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Judgment
M. Jeyapaul, J.—The Respondents, who admittedly borrowed loan from the Petitioners herein, laid three Original Petitions before the IX
Assistant Judge, City Civil Court, Chennai invoking the provision under Sections 5(1) and 8 of the Tamil Nadu Prohibition of Charging Exorbitant
Interest Act, 2003 praying for declaration that the Respondents herein are not liable to pay the exorbitant interest at the rate of 33% per annum
towards the loan amount, for a direction to the Petitioners herein to charge interest at the rate of 9% for the secured loan, for passing an order of
adjustment of the interest paid by the Respondents to the Petitioners herein over and above the rate of 9% per annum and also to direct the
Petitioners herein to return the security documents given to them by the Respondents. They have also sought for an injunction restraining the
Petitioners herein from filing criminal complaints for the recovery of the said loan transaction.
The Trial Court, having entertained the original petition filed by the Respondents herein u/s 5(1) and 8 of the Tamil Nadu Prohibition of Charging
Exorbitant Interest Act, 2003, granted interim relief to the Respondents herein. At that stage, the present revision petitions have been filed invoking
Article 227 of the Constitution of India praying to strike off the aforesaid O.P. Proceedings initiated by the Respondents from the file of the IX
Assistant Judge, City Civil Court, Chennai.
The revision Petitioners have contended as follows:
The Respondents have sought to project the petitions under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 when the Act,
per se, does not apply to loan transaction between the revision Petitioners and the Respondents. The revision Petitioners being a non-banking
financial corporation, is governed by Reserve Bank of India Act. Therefore, the interest charged by the revision Petitioners does not fall under the
definition of exorbitant interest under the the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003. The Arbitration process had
already been initiated by the revision Petitioners as per the terms of the loan agreements. The Reserve Bank of India has not fixed a cap on the
rates at which the non-banking financial corporation could lend money. The Respondents also had not deposited the amount ought to have been
deposited u/s 5 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003. The loan advanced by the Petitioners to the Respondents
fall under the excluded category referred to u/s 2(6) of the Tamil Nadu Money Lenders Act, 1957. Contending that the court below has exercised
the jurisdiction not vested in it under law and has exceeded the scope of its authority and committed apparent and grave error in jurisdiction and
law, the Petitioners pray for interference in order to strike off the whole O.P proceedings from the file of the IX Assistant Judge, City Civil Court,
Chennai.
The Respondents, in their counter, have contended as follows:
The Respondents have mortgaged their properties which are worth much more than the value of the loan sanctioned. All the loans availed by the
Respondents from the Petitioners are secured loans. The revision Petitioners have increased the rate of interest from 25% to 26.5% with effect
from 1st August 2008 and again 33% per annum inspite of the protest raised by the Respondents. The revision Petitioners are bound to follow the
provisions of the Tamil Nadu Money Lenders Act, 1957 and the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003. The
Respondents were forced to resort to the proceedings under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 before the
Special Court viz., the IX Assistant Judge, City Civil Court, Chennai under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003.
The Reserve Bank of India has no authority to exempt the non-banking financial corporations from the purview of the State enactments. As per the
Government notification issued u/s 7(1) of the Tamil Nadu Money Lenders Act, 1957, the rate of interest for the secured loan shall not exceed 9%
per annum and for the unsecured loan 12% per annum. Claiming that the revision Petitioners chose to float the interim orders passed by the
Subordinate Court, pray for dismissal of the civil revision petitions.
Learned Counsel appearing for the revision Petitioners would vehemently contend that the loan transaction between the revision Petitioners and
the Respondents is exempted u/s 2(6) of the Tamil Nadu Money Lenders Act, 1957. Referring to Section 12 of the Tamil Nadu Prohibition of
Charging Exorbitant Interest Act, 2003, he would submit that the provisions of the Money Lenders Act would apply mutatis mutandis to a person
referred to in Section 3 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003. Therefore, it is his submission that the Special
Court has exceeded its jurisdiction vested in it in law.
Learned Senior Counsel appearing for the Respondents would submit that the term loan has been defined distinctly under the Tamil Nadu
Prohibition of Charging Exorbitant Interest Act, 2003. As the rate of interest charged by the Petitioners herein far exceeded the rate of interest
fixed by the Government under the notification issued u/s 7 of the Tamil Nadu Money Lenders Act, the exorbitant interest charged by the
Petitioners would fall under the definition of ''kandhu vatti''. As the Respondents have been given the option to approach the Special Court
invoking the provision u/s 5 and 8 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003, the Respondents have rightly
approached the court for the reliefs, it is submitted.
There is no dispute to the fact that the revision Petitioners are involved in money lending business and that the Respondents have borrowed huge
amount of loan from the revision Petitioners. It appears that the revision Petitioners have finally charged interest at the rate of 33% per annum for
the various loans lent by them to the Respondents.
The point that arises for determination is whether the loan transaction between the revision Petitioners and the Respondents would fall under the
ambit and scope of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003. Various provisions under the Tamil Nadu Money
Lenders Act, 1957 and the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 would throw light on the issue involved in these
petitions. Section 3 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 prohibits charging of exorbitant interest. It reads that
no person shall charge exorbitant interest on any loan advanced by him.
Section 2(6) of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 defines loan as an advance of money for daily vatti, hourly
vatti, kandhu vatti, meter vatti or thandal. The term loan has been defined in terms of usurious interest being paid by the victims.
Exorbitant interest means and includes daily vatti, hourly vatti, kandhu vatti, meter vatti and thandal as per Section 2(6) of the Tamil Nadu
Prohibition of Charging Exorbitant Interest Act, 2003. It is the admitted case of both the parties that the concept of daily vatti, hourly vatti, meter
vatti or thandal would not apply to the subject loan transactions.
Now, we will have to analyse what is kandhu vatti as defined u/s 2(5) of the said Act. Kandhu vatti means an interest which will work out to an
interest rate more than that fixed by the Government u/s 7 of the Money Lenders Act.
For the purpose of understanding the rate of interest fixed by the Government invoking the provision u/s 7 of the Money Lenders Act, the
court has to fall back on the Tamil Nadu Money Lenders Act, 1957. The phrase, ""a person"" referred to in Section 3 of the Tamil Nadu Prohibition
of Charging Exorbitant Interest Act shall be defined with the meaning assigned to money lenders under the provisions of the Tamil Nadu Money
Lenders Act as per Section 12 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003. the Tamil Nadu Prohibition of Charging
Exorbitant Interest Act, 2003 conspicuously omits to define the phrase ''money lender''. Instead, a prohibition of charging exorbitant interest has
been imposed on a person who lent loan. The said person as defined u/s 3 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act,
2003 is none other than the money lender as defined under the provisions of the Tamil Nadu Money Lenders Act, 1957.
Money lender means a person whose main or subsidiary occupation is the business of financing and realising loans but excludes a bank or a
co-operative society. A money lender is a person who is carrying on business of financing and realizing loans. Neither a bank nor a co-operative
society is termed as a money lender as per the aforesaid definition found u/s 2(8) of the Tamil Nadu Money Lenders Act, 1957. The definition of
money lender referred to above squarely applies to the person referred to in Section 3 of the Tamil Nadu Prohibition of Charging Exorbitant
Interest Act, 2003.
The meaning as defined to the term ''loan'' under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 in terms of usurious
interest imposed by the persons cannot be attributed to the term ""loans"" found under the definition of the phrase money-lender in the Tamil Nadu
Money Lenders Act, 1957. To come to a decision as to whether an advance made on the basis of the negotiable instrument exceeding Rs.
10,000/= would cover the term ""loan"" being advanced by the money lender, the definition of ""loan"" as defined u/s 2(6) of the Tamil Nadu Money
Lenders Act, 1957 will have to be necessarily adverted to by the court.
As per Section 2(6)(vi) of the Tamil Nadu Money Lenders Act, 1957, an advance made on the basis of a negotiable instrument exceeding Rs.
10,000/= would not fall under the definition of loan. Therefore, a money lender, who makes advances on the basis of a negotiable instrument
exceeding Rs. 10,000/=, is not ""a person"" referred to in Section 3 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003. In
other words, a debtor cannot lawfully charge a person viz., a money lender with the act of exorbitant interest when the money lender advanced the
loan on the basis of a negotiable instrument exceeding Rs. 10,000/=. In view of the above, the submission made by the learned Senior Counsel
appearing for the Respondent that the term ""loan"" as defined u/s 2(6) of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 will
have to be applied to the term ''loan'' found u/s 2(6)(vi) of the Tamil Nadu Money Lenders Act, 1957 is not accepted by this Court.
In the instant case, there is no dispute to the fact that advances have been made by the revision Petitioner to the Respondents on the basis of
negotiable instrument also. Therefore, the standard rate fixed by the Government by issuing notification invoking the provision u/s 7 of the Tamil
Nadu Money Lenders Act 1957 has no application to the loan advanced by the revision Petitioner to the Respondents.
Referring to the old provision u/s 2(6)(vi) of the Madras Money Lenders Act (Act 26/1957), the First Bench of this Court in J.D. Nichani and
Another Vs. State of Madras, has held as follows:
Section 2(6)(vi) has exempted the operation of the Act in regard to loans evidenced by Negotiable Instruments exceeding Rs. 3000 the underlying
idea being that persons who borrow such large amounts of Rs. 3000 and above on executing negotiable instruments can take care of themselves
and that protection afforded by this Act would not be necessary as it is essentially one for the protection of the impecunious and helpless
borrowers. We are, therefore, of opinion that mere is nothing in Section 2(6) of the Act to show that there has been a discrimination in the
application of the Act itself. The materials now available show that the evil of the money lenders'' exploitation was with reference to lower middle
class people, particularly, the salaried servants and wage earners. The distinction made u/s 2(6) in the cases specified therein and other cases of
advances is, therefore, reasonable.
In order to obviate the lower middle class people, particularly the salaried servants and wage earners from the exploitation of the money
lenders, such a provision has been made, it has been declared by this Court in the above decision. In the instant case, crores and crores of rupees
had been advanced by the revision Petitioners to the Respondents. The rate of interest has been reportedly levied only in terms of the contract
agreed between the parties. Neither the Tamil Nadu Money Lenders Act, 1957 nor the Tamil Nadu Prohibition of Charging Exorbitant Interest
Act, 2003 has any application to the loan transactions of this nature. Those two Acts address the grievance of the gullible public who borrow small
loan on usurious interest slapped on them and not for the mammoth loan transactions of this magnitude based on negotiable instruments.
A similar provision is found under the Bombay Money Lenders Act, 1946. While interpreting the provision found u/s 2(9)(f) and (f1) of the
said Act, a Division Bench of Bombay High Court in Bhanushankar Jatashankar Bhatt, Adv. Vs. Kamal Tara Builders Pvt Ltd. and another, has
held that the aforesaid provisions are not violative of Article 14 of the Constitution just because it excludes from its import the borrowings above
Rs. 3000/= It has also been held that small borrowers borrowing an amount of less than Rs. 3000/= belong to a distinct and separate class. The
distinction made on the basis of borrowings was held reasonable and therefore it could not be termed as arbitrary. The impugned provisions are
enacted to protect large section of the labour and lower class people from the exploitation by money lenders. It has been observed therein that the
Money Lenders Act itself was enacted to give protection to the poor section of the society who are unable to resist the economic affairs that
concern them.
In the light of the aforesaid decision, I hold that the Tamil Nadu Money Lenders Act, 1957 and the Tamil Nadu Prohibition of Charging
Exorbitant Interest Act, 2003 would not apply to money lenders who advance loans on the basis of negotiable instruments exceeding Rs.
10,000/=.
The learned Counsel appearing for the revision Petitioners would contend that the presentation of the petition u/s 5(1) of the Tamil Nadu
Prohibition of Charging Exorbitant Interest Act, 2003 is very much defective inasmuch as there was no deposit made as contemplated thereunder.
Per contra, the learned Senior Counsel appearing for the Respondents would submit that the word ''may'' has been used u/s 5(1) of the above
said Act giving wide option to the debtor either to deposit or not to deposit money due in respect of the loan while presenting a petition to the
court.
Section 5 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 reads as follows:
Deposit of money and presentation of petition to court and the procedure thereof- (1) A debtor may deposit the money due in respect of loan
received by him from any person together with interest at the rate fixed by the Government u/s 7 of the Money-lenders Act, into the Court, having
jurisdiction, along-with a petition to record that the amount deposited is in full or part satisfaction of the loan including the interest therefor, as the
case may be.
(2) The Court shall, on receipt of a petition under Sub-section (1), refer a copy of the petition to the person mentioned in the petition, directing him
to give his version of the case within a period of fifteen days as may be granted by the Court. The Court may, after due inquiry and after
considering the versions of the parties, pass orders recording the satisfaction of the loan and interest therefore in full or in part, as the case may be.
In the considered opinion of this Court, the word ''may'' used u/s 5(1) of the Act would imply the option given to a debtor to approach the
court with a petition to refer full or part satisfaction of the loan with interest. Once a debtor exercises his option to approach the court for such a
purpose, a debtor, who presents a petition, is bound to deposit the money in respect of the loan received by him together with interest. Therefore,
the expression ''may'' employed u/s 5(1) does not mean by any stretch of imagination that deposit of money while presenting a petition is always at
the option of a debtor. If such an import is given to the aforesaid provision of law, no debtor would be inclined to deposit the loan amount with
interest to get a relief within the time frame fixed u/s 5(2) of the Act. Consequently, it would be a mockery if the debtor, who has not chosen to
show his bona fides by depositing the money due in respect of the loan with interest, is permitted to seek for a remedy by just filing a petition. The
provision u/s 5(2) of the Act speaks of an inquiry and passing of an order recording the satisfaction of the loan and interest therefore in full or part.
If the amount due in respect of the loan with interest therein is not deposited as contemplated u/s 5(1) of the Act, the court may not be in a position
to record in full or part satisfaction of the loan.
In the instant case, it is found that the Respondents have presented the petition invoking the provision u/s 5(1) of the Tamil Nadu Prohibition of
Charging Exorbitant Interest Act, 2003 without adhering to the mandatory direction found therein to deposit the amount received by him together
with interest. Therefore, even assuming for the sake of argument that the Respondents are entitled to invoke the provision of law, the Respondents
should have deposited the money due in respect of loan with interest. The Trial Court, in the absence of which, should not have entertained the
petition presented under the aforesaid provision of law by the Respondents.
It is next contended by the learned Counsel appearing for the revision Petitioners that the present petition filed by the Respondents u/s 5(1) of
the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 is hit by Order II Rule 2 of the Code of Civil Procedure.
Per contra, the learned Senior Counsel appearing for the Respondents would submit that the cause of action and the issues involved in the
earlier suit filed by the Respondents in O.S. No. 4553 of 2009 is totally different from the cause of action and the issues involved in the present
petition filed by the Respondents u/s 5(1) of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003.
The suit in O.S. No. 4553 of 2009 has been filed by the Respondents praying for permanent injunction restraining the Petitioners herein from
presenting the cheques issued by the Respondents, from dealing with the promissory notes executed by them till the Petitioners exhaust their rights
against the secured properties and to permit the Respondents to sell the properties mentioned in the second schedule therein and deposit the sale
proceeds in the court. The present petition has been filed invoking the provision u/s 5(1) of the Tamil Nadu Prohibition of Charging Exorbitant
Interest Act, 2003 to record either full or part satisfaction of the loan amount advanced by the Petitioners to the Respondents.
As per Order II Rule 2 of the Code of Civil Procedure, every suit shall include the whole of the claim which the Plaintiff is entitled to make in
respect of the cause of action. But, where a Plaintiff omits to sue a portion of his claim, he shall not afterwards sue in respect of that portion of the
claim so omitted.
In the instant case, a Special Court has been constituted to deal with the grievances of the debtors u/s 5 and 8 of the Tamil Nadu Prohibition of
Charging Exorbitant Interest Act, 2003. The Special Court has been designated to deal with such provisions. The relief sought for in the petition
filed by the Respondents invoking the provision under Sections 5 and 8 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003
cannot be introduced and brought in the earlier suit filed by the Respondents in O.S. No. 4553 of 2009 on the file of the City Civil Court, Madras.
Further, the cause of action for the present petition is totally different from the cause of action which gave rise to a prayer for injunction. Therefore,
it is found that the Respondents have never omitted to make any further claim with respect to the cause of action which gave rise to the suit in O.S.
No. 4453 of 2009. Therefore, Order II Rule 2 of the CPC has no application to the facts and circumstances of this case.
It is the next contention of the learned Counsel appearing for the revision Petitioner that neither Section 94 nor Section 151 of the CPC confers
any power on the Trial Court to grant interim injunction when a petition is presented under Sections 5 and 8 of the Tamil Nadu Prohibition of
Charging Exorbitant Interest Act, 2003.
Per contra, the learned Senior Counsel appearing for the Respondents would submit that both Section 94 and 151 of the CPC confer ample
power on the Trial Court to grant relief to meet the ends of justice.
Section 94 of the CPC which deals with supplemental proceedings could be invoked praying for an interlocutory order in order to prevent the
ends of justice from being defeated only when there is a prescription found in the rules to grant such reliefs. Therefore, when there is no specific
prescription under the provisions of the Code of Code of Code of Civil Procedure, supplemental proceedings u/s 94 of the CPC cannot be
invoked in the guise of rendering justice to the party.
It is true that under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003, there is no provision empowering the competent
court to grant interim relief. There may be cases where an interim relief would be required to meet the ends of justice. When a competent court
entertains a petition u/s 5 or u/s 8 or under both the sections, it has got ample power u/s 151 of the CPC to grant interim relief in order to meet the
ends of justice even though there is no specific provision contemplated under the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003
to grant interim reliefs. Therefore, there is nothing wrong for the competent court to invoke the provision u/s 151 of the CPC when there is no
specific provision under the Special Act to grant any such interim relief. But, in the instant case, the Special Court had entertained a petition under
Sections 5 and 8 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 without any jurisdiction. While entertaining the said
petition, the Special Court had failed to mandate the Respondents to deposit the money due and payable with interest. Under such circumstances,
invocation of the inherent powers u/s 151 of the CPC by the Special Court is totally unjustifiable.
There is already an arbitration proceedings pending between the parties. But, the Respondents had already filed a suit praying for permanent
injunction restraining the Petitioners herein from presenting the cheques issued by the Respondents, from dealing with the promissory notes
executed by them till the Petitioners exhaust their rights against the se-cured properties and to permit the Respondents to sell the properties
mentioned in the second schedule therein and deposit the sale proceeds in the court. Now, the Respondents have also filed these petitions under
Sections 5 and 8 of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003 misusing the process of the court.
As it is found that the Special Court viz., IX Assistant Judge, City Civil Court, Chennai has exercised its jurisdiction not vested in it and has
committed a grave error in the matter of jurisdiction and of law and that the revision Petitioners also have abused the process of law by
approaching the Special Court, the entire proceedings in O.P. Nos. 194 to 196 of 2009 are liable to be struck off from the file of the learned IX
Assistant Judge, City Civil Court, Chennai.
In the result, striking off the entire impugned proceedings in O.P. Nos. 194 to 196 of 2009 on the file of the IX Assistant Judge, City Civil
Court, Chennai, all the three revision petitions stand allowed. There is no order as to costs. The connected Miscellaneous Petitions stand closed.