2021 (6) TMI 955 - HC - Indian Laws

Dishonor of cheque - seeking an order of injunction against the respondent in respect of money lent and advanced by the petitioner - Section 13 of The Bengal Money-Lenders Act, 1940 - HELD THAT - Section 13 of The Bengal Money-Lenders Act, 1940, prohibits a court from passing a decree or order in favour of a money-lender in a suit filed by a money-lender for the recovery of a loan advanced, unless the court is satisfied that the moneylender held an effective licence at the time of granting the loan or advancing any part thereof. The other parts of Section 13 are not relevant for the purposes of this application. Section 2(12) of the said Act defines a loan as an advance, whether on any monetary terms or in kind, made on condition of repayment with interest and includes any transaction which is in substance a loan but does not include an advance made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881, other than a promissory note as provided under sub-clause (12)(e). While both sections intend to give a protective cover to the petitioner at the time of institution of and during pendency of the suit in terms of preserving the property which would afford relief to the petitioner in real terms, there is an important distinction in the nature of the property contemplated under the provisions. Under Order XXXIX Rule 1, the property sought to be preserved is 'property in dispute in a suit', whereas, it is the respondent's property under Order XXXVIII Rule 5-the words used are 'his property' following specific reference to ''the respondent, with intent to obstruct or delay''. The distinction reinforces the need to preserve the suit property till final orders are passed in the former and to secure the petitioner for facilitating execution of a decree in the latter - The rigours of Order XXXVIII Rule 5 are not applicable in the present case, at least at this stage, simply because the petitioner is not seeking attachment of any of the properties of the respondent. All that the petitioner seeks is protection, until the matter is heard on affidavits, from its monetary claim against the respondent being rendered infructuous. There is no basis therefore to expand the contours of what the petitioner prays for and factor in attachment when a restraint, simpliciter, would do. The petitioner has established the first of the troika of a prima facie case by establishing the fact of money being lent and advanced to the respondent and the respondent acknowledging receipt of the same by making payment of the interest component to the petitioner after deducting tax at source on the said payments. The interest payments could not have been made in a vacuum but in connection with the loan given to the respondent by the petitioner. These facts are sufficient to hold that the petitioner has a prima facie case. The complete denial of the loan by the respondent in its reply dated 23rd July 2019 to the Notice of Demand of the petitioner, sets off alarm-bells calling for a measure of protection to the petitioner - The respondent's total denial supports the second and third tests of balance of convenience and irreparable injury warranting passing of a temporary injunction in favour of the petitioner. The respondent will not suffer any injury since the petitioner does not seek an order of attachment of the assets of the respondent. Having found that the petitioner has made out a satisfactory case under Order XXXIX Rule 1 of The Code of Civil Procedure, there shall be an order restraining the respondent from dealing with or disposing of, alienating or encumbering any of his immovable assets and properties without leave of the Court until the matter is finally heard out on affidavits or until further orders are passed at the instance of any of the parties before the Court - Affidavit-in-opposition to be filed within 3 weeks from date, reply within 2 weeks thereafter. List the matter after 5 weeks.

Issues Involved:
1. Request for an injunction against the respondent for money lent.
2. Denial of loan facility by the respondent.
3. Maintainability of the application under Section 13 of The Bengal Money-Lenders Act, 1940.
4. Distinction between Order XXXVIII Rule 5 and Order XXXIX Rule 1 of The Code of Civil Procedure, 1908.
5. Establishment of a prima facie case by the petitioner.
6. Balance of convenience and irreparable injury to the petitioner.

Detailed Analysis:

1. Request for an Injunction Against the Respondent for Money Lent:
The petitioner sought an order of injunction against the respondent concerning a principal sum of ?7,50,00,000/- lent and advanced by the petitioner through five cheques drawn on Axis Bank from May 2017 to February 2018. The petitioner claimed the money was lent at an agreed interest rate of 15% per annum.

2. Denial of Loan Facility by the Respondent:
The respondent denied the loan facility in its entirety. The petitioner provided bank account statements reflecting the transfers and Form 26AS showing TDS deposited by the respondent on account of interest payments, indicating an acknowledgment of the debt.

3. Maintainability of the Application Under Section 13 of The Bengal Money-Lenders Act, 1940:
The court addressed the maintainability of the application under Section 13, which prohibits a court from passing a decree or order in favor of a money-lender unless the money-lender held an effective license at the time of granting the loan. The court found that the loan advanced by way of cheques falls outside the purview of a "loan" under the Act, thus Section 13 was not applicable.

4. Distinction Between Order XXXVIII Rule 5 and Order XXXIX Rule 1 of The Code of Civil Procedure, 1908:
The petitioner sought an order under Order XXXIX Rule 1, which allows for a temporary injunction to prevent injury to the petitioner in relation to any property in dispute. The court highlighted the distinction between Order XXXIX Rule 1 (temporary injunctions) and Order XXXVIII Rule 5 (attachment before judgment), noting that the petitioner did not seek attachment of the respondent's properties but rather a restraint to protect the monetary claim.

5. Establishment of a Prima Facie Case by the Petitioner:
The petitioner established a prima facie case by demonstrating the fact of money lent and advanced to the respondent, supported by bank statements and Form 26AS. The respondent’s acknowledgment of the debt through interest payments deducted at source further strengthened the petitioner’s case.

6. Balance of Convenience and Irreparable Injury to the Petitioner:
The court found that the balance of convenience and irreparable injury favored the petitioner. The respondent’s complete denial of the loan and failure to mention interest payments in their reply indicated a serious dispute, warranting a temporary injunction to protect the petitioner’s interests. The respondent would not suffer any injury as the petitioner did not seek attachment of the respondent’s assets.

Conclusion:
The court granted an order restraining the respondent from dealing with or disposing of, alienating, or encumbering any of his immovable assets and properties without leave of the court until the matter is finally heard on affidavits or until further orders. Affidavit-in-opposition was to be filed within three weeks, with a reply within two weeks thereafter, and the matter was listed for a hearing after five weeks.

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