The Bombay High Court recently ruled that the civil court’s judgment in an earlier action will prevail over an order made under section 18(2) of the Money Lending (Regulation) Act 2014 for the same cause of action.

Judge Sandeep V. Marne of the Aurangabad bench quashed the order made by the District Registrar (Money Loans) and Appeals Authority which had declared a transaction between the parties to be a mortgage despite the civil court’s prior declaration as per which was an absolute sale.

As the civil court had already determined the nature of the transaction, the order made by the civil court would prevail over the findings recorded by authorities exercising jurisdiction under the 2014 Act.“.

A Haribabu Thorat in 2009 executed two deeds of sale transferring two lands for Rs. 6 lakh to petitioner Bhanudas Shinde. While Shinde viewed the transaction as a sale, Thorat assumed it was a “mortgage by conditional sale”. Thorat claimed that Shinde gave him a loan of Rs 6 lakh as an unauthorized moneylender and took the land as collateral. Shinde did not return the land to Thorat despite his willingness to return the money.

The District Registrar commenced proceedings against Shinde under the 2014 Act. The applicant’s home was searched and, based on certain documents, a prima facie doubt was raised as to the possibility of his giving himself up. in money lending activities. The District Registrar declared in 2018 that the deeds were a mortgage by conditional sale, by an order under section 18(2) of the 2014 Act, and returned ownership of the land to Thorat. The Applicant’s appeal to the Divisional Joint Registrar, Co-operative Societies was dismissed.

In the meantime, the Civil Court rejected Thorat’s request, considering that the transaction was that of a sale and not a mortgage by conditional sale. The prayer for the return of the land to Thorat was rejected. The petitioner applied to the High Court to challenge the District Registrar’s order.

Plaintiff’s attorney KN Shermale argued that the proceeding before the District Registrar was inadmissible due to the pending civil suit for the same cause of action. After the civil court dismissed Thorat’s lawsuit, the district clerk could not have entered contrary findings about the nature of the documents in question.

Attorney SK Shinde for Thorat and AGP SS Dande for the State objected to the maintainability of the petition due to the availability of an alternative remedy of filing a petition for review before the Registrar General under section 9 of the law. On the merits, they argued that enough material had been seized from the applicant’s residence to show that he was in the business of lending money.

Maintainability

The court noted that when Thorat filed a complaint with the district clerk, he had already invoked civil court jurisdiction. He dismissed the civil action which had been brought before the district clerk by the petitioner, he observed.

The court said that by the time the final decision was made by the district clerk, the civil court had already ruled that the transaction was one of absolute sale.

“The District Registrar (lending money) could not have assumed that the transaction was a mortgage. Unless the District Registrar (lending money) comes to the conclusion that the property came into possession of ‘a lender as security for a loan, he cannot exercise the power of restoration of title under section 18(2).Once the transaction has been declared as a sale by the civil court, the Registrar of District (loan of money) could not have exercised jurisdiction under section 18 of the 2014 Act,” the bench said.

The District Registrar could not have heard the complaint once the Petitioner brought to his attention the pending civil suit for the same cause of action, the court found and held that the District Registrar’s order n was not competent.

The court noted that the civil court and the district clerk took diametrically opposed views regarding the nature of the transaction between the parties. She added that the district registrar did not address the fact that the civil court dismissed the respondent’s lawsuit and treated the transaction as a sale.

Divisional Joint Registrar (Cooperative Societies) in the appeal also ignored the judgment of the civil court, the court said.

The court applied the “spirit” of Articles 10 (stay of proceedings) and 11 (res judicata) of the CCP to the present case and declared that a party cannot be authorized to simultaneously pursue parallel remedies before two authorities in deleting a previous procedure.

“This Court cannot be a silent spectator of Respondent No. 5’s abuse of process of law. [Thorat] and turn a blind eye to his deplorable conduct on the grounds that another review remedy is available. Therefore, both for reasons of incompetence and of incongruous situation created due to contradictory orders, the interference of the Court in the exercise of its jurisdiction under Articles 226 and 227 of the Constitution of the India would be justified to straighten things out and avoid confusion. created due to conflicting orders made by the civil court and a statutory authority. »

merits

While awaiting the civil trial, Thorat had approached the Minister of Agriculture with a complaint against the petitioner. He made a general demand for the return of all the land of various farmers in the neighboring villages. The Minister ordered Collector Ahmednagar to conduct an investigation under the 2014 Act. The court rejected the claimant’s claim that the District Registrar had no choice but to issue an order against the applicant, noting that the Minister had not issued instructions to take a particular decision but simply to carry out an investigation.

The court noted that Thorat managed to restore ownership of the land in his favor without repaying the quid pro quo amount of Rs. 6 lakh even though he was ready to repay the amount as per his prayer in the civil suit. The court concluded that he had initiated parallel proceedings to avoid reimbursement of the consideration.

The district clerk ignored the judgment of the civil court on the grounds that the suit had not been brought under the 2014 law. The court said it was a gross error and that the district clerk should have reviewed the judgment as he was ruling on the question of the nature of the transaction which had already been decided by the civil court.

The district clerk (loan of money) should have understood that he was recording a diametrically opposed opinion on the nature of the transaction, which led to total confusion… The appeal authority is- i.e. the joint divisional clerk, added a premium to illegality by not even referring to the judgment and order rendered by the civil court“, observed the court.

The court said that serious illegalities crept in because the authorities exercising their jurisdiction under the 2014 law ignored the judgment and order issued by the civil court at an earlier time.

The court said that the authorities under the law can independently determine whether the petitioner is engaged in the lending of money or not, however, once the civil court finds the nature of the document to be a transaction of sale, the authorities cannot register a contrary opinion that the transaction was a mortgage and the land was offered as security for a loan.

Accordingly, the court set aside the order made by the District Registrar (Money Loans) as well as the order made by the Joint Divisional Registrar, Cooperative Societies.

Case No. – Written Petition No. 6581 of 2022

Case Title – Bhanudas N/A Ramchandra Shinde v. State of Maharashtra and Ors.

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