Bouncing
of cheque complaint by money lender- maintainable?
Part-2
Though,
earlier, the money lending aspect, necessity of registration of money lender
and obtaining license by money lender as per Punjab Registration of Money
Lenders Act 1938{PROMLA) with a view to maintain complaint under section 138 of
Negotiable Instruments Act have already been discussed, but given the magnitude
of the matter and the judicial precedents, including, recent judgments
pronounced in this regard by hon’ble Delhi High Court in a matter captioned as Hansraj
Bansal Vs State & Anr Crl. Rev 228/2017 along with connected
matters, it is felt necessary to further deliberate on the matter. The Money
lending Act as prevailing in different states inclusive of Punjab
Registration of Money Lenders Act, 1938 (PROMLA), as also Bengal
Money-Lender’s Act, 1940, Karnataka Money Lenders Act 1961, Gujarat
Money lenders Act 2011 and Bombay Money Lenders Act, 1946 has also been contextually
referred to in respect of maintaining complaints u/s 138 of Negotiable
Instruments Act.
The
judgment rendered in Hansraj Bansal (Supra) is a comprehensive
one and decided on 12.09.2023 and crave for reference of it with finding
recorded therein so mas to complete the discussion as undertaken.
As
a prelude it is to be taken note of that the Negotiable Instruments Act, 1881
was enacted to define and amend the law relating to Promissory Notes, Bills of
Exchange and Cheques. The Banking, Public Financial Institutions and Negotiable
Instruments Laws (Amendment) Act, 1988 has inserted new Chapter XVII comprising
sections 138 to 142 with effect from 01.04.1989 in the Act. Section 138 of the
Act provides the penalties in case of dishonour of cheques due to insufficiency
of funds etc. in the account of the drawer of the cheque. However, as Sections
138 to 142 of the Act were found inadequate, in catering to the issues of dishonour
of cheques, hence, the Negotiable Instruments (Amendment and Miscellaneous
Provisions) Act, 2002, amended sections 138, 141 and 142 and inserted new
sections 143 to 147 in the Act aimed at speedy disposal of cases relating to
dishonour of cheque, through their summary trial as well as making them
compoundable. Similarly, Section 143 A and Section 148 of Negotiable
Instruments Act was included in the Act by Negotiable Instruments Act
(Amendment) Act 2018 and came into effect on 01.09.2018. Prior thereto,
Negotiable Instruments (Amendment Act) 2015 was enacted for bringing out
comprehensive change.
Reverting
to the complaint in Hansraj Bansal (Supra), the facts of the aforesaid
complaints are very interesting. The petitioner was the complainant
before the ld Trial Court and he was examined under section 165 of Indian
Evidence Act, 1872. The petitioner in examination under section 165 of Indian
Evidence Act, 1872 had stated that he has filed around 15-20 complaints under
section 138 of the Act against 12 persons. He had given money to some of the several
respondents for their chit funds activities and money was given to rest
of the respondents due to friendly relations. Thereafter a show cause notice
was also ordered to be issued to the petitioner to explain as to whether he is
engaged in business of money lending and if he is so engaged, whether, he has
any statutory licence, for doing money lending business. All the complaints
pertaining to the petitioner as complainant were ordered to be placed on same
day. The petitioner replied to the show cause notice, wherein, the petitioner
stated that he is not engaged in business of money lending.
The
complaints filed by the complainant were dismissed, primarily on ground
that the petitioner has violated the provisions of the Punjab Registration of
Money Lenders Act, 1938 as he was engaged in business of money lending without
licence.
FACTUAL MATRIX
The
trial court in respect of three complaints had observed that the petitioner in
these complaints alleged that the respondent no.2 was engaged in the business
of committee (chit funding) and has sought financial assistance from the petitioner
against several pronotes and issued cheques on completion of the date of
each pronote in discharge of the liability. It was further observed that
amount was advanced by the petitioner on the basis of pronote and
subsequently the cheques were issued by the respondent no 2 and issuance of the
cheques doesn’t mean that the amount in question was advanced by the petitioner
on basis of a Negotiable Instrument, rather, was advanced on the basis
of promissory notes. Accordingly, transaction is covered by the definition of
loan as provided in the Punjab Registration of Money Lenders Act,1938 (In short
“PROMLA”). The trial court in respect of three complaints observed that the
petitioner in these complaints alleged that amounts were advanced as financial
assistance to the respondents no.2 for a definite period and after completion
of the period, the respondents no.2 stated to have issued the cheques in
discharge of liabilities, so it cannot be said that the amounts were advanced
by the petitioner on the basis of a negotiable instrument but on oral assurance
by the respondents no.2 to repay within the agreed time period. Accordingly
amount advanced is covered within the term ‘loan’.
The
trial court in its orders referred to section 3 of the Punjab Registration of
Money Lenders Act, 1938 (PROMLA) and definitions of loan as per section 2(8)
and money lender as per section 2(9) which reads as under:-
Section
3. Suits
and applications by money-lenders barred, unless money-lender is registered and
licensed-
Notwithstanding
anything contained in any other enactment for the time being in force, a suit
by a money lender for the recovery of a loan, or an application by a
money-lender for the execution of a decree relating to a loan, shall, after the
commencement of this Act, be dismissed, unless the money lender –
(a)
at the time of the institution of the suit or presentation of the application
for execution; or
(b)
at the time of decreeing the suit or deciding the application for execution –
(i)
is registered; and
(ii)
holds a valid licence, in such form and manner as may be prescribed; or
(iii)
holds a certificate from a Commissioner granted under section 11, specifying
the loan in respect of which the suit instituted, or the decree in respect of
which the application for execution is presented; or
(iv)
if he is not already a registered and licensed money- lender, satisfies the
Court that he has applied to the Collector to be registered and licensed and
that such application is pending: provided that in such a case, the suit or
application shall not be finally disposed of until the application of the
money-lender for registration and grant of licence pending before the Collector
is finally disposed of.
As per Section 2(8)
"Loan" means an advance whether secured or unsecured of money or
in kind at interest and shall include any transaction which the court finds to
be in substance a loan, but it shall not include –
(i)
an advance in kind made by a
landlord to his tenant for the purposes of husbandry; Provided the market value
of the return does not exceed the market value of the advance as estimated at
the time of advance.
(ii)
a deposit of money or other property in a
Government Post Office Bank, or any other Bank, or with a company, or with a
co-operative society or with any employer as security from his employees;
(iii)
a loan to, or by, or a deposit with
any society or association registered under the Societies Registration Act,
1860, or under any other enactment;
(iv)
a loan advanced by or to the
Central or any [State] Government or by or to any local body under the
authority of the Central or any [State] Government;
(v)
a loan advanced by a bank, a
co-operative Society or a company whose accounts are subject to audit by a
certificated auditor under the Indian Companies Act, 1913;
(vi)
a loan advanced by a trader to a
trader, in the regular course of business, in accordance with trade usage;
(vii)
an advance made on the basis of a
negotiable instrument as defined in the Negotiable Instruments Act, 1881, other
than a promissory note.
2(
9) "Money-lender" means a person, or a firm carrying on the
business of advancing loans as defined in this Act, and shall include the legal
representatives and the successors-in-interest whether by inheritance,
assignment or otherwise, of such person or firm; provided that nothing in this
definition shall apply to –
(a)
a person who is the legal representative or is by inheritance the
successor-in-interest of the estate of a deceased money-lender together with
all his rights and liabilities; provided that such person only –
(i)
winds up the estate of such money-lender;
(ii)
realises outstanding loans;
(iii)
does not renew any existing loan, nor advance any fresh loan;
(b)
a bona fide assignment by a money-lender of a single loan to anyone other than
the wife or husband of such assignor, as the case may be, or any person, who is
descended from a common grand-father of the assignor.
The
trial court in orders observed that amount advanced by the petitioner falls
within the definition of ‘loan’ as per Punjab Registration of Money Lenders
Act, 1938 (PROMLA) and in the absence of any explanation by the petitioner, it
can be safely said that the petitioner is a money lender within the meaning of
Section 2(9) of the Punjab Registrations of Money Lenders Act, 1938. The trial
court in support of its orders has referred two decisions delivered by the Bombay
High Court in Anil V Purshottam, Criminal Application No. 630 of
2009 in Criminal Appeal (stamp) No. 139 of 2009 decided on dated
21.11.2009 and Tinki Nagpur V Unknown, Criminal Appeal No.
467/2009 decided on 12.01.2010.
The
Bombay High Court in Anil V Purshottam (Supra) observed as under:-
“Here,
I may refer to the provisions of the Bombay Money Lenders 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 applicant complainant 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
money-lender 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 money-lender held a valid licence, and if the court
is satisfied that the money-lender 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”.
The
Bombay High Court in Tinki Nagpur V Unknown Supra) observed as under:-
“The
words "No court" and "in any suit" used in the Section are
wider in scope to 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 the loan transaction or transactions. The trial Court was,
therefore, entitled to insist upon the complainant for production of valid
license for money lending and also to infer in view of Section 114 (g) of the
Evidence Act that the document withheld was unfavourable to the complainant who
withheld it. Thus, the legal position cannot be disputed that Courts are bound
to dismiss the suit by money lender for recovery of loans when such money
lender was found carrying on business of money lending on the date or dates of
the transaction without having valid money lending license”.
The
trial court in Hansraj Bansal (Supra), ultimately opined that the
petitioner has violated the provisions of the Punjab Registration of Money
Lenders Act, 1938 (PROMLA), as he is engaged in the business of money-lending
without requisite license and accordingly dismissed the complaints as mentioned
hereinabove.
Versions of petitioner before
Delhi High Court
The
petitioner challenged orders on grounds that orders are bad in eyes of law and
suffer from legal infirmity. The trial court has erred in jurisdiction to pass
the extra-judicial dismissal orders without explaining the statute properly. A
money lender requires to be permanently engaged in the said business with
repetition and continuity. The trial court has referred to the judgments which
exclusively deal with the civil suits for recovery by money lenders and none of
the said judgements exclusively applicable to the criminal complaints under the
provisions of the Act. The Punjab Registration of Money Lenders Act,1938 (PROMLA)
is applicable to suits only, and not to complaints under the Act. The trial
court has erred in passing the order of dismissal whereas the trial court
itself has summoned the respondents after being satisfied about the legality of
the complaints. The orders passed by the trial court has caused miscarriage of justice
and if the trial court was of the view that the complaints are hit under any
provisions of the law then the trial court should have dismissed the complaints
and acquitted the respondents no.2, only, after conclusion of trial.
It
was contended by the petitioner that the trial court should not have dismissed
the complaints at a pre-trial stage without evidence having been led by the
petitioner and cited decision of the Supreme Court In Re: Expeditious Trial
of Cases Under Section 138 of N.I. Act, 1881, AIR 2021 SC 1957 wherein it
was held that section 258 Cr.P.C. is not applicable to a summons case
instituted on a complaint and as such section 258 Cr. P.C. cannot be applied in
respect of the complaints filed under Section 138 of the Act. The Trial Court
is not conferred with inherent power either to review or recall the order of
issuance of process.
It
was further contended that the Trial Court is not conferred with inherent power
either to review or recall the order of issuance of process. Reference was made
to Court on its Own Motion V State, Neutral Citation No: 2022/DHC/001932,
wherein it was held that the court of a Magistrate does not have the power
to discharge the accused upon his appearance in court in a summons trial case
based upon a complaint in general, and particularly, in a case under section
138 of the Act, once cognizance has already been taken and process issued under
Section 204 Cr.P.C and trial court should not have abruptly dismissed the
complaints filed by the petitioner after taking cognizance and issuing process
to the respondents no 2 till the completion of trial. Moreover, it was also
argued that issue of applicability of provisions of the Punjab Registration of
Money Lenders Act, 1938 (PROMLA) to the complaints filed under the Act and
whether this issue can be decided without evidence being led to show that the
petitioner was a money lender. Reference was made to the following judgments:
(i)
Samarendra Nath Das V Supriyo
Maitra, 2005 SCC OnLine Cal 628 (Calcutta High Court)
(ii)
Jupiter Brokerage Services Ltd. V
Ektara Exports Pvt. Ltd., 2015 SCC OnLine Cal 10514 (Calcutta
High Court),
(iii)
Dhanjit Singh Nanda V State &
another, 2009 SCC OnLine Del 261 (Delhi High court)
(iv)
Ravinder Paul V Ashwani Kumar, 2020
SCC OnLine P&H 4606 Punjab & Haryana High Court)
(v)
Satyanarayana V M/s Sandeep Enterprises, 2004
SCC 8 OnLine Kar 427 (Karnataka High Court).
It
was thus contended that the provisions of the Punjab Registration of Money
Lenders Act, 1938 are not a bar for a complaint case filed under the Act and
rather than an appeal, revision petition is maintainable and can be filed
directly before the high court in the above backdrop.
RESPONDENTS PLEA
As
per the respondent the revision petitions were not maintainable without
invoking jurisdiction of the Sessions Court, since, the complaints were
dismissed during the trial and queries were put to the petitioner in
examination under section 165 of the Indian Evidence Act, 1872 as he had filed
multiple complaints against several persons on the basis of pronote and the
petitioner also admitted that he had no licence of money lending though he had
filed multiple complaints against the various persons i.e. the respondents.
Moreover, if money lending is prohibited without license, then, it cannot be
legally enforceable under the Act and hence the present petitions are liable to
be dismissed.
REFLECTIONS
(i)
The petitioners had filed several
complaints against the respondent no.2 (accused) u/s 138 of NI Act;
(ii)
The premise of the complaint was loan
advanced;
(iii) The
petitioner had no license and had not registered as a money lender under
PROMLA;
(iv) Pre-summoning
evidence was led and thereafter cognizance for offence punishable under section
138 of the Act was taken against the respondents no.2/ accused and summons were
issued;
(v)
Notice under section 251 Cr.P.C.
was given to the respondents no.2 to which no guilty was pleaded and claimed trial;
(vi) The
trial court before recording evidence, post notice under section 251 Cr.P.C.,
examined the petitioner under section 165 of Indian Evidence Act, 1872;
(vii) The
petitioner/complainant had admitted that he had filed around 15-20 complaints
under section 138 of the Act against 12 persons;
(viii) A
show cause notice was also issued to the petitioner to explain as to whether he
is engaged in business of money lending and is having any statutory licence for
doing money lending business;
(ix) The
petitioner responded to the show cause notice and had stated that he is not
engaging in business of money lending;
(x)
The complaint was dismissed at that
stage itself, primarily, on ground that the petitioner is not having valid
money lending licence as per the Punjab Registration of Money Lenders Act, 1938;
FINDINGS
BY HIGH COURT
The
loan does not include in its ambit an advance made on the basis of a negotiable
instrument as defined in the Act other than a promissory note. Section 2(9) of
PROMLA defines money lender which means a person or a firm carrying on the
business of advancing loans.
The
issue before the Delhi High Court in Hansraj Bansal (Supra) needing
judicial consideration was that :
“Whether
a person can be debarred from filing and prosecuting complaint under section
138 of the Act if he is doing business of money lending without holding a valid
licence and whether there is apparent conflict between section 3 of Punjab
Registration of Money Lenders Act, 1938 and section 138 of the Act
and
whether there is apparent conflict between section 3 of Punjab Registration of
Money Lenders Act, 1938 and section 138 of the Act.?”
The various judgments/precedents as narrated below were examined by the Delhi
High Court, The reliance placed are as under:
SUPREME
COURT
(1) The
Supreme Court in Gajanan & others V Seth Brindaban, 1971 SCR (1) 657 has
observed that the registration of a money lender does not afford to debtors
any additional protection not available under the other provisions of the Act.
An unregistered money lender can be punished only for the collective act of
carrying on the business of money lending and not for every loan advanced by
him without a registration certificate.
(2)
The Supreme Court in Electronics
Trade & Technology Development Corporation Ltd., Secunderabad V Indian
Technologists & Engineers (Electronics) (P) Ltd. and another, (1996) 2 SCC
739 has observed that the object of bringing section 138 on statute appears
to inculcate the faith in the efficacy of banking operations and credibility in
transacting business on negotiable instruments and section 138 intended to
prevent dishonesty on the part of the drawer of negotiable instrument to draw a
cheque without sufficient funds in his account maintained by him in a book and
induce the payee or holder in due course to act upon it.
(3) The
Supreme Court again in Goa Plast (P) Ltd. V Chico Ursula D’Souza, (2004) 2
SCC 235 while dealing with the objects and ingredients of Sections 138 and
139 of the Act observed as under:-
“The
object and the ingredients under the provisions, in particular, Sections 138
and 139 of the Act cannot be ignored. Proper and smooth functioning of all
business transactions, particularly, of cheques as instruments, primarily
depends upon the integrity and honesty of the parties. In our country, in a
large number of commercial transactions, it was noted that the cheques were
issued even merely as a device not only to stall but even to defraud the
creditors. The sanctity and credibility of issuance of cheques in commercial
transactions was eroded to a large extent. Undoubtedly, dishonour of a cheque
by the bank causes incalculable loss, injury and inconvenience to the payee and
the entire credibility of the business transactions within and outside the country
suffers a serious setback. Parliament, in order to restore the credibility of
cheques as a trustworthy substitute for cash payment enacted the aforesaid
provisions. The remedy available in a civil court is a long-drawn matter and an
unscrupulous drawer normally takes various pleas to defeat the genuine claim of
the payee”.
(4)
The Supreme Court in Indian Bank Association and others V Union of India
(UOI) and another, Writ Petition (Civil) No. 18 of 2013 decided on
21.04.2014 also observed that sections 138 to 142 of the Act were found to be
deficient in dealing with the dishonoured cheques. The legislature inserted new
Sections 143 to 147 by the Negotiable Instruments (Amendment and Miscellaneous
Provisions) Act, 2002 and earlier to this the Negotiable Instruments Act, 1881
was amended by the Banking, Public Financial Institutions and Negotiable Instruments
Laws (Amendment) Act, 1988 whereby a new Chapter XVII was incorporated for
penalties in case of dishonour of cheques due to insufficiency of funds in the
account of the drawer of the cheque to encourage the culture of use of cheques
and enhancing the credibility of the instrument.
It
is held in Hansraj Bansal (Supra) that:
“Every
statute is enacted for specific purpose and intent and should be read as a
whole. The legislature enacts statutes and legislation and takes appropriate
precautions at time of drafting and enacting different legal provisions but
sometimes conflicts appears in interpretation of different statutory
provisions. In this eventuality Doctrine of Harmonious Construction needs to be
adopted. The legal provisions contained in one particular statute cannot be
read to defeat legal provisions contained in another statute and both legal
provisions contained in different statute should be given maximum effect in
their operation and applicability. The Punjab Registration of Money Lenders
Act, 1938 and Chapter XVII of the Negotiable Instruments Act, 1881 which was incorporated
by the Banking, Public Financial Institutions and Negotiable Instruments Laws
(Amendment) Act, 1988 for providing penalties in case of dishonour of cheques
with an objective to encourage the culture of use of cheques and enhancing the
credibility of the instrument. Both statutory provisions were enacted with
different objectives and intent and are operational in independent and separate
legal spheres. There is no apparent conflict between section 3 of the Punjab
Registration of Money Lenders Act, 1938 which apparently bars civil remedy for
a money lender who is not having valid licence or certificate for doing
business of money lending and Chapter XVII of the Act which provides criminal
Page 30 CRL.REV.P. 228/2017 & connected matters remedies and penalties in
case of dishonor of a cheque due to reasons as mentioned in section 138 of the
Act”.
So
far as the legal issue to the effect that whether a complainant who is not
having valid licence or certificate for money lending can institute can still prosecute
complaint under section 138 of the Act, came for consideration before several High
Courts.
Delhi
High Court
(i)
In Dhanjit Singh Nanda V State &
Another, Crl.M.C.209/2009 decided on 09.02.2009 rejected the argument that
the complainant is debarred from recovering loan amount as he is not a
registered money lender. It was observed as under:-
“The
next argument addressed by the petitioner that the respondent was debarred from
recovering the loan amount being not a registered money lender does not lie in
the mouth of the petitioner for two reasons: The petitioner took the loan from
the respondent voluntarily and even executed an agreement in this regard
whereby he agreed to repay the same after ninety days with interest. At the
same time, he also issued the cheque in question for the repayment of the loan
but became dishonest when the cheque was presented for encashment. The 2nd
reason to reject the argument of the petitioner is that the proceedings under
Section 138 of NI Act are not recovery proceedings, but are proceedings to
punish a person who after issuing a cheque fails to honour the same and also
commits a default in paying the said amount on receipt of the notice.”
(ii)
In Kajal V Vikas Marwah, Crl.A.
870/2013 decided on 27.03.2014 the issue -if the complainant is not holder of
money lending licence, can he be debarred from filing complaint under section
138 of the Act is also on similar line.
(iii)
In
Guddo Devi @ Guddi V Bhupender Kumar, Crl.Rev.P. 1246/2019
decided on 11.02.2020 it is observed that there is no material to conclude that
the respondent was carrying on the business of advancing loans. Merely, because
the respondent had lent money to three or four persons, did not lead to the
inference that the respondent had been carrying out the activity of money
lending as a business.
PUNJAB
& HARYANA HIGH COURT
(1)
In Ravinder Paul V Ashwani Kumar,
CRA-S-2319-SB-2012 (O&M) decided on 04.02.2020 observed as under:-
“The
trial Court had dismissed the complaint mainly for the reason that the
complainant was a money lender, lending money without licence. The Magistrate
had not gone into the merits of the case as to whether the necessary
ingredients of Section 138 of the Act were established or not. Therefore, the
impugned judgment dismissing the complaint for the reason of complainant having
been found to be a professional money lender practicing money lending without
licence is not sustainable”.
(2) The
Punjab & Haryana High Court in Balwant Singh V Mukhtiar Singh,
RSA-2844-2015 (O&M) decided on 2.12.2022 held that the plaintiff was
regularly and consistently lending money on interest and was not merely a
casual or occasional lender. The plaintiff though running the business of money
lending neither got registered under Section 4 of the 1938 Act nor even
possesses any license under the said Act. Accordingly, the suit for recovery
filed on basis of pronote and a receipt itself was liable to be dismissed being
not maintainable.
CALCUTTA HIGH
COURT
(i)
In Samarendra Nath Das V Supriyo Maitra, C.R.R No. 175/05 decided on
16.12.2005 it is observed that alleged violation of provisions of Money
Lenders Act does not bar continuation of proceedings under Section 138 of the
Act. It was held as under:-
11.
The submissions made is not at all applicable in the present matter. Had it
been a money suit instituted by the money lender for the recovery of the loan
advanced by him together with interest and for accounting all these submissions
would have been relevant. In a criminal proceeding u/s 138 of the NI Act these
are not relevant at all. In the instant matter a Magistrate is to consider
whether the offence as alleged was committed or not and whether evidence is
sufficient to prove complainant's case. Legality or illegality of the contract
and existence and non-existence of money lending business by the complainant is
not a ground to throw the complainant's case out of Court. If it was a money
suit for recovery of the money the accused petitioner would have been
definitely in a better position and was entitled to the advantage of violation
of Sections 23 and 24 of the Contract Act as well as non-existence of money
lending business of the money lender. The accused petitioner has only remedy in
the trial to rebut the presumption u/s 139 of the NI Act, and to establish his
case by leading evidence, when he would be asked to enter into defence after
his examination u/s 313 of the Code would be over. When all the prima facie
materials of offence u/s 138 of the NI Act is present sufficient to issue
process this, Court would not interfere into the order of the learned
Magistrate and would not quash the criminal proceeding or set aside the order
of the learned Magistrate. The accused petitioner has remedy only to lead
evidence by examining witnesses and producing documents to prove that there was
no transaction with complainant or that he did not issue any cheque in favour
of the complainant and that there was no existing debt or liability at the time
of his entering into defence and leading his evidence”.
(ii)
Jupiter Brokerage Services Ltd. V Ektara Exports Pvt. Ltd. & others, C.R.A.
No936 of 2013 it is observed that the trial court considered defence of the
respondents/accused that the transactions in question were simple lending of
money for which the appellant/complainant had no valid licence and hence the
provisions of Section 138 or 139 of the Act are not attracted in the case and
this argument was accepted by the trial court and the trial court dismissed the
appellant/complainant’s case on such ground only. It was observed by the high
court that money lending without licence is not totally barred or prohibited by
the Bengal Money-Lender’s Act, 1940 which is basically a Regulatory Act
and regulates the business of money lending. It was held as under:-
“There
cannot be any dispute to the fact that the presumptions both in Section 118 and
139 of the N.I. Act are rebuttable presumptions. In the present case the only
point for rebuttable of such presumptions for the respondents/accused is that
the transactions in question are illegal transactions as the
appellant/complainant has no money-lending licence. As held earlier, lending
money without having a money-lending licence itself is not prohibited under the
Bengal Money-Lender’s Act, 1940. So, the presumptions in favour of the
appellant/complainant stand unrebutted. The respondents/accused cannot,
therefore, escape from the liability under Section 138 of the N.I. Act,
especially when there is no denial of the fact that the respondents/accused
issued the cheques in question which were dishonoured due to insufficient fund
in the account of the respondents/accused”.
Karnataka High Court
A
Division Bench of Karnataka High Court in V. Satyanarayana V Sandeep
Enterprises, 2005 CriLJ 12 while interpreting money lender also observed as
under:-
“Even
otherwise, if assumed that the cheques were issued by the petitioner/accused in
the course of money lending - business, that itself does not attract the
provisions contained in Karnataka Money Lenders Act. This is because, under
said Act, money lender means "a person, who carried on the business of
money lending" and to say that one is a money lender, he or she must carry
on & connected matters business in money lending in the State and, to
record an activity as business, there must be a course of dealings carried with
a profit motive. In other words, money lending must be carried on as
profession. If the money lending was not with profit motive or, not carried on
as a profession, he or she does not become a money lender under the Karnataka
Money Lenders Act. So, a stray instance of lending money does not show carrying
on the business of money lending as profession or with profit motive”.
In
Hansraj Bansal (Supra) The Delhi High Court has thus held as under:
“It is acceptable
proposition of law that section 3 of Punjab Registration of Money Lenders Act,
1938 does not limit operation of section 138 of the Act and both are
independent and mutually exclusive to each other. If a person advances a loan
even without having a valid money lending licence or certificate he can
institute and prosecute complaint under section 138 of the Act on basis of
cheques and he has to satisfy only the mandatory requirements of section 138 of
the Act”.
It
was further observed in the Hansraj Bansal (Supra) that cognizance was taken under section 138 of the
Act and notice under section 251 Cr.P.C. was given for offence under section
138 of the Act, and the trial court, abruptly examined the petitioner under
section 165 of Indian Evidence Act, 1872, wherein, the petitioner stated that
he has filed around 15-20 complaints under section 138 of the Act against 12
persons and he had given money to some of the respondents for their chit fund
activities and money was given to rest of the respondents due to friendly
relations. It was also observed that issuing a show cause notice to the petitioner during
trial which is absolutely unknown in summon trial as per Chapter XX of the Code
of Criminal Procedure, 1973 and thus, seeking explanation as to whether he is
engaged in business of money lending and if he is so engaged, whether he has
any statutory licence for doing money lending business and further all the
complaints pertaining to the petitioner as complainant were ordered to be
placed on same day. It is also a matter of record that the petitioner replied
show cause notice wherein the petitioner stated that he is not engaged in
business of money lending. Thereafter the trial court has held that the
petitioner advanced loan to many persons assumed without any legal and factual
basis that the petitioner is a money lender and loans advanced by the
petitioner to the respondents fall with in definition of loan as per Punjab
Registration of Money Lenders Act, 1938.The information given by the petitioner
in response to queries put to him under section 165 of the Indian Evidence Act,
1972 was confined to only that he had given money to the respondents which did
not reflect in any manner his activities as professional manner. The petitioner
in reply to show cause notice categorically stated that he is not engaged in
business of money lending. It was thus held by the hon’ble Delhi High Court
that the trial court should not have dismissed the complaints and the orders
are outcome of complete non-application of judicial mind by the trial court and
in total contravention of procedure laid down in Chapter XX of the Code of
Criminal Procedure, 1973. It was held that the orders dated 15.07.2015 and
20.08.2015 are illogical, abrupt and completely illegal and cannot be sustained
in view of the accepted proposition of law and the trial court should have
proceeded with trial of complaints under section 138 of the Act. The trial
court should not have dismissed the complaints under section 138 of the Act
filed by the petitioners merely on basis of statement of the petitioners
recorded under section 165 of the Indian Evidence Act, 1972 and reply given by
the petitioner in response to show cause notice. The trial court reliance on
two decisions delivered by the Bombay High Court was misplaced under given
facts and circumstances of present petitions.
The
Delhi High Court in Hansraj Bansal (Supra) also referred to the Supreme
Court in Re: Expeditious Trial of Cases under Section 138 of N.I. Act, 1881,
AIR 2021 SC 1957 wherein it is held by the Supreme Court that Section 258
of Cr. P.C. is not applicable to a summons case instituted on a complaint and
as such section 258 Cr. P.C does not have any role to play in respect of the
complaints filed under Section 138 of the Act. The trial court is not vested
with inherent power either to review or recall the order of issuance of
process. It was also observed by the Delhi High Court in Court on its Own
Motion V State, Neutral Citation No: 2022/DHC/001932 has held that the
court of a magistrate does not have the power to discharge the accused
upon his appearance in court in a summons trial case based upon a complaint
including complaints under section 138 of the Act once cognizance has already
been taken and process is ordered to be issued under section 204 Cr.P.C.
Accordingly, trial court has adopted a wrong procedure alien to chapter XX of
the Code of Criminal Procedure Code, 1973 in dismissing complaints merely on
basis of examination of the petitioner under section 165 of the Indian Evidence
Act, 1872 and reply to show cause notice and without resorting to trial as per
the law.
The
revision petitions were held to be maintainable as the orders dated 15.07.2015
and 20.08.2015 as the trial court has dismissed the complaints abruptly without
concluding the trial which does not amount to acquittal. This court in
revisional jurisdiction can exercise its power in cases where there is palpable
error, non-compliance with the provisions of law, the decision is completely
erroneous or where the judicial discretion is exercised arbitrarily. The
legality, propriety or correctness of an order passed by the Metropolitan Magistrate
is the very foundation of exercise of revisional jurisdiction. As the trial
court has not dismissed the complaints and acquitted the respondent no 2 after
conclusion of trial and on basis of evidence to be led by the contesting
parties but on wrong assumption of legal principles and without resorting to
settled legal principles which resulted into miscarriage of justice to the
petitioner, hence, the revisions are held to be maintainable without resorting
to filing appeals.
Moreover,
it is held in CBI V State of Gujarat, (2007) 6 SCC 156 that the revision
petition against an order passed by Magistrate can be filed directly before the
High Court. Section 397 of the Code of Criminal Procedure, 1973 gives
concurrent jurisdiction to both High Court and Sessions Court and such present
revision petitions can be filed directly to the High Court over the Sessions
Court. The present petitions are as such maintainable before this court.
The
revision petitions were thus allowed.
From
the discussion as afore stated, what clearly emanates is that the respective
Money Lenders Act, such as Punjab Registration of Money Lenders Act, 1938
(PROMLA), Bengal Money-Lender’s Act, 1940, Karnataka Money Lenders
Act 1961, Gujarat Money lenders Act 2011 and Bombay Money Lenders
Act, 1946 after having been
deliberated and consequently, it appears on the basis of above that there is no
bar in maintaining criminal complaint u/s 138 of Negotiable Instruments Act,
even if the complainant is found to be money lender. All that the complainant
is required to meet is the legal stipulations as included in section 138 of NI
Act and the pre-requisites therein and once cause of action is complete under
the said Act, the PROMLA or such similar act shall not come in the way of
maintaining a criminal complaint u/s 138 of Negotiable Instruments Act. Even
otherwise, it is also reflected that the bar as per PROMLA is to a civil suit
and prima facie if it is found that the plaintiff is a money lender without
license, the suit could be dismissed, but that analogy cannot be applied in the
case u/s 138 of NI Act and criminal complaint u/s 138 of Negotiable Instruments
Act shall be maintainable even if the complainant is found to be money lender
and was not registered and had no license under such Money lending Act, since,
then pre-requisites of criminal complaint u/s 138 of NI Act does not envisage
meeting the stipulation of Money lending Act, but the specification of
Negotiable Instruments Act shall have to be met for maintaining a complaint.
------
Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
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