SEC-138 OF N.I. ACT
Querist :
Anonymous
(Querist) 06 December 2009
This query is : Resolved
A HAS TAKEN A LOAN FROM A PRIVATE FINANCE CO. FOR RS.40,000/-. A WAS PAYING INSTALLMENTS BUT PRIVATE CO. WAS NOT ISSUING TOTAL RECEIPTS FOR CASH AMOUNT RECEIVED. DISPUTE ARISES WHEN A SMALL AMOUNT OF LOAN WAS OUTSTANDING.
B (CO.) PRESENTED BLANK CHEQUE TAKEN FOR SECURITY AND FILED RS.70,000/- COURT CASE WHICH WAS DECIDED AGAINST A AND PUNISHMENT OF ONE YEAR CONVICTION WITH RS.1,000/- FINE AWARDED.A FILED APPEAL AGAINST CONVICTION WHICH IS PENDING.
IT WAS TOLD BY B (FINANCE CO.) DURING TRIAL THAT HIS PROP. FINANCE FIRM HAS NO LICENSE FOR FINANCE WORK(BUT JUDGE IGNORED SAME). WHETHER A FINANCE CO. HAVING NO LICENSE TO FINANCE CAN TAKE LEGAL ACTION U/S 138 OF N.I. ACT AGAINST A AND GET HIM CONVICTED .B HAS ALSO FILED CIVIL SUIT FOR RECOVERY OF RS.70,000/- PLUS INTEREST. WHETHER B IS LEGALLY ENTITLED FOR THIS CIVIL SUIT ALSO?
niranjan
(Expert) 06 December 2009
B being proprietory firm he can take both civil as well as criminal action against you.
Raj Kumar Makkad
(Expert) 06 December 2009
It is better to settle the case out of court with B otherwise it has civil as well as right under section 138 NI act to sue A and it is immaterial in criminal case whether he had any license of financing or not but in civil suit, this is very much relevant.
A V Vishal
(Expert) 06 December 2009
A Prop Finance company without a valid license to do money lending business cannot proceed u/s 138 NI Act since the debt is not legally enforceable.
A V Vishal
(Expert) 06 December 2009
Moneylenders sans licence can't sue to get funds back
Swati Deshpande I TNN
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 repymant,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.
Courtesy: s.deshpande@timesgroup.com
adv. rajeev ( rajoo )
(Expert) 07 December 2009
to do the finance business without the money lending license is illegal the company cannot initiate case u/w 138 of NI Act. To do the money lending business money lenders license is necessary.
