Civil Court Order To Prevail Over Findings Recorded By Authorities Under Maharashtra Money-Lending (Regulation) Act: Bombay High Court

"Since the Civil Court has already determined the nature of the transaction, the order passed by the Civil Court would prevail over the findings recorded by the authorities exercising powers under the Act of 2014".

One Haribabu Thorat in 2009 executed two sale deeds transferring two lands for Rs. 6 lakh to the petitioner Bhanudas Shinde. While Shinde considered the transaction to be a sale, Thorat assumed it to be a "mortgage by conditional sale". Thorat claimed that Shinde gave him a loan of Rs 6 lakh as an unauthorised money lender and took the land as security. Shinde did not return the land back to Thorat despite his willingness to return the money. 

The District Registrar initiated proceedings against Shinde under the 2014 Act. The petitioner's residence was searched and, on the basis of certain documents, a prima facie doubt was raised that he was indulging in money lending activities. The District Registrar in 2018 declared that the deeds were of a mortgage by conditional sale, by an order under section 18(2) of the 2014 Act, and restored ownership of the land to Thorat. The petitioner's appeal before Divisional Joint Registrar, Co-operative Societies was rejected.

In the meantime, the Civil Court dismissed Thorat's suit holding that the transaction was that of sale and not of mortgage by conditional sale. The prayer for reconveyance of the land to Thorat was rejected. The petitioner approached the High Court challenging the order of the District Registrar.

Advocate K. N. Shermale for the petitioner submitted that the proceedings before District Registrar were not maintainable due to the pending civil suit for the same cause of action. After the Civil Court dismissed Thorat's suit, the District Registrar could not have recorded contrary findings about the nature of the documents in question.

Advocate S. K. Shinde for Thorat and AGP S. S. Dande for the State objected to the maintainability of the petition due to availability of alternate remedy of filing revision petition before the Registrar General under Section 9 of the Act. On merits, they submitted that sufficient material was seized from the petitioner's residence to show that he was in the business of money lending.

Maintainability

The court noted that when Thorat filed a complaint before the District Registrar, he had already invoked jurisdiction of the Civil Court. He suppressed the civil suit which was brought on record before the District Registrar by the petitioner, it observed.

The court said that by the time the final decision was passed by the District Registrar, the Civil Court had already held that the transaction was that of absolute sale. 

"The District Registrar (Money Lending) could not have assumed the transaction as that of mortgage. Unless District Registrar (Money Lending) comes to a conclusion that the property came in possession of a moneylender by way of security for loan, he cannot exercise power of restoration of property under Section 18(2). One the transaction was declared as a sale by the Civil Court, District Registrar (Money Lending)could not have exercised jurisdiction under Section 18 of the Act of 2014," said the bench.

The District Registrar could not have entertained the complaint once the petitioner invited his attention to the pending civil suit for the same cause of action, the court opined and held that the order of the District Registrar is without jurisdiction.

The court noted that the Civil Court and the District Registrar have taken diagonally opposite views regarding the nature of the transaction between the parties. It added that the District Registrar did not deal with the fact that the Civil Court dismissed the respondent's suit and treated the transaction as that of sale.

Divisional Joint Registrar (Cooperative Societies) in the appeal has also ignored the Civil Court's judgment, said the court. 

The court applied the "spirit" of Sections 10 (stay of suit) and 11 (res judicata) of the CPC to the present case and stated that a party cannot be permitted to simultaneously exercise parallel remedies before two authorities by suppressing earlier proceedings. 

"This Court cannot be a mute spectator to the abuse of process of law by Respondent No. 5 [Thorat] and turn a blind eye to his deplorable conduct on the ground that an alternate remedy of revision is available. Therefore both for the reasons of lack of jurisdiction and incongruous situation created on account of conflicting orders, interference by this Court in exercise of jurisdiction under Article 226 and 227 of the Constitution of India would be warranted to set the things right and to prevent a confusion being created on account of contradictory orders being passed by the Civil Court and a statutory authorities."

Merits

During the pendency of the civil suit, Thorat had approached the Agriculture Minister with a complaint against the petitioner. He made a general request for return of all the lands of various farmers in the nearby villages. The Minister directed the Collector, Ahmednagar to conduct an enquiry under the 2014 Act. The court rejected the petitioner's contention that the District Registrar had no choice but to pass an order against the petitioner observing that the Minister did not issue directions to take a particular decision but just to conduct an enquiry.

The court noted that Thorat succeeded in restoration of ownership of the lands in his favour without refunding the consideration amount of Rs. 6 lakh even though he was willing to refund the amount as per his prayer in the civil suit. The court inferred that he instituted parallel proceedings to avoid refund of the consideration amount.

The District Registrar did not take cognizance of the Civil Court judgement on the ground that the suit was not filed under the 2014 Act. The court stated that this was a gross error and the District Registrar should have considered the judgement because he was deciding the issue about the nature of the transaction which was already decided by the Civil Court.

"The District Registrar (Money Lending) ought to have appreciated that he was recording a diagonally opposite opinion on the nature of the transaction, leading to utter confusion....The Appellate Authority i.e. Divisional Joint Registrar added a premium to the illegality by not even referring to the judgment and order passed by the Civil Court", the court observed.

The court said serious illegalities have crept in on account of the authorities exercising jurisdiction under the Act of 2014 in ignoring the judgment and order delivered by the Civil Court delivered at a prior point of time.

The court said the authorities under the Act may independently determine whether the petitioner is engaged in money lending or not, however, once the Civil Court has held the nature of the document be a transaction of sale, the authorities cannot not record a contrary opinion that the transaction was a mortgage and the land was offered by way of security for a loan.

Therefore, the court set aside the order passed by the District Registrar (Money Lending) as well the order passed by Divisional Joint Registrar, Co-operative Societies.

Case no. – Writ Petition No. 6581 of 2022

Case title – Bhanudas S/o Ramchandra Shinde v. State of Maharashtra and Ors.

Citation: 2022 LiveLaw (Bom) 443