Merely Advancing Money At Interest Does Not Ipso Facto Make A Party A Money Lender; Bar Under Section 13 Of Maharashtra Money Lending Act Incapable Of Decision At Order VII Rule 11 Stage: Bombay High Court
Isabella Mariam
The High Court of Judicature at Bombay, Single Bench of Justice Gauri Godse, has rejected an application seeking dismissal of a money recovery suit at the threshold stage, holding that the statutory bar applicable to unlicensed money lenders cannot be conclusively determined without a full trial. The Court held that merely advancing money at interest does not automatically render a party a money lender within the meaning of the Maharashtra Money Lending (Regulation) Act, 2014, and that the applicability of the statutory bar under Section 13 of the Act requires examination of evidence and cannot be decided summarily at the stage of a plaint rejection application.
The defendant filed an application under Order VII Rule 11(d) of the Civil Procedure Code seeking rejection of the plaint on the ground that the suit was barred under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014. The suit was instituted for recovery of money based on dishonoured cheques and promissory notes executed by the defendant. The plaintiff pleaded that it had advanced short-term business loans from 2011–2012 onwards, initially amounting to approximately Rs. 48 Crores and subsequently increasing to about Rs. 510 Crores, carrying interest up to 36% per annum.
The defendant contended that the plaintiff was engaged in the business of money lending without a valid licence and that Section 13 barred passing of a decree in favour of an unlicensed money lender. It was argued that the transactions constituted “loans” within Section 2(13) and did not fall within the exclusion under Section 2(13)(j).
The plaintiff relied on dishonoured cheques, promissory notes, and letters acknowledging liability, and contended that the transactions were covered by the statutory exclusion relating to advances made on the basis of negotiable instruments exceeding Rs. 3 Lakhs.
The Court recorded that “This application is filed by the defendant under Order VII Rule 11(d) of the Civil Procedure Code (‘CPC’) for the rejection of the plaint on the ground that the suit is barred in view of Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014.”
After examining the pleadings, the Court observed, “Thus, from the plaintiff’s pleadings, it is clear that the plaintiff has filed a suit based on the dishonoured cheques and the promissory notes executed by the defendant.”
Referring to the Division Bench decision in Deepak Raheja, the Court stated that Section 13 stipulates that no Court shall pass a decree in favour of a money lender unless satisfied that at the time the loan was lent, the money lender held a valid licence, and that if no licence existed, the suit shall be dismissed. It recorded the Division Bench’s conclusion: “To put it in a nutshell, without a loan (as defined in the Money Lending Act of 2014 itself) being involved, there is no bar on any court to pass a decree.”
The Court further observed that “when the suit is filed on the basis of dishonoured cheques and the promissory notes executed by the defendant, it cannot be ascertained at the preliminary stage under Order VII Rule 11 of the CPC whether the money advanced by the plaintiff and the transactions between the parties would not fall under the definition of ‘loan’ under Section 2(13) of the said Act for applying the bar as contemplated under Section 13 of the said Act.”
It recorded that “the allegation of engaging in the business of money lending can only be dispelled by leading detailed evidence, and the issue regarding the assertion of the business of money lending without a license would require examination of evidence, and such an exercise cannot be done in a summary manner.”
The Court remarked: “Merely advancing money to people does not ipso facto make a party a money lender; hence, the issue whether the plaintiff can be termed a money lender, within the parameters of the said Act, for applying the bar contemplated under Section 13 of the said Act cannot be decided at the stage of Order VII Rule 11 of the CPC.”
The Court reiterated that “the power of the Court to reject the plaint is a drastic measure, as it terminates a civil action at the threshold, and therefore must be exercised strictly in accordance with the conditions enumerated under Order VII Rule 11 of the CPC.”
It ultimately recorded that “the issue whether the plaintiff can be termed a money lender, within the parameters of the said Act, for applying the bar contemplated under Section 13 of the said Act cannot be decided at the stage of Order VII Rule 11 of the CPC.”
The Court concluded by directing that “Hence, in the present case, the plaint cannot be rejected at the threshold. For the reasons recorded above, the interim application is rejected.”
Advocates Representing the Parties
For the Petitioners: Mr. Navroz Seervai, Senior Advocate; Mr. Prateek Sakseria, Senior Advocate; Mr. Nishit Dhruva; Mr. Yash Dhruva; Ms. Niyati Mechant; Mr. Harsh Sheth instructed by MDP Legal.
For the Respondents: Mr. Gaurav Joshi, Senior Advocate; Mr. Gaurav Mehta; Mr. Chaitanya D. Mehta; Ms. Sonali Aggarwal instructed by M/s. Dhruve Liladhar & Co.
Case Title: Hubtown Limited v. Ashok Commercial Enterprises
Neutral Citation: 2026: BHC-OS:1601
Case Number: Interim Application (L) No. 27175 of 2021 in Commercial Suit No. 1532 of 2018
Bench: Justice Gauri Godse
