Holding

Section 521(e)(ii) does not empower the Commissioner to impose a licence on money lenders and pawn brokers where no material conditions can be imposed, rendering the licence fee illegal.

Summary

The A.P. Bankers and Pawn Brokers Association, engaged in money lending and pawn broking, challenged a municipal notification that required them to pay a licence fee under Section 521(e)(ii) of the Hyderabad Municipal Corporation Act, 1955. The High Court had dismissed the petition, holding that the trade was dangerous and likely to create nuisance. On appeal, the Supreme Court examined whether the Act authorised the Commissioner to impose a licence on a trade for which no specific regulatory conditions could be imposed. It found no material to show that money‑lending or pawn‑broking is inherently dangerous or creates nuisance, and noted that the municipal law provides no mechanism to regulate such trades beyond the licence. Consequently, the Court held that the levy of a licence fee without any enforceable conditions is ultra vires. The petition was allowed and the High Court judgment set aside.

Issues considered

Whether Section 521(e)(ii) of the Hyderabad Municipal Corporation Act empowers the Commissioner to require a licence for money lenders and pawn brokers.
Whether the trade of money lending and pawn broking is dangerous to life, health or property or likely to create nuisance, justifying a licence requirement.
Whether a licence fee can be levied in the absence of any substantive terms or conditions that can be enforced.

Subjects

licence feemunicipal corporationSection 521money lendingpawn brokingnuisanceregulatory powerjudicial review

Judgment

A A.P. BANKERS AND PAWN BROKERS ASSOCIATION
V.

MUNICIPAL CORPORATION OF HYDERABAD

MARCH 2, 2001

B [A.P. MISRA AND S.N. VARIAVA, JJ.]

Municipalities:

Hyderabad Municipal Corporation Act, 1955: Section 521( e)(ii).

c Licence fee-Levy of-Money lender.,- and pawn brokers-Allowed to
carry on their business only on payment ~f licence fee-Validity of-Held: The
pu1pose of S. 521 is to i-egu/ate trade or operation on ce11ain terms and
conditions-If there are no lerms and conditions there is no question of issuing
a licencP--No material to sholv that money lending and palvn /11vking business
D is dangerous or likely to create nuisance-Hence, levy of licence fee illegal.

The appellant carried on the husiness of money lending and pawn
broking. The respondent-Corporation imported a licence fee under Sec-
tion 52l(e)(ii) of the Hyderabad Municipal Corporation Act, 1955 on the
appellant to carry on the said business. The High Court dismissed the writ
E petition of the appellant on the ground that the said business was likely to
create nuisance. Hence this appeal.

Allo,.ing the appeal, the Court

F HELD : 1. The whole purpose of Section 521 of the Hyderabad
Municipal Corporation Act, 1955 is to ensure that the Commissioner is in
a position to regulate the trade or operation or to prevent things from
being kept except on certain terms and conditions, which may be fixed by
the licence. It, therefore, automatically follows that if there are no terms
and conditions which can be imposed by a Commissioner or the Munici-
G pality in respect of a particular trade or operation then even if the Com-
missioner is of the opinion that the trade or operation is dangerous to life
or health or property or that it is likely to create a nuisance he would not
be able to regulate or control that trade or operation. Insisience on getting
a licence, in such a case, would be a useless formality and would not be
H ~uthorised by Section 521. [346-A-C]
340
A.P. BANKERS AND PAWN BROKER ASSOCIATION 11. MUNICIPALCORPN. OF HYDERASAD 341

2.1. In the present case, no material has been placed to show on what A
basis the Commissioner considers such businesses to be dangerous and is
likely to cause nuisance. More importantly it has not been shown how the
respondent regulates such trades and occupation. [347-F-G]

2.2. It is not shown or averred that all the shops are in r!sidential
areas inhabited by middle class and poor families or that all members of B
the Appellant-Association issue advertisements or that all shops are in
crowded areas. If one or two or some shops are set up in the thick of a
residential locality inhabited by middle class or poor families or set up in a
crowded place or issue an advertisement, the entire trade or occupation
cannot be termed to be dangerous to life, health or property or likely to C
create nuisance. The opening part of Section 521 talks of "trades and
operations". Similarly, Section 521(e)(i) also talks of "trades and
operations". However, Section 521(e)(ii) uses the word "trade or occupa-
tion". Thus if a shop or some shops are set up in crowded areas or require
any regulation, then it would be a matter for regulating that particular
shop or those particular shops by laying, down appropriate conditions. D
Merely because a pawn broker or a money lender is likely to set up a shop
in the thick of a residential locality or in a crowded place would be no
ground for the Commissioner to come to a conclusion that the entire trade
or occupation of money lending and pawn broking is dangerous or likely to
create nuisance. It is clarified that this Court is not saying that the Com- E
missioner cannot under Section 521(e)(ii) notify a particular trade or
operation, i.e. include all ptrson carrying on that particular trade or
operation. [347-G-H; 348-A-D]

M.A. Rasheed v. State of Kera/a, [1974] 2 SCC 687; Narayan Govind
Gavate v. State of Maharashtrq, [1997] 1 SCC 133, referred to. F
Chief Constable North Wales Police v. Evan;; (1962) All. E.R. 141 and
R. V. Radio Authority, ex.-parte Bui~ (1997) All E.R. 561, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1691 of2001.

From the Judgment and Order dated 27 .11.1995 of the High Court of G
A.P. at Hyderabad in W.A. No. 379/94.

L. Nageshwar Rao, A. Subba Rao, Jayanth Muthraj and S. Udaya
Kumar Sagar for the appearing parties.

The Judgment of the Court was delivered by H
342 SUPREME COURT REPORTS [2001] 2 S.C.R.
A S. N. VARIAVA, J. Leave granted.

This Appeal is against a Judgment dated 27th November, 1998.

Briefly stated the facts are as follows :

B The Appellants are an Association of money lenders and pawn brokers. The
Respondent-Corporation had in the year 1972 by a Notification dated 14th/
15th April, 1972, notified the business of money lenders and pawn brokers
as one which reguired a licence under Section 521 of the Hyderabad r
Municipal Corporation Act. Having so notified a licence fee of Rs.50 was
charged from all money lenders and pawn brokers. At that time no challenge
C was made to the Notification. However, by another Notification dated 11th
April, 1987, the licence fees was enhanced from Rs.50 to Rs.500 in case of
money lending and pawn broking business and Rs.200 in case of money
exchange operations.

The· Appellants filed a writ petition in the High Court of Andhra
D Pradesh challenging the Notification dated 11th April, 1987, inter alia, on the
ground that Section 521 did not empower the Commissioner to notify the
trades of money lending and pawn broking as being trades for which a licence
is necessary. The Writ Petition came to be dismissed by a single Judge of
the High Court on 18th of February, 1994. The single Judge, inter alia, held
E that the business of money lending and pawn broking were dangerous to
property in the sense that they involved a risk to property of the persons who
hypothecate the same with the money lenders and that having regard to the
manner in vvhich and the circumstances under which such· business is carried
on they are likely lo create nuisance.

F Against the judgment of the learned single Judge, the Appellants filed
an Appeal. The Appeal came to be dismissed by the impugned Judgment
dated 27th November, 1998. By the impugned Judgment, the learned Judges
have dis-agreed with the single Judge and held that the business of money
]ending or pawn broking is not dangerous to property. They have, however,
G held that these are operations which are likely to create a nuisance inter alia
on the following reasoning:

"Approaching the term in the background of the above meanings
and definitions, more especially the concept of "nuisance in fact"/
"nuisance per accidens", one can say that running of a money lending
H or pledge shop is likely to create nuisance to the residents of locality
A.P. .BANKERS AND PAWN BROKER A.~SOC!ATION '~ MUN!CJPALCORPK OF HYDERABAD[$.~. VARIAVA,J.) 343
at times. Let us take a case where such a shop is set up in the thick A
of a residential locality inhabited by middle class and poor families
and the proprietors reso11 to advertisements and other types of
canvassing so as to lure the vulnerable sections of society to bon·ow
money at high rates of interest by pledging the jewellery and so on.
A section of population residing in that locality may feel annoyed or
entertain a feeling of insecurity. The activity of pledging and money
B
lending on secmity of articles held precious the families may affect
T the susceptibilities of the family members and other residents of the
locality. The ramifications or the impact of the business may not
necessarily be confined within the precincts of the shop, but it may
stretch beyond that and percolate into the day to day life stream of c
the residents of the localiry.

Let us take another example which equally holds good not only
for the money lender's shop, but also for any other trade in a City.
Supposing the shop is set up at a crowded place, just adjacent to, or
encroaching on the foot p"tl1 a,.,d the pursuit of the business involves D
visits by large number of customers. It is likely to cause obstruction
or inconvenience to the passers-by. Thus, the location of a money
lending or pa\\'n broker's shop more often assumes good deal of
importance. Viewed from this angle, the possibility of a professional
money lender's shop causing nuisance in some degree or the other E
cannot be ruled out. It may not cause nuisance at all times and in all
localities, but under certain situations or circumstances or at
certain times, the running of such shop is likely to create nuisance to
a section of members of public. That is enough to justify the formation
of the opinion by the Commissioner. As already observed, the
Court cannot substitute lts own view on the question whether F
a particular trading activity is likely to create nuisance. If the
Commissioner had reached the satisfaction that the trade or operation
is likely to create nuisance either by its nature or by reason of the
manner in which or the conditions under which the trading activity
is carried on, that is sufficient to uphold the Commissioner's notifi- G
cation. The judicial review of the opinion reached by the Commis-
sioner ought to be confined within limited parameters as indicated
above."

We have heard the parties at length. The question for consideration is
whether the Commissioner has powers under Section 521 of tlie said Act to H
,
344 SUPREME COURT REPORTS (2001] 2 S.C.R.
A insist that money lenders and pawn brokers only nm their business on the
basis of a licence issued by the Respondents.

Section 521 reads as follows :

"521. Certain things not to be kept and certain trades and
B operations not to be carried on, without a licence:- (1) Except under
and in conformity with the tem1s and conditions of a licence granted
by the Commissioner no person shall -

(a) keep, in or upon any premises, for any purpose whatever :

c (i) any article specified in Part I of Schedule 'P'.

(ii) any article specified in Part II of Schedule 'P' in excess
of the quantity of such article which may at any one time
be kept in or upon the same premises without a licence;

(b) keep, in or upon any premises, for sale or for other than
D
domestic use, any article specified in part III of Schedule 'P';

(c) keep, in orupon any building intended for or used as a dwelling
or within fifteen feet of such building, cotton, in pressed bales
or boars or loose, in quantity exceeding four cwts;
E
(d) keep or allow to kept in or upon any premises, horses, cattle or
other four footed animals -

(i) for sale;

(ii) for letting out on hire;
F
(iii) for any purpose for which any charge is made or any
remuneration is received; or

(iv) for sale of any produce thereof;

G (e) carry on, allow to be carried on, in or upon any premises -

(i) any of '·the trades or operations connected with trade
specified in Part IV of Schedule 'P';

(ii) any trade or operation which in the opinion of the Com-
H missioner is dangerous to life, health or property, or likely
l·
1.

A.P. BANKERS AND PAWN BROKER ASSOOATIONv. MUN!CIPALCORPN.OF HYDER.'l.BAD [S.N. VARJAVA.J.J 345
to create a nuisance either from its nature, or .by reason of A
the manner in which, or the conditions under which, the
same, is or is proposed to be cariied on;

(f) carry on within the city or use any premises for the trade or
operation of a carrier.
B
(2) A person shall be deemed to have known that a trade or operation
., is, in the opinion of the Commissioner, dangerous or likely to create
a nuisance within the meaning of paragraph (ii) of clause (e) of sub-
section (1), after written notice to that effect, signed by the Commis-
sioner has been served on such person or affixed to the premises to C
which it relates.

(3) A person shall be deemed to cany on or to allow to be earned
on a trade or operation within the meaning of paragraph (ii) of clause
(e) of sub- section(!), if he does any act in furtherance of such trade
or is in any way engaged or concerned therein whether as principal, D
agent, clerk, master, servant, \\'orkrnan, handicraftsman or othetwise.

(4) It shall be in the discretion of the Commissioner -

(a) to grant any license referred to in sub-section (I) to such
restrictions or conditions, if any, as he shall think fit to impase; E
or

(b) to withhold any such licence.

(5) Every person to whom a licence is granted by the Commissioner
under sub-section (3) shall keep snch licence in or upon the premises, F
if any, to which it relates.

(6) Nothing in this section shall be deemed to apply to mills for
spinning or weaving cotton, wool, silk, or jute to any other large mill
or factory which the Commissioner may, !Tom time to time, with the G
approval of the Standing Committee specially exempt from the
operation thereof."

It is admitted that the Notification is under Section 52l(e)(ii). Section
521 provides for "certain things not to be kept and certain trades and
operations not to be cairied on without a licence". Sub-section l starts with H
·l
I

346 SUPREME COURT REPORTS [2001] 2 S.C.R.
A the words "Except UI)der ru1d in confmmity with the terms and conditions of
a licence granted by the Commissioner." Thus the whole purpose of Section ~
521 is to ensure that the Commissioner is in a position to regulate the trade
or operation or to prevent things from being kept except on certain terms and /

conditions, which may be fixed by the licence. It, therefore, automatically
follows that if there are no terms and conditions which can be imposed by
B
a Commissioner or the Municipality in respect of a particular trade or
operation then even if the Connnissioner is of the opinion that that trade or
operation is dangerous to life or health or property or that it is likely to create
a nuisance he would not be able to regulate or control that trade or operation.
Insistence on getting a licence, in such a case, would be a useless formality
c and would not be authorised by Section 521.

It is with this view in mind that this Court had on 23rd of January, 2001
called upon the Respondents to produce a licence, which had been issued to
money lenders and pawn brokers. TI1is had been done with a view to see
whether there was any term or condition which could be imposed by the
D Respondents on money lenders ru1d pawn brokers.

At this stage it must also be mentioned that the trade and operation of
money lending and pawn brokL'lg is controlled and governed by other Acts
and other Laws like the Andhra Pradesh Money Lenders Act, the Andhra
Pradesh Pawn Brokers Act, etc. Those Acts lay down all terms and conditions
E on the basis of which such trade or operations could be carried on. In the ~

Hyderabad Municipal Corporation Act there is no provision empowering the
Respondents to either carry out inspections or to take any measures to ensure
that such trade and operations are run properly and that exploitation is
avoided. This aspect has been noticed by the High Court in the impugned
F Judgment.

In pursuance of the direction issued on 23rd of January, 2001, a copy ~

of the licence issued by the Respondents had been produced. On a perusal
of the licence it was clear that there was not a single term or condition, in
that licence, which could apply to this o·ade or occupation. It was, however,
G sought to be submitted that there were biank spaces provided in the licence.
It was submitted that in those blank spaces the terms and conditions regu-
lation such trade and operations were hand-filled before a licence was issued.
)..
This oral submission was denied by the Appellants. The Appellants pointed
out that no licence was being issued and that all that was being. done was
H that a receipt for the licence fee was being issued. Counsel for the Respond-
A.P.BANKERS AND PAWN BROKER ASSOCATION v_ MUNIOP.\LCORPN.OF HYDERABAD [S.N. VARIAVA,J.] 347
ents was asked to verify this fact and let this Court know what the correct A
position was.

Written submissions have since been filed. In the written submissions
it is admitted that no licence is being issued to the members of the Petitioner
Association. It is now admitted that only receipts for the fees collected are
issued. Now it is sought to be stated that on the receipt it is stamped that B
the offices should be kept clean. It is now stated that the regulation is to the
extent of deciding the location, maintenance of cleanliness and regulating
noise pollution. These are new points made out for the first time in the written
submission. Uptill now the case has been that the Commissioner was of the
opinion that this particular trade or operation was dangerous to life or is likely c
to create a nuisance i.e. under Section 52l(e)(ii). Maintenance of cleanliness
deciding location and regulating noise pollution would not fall within Section
521(e)(ii). Also factually it has not been shown how cleanliness is ensured
or location is being controlled by means of licence. There is also no
explanation as to how and by what term or condition noise pollution is sought
to be regulated. In the receipt issued there is no regulation regarding noise D
pollution or location.

Faced with this position Mr. Nageshw'1r Rao relied upon the case of
Chief Constable of the North Wales police v. Evans, [1982] All E.R. 141, RV
Radio Authority, ex parte Bull & Another, [1997] ALL.E.R. 561, M.A. E
Rasheed & Ors. v. 71ie State of Kera/a, [1974] 2 S.C.C. 687 and Narayan
Govind Gavate & Ors. v. State of Maharashtra & Ors., [1977) 1 S.C.C. 133.
Based on these authorities it is submitted that the opinion of the Commis-
sioner as to whether any activity is dangerous or is likely to create nuisance
is a subjective opinion. He submits that judicial review in such a case is very
limited and the Court would not substitute its opinion for the opinion of !he F
Commissioner. There can be no dispute with the legal proposition. However,
the opinion has to be based upon some relevant material. In the present case
no material has been placed before us to show on what basis the Commis-
sioner considers snch businesses to be dangerous and are likely to cause
nuisance. More importantly it has not been shown how such trades and G
occupation are regulated by the Respondent. The only circumstances are those
extracted above from the impugned Judgment. However, it is not shown or
averred that all shops are in residential areas inhabited by middle class and
poor families or that all members of the Appellant Association issue adver-
tisements or that all shops are in crowded areas. If one or two or some shops
H
348 SUPREME COURT REPORTS [2001] 2 S.C.R.
A are set up on the thick of a residential locality inhabited by middle class or
poor families or set up in a crowded place or issue an advertisement, the entire
trade or occupation cannot be termed to be dangerous to life, health or
property or likely to create a nuisance. To be noted that the opening part of
Section 521 talks of "trades and operations". Similarly Section 52l(e)(i) also
talks of trades and operations. However, Section 52l(e)(ii) uses tl1e word
B
"trade or occupation". Thus if a shop or some shops are set up in crowded
areas or require any regulation, then it would be a matter for regulating that
particular shop or those particular shops by laying down appropriate condi-
tions. Merely because a pawn broker or a money lender is likely to set up r
a shop in the thick of a residential locality or in a crowded place would be
c no ground for the Commissioner to come to a conclusion that the entire trade
or occupation of money lending and pawn broking is dangerous or likely to
create nuisance. It is clarified that this Court is not saying that the Commis-
sioner cannot nnder Section 52i(e)(ii) Notify a particular trade or operation,
i.e. include all persons carrying on that particular trade or operation.
D In· this view of the matter we are of the opinion that the impugned
judgment cannot be sustained. The same is accordingly set aside. The Writ
Petition of the Appellants is allowed.

The Appeals stands disposed of according! y. There shall be no Order
as to costs.
E
v.s.s. Appeals allowed.