2014 (11) TMI 1273 - HC - Indian Laws

Grant of leave to defend the suit, conditional upon its depositing only the principal sum - appellant contends that the suit is based only on the loan and not on the cheques and bills of exchange admittedly drawn and accepted by the appellant - whether the loan in the present case falls within the ambit of sections 2(17) and (10) of the Bombay Money Lenders Act? - HELD THAT - The appellant's contention that the suit is barred by the provisions of the Bombay Money Lenders Act is not well founded. Section 2(9) defines a loan to mean an advance at interest whether of money or in kind, but does not include a loan or advance of the nature stipulated in clauses (a) to (f2) thereof. The above suit is not hit by the Bombay Money Lenders Act in view of clause (f) of section 2(9) of the Bombay Money Lenders Act. In view of clause (f), the loans do not fall within the purview of the Act as they were advances made on the basis of the negotiable instrument as defined in the Negotiable Instruments Act, 1881 viz. the cheques and the bills of exchange. In the present case, the loans were advanced by the respondents to the appellants on the basis of negotiable instruments other than promissory notes. This is clear from the facts and circumstances of this case especially the manner in which the amounts were advanced and cheques were drawn. The fact that the cheques were forwarded by the appellants to the respondents after the loans were advanced by RTGS transfers makes no difference. The amounts were advanced by the respondents to the appellants and the cheques and the bills of exchange were issued by the appellant to the respondents as a part of one composite agreement. In other words, this agreement was entered into at the same time. This is not a case where the amounts were first advanced and thereafter the parties agreed that the borrower would draw the cheques and bills of exchange and execute the said writings. The entire arrangement was agreed upon at the same time. There is nothing on record that militates against this view. The appellant has not even pleaded anything to the contrary. It is not the appellant's case that the cheques and the bills of exchange were drawn and the writings were executed independent of the loan pursuant to any understanding arrived at subsequently. It follows therefore that the said loans were made on the basis of the said negotiable instrument viz. the cheques and the bills of exchange drawn by the appellants in favour of and payable to the respondents. The mere fact that a negotiable instrument is handed over subsequent to the loan being disbursed makes no difference if the loan was made on the basis of the negotiable instrument. Where it is agreed as part of a composite agreement to advance a loan against a negotiable instrument covered by section 2(9)(f), it makes no difference that the negotiable instrument is handed over subsequently. There is in fact no defence to the suit. Despite the same, the learned Judge has granted leave conditional upon the appellants depositing only the principal sum claimed. The appellant can, therefore, have no grievance against the said order - Appeal dismissed.

Summary

Issues Involved:
1. Whether the appellant has any defense on the merits of the case.
2. Whether the suit is barred under the provisions of the Bombay Money Lenders Act, 1946.

Issue-wise Detailed Analysis:

1. Defense on the Merits:
The appellant admitted to receiving the claimed amount of Rs. 67 crores and failing to repay it. The appellant also acknowledged issuing cheques and bills of exchange to the respondents and executing writings admitting the receipt of Rs. 67 crores, assuring the respondents that the cheques would be honored upon presentation. The appellant's contention that the suit is based solely on the loan and not on the cheques and bills of exchange is rejected. The court noted that the suit is indeed based on the dishonored cheques, bills of exchange, and written promises to repay the loan. The plaint and the documents relied upon clearly establish that the suit is based on these instruments, and not merely on the loan. Therefore, the appellant has no defense on the merits of the case.

2. Applicability of the Bombay Money Lenders Act, 1946:
The appellant argued that the claim is barred under the Bombay Money Lenders Act, 1946, asserting that the respondents were carrying on money lending business without a license. This defense was raised belatedly and is considered an afterthought, not a bona fide defense. The court examined the relevant provisions of the Act, particularly Section 2(9) and Section 10. Section 2(9) excludes advances made on the basis of negotiable instruments from the definition of "loan." The court concluded that the loans in question were advanced on the basis of negotiable instruments (cheques and bills of exchange), and therefore, do not fall within the purview of the Act. The arrangement between the parties was a composite agreement, where the cheques and bills of exchange were part of the original loan agreement, even if handed over subsequently. Consequently, the suit is not barred by the Bombay Money Lenders Act.

Conclusion:
The court found no defense to the suit on merits and rejected the appellant's contention that the suit is barred under the Bombay Money Lenders Act. The appeal was dismissed, and the appellant was granted an extension to deposit the amount until 31.12.2014.