Recently, in a ruling that clarifies the interplay between the Negotiable Instruments Act, 1881 (NI Act), and the Kerala Money-Lenders Act, 1958, the Kerala High Court has held that the statutory presumption under Section 139 of the NI Act exists even where a cheque is issued to a non-banking financial company (NBFC) charging interest above the ceiling prescribed for moneylenders. Justice M.B. Snehalatha, while dismissing a criminal revision petition filed by the accused, observed that “the non-banking financial companies regulated by the Reserve Bank of India in terms of the provisions of Chapter IIIB of the RBI Act, 1934 cannot be regulated by the Kerala Money-Lenders Act, 1958.”
The case stemmed from a vehicle loan-cum-hypothecation agreement executed by the petitioner, Abdulla P., with Manappuram General Finance and Leasing Ltd. for a sum of ₹1,19,000. On default of instalments, the vehicle was repossessed and auctioned, leaving an outstanding liability of ₹1,11,644. To discharge this liability, the accused issued a cheque, which was dishonoured on presentation due to insufficient funds. Following the trial, he was convicted under Section 138 NI Act and sentenced to imprisonment till the rising of the court along with a fine equal to the dishonoured amount. His appeal before the Sessions Court was dismissed, leading to the present revision petition before the High Court.
The petitioner argued that the NBFC had charged interest in violation of Section 7 of the Kerala Money-Lenders Act, 1958, and therefore, the cheque was not issued in discharge of a legally enforceable debt. The Court rejected the contentions of the Petitioner while referring to the Supreme Court’s decision in Nedumpilli Finance Company Ltd. v. State of Kerala and Ors., which held that NBFCs are entirely regulated by the RBI, “from the time of their birth (by way of registration) till the time of their commercial death (by way of winding up),” thereby placing them outside the purview of State money-lending legislations.
Reiterating the mandatory presumption under Section 139 NI Act, the Court held, “The presumption under Section 139 N.I Act entails an obligation on the court to presume that the cheque in question was issued by the drawer or accused in discharge of a debt or liability.” It further observed that this presumption, though rebuttable, cannot be displaced by a mere denial of liability but requires credible evidence from the accused. In the present case, no such rebuttal was established.
Concluding that no ground for interference was made out, the Court sustained the concurrent findings of the Magistrate and the Sessions Court, thereby affirming the conviction and sentence of the accused under Section 138 of the NI Act.
Case Title: Abdulla P. v. Manappuram General Finance and Leasing Ltd. and Anr.
Case No: Crl.Rev.Pet. No. 1530/2019
Coram: Justice M. B. Snehalatha
Advocates for Petitioner: Advs. P. Samsudin, K.C. Antony Mathew, Jithin Lukose
Advocates for Respondent: Adv. B.S. Suresh Kumar, PP K.M. Faisal
