Whether prosecution for dishonour of cheque issued to money lender is permissible?

On   going   through   the   complaints,   the   evidence
adduced, I  find that the view taken by the Magistrate was a
reasonable one and based on the evidence adduced before him.
There were a number of suspicious features about the case of the
complainant which have been reflected in the judgments delivered
by the learned Magistrate.  On considering the facts of the case,
even this Court feels that the possibility of the complainant having
taken blank signed cheques from the accused, is apparent, and in
any case, cannot be ruled out.   Moreover, since the complainant
has   advanced   a   similar   loan   to   a   number   of   persons,   the
transactions in the present two cases are quite likely to be of the
type which   the provisions of the  Bombay Money Lenders Act
prohibit.   The conclusion arrived at by the learned Magistrate that
the cheques in question could not be said to have been issued for
the discharge of a legally enforceable debt or other liability,  does
not appear to be suffering from any infirmity or illegality.
16 The complainant vehemently contended that the loan
was   advanced   on   the   basis   of   a   bill   of   exchange,   and   that
therefore, in view of clause (f) of sub­section (9) of section 2 of
the Bombay Money Lenders Act 1946, it could not be termed as a
loan to which the provisions of the Bombay Money Lenders, 1946
would apply.  However, on a careful consideration on the facts of

the   case,   it   appears   that   in   reality,   there   was   no   genuine
transaction on the basis of any bill of exchange.  The complainant
simply   had   advanced   some   amounts   to   the   accused   no.1   on
interest, and had in all probability, taken the blank hundies and
blank signed cheques at that time itself.   There is a reason to
believe that the complainant was advancing money as and by way
of a business of money lending without having a valid licence.
This   conclusion   that   was   arrived   at   by   the   learned   Magistrate
cannot be said to be suffering from any infirmity or illegality.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.19 OF 2005
WITH
CRIMINAL APPEAL NO.21 OF 2005
Girdhari Parmanand Motiani .. Appellant
Versus
Vinayak Bhagwan Khavnekar

­­­
   CORAM :   ABHAY M. THIPSAY, J.
DATED  :    14th AUGUST, 2015
­­­
Citation: 2016 ALLMR(CRI)1909

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When suit for recovery of loan is not barred by provision of bombay money lender Act?

 The Bombay Money-Lenders Act was intended to do away with a very serious evil in our society. It was intended to keep control over money-lending transactions and to see that excessive rate of interest was not charged by money-lenders and the only way that such control could be maintained was by providing penalties for doing money-lending business without a proper license from the State. Therefore, in construing an Act of this nature which takes away vested rights and curtails freedom of contract in order to give relief to a particular class, the Court should guard against giving it an interpretation which would extend its scope. The provisions of the Act should be interpreted literally and strictly. Section 2(9)(f) expressly excludes an advance made on the basis of the negotiable instrument as defined under the Negotiable Instruments Act, from the definition of the term `loan'.

Section 10 provides that no Court shall pass a decree in favour of a money-lender to which the Act applies unless the moneylender held a licence at the relevant time. Section 2(17) states that the expression "suit to which this Act applies" means any suit or proceeding of the nature mentioned in clauses (a), (b) and (c) thereof. Clause (a) refers to a suit or proceeding "for the recovery of a loan made after the date on which the Act comes into force." Thus if a loan falls within the ambit of the expression "suit to which this Act applies" in section 2(17), a suit or proceeding to recover the same would have to be dismissed in view of section 10 unless the money-lender holds a licence at the relevant time.

 The question therefore, is whether the loan in the present case falls within the ambit of sections 2(17) and (10). The appellant's contention that the suit is barred by the provisions of the Bombay Money Lenders Act is not well founded. Section 2(9) defines a loan to mean an advance at interest whether of money or in kind, but does not include a loan or advance of the nature stipulated in clauses (a) to (f2) thereof. The above suit is not hit by the Bombay Money Lenders Act in view of clause (f) of section 2(9) of the Bombay Money Lenders Act. In view of clause (f), the loans do not fall within the purview of the Act as they were advances made on the basis of the negotiable instrument as defined in the Negotiable Instruments Act, 1881 viz. the cheques and the bills of exchange.

Equivalent Citation: 2015(2)ALLMR679
IN THE HIGH COURT OF BOMBAY
Appeal (Lodging) No. 252 of 2014 in Summons for Judgment No. 21 of 2013 in Summary Suit No. 203 of 2013
Decided On: 20.11.2014
Appellants: Parekh Aluminex Limited
Vs.
Respondent: Ashok Commercial Enterprises
Hon'ble Judges/Coram:S.J. Vazifdar and Revati Mohite Dere, JJ.

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Whether accused can be acquitted in cheque dishonour case on ground that complainant has no money lending license?

Under Section 139 of the N.I. Act, there is presumption in favour of holder that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole in part of any debt or other liability. The explanation to Section 138 makes it clear that "debt or other liability" means legally enforceable debt or other liability. Under Section 118 of the N.I. Act it can legally be inferred that the cheque was made or drawn for consideration on the date which the cheque bears.
8. Thus, bearing in mind the relevant provisions of the N.I. Act, it must be emphasized that only legally enforceable debt or liability can be enforced in the proceedings under Section 138 of the said Act, because the explanation to the penal provision is abundantly clear that the dishonoured cheque must have been received by the complainant against a legally enforceable debt or liability.
9. The complainant in the present case, is a money lender who had advanced loan to the accused on the basis of the two promissory notes dated 3.2.2006 and 8.4.2006 respectively for loan of Rs. 18,000/- and Rs. 19,000/- respectively, at interest at the rate of 21 per cent per annum. It is thus case of the complainant that the accused had issued cheque No. 767789 drawn upon Canara Bank, Sadar Bazar, Nagpur for Rs. 40,000/- towards repayment of loan amount and interest. Thus, it was incumbent upon the complainant to establish the fact that she held valid money lending license in accordance with the provisions of Bombay Money Lenders Act, 1946 for the relevant period of the transaction. The complainant money lender did not produce such a valid money lending license at the time when complaint was instituted nor till it is decided although required. Furthermore, no such valid money lender's license is produced even during pendency of this Appeal. Section 10 of the Bombay Money Lenders Act, 1946 runs thus:

10(1) No Court shall pass decree in favour of money lender in any suit to which this Act applies including such suit pending in the Court before the commencement of the Bombay Money Lenders (Amendment) Act, 1975 unless the Court is satisfied that at the time when loan or any part thereof to which the suit relates was advanced the money lender held a valid license and if the Court is satisfied, the money lender did not hold a valid license, it shall dismiss the suit. The words "No court" and "in any suit" used in the Section are wider in scope to embrace any suit or proceeding initiated by a money lender who is required to hold and prove valid license for money lending for the relevant period of the loan transaction or transactions. The trial Court was, therefore, entitled to insist upon the complainant for production of valid license for money lending and also to infer in view of Section 114(g) of the Evidence Act that the document withheld was unfavourable to the complainant who withheld it. Thus, the legal position cannot be disputed that Courts are bound to dismiss the suit by money lender for recovery of loans when such money lender was found carrying on business of money lending on the date or dates of the transaction without having valid money lending license. The Court, in view of Section 10(1) of the Bombay Money Lenders Act, 1946 is bound to dismiss the suit instituted without production of valid money lending license operative at the time of suit loan transactions. In other words, a money lender can not enforce such loan transaction lawfully without production of valid money lending license operative at the time of transaction of loan to be recovered. Thus, no fault can be found with the trial Court as it was duty bound to dismiss the complaint by the complainant a money lender who was engaged in business of money lending without a valid money lending license at the time of transaction in view of clear provisions of Section 10 of the Bombay Lenders Act, 1946 as the learned Court could not have assisted the complainant to facilitate or further the illegal claim or claim prohibited by law in the complaint. Since explanation to Section 138 of the N.I. Act clearly stipulated that the debt or liability means legally enforceable debt or other liability the claim by money lender against her borrower without production of valid and operative money lending license covering period of transaction was unenforceable claim under Section 138 of the N.I. Act was bound to be dismissed. The complainant moneylender despite availing of sufficient opportunity in the trial Court could not produce valid and operative money lending license at the time of transaction of loan, hence dismissal of complaint can not be faulted as the complainant failed to establish legally enforceable debt or liability of the accused. Section 5 of the Bombay Money Lenders Act prohibits business of money lending except in accordance with terms and conditions of money lending license. In the present case, it was claimed that the loans were advanced at interest on the basis of two promissory notes executed in front of a guarantor. Thus, when transaction of money lending without valid license was prohibited by law, no court can help or assist a party money lender to enforce or recover a claim, except in accordance with law i.e. the Bombay Money Lenders Act, 1946 in this case. The complainant withheld important document without any explanation; hence presumption arose against the complainant in view of Section 114(g) of the Evidence Act for non-production of license. Learned Advocate for the appellant made a reference to ruling in Rajesh Varma v. Aminexs Holdings and Investments and Ors. 2008 (3) Mah.L.J. 460 to submit that every loan is not covered by the provisions of the Act inasmuch as Section 2(g) expressly excluded advance of any sum exceeding Rs. 3000/- made on the basis of negotiable instrument other than a promissory note. In the case in hand, the money lender had advanced loans at interest on the basis of two promissory notes hence the ruling cited can not be come to the rescue of the complainant in the facts and circumstances of the present case as the complainant could not establish legally enforceable debt or liability from the accused towards complainant. Since the complainant has failed to establish salutary or basic ingredients of offence punishable under Section 138 of the said Act or observed in Kusum Ingots 's case (supra), the complaint was rightly dismissed and the finding as to acquittal was correct and logical by the trial Court. No ground is made out so as to interfere in this Appeal. The acquittal of the accused is justified, as the cheque in question was, in fact, had not been issued for any legally enforceable debt or liability in view of the provisions of the Bombay Money Lenders Act, 1946.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
 BENCH AT NAGPUR, NAGPUR.

CRIMINAL APPEAL NO:  467  /2009

Smt.Nanda w/o Dharam Nandanwar
Vs
Nandkishor s/o Talakram  Thaokar

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­
CORAM:  A.P.BHANGALE, J.
DATED:12th January, 2010

Citation: 2010(1)Crimes708, 2010(3)MhLj268

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Money-lending laws not applicable to NBFCs, holds Gujarat High Court

In Radhey Estate Developers vs Mehta Integrated Finance Co Ltd, a Division Bench of the Gujarat High Court (ruling dated 26 April 2011) ruled that the Bombay Money Lenders Act, as applicable to the State of Gujarat, does not apply to non-banking financial companies (NBFCs) which are regulated by the RBI (Reserve Bank of India). While the ruling may come as a great respite to NBFCs, it opens up several questions which go to the very heart of regulation of the financial sector in India.

Gujarat High Court

Radhe vs Mehta on 26 April, 2011

In
all these appeals as common question of law is involved, they were heard together and disposed of by this common judgement.


2. The
appellants-Radhe Estate Developers of Letters Patent Appeal No. 113 of 2010 preferred a writ petition - Special Civil Application No.13024 of 2009 for a direction on the respondent-Assistant Registrar (Money Lending), Ahmedabad, to decide the application preferred by it for prosecution of the 1st respondent - Mehta Integrated Finance Limited, for having obtained licence under the Bombay Money-Lenders Act, 1946, (hereinafter referred to as `the Money-Lenders Act') and thereby prosecute it u/Sec.35A and 35B of the Money-Lenders Act. Learned Single Judge, having noticed that the representation preferred by the appellant-writ petitioner is pending with the authorities, disposed of the writ petition by the impugned order dated 14th December 2009 with a direction to decide the said representation, giving rise to the appeal.


3. The
other appeals, i.e. Letters Patent Appeals Nos. 1094, 1095 and 1097 of 2010, have been preferred by State of Gujarat or its authorities against the common judgement dated 13th January 2010 passed in four different writ petitions, wherein learned Single Judge held that the Bombay Money-Lenders Act, 1946, would not be applicable to the companies, which are Non-Banking Financial Companies (hereinafter referred to as `N.B.F.Cs.') and governed by Chapter III of the Reserve Bank of India Act, 1934 (hereinafter referred to as `the R.B.I. Act'), and thereby set aside the notices issued by the Assistant Registrar (Money-Lending) to four different companies under the Money-Lenders Act.



4. The
questions required to be determined in these appeals are:
(i) whether
the Bombay Money-Lenders Act, 1946, apply to the Non-Banking Financial Companies?

and

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