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Hemant Agarwal


ha21@rediffmail.com Mumbai : 9820174108
[ Scorecard : 3340]
Posted On 01 December 2009 at 08:28 Report Abuse

NO LICENCE = Dismissed cheque bounce case

 

Moneylenders sans licence can’t sue to get funds back
(Times of India,  dated 30 November'2009, Mumbai edition, page 02)

 

Mumbai: Unlicenced moneylenders can’t take the legal route to recover their moolah.

 

   “Lack of a licence will debar a moneylender from using legal ways to secure repaymant,’’ said Justice P R Borkar of the Aurangabad bench of the high court last week. The Negotiable Instruments Act—a law that bounced cheque victims use to recover their money—makes it clear that the debt had to be “legally enforceable’’. Section 138 of the Negotiable Instruments Act states that a “debt or other liability’’ means a legally enforceable debt or other liability. The money lent out by an unlicensed businessman will not amount to “a debt or liability’’ and so the legal provisions of filing a criminal complaint against the person whose cheque has bounced will not apply to such transactions.

 

   The high court upheld the acquittal of Purushottam Kawane, a resident of Ahmednagar, in a bounced cheque case filed against him by one Anil Kataria. Kataria, on evidence before the local trial magistrate, had turned out to be an unlicensed moneylender. In 2004, Kawane borrowed Rs 4 lakh from Kataria, but when the former issued a cheque of Rs 2 lakh, it bounced. In 2005, Kataria initiated criminal proceedings under Section 138 of the Negotiable Instruments Act.

 

   Three years later, the magistrate aquitted Kawane and Kataria knocked on the high court’s door to allow him to appeal. The high court referred to the provisions of a pre-Independence law, Bombay Moneylenders Act, 1946. Section 5 of this Act lays down that “no moneylender shall carry on business of money lending, except in the area for which he has been granted a licence’’. Kataria never said he had a money-lending licence and Kawane’s lawyer also added that he had filed bounced cheque proceedings against 10 others for close to Rs 80 lakh he had lent.

 

   The law also bars a court from passing an order in favour of a moneylender in any suit unless the court is satisfied that at the time when the loan was advanced, the moneylender held a valid licence. If the court finds that the the moneylender did not hold a valid licence, it shall dismiss the suit. In other words, an unlicenced money lender cannot loan or legally recover.

 

   In fact, the unlicensed money lender, doing unauthorised business, faces up to one year in jail and Rs 500 fine for the first offence and two years’ imprisonment and Rs 5,000 fine for the second offence.
 



Total thanks : 2 times


Online certification courses in IP, IT and Social Media laws


raj kumar makkad


Advocate
[ Scorecard : 131918]
Posted On 01 December 2009 at 08:43 Report Abuse

good information has been supplied.



Adv. T.K Sujith


lawyer
[ Scorecard : 114]
Posted On 04 December 2009 at 06:59 Report Abuse

thank  u for this information.....



Adinath@Avinash Patil


advocate
[ Scorecard : 5150]
Posted On 09 December 2009 at 05:49 Report Abuse

HEMANT THANX FOR INFORMATION



RAKHI BUDHIRAJA


LAWYER AT BUDHIRAJA & ASSOCIATES, SUPREME COURT OF INDIA
[ Scorecard : 10743]
Posted On 09 December 2009 at 18:28 Report Abuse

thanx for the valuable information

 



Shree.


Advocate.
[ Scorecard : 5312]
Posted On 11 December 2009 at 13:27 Report Abuse

Dear All,

 Can any member post the citation or judgement of this Landmark Judgement.Thanks in advance.



Hemant Agarwal


ha21@rediffmail.com Mumbai : 9820174108
[ Scorecard : 3340]
Posted On 11 December 2009 at 21:18 Report Abuse

JUDGEMENT

 

IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD

   CRIMINAL APPLICATION NO.630 OF 2009

                           IN

      CRIMINAL APPEAL (STAMP) NO. 139 OF 2009    

Anil s/o Baburao Kataria,

age 42 years, occup.trading,

r/o Shivneri Marg, Station

Road, Ahmednagar, Taluka .. Applicant/ and District Ahmednagar. ori.complainant.

versus

  Purshottam s/o Prabhakar Kawane

age 50 years, occup. service,

r/of M.E.S. Colony, Solapur Rd.

Ahmednagar. .. Respondent.    Shri P.S. Pawar, Advocate for applicant. Shri Amol
N.Kanade, Adv. for Respondent. 2

  Coram:  Borkar J.

                                 Date : 21.11.2009.

  ORAL JUDGMENT

 

1. This is an application for leave to file  appeal against the judgment and order of acquittal  passed by the learned Judicial Magistrate, First  Class (1st Court), Ahmednagar in S.T.C. No.3528 of  2005 decided on 11.12.2008.

 

2. Briefly stated, in or about September  October 2004, present Respondent was in need of  financial help and, therefore, he requested the  present applicant to give him amount of Rs.4.00  lakhs and assured to repay the same within one or two months. The applicant paid the amount.  However, according to the applicant, the  respondent failed to repay the amount and  therefore demand was raised by applicant pursuant  to which the present respondent issued cheque  dated 24.5.2005 drawn on Post Office Savings Bank,  Ahmednagar Branch, for Rs.2.00 lakhs. On 25.5.2005, the applicant deposited that cheque in  the said bank for encashment, but the same was  dishonoured on the ground of insufficiency of  funds.

 

3. Thereafter on 4.6.21005, the applicant  issued notice to the Respondent calling upon him  to pay the amount within fifteen days and since  the amount was not paid, the complaint under  Section 138 of the Negotiable Instruments Act was  filed. The trial court took cognizance of the  complaint and issued notice to the present  Respondent who then appeared in the matter. The  trial was conducted and ultimately the order of  acquittal was passed which is sought to be  challenged by seeking leave of this court to file  appeal.

 

4. Heard Shri P.S.Pawar, learned Advocate  for the applicant and Shri Amol N.Kakade Advocate  for the respective parties. Both have taken me  through various documents and the judgment of the  trial court. The trial court has taken into consideration the admission given by the applicant  in his cross examination that he had filed  criminal cases for commission of offence  punishable under Section 138 of the Negotiable  Instruments Act, against the persons mentioned in paragraph 20 of the judgment. Those persons are  (1) Ananda Gahile, (2) Vijay Kale, (3), Rajendra  Dake, (4) Vinay Khisti, (5) Shivaji Chaure, (6)  Santosh Malwade, (7) Akrur Kaspate, (8) Kanhayalal  Rathod, (9) Sachin Joshi and (10) Prakash late.    The applicant denied that the cases involved the  amounts total of which is more than Rs.80.00  lakhs.

 

5. It is argued on behalf of the Respondent  that the transactions with so many persons clearly  indicate that the transaction with the Respondent  was not of a hand loan transaction, but it was a  money lending transaction and the complainant/applicant is doing money lending  business without licence.


6. In paragraph 16 of the judgment, the  learned trial court referred to evidence of DW1  Premlata Balasaheb Parkhe at Exh.50 who is an  employee of the Incometax Department. She  produced incometax returns of the present  applicant at Exhibits 52 and 53 and in paragraph  16 of the judgment, the trial court noted that the  total income of the applicant in the year 200203  was Rs.60,000/= and for the year 200304, it was  Rs.57,989/= and it is amply clear that the person  having such income could not have lent amount of  Rs.4.00 lakhs in lumpsum to the respondent  accused. There is no other documentary evidence led by the complainant to prove that he actually  lent Rs.4.00 lakhs. It is the case of present  Respondent that he borrowed amounts of Rs.10,000/=  and Rs.20,000/= from the applicant and repaid Rs.  50,000/=. However, while giving loan, the  applicantcomplainant had obtained blank cheques  from the respondent and taking advantage of the  same, the present case is filed.

                                

7. The trial court has come to the  conclusion that the complainant could not have an  amount of Rs.4.00 lakhs in lump sum at a time and  there is nothing on record that he got some  windfall after March 2004 so that he could give  loan of Rs.4.00 lakhs at a time to the accused  respondent in SeptemberOctober 2004.  Moreover, it  appears from the admission of the complainant in  his cross examination referred to above that he  is doing money lending business. He admitted to  have money transactions with ten persons named  which ultimately resulted in their prosecution for  offence punishable under Section 138 of the Negotiable Instruments Act.

 

8. Shri Amol Kakade, learned Counsel for  the Respondent has filed affidavitinreply and  produced xerox copy of criminal M.A. No.16 of 2009  filed by present applicant, whereby he has sought  transfer of as many as 60 cases from one court to  another. There is no denial of this document.  Averments in affidavit in reply and said document  clearly shows that the applicant was doing money lending business and therefore, inference drawn  by the trial court cannot be said to be  unreasonable, but it is proper inference based on  admission before it.

 

09. Here, I may refer to the provisions of  the Bombay MoneyLenders Act, 1946.
Section 5 of  the said Act lays down that no money lender shall  carry on business of money lending except in the  area for which he has been granted a licence and  except in accordance with the terms and conditions  of such licence. It is not the case of present  applicantcomplainant that he has any money  lending licence. Section 10 of the Act lays down  that no court shall pass a decree in favour of a  moneylender in any suit to which said Act applies unless the court is satisfied that at the time  when the loan or any part thereof, to which the  suit relates was advanced, the moneylender held a  valid licence, and if the court is satisfied that  the moneylender did not hold a valid licence, it  shall dismiss the suit. In other words, carrying  on money lending business without licence debars a  person from doing money lending and recovering the  amount through court. As per explanation to  Section 138 of the Negotiable Instruments Act  "debt or other liability"means a legally  enforceable debt or other liability. So, a loan advanced by a money lender who is doing business  of money lending without licence is not a debt or  other liability and provisions of Section 138 of  the Act will not apply to such transaction. In the  light of above, it cannot be said that in the  present case, that the cheque issued by the  Respondent in favour of the applicant was for the  liability enforceable in law.

 

10.   I may also refer to Section 32B(b) of the  said Act,which lays down that whoever carries on  the business of moneylending at any place without  holding a valid licence authorising him to carry  on such business at such place, shall, on  conviction, be punished for the first offence with  imprisonment of either descripttion which may  extend to one year or with fine which may extend  to rupees one thousand and five hundred or with both and for the second or subsequent offence, in  addition to, or in lieu of, the penalty specified  in clause (i) with imprsonment which shall not be  less than two years, where such person is not a  company, and with fine which shall not be less  than rupees five thousand, where such person is a  company.

 

11. In light of facts and circumstances as  above, this is not a case wherein application for  leave to file appeal can be granted. Hence,  application rejected.

(P.R.BORKAR, J.) 
 

 



Total thanks : 1 times


MUKESH


Legal Consultants
[ Scorecard : 38]
Posted On 13 December 2009 at 22:06 Report Abuse

Well, the Hon'ble court has erred. Sec. 138 proceedings are not recovery proceedings. What is prohibited under the Money Lending Act is issuance of decree by any court. Refer S. Parmeshwaraapa. vs  S. Choodappa. III (2007) BC 752, 2007 135 Comp cases 123 Karn.It may be noted that even this is a single bench judgement.



Hemant Agarwal


ha21@rediffmail.com Mumbai : 9820174108
[ Scorecard : 3340]
Posted On 14 December 2009 at 11:35 Report Abuse

"Mukesh"  (Legal Consultant )


Para no. 09 of the judgement says as follows :

 

- quote -
"....a loan advanced by a money lender who is doing business  of money lending without licence is not a debt or  other liability and provisions of Section 138 of  the Act will not apply to such transaction. In the  light of above, it cannot be said that in the  present case, that the cheque issued by the  Respondent in favour of the applicant was for the  liability enforceable in law."
- unquote -


1.  N.I.Act is applicable  " ONLY & ONLY "   for a   "legally enforceable debt"
 

2.  Loan given without a Money Lender's licence, is a Violation of Law.
 

3.  A cheque which is given (FOR ANY PURPOSE, WHATSOEVER)   in  Violation of Law,  CANNOT be classified as a   "legally enforceable debt".


4.  Trial under the N.I.Act cannot be proceeded, if the  cheque is proved to given for any debt,  which is in Violation of Law (WHATSOEVER).
 

5.  Trial under N.I.Act is not meant for  "recovery" of any sort  OR  for awarding any "decree" of any sorts.
 

6..  On the contrary it is meant to impose punishment,  if the offence is not MUTUALLY Compounded before final orders.

 

QUESTION :
IN the light of the above,  it would be prudent to know as to WHY  OR  HOW the HC has error'ed.


 

Keep Smiling .... Hemant Agarwal
 



Mona Doshi


----------------------
[ Scorecard : 50]
Posted On 15 December 2009 at 21:01 Report Abuse

Originally posted by :Hemant Agarwal
" NO LICENCE = Dismissed cheque bounce case
 
Moneylenders sans licence can’t sue to get funds back
(Times of India,  dated 30 November'2009, Mumbai edition, page 02)
 
Mumbai: Unlicenced moneylenders can’t take the legal route to recover their moolah.
 
   “Lack of a licence will debar a moneylender from using legal ways to secure repaymant,’’ said Justice P R Borkar of the Aurangabad bench of the high court last week. The Negotiable Instruments Act—a law that bounced cheque victims use to recover their money—makes it clear that the debt had to be “legally enforceable’’. Section 138 of the Negotiable Instruments Act states that a “debt or other liability’’ means a legally enforceable debt or other liability. The money lent out by an unlicensed businessman will not amount to “a debt or liability’’ and so the legal provisions of filing a criminal complaint against the person whose cheque has bounced will not apply to such transactions.
 
   The high court upheld the acquittal of Purushottam Kawane, a resident of Ahmednagar, in a bounced cheque case filed against him by one Anil Kataria. Kataria, on evidence before the local trial magistrate, had turned out to be an unlicensed moneylender. In 2004, Kawane borrowed Rs 4 lakh from Kataria, but when the former issued a cheque of Rs 2 lakh, it bounced. In 2005, Kataria initiated criminal proceedings under Section 138 of the Negotiable Instruments Act.
 
   Three years later, the magistrate aquitted Kawane and Kataria knocked on the high court’s door to allow him to appeal. The high court referred to the provisions of a pre-Independence law, Bombay Moneylenders Act, 1946. Section 5 of this Act lays down that “no moneylender shall carry on business of money lending, except in the area for which he has been granted a licence’’. Kataria never said he had a money-lending licence and Kawane’s lawyer also added that he had filed bounced cheque proceedings against 10 others for close to Rs 80 lakh he had lent.
 
   The law also bars a court from passing an order in favour of a moneylender in any suit unless the court is satisfied that at the time when the loan was advanced, the moneylender held a valid licence. If the court finds that the the moneylender did not hold a valid licence, it shall dismiss the suit. In other words, an unlicenced money lender cannot loan or legally recover.
 
   In fact, the unlicensed money lender, doing unauthorised business, faces up to one year in jail and Rs 500 fine for the first offence and two years’ imprisonment and Rs 5,000 fine for the second offence.
 
"




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