TMI Blog2000 (8) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... rds sums advanced to the defendants. The defendants raised an objection against maintainability of the suit on the ground of noncompliance with the provisions of the Assam Act, particularly Section 7D. To be more specific me objection was that the Bank being a 'moneylender' has not been registered under the Assam Act; in the absence of a registration certificate, the suit is not maintainable and, therefore, cannot be proceeded with. The Additional District Judge, Dibrugarh, framed an issue whether the suit is maintainable? The said issue was laken up as a preliminary issue. By the order dated 26th June, 1989 the learned trial judge dismissed the suit as not maintainable. The plaintiff challenged the Judgment of the trial court before the High Court in First .Appeal No. 78 of 1989, wherein a Division Bench by the judgment dated 29th July, 1998 set aside the judgment of the trial court and directed disposal of the suit on merits in accordance with law. The said judgment is under challenge in this appeal. Shri Bhaskar P. Gupta, learned senior counsel appearing for the appellants strenuously urged that the High Court is not right in holding that the provisions of the Assam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic consequence should be avoided by reading down the provision in Section 2(1) to mean that a 'moneylender' means 'a person who solely carries on the business of advancing money on condition of the repayment with interest', On the case of the parties and the contentions raised by the learned counsel appearing for them, the point formulated earlier arises for determination. In P. Ramanatha Aiyer's Law Lexicon the term Banking business is stated to be the business of banking, as defined by law and custom, consists in the Issue of notes intended to circulate as money where the banks are banks of issue; in receiving deposits payable on demand; in discounting commercial paper; making loans of money on collateral security; buying and selling bills of exchange, negotiating loans, and dealing in negotiable securities issued by the Government, State and national municipal and other corporations. We shall next consider some relevant provisions of the Statutes which control and regulate the activities of banks and those of moneylenders. The Banking Regulation Act 1949 has been enacted by the Parliament to consolidate and amend the law relating to banking. In sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Central Government may, by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage. In subsection (2) of section 6 it is expressly provided that no banking company shall engage in any form of business other than those referred to in 'subsection (1). Under section 21 of the Act control over advances by banking companies is vested in the Reserve Bank of lndia. In subsection (1) thereof it is laid down that where the Reserve Bank is satisfied that it is necessary or expedient in public interest or in the interest.of the depositors or banking policy, so to do, it may determine she policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined. In subsection (2) of section 21 provision is made that without prejudice to the generality of the power vested in the Reserve Bank under subsection (1) enabling the Reserve Bank to give directions to banking companies regarding certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of this Act by a Bank which has been declared to be a notified Bank under S.2A whether or not such bank was declared to be a Bank at the time the loan was advanced. a loan advanced by Life Insurance Corporation of India, Financial Corporation of India or any other corporate body. Section 2A provides that the State Government may, by notification in the official Gazette, declare any bank to be a notified bank for the purpose of this Act, Under section 4 any contract made before or after the commencement of this Act for the loan of money by a moneylender shall be illegal in so far as it provides directly or indirectly for the payment of compound interest or for the rate or amount of interest being increased by reason of any default in the payment of sums due under the contract. Section 6 provides that every money lender shall regularly maintain an Account for each borrower separately of all transactions with dates and places of such transaction in respect of any loan advanced to that borrower and furnish such borrower every year with an eligible statement of accounts in the prescribed manner signed by the moneylender or his authorised agent. In section 6A provision is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ane setting of the statute. The bulk of the beneficiaries are rural indigents and the rest urban workers. These are weaker sections for whom constitutional concern is shown because institutional credit instrumentalities have ignored them. Moneylending may be ancillary to commercial activity and benignant in its effects, but moneylending may also be ghastly when it facilitates no flow of trade, no movement of commerce, no promotion of intercourse, no servicing of business, but merely stagnates rural economy, strangulates the borrowing community and turns malignant in its repercussions. The former may surely be trade but the latter the law may well say is not trade. In this view, we are more inclined to the view that this narrow, deleterious pattern of moneylending cannot be classed as 'trade'. No other question then arises, since the petitioners and appellants cannot summon Article 301 to their service, The Division Bench of the Calcutta High Court in Maha luxmi Bank Ltd. v. Registrar of Companies, West Bengal, AIR (1961) Cal. 666 construing the definition of the word Banking in Section 5( 1 )(b) of the Banking Companies Act, 1949 observed inter alia (at p.669) : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e banking company is expressly prohibited from carrying on any kind of incidental or allied business other man those enumerated in sub clause (a) to (o) of subsection (1) of Sec, 6 of the Act. Thus it is abundantly clear that the essence of banking is the relationship which is brought into existence at the time of the deposit; that is the core of banking. It is true that the business of banking covers every possible phase or combination of deposit, custody, investment, loan, exchange, issue and transmission of money, creation and transfer of credit and other kindred activities but if the essential characteristic of banking namely the power to receive deposits from the public which are repayable in the manner indicated in Sec. 5(l)(b) of the Banking Companies Act is absent and merely the power of granting loans is retained and exercised that, in my view does not make the company a banking company. Lending of money may be one phase of a banking business but it is not the main phase or the distinguishing phase. In the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. taut Others., [1987] 1 SCC 424 a Bench of learned two Judges of this Court consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial or any institution which the State Government may, by notification in the Official Gazette, specify in this behalf. The expression business of moneylending is defined in section (2) to mean the business of advancing loans whether in cash or kind and whether or not in connection with or in addition to any other business. In Tamil Nadu Money Lenders Act, 1957 the expression 'money lender' is defined in s.2(8) to mean a person whose main or subsidiary occupation is the business of advancing and realizing loans, but excludes a bank or a cooperative society. The explanation to the said section lays down that where a person who carries on in the (State of Tamil Nadu) the business of advancing and realizing loans is resident outside the State of Tamil Nadu, the agent of such person resident in the State of Tamil Nadu shall be deemed to be the moneylender in respect of that business for the purpose of the Act, In the Bengal Money Lenders Act, 1940 it is provided that loan means an advance whether of money or in kind, made on condition of repayment with interest and includes any transaction which is in substance a loan but does not include (d) a loan advanced before or af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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