2010 (1) TMI 1282 - HC - Indian Laws

Dishonour of Cheque - money lending business - legally enforceable debt or not - whether a person can be debarred from filing and prosecuting complaint u/s 138, if he is doing business of money lending without holding a valid licence - HELD THAT - Since explanation to Section 138 of the N.I. Act clearly stipulated that the debt or liability means legally enforceable debt or other liability the claim by money lender against her borrower without production of valid and operative money lending license covering period of transaction was unenforceable claim u/s 138 of the N.I. Act was bound to be dismissed. The complainant moneylender despite availing of sufficient opportunity in the trial Court could not produce valid and operative money lending license at the time of transaction of loan, hence dismissal of complaint can not be faulted as the complainant failed to establish legally enforceable debt or liability of the accused. Hence this Court is of the considered view that the complainant could not establish her case against the accused so as to bring home the guilt on the part of the accused. The cheque in question was not issued to discharge loan enforceable according to law and, therefore, notwithstanding that it was dishonoured by nonpayment of loan remaining unpaid despite demand notice in writing, it cannot came within the purview of Section 138 of the N.I. Act. As such, it would not be possible for this Court to reverse the acquittal and to fasten criminal liability upon the accused, u/s 138 of the N.I. Act. The Appeal is, therefore, dismissed.

Summary

Issues:
1. Appeal against acquittal under Section 138 of the Negotiable Instruments Act, 1881.
2. Legally enforceable debt and liability as per the Bombay Money Lenders Act, 1946.

Analysis:
1. The appeal was filed against the acquittal of the accused under Section 138 of the Negotiable Instruments Act, 1881. The complainant, a money lender, alleged that the accused borrowed money and issued a cheque which was dishonored. The accused denied the complaint, arguing that the complainant lacked the required money lending license under the Bombay Money Lenders Act, 1946. The trial court acquitted the accused, leading to the appeal.

2. The complainant failed to produce a valid money lending license as required by the Bombay Money Lenders Act, 1946. Section 10(1) of the Act mandates that no court can pass a decree in favor of a money lender without a valid license. The trial court rightly dismissed the complaint as the complainant did not hold a valid license during the loan transactions. The court emphasized that only legally enforceable debts or liabilities can be pursued under Section 138 of the Act, and the complainant's failure to produce the license rendered the claim unenforceable.

3. The court referred to legal provisions such as Section 139 of the N.I. Act and Section 118 of the N.I. Act to establish the requirements for proving an offense under Section 138. It was highlighted that the complainant's failure to produce the necessary license invalidated the claim against the accused. The court also cited the Indian Contract Act, 1872, specifically Section 23, to emphasize that agreements involving unlawful objects, such as unlicensed money lending, are void. Consequently, the court upheld the trial court's decision to acquit the accused, as the complainant failed to establish a legally enforceable debt or liability against the accused.

4. In conclusion, the court dismissed the appeal, stating that the complainant could not prove the accused's criminal liability under Section 138 of the N.I. Act due to the absence of a valid money lending license. The court emphasized the importance of adhering to legal requirements, such as holding the necessary licenses, in pursuing claims under the relevant laws. The acquittal of the accused was deemed justified based on the legal provisions and evidence presented during the trial.