The Supreme Court on Thursday (October 29) clarified that its May 2026 judgment in M/s Mansi Finance (Chennai) Ltd. v. M. Lalitha & Ors. should not be understood as having laid down a pan-India precedent that unlicensed money lenders can maintain complaints under Sections 138 and 141 of the Negotiable Instruments Act, 1881 over loans advanced against negotiable instruments.

The Court stated that the May judgment dealt with only the Tamil Nadu Money Lenders Act. Moneylenders in Maharashtra seeking recovery of loans advanced against promissory notes must produce their money-lending licence at the threshold in proceedings arising from cheque dishonour or recovery proceedings per the provisions of the Maharashtra law.

A bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria made the observation while considering a miscellaneous application filed by one Vyomesh Mahipatray Shah, who apprehended that the judgment could be relied upon by unlicensed moneylenders in Maharashtra to pursue cheque-bounce proceedings arising from loans advanced against promissory notes.

The applicant pointed out that the judgment concerned a transaction governed by the Tamil Nadu Money-Lenders Act, 1957. Under that law, advances against negotiable instruments, including promissory notes, are excluded from the definition of loan under the statute. Thus, a debt secured by a negotiable instrument, including against a promissory note, remains a legally enforceable debt under the Tamil Nadu Act.

However, the Maharashtra Money-Lending (Regulation) Act, 2014 adopts a different position. Section 2(13)(j) excludes advances against negotiable instruments other than promissory notes. Therefore, in Maharashtra, an advance against a promissory note, even when accompanied by cheques, being a loan, is hit by the prohibition on unlicensed money lending under Section 4 of the Maharashtra Act.

The applicant argued that the judgment, which restored cheque-dishonour proceedings against three accused persons in connection with loans supported by promissory notes, should not be treated as having pan-India application so as to permit unlicensed moneylenders in Maharashtra to enforce such loans.

Explaining that under Sections 4 and 13 of the Maharashtra Act, money lending without a licence is prohibited and loans advanced in violation of the Act are unenforceable, the judgment authored by Justice Mishra said that such loans would not constitute legally enforceable debts for the purpose of Section 138 of the NI Act. The Court also indicated that moneylenders must produce the requisite licence at the threshold of civil recovery or cheque-dishonour proceedings.

"Such money lending against a promissory note without a licence is prohibited under Section 4 of the Maharashtra Act and such loan is not enforceable under Section 13 of the Maharashtra Act. Consequently, unlike Tamil Nadu, in the State of Maharashtra, such debt is not legally enforceable debt for the purpose of Explanation to Section 138 of the NI Act. In any proceedings filed on dishonour of cheque or recovery proceedings, the money lender in the State of Maharashtra has to produce a licence to satisfy the Court at the threshold."

Noting that it has not dealt either with the provisions of the Tamil Nadu or the Maharashtra money lending laws, the Court declined to issue a clarification on its judgment, urging the parties to raise the issue before the concerned Trial Court or the superior Courts.

"If there is any bar under Section 13 of the Maharashtra Act on initiation of proceedings for recovery of loan by an unlicensed money lender on the ground that the loan advanced involving a pronote in favour of an unlicensed money lender in Maharashtra, being contrary to statute, does not constitute a legally enforceable debt in terms of the Explanation to Section 138 of the NI Act, the same shall be examined by the concerned Court if any plea is taken before the Court where the matter is pending or before any superior Court, on its own merits."

“Since the judgment dated 26.05.2026 has not dealt with the provisions of the Tamil Nadu Money-lenders Act, 1957 or the Maharashtra Money-Lending (Regulation) Act, 2014, the clarification, as sought for, is not required and the parties would be at liberty to raise the issue before the concerned Trial Court or the superior Courts.”, the Court said.

Appearances:

For Petitioner(s) Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Karan Bharihoke, Adv. Mr. Ankur Saigal, Adv. Mr. Mahesh Agarwal, Adv. Mr. Shashwat Singh, Adv. Ms. Priyasha Sharma, Adv. Ms. Pragya Parijat Singh, AOR

For Respondent(s) Mr. Shyam Divan, Sr. Adv. Mr. Chaitanya Mehta, Adv. Mr. Gaurav Mehta, Adv. Mr. Lzafeer Ahmad B. F., AOR Ms. Sonali Agarwal, Adv. Mr. Shubham Arun, Adv. Mr. Adith Deshmukh, Adv.