M/S. P. VAIKUNTA SHENOY & CO. versus P. HARI SHARMA

Citation: [2007] 11 S.C.R. 725 · Decided: 31-10-2007 · Supreme Court of India · Bench: A.K. MATHUR · Disposal: Appeal(s) allowed

Judgment (excerpt)

f 
I 
"'f 
MIS. P. VAIKUNTA SHENOY & CO. 
A 
v. 
P. HARI SHARMA 
OCTOBER 31, 2007 
[A.K. MATHUR AND MARKANDEY KAT JU, JJ.] 
B 
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Karnataka Money Lenders Act, 1961; S. 2(10): 
Business/market practices-A commission agent advancing c 
money to supplier of areca nut, however, charging interest-Supplier 
allegedly did not repay the amount-Suit for 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 of such advancing of loan was to ensure D 
regular supply of goods, areca nuts and not money lending-Such a 
practice prevalent and wide-spread in such business-Applying 
principle of purposive construction to the definition of money-lenders, 
appellant could not be said to be a money lender as he was not doing 
the business of money lending in a strict sense-Hence, impugned E 
judgment set aside and judgment of trial Court restored-
Interpretation of Statutes-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 off and on to secure regular supply of the F 
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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 of the amount with interest. Before the trial 
Court, the respondent contended that the appellant was a money-
lender and he did not have a licence as required by the Karnataka G 
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 
725 
H 
726 
SUPRf;ME COURT REPORTS 
(2007] 11 S.C.R. 
A in Section 200) of the Karnataka Money Lenders Act. 
Respondent submitted that in view of the definitions as given 
u/s. 2(10) gf the Karnataka Money Lenders Act, the appellant was 
clearly a money .. Jend~r. 
B 
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 of peoples' poverty. [Para 7] [728-C] 
C 
1.2. In the money lending business the object of the money-
lend~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 of areca nuts. 
Though, no doubt, interest at the rate of 18 per cent per annum was 
D 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 of his business. Very often, one of 
the methods is that the businessman advances money to his supplier 
E of goods 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 of the 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 
G 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 
H to be a money-lender as he was not really doing the business of 
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M/S.P.VAIKUNTASHENOY &CO. V. P.HARISHARMA 727 
[MARKANDEY KA TJU, J .] 
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money lending in the strict sense but was only advancing loans to A 
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 B 
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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. 
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The Judgment of the Court was delivered by 
MARKANDEY KATJU, J. 1. This appeal has been filed against 
the impugned judgment of the Karnataka High Court dated 25.03.2000 
in R.F .A No. 531 of 1997. We have heard le

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