Shripat Rao, J.@mdashThis civil revision petition has been referred to the Full Bench in view of the important and intricate question of law raised therein.
2. One Shamshir Ali the revision petitioner before us obtained in 1350 F. a licence authorising him to do business in money lending for a period of four years. He again obtained a licence in 1357 F. and it is not known nor was it enquired into why he did not or could not obtain the licence during the interim period of about three years. On 10th Amardad 1356 F. the revision petitioner filed a suit for the recovery of about Rs. 300/- and odd due on a promissory note dated 10-2-56F (10-11-1946). In his written statement dated 12th Sherwar 1356 F. (12-7-1947) the defendant while admitting the execution of the promissory note and the maintainability of the suit pleaded poverty and inability to pay the amount in lump sum and prayed that a decree for the payment of the amount by annual instalments of Rs. 25/- be passed against him. The trial Court on 12th Sherwar 1356 F. (12-7-1947) decreed the suit on the basis of the admission and ordered payment of the decretal amount by annual instalments of Rs. 98/- till the decree was satisfied.
3. The plaintiff preferred an appeal against the aforesaid decision of the trial Court on the ground that there was no reason for ordering the decretal amount to be paid on installment basis. The appellate Court while allowing the appeal afforded an opportunity to the defendant to adduce evidence to show his poverty and straitened circumstances that justified the lower Court to pass a decree the amount of which was payable by installments and remanded the case for that purpose. After remand the defendant on 29th Ardhibehest 1357 F. (29th March 1948) raised a plea that the plaintiff not being a licensed money lender within the meaning of the Hyderabad Money Lenders Act (V (5) of 1349 F) he (plaintiff) should be non suited. The trial Court without adjudicating on the question for which the suit was remanded dismissed the same on the technical ground that the plaintiff was not a license holder under the Hyderabad Money Lenders Act (V (5) of 1349 F). As the First Appellate Court confirm the judgment of the trial Court the appellant came in revision before me.
4. The important point for consideration is whether transacting the business of money lending without a licence which was required to be obtained under S. 3 of Act V (5) of 1349 Fasli renders the transaction illegal or incapacitates the money lenders from doing business of money lending as a result of which such a transaction becomes void and the money becomes irrecoverable from the debtor. Section 3 (2) lays down that every money lender shall submit a petition in writing for his name being registered before an officer duly appointed for the purpose who will, after necessary proceedings, issue a licence, sub-section (5) Cl. (a) states that no money lender shall carry oh with the business of money lending in any district without obtaining a licence and Cl. (b) of the same sub-section provides that a person who contravenes the provisions of sub-s. (a) shall be liable to rigorous imprisonment which may extend to six months or fine or both. Section 9 prescribes the procedure to be followed by the Courts when the creditor files a suit against the borrower. Sub-section (2) of S. 9 makes provision for dismissing the suit if it is proved at the trial that the creditor is not a licence holder.
5. Before deciding the exact nature of the penal clause in the Sections referred to above, we think it will be necessary to determine the object of the legislature in enacting the Hyderabad Money Lenders Act (V (5) of 1349 Fasli), for it was argued that the penal clause makes money lending without a licence illegal under S. 24 of the Hyderabad Contract Act (S. 23 of the Indian Contract Act) and that, therefore, no suit can lie for the recovery of money advanced on an illegal contract. Mr. Laxman Rao Ganu the learned Advocate for the Revision Petitioner had taken a contrary view and argued that the purpose of the said Act was not to prohibit money lending without licence but to regularise the same.
6. What was the object of the legislature in enacting Act V (5) of 1349 Fasli? In the preamble of this Act it was mentioned that it was expedient to make provision for regularising and controlling the money lending transactions and that was why the Act was enacted. It is a well established canon of jurisprudence that:
the preamble of a statute is simply a prefatory statement at its beginning, following the title and preceding the enacting clause, explaining or declaring the reasons and motives for, and the object sought to be accomplished by the enactment of the Statute (statutory Construction by Crawford-p. 124.)
It has been held that the preamble is an excellent aid to the construction of ambiguous statute or statutes of doubtful meaning and that it is a key to the construction of a statute and should be resorted to unlock the minds of its makers. Their Lordships of the Supreme Court in ''Charanjit Lal v. The Union of India, held that even the proceedings of the legislative bodies could be looked into to a limited extent for the proper understanding of the circumstances under which it was passed and the reasons which necessitated it (per Fazl Ali J. at page 35). It will be useful in this connection to review in brief the objects and reasons which necessitated the enactment of Act V (5) of 1349 F. Till the date of entry of Act V (5) of 1349 Fasli in the statute book a Regulation known as the Hyderabad Money Lenders Regulation passed in 1347 Fasli was in force. In 1346 F. the Hyderabad Money Lenders Bill was submitted before the Legislative Council. The reasons for introducing the Bill as stated in the Jareeda dated 21st Aban, 1347 Fasli Volume 69 No. 46 page 297 are that the money lenders should be made to obtain a licence and should be made TO keep regular accounts and that they should furnish to their debtors a statement of accounts at regular intervals. In order to provide relief to over-burdened cultivators such a control on money lenders was considered essential. This is clarified by the preamble to the Act wherein it was stated that the Act was passed for regulation and better supervision or money lending transactions obviously for the benefit of the borrowers. There seems to be much in common between the Central Provinces Money Lenders Act (XIII (13) of 1934) and Act V (5) of 1349 Fasli of the Hyderabad State. The chief object of the latter Act seems to be to protect the ignorant debtors especially agriculturists and to prevent creditors from manipulating the accounts to the detriment of the debtors. Thus, under S. 5 the creditor has to maintain the accounts of each debtor separately and furnish the same under his signature every year to each of them. It should contain a statement showing separately the various transactions entered into during the period and also the interest payable on each loan advanced to each debtor. Compound interest is not allowed. Sub-section 3 of the aforesaid Section states that a Government Officer appointed for the purpose may ascertain whether the requirements of the law have been satisfactorily complied with Section 6 lays down some further conditions upon a pledgee. Thus, from he statement of accounts submitted the debtor will be in a position to study the extent of his liability taking stock of his position from time to time and to check the accuracy or otherwise of the statement. Section 9 lays down the procedure which the Courts are to follow when a suit for the recovery of a debt is filed by a money lender. Every Court is enjoined to frame an issue whether the plaintiff is a money-lender within the meaning of the Act and whether he has fulfilled the conditions laid down in Ss. 3, 5 & 6. Sub-section (2) of S. 9 lays down that, if it be proved that the plaintiff being a money lender holds no licence his suit should be dismissed- (This was introduced as an amendment in 1353 Fasli). The other sub-sections of the aforesaid sections provide that interest or costs may be reduced or disallowed for the contravention of the provisions relating to maintenance of account and furnishing of statements to the debtors. Payment of money by instalments is also provided for. Thus, it seems clear, that the purpose of the Act is not to prohibit money lending without licence but the condition of taking out a licence is imposed for the purpose of regularising the accounts of the money lenders so that debtors may know their position and Government may have a chance to check and inspect the accounts of the money-lenders. This is made abundantly clear by the fact that Banks, Co-operative Societies, and Companies who carry on money lending business have been exempted from obtaining licence. It can, therefore be presumed that the obtaining of licence; is for the purpose of supervising and regularising the money lending and that it was not intended that money-lending transactions: should be prohibited unless licensed. It has been held in ''31 Deccan L R 485'', and a catena of decisions that if a money-lender as plaintiff obtains a licence even after filing the suit, his suit should not be dismissed. There is a similar provision in the Punjab Money Lenders Act, S. 3 of which lays down that if at the time of the institution of the suit or at the time of decreeing the suit the plaintiff produces a certificate or licence of money lending that will be sufficient for the purposes of the law. There is a further provision that even "pendente lite" if an application before the Collector for the grant of a licence be presented by the plaintiff, adequate opportunity should be given to him to get the licence. Thus, the purpose of laying down the procedure with regard to cases filed in Court seems to be to safeguard the interests of the debtors so far as the furnishing and maintaining of accounts under the Act is concerned and to penalize if those provisions are contravened. The purpose does not seem to be to prohibit money lending without a licence. In an unreported decision vide ''Vallabhji v. Tulsiram'', ''File No. 654 of 1354 F. and also in ''32 Deccan L R 501'', it was held sufficient if licenses were produced even after the suits were filed though in that case the newly amended provisions were not under consideration.
7. The above opinion requires further examination in view of certain observations and rulings made under the English Money Lenders Act. In ''Victorian Dalesford Syndicate Ltd. v. Dott'', (1905) 2 Ch D 624, it was held that S. 2 (1) (c) of the Money Lenders Act, 1900, applies to a money-lender who has not registered his name under the Act; and the result is that he cannot make any valid "agreement in the course of his business as a money lender with respect to the advance and repayment of money, or to take any security for money in. the course of his business as a money lender." It was held in the ruling that the money lender has to register for the protection of those who deal with him. The purpose is a public purpose and therefore the act for the doing of which the penalty is imposed is an Act which is impliedly prohibited by the statute and is consequently illegal. The same view was expressed in ''Bonnard v. Dott'', (1906) 1 Ch D 740.
8. It was argued on the basis of these two rulings that as the Hyderabad Money Lenders Act also imposes penalties on money lenders for non-registration the principle enunciated therein should be applied to this revision petition and the contract held void. Before examining and applying these two rulings to the issue before us, it is necessary to go through the provisions of the English law relating to money (sic)It may be observed here that the Privy Council ruled that it would be dangerous to apply the decision of an English Court construing an English Act of Parliament not ''in paria materia'' with the Indian statute and not even forming the foundation of those statutes and allow it to prevail over Indian decisions interpreting very similar enactments. In ''
it is, they think, always dangerous to apply English decisions to the construction of an Indian Act." In ''Municipal Board of Gonda v. Bachu'', AIR 1951 All 730, their Lordships had to consider the question as to how far the failure to comply with S. 97 of the U.P. Municipalities Act made the contract entered into by the Municipality void and illegal. Rulings of English Courts based on the Public Health Act of 1875 were cited in which it was held that the contract by an Urban Authority of the value exceeding �50/- not being under seal was illegal and that the contractor was prohibited from recovering the money for the words carried out by him. In ''Young & Co. v. Corporation of Royal Leamington Spa'', (1883) 8 AC 517, Lord Bramwell observed that the mandatory provisions of the statute must prevail and added that the legislature "made provisions for the protection of the rate payers, share-holders and others who must act through the agency of a representative body by requiring the observance of certain solemnities and formalities which involve deliberation and reflection. That is the importance of the seal." The Lord continuing said" it is ideal to say there is no magic in a wafer... This decision may be hard in this case on the plaintiffs who may not have known the law. They and others must be taught it, which can only be done by its enforcement.
In spite of this decision of the English Court the Allahabad High Court in the aforesaid ruling did not follow the English ruling and came to the conclusion that the provisions of S. 96 of the U.P. Municipalities Act were different from those of the Public Health Act and therefore a contract which was entered into in contravention of S. 96 of the U. P. Municipalities Act if held invalid does not incapacitate the Municipality to enter into an agreement and hence the provisions of S. 65 of the Contract Act will be applicable and the contractor will have to be paid by the Municipality for the benefit which the Municipality got due to the carrying out of the contract.
9. After going carefully through the provisions of S. 2 (i) (c) of the Money Lenders Act of England 1900, we are of opinion that those provisions are different from those of section 3 of the Hyderabad Money Lenders Act. Section 2 (i) (c) of the English Money Lenders Act reads as follows:
A money lender shall not enter into any agreement in the course of his business as a money-lender with respect to the advance and repayment of money or to take any security for money in the course of his business than his registered name.
It will be clear from the above provision that the English money lender under the Act is barred from entering into any agreement with respect to the advance of money etc., in the course of his business as a money lender unless he gets himself registered as such. There is no such clear and specific provision in S. 3 of Act V (5) of 1349 F. It was argued that S. 3 (5) (b) of Act V of 1349 F. imposes a penalty of imprisonment or fine for the contravention of the provision relating to licence and that therefore it should be held to have prohibited the money lender from legally transacting any business. There is a similar provision in the C.P. Money Lenders Act as also in the Punjab Money Lenders Act. But in spite of that provision it has been held that it does not operate to invalidate transactions entered into without licence. Section 11 (e) (ii), C.P. Money Lenders Act provides that whoever contravenes the provisions and carries on money lending without a licence shall be punished with a fine which may extend to Rs. 50/- or if he has previously been convicted of an offence under that sub-section will be liable to pay a fine which may extend to Rs. 100/-
Thus, the purpose of imposing the penalty seems to be not to make the money lending transactions illegal but to hold the money lenders responsible before a Criminal Court so that they shall be careful not to transact business without a licence lest they may be punished. It was argued that in the C.P. Money Lenders Act and in the Hyderabad Money Lenders Act as the latter stood prior to the amendment in 1355 P., the penal provision extended only to fine and that under the amendment introduced by Regulation No. XVI (16) of 1355 F. an alternative punishment of imprisonment was also incorporated and that therefore it must be presumed that the legislature changed the previous purpose of the Act viz., to get the accounts regularised and supervised by introducing a new provision which entailed prohibition of money lending transactions unless under a licence. I am unable to agree with this contention. The mere introduction of the clause relating to imprisonment cannot alter the object so long as the preamble has been the same even despite the latest amendment, namely, that the purpose of the Act was to regularise and supervise money lending transactions. The expression "regularization and supervision" does not import prohibition.
10. In the two English cases cited above, the purpose of inflicting penalty was explained to be either to collect revenue or to prohibit the transaction and revenue collection does not seem to be to prohibit the money lender from entering into a contract without a licence. On the basis of these two rulings it was strenuously argued that the penalty of imprisonment could not be for purposes of revenue collection. In our opinion the object of the legislature in enacting such laws cannot be limited only to the dual purpose mentioned in the English cases. The purpose can also be to regularise and supervise the accounts for achieving which licences are insisted upon so that the supervising authorities may have full knowledge of the number of money lenders in the State and the accounts maintained by them; in order to achieve this the penal clause was introduced in the Act so that the money lenders may get themselves registered as such. Keeping this purpose in view, we hold that the English Cases are inapplicable to the question for decision before us. Act V of 1349 F has not in so many terms prohibited money lending without licence nor is there any clause to show the civil effect of unlicensed money lending as for instance the procedure laid down in the Assam Money Lenders Act of 1934, Sec. 11 (4) of which lays down:
Where it is shown that a money lending transaction was brought about by a contravention of the provisions of the said Section the transaction shall be illegal....
No such provision is to be found in our Act. It would be erroneous to suppose that the legislature intended to create hardship for the rural agriculturists by prohibiting and making money lending without licence illegal. On the contrary, the purpose appears to be to prohibit money lenders from maintaining wrong accounts or charging usurious interest or committing other irregularities which they were generally inclined to do taking advantage of the ignorance of the agriculturists. If that purpose were to be kept in view, the contract of money lending without a licence cannot be re garded as illegal. The Hyderabad Money Lenders Act will therefore have to be regarded as a remedial Act and must be liberally construed. The disjunction, "or" in the penal clause, "...imprisonment or fine... " clearly goes to show that it is left to the discretion of the presiding officer of the Court to impose either or both the penalties as he thinks fit, thereby making the clause only directory and discretionary in character; its effect not being mandatory, non-compliance thereof cannot make money lending transactions illegal and void.
11. It is well settled that each statute must be judged by itself as a whole, regard being had not only to its language but also to the objects and purposes for which it was enacted.
If a statute does not declare a contract made in violation of it to be void and if it is not necessary to hold the contract void in order to accomplish the purpose of the statute the inference is that it was intended to be directory, and not prohibitory of the contract. (Crawford page 524).
Applying this dictum to Act V of 1349 F and assuming that its purpose is to compel money lenders to maintain regular accounts and allow opportunity to the supervising authorities to check their accounts, it is clear that it is unnecessary to hold a contract entered into without licence as void in order to accomplish the said purpose of the Act. Moreover Act V of 1349 F does not declare a contract of money lending made in violation of it to be void. The inference, therefore, is that the penal clause was intended to be directory. If the legislature had intended to make such contracts illegal it should have specifically said so. In the absence of any such words in the Amendment we cannot hold the contract to be void and cannot declare money lending without licence opposed to public policy. In 35 Deccan L.R. 69 it was held that the breach of certain Sections of the Abkari Act prohibiting a party from entering into contract with some dealer was not a mandatory provision and that a contract entered into in contravention of the said Sectionas not void. In 27 Deccan L.R. 447 it was held that the contract for the purchase of land by a Government servant within his jurisdiction in contravention of the provisions of the Hyderabad Land Revenue Act was not illegal or void. In ''Johnson Vs. Hudson (1809) 10 R.R. 465'' where a tobacco dealer sold tobacco to a customer without obtaining a licence and in contravention of the provisions of statute 43 Geo III which made priced tobacco sold without a licence liable to forfeiture and punishment, it was held that the seller was entitled to recover the price of the tobacco from the vendee and that the penal clause was incorporated in the statute merely for the purpose of revenue collection. In ''Gremaire v. Valon''. (1809) 170 E.R. 1110'' it was held that notwithstanding statute III Hen VIII clause (h) which provides that no one shall practise as a surgeon in London or 7 miles around without obtaining a licence from the College of Surgeons on payment of � 5/- a month, a person who is not so licensed may maintain an action for business done as surgeon within those limits, the statute containing no prohibitory clauses.
12. The facts of the case before us are that the plaintiff had a four year licence from 1350 F. He again obtained a licence in 1357 F and was without a licence, say, for about three years after 1354 F. The execution of the promissory note was admitted by the defendant who prayed for a decree, amount of which was to be paid on instalment basis on the grounds of poverty. The plea of poverty was not supported by evidence. We are not satisfied that the defendant is poor. That decree became ''res judicata'' so far as the validity of the transaction was concerned. Keeping in view the purpose for which Act V of 1349 F was enacted, the transaction in question cannot be said to be illegal and therefore the revision petitioner in our opinion is entitled to a decree. We accept the revision petition and decree the plaintiff''s suit with costs throughout.
Naik, C.J.
13. I agree.
14. M.A. Ansari J.: The legal point to be decided in this Full Bench case is whether a debt is recoverable by a person who had no licence under the Hyderabad Money Lenders Act, No. V of 1349 Fasli, at the time of advancing the loan, I shall first give a brief summary of the facts. Shamshir Ali, the revision petitioner, had a licence dated Amardad 14, 1350 Fasli (June 19, 1941) authorising him to do money lending which was under Sub-Section (4) of Section 3 of the Act to be operative for four years. After this licence has expired, he lent Rs. 301/- to defendant, the opposite party, who also executed a promissory note for the amount on Dai 10, 1356 Fasli (November 10, 1946). At the time the creditor had no licence, for his next one is dated Farwardi 7, 1357 Fasli (February 7, 1948). Without getting any such document, he on Amardad 10, 1356 Fasli (June 10, 1947) instituted a suit on the basis of the promissory note and the defendant filed a written statement on Shehrewar 12, 1356 Fasli (July 12, 1947), in which he admitted the execution of the promissory note and asked for an yearly instalment decree of Rs. 25. On the same date, the trial Court passed a decree, directing payment of the debt in annual instalments of Rs. 96. The revision petitioner then filed an appeal against it. The lower appellate Court on Azur 20, 1357 F. (October 20, 1947) being of opinion that an issue should have been framed regarding the debtor''s inability to pay and evidence taken on it before such a decree could be passed, allowed the appeal and remanded the case to the trial Court for decision on such an issue. After the remand and on Ardehibist 25, 1357 Fasli (March 25, 1948) the defendant raised the plea that as the plaintiff had not complied with the provisions of the Hyderabad Money Lenders Act, this suit should be disallowed. Thereupon, the trial Court held that as the creditor had no licence when the money was lent, his suit should be dismissed, and the first appellate Court has confirmed the decree. Against this decision, the plaintiff has come in revision to this Court. Hearing the case as a Single Judge, I considered the point to be of sufficient importance to be referred it to a Division Bench, which has referred it to this Full Bench.
15. I shall now summarise the important Sections of the Act; for it appears to me to be a well-established legal proposition that where conditions are prescribed by any Act for the conduct of any particular business and the object of the legislature in imposing the conditions Is the maintenance of Public Order, or the protection of the persons dealing with those on whom the conditions are imposed and they are not observed, any agreement made in course of such business is void. The Act consists of fifteen Sections. Sub-section (4) of Section 2 of the Act defines ''loan'' as any lending, with or without security, of cash or commodity on interest, and then enumerates eight kinds of loans which are not covered by the definition. Subsection (7) says that money lender is the person who, carries money lending as his usual business; or does it along with some other occupation. Section 3 of the Act originally consisted of six Sub-sections; but by the Regulation No. 16 of 1355 Fasli (1945-46 A.D.), it has been amended in several important particulars. The last Sub-section has been deleted by it and important modifications are made which will'' be referred in appropriate places. Under Subsection (1) of Section 3, every officer nominated by the Government for the purpose is to maintain a register according to the prescribed form and by Sub-section (2) each money lender is to apply in a prescribed form for the registration of his name. The officer concerned is bound to register his name and issue a licence within a fixed period; but according to the proviso which has later beers added, if such an officer has reasonable grounds for believing the conduct of the money lender to be unsatisfactory, he can for reasons to be recorded refuse to issue or renew the licence. Sub-section (3) enacts that the application for the registration must be accompanied with a fee, which is not to exceed Rs. 25 and then Sub-section (4) fixes the period of every licence to be four years. The next Sub-section (5) as amended by the Regulation No. 16 of 1355 Fasli (1945-46 A.D.) is an important one and consists of three parts: Clause (a) restrains any money lender from doing business in any district without having obtained a licence, Clause (b) makes the person found guilty of having infringed the first Clause liable to punishment which may extend to six months or fine or both and Clause (c) renders the offence cognizable and bailable. Then, u/s 5, such a creditor must keep a regular and separate account for each debtor, and in each year he should furnish to his debtors their accounts under his own or agent''s signature, which should disclose the amounts due from them together with details of all the transactions that have taken place during the year. Moreover the amounts of the principals and interests should be separately shown, the creditor being debarred from including interest into the principal. Section 6 relates to pawn-brokers who must in addition to the responsibility of keeping accounts maintain the particulars sufficient to identify the things pledged, the dates for their redemption and the names of their pledges. He is further bound to give copies of the particulars to the debtors at the time of their entering into contracts. u/s 8 of the Act, the money lender is to give without any delay receipts for the amounts repaid. By the amended Section 10, the rate of interest for simple loans must not exceed nine or six per cent where securities are taken. He is further forbidden to charge interests upon interests or any expenses other than those specified in sub-s. (3). Section 12 authorizes a Court to direct decrees passed after the Act for payment of money to be by such instalments as are justified by the decretal amount and the circumstances of the debtor. Section 13 renders the money lender or his agent liable to imprisonment for two years or fine if he is found guilty of harassing his debtor. Section 9 of the Act casts a duty on the Court of framing issues as to whether the creditor being a money lender has complied with provisions of Sections 3, 5 and 6. It the Court finds that he is a money lender, but has no licence, then the suit under Sub-section (2), must be dismissed. On the other hand, if the claims be proved, but no account has been maintained under Sec. 5 or there be no specification of things pledged u/s 6 or no receipt u/s 8, The whole or part of the interest and costs can be disallowed. Again under Sub-section (3), if no annual account has been furnished according to Clause (b) of Sub-section (1) of Section 5, the Court is bound to disallow the interest for the period the accounts hove not been furnished unless it is satisfied that there are adequate reasons for such non-furnishing of the accounts and they have later been furnished.
16. From the above summary of the Sections, it is obvious that one of the objects of the legislature in passing the Act is to safeguard the interests of persons who deal with money lenders. Otherwise, the provisions for dismissing of suit, striking of interest or punishment for harassment by the creditors are meaningless. Again, the Collector''s power under S. 4 of the Act relating to the cancelling or suspending licences of such persons whose suits have been dismissed on the grounds of their having been guilty of fraud or forgery or duress indicate similar object.
17. Coming to the case law, the first authority I would refer is of Boistub Churn v. Wooma Churn'', 16 Cal 436. The plaintiffs here had not taken out a licence for the sale of fermented liquors, under Bengal Act VII of 1878, sold to the defendant a certain quantity of porter, and sued him for the price. The defendant contended that the contract was void under S. 23 of the Contract Act, inasmuch as the plaintiffs had sold the goods without obtaining a licence under the Excise Act. It was held that The Act was not framed solely for the protection of the revenue; but was embracing other important objects of public policy as well and therefore the agreement entered into by a person who had not obtained a licence under the Act was void and money cannot be recovered under it. Wilson J. observed:
Two tests have been applied in many of the cases First, in a number of cases it has been said, that in an Act intended only for the raising of revenue and the protection of that revenue, a clause imposing a penalty may well be construed, not as prohibiting a transaction in such a sense as to make it illegal and void, but as providing a means of enforcing the liability of a person on whom the penalty is imposed.
If that test be applied in the present case the conclusion at which the Judge of the Small Causes Courts has arrived is correct; because it seems to me clear that the Act with which we are dealing is not a mere Act for the protection of the revenue, but that it is an Act having other objects of public policy in view as well.
Another test has been applied in various cases in order to determine whether the penalty imposed by an Act was intended to create a prohibition so as to invalidate a specific act of dealing in violation of the law in which the penalty is to be found, and that is, to see whether the penalty is imposed in general terms for the carrying on of a trade, or for the omission of some preliminaries which the law imposes on the opening of a trade, or some such general purposes as that, or whether the penalty is imposed on each specific act of dealing. In the latter class of cases, the Courts have been prone to construe the penalty as creating a prohibition, and therefore, vitiating each transaction. If that test be applied in this case, it is clear that the penalty is imposed on each specific act.
18. Applying both the tests to this Act, it appears to me that the object of Act is not merely administrative and all suits to recover loans where no licence is produced are liable to be dismissed. Therefore, according to the authority the particular debt in the case before me cannot be recovered.
19. The above authority was followed in ''Behari Lall v. Jagodish Chunder,'' 31 Cal 798, where it was held that the prohibition by the Excise Act of the sale of liquor without a licence is based upon the principle of public policy and on moral grounds, and that the purpose of the Act is not confined to the protection of the revenue alone. The suit was accordingly dismissed.
20. In ''Ismailji Yusufali v. Raghunath Lachiram,'' 33 Bom 636, the facts were that the father of the defendant had obtained from the Government a lease of certain salt pans to manufacture salt under licence and one of the conditions of the lease was that the lessee should not sublet the salt pans without the written permission of the Collector. The father of the defendant without any such permission sublet the pans to R who, as a security for the performance of the conditions of the sub-lease, deposited a sum of Rs. 1,000. The sub-lease was acted upon and after its expiration, the sub lessee brought a suit for the recovery of the deposit from the son. The latter denied the right to recover the deposit on the ground that it formed a consideration for an agreement which having been forbidden by law was illegal. The plea of the defendant prevailed and it was held that the real object and the necessary effect of the sub-lease was to enable the plaintiff to manufacture salt without a licence in the guise of a sub-lease although that was forbidden by law and by the terms of the licence. Chandavarkar, Ag. C.J. at page 643 says:
Under S. 11 of the Salt Act the manufacture of salt without a licence is prohibited subject to a proviso which is not material to our purpose here. Section 47 of the Act makes such manufacture an offence and. renders any person committing it liable to punishment.
The real object and necessary effect of the agreement between the appellant and the respondent was to enable the latter to manufacture salt without licence in the guise of a sub-lease, although that was forbidden by law and by the terms of the licence. The decree must be reversed and the claim rejected.
21. Then in the Full Bench case of ''Ramanayudu v. Suryadevara Seetharamayya,'' 58 Mad 727, a promissory note was executed by A after he had become the successful bidder at a toddy shop auction, in favour of B of advances to be made by the latter for carrying on the toddy shop business which they agreed to work as partners. The licence was later issued in A''s name and the partnership carried on the business and moneys covered by the promissory note were lent by B to the partnership. A had not obtained the permission of the Collector to work the toddy shop in partnership. It was held that inasmuch as S. 27 of the Abkari Act, that no privilege of supply or vend shall be sold, transferred or sub rented without the Collector''s previous permission; nor, if the Collector so orders, shall any agent be appointed for the management of any such privilege without his previous approval, had been contravened, the partnership was formed for an illegal purpose and no suit could be filed on the promissory note.
22. In ''
23. I will now refer to two English cases where an English Act relating to money lenders have been construed and it has been held that where a certain rule with the object to safeguard the interest of a particular class is laid down and penalty provided for breach of such conduct, the contract entered in breach of such rule is void. The first of such case is Victorian Daylesford Syndicate Ltd. v. Dott (1905) 2 Ch D 624. Here the defendant at the relevant dates to the cause of action was a money lender; but was not registered. He lent �-500 upon certain terms, under which he had received repayment of this loan a further sum of �503 13s. 9d., 400 fully paid up shares in a company and claimed another 3000 shares in the company under option which he said he had exercised. The plaintiff-company brought the action alleging the transactions to be harsh and claiming to have them reopened. It was held that S. 2, sub-s. (1) (c) of the Money Lenders Act applied and the result was that the defendant could not make any valid agreement in the course of his business as a money lender with respect to the advance and repayment of money, or take any security. Buckley J. at page 629 observes:
The next question is whether the Act is so expressed that the contract is prohibited so as to be rendered illegal. There is no question that a contract which is prohibited, whether expressly or by implication, by a statute is illegal and cannot be enforced. I have to see whether the contract is in this case prohibited expressly or by implication. For this purpose statutes may be grouped under two heads - those in which a penalty is imposed against doing an act for the purposes only of the protection of the revenue, and those in which a penalty is imposed upon an act not merely for revenue, purposes, but also for the protection of the public There is no question of protection of the revenue here at all. The whole purpose is the protection of the public. The money-lender has to be registered, and has to trade in his registered name obviously and notoriously for the protection of those who deal with him. The purpose is a public purpose, and therefore upon all the authorities the act for the doing of which a penalty is imposed is an act which is impliedly prohibited by the statute, and is consequently illegal.
24. This authority was approved by the appellate Court in another case of ''Bonnard v. Dott'', (1906) 1 Ch D 740. Both these were under the English Money Lenders Act and my learned brother, Mr. Justice Shripat Rao, has rejected them on the ground that the English statute is not in ''pari materia'' with the Hyderabad Act. I do not agree with him. The English S. 2, sub-s. (1) (c) is as follows:
Shall not enter into any agreement in the course of his business as a money-lender with respect to the advance and repayment of! money, or take any security for money in the course of his business as a money-lender otherwise than in his registered name.
Section 3, sub-s. (5) (a) of the Hyderabad Act says:
No money-lender can, without having obtained a licence under sub-s. (2) carry business as money-lender in any district.
25. If the definition of money-lender as given in sub-s. (7) of S. 2 is kept in view as well as other sub-sections of S. 3, I do not think the prohibitions about money lending without being registered in the two sub-sections are different. Then the ground for holding such a contract void under the Indian Law is stronger; for S. 23 of the Indian Contract Act renders every contract void whose object is of such nature that if permitted if would defeat the provisions of any law, and the section is parallel to S. 24 of the Hyderabad Act. If a person without a licence at the time of advancing money can recover the debt, he need not worry about his licence being revoked or suspended, or even his being punished. To decree his claim would thus amount to defeating the provisions of the Act. Then the two English authorities proceed upon a principle which has been accepted by Indian Courts and there appears no reason why it should not be acted upon in the case of a money-lender who has failed to comply with statutory directions.
26. The authorities of this Court have not been uniform. In ''Gunda Mallayya v. Sennam Lingayya'', 31 Deccan L.R. 485, it has been held that if a licence be obtained at the time of the institution of the suit, it would suffice and the fact of its not having been obtained at the time when the contract was entered into is immaterial. The authority overlooks the principle that no subsequent conduct can revive a void contract. 1 respectfully differ from it. Again, reference is made to a Single Judge authority of ''Abdul Karim v. Dinshahji'', 35 Deccan L.R. 69, wherein it has been held that a certain section of the Abkari Act was a mere directory and a contract entered into in contravention of the Rule does not make the contract void. Being the authority of a Single Judge, I am not bound by it. The contrary view has been taken in ''Govind Singh v. Vali Mohammad'', AIR 1951 Hyd 44, wherein it has been held that a contract made with a money lender who has failed to register himself under the Act is illegal and the money-lender cannot recover the debt. So also my learned brother, Mr. Justice Suryanarayana Rao, has in ''Mahomed v. Faqir Mohammad", 1950 Hyd L.R. 349, held that the provision of S. 3, Cl. (2) of the Act is mandatory and in case of failure the money-lender cannot enforce the contract. I think these latter authorities are correct.
27. Any distinction between the directory or mandatory provisions is not helpful in allowing this petition; for the provision relating to the registration appears to me to be mandatory. Sub-section (2) of S. 3 directs registration. Then sub-s. (5) Cl. (a) forbids without licence carrying of money lending business and Cl. (b) of the same sub-section makes such carrying of business punishable with imprisonment, which means that it is an offence. The lending being penalised and the purpose being a public one, it is clear that contract is impliedly prohibited and therefore void.
28. No question of ''res judicata'' arises in the case. The first decree of the lower Court has been reversed by the appellate Court and the case remanded for a fresh decision. Sitting in revision, I have no final existing decision wherein the right of the revision petitioner to recover his loan has been allowed, and I am free to decide the case on the legal points. As I have disagreed with the views of my learned brother and His Lordship the Chief Jus ice, I thought it necessary to give in some details my reasoning for reaching a different conclusion. I am, therefore, of opinion that the decisions of the lower Courts are correct and this revision petition should be dismissed with costs.
