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Whether money lender not having valid money lending license

can file dishonour of cheque case?
Therefore, on the same analogy, once it is proved and the
entire facts that the alleged Bahi entries are not
negotiable instruments, which can be enforced, not alone
sufficient to charge any person with liability, sequelly, the
complainant was legally debarred to recover the alleged
loan, as envisaged under the indicated provisions of the
Money lender's Act and in view of such legal disabilities
attached to the complaint, as discussed here-in-above,
are put together, then, in that eventuality, to my mind, the
conclusion is irresistible and inescapable that he
(complainant) cannot adhere to initiate the criminal
prosecution against the respondent within the meaning
and in the garb of complaint u/s. 138 of the NI Act. Hence,
the trial Court has correctly acquitted the respondent, by way of impugned judgment of acquittal dated 4.6.2014,
which, in substance, is as under (paras 16 & 17):-

"16. Section 3 of the Act provides that the suit by a money lender for recovery of loan, lent within a
valid license, shall be dismissed. Now the court was required to ascertain whether Section 3 of the
Act would cover a complaint filed under Negotiable Instruments Act or not. To decide the same,
reliance has to be placed upon the law laid down by the Hon'ble Bombay High Court, provisions of
Bombay Money Lenders Act, 1946 and object behind the passing of the Punjab Registration of
Money-lenders' Act as applicable to Haryana. Under the Bombay Money Lenders Act, 1946 the
suit filed by a money lender for recovery of loan without a valid license has to be dismissed. The
Hon'ble Bombay High Court in case titled as Smt. Nandc v. Nandkishor, MANU/MH/0069/2010:
2011 (7) R.C.R. (Criminal) 697 : 2010 (2) CCC 288 (Bombay) has held that the word "in any suit"
are wider in scope and embrace any suit or proceeding initiated by a money lender who is
required to hold and prove valid license for money lending for the relevant period of loan
transaction or transactions. The Hon'ble High court held that the complaint filed by a money lender
under Negotiable Instruments Act has also to be dismissed as the debt amounts to an
unenforceable claim under Section 138 of Negotiable Instruments Act. In addition to this, the intent
and object of the legislature behind the enactment of the Punjab Registration of Money-lenders' Act
as applicable to Haryana appears to bar the rights of a money lender, lending money without a
valid license, for recovering the loan amount in any manner. Therefore, any proceeding whereby
the money lender would be intending to recover the loan amount, lent without a valid license,
would be also barred. Had it not been the case, the legislature would not have debarred the money
lender from filing a suit for recovery of loan amount.
Therefore, the claim by money lender (complainant) against borrower (accused) without a
valid and operative money lending license covering period of transaction as unenforceable
claim under section 138 of the Negotiable Instruments Act.
IN THE HIGH COURT OF PUNJAB AND HARYANA
C.R.A. No. A-1101-MA of 2014
Decided On: 13.11.2014
Appellants: Narsi Dass
Vs.
Respondent: Surender
Hon'ble Judges/Coram:Mehinder Singh Sullar, J.

Citation: 2015ALLMR(Cri)114, 2015(1)RCR(Civil)108

1. The matrix of the facts & evidence, unfolded during the course of trial, which needs a necessary
mention for the limited purpose of deciding the core controversy, involved in the instant petition for
leave to appeal and emanating from the record, is that initially, petitioner-complainant Narsi Dass
s/o. Kartar Singh (for brevity "the complainant"), who was running a shop of commission agent,
styled as M/s. Ompal Satish Kumar, has instituted a criminal complaint, in which, respondent
Surender s/o. Chanda Ram was summoned to face the trial for the commission of an offence
punishable u/s. 138 of the Negotiable Instruments Act, 1881 (hereinafter to be referred as "the NI
Act") by the trial Court. The case set up by the complainant, in brief in so far as relevant, was that
the respondent was a Farmer at the relevant time. He used to borrow money from him for
agricultural purpose with an understanding that he would repay the amount of loan along with
interest at the rate of 24% per annum. At the same time, he had promised to sell his agricultural
produce at the shop of complainant. Subsequently, he stopped doing so in the year 2010.
Thereafter, the complainant requested the respondent to repay the amount borrowed by him along
with interest. Instead of paying the loan amount, he had issued impugned cheque dated 16.5.2011
for ` 1,50,000/- drawn at Oriental Bank of Commerce, Nissing in his (complainant's) favour in
discharge of part of his liability. The cheque was presented for encashment, but it was returned
unpaid with the remarks "Insufficient Funds", vide memo dated 17.5.2011 by the bank. Thereafter,
the statutory legal notice dated 23.5.2011 was served upon the respondent, by virtue of which, he
was called upon to make the payment of the amount of impugned cheque within a stipulated
period, but in vain. Then, the complainant filed a criminal complaint against the respondent in the
manner depicted here-in-above.
2. Having completed the codal/statutory procedure of the trial and after closing the evidence by the
complainant, the statement of the respondent was recorded. The entire incriminating
material/evidence was put to enable him to explain any circumstance appearing against him on the
record, as contemplated under section 313 Cr.P.C. He has stoutly denied the entire evidence of
complainant in its totality and termed the pointed complaint as false.
3. Likewise, considering the entire oral as well as documentary evidence brought on record, the
trial Court dismissed the complaint of complainant and acquitted the respondent from the indicated
offence, by way of impugned judgment of acquittal dated 4.6.2014.
4. Aggrieved thereby, the complainant has preferred the present petition for leave to appeal to
challenge the impugned judgment of acquittal, invoking the provisions of section 378(4) Cr.P.C.
That is how I am seized of the matter.
5. Having heard the learned counsel for the petitioner, having gone through the evidence on record
with his valuable assistance and after bestowal of thoughts over the entire matter, to my mind,
there is no merit in the instant petition in this context.
6. At the very outset, it may be added here that the jurisdiction of the appellate Court in case of
acquittal, was determined by the Hon'ble Apex Court in a celebrated judgment of Ghurey Lal v.
State of U.P., MANU/SC/3223/2008 : 2008 (10) SCC 450. Having considering the scope of
sections 378, 386Cr.P.C. and a line of various judgments on the point, it was ruled as under (Para
75):-

"75. In light of the above, the High Court and other appellate courts should follow
the well settled principles crystallized by number of judgments if it is going to
overrule or otherwise disturb the trial court's acquittal:

1. The appellate court may only overrule or otherwise disturb the trial
court's acquittal if it has "very substantial and compelling reasons"
for doing so.
A number of instances arise in which the appellate court would have
"very substantial and compelling reasons" to discard the trial court's

decision. "Very substantial and compelling reasons" exist when:

i) The trial court's conclusion with regard to the facts

is palpably wrong;
ii) The trial court's decision was based on an
erroneous view of law;
iii) The trial court's judgment is likely to result in
"grave miscarriage of justice";
iv) The entire approach of the trial court in dealing
with the evidence was patently illegal;
v) The trial court's judgment was manifestly unjust
and unreasonable;
vi) The trial court has ignored the evidence or
misread the material evidence or has ignored
material documents like dying declarations/report of
the Ballistic expert, etc.
vii) This list is intended to be illustrative, not
exhaustive.

2. The Appellate Court must always give proper weight and

consideration to the findings of the trial court.
3. If two reasonable views can be reached - one that leads to
acquittal, the other to conviction - the High Courts/appellate courts
must rule in favour of the accused."

7. Above being the legal position and evidence on record, now the short & significant question,
though important, which invites an immediate attention of this Court and arises for determination in
this case is as to whether the trial Court has committed such jurisdictional error to acquit the
respondent and there are substantial and compelling reasons to set aside the judgment of
acquittal or not in this respect?
8. Having regard to the contentions of learned counsel for petitioner, to me, the answer must
obviously be in the negative, as the complainant has miserably failed in this relevant connection
and the present petition deserves to be dismissed for the reasons mentioned here-in-below.
9. As is evident from the record that the case of complainant from the very beginning was that the
respondent was a Farmer at the relevant time. He used to borrow money from him for agricultural
purpose with an understanding that he would repay the amount of loan along with interest at the
rate of 24% per annum. At the same time, the respondent had promised to sell his agricultural
produce at the shop of complainant. Subsequently, he stopped doing so in the year 2010.
Thereafter, the complainant filed the instant complaint against him in the indicated manner. The
loan for agricultural purpose was allegedly advanced by the complainant to the respondent and it
was stated to have been entered in the Bahi entries. No evidence, muchless cogent, is
forthcoming on record even to suggest remotely, how, when, in what manner, on what date, how
much amount was advanced, by means of Bahi entries and how much balance amount remains to
be paid by the respondent to the complainant.
10. What cannot possibly be disputed here is that such Bahi entries are not the instruments of
advancement of loan like pronote, bonds or Bill of exchange etc., which can legally be enforced, as
recognized in the NI Act. These entries are only relevant u/s. 34 of The Indian Evidence Act, 1872,
that too, in case, the same were kept regularly in the course of business. At the same time, such
Bahi entries must be kept in conformity with some known system of accountancy, either in the
official language or customary language well known to the parties and not otherwise. Where the
books produced in a case are merely ledgers, these are not supported by any daybook or

roznama, do not contain entries of transactions and there is no daily opening or closing balance,
the same are meaningless. Therefore, such Bahi entries cannot and indeed should not be taken to
be account book regularly kept in the course of business, as provided u/s. 34 of The Indian
Evidence Act, in view of ratio of law laid down by the Assam High Court in case Chandi Ram Deka
v. Jamini Kanta Deka, 1952 AIR (Assam) 92 and Orissa High Court in case Hira Meher and
another v. Birbal Prasad Agarwala, 1958 AIR (Orissa) 4 and are not at all legally enforceable.
11. Not only that, it is now well settled principle of law that an entry in the Bahi Khata merely is an
admission by its maker in his own favour and it is only admissible in evidence if it is accepted by
the opposite side (loanee) and not otherwise, which is entirely missing in the instant case. Such
entries shall alone be not sufficient to charge any person with liability, in view of ratio of law laid by
Hon'ble Apex Court in case Chandradhar Goswami v. Gauhati Bank Ltd., MANU/SC/0031/1966 :
AIR 1967 Supreme Court 1058 and Rajasthan High Court in case Pit Ram Singh v. Vimla
Devi,MANU/RH/0035/1992: 1992 (2) R.C.R. (Rent) 606 : 1992 AIR (Raj.) 149.
12. Moreover, it is a matter of very common knowledge that commission agents used to obtain
such blank/undated cheques from the Farmers as a security in good faith, not in lieu of any legal
liability, to which, the court can take judicial notice of it. Therefore, once it is ruled that such Bahi
entries are not negotiable instruments of advancement of loan, such as, pronote, bonds and Bill of
exchange etc., which can legally be enforceable, as contemplated by the NI Act, not alone
sufficient to charge any person with liability and such cheques were issued as a security of the
loan amount, then, the complainant was debarred from filing the complaint u/s. 138 of the NI Act
against the respondent.
13. Sequelly, there is yet another aspect of the matter, which can be viewed entirely from a
different angle. The case set up by the complainant in his complaint was that he used to advance
loan to the respondent for agricultural purpose from time to time and he was required to repay the
loan along with interest at the rate of 24 per cent per annum. Not only that, he has also
categorically acknowledged that he used to lend money on credit basis to different persons, but he
did not possess any money lender's licence. That means, the complainant was engaged in money
lending business to the public at large and did not possess the money lender's licence.
Indisputably, The Punjab Registration of Money-lender's Act, 1938 (hereinafter to be referred as
"the Moneylender's Act") is applicable to the State of Haryana by substituting the word "Haryana"
by means of Adaptation of Law Order 1968. Section 4(2)postulates that no money lender shall
carry on the business of advancing loans unless he gets himself registered under sub-section (1).
Any money lender, who contravenes these provisions, shall be liable on conviction to a fine not
exceeding one thousand rupees for the first offence and two thousand rupees for entry
subsequent offence in this direction.
14. Likewise, Section 3 of the Act posits that notwithstanding anything contained in any other
enactment for the time being in force, a suit by a money lender for the recovery of a loan or an
application by a moneylender for the execution of a decree relating to a loan, shall, after the
commencement of this Act, be dismissed, unless the money lender at the time of institution of the
suit or presentation of the application for execution or at the time of decreeing the suit or deciding
the application for execution is registered and holds a valid license, in such form and manner as
may be prescribed, which is totally lacking in the present case in this relevant connection.
15. A conjoint and meaningful reading of the indicated provisions of social and beneficial
legislation, would reveal that the complainant was only competent to advance agricultural loan if he
holds the pointed valid licence/registration certificate. Having a money lender's license is a
condition precedent to advance the loan to the Farmers. The advancement of loan by the
complainant to the respondent without any valid licence is not only illegal, but, at the same time, he
can be prosecuted u/s. 4 of the Moneylender's Act as well. Similarly, this Court in case Manjit Kaur
v. Vanita,MANU/PH/1731/2009: 2010 (3) RCR (Criminal) 574 and Delhi High Court in case Prajan
Kumar Jain v. Ravi Malhotra, MANU/DE/2779/2009 : 2010 (3) Civ. C.C. 410, have categorically
held that in case a cheque is issued for time barred debt and it is dishonoured, then, it cannot be
termed to have been issued, in lieu of legal enforceable liability/debt within the meaning of
section 138 of the NI Act.

16. Therefore, on the same analogy, once it is proved and the entire facts that the alleged Bahi
entries are not negotiable instruments, which can be enforced, not alone sufficient to charge any
person with liability, sequelly, the complainant was legally debarred to recover the alleged loan, as
envisaged under the indicated provisions of the Money lender's Act and in view of such legal
disabilities attached to the complaint, as discussed here-in-above, are put together, then, in that
eventuality, to my mind, the conclusion is irresistible and inescapable that he (complainant) cannot
adhere to initiate the criminal prosecution against the respondent within the meaning and in the
garb of complaint u/s. 138 of the NI Act. Hence, the trial Court has correctly acquitted the
respondent, by way of impugned judgment of acquittal dated 4.6.2014, which, in substance, is as
under (paras 16 & 17):-

"16. Section 3 of the Act provides that the suit by a money lender for recovery of
loan, lent within a valid license, shall be dismissed. Now the court was required to
ascertain whether Section 3 of the Act would cover a complaint filed under
Negotiable Instruments Act or not. To decide the same, reliance has to be placed
upon the law laid down by the Hon'ble Bombay High Court, provisions of Bombay
Money Lenders Act, 1946 and object behind the passing of the Punjab Registration
of Money-lenders' Act as applicable to Haryana. Under the Bombay Money Lenders
Act, 1946 the suit filed by a money lender for recovery of loan without a valid
license has to be dismissed. The Hon'ble Bombay High Court in case titled as Smt.
Nandc v. Nandkishor, MANU/MH/0069/2010 : 2011 (7) R.C.R. (Criminal) 697 : 2010
(2) CCC 288 (Bombay) has held that the word "in any suit" are wider in scope and
embrace any suit or proceeding initiated by a money lender who is required to hold
and prove valid license for money lending for the relevant period of loan transaction
or transactions. The Hon'ble High court held that the complaint filed by a money
lender under Negotiable Instruments Act has also to be dismissed as the debt
amounts to an unenforceable claim under Section 138 of Negotiable Instruments
Act. In addition to this, the intent and object of the legislature behind the enactment
of the Punjab Registration of Money-lenders' Act as applicable to Haryana appears
to bar the rights of a money lender, lending money without a valid license, for
recovering the loan amount in any manner. Therefore, any proceeding whereby the
money lender would be intending to recover the loan amount, lent without a valid
license, would be also barred. Had it not been the case, the legislature would not
have debarred the money lender from filing a suit for recovery of loan amount.
Therefore, the claim by money lender (complainant) against borrower (accused)
without a valid and operative money lending license covering period of transaction
as unenforceable claim under section 138 of the Negotiable Instruments Act.
17. Although, it has been proved that the claim of the complainant was not
enforceable under the Negotiable Instruments Act but to settle the controversy for
once and all, it was essential to decide whether the accused was otherwise under
any sort of debt or not. It has been the case of the complainant that the accused
used to take loan from him from time to time. The cheque amount was found to be
due against him. On the other hand, accused has taken a plea that the cheque in
question was a blank cheque, not supported by any consideration and misused by
the complainant to file a false complaint against him. In the present case, the claim
of the complainant was not based upon a single transaction and the liability
of `1,50,000/- was found to be due towards the accused on 19.5.2010. Meaning
thereby, the accused must had taken loan from the complainant on various
occasions & from time to time and his part liability was calculated to be ` 1,50,000/on 19.5.2010. Under these peculiar facts & circumstances of the case, the court is
of the view that accused did the best what he could have done by denying his
liability for an amount of ` 1,50,000/- towards the complainant. The complainant
belongs to the businessman fraternity and accordingly it was expected of him that

he must be maintaining day book or ledger account of the accused in ordinary

course of his business. The day book was the book in which the dealings of the
complainant with all the persons should be entered on day to day basis and
thereafter entries should be entered on the basis of day book in the ledger account
of concerned person. It is a matter of common practice that the complainant/lender
takes signatures of the accused/borrower either on the entries mentioned on the
day book or in the concerned ledger account. Therefore, it was incumbent on the
complainant to furnish the day book or ledger account in support of his version
because the liability of the accused could not be ascertained in any other manner.
The complainant only tendered day book and ledger account for the year 2010-11
but in absence of day book and ledger account 2004-05 onwards, neither the
complainant could have determined the liability of the accused nor the court could
so the same. In absence of the complete books of account, the amount lent to the
accused on different occasions could not be ascertained and accordingly it could
not be said that the amount of ` 1,50,000/- was due towards the accused on
19.5.2010. Reliance in this regard may be placed upon the law laid down by the
Hon'ble Supreme Court of India, in case titled as M.S. Narayana Menon & Mani v.
State of Kerala & Anr.,MANU/SC/2881/2006 : 2006 (3) R.C.R. (Criminal) 504 : 2006
(3) CCC 468 (SC) wherein it has held that "in case of dishonour of acheque
(alleged to be issued towards outstanding dues) in business dealing, if account
books not produced by the complainant, the contention of accused that cheque was
issued as security can be believed and the conviction can be set aside." Last but
not the least, the complainant did not furnish the Income Tax Returns of the relevant
years i.e. 2004-05 onwards for the reasons best known to him. Had the complainant
furnished his income tax returns then it could have been very easily ascertained if
the total amount of ` 1,94,050/- was due towards the accused or not.
All these facts and circumstances clubbed together do create more than a
reasonable doubt over the version of the complainant and lends reasonable support
to the version of the accused that the cheque in question was a blank cheque and it
was not issued in discharge of any legally enforceable debt/liability. The onus was
shifted upon the complainant and he was required to prove his case beyond all
shadows of reasonable doubt but, as discussed above, in absence of books of
account maintained by him in ordinary course of business and income tax returns,
he could not establish/prove his case beyond all shadows of reasonable doubt.
Hence, it has been clearly established that the cheque was definitely not supported
by a consideration of ` 1,50,000/- on the date of its issuance."

17. Meaning thereby, the trial Magistrate has examined the matter in the right perspective and
recorded the cogent grounds in this behalf. The learned counsel for complainant did not point out
any material, much less cogent, so as to warrant any interference in the present matter. Such
articulated impugned judgment of acquittal, containing valid reasons, cannot possibly be interfered
with by this Court, in exercise of limited jurisdiction u/s. 378(4)Cr.P.C., unless and until, the same is
illegal, perverse and without jurisdiction. Since no such patent illegality or legal infirmity has been
pointed out by the learned counsel for complainant, so, the impugned judgment of acquittal
deserves to be and is hereby maintained in the obtaining circumstances of the case.
18. No other legal point, worth consideration, has either been urged or pressed by the learned
counsel for the petitioner. In the light of aforesaid reasons, as there is no merit, therefore, the
instant petition for leave to appeal is hereby dismissed as such.

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