From Loans to Deposits: Supreme Court Repositions MPID as a Quasi‑Criminal Remedy Against Fraudulent Defaults

 Introduction: Why this judgment matters

The recent Supreme Court decision Alka Agrawal and Ors. Vs. State of Maharashtra and Ors Decided On: 15.05.2026,2026 INSC 489, under the MPID Act marks a doctrinal shift with direct implications for trial courts, designated courts under MPID, and High Courts dealing with overlapping civil and criminal remedies. By treating even a “loan” transaction as a “deposit” where statutory ingredients are satisfied, the Court has significantly widened the operational reach of Section 2(c) and, correspondingly, Section 3 of the Act. At the same time, the judgment carefully preserves the long‑standing caution against criminalising purely civil money disputes, by anchoring MPID liability in the statutory concept of “fraudulent default” rather than in mere non‑payment.

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From Friendly Loan to Criminal Liability: Supreme Court on MPID and Private Financial Arrangements

6.7. The contention is therefore entirely misconceived that having failed to establish the offences under the Indian Penal Code, the complaint Under Section 3 of the MPID Act could not be maintained. In the same way, the plea that the dispute is of civil nature bear no relevance, once it is found that the transaction between the Appellants and Respondent Nos.2 to 6 satisfies the essentials of the definition Under Section 2(c) read with Section 2(d) of the MPID Act to become "deposit", accepted by "Financial Establishment" entitling the Appellants to file a complaint Under Section 3 of the MPID Act.

6.8. In light of the foregoing discussion and reasons, there is no escape from the conclusion that the amounts lent by the Appellants to Respondent Nos.2 to 6 were "deposit" within the scope and ambit of the definition in Section 2(c) of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999. Respondent Nos.2 to 6 as recipients of the amounts assume the character of a "Financial Establishment" as defined in Section 2(d) of the MPID Act.

9. The Appellants are entitled to invoke Section 3 and proceed under the MPID Act, to be further entitled to have the remedies under the MPID Act for ventilation of their grievance.

IN THE SUPREME COURT OF INDIA

Criminal Appeal No. 2537 of 2026 

Decided On: 15.05.2026

Alka Agrawal and Ors. Vs. State of Maharashtra and Ors.

Hon'ble Judges/Coram:

Manoj Misra and N.V. Anjaria, JJ.

Author: N.V. Anjaria, J.

Citation: 2026 INSC 489, MANU/SC/0486/2026

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The Finer Nuances of Debt Funding. (Real Properties).

 Submitted by:

A.M. Ibrahim. B. Arch, MIBC, FIV, FICA, FIE (I), MCIT, MBIM (U.K).

https://drive.google.com/file/d/1vtpmtGFVUUs72SDtT6Gy9MTsFLAhprlP/view?usp=sharing

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Good article on Valuation of Immovable Property for Secured Lending Purposes

Submitted by:

A. M. Ibrahim. B.Arch., FIE (I), FIV, FICA.

Kadayanallur – Tamil Nadu.

https://drive.google.com/file/d/1o0ORtAanYXwHPrkB_57CWl2Ckc-u1-1K/view?usp=sharing

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Whether accused can be prosecuted for an offence U/S138 NI Act if he has given a cheque as Security for a Loan From an Unlicensed Money Lender?

 The learned Sessions Judge

while allowing the revision application preferred by

respondent Nos. 1 and 2 has observed that the contract

which is forbidden by law is void contract. In cases of

money lending business without license, the provisions

under Section 138 of Negotiable Instruments Act are not

attracted. According to the complainant huge amount of Rs.

4,50,000/- was parted to the accused. There was a

Memorandum Of Understanding (for short “MOU”) dated

22.02.2014 between M/s. Monika Sumit Ujjain as the lender

and M/s. Saga Infra as the borrowers. As per MOU it can be

gathered that the transactions was without license. Post

dated cheques were given by way of security. I have

perused the MOU and the other documents on record

considering the factual matrix of this case I do not find any

reason to interfere with the impugned order.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

CRIMINAL REVISION APPLICATION NO. 394 OF 2015

Mrs. Monica Sunit Ujjain  Vs Sanchu M. Menon

CORAM : PRAKASH D. NAIK, J.

DATE : 2nd AUGUST, 2022

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Can a person be held liable for offence of dishonour of cheque if he was partner of firm that had taken loan or a he was guarantor for the loan?

  It is an admitted case of the respondent Bank that the appellant had not issued any of the three cheques, which had been dishonoured, in his personal capacity or otherwise as a partner. In the absence of any evidence led by the prosecution to show and establish that the appellant was in charge of and responsible for the conduct of the affairs of the firm, an expression interpreted by this Court in Girdhari Lal Gupta v. D.H. Mehta and Another11 to mean ‘a person in overall control of the day-to-day business of the company or the firm’, the conviction of the appellant has to be set aside.{ State of Karnataka v. Pratap Chand and Others, (1981) 2 SCC 335.} The appellant cannot be convicted merely because he was a partner of the firm which had taken the loan or that he stood as a guarantor for such a loan. The Partnership Act, 1932 creates civil liability. Further, the guarantor's liability under the Indian Contract Act, 1872 is a civil liability. The appellant may have civil liability and may also be liable under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, vicarious liability in the criminal law in terms of Section 141 of the NI Act cannot be fastened because of the civil liability. Vicarious liability under sub-section (1) to Section 141 of the NI Act can be pinned when the person is in overall control of the day to-day business of the company or firm. Vicarious liability under sub-section (2) to Section 141 of the NI Act can arise because of the director, manager, secretary, or other officer's personal conduct, functional or transactional role, notwithstanding that the person was not in overall control of the day-to-day business of the company when the offence was committed. Vicarious liability under sub-section (2) is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company. {Para 11}

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

AJAY RASTOGI; SANJIV KHANNA, JJ.

CRIMINAL APPEAL NO. 767 OF 2022 

DILIP HARIRAMANI Vs BANK OF BARODA

Author: SANJIV KHANNA, J.

Dated: MAY 09, 2022

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Whether the borrower can initiate an insolvency proceeding against the corporate person who is a guarantor regarding the loan account given to the partnership firm?

To get over this position, much reliance was placed on

Section 5(5A) of the Code, which defines the expression

“corporate guarantor” to mean a corporate person, who is the

surety in a contract of guarantee to a Corporate debtor. {Para 23}

24. Accepting the aforementioned argument of the appellant

would result in diluting or constricting the expression “corporate

debtor” occurring in Section 7 of the Code, which means a

corporate person, who owes a debt to any person. The “debt” of a corporate person would mean a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. The expression “debt” in Section 3(11) is wide enough to include liability of a corporate person on account of guarantee given by it in relation to a loan account of any person including not being a corporate person in the event of  default committed by the latter. It would still be a “financial debt” of the corporate person, arising from the guarantee given by  it, within the meaning of Section 5(8) of the Code.

25. Notably, the expression “corporate guarantee” is not defined

in the Code. Whereas, expression “corporate guarantor” is

defined in Section 5(5A) of the Code. If the legislature intended to exclude a corporate person offering guarantee in respect of a loan secured by a person not being a corporate person, from the

expression “corporate debtor” occurring in Section 7, it would

have so provided in the Code (at least when Section 5(5A) came to be inserted defining expression “corporate guarantor”). It was

also open to the legislature to amend Section 7 of the Code and

replace the expression “corporate debtor” by a suitable

expression. It could have even amended Section 3(8) to exclude

liability arising from a guarantee given for the loan account of an

entity not being a corporate person. Similarly, it could have also

amended expression “financial debt” in Section 5(8) of the Code,

“claim” in Section 3(6), “debt” in Section 3(11) and “default” in

Section 3(12). There is no indication to that effect in the

contemporaneous legislative changes brought about.

26. The expression “corporate debtor” is defined in Section 3(8)

which applies to the Code as a whole. Whereas, expression

“corporate guarantor” in Section 5(5A), applies only to Part II of

the Code. Upon harmonious and purposive construction of the

governing provisions, it is not possible to extricate the corporate

person from the liability (of being a corporate debtor) arising on

account of the guarantee given by it in respect of loan given to a

person other than corporate person. The liability of the

guarantor is coextensive with that of the principal borrower. 

27. In law, the status of the guarantor, who is a corporate

person, metamorphoses into corporate debtor, the moment

principal borrower (regardless of not being a corporate person)

commits default in payment of debt which had become due and

payable. Thus, action under Section 7 of the Code could be

legitimately invoked even against a (corporate) guarantor being a corporate debtor. The definition of “corporate guarantor” in

Section 5(5A) of the Code needs to be so understood.

28. A priori, we find no substance in the argument advanced

before us that since the loan was offered to a proprietary firm

(not a corporate person), action under Section 7 of the Code

cannot be initiated against the corporate person even though it

had offered guarantee in respect of that transaction. Whereas,

upon default committed by the principal borrower, the liability of the company (corporate person), being the guarantor, instantly triggers the right of the financial creditor to proceed against the corporate person (being a corporate debtor). Hence, the first question stands answered against the appellant. 

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2734 OF 2020

LAXMI PAT SURANA  Vs  UNION BANK OF INDIA 

Author: A.M. Khanwilkar, J.

Bench: A.M. Khanwilkar, Dinesh Maheshwari,B R Gawai JJ

Dated: March 26, 2021.

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Whether complaint for dishonour of cheque is maintainable if cheque is issued for discharging time barred loan?

The controversy in the case on hand is squarely covered by the aforesaid judgment of the Division Bench of this court. The cheque issued for discharging liability for a time barred loan would constitute a fresh promise and consequently liability under Section 138 of the N.I. Act in the event of dishonor of such cheque will have to be fastened on the defaulter. It is not in dispute that loan was sanctioned in the year 2003. Respondent No. 1 has not seriously assailed issuance of cheque by him on 7.9.2009. The cheque issued amounts to promise within the meaning of Section 25(3) of the Contract Act and on account of dishonor of such a cheque, complaint under Section 138 of the N.I. Act would be maintainable.

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Criminal Appeal No. 72 of 2013

Decided On: 20.01.2017

 Pragati Credit Co-operative Society Ltd. Vs.  Suresh and Ors.

Hon'ble Judges/Coram:

Indira Jain, J.

Citation: 2017 ALLMR (CRI) 3081

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When plea of defendant that agreement of sale was mortgage by conditional sale is not tenable?

The finding of the Court below that since the defendant had pleaded that it was a loan, therefore, the burden would be shifted on the plaintiff that it was not a sale agreement appears to be not according to the law as Section 58(c) of the Transfer of Property Act covers such transaction. For sake of brevity, Section 58(c) of the Transfer of Property Act is reproduced as under.

58(c) Mortgage by conditional sale. - Where the mortgagor ostensibly sells the mortgaged property-

on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or

on condition that on such payment being made the sale shall become void, or

on condition that on such payment being made the buyer shall transfer the property to the seller,

the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale:

[Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale].

9. Reading of the aforesaid provision would show the defendant though had raised the defence that it was a loan but the transaction is not been embodied in the document Ex. P-1, therefore, as per the proviso clause the transaction cannot be deemed to be a mortgage as condition do not have been incorporated in the document Ex. P-1 except the defence and the oral evidence. Consequently, the finding of the trial Court cannot be sustained on this issue.

11. Further more, the defendant stated that the husband of the defendant has demanded a loan of Rs. 40,000/- which was arranged by the plaintiff and thereafter a fiduciary agreement of sale was executed which is Ex. P-1, thereby the defendant admitted the existence of agreement (Ex. P-1) but stated that it was for a mortgage. No such averments have been contained in the document. Therefore, it would be difficult to accept such defence in view of proviso to section 58(c) of the Transfer of Property Act the document was of a mortgage.

IN THE HIGH COURT OF CHHATTISGARH AT BILASPUR

First Appeal No. 72 of 2004

Decided On: 03.01.2019

Santosh Mahobiya  Vs.  Mahendra Tamboli

Hon'ble Judges/Coram:

Goutam Bhaduri, J.

Citation: AIR 2019 Chhat 92

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Whether Taking Loans In Wife’s Name And Failing To Repay Them Amounts To Cruelty?

There is specific averment that respondent is in habit of taking loans and he also took loan in the name of wife i.e. appellant and he also made her guarantor in some loans. He failed to repay his loans and as a result, appellant faced embarrassment. Respondent along with friends cheated one Ms. Dolly Gujral, who lodged FIR against them under various sections of IPC in police station Raipur, Dehradun. Respondent used filthy language and had not spent time with appellant. He spent most the time with one lady, who is residing in the same apparent where parties lived. He also gave beatings to his wife i.e. appellant.

6. Taking of loan is neither an offence nor shameful act but failed to repay it may cause embarrassment, as lender comes to recover his loan by any means. It also maligns the reputation of a person is society. Appellant is a house wife. Respondent also took loan in the name of his wife / appellant and also made her guarantor. Appellant has no source of income and she was deserted by her husband. In such circumstance, it was very painful for her to live because she has no source of income but has to repay the loan.

7. Learned Judge Family Court failed to appreciate evidence in right prospect. Learned Judge Family Court treated the condition of parties, as if they are living in penury while the fact is respondent / husband had taken various loans including for purchasing of luxury cars but he is not repaying the loans, which causes embarrassment and mental agony to the appellant.

8. In view of law laid down by Hon’ble Apex Court in the case of Maya Devi Vs. Jagdish Prasad reported in AIR 2007 SC 1426 it can safely be said that all the activities and conducts of the

husband respondent are sufficient to establish the cruelty meted out by him to appellant.

IN THE HIGH COURT OF UTTARAKHAND

AT NAINITAL

First Appeal No. 133 of 2017

Smt. Manpreet Verma. Vs  Brij Verma.

Coram:

Hon’ble V.K. Bist, J.

Hon’ble Alok Singh,J.

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How rule of damdupat is applicable to suit for recovery of money?

 This Section is based on the rule of damdupat. The rule of damdupat is a branch of Hindu law of debts. According to this rule, the amount of interest recoverable, at any one time cannot exceed the principal. Where a suit has been instituted to recover a loan, the rule of damdupat ceases to operate. The result is that though the Court is bound to apply the rule of damdupat up to the date of the suit, it is free to award interest to the creditor at such rate, as it thinks proper from the date of the suit, up to the date of decree or payment upon the total amount that may be found due to the plaintiff after applying that rule. The rule of damdupat does not apply to interest recoverable in execution of a decree. The reason is that the rule ceases to operate after the suit. The principle of this section applies not only to a suit brought by a creditor, but also to a suit for redemption brought by a mortgager.

25. This rule of damdupat now finds a statutory recognition in the Karnataka Money Lenders Act, 1961. Section 26 of the said Act provides that notwithstanding anything contained in any agreement or any law for the time being in force, no Court shall in respect of any loan whether advanced before or after the date on which the Act comes into force decree, on account of interest, a sum greater than the principal of the loan due on the date of the decree. Thus, this rule of Hindu Law has been incorporated in the said Act in respect of the loans advanced by money-lenders.

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Regular First Appeal No. 478 of 2012

Decided On: 01.12.2015

Bawa Enterprises and Ors.

Vs.

G.R. Shet and Ors.

Hon'ble Judges/Coram:

N. Kumar and B. Manohar, JJ.

Citation: AIR 2017(NOC) 55 KAR

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Whether burden of proof will be on defendant if he takes plea of loan transaction?

Submissions of Mr. Thorat that when there is a registered document, then the sale is to be considered as a genuine, would have been accepted if the defendant would not have challenged the truth-fullness of the contents of the sale-deed and not contended that it is a sham document given as a security. The case of the defendant squarely falls under proviso Section 92 of the Indian Evidence Act, 1872. Obviously, the burden lies on the defendant to prove that the document executed was intended for something else than what is mentioned in the document.

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 22 of 1990

Decided On: 31.10.2012

Shripati Ramchandra Choudhari

Vs.

Rajaram Bhau Shinde

Coram:

Mrs. Mridula Bhatkar, J.

Citation: 2013(1) MHLJ 304

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Whether accused can be acquitted if complainant bank fails to give details of loan given to accused?

Interestingly,   the   complaint   merely   states   that  the

accused had issued the cheque in repayment of the loan  without

giving any particulars of the loan.  The complaint does not give any

details as to when the amount of loan was disbursed.  It does not

even give the amount of loan that was given to the accused. In the

affidavit of his evidence in lieu of examination­in­chief also, the

witness for the complainant, did not give these details.   On the

contrary, he admitted that he did not know about these details.

13 In the cross­examination of the complainant's witness,

he admitted that, usually, when a cheque is given for repayment of

a loan, the (loan) account number of the debtor is written on the

reverse of the cheque.  He admitted that, in the instant case, such

account number  was not written.   Inspite  of  repeatedly  being

questioned in the cross­examination, he could not give the loan

account number of the accused, while admitting that such loan

account number ought to be there, if the accused had been given a

loan.  

14 In the cross­examination of the complainant's witness,

he admitted that proceedings had been filed against the accused

in the Co­operative court and some award had been obtained from

the Co­operative court.   He also admitted that the accused had

deposited some amount in the loan account.   He, however, was

unable to state how much amount had been deposited by the

accused in the loan account and / or how much loan amount had

already been satisfied on 25th  February 2005, i.e.,   the date on

which the cheque was supposedly issued.  The witness also stated

that he  did not have any record or account  to show how much

amount was due and payable by the accused to the complainant on

25th February 2005.

15 The   accused   had   taken   a   defence   that   he   had

previously obtained loan from the complainant bank which had

been  repaid.   These  facts were admitted by  the  complainant's

witness in his cross­examination.   The case of the accused was

that, a cheque given by him to the complainant at that time, as

and by way of security, had been misused, and the accused was

wrongly being prosecuted with respect to an offence punishable

under Section 138 of the N.I.Act.

16 In   light   of   the   fact   that   the   complainant   had

scrupulously avoided giving any details, whatsoever, of the loan

allegedly   obtained   by   the   accused,   and   the   admission   of   the

complainant's   witness   that   he   did   not   have   such   details,   thedefence of the accused was certainly plausible.  The Magistrate's

conclusion,   that   the   accused   had   successfully   rebutted   the

presumption created by Section 139 of the N.I.Act, was proper

and legal.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.920 OF 2013

THE KARAD URBAN CO­OPERATIVE BANK  )

LIMITED ) V/s. SUNIL LAXMAN DALVI AND ANR. )

CORAM : ABHAY M. THIPSAY, J.

DATE : 15th DECEMBER 2015.

Citation:2016(4) MHLJ 577

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Whether jurisdiction of civil court is barred in respect of recovery of loan by co-operative society?

The settlement of disputes including the recovery of loan by a society from its members or sureties lies with the Co-operative Court. The Civil Court has no jurisdiction to try and entertain the suit in regard to the dispute which fall both in the purview of sub-section (1) of Section 91 of the Act. Section 92 regulates the period of limitation for different types of disputes mentioned in it and the disputes of the nature as provided in Section 91 has to be tried as a suit by the Co-operative Court as a Civil Court. Section 94 lays down the procedure for settlement of disputes and power of Co-operative Court. The Co-operative Court or the Registrar or the authorized person, as the case may be, if satisfied on inquiry or otherwise that a party to such dispute or the person against whom proceedings are pending under Section 88, with intent to defeat, delay or obstruct the execution of any award or the carrying out of any order that may be made is empowered to direct additional attachment of the property under Section 95. Any party aggrieved by any decision of the Co-operative Court or order passed by the Co- operative Court or the Registrar or the authorized person under Section 95 is at liberty to file appeal before the Co- operative Appellate Court under Section 97. Section 98 provides that orders mentioned therein if not carried out on a certificate signed by the Registrar or the Co-operative Court or a liquidator shall be executed in the same manner as a decree of civil court and shall be executed in the same manner as a decree of such court or be executed according to law and under the Rules for the time being in force for the recovery of arrears of land revenue. 

Supreme Court of India

Greater Bombay Co-Op. Bank Ltd vs M/S United Yarn Tex. Pvt. Ltd. & Ors on 4 April, 2007

Bench: B. N. Agrawal, P. P. Naolekar, Lokeshwar Singh Panta

           CASE NO.:
Appeal (civil)  432 of 2004

Read full judgment here:Click here

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Whether a person can take defence that he had signed on blank forms while taking loan from bank?

 In para 13 of the cross-examination, defendant No. 3 has also given number of admissions, which read as under:

It is true that I signed all the loan documents alongwith defendant nos. 2 and 4. It is true that all loan documents were signed by me as a Guarantor and Director of the company. I did not make any complaint to the bank and/or its higher official for having obtained my signatures on the blank forms including form of guarantee letter.

(emphasis supplied) 

40. Perusal of the aforesaid evidence would unequivocally go to show that defendant No. 3 has admitted to have signed all loan documents alongwith defendant Nos. 2 and 4. He has also admitted that loan documents were signed by him as guarantor as also in the capacity of Director of the defendant No. 1-Company. He has also admitted that he did not make any complaint to the bank or its higher authority for obtaining his signatures on the blank forms including form of guarantee letter. It is, thus, clear that execution of the loan documents has been admitted and the execution of the agreement of guarantee has also been admitted. The defendant No. 3 has failed to prove that the said documents were blank documents. Had it been so, he would not have remained silent. He is an educated person. He would have definitely complained to the higher authorities of the bank against the Branch Manager for having obtained blank loan documents from him. Apart from his own bare statement, there is no other evidence on record. Defendant No. 3 was running Industrial Unit. He has seen ups and downs of the life. Such a person is not expected to sign blank documents. Apart from this assuming to be so, once having acted upon those documents having taken advantage of those documents; having taken advantage of the money borrowed from the bank and having used it for years together for its Industrial unit; the defendant No. 3 cannot be allowed to take such somersault and contend that the documents were blank though he has borrowed money, though he had taken guarantee.

Bombay High Court

Central Bank Of India, A Body ... vs The Sion Bakers And Confectioners ... on 11 April, 2008

Equivalent citations: 2008 (110) Bom L R 1363

Bench: V Daga

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Leading judgment on money lending law

I shall first take up the point whether the suit itself is barred under Section 4 of the Bihar Money-Lenders (Regulation of Transactions) Act, 1939 (Bihar Act VII of 1939). The relevant portion of that section reads as follows:--

"4. Suit for recovery of loan only maintainable by registered money-lenders --No Court shall entertain a suit by a money-lender for the recovery of a loan advanced by him after the commencement of this Act unless such moneylender was registered under the Bihar Money-Lenders Act, 1938 (Bihar Act 3 of 1938) at the tune when such loan was advanced ........."

Two important things are to be considered for the application of this section. The first thing is whether it is a suit for a money-lender; and secondly, whether it is for recovery of a loan. In the present case, no money was actually advanced by the plaintiff. He had to take a salami of Rs. 18,000.00 from the defendants, and the defendants had no ready money to pay the same. They, therefore, executed the mortgage bond in respect of this salami money. It is not argued on behalf of the appellant that the plain-tiff is a professional money-lender. It has been held in several cases that where money-lending is casual, then the provisions regarding registration as a moneylender do not apply, vide MANU/BH/0144/1947 : AIR 1949 Pat 400, Bhutnath Kumar v. Nilkantha, Narain Singh.

The business of money-lending imports a notion of system, repetition and continuity, and that is a test of determining whether the plaintiff is a professional money-lender. Occasional loans to relatives, friends or acquaintances do not make the lender a professional moneylender. There must be more than occasional and disconnected loans to justify a finding that the plaintiff is a professional money-lender so as to apply the bar of Section 4 of Bihar Act VII of 1939: Vide Dwarkadas Marwari v. Kalipada Dey. 1959 BLJR 145 and Lakhi Narayan Sao v. Sm. Bhagwati Kuer. MANU/BH/0103/1963 : AIR 1963 Pat. 350.

Equivalent Citation: AIR1970Pat167, 1969(17)BLJR950

IN THE HIGH COURT OF PATNA

A.F.O.D. No. 459 of 1963

Decided On: 19.05.1969

Sanwarmal Agarwalla Vs. Benoy Krishna Mukherjee and Anr.

Hon'ble Judges/Coram:
Anwar Ahmad and M.P. Varma , JJ.

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When debt will not be loan for purposes of money lenders Act?

The matter seems to be concluded by the decision of the Supreme Court in Radha Kissen vs. Keshardeo (MANU/SC/0135/1957 : A.I.R. 1957 SC 743) where the approach to the question such as the one arising in this case has been indicated The Supreme Court affirmed the decision of the Calcutta High Court in Radha Kissen vs. Keshar Deo (MANU/WB/0041/1954 : A.I.R. 1954 Cal 105). In that case when the purchasers failed to complete the agreement for sale of certain property, the vendor instituted a suit against them for specific performance of the agreement. The suit was compromised and a decree was passed in terms of the agreement arrived at between the parties under which the vendor was to accept payment of a portion of the money payable under the agreement for sale immediately and the balance in certain instalments with interest. The compromise decree vested the property agreed to be sold in one of the purchasers and created a charge on it for the purchase-money unpaid for the time being. Later on the purchasers contended that they were borrowers within the meaning of S. 3 of the Bengal Money Lenders Act and that, therefore, they could not be made to pay an amount in excess of the amount prescribed by S. 30 of the Act in respect of a loan. The Supreme Court negatived this contention pointing out that the fact that under the compromise decree the moneys were payable in a number of instalments instead of at once did not show that the price due had become a loan and that the compromise decree did not alter the intrinsic nature of the money due to the vendor. It was also emphasized that in such cases there must be evidence to show that subsequent to the sale and purchase transaction there was an agreement between the parties to treat the unpaid price as a loan, an agreement to convert the outstanding purchase-money into a loan by the vendor to the purchaser, The Supreme Court referred to the decisions of the Calcutta High Court in Nirode Barani vs. (sic) Kumar (MANU/WB/0187/1942 : A.I.R. 1942 Cal 616) and Fatch Chand vs. Akimuddin (MANU/WB/0048/1942 : A.I.R. 1943 Cal 108) and after discussing the facts of those cases pointed out that in both those cases the parties had agreed to treat the purchase-money as paid off in entirety and the amount equivalent to the unpaid purchase money as being due by the purchaser to the vendor by way of loan. In the instant case, there is no evidence of such an agreement.

Property - Suit for recovery of amount - Suit decreed by lower Court - Hence, present petition - Held, a loan contracted no doubt created a debt - But there might be a debt contracted without contracting a loan - A dividend declared by a company was after its due date a debt of company to shareholder; moneys due from an insurance company under a policy were debts; arrears of rent were debts but none of them was a loan - Petition dismissed.

Equivalent Citation: 1959JLJ742

IN THE HIGH COURT OF MADHYA PRADESH (INDORE BENCH)

C. Rev. No. 81 of 1959

Decided On: 17.03.1959

 Mangilal
Vs.
 R.R. Contractor & Company

Hon'ble Judges/Coram:
P.V. Dixit, J.

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Whether Directors can be made liable to pay loan taken by company?

 As per the case made out in the Original Application, the petitioner is neither a Borrower nor a Guarantor. The defendant No. 1 being a Company incorporated is a separate legal entity and unless a Director of the said Company is a surety or a guarantor, he cannot be fastened with liability to repay the loan advanced to the defendant No. 1 Company. Even assuming that the petitioner is a shareholder of the defendant No. 1 Company, his liability will be only to the extent of balance amount due on the shares held by him and that liability will arise only when call is duly made. The Original Application filed by the respondent does not disclose any cause of action against the petitioner.

Bombay High Court

Jaikisan S/O Jaynarayan Bhaiyya vs United Western Bank Ltd. on 12 February, 2004

Equivalent citations: 2004 (5) BomCR 705, 2004 (2) MhLj 755

Bench: A Oka

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How to prove that loan transaction was money lending transaction in case of dishonour of cheque?

The fourth ground raised by the learned counsel for the petitioners is with regard to lending loan without having any licence to do business under the Andhra Pradesh (Telangana Area) Money Lenders Act, 1349 F. Placing reliance on a judgment of this Court reported in Mrs. K.Sudersanam V. S.Venkata Rao and as there was no licence to do money lending business, he submits that a complaint under Section 138 of the Act is not maintainable. Since the complainant is a company established for a business other than money lending, he submits that the second respondent could not have lent money without obtaining licence under the provisions of the Act. He thus contends that any default in payment of money is not enforceable under law and the present complaint under Section 138 of the Act is not maintainable. As stated above, the petitioners are strangers to the second respondent and they came into contact with the complainant only through one T.Sateesh Kumar, who is the friend of accused No.2.

Keeping in view the facts in issue, the said argument of the learned counsel for the petitioners needs to be tested with the judgment relied upon by him.

A reading of the judgment of this Court referred to above (K.Sudersanam (10 Supra) would disclose that in order to fall within the definition of money lender it is not enough merely to show that a man had on several occasions lent money at remunerative rates of interest but that there must be a certain degree of system and continuity about the transactions and that the definition of money lender in the Act does not include those who advanced money casually. In case on hand, there is no material to show that there was a certain degree of system and continuity in doing money lending business. On the other hand, the complaint refers to only one transaction.

Apart from that the word money lender is defined in Section 2 (7) of the Andhra Pradesh (Telangana Area) Money Lenders Act, 1349 F which reads as under.

Money lender means a person including a pawn broker, who, within the meaning of this Act, only advances loan in the ordinary course of his business or does so along with other business, and shall also include the legal representative of such person, and the person claiming to be his representative on the ground of succession or assignment or otherwise.

The word loan mentioned in Section 2 (7) of the Andhra Pradesh (Telangana Area) Money Lenders Act, 1349 F is defined in Section 2 (4) of the Act which is as under: -

loan means a loan secured or unsecured, advanced on interest in cash or in kind, and shall include every transaction which is in substance a loan, but shall not include the following. Section 2 (4) (d) of the Act reads as under:

a loan advanced by a bank, a co-operative society or a company A conjoint reading of Section 2 (4) (d) and 2 (7) of the Andhra Pradesh (Telangana Area) Money Lenders Act, 1349 F would clearly indicate that the money advanced by a company in the form of loan is excluded from the purview of the Andhra Pradesh (Telangana Area) Money Lenders Act, 1349 F. Viewed from any angle, the argument of the learned counsel for the petitioners does not stand to merit.

Andhra High Court

M/S. Vasundhara Projects Pvt.  vs State of andhra pradesh on 28 January, 2014

Citation; 2015 ALLMR(cri)Journal 100

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Dishonour of cheque-purpose for which loan was taken whether material?

As to the question whether the appellant-complainant was right in claiming that the accused had sought this advance for renovating his bar, this need not have influenced the learned Additional Sessions Judge, even if it is taken that the complainant's word on this count was not true, since the complainant would depend on what the accused told him and would have no reasons to check up whether the accused really needed money for the purpose for which he was seeking it. Therefore, these things could not be said to be so material to outweigh the presumption that the amount represented in the cheque was for legally enforceable debt or liability.  These conclusions are fortified by the fact that the accused had in fact allowed a cheque of Rs.20,000/- to be honoured and was ready to pay a further sum of Rs.20,000/- when another case of dishonour of cheque issued in the same series was before the same Magistrate. Had the complainant been a bully and had snatched the cheques from the accused and had the accused been really scared and, therefore, not made a complaint to the police, he would at least not have offered to pay Rs.20,000/-, when a case was already filed against him and when he was before the Court. Therefore, the learned Additional Sessions Judge should have noted these aspects and held as a matter of fact that the story of complainant having made an advance of Rs.2,40,000/- had not been rebutted. 
IN THE HIGH COURT OF BOMBAY AT GOA
 CRIMINAL APPEAL NO.6 OF 2012 
Mr. Krishna P. Morajkar,
 V/s
 Mr. Joe Ferrao,
 CORAM : R.C. CHAVAN, J. 
Pronounced Date : 19th JULY, 2013
 Citation;2013 CR l J(NOC)572 Bombay

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