2007 JTR(SC) 1402
2007 60 AIC 56 ; 2008 1 AIR(Kar)(R) 87 ; 2008 AIR(SC) 416 ; 2007 AIR(SCW) 7167 ; 2008 1 AllMR(SC) 415 ; 2008 1 AWC 432 ; 2008 1 BankJ 769 ; 2008 1 BC 263 ; 2007 Supp DNJ 347 ; 2007 13 JT 518 ; 2008 1 KarLJ 161 ; 2007 4 KLT 985 ; 2008 3 MLJ 541 ; 2008 1 RCR(Civ) 1 ; 2007 12 Scale 640 ; 2007 14 SCC 297 ; 2007 11 SCR 725 ; 2008 KHC 5158 ; 2007 8 Supreme 178
2007(8) Supreme 178
Supreme Court of india
(From Karnataka High Court)
A.K. Mathur & Markandey Katju, JJ.
M/s P. Vaikunta Shenoy & Co. — Petitioner
versus
P. Hari Sharma — Respondent
Appeal (civil) 5540 of 2001
Decided on : 31-10-2007
important point
While construing the provisions of a statute, the object for which it was made has to be kept in mind and the purposive construction has to be adopted.
Act Referred :KARNATAKA MONEY LENDERS ACT : S.2(2), S.2(10)
(A) The Karnataka Money Lenders Act, 1961, defines 'money-lender' as one who carries on the business of money lending in the state, and 'business of money lending' as the business of advancing loan whether or not in connection with any other business. These definitions were held relevant to determine whether the appellant fell within the regulatory scope of the Act, requiring a purposive interpretation aligned with the statute's object.
(B) The core legal principle is that the object of the Karnataka Money Lenders Act is to prevent oppression by money-lenders exploiting poverty, and this must be considered through a purposive construction. A transaction may not constitute money-lending business if the primary object is not earning interest but securing the regular supply of goods.
Facts of the case:
The plaintiff advanced money to the defendant, who owned an areca nut garden, to secure regular supply of areca nuts. The ledger showed an outstanding amount, and the plaintiff sued for recovery with interest at 18 per cent per annum. The defendant contested, claiming the plaintiff was an unlicensed money-lender, rendering the suit non-maintainable.
Findings of Court:
The court found that the appellant's object in advancing loans was not to earn interest but to ensure a regular supply of areca nuts, which is a prevalent business practice. Consequently, the appellant was not a money-lender within the meaning of the Act.
Issues:
Whether the plaintiff qualifies as a 'money-lender' under the Karnataka Money Lenders Act, and whether the suit is maintainable without a license under the Act.
Ratio Decidendi:
A purposive interpretation of the statute shows that advancing loans to secure regular supply of goods, where the principal object is not earning interest, does not fall within the business of money lending as defined under the Act.
Result:
The appeal is allowed, the impugned judgment is set aside, and the trial court's decree is restored without any order as to costs.
(A) The Karnataka Money Lenders Act, 1961, defines 'money-lender' as one who carries on the business of money lending in the state, and 'business of money lending' as the business of advancing loan whether or not in connection with any other business. These definitions were held relevant to determine whether the appellant fell within the regulatory scope of the Act, requiring a purposive interpretation aligned with the statute's object.
(B) The core legal principle is that the object of the Karnataka Money Lenders Act is to prevent oppression by money-lenders exploiting poverty, and this must be considered through a purposive construction. A transaction may not constitute money-lending business if the primary object is not earning interest but securing the regular supply of goods.
Facts of the case:
The plaintiff advanced money to the defendant, who owned an areca nut garden, to secure regular supply of areca nuts. The ledger showed an outstanding amount, and the plaintiff sued for recovery with interest at 18 per cent per annum. The defendant contested, claiming the plaintiff was an unlicensed money-lender, rendering the suit non-maintainable.
Findings of Court:
The court found that the appellant's object in advancing loans was not to earn interest but to ensure a regular supply of areca nuts, which is a prevalent business practice. Consequently, the appellant was not a money-lender within the meaning of the Act.
Issues:
Whether the plaintiff qualifies as a 'money-lender' under the Karnataka Money Lenders Act, and whether the suit is maintainable without a license under the Act.
Ratio Decidendi:
A purposive interpretation of the statute shows that advancing loans to secure regular supply of goods, where the principal object is not earning interest, does not fall within the business of money lending as defined under the Act.
Result:
The appeal is allowed, the impugned judgment is set aside, and the trial court's decree is restored without any order as to costs.
JUDGMENT
MARKANDEY KATJU, J.—
1.This appeal has been filed against the impugned judgment of the Karnataka High Court dated 25.03.2000 in R.F.A. No. 531 of 1997. We have heard learned counsel for the parties and perused the record.
2.The plaintiff-appellant has alleged that he was carrying the business of commission agent. The defendant was having an areca nut (supari) garden and he used to supply the areca nuts to the plaintiff. The defendant used to receive money from the plaintiff off and on, which the plaintiff used to advance him to secure regular supply of the areca nuts. It was alleged by the plaintiff that defendant had borrowed Rs.72,044.43 paise as per the ledger account regularly maintained by the plaintiff. Hence the plaintiff filed a suit for recovery of this amount with interest at the rate of 18 per cent per annum.
3.The defendant denied the plaintiffs case and advanced the plea that plaintiff was a money-lender and he did not have a licence as required by the Karnataka Money Lenders Act, 1961. Consequently, the defendant alleged that the suit was not maintainable as the plaintiff had not taken a licence under the aforesaid Act.
4.The Trial Court decreed the suit of the plaintiff but the said decree was set aside by the High Court. Hence this appeal.
5.Learned counsel for the plaintiff-appellant has submitted that the plaintiff was not a money-lender as defined in Section 2 (10) of the Karnataka Money Lenders Act. The aforesaid Section 2 (10) states that a money-lender is one who carries on the business of money lending in the State.
Section 2 (2) defines the business of money lending as follows :
“Business of money lending means business of advancing loan whether or not in connection with or in addition to any other business.
6.Learned counsel for the respondent submits that in view of the aforesaid definitions the appellant was clearly a money-lender. We do not agree.
7.It may be mentioned that the purpose of the Act was to prevent the malpractice of oppression by money-lenders to take advantage of peoples poverty.
8.In the money lending business the object of the money-lender is to earn interest on the loan he has advanced. In the present case the object of advancing the loan by the appellant was not to earn interest thereon but to ensure the regular supply of areca nuts. Though, no doubt, interest at the rate of 18 per cent per annum was charged on these loans yet that was not the principal object of advancing the loan.
9.In business various methods are adopted by a businessman for ensuring the smooth running of his business. Very often, one of the methods is that the businessman advances money to his supplier of goods to ensure that the supplies are regular and are made to him rather than being diverted to other parties. There is nothing illegal in this practice and it is widespread.
10.When we construe the provisions of the Karnataka Money Lenders Act we must see the object for which it was made and we have to adopt the purposive construction.
11.As observed by this Court in New India Sugar Mills v. Commissioner of Sales Tax1, [AIR 1963 SC 1207, p. 1213 : 1963 Supp (2) SCR 459] :
“It is a recognized rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they best harmonize with the object of the statute, and which effectuate the object of the legislature. (See also the decisions mentioned in G.P. Singhs Principles of Statutory Interpretation: 9th Edition 2004 at Page 110).”
12.To give an example, under the U.P. Bhoodan Yagna Act, 1953 the lands which were donated by large landholders could be allotted to landless persons. It was held by this Court in U.P. Bhoodan Yagna Samiti v. Braj Kishore2, [AIR 1988 SC 2239: 1988 (4) SCC 274] that the expression landless persons should be interpreted to mean landless peasants and not landless businessman. If a literal meaning was given to the expression landless persons then even a very rich businessman who possessed hundreds of crores of rupees can claim allotment of a piece of land on the ground that he was a landless person as he owns no land. That could not possibly be the object of the Act. The object of the Act was to give land to landless peasants only.
13.In view of the above discussion we are of the opinion that a purposive interpretation has to be given to the definition of money-lenders. From this angle the appellant could not be said to be a money-lender as he was not really doing the business of money lending in the strict sense but was only advancing loans to secure the regular supply of areca nuts.
14.In view of the above this appeal is allowed, impugned judgment of the High Court is set aside and the judgment of the trial court is restored. No order as to costs.
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