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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Whether court can provide assistance for recovery of unaccounted money?

We have heard the learned Counsel for the parties. In our view the trial Court was absolutely right. The 1st Respondent is a money lender. He has admitted that he earned Rs. 30,000/- from money lending business. As a money lender he is statutorily bound, by virtue of Section 9 of the Kerala Money Lenders Act, 1958, to maintain books of accounts. His statement that he has not maintained the records which could be produced in Court is very significant. That statement coupled with the further statement that both the parties had agreed that these were to be unaccounted transactions required the Court to draw an adverse inference against him. of course under Section 118 of the Negotiable Instruments Act the Court is to presume that a negotiable instrument has been executed for consideration. However, in this case it has been established that there were chit fund transactions between the parties. It is also established that in respect of those chit fund transactions a sum of approximately Rs. 25,000/- was due and payable. It is established that that amount was not paid. It is an admitted position that No. suit was filed for recovery of that amount. Further having seen the suit promissory notes, as well as the other promissory notes, we are in agreement with the trial Court that all of them appear to have been got executed on the same day. All of them are in same hand writing and in the same ink. It is impossible to believe that over a period of two years the same pen could have been continued to be used. It is thus clear that these documents were got executed at the time that the chit fund transactions were being entered into by the parties. This rebuts the presumption that any consideration had flown under these transactions. In these circumstances it was absolutely necessary for the 1st Respondent to produce his books of accounts particularly as he has admitted that he was doing money lending business.

13. There is any reason also why the impugned judgment cannot be upheld. According to the 1st Respondent these transactions were to be unaccounted transactions. According to the 1st Respondent, all these amounts are paid in cash. If these are unaccounted transactions then they are illegal transactions. No. court can come to the aid of the party in an illegal transaction. It is settled law that in such cases the loss must be allowed to lie where it falls. In this case as these are unaccounted transactions, the Court could not have lent its hands and passed a decree. For these reasons also the suit was required to be dismissed.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 4101-4102 of 1998

Decided On: 31.03.2004

 G. Pankajakshi Amma and Ors.
Vs.
 Mathai Mathew (D) thr. L.Rs. and Anr.

Coram:
S.N. Variava and H.K. Sema, JJ.

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Whether provisions of money lending Act are applicable to casual money lender?

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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Whether defendant can prove without filing written statement that plaintiff is professional money lender?

As regards the plea of the suit being barred by Money
Lenders Act, the learned Court below has categorically observed
that the appellant/defendant had failed to establish the said plea
by proving the fact that the plaintiff was a professional money
lender. Whether or not the suit filed by the plaintiff is barred under
Section 7-D of the Assam Money Lenders Act, 1934 would depend on the facts and circumstances of the case, if it is established that
the plaintiff had lent money in course of his business as a money
lender. Since the defendant had not contested the suit by filing
written statement, hence, there was no occasion for the defendant
to prove and establish the said fact by leading evidence. In that
view of the matter, the learned Court below had rightly rejected
the plea taken by the appellant as regards the suit being barred
under the Money Lenders Act.
 From the perusal of the decision of this Court rendered in the
case of Hem Chandra Chaudhury (supra) relied upon by Mr. Das, it
appears that the said judgment goes against the appellant in the
facts and circumstances of the present case as this Court had
categorically observed that the applicability bar of Section 7-D of
the Assam Money Lenders Act, 1934 cannot be considered in the
absence of any assertion in the written statement that the money
lent by the plaintiff was in course of his business as a money lender.
GAUHATI HIGH COURT
SMT RINA BALA DEVI V MD AHMAD ALI
RSA No.84 of 2015
CORAM;
 HON’BLE MR. JUSTICE SUMAN SHYAM
DATED;17.06.2015
AIR 2015(NOC)1096 GAU

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Whether money lender not having valid money lending license can file dishonour of cheque case?

Therefore, on the same analogy, once it is proved and the entire facts that the alleged Bahi entries are not negotiable instruments, which can be enforced, not alone sufficient to charge any person with liability, sequelly, the complainant was legally debarred to recover the alleged loan, as envisaged under the indicated provisions of the Money lender's Act and in view of such legal disabilities attached to the complaint, as discussed here-in-above, are put together, then, in that eventuality, to my mind, the conclusion is irresistible and inescapable that he (complainant) cannot adhere to initiate the criminal prosecution against the respondent within the meaning and in the garb of complaint u/s. 138 of the NI Act. Hence, the trial Court has correctly acquitted the respondent, by way of impugned judgment of acquittal dated 4.6.2014, which, in substance, is as under (paras 16 & 17):-

"16. Section 3 of the Act provides that the suit by a money lender for recovery of loan, lent within a valid license, shall be dismissed. Now the court was required to ascertain whether Section 3 of the Act would cover a complaint filed under Negotiable Instruments Act or not. To decide the same, reliance has to be placed upon the law laid down by the Hon'ble Bombay High Court, provisions of Bombay Money Lenders Act, 1946 and object behind the passing of the Punjab Registration of Money-lenders' Act as applicable to Haryana. Under the Bombay Money Lenders Act, 1946 the suit filed by a money lender for recovery of loan without a valid license has to be dismissed. The Hon'ble Bombay High Court in case titled as Smt. Nandc v. Nandkishor, MANU/MH/0069/2010: 2011 (7) R.C.R. (Criminal) 697 : 2010 (2) CCC 288 (Bombay) has held that the word "in any suit" are wider in scope and 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 loan transaction or transactions. The Hon'ble High court held that the complaint filed by a money lender under Negotiable Instruments Act has also to be dismissed as the debt amounts to an unenforceable claim under Section 138 of Negotiable Instruments Act. In addition to this, the intent and object of the legislature behind the enactment of the Punjab Registration of Money-lenders' Act as applicable to Haryana appears to bar the rights of a money lender, lending money without a valid license, for recovering the loan amount in any manner. Therefore, any proceeding whereby the money lender would be intending to recover the loan amount, lent without a valid license, would be also barred. Had it not been the case, the legislature would not have debarred the money lender from filing a suit for recovery of loan amount.

Therefore, the claim by money lender (complainant) against borrower (accused) without a valid and operative money lending license covering period of transaction as unenforceable claim under section 138 of the Negotiable Instruments Act.

IN THE HIGH COURT OF PUNJAB AND HARYANA

C.R.A. No. A-1101-MA of 2014

Decided On: 13.11.2014

Appellants: Narsi Dass
Vs.
Respondent: Surender

Hon'ble Judges/Coram:Mehinder Singh Sullar, J.

 Citation: 2015ALLMR(Cri)114, 2015(1)RCR(Civil)108

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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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How to appreciate evidence in case of suit based on promissory note?

It is undisputed, rather admitted that the plaintiff-
respondent is a money lender. Naturally he would be well aware
how to write-fill in the pronote and receipt and at which place the
adhesive stamps are to be affixed. The perusal of Ex.P-2 and Ex.P-
3 shows that the stamps have been affixed at an unnatural place. It
shows that the same were not affixed at the time when Gurpal
Singh allegedly signed it. Moreover, no date or signatures of
Gurpal Singh are thereon the said stamps. The other point which
shows the falsity of the case of the respondent-plaintiff is that if
infact Gurpal Singh appellant had received an amount of Rs.5000/-
and he did sign in English script why the receipt of amount was not
got recorded from him in his handwriting. Then most suspicious
circumstance is that why the witnesses of alleged pronote and
receipt did write in their own handwriting that Rs.25,000/- was
received in their presence. It shows that these persons have signed
the document later on at the behest of the plaintiff-respondent.
They too have committed forgery. While committing a wrong
conscience of men becomes the best and the worst evidence against
him. He trembles. Moreover, there is a cutting in the date 28.6.85
written by Parmod Kumar. There is over writing in digit ‘6’ and
digit ‘2’ and to make the matter clear the plaintiff attempted to add-
Behari in the letter ‘Panch’ which has been made ‘Panchi’. No
explanation has been given by the plaintiff-respondent for their
over-writings and forgeries. Even none of these made up witnesses
were produced in witness box by the plaintiff-respondent. Had
they appeared they could have been cross examined. So, until and
unless, these persons were not examined by him and they were
given up, neither due execution of the pronote and receipt can be
said to have been proved nor the passing of consideration can be
said to have taken place.”
The plaintiff has not pleaded the advancement of loan of
Rs.5,250/- vide cheque Ex.P1 dated 05.05.1982 in the plaint, it was so
stated in the rejoinder only. A perusal of the pronote (Ex.P2) and the
receipt (Ex.P3) shows that signatures of Gurpal Singh, the defendant
are not on the stamps affixed. Though, there is no attesting witness on

the pronote part of the document but in respect of receipt part, Parmod
Kumar Chuchra and Krishan Lal son of Daulat Ram are the two
attesting witnesses. There is date underneath the signatures of Parmod
Kumar Chuchra as well as over-writing whereas there is no date
underneath the signatures of Gurpal Singh, the defendant.
The
amount of Rs.25,000/- mentioned in the endorsement signed by
Krishan Lal has also overwriting. The stamp on the pronote part had
the words written 12500/- as half of the amount of pronote. The
stamps have been cancelled on the basis of writings which are in the
hand of the person who has filled up the receipt and pronote. They are
not in the hands of Gurpal Singh. There is no date mentioned under
the signatures of the defendant who signed in English, whereas the
date and the amount mentioned by the attesting witnesses. It is an
unusual mode of execution of pronote. The manner of execution of
pronote creates enough doubt in respect of execution of pronote and
receipt by the defendant. It only confirms the finding recorded that the
signatures of the defendant were obtained on blank papers and has
been used for preparation of pronote and receipt.
The findings recorded by the learned first Appellate
Court, that execution of the pronote (Ex.P2) and the receipt (Ex.P3)
are not proved to be executed on the date and time purported and has
been prepared on an already signed document, is based upon proper
appreciation of evidence. 

IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
RSA No.1429 of 1997 (O&M)
Date of decision:10.10.2014

Krishan Kumar  Vs Gurpal Singh

CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA
Citation;AIR2015(NOC)2 P&H

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