MAGANLAL PRAGJIBHAI SEEDSMAN Vs. STATE OF BOMBAY

JUDGEMENT

(1.) THE question that this Full Bench has to consider lies in a very narrow compass and in our opinion is capable only of one answer. A money-lender was convicted for having charged interest on the loan advanced by him at a rate higher than the rate prescribed by Government under Section 25 of the Bombay Money-lender's Act. The rate prescribed is 12 per cent. His contention was that he was not contravening the provisions of the Act inasmuch as what he was doing was charging compound interest at the rate mentioned in the Act. What he purported to do was that he added interest to the principal advanced by him and in the next year he charged 12 per cent. interest not merely on the loan actually advanced by him but on the loan plus the interest which had accumulated on that loan, and the question that falls to be considered by us is whether it is open to a money-lender to charge interest, even though he chooses to call it compound interest, at a rate exceeding the rate laid down by the Legislature under Section 25.

(2.) NOW, under the Money-lenders Act both "interest" and "principal" are defined, and looking at these two definitions it is clear that if a money-lender charges anything more than the loan actually advanced by him, that constitutes interest by whatever name it may be called, and the only additional amount he is entitled to charge the person to whom he has loaned the money is an amount which would result in that amount bearing to the principal a ratio which will not exceed the rate of interest fixed by Government under the Act. Mr. Thakkar's contention is that there is nothing in the Act which prohibits the charging of compound interest : What he urges is that if the rate of interest is fixed at 12 per cent. then it is open to the money-lender to charge simple interest at the rate of 12 per cent. or compound interest at the rate of 12 per cent. and what he points out to us is that we must find a prohibition in the Act itself preventing the money-lender charging compound interest at the rate of 12 per cent. before we can hold the money-lender guilty on the facts. In our opinion, that is an entirely erroneous way to consider the various provisions of the Act. The Act does not speak either of simple or compound interest. The mischief that the Act aims at is the mischief of the money-lender charging more than 12 per cent. interest on the loan advanced by him to the person in need of the loan. Therefore, all that the Court has got to do is to find out what was the actual loan advanced by the money-lender, then ascertain what is the amountl he has charged in excess of that loan, and if that excess amount bears to the loan a ratio higher than the rate of interest prescribed under Section 25, the money-lender comes within the mischief of the Act. In this particular case we are dealing with, there is no dispute that if that principle were to be adopted, the money-lender has charged to the person to whom the loan was advanced an amount in excess of 12 per cent, interest calculated in the manner suggested by us.

(3.) THE result is that the conviction will be confirmed and the rule discharged.