Presumption U/S 139 NI Act Exists Even If Cheque Issued To NBFC That Charged Interest In Excess Of Money Lenders Act: Kerala High Court

The Kerala High Court has held that the presumption in favour of a cheque holder under Section 139 of the Negotiable Instruments Act exists even if the non-banking financial company (NBFC) to which the cheque was issued charged interest higher than that permissible under the Kerala Money-Lenders Act.Justice M.B. Snehalatha observed:“The Hon'ble Apex Court held that the entire life of a NBFC from the womb to the tomb is regulated and monitored by the Reserve Bank of India. The non banking financial companies regulated by the Reserve Bank of India in terms of the provisions of Chapter IIIB of the RBI Act, 1934 cannot be regulated by the Kerala Money-Lenders Act, 1958. Therefore, the argument advanced by the learned counsel for the accused that the interest claimed by the complainant was excessive and in violation of Kerala Money-Lenders Act 1958 and therefore it was an illegal transaction and for that reason, Ext.P4 cheque cannot be treated as a cheque issued in discharge of a legally enforceable debt etc. are untenable. The presumption under Section 139 N.I Act entails an obligation on the court to presume that the cheque in question was issued by the drawer or accused in discharge of a debt or liability...”The petitioner had entered into a hire purchase agreement with the 1st respondent NBFC for getting loan to purchase a vehicle. On default of payment of loan amount, the vehicle was repossessed and for the balance amount, a cheque was issued. This cheque was dishonoured by the petitioner. The trial court and the first appellate court found the petitioner to be guilty of the offence under Section 138 of the NI Act. The petitioner moved the high court challenging findings of the lower courts. The petitioner contended that the NBFC had charged exorbitant interest in the hire-purchase agreement, higher than that permissible under the Money Lenders Act and the entire transaction was illegal. Therefore, it was argued that the cheque was not issued in discharge of a legally enforceable debt.Relying on the Supreme Court's judgment in Nedumpilli Finance Company Limited v. State of Kerala and Others, the High Court found that the rebuttable presumption under Section 139 NI Act exists since the Kerala Money-Lenders Act, 1958 does not apply to NBFCs.Finding that the accused had not rebutted the presumption while the complainant had succeeded in establishing that the cheque was issued in discharge of a legally enforceable debt, the Court upheld the conviction.Thus, it dismissed the petition.Case No: Crl.Rev.Pet. No. 1530/2019Case Title: Abdulla P. v. Manappuram General Finance and Leasing Ltd. and Anr.Citation: 2025 LiveLaw (Ker) 499Counsel for the petitioners: P. Samsudin, K.C. Antony Mathew, Jithin LukoseCounsel for the respondents: B.S. Suresh Kumar – R1, K.M. Faisal – Public ProsecutorClick To Read/Download Judgment

Presumption U/S 139 NI Act Exists Even If Cheque Issued To NBFC That Charged Interest In Excess Of Money Lenders Act: Kerala High Court

K. Salma Jennath

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