2006 (2) TMI 680 - HC - Indian Laws

Summary

Issues Involved:
1. Applicability of the Bombay Money Lenders Act, 1946 to a financial company.
2. Validity of the interest rate charged by the financial company.
3. Legality of the hire purchase agreement and related documents.
4. Issuance of process by the Magistrate under various sections of the Bombay Money Lenders Act.
5. Definition and scope of "loan" under the Bombay Money Lenders Act, 1946.

Issue-wise Detailed Analysis:

1. Applicability of the Bombay Money Lenders Act, 1946 to a Financial Company:
The applicants argued that they are a financial institution and the provisions of the Bombay Money Lenders Act are not applicable to them. The Court noted that the applicant is indeed a financial company disbursing loans and that the complainant had agreed to the terms of the loan, including the rate of interest. The Court emphasized that the loan was taken for transport business, and there was a hire purchase agreement executed between the parties.

2. Validity of the Interest Rate Charged by the Financial Company:
The complainants alleged that the interest rate of 36% charged by the financial company was excessive and violated the provisions of the Bombay Money Lenders Act. The Court observed that the complainant had signed documents agreeing to the specified rate of interest and had paid the instalments for some time before defaulting. The Court referred to Section 23 of the Act, which limits the amount of interest recoverable in civil proceedings but does not apply to criminal cases.

3. Legality of the Hire Purchase Agreement and Related Documents:
The complainants alleged forgery in the hire purchase agreement and other documents. The Court referred to the Supreme Court's decision in Charanjit Singh Chadha and others v. Sudhir Mehra, which held that repossession of goods as per the terms of a hire purchase agreement does not amount to a criminal offence. The Court found that the financial company acted within its rights under the hire purchase agreement when it seized the trucks after the complainant defaulted on payments.

4. Issuance of Process by the Magistrate under Various Sections of the Bombay Money Lenders Act:
The Magistrate had issued process under Sections 5, 25, 26, 32 (1), 32 (2), 33 (1), and 34 of the Bombay Money Lenders Act. The applicants sought to quash the process, arguing that the provisions of the Act were not applicable to them. The Court found that the transaction could not be classified as a "loan" under the Act, except for the purposes of Sections 23 and 25, which pertain to civil proceedings and not criminal cases.

5. Definition and Scope of "Loan" under the Bombay Money Lenders Act, 1946:
The Court examined the definition of "loan" under Section 2(9) of the Act, which excludes loans to traders except for the purposes of Sections 23 and 25. Since the complainant was a trader who took a loan for transport business, the Court concluded that the transaction did not fall under the purview of the Act. The Court noted that the financial company had acted according to the terms agreed upon by both parties.

Conclusion:
The Court allowed the applications, quashing the complaints and the process issued by the Magistrate. The Court held that the financial company was entitled to act as per the terms of the hire purchase agreement and that the transaction did not constitute a "loan" under the Bombay Money Lenders Act. The complaints registered as Criminal Case Nos. 1381/2000, 1382/2000, and 1383/2000 were quashed and set aside.