Dinesh Shishupal Punia vs Aslam Shaikh
2023 Latest Caselaw 3535 Bom

2023:BHC-OS:2894-DB

                                                                  AMOL 904 IAL 9131.2023.odt




                             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                 ORDINARY ORIGINAL CIVIL JURISDICTION


                                 INTERIM APPLICATION(L) NO. 9131 OF 2023
                                                   IN
                                       APPEAL (L) NO. 5883 OF 2023

           Dinesh Shishupal Punia                                          ...Applicant
                 Versus
           Aslam Shaikh                                                   ...Respondent

Mr. Atul Damle, Senior Advocate i/b. Mr. Hemant Ghadigaonkar for appellant/applicant.

Mr. Sarosh Bharuch a/w. Mr. Shrey Fatterpekar, Mr. Ameet Mehta, Mr. Nirav Marjadi, Ms. Avani Rathod, Ms. Srushti Mehta, Ms. Nikita Deora & Ms. Nishita Bhutta i/b. Solicis Lex for respondent.

                                                         CORAM:        K.R. SHRIRAM &
                                                                       RAJESH S. PATIL, JJ

                                                         DATED:        11th April, 2023

           PC:-

1. Appeal is impugning an order dated 2 nd February 2023 by which

the learned Single Judge was pleased to grant conditional leave to defend, the

condition being appellant depositing a sum of Rs. 4,00,00,000/- (Rupees Four

Crores only) within eight weeks.

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2. When the appeal was taken up yesterday for admission, we had

made it very clear to counsel for appellant that we are not inclined to interfere

and perhaps may consider granting a week or to more to deposit the amount

of Rs. 4,00,00,000/-. Mr. Damle requested the matter be stood over to today

to enable him to take instructions. Today Mr. Damle stated that his

instructions are not to agree to the suggestion made by this Court, but to

argue the matter on merits.

3. Respondents had filed the summary suit to recover an amount of

Rs. 4,00,00,000/- together with interest at the rate of 9% per annum based

upon a settlement agreement dated 21st September 2021.

4. Respondents who are husband and wife being married to each

other had lent and advanced money to appellant and appellant's wife one

Manisha Punia over a period of time since year 2016.

5. The parties were on friendly terms and this financial help was

extended by respondents since appellant and his wife were in dire need of

funds. Respondent no.1 lent and advanced an amount of Rs. 98,50,000/- to

appellant's wife (Manisha Punia). Respondent no.2 lent and advanced an

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amount of Rs. 1,36,50,000/- to appellant's wife (Manisha Punia). Thereafter,

respondents lent and advanced to appellant and his wife (Manish Punia) an

amount of Rs. 4,50,00,000/- in cash. Accordingly a total sum of Rs.

6,85,00,000/- was lent. Defendant sets out the various bill exchange issued by

appellant initially totaling to an amount of 6,85,00,000/- which was reduced

to Rs. 6,50,00,000/- upon payment of a sum of Rs. 35,00,000/- that was made

by appellant's wife (Manisha Punia).

6. Thereafter, three post dated cheques were issued for

Rs.63,50,000/-, Rs. 1,36,50,000 and 4,50,00,000/-. All the cheques were

returned dishonoured and respondents commenced proceedings against

appellant and his wife, under the provision of Section 138 of Negotiable

Instrument Act, 1881. Respondents also filed a complaint against appellant

and his wife (Manisha Punia) before the Economic Offences Wing (EOW).

During the course of the investigation/proceedings before the EOW, the

settlement agreement dated 21 st September 2021 was entered into between

appellant and respondent. Since, appellant did not honour his commitments

under the settlement agreement, the summary suit came to be filed.

7. After hearing the parties, by detailed order dated 2 nd February

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2023, which is impugned in this appeal, the Learned Single Judge granted

conditional leave to defend upon appellant depositing a sum of Rs.

4,00,00,000/- in this court within eight weeks. Eight weeks got over on 30 th

March 2023.

8. Though various grounds have been taken in the appeal, only two

grounds were pressed by Mr. Damle, i.e., (a) the settlement agreement was

entered into under threat/coercion exercised in the office of the EOW, i.e., the

settlement agreement was signed under threat and coercion, and (b) the

second is the suit is barred under the provisions of Money Lenders Act.

9. Mr. Damle in fairness submitted that these defenses were taken

for the first time in the affidavit in reply to the summons for judgment.

10. In our view these defences are nothing but moonshine and after

thoughts. If the settlement agreement was entered into under threat and

coercion, we would have expected appellant to raise protest at least within

reasonable time after the entered into the said agreement. Admittedly, it has

been raised for the first time in affidavit in reply to the summons for

judgment. Moreover, before the settlement agreement was entered into

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appellant had issued three post dated cheques all of which came to be

dishonoured. There nothing to indicate that these three cheques have been

issued under threat and coercion. Moreover, proceedings under section 138 of

Negotiable Instrument Act, 1881 have been commenced against appellant

which are still pending.

11. As regards the defence that the suit is barred under provision of

Money Lenders Act again the defence is nothing but moonshine and has to be

rejected.

12. Before the Division Bench this Court in the case of Parekh

Aluminex Limited V/s. Ashok Commercial Enterprises and another 1 a similar

defense was raised. The Division Bench was pleased to reject the submission.

Paragraph nos. 16 to 23 of the said judgment reads as under :-

"16. Mr. Chinoy relied on Section 2(17) of the Bombay Money-Lenders Act and Section 10 in support of his contention to show that the suit is not maintainable and is barred under the Act, as according to him, the suit was for the recovery of the loan amount. Mr. Chinoy further contended that even otherwise, even assuming the suit is based on the dishonoured cheques it is, in effect, a suit to recover the loan and is, therefore, barred under the Act.

He submitted that if repayment of the loan is barred under the Act, it would not make any difference, whether the suit was instituted on the basis of a dishonoured cheque or otherwise, as any form of enforcement of the

1 2014 SCC Online Bom 2304

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'loan' is barred under the Act. He further submitted that under Section 2(9)(f), a loan made on the basis of a negotiable instrument must mean a negotiable instrument given at the time of the loan and not subsequently or later. He submitted that giving of a loan and issuance of cheque must be contemporaneous. He relied on the judgments in the case of Khyati Realtors Pvt. Ltd. v. Zenal Construction Pvt. Ltd.1, Kaloji Talusappa Gangavathi v. Khyanagouda2 and Nanda w/o Dharam Nandanwar v. Nandkishor S/o Talakram Thaokar3, in support of his contention.

17. Mr. Sen, learned Senior Counsel for the respondents refuted the submissions. He submitted that Section 2(17) cannot be read in isolation only with Section 10 of the Bombay Money-Lenders Act and that it will necessarily have to be read with Section 2(9)(f) of the said Act, in order to give it a harmonious construction. He submitted that if the interpretation as sought to be contended by Mr. Chinoy is accepted, Section 2(9)(f) including certain acts/documents from the term 'loan' the provision will be rendered otiose. He submitted that it is not necessary that the negotiable instrument has to be handed over at the time when the loan is advanced as long as it is agreed by the parties to hand over the same later. He further submitted that the letters acknowledging the amount due and payable to the respondents constitute a contract and as such would make the appellant liable to pay the amounts under the dishonoured cheques.

18. The relevant provisions of the Bombay Money-Lenders Act relied upon by the parties are as follows: "2. Definitions.

(9) "loan" means an advance at interest whether of money or in kind, but does not include-

(a) a deposit of money or other property in a Government Post Office Bank or in any other bank or in a company or with a co-operative society;

(b) a loan to, or by, or a deposit with any society or association registered under the Societies Registration Act, 1860, (XXI of 1860), or any other enactment relating to a public, religious or charitable object;

(c) a loan advanced to a Government or by any local authority authorised by Government;

(cc) a loan advanced to a Government servant from a

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fund, established for the welfare or assistance of Government servants, and which is sanctioned by the State Government;

(d) a loan advanced by a co-operative society; (d1) an advance made to a subscriber to, or a depositor in, a Provident Fund from the amount standing to his credit in the fund in accordance with the rules of the fund;

(d2) a loan to or by an insurance company as defined in the Insurance Act, 1938 (IV of 1938);

(e) a loan to, or by bank;

(ee) loan to, or by, or deposit with, any body (being a body not falling under any of the other provisions of this clause), incorporated by any law for the time being in force in the State;

(f) an advance [of any sum exceeding rupees three thousand] made on the basis of a negotiable instrument as defined in the Negotiable Instruments Act, 1881 (XXVI of 1881); other than a promissory note;

(f1) an advance, of any sum exceeding rupees three thousand made on the basis of a hundi (written in English or any Indian language);

(f2) an advance made bona fide by any person carrying on any business, not having for its primary object the lending of money if such advance is made in the regular course of his business."

19. Section 2(17) reads thus:

"suit to which this Act applies" means any suit or proceeding-

(a) for the recovery of a loan made after the date on which the Act comes into force;

(b) for the enforcement of any security taken or any agreement, made after the date on which this Act comes into force in respect of any loan made either before or after the said date; or

(c) for the redemption of any security given after the date on which this Act comes into force in respect of any loan made either before or after the said date."

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20. Section 10 reads thus;

"10. (1) No court shall pass a decree in favour of a money-lender in any suit to which this Act applies [including such suit pending in the court before the commencement of the Bombay Money-lenders (Amendment) Act, 1975] unless the court is satisfied that at the time when the loan or any part thereof, to which the suit relates was advanced, the money-lender held a valid licence, and if the court is satisfied that the money- lender did not hold a valid licence, it shall dismiss the suit."

(2) Nothing in this section shall affect -

(a) suits in respect of loans advanced by a money-lender before the date on which this Act comes into force;

(b) the powers of a Court of Wards, or an Official Assignee, a receiver, an administrator or a Court under the provisions of the Presidency-towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, or any other law in force corresponding to that Act, or of a liquidator under the Companies Act, 1956, to realise the property of a money- lender."

21. The Bombay Money-Lenders Act was intended to do away with a very serious evil in our society. It was intended to keep control over money-lending transactions and to see that excessive rate of interest was not charged by money-lenders and the only way that such control could be maintained was by providing penalties for doing money-lending business without a proper license from the State. Therefore, in construing an Act of this nature which takes away vested rights and curtails freedom of contract in order to give relief to a particular class, the Court should guard against giving it an interpretation which would extend its scope. The provisions of the Act should be interpreted literally and strictly. Section 2(9)(f) expressly excludes an advance made on the basis of the negotiable instrument as defined under the Negotiable Instruments Act, from the definition of the term 'loan'.

22. Section 10 provides that no Court shall pass a decree in favour of a money-lender to which the Act applies unless the money-lender held a licence at the relevant time. Section 2(17) states that the expression "suit to which this Act applies" means any suit or proceeding of the nature mentioned in clauses (a), (b) and (c) thereof.

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Clause (a) refers to a suit or proceeding "for the recovery of a loan made after the date on which the Act comes into force." Thus if a loan falls within the ambit of the expression "suit to which this Act applies" in section 2(17), a suit or proceeding to recover the same would have to be dismissed in view of section 10 unless the money-lender holds a licence at the relevant time.

23. The question therefore, is whether the loan in the present case falls within the ambit of sections 2(17) and (10). The appellant's contention that the suit is barred by the provisions of the Bombay Money Lenders Act is not well founded. Section 2(9) defines a loan to mean an advance at interest whether of money or in kind, but does not include a loan or advance of the nature stipulated in clauses (a) to (f2) thereof. The above suit is not hit by the Bombay Money Lenders Act in view of clause (f) of section 2(9) of the Bombay Money Lenders Act. In view of clause

(f), the loans do not fall within the purview of the Act as they were advances made on the basis of the negotiable instrument as defined in the Negotiable Instruments Act, 1881 viz. the cheques and the bills of exchange."

13. This was followed by a learned Single Judge of this Court in Bipin

Vazirani V/s. V. Raheja Design Construction Private Limited and Another. 2

Paragraph no. 7 reads as under :-

"7. In that decision I considered the settled law on the subject including amendments to the Money Lending Act and the interpretation of the expressions 'loan', 'money lender', 'business of money lending', and, in particular how such a defence could be raised. In paragraph 36 of the Base Industries Group decision I culled out propositions that seemed to me to emerge from that discussion:

"36. From this discussion, the following propositions emerge:

(a) Not every loan is axiomatically a money-lending 2 2018 SCC Online Bom 19972

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transaction for the purposes of the 1946 or the 2014 Acts. There is no such presumption in law.

(b) It is doing of the 'business of money-lending' that attracts the provisions of the statute. In interpreting the phrase, the correct emphasis is on the word 'business', not 'money-lending'. It is the word 'business', and not the expression 'money-lending', that is determinative. Simply put, every instance of lending money is not money-lending. Not every lender is a Shylock.

(c) To constitute 'business', a single isolated instance does not, and even several isolated stray instances do not, constitute 'the business of money-lending'. To be engaged in the 'business of money-lending', the activity must be systematic, regular, repetitive, and continuous, and must generate an appreciable revenue. The fact that the borrower is a stranger to the lender does not on its own make the latter a 'money-lender'.

(d) A loan recovery action is not barred merely because there is a loan. It has to be shown that the loan was part of 'the business of money-lending'.

(e) A plaintiff seeking a recovery of a loan is not required to show that his suit is not barred by the Money Lenders Act. It is always for the defendant who puts up money-lending as a defence to show that the transaction is forbidden by the Money Lenders Act."

14. In this case also it was a single isolated instance and there is

nothing to indicate that respondents were in the business of money lending

that they were lending money on systematic, regular or repetitive or

continuous basis for generating any appreciable revenue. The onus is on

defendant, appellant in this case, to show that transaction was forbidden by

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Money Lenders Act. There is nothing to even suggest anything to that effect.

15. In the circumstances, the learned Single Judge was very correct in

granting conditional leave to defend.

16. Before we part it will be apposite to reproduce paragraph no. 17

to 17.6 of judgment of the Apex Court in IDBI Trusteeship Services Limited

V/s. Hubtown Limited 3 which reads as under :-

"17. Accordingly, the principles stated in paragraph 8 of Mechelec's case will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four judges in Milkhiram's case, as follows:

17.1. If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defence the suit.

17.2. If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend. 17.3. Even if the defendant raises triable issues, if a doubt is left with the trial judge about the defendant's good faith, or the genuineness of the triable issues, the trial judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.

17.4. If the Defendant raises a defence which is

3 (2017) 1 SCC 568

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plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.

17.5. If the Defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith.

17.6. If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court."

17. Mr. Damle submitted that appellant has raised triable issue. As

noted above none of the two defences raised are triable issues. Appellant has

raised no substantial defence or genuine triable issue. The defences are

frivolous and vexatious.

18. Appeal, therefore, dismissed with costs in the sum of Rs.

1,00,000/-. This amount shall be paid over to respondent's advocate within

two weeks.

19. Consequently, interim application also dismissed.

(RAJESH S. PATIL,J.)                                                       (K.R. SHRIRAM,J.)