TMI Blog2013 (8) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... of money and investment support for acquisition of the flats. The respondent stated that it will repay the amount in a short while. Relying on this assurance, the petitioner gave a sum of Rs. Two Crores to the respondent by a cheque dated 12 th December, 2007. Inspite of the assurance, the respondent failed to refund the amount. Thereafter, the respondent entered into an agreement with the petitioner on 24 th February, 2009. It is the case of the petitioner that the respondent by this agreement admitted their liability towards the investment support. The respondent agreed to pay interest for the period from 12 th December, 2007 to 12th September, 2009 and the amount was calculated at Rs. One crore thirty lakhs. A penalty at the rate of Rs. One lakh per month was also provided in the agreement. It was agreed that the securities would be realized on non-payment. The Directors of the respondent also gave their personal guarantees and a schedule for the repayment was agreed upon. The post dated cheques were also given by way of security. By this agreement, the respondent agreed to pay an amount of Rs.Three crores thirty lakhs. Pursuant to this agreement dated 24 th February, 2009, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give further financial assistance, the petitioner failed to do so and the respondent was placed in difficult position. 5 A rejoinder has been filed by the petitioner, in which solvency of the respondent company is disputed and the averments made in the petition are reiterated. As far as the averments regarding money lending is concerned, the petitioner has denied that the transaction in question did not fall within the scope of the Bombay Money Lenders Act, 1946. A further affidavit in rejoinder is also filed by the petitioner, controverting the assertions made on behalf of the respondent by annexing the annual report. In the additional affidavit in rejoinder, the petitioner has stated that the annual accounts do not show that the petitioner is a money lender and/or the present transaction is of money lending. 6 I have heard Mr. Zal Andhyarujina, learned counsel and Mr.Roham Cama, learned counsel for the petitioner and Mr. Sanjay Jain, the learned counsel for the respondent. 7 The receipt of the amount of Rs. Two crores is not disputed. The execution of the agreement dated 24 th February, 2009 is also not disputed. It is also not disputed that the cheques were issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999(3) Bom. C.R. 760. The learned single Judge after considering the provisions of Bombay Money Lenders Act, 1946 came to the conclusion that as far as the applicability of the Money Lenders Act is concerned, the presentation of a suit and the presentation of a company petition will be on the same footing. The learned single Judge came to the conclusion that though the company petition is not for recovery of money and is for the winding up of the company, under section 434(1) the debt must be legally recoverable. If the petitioner is shown to be a money lender then the recovery of the amount will be barred under section 10 of the Bombay Money Lenders Act and thus a petition for winding up will also not be maintainable. The learned single Judge in paragraph 13 observed thus : 13. It was urged that the petition should be rejected as the debt is not legally recoverable. It was contended that if no relief could be granted if a suit was filed then the Company petition would not be maintainable. Learned Counsel has relied upon a judgement of this Court in Dabholkar Enterprises v. Padma Alloy Castings Pvt. Ltd., . In that case a petition for winding up was filed by a partnership wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending without a requisite licence, the recovery of the amount would be barred and thus the company petition will be dismissed. 12 Once the defence of money lending is available to the respondent, the next point, will arise as to what would be the level of scrutiny by the company court and what will be the extent of burden upon the respondent to show that the petitioner is engaged in the business of money lending. Is it that the respondent must 'conclusively prove' that the petitioner is engaged in the business of money lending or if it is sufficient that enough material is placed on record to draw an inference that the petitioner is engaged in a business of money lending, which can only be dispelled by leading detailed evidence. 13 The learned single Judge (K. Shivashankar Bhat, J.) of the Karnataka High Court in the case of Divya Export Enterprises vs. Producing Private Ltd. , reported in 1991 (70) Company Cases 692 (Kar) relied upon the decision of the Apex Court in the case of Mechalec Engineers and Manufacturers vs. Basic Equipment Corporation, reported in AIR 1977 SC 577, held that the guidance to find out whether the defence is bona fide and one of subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defence. The principles governing for grant of unconditional leave in summons for judgment will not be irrelevant while considering whether the defence to a winding up petition is bonafide. 14 The next point will then arise as to how the courts have treated the defence of money lending while considering the grant of unconditional leave in a summary suit. The learned counsel for the respondent relied upon the decision of the learned single Judge of this Court (D.K. Deshmukh, J.) in the case of Jatix Jashwantrai Bhagat vs. Dayaram WaWaghaji Thaker Ors . in Summons for Judgment No. 309 of 2006 in Summary Suit No. 1642 of 2006 dated 4 th October, 2006. The learned counsel for the respondent has placed on the record a copy of the reply filed by the defendant in that case. The defendant had raised a defence that the plaintiff is a money lender and he has advanced loans to various persons and the transaction falls in the definition of loan as defined under section 2(9) of the Bombay Money Lenders Act. The learned single Judge found in that case that there was no dispute that the loan was advanced. The court found that the defence put up by the defendant in that case could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andatory on the part of the Court. In our case, the Plaintiff has relied on the Promissory note wherein interest @ 18% p.a. is specified. Learned single Judge of this Court, in a case of Dharmadas Motibhai Wani vs. Shidya Jatrya Bhil, 1990 BLR 459 (supra) held that by virtue of Section 80 of the Negotiable Instruments Act (Bom. XXXI of 1947), the advance on interest, and, therefore, the 'loan', within the meaning of Section -2(9) of the Bombay Money Lenders Act. Mr. Jain has further relied on the judgment of the learned single Judge of Patna High Court in case of Urrah Dlusadh vs. Inderdayal Singh : AIR 1954 PATNA 301, wherein it has been held that where the defendant pleads that the plaintiff not being registered as a money lender cannot recover the loan, it is for the Plaintiff, who claims exemption, to prove the circumstances on which he can rely to escape the penalty provided under the Bihar Money Lenders' Act. As per the ratio of the Division Bench of Patna High Court in a case of Dwarka Prasad vs. Firm L.B. Ambika Ram, Patna 103 (supra), the burden is on the Plaintiff to prove that the loan transaction was of casual nature and that he was not carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; almost throughout. The agreement provides for security clause and penalty and also lays down modalities for repayment. Thus from the petition and the agreement it is clear that the petitioner is in the business of finance and investment and real estate. 18 It is argued by the learned counsel for the petitioner that loans may be one of the subsidiary activities of the petitioner and the present transaction is an isolated transaction. In this context, the reply rejoinder is filed by the petitioner needs to be noticed. It is significant to note that in paragraph 8 of the rejoinder, the petitioner has denied that the transaction is not a 'loan transaction'. The reference is to the 'transaction' . When a specific contention is raised in the reply that the petitioner is in the 'money lending business', denial is only of the fact that the transaction being of 'money lending'. There is a distinction between these two aspects, namely, the petitioner being in 'money lending business' and the transaction being a 'money lending transaction'. It is pertinent to note a first instance that the petitioner is a money lender, has not been denie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt period show that the major part of the income of the petitioner was the interest on the loans and advances. The petitioner has advanced substantial amount of loan and has received substantial amounts of loan. The fixed assets of the company are only office equipments. The directors in their report have also acknowledged that the main operations of the company is earning interest on advances of loan. This position has to be read alongwith the description of the petitioner in the agreement. In the agreement the petitioner is described as in the business of finance. The respondent has placed balance sheets for the period of five years on the record before and after the transaction. The balance sheets, prima facie, show that there is a systematic activity on the part of the respondent to advance loans and substantial interest therefrom. It is also contended by the learned counsel for the respondent that even the claim made in the petition of interest on the amount claimed is usurious. Once these basic facts, coupled with the assertion regarding business of money lending without licence are placed on record, then it is upto the the petitioner to show that it is not so. 23 As state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and therefore, section 2(9) (f) will be attracted. The learned counsel submitted that in the case of Sitaram Laxminarayan Rathi (supra) even the post dated cheque is considered at an instrument under the Negotiable Instruments Act and the provisions under section 2(9)(f) of the Money Lenders Act would be attracted. Section 2(9) (f) and (f2) are reproduced below : Section 2(9) : loan means an advance at interest *** whether of money or in kind but does not include- .. .. (f) an advance [of any sum exceeding rupees three thousand] made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881 (XXVI of 1881), other than a promissory note; [(f2) an advance made bonafide by any person carrying on any business, not having for its primary object the lending of money, if such advance is made in the regular course of his business] 25 The main question is whether the advance is made on the basis of a negotiable instrument. This issue will turn on the facts of each case. In the case of Nandram Kaniram (supra), the plaintiff therein paid a sum of ₹ 15,000/- to the defendant through a cheque dated 24 th June, 1976 thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment which contains power of attorney and hypothecation will be covered under Articles 6 and 40(b) of the Bombay Stamps Act. The learned counsel submitted that the stamp duty paid on the agreement is only ₹ 200/- and, therefore, considering the provisions of the above mentioned Articles, the instrument in question is grossly inadequately stamped and cannot be read in evidence. Reliance is placed on the decision of the Apex Court in the case of SMS Tea Estates Pvt. Ltd. , vs. Chandmari Tea Company Pvt. Ltd. , reported in 2011 (9) SCE 382. The Division Bench of this court (S.K. Desai and Aggarwal, JJ) in the case of Har Kishore Jain Sons Pvt. Ltd. , vs. Bank of Baroda in Appeal No. 873 of 1984 and the decision of the learned single Judge of this Court (H. Suresh,J.) in the case of Yogendra Patwardhan vs. Khandellwal Hermann , reported in 1989 (1) Bom. C.R. 96. It is urged by the learned counsel for the respondent that unless under section 35 of the Stamp Act, stamp duty and penalty due in respect of the Stamp duty is paid, the court cannot rely on the instrument. It is also submitted that once the defence of improper stamp duty is raised, though it is technical, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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