2018 (4) TMI 1950 - HC - Indian Laws

Dishonour of Cheque - Defendants contend that by reason of the bar under Section 13 of the Maharashtra MoneyLending (Regulation) Act 2014 no decree can be passed in the suit - whether the suit relates to any loan or part thereof lent by a money lender? - HELD THAT - Merely because while narrating the facts of the case the grant of loan by the Plaintiff to the Defendants finds a mention merely as a historical narration it cannot be said that the suit is for recovery of loan. The moment payment is made by a cheque or another negotiable instrument of a loan the liability under the loan is substituted by the liability to honour the cheque or the negotiable instrument as the case may be. In fact in a sense the original liability to pay the loan is discharged by means of execution of the negotiable instrument. If this negotiable instrument is not honoured upon presentation for payment a distinct and new liability arises under the provisions of the Negotiable Instruments Act. It is no answer then to a suit filed on such negotiable instrument that its holder is a money lender and that he did not hold a valid licence when he lent the original sum. The original loan lent merely forms part of a consideration for the negotiable instrument. There is nothing in law which prevents such consideration coming from a money lender who does not hold a valid money lending licence. The consideration cannot be termed as an invalid consideration. Section 30 of the Act merely provides for a bar in passing a decree in favour of a money lender in a suit which relates to money lent and advanced and does not render the loan itself to be either illegal or invalid. Accordingly there is no merit in this defence offered to the summons for judgment. In the premises on the facts of the case this court would be perfectly justified in making the summons for judgment absolute by passing a decree in favour of the Plaintiff. However with a view to give one chance only by way of mercy to the Defendants to try and make out a case at the trial of the suit this court is of the view that the Defendants may be allowed to defend the suit but on a condition of deposit of the entire principal amount of the dishonoured cheque into this court. Defendant No. 1 is granted leave to defend the suit on and subject to the condition of deposit in this court of a sum of Rs. 1, 86, 78, 313/within a period of eight weeks from today - The notice of motion is accordingly dismissed.

Issues involved:
1. Suit based on a dishonored cheque for a significant amount.
2. Defendants' defense under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014.
3. Interpretation of the suit as compensation for dishonored cheque rather than recovery of a loan.
4. Defendants' arguments regarding the nature of the transaction and the validity of the Plaintiff's license.
5. Consideration of the liabilities arising from the negotiable instrument.
6. Rejection of nominal defenses and granting conditional leave to defend the suit.
7. Orders passed by the court regarding defense, deposit of the principal amount, and further proceedings.

1. Suit based on a dishonored cheque:
The judgment involves a summary suit converted into a commercial summary suit due to a dishonored cheque amounting to Rs.1,86,78,313. The Plaintiff claimed to have advanced a loan to the Defendants, leading to the issuance of the dishonored cheque.

2. Defendants' defense under Section 13 of the Act:
The Defendants contended that no decree could be passed in the suit under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014, due to the lack of a valid license held by the Plaintiff during the loan transactions.

3. Interpretation of the suit as compensation for dishonored cheque:
The court clarified that the suit was for compensation to the Plaintiff as the holder of a dishonored bill of exchange or cheque, not for the recovery of a loan. The liability under the loan was substituted by the liability to honor the negotiable instrument.

4. Defendants' arguments and validity of Plaintiff's license:
The Defendants argued that the Plaintiff was engaged in money lending without a valid license, citing case law to support their defense. However, the court emphasized that the suit was related to the dishonored negotiable instrument, not the original loan transaction.

5. Consideration of liabilities from the negotiable instrument:
The court highlighted that the Defendants were bound to compensate the Plaintiff for the dishonored cheque under the Negotiable Instruments Act, irrespective of the Plaintiff's licensing status at the time of the loan transaction.

6. Rejection of nominal defenses and granting conditional leave to defend:
The court dismissed nominal defenses raised by the Defendants, such as entries for income tax purposes or the cheque issued as security, as insufficient. Conditional leave to defend the suit was granted to the Defendants, subject to depositing the principal amount of the dishonored cheque.

7. Orders passed by the court:
The court granted Defendant No. 1 leave to defend the suit upon depositing the principal amount within eight weeks. Defendant Nos. 2 and 3 were granted unconditional leave to defend. Further directions and timelines for filing written statements were provided, and a notice of motion for attachment before judgment was dismissed due to lack of concrete likelihood of property disposal by the Defendants.

← Previous Next →