M-S. P. VAIKUNTA SHENOY & CO. v. P. HARI SHARMA

Citation: [2007] 11 S.C.R. 725

Court: Supreme Court of India

Bench: A.K. MATHUR, MARKANDEY KATJU

Case summary

M-S. P. VAIKUNTA SHENOY & CO. v. P. HARI SHARMA.pdf

Judgment text

f "'f MIS. P. VAIKUNTA SHENOY & CO. v. P. HARI SHARMA OCTOBER 31, 2007 [A. K. MATHUR AND MARKANDEY KATJU, JJ. ] ~ / Karnataka Money Lenders Act, 1961; S. 2(10): Business/market practices-A commission agent advancing money to supplier ofareca nut, however, charging interest-Supplier allegedly didnot repay the amount-Suitfor recovery-Decreed by trial Court-Reversed by High Court-On appeal, Held: Though the commission agent charging interest on loan advanced by him to supplier but his principal aim ofsuch advancing ofloan was to ensure regular supply ofgoods, areca nuts and not money lending-Such practice prevalent and wide-spread in such business-Applying principle ofpurposive construction to the definition ofmoney-lenders, appellant could not be said to be a money lender as he was not doing the business ofmoney lending in a strict sense-Hence, impugned judgment set aside and judgment of trial Court restored- Interpretation ofStatutes-Purposive construction.

Appellant was a commission agent of areca nut and the respondent was a supplier. The respondent used to receive advance money from the appellant offand on to secure regular supply ofthe ~ areca nuts. Appellant alleged that the respondent had borrowed certain amount from him but did not repay the same. Therefore, he filed a suit for recovery ofthe amount with interest. Before the trial Court, the respondent contended that the appellant was a moneylender and he did not have a licence as required by the Karnataka Money Lenders Act, 1961. Therefore, the suit was not maintainable. } The tria! Court decreed the suit. On appeal, the decree was set aside by the High Court. Hence the present appeal. Appellant contended that he was not a money lender as defined -t 726 SUPRf;ME COURT REPORTS (2007] 11 S. C. R. in Section 200) ofthe Karnataka Money Lenders Act. Respondent submitted that in view of the definitions as given u/s.

2(10) gfthe Karnataka Money Lenders Act, the appellant was clearly a money.. Jend~r. Allowing the appeal, the Court HELD: 1. 1. The purpose of the Money Lenders Act is to prevent the malpractice of oppression by money-lenders to take advantage ofpeoples' poverty. [Para 7] [728-C] 1. 2. In the money lending business the object of the moneylend~r 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 ofareca nuts. Though, no doubt, interest at the rate of18 per cent per annum was charged on these loans yet that was not the principal object of advancing the loan. [Para 8) [728-D, E] 1. 3. In business various methods are adopted by a businessman for ensuring the smooth running ofhis business.

Very often, one of the methods is that the businessman advances money to his supplier ofgoods 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. [Para 9] [728-E, FJ 2. 1. When the provisions ofthe Karnataka Money Lenders Act p are construed, the object for which it was made must be seen, and for this purpose principle of purposive construction has to be ad~pted. [728-F, G] New India Sugar Mills v. Commissioner of Sales Tax, AIR (1963) SC 1207: [1963) Supp 2 SCR 459 and UP. Bhoodan Yagna Samiti v. Braj Kishore, AIR (1988) SC 2239: [1988) 4 SCC 274, relied on. 2. 2. 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 r ,, ~ money lending in the strict sense but was only advancing loans to secure the regular supply of areca nuts.

[Para 13) [729-D, E] CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5540 of 2001. From the final Judgment and Order dated 25. 3. 2000 of the High Court of Karnataka at Bangalore in R. F. A. No. 531 of 1997. ~ ). V. B. Joshi and Kailash Pandey for the Appellant. G. V. Chandrashekhar, Anjana Chandrashekhar and P. P. Singh for the Respondent. The Judgment ofthe Court was delivered by MARKANDEY KATJU, J. 1. This appeal has been filed against the impugned judgment ofthe 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-appella,nt has alleged that he was carrying the business of commis;iio. n cigep. t·. ·The defendant was having an areca nut (supari) g~ge. n Md he used to supply the areca nutsto the plaintiff. The defendant used to receive money from the plaintiffoffand on, which the plaintiff used to advance him to secure regular supply ofthe areca nuts.

It was alleged by the plaintiffthat defendant had borrowed Rs. 72,044. 43 paise as per the ledger account regql - 4. The Trial Court decreed the suit ofthe plaintiffbut 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 money-lender is one who "carries on the business ofmoney lending in the State". Section 2 (2) defines the business ofmoney lending as follows:- 'Business of money lending means business of advancing loan whether or not in connection with or in addition to any other A_ business'. ... 6. Learned counsel for the respondent submits that in view ofthe aforesaid definitions the appellant was clearly a money-lender. We do not agree. 7.

It may be mentioned that the purpose ofthe Act was to prevent the malpractice ofoppression by money-lenders to take advantage of peoples' poverty. 8. In the money lending business the object ofthe money-lender is to earn interest on the loan he has advanced. In the present case the object ofadvancing the loan by the appellant wa~ not to earn interest thereon but to ensure the regular supply ofareca 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 ofadvancing the loan. 9. In business various methods are adopted by a businessman for ensuring the smooth running ofhis business. Very often, one ofthe methods p is that the businessman advances money to his supplier ofgoods 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. I0.

When we construe the provisions of the Karnataka Money Lenders Act we must see the object for which it was made a:nd we have to adopt the purposive construction. 11. As observed by this Court in New India Sugar Mills v. -{. Commissioner ofSales Tax, AIR (1963) SC 1207, p. 1213 : [1963] Supp 2 SCR 459] :- J- "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 t~e object ofthe statute, and which effectuate the object of the legislature". (See also the decisions mentioned in G. P. Singh's ''Principles of Statutory Interpretation: 9th Edition 2004 at Page 110). 12. To give an example, under the U. P. Bhoodan YagnaAct, 1953 the lands which were donated by large landholders could be allotted to 'landless persons'. It was held by this Court in UP. Bhoodan Yagna Samiti v.

Braj Kishore, AIR (1988) SC 2239: [1988] 4 SCC 274 that the expression 'landless persons' should be interpreted to mean landless peasants and not landless businessman. Ifa literal meaning was given to the expression 'landless persons' then even a very rich businessman who possessed hundreds ofcrores ofrupees can claim allotment ofa piece of land on the ground that he was a landless person as he owns no land. That could not possibly be the object ofthe Act. The object ofthe Act was to give land to landless peasants only. 13. In view of the above discussion we are of the opinion that purposive interpretation has to be given to the definition ofmoney-lenders. From this angle the appellant could not be said to be a money-lender as he was not really doing the business ofmoney lending in the strict sense but was only advancing loans to secure the regular supply ofareca nuts. 14. Ir.

view ofthe above this appeal is allowed, impugnedjudgment of the High Court is set aside and the judgment of the trial court is restored. No order as to costs S. K. S. Appeal allowed.