Mere Transfer Of Money With Interest Doesn't Make A 'Money Lender'; Bar Under Money Lending Act Can't Be Decided At O.VII R.11 Stage: Bombay HC

The Bombay High Court has held that merely advancing money, even at interest, does not automatically render a party a “money lender” within the meaning of the Maharashtra Money Lending (Regulation) Act, 2014. The Court observed that the applicability of the statutory bar under Section 13 of the Act cannot be conclusively determined at the threshold stage of considering an application under Order VII Rule 11 of the Code of Civil Procedure. Justice Gauri Godse was hearing an Interim Application filed by Hubtown Limited, the defendant in a commercial suit instituted by Ashok Commercial Enterprises for recovery of money based on dishonoured cheques and promissory notes. The defendant sought rejection of the plaint under Order VII Rule 11(d) CPC on the ground that the suit was barred by Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014, contending that the plaintiff had advanced large sums at high rates of interest without holding a valid money lending licence. It was argued that the plaintiff was engaged in the business of money lending and that the transaction did not fall within the statutory exclusions under Section 2(13)(j) of the Act.The Court examined the pleadings and noted that the suit was founded on dishonoured cheques and demand promissory notes issued by the defendant, along with written acknowledgements of liability. It referred to the statutory definition of “loan” and the exception carved out under Section 2(13)(j), which excludes certain advances made on the basis of negotiable instruments from the ambit of the Act.The Court held that when the suit is filed on the basis of dishonoured cheques and the promissory notes executed by the defendant, it cannot be ascertained at the preliminary stage under Order VII Rule 11 of the CPC whether the money advanced by the plaintiff and the transactions between the parties would not fall under the definition of 'loan' under Section 2(13) of the said Act for applying the bar as contemplated under Section 13 of the said Act.It observed that the burden of establishing, even prima facie, that the plaintiff is a money lender lies on the defendant, and such an enquiry necessarily requires trial. It observed:“Merely advancing money to people does not ipso facto make a party a money lender; hence, the issue whether the plaintiff can be termed a money lender, within the parameters of the said Act, for applying the bar contemplated under Section 13 of the said Act cannot be decided at the stage of Order VII Rule 11 of the CPC.”Accordingly, the High Court rejected the Interim Application, holding that the applicability of the bar under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014, could not be adjudicated at the stage of Order VII Rule 11 CPC and must await determination on evidence at trial.Case Title: Hubtown Limited v. Ashok Commercial Enterprises [INTERIM APPLICATION (L) NO. 27175 OF 2021 IN COMMERCIAL SUIT NO. 1532 OF 2018]Click Here To Read/Download Order

Mere Transfer Of Money With Interest Doesn't Make A 'Money Lender'; Bar Under Money Lending Act Can't Be Decided At O.VII R.11 Stage: Bombay HC

Saksham Vaishya

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