the Provincial Government and also for the Court declaring any agreement to charge higher rate of interest void. But there is nothing in s. 25 to impose an obligation upon the money-lender not to charge a rate of interest exceeding the maximum rate. Therefore, before sub-s. (3) of s. 25 was enacted it would have been open to a money-lender to charge a rate of interest exceeding the maximum rate of interest fixed by the Provincial Government and in doing so he would not be committing any offence. He would only have run the risk of his not being able to recover such interest because no Court could have given him relief on the basis of an agreement which provided for a rate of interest exceeding the maximum rate. Therefore, in order to make s. 34 applicable to s. 25 the Legislature had expressly to provide by sub-s. 3 that when a money-lender charges or receives from a debtor interest at a rate exceeding the maximum rate he commits an offence and contravenes the provisions of the Act for the purposes of s. 34.

    In my opinion, therefore, the conviction of the accused under s. 5 is proper. With regard to his conviction under s. 25(3), on the same parity of reason his conviction cannot be justified because s. 25(3) was enacted in 1949 and the offence committed was during the period January 6, 1948 to October 24, 1948. Therefore, while upholding the conviction of the accused under s. 5 of the Bombay Money-lenders Act, I must set aside his conviction under s. 25(3). The sentence under s. 25(3) will also be set aside and the fine paid in respect of the offence under s. 25(3) will be refunded to the accused. The accused is acquitted of the offence under s. 25(3) and his conviction under s. 5 is confirmed.

    Order accordingly.
    M.W.P
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    Parashuram Laljishet Gujar v. The State Of Bombay
    (Oct 5, 1951)