2024 (10) TMI 614 - HC - Indian Laws

Dishonour of cheque - money lending or investment - Applicability and interpretation of the Bengal Money Lenders Act, 1940 in relation to Section 138 of the Negotiable Instruments Act, 1881 - legally enforceable debt or investment of money into business - specific overt act has been alleged or attributed against the petitioner for the commission of alleged offence or not - sufficient ingredient for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 in the complaint or not - HELD THAT - As per explanation to Section 138 of the Negotiable Instruments Act debt or other liability means a legally enforceable debt or other liability. So, a loan advanced by a money lender who is doing business of money lending without licence is not a debt or other liability and provisions of Section 138 of the Act will not apply to such transaction. In the light of above, the legal position is only applicable to the case, which falls under the provision of Bombay Money Lenders Act, 1946. But, the present case falls under the provision of Bengal Money Lenders Act, 1940 and those cases circumstances are totally different. The Hon ble Supreme Court in the case Electronics Trade Technology Development Corporation Ltd., Secunderabad v. Indian Technologists Engineers (Electronics) (P) Ltd. 1996 (1) TMI 398 - SUPREME COURT observed that the object of bringing section 138 on statute appears to inculcate the faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments and section 138 intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a book and induce the payee or holder in due course to act upon it. The Bengal Money Lenders Act, 1940 and Chapter XVII of the Negotiable Instruments Act, 1881 which was incorporated by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 for providing penalties in case of dishonour of cheques with an objective to encourage the culture of use of cheques and enhancing the credibility of the instrument. Both statutory provisions were enacted with different objectives and intent and are operational in independent and separate legal spheres - There is no apparent conflict between provisions of the Bengal Money Lenders Act, 1940 which is not apparently bars civil remedy for a money lender who is not having valid licence or certificate for doing business of money lending and Chapter XVII of the Act which provides criminal remedies and penalties in case of dishonour of a cheque due to reasons as mentioned in section 138 of the Act. It is acceptable proposition of law that provisions of the Bengal Money Lenders Act, 1940 does not limit operation of section 138 of the Act and both are independent and mutually exclusive to each other. If a person advances a loan even without having a valid money lending licence or certificate, he can institute and prosecute complaint under section 138 of the Act on basis of cheques and he has to satisfy only the mandatory requirements of section 138 of the Act. There are no merits in arguments advanced by the counsel for the petitioner that without money lending license a complaint cannot be filed under the N.I. Act and the complaint can be decided without evidence being led to show that petitioner was a Money Lender. The arguments advanced by the counsel for the Petitioner on aforesaid issues are without any legal basis and are legally unsustainable. Therefore, there is insufficient reason placed before this Court that no proceedings can be initiated or continued and it would be gross abuse of process of law. The Criminal Revisional application filed by the petitioner has devoid of merits - revision dismissed.

Summary

Issues Involved:

1. Whether the proceedings under Section 138 of the Negotiable Instruments Act, 1881 can be quashed on the ground that the complainant was engaged in money lending without a valid license under the Bengal Money Lenders Act, 1940.
2. The applicability and interpretation of the Bengal Money Lenders Act, 1940 in relation to Section 138 of the Negotiable Instruments Act, 1881.
3. Whether the absence of a money lending license invalidates the debt or liability under Section 138 of the Negotiable Instruments Act, 1881.

Issue-Wise Detailed Analysis:

1. Quashing of Proceedings under Section 138 of the Negotiable Instruments Act, 1881:

The petitioner sought to quash the proceedings under Section 138 of the Negotiable Instruments Act, 1881, arguing that the complainant was engaged in money lending without a valid license, thus rendering the proceedings invalid. The Court examined whether the absence of a money lending license could debar the complainant from filing a complaint under Section 138. It was held that the proceedings under Section 138 are not barred by the absence of a money lending license. The Court emphasized that the proceedings under Section 138 are criminal in nature and independent of the civil remedies under the Money Lenders Act. The Court referred to precedents where it was established that even if a person is engaged in money lending without a license, it does not prevent them from prosecuting a complaint under Section 138 if the cheque issued for repayment is dishonored.

2. Interpretation of the Bengal Money Lenders Act, 1940:

The petitioner contended that the provisions of the Bengal Money Lenders Act, 1940, should bar the proceedings under Section 138. However, the Court clarified that the Bengal Money Lenders Act is a regulatory statute that does not outright prohibit money lending without a license but regulates it. The Court highlighted that the Act does not mandate the dismissal of proceedings under Section 138 merely due to the absence of a money lending license. The Court contrasted this with the Bombay Money Lenders Act, where such a prohibition exists, but noted that the Bengal Act does not have a similar provision. The Court relied on the doctrine of harmonious construction, emphasizing that statutes should be read to give maximum effect to their provisions without defeating the purpose of another statute.

3. Validity of Debt or Liability under Section 138:

The Court addressed whether the absence of a money lending license affects the validity of the debt or liability under Section 138. It was observed that Section 138 deals with the dishonor of cheques and the criminal liability arising from it, which is distinct from the civil liability under the Money Lenders Act. The Court reiterated that the essential elements for an offence under Section 138 include the issuance of a cheque, its dishonor due to insufficient funds, and failure to pay the amount after receiving notice. The absence of a money lending license does not negate these elements or the enforceability of the debt for the purposes of Section 138.

In conclusion, the Court dismissed the Criminal Revisional application, affirming that the proceedings under Section 138 of the Negotiable Instruments Act, 1881, are maintainable irrespective of the complainant's status as a licensed money lender under the Bengal Money Lenders Act, 1940. The Court found no legal basis to quash the proceedings and emphasized the independence of the two statutes in their respective legal spheres.