[Cites 21, Cited by 0]
Bombay High Court
Hubtown Limited vs Ashok Commercial Enterprises on 21 January, 2026
2026:BHC-OS:1601
901-IA(L)-27175-2021.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
rrpillai ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION (L) NO. 27175 OF 2021
IN
COMMERCIAL SUIT NO. 1532 OF 2018
Hubtown Limited ... Applicant
In the matter between
... Plaintiff
Ashok Commercial Enterprises
Vs.
Hubtown Limited ... Defendant
Mr. Navroz Seervai, Senior Advocate a/w Mr. Prateek Sakseria,
Senior Advocate a/w Mr. Nishit Dhruva, Mr. Yash Dhruva, Ms.
Niyati
Mechant, Mr. Harsh Sheth i/b MDP Legal for the Applicant in
IA(L)/27175/2021/Defendant.
Mr. Gaurav Joshi, Senior Advocate a/w Mr. Gaurav Mehta, Mr.
Chaitanya D. Mehta, Ms. Sonali Aggarwal i/b M/s. Dhruve
Liladhar & Co. for the Plaintiff.
CORAM : GAURI GODSE, J.
RESERVED ON : 16th OCTOBER 2025
PRONOUNCED ON : 21st JANUARY 2026
JUDGMENT:
BASIC FACTS:
1. This application is filed by the defendant under Order VII
Digitally
signed by
RAJESHWARI
RAJESHWARI RAMESH
PILLAI
Rule 11(d) of the Civil Procedure Code ('CPC') for the rejection
RAMESH
PILLAI Date:
2026.01.21
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of the plaint on the ground that the suit is barred in view of
Section 13 of the Maharashtra Money Lending (Regulation)
Act, 2014 ('the said Act'). The suit is filed for recovery of money
against the defendant based on the dishonoured cheques
issued by the defendant and promissory notes executed by the
defendant.
SUBMISSIONS ON BEHALF OF THE DEFENDANT:
2. The submissions made by learned senior counsel for the
defendant are summarised as under:
a) As per the pleadings in the plaint, the plaintiff is engaged
in the business of builder finance and claims to have
advanced loans to the defendant from 2011-2012 at
interest rates up to 36% per annum. The plaintiff has
pleaded that a loan was granted to the defendant in
2011-2012 for a sum of approximately Rs. 48 Crores,
which was subsequently increased to approximately Rs.
510 Crores. The defendant unilaterally issued post-dated
cheques for repayment of the loan and executed demand
promissory notes from time to time. The cheques, when
presented, were dishonoured for the reason 'insufficient
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funds'. Thus, according to the plaintiff, the suit is filed on
the basis of dishonoured cheques and on the defendant's
letter admitting acceptance of the loan and liability to
repay.
b) The plaintiff has not pleaded that it possesses a
mandatory license as required under the said Act. Thus,
the plaintiff has deliberately suppressed in the suit that it
does not possess a mandatory license. It is only by clever
drafting that the factual aspect regarding the money-
lending license is suppressed in the plaint. Thus, on a
meaningful reading of the pleadings in the plaint, it is
apparent that the plaintiff is engaged in the business of
money lending without a licence. The plaintiff has
allegedly granted loans and advanced interest funds to
the defendant at different rates. Accordingly, the plaintiff
contends that the defendant has issued demand
promissory notes for repayment of the alleged loans.
However, the plaintiff has wrongly captioned the notes as
bills of exchange.
c) Under Section 13 of the said Act, there is a bar to pass a
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decree in favour of a money-lender when the money-
lender does not hold a valid licence. Thus, Section 13 of
the said Act bars a Court from passing a decree in a suit
filed by an unregistered money-lender. Therefore, the
plaint is liable to be rejected under Order VII Rule 11 (d)
of CPC. Learned senior counsel for the defendant relied
upon the decision of this Court in the case of Fauzan
Shaikh Vs. State of Maharashtra1, and the Apex Court's
decision in the case of RBANMS Educational Institution
Vs. B. Gunashekar2. Learned senior counsel for the
defendant, therefore, submits that the suit is an abuse of
judicial process where the plaintiff has, by clever drafting,
espoused a cause of action which is barred by Section 13
of the said Act.
d) The exclusion under Section 2(13)(j) would not assist the
plaintiff in the facts of the present case. According to the
learned senior counsel for the defendant, as per the
scheme of Section 2(13) of the said Act, a loan means an
advance at an interest. Clause (j) of Section 2(13) of the
1 Criminal PIL (St.) No. 41 of 2019
2 2025 SCC OnLine SC 793
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said Act uses the term 'advance' as contradistinguished
with other clauses of Section 2(13) which use the terms
'loan' or 'deposit'. Thus, only interest-free advances/
friendly advances without interest are excluded from the
definition of 'loan' under Section 2(13) of the Act.
Therefore, when there is a component of interest in
monies given by a money lender to the debtor, the money
lender is covered by the rigours of the said Act. In such a
situation, the factum of loan being given on the basis of a
negotiable instrument or otherwise makes no difference
since a component of interest is involved, and hence,
such a loan is not excluded from the definition of 'loan'
under Section 2(13) of the Act.
e) Thus, according to the learned senior counsel for the
defendant, the assertions in the plaint to the effect that
loans were advanced at interest rates up to 36% per
annum, it is evident that the plaintiff is engaged in
continuous and repetitive business of money lending and
has advanced monies 'at interest' to the defendant as a
part of its business of money lending. Thus, according to
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the learned senior counsel for the defendant, the loans
given by the plaintiff to the defendant are not an advance
and therefore not excluded by Section 2(13)(j) of the said
Act.
f) Without prejudice to the aforesaid submissions regarding
non-applicability of the exceptions under the definition of
'loan', learned senior counsel for the defendant submitted
that the plaintiff has pleaded that the alleged loan given is
on the basis of a 'demand promissory note'. Hence, the
exclusion under Section 2(13)(j) of the said Act itself
excludes an advance. Thus, if an advance is given on the
basis of 'promissory note', it is a 'loan' within the meaning
of Section 2(13) of the said Act and hence, is not covered
by any of the exclusions.
g) As per the plaintiff's pleading that a loan was granted by
the plaintiff to the defendant in 2011-2012 for a sum of
Rs.48 Crores, there is no pleading whatsoever on the
dates on which the monies were allegedly disbursed by
the plaintiff to the defendant, increasing the sum to
Rs.510 Crores. The plaintiff is otherwise in the business
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of lending loans and has admittedly characterised the
transactions as loans; thus, there is no nexus between
the loan and the negotiable instrument issued by the
defendant. Thus, based on the pleadings, it is evident
that the loan was not given based on a negotiable
instrument. Hence, the plaintiff would not be entitled to
seek the benefit of the exclusion under Section 2(13)(j) of
the said Act. To support his submissions, learned senior
counsel for the defendant relied on the decision in Khyati
Realtors Pvt. Ltd Vs. M/s. Zenal Construction Pvt. Ltd. 3
h) According to the plaintiff's pleadings, the dishonoured
cheques on which the suit is purportedly based are dated
1st April 2018 and issued for amounts of Rs. 68.92 Crores
and Rs. 499.92 Crores, respectively. Section 5, read with
Section 6, of the Negotiable Instruments Act provides that
a cheque is a bill of exchange for an 'ascertained sum of
money'. The plaintiff has claimed Rs.510 Crores as
principal and Rs.78.43 Crores as balance interest.
However, since no rate of interest is specified on the
alleged negotiable instrument on which the suit is filed,
3 Company Petition No. 243 of 2012
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the interest is payable at 18% per annum in terms of
Section 80 of the Negotiable Instruments Act. The plaintiff
thus cannot claim shelter of the alleged exclusion under
Section 2(13)(j) of the said Act by contending that the
'loan' is given on the basis of a negotiable instrument, i.e.
the dishonoured cheques.
i) The plaintiff's claim is based on a letter dated 13 th July
2018, where the defendant allegedly assured, agreed
and promised to repay the amount and issued post-dated
cheques and promissory notes. However, the plaintiff
also contends that such post-dated cheques were
unilateral and not acceptable to the plaintiff. Hence, it is
evident from the particulars of the claim and in view of the
plaintiff not being ad idem with the defendants' terms
contained in the letter dated 13 th July 2018, no written
contract can be said to be in existence to maintain the
suit. Hence, based on such a letter, a summary suit under
Order XXXVII of CPC would not be maintainable. Hence,
the suit is not filed to claim a legally enforceable debt.
The plaintiff being an unregistered moneylender, the suit
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would therefore be barred under Section 13 of the said
Act.
j) Learned senior counsel for the defendant submitted that,
as held by this Court in the case of Marine Container
Services (I) Pvt. Ltd. Vs. Rushabh Precision Bearings
Ltd.4, a suit filed by an unregistered money lender is not
maintainable since the recovery is barred and no relief
can be granted. Learned senior counsel for the defendant
therefore submitted that the plaint is liable to be rejected
in view of the bar under Section 13 of the said Act.
SUBMISSIONS ON BEHALF OF THE PLAINTIFF:
3. Learned senior counsel for the plaintiff opposed the
prayer for rejection of the plaint on the following submissions:
a) Learned senior counsel for the plaintiff relied upon the
relevant averments in the plaint regarding post-dated
cheques issued by the defendant and letters issued by
the defendant promising and assuring repayment of the
loan amount. Thus, even if there is no licence as alleged
by the defendant, the plaintiff would fall under the
4 [1999 (3) Bom. C. R. 760]
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exceptions to clause (j) of sub-section (13) of Section 2 of
the said Act. Hence, Section 13 would have no
application in the present suit.
b) As per the pleadings in paragraphs 4, 5, 17, 18, 21 and
25 of the plaint, the plaintiff advanced loans on the basis
of post-dated cheques. Since the post-dated cheques
were dishonoured, the plaintiff also filed a criminal
complaint. In paragraph 22 of the plaint, it is therefore
contended that in view of the dishonoured cheques, the
amount as per the cheques has become due and payable
to the plaintiff.
c) To support his submissions, learned senior counsel for
the plaintiff relied upon the decision of this Court in the
case of Parekh Aluminex Ltd. Vs. Ashok Commercial
Enterprises5 and the decision of learned single Judge in
the case of Ashok Commercial Enterprises and Anr. Vs.
Kamla Shakti Developers & Ors. 6. On similar
propositions, learned senior counsel for the plaintiff relied
upon the recent decision of the Hon'ble Division Bench of
5 2014 SCC OnLine Bom 2304
6 Summons for Judgment No. 89 of 2018 in COMSS No.472 of 2016
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this Court in the case of Deepak Bhagwandas Raheja Vs.
Tikamdas & Associates7.
d) Learned senior counsel for the plaintiff submits that the
Division Bench of this Court in the case of Deepak
Raheja has explained the bar under Section 13 of the
said Act. It is held that an unlicensed money lender would
face the restrictions on maintaining a suit for recovery
under Section 13 of the said Act, but that would require
the jurisdictional fact of his being a money lender in the
context of the objectives of the legislation. The decision of
the Division Bench in the case of Fauzan Shaikh is not a
lucid declaration that any and every advancement of
monies at interest, which is on the basis of a negotiable
instrument, would automatically become a loan by a
money lender under Section 2(13) of the said Act. It is
submitted that if such a submission is accepted, the
provisions of Section 2(13)(j) of the said Act would be
rendered otiose.
e) Learned senior counsel for the plaintiff, therefore, submits
7 Commercial Appeal (L) No. 15455 of 2023 in COMSS No. 311 of 2020
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that the suit filed based on the dishonoured cheques and
the promissory notes executed by the defendant would
not be barred in view of Section 13 of the said Act. He
submits that the plaintiff's case falls under the exception
of clause (j) of sub-section (13) of Section 2 of the said
Act. Hence, the plaintiff was not under an obligation to
register as a moneylender. Therefore, there is no
question of rejection of the plaint on the ground that it is
barred in view of Section 13 of the said Act.
SUBMISSIONS IN REJOINDER ON BEHALF OF THE
DEFENDANT:
4. In response to the submissions made by learned senior
counsel for the plaintiff by relying upon the decision in the case
of Ashok Commercial Enterprises, the learned senior counsel
for the defendant submitted that the suit in the said case was
filed much prior to the declaration of law in the case of Fauzan
Shaikh and thus cannot be considered. The suit in the case of
Ashok Commercial Enterprises was admittedly and
undisputedly based on a negotiable instrument and was not
founded on promissory notes. Hence, the decisions relied upon
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by the learned senior counsel for the plaintiff would not be
applicable to the facts of the present case. So far as the
decision in the case of Deepak Raheja is concerned, the suit
was admittedly and undisputedly based on bills of exchange
and dishonoured cheques and not founded on promissory
notes. Hence, the suit was a loan recovery action of an
unregistered money lender who was admittedly engaged in the
business of money lending. In the case of Deepak Raheja, the
defendant failed to establish that the plaintiff therein was a
money lender. However, in the present suit, the plaintiff has
pleaded that the plaintiff is in the business of money lending.
Thus, the decisions would not be applicable to the facts of the
present case. The judgment in the case of Fauzan Shaikh is
distinguished by the Division Bench in the case of Deepak
Raheja as the suit was filed on the basis of a negotiable
instrument. However, in the present suit, since the plaintiff is
admittedly in the business of money lending, reliance on the
decision of Deepak Raheja is clearly distinguishable and
misplaced in the present facts. Hence, according to the learned
senior counsel for the defendant, the plaint is liable to be
rejected as barred under Section 13 of the said Act.
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ANALYSIS AND CONCLUSIONS:
5. I have carefully perused the pleadings in the plaint and
the supporting documents. The plaintiff has pleaded that he is
engaged in the business as an importer, exporter, and
manufacturer's representative, investment in real estate and
builder finance. The plaintiff contended that the defendant, for
its business purpose and in consideration of the defendant
agreeing to pay to the plaintiff interest for the financial years
2011-2012 and 2012-2013 at 21% per annum and
subsequently at different rates of interest as agreed upon, the
plaintiff granted short-term loans to the defendant for its
business-related requirements. Accordingly, the defendant, by
letter dated 25th April 2012, confirmed that, as per the books of
account of the defendant as on 31 st March 2012, a sum of Rs.
48 Crores is standing to the credit of the plaintiff's account. The
plaintiff accordingly granted a further business loan. The
defendant issued post-dated cheques for repayment towards
the loan. The defendant also executed a promissory note dated
1st April 2018, payable on demand for Rs. 510,24,22,993/- and
unilaterally fixed the due date of 1 st April 2019. The plaintiff has
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also relied upon the demand promissory note dated 1 st April
2017, promising to pay, on demand, the principal sum of
Rs.357,00,00,000/- along with interest at the rate 36% per
annum. The plaintiff relies upon the promissory notes and the
cheques issued.
6. The plaintiff has therefore relied upon letters dated 7 th
June 2017, 27th June 2017, 28th June 2017, 14th September
2017, 1st March 2018, 1st April 2018, 16th April 2018, and 19th
June 2018, calling upon the defendant to make payment of the
due amount. The plaintiff has further pleaded that the
defendant, by its letter dated 2 nd November 2017,
acknowledged and confirmed receipt of a business loan, which
was due and payable. Accordingly, for the purpose of
repayment of Rs.499,92,00,000/-, a cheque dated 1 st April 2018
was issued, and the defendant assured that the cheque would
be honoured by issuing a letter dated 2 nd November 2017. The
two cheques were accordingly deposited. However, the same
were dishonoured for the reason 'funds insufficient'. Hence, the
plaintiff has filed a private complaint under Section 138 of the
Negotiable Instruments Act. In such circumstances, the plaintiff
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has filed the present suit for recovery of the principal amount
with interest.
7. The plaintiff has therefore pleaded that the suit is filed to
recover a liquidated sum of money based on the dishonoured
cheques and the letters issued by the defendant
unconditionally admitting acceptance of the loan and its liability
to repay. 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.
8. The plaintiff has relied upon the definition of 'loan' under
Section 2(13) of the said Act. The exception in clause (j) of sub-
section (13) of Section 2 is relied upon by the learned senior
counsel for the plaintiff to contend that an advance of any sum
exceeding Rs.3 Lakhs made on the basis of a negotiable
instrument other than a promissory note is covered under the
exception to the definition of the loan, meaning an advance at
interest. It is therefore contended on behalf of the plaintiff that,
in view of the exception under clause (j), the money advanced
by the plaintiff is not covered under the definition of loan
defined under the said Act. Hence, the plaintiff is not required to
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be registered as a money lender. Hence, the bar under Section
13 is not applicable to the plaintiff's case.
9. In Deepak Raheja, the Division Bench of this Court held
that Section 13 of the said Act stipulates that no Court shall
pass a decree in favour of a money lender in any suit unless a
Court is satisfied that at the time when the loan or any part
thereof to which the suit relates was lent, the money lender
held a valid licence, and if the Court is satisfied that the money
lender did not hold valid licence it shall dismiss the suit. Thus, it
is held that on a plain reading of the definition of the word
'loan', an 'advance' of any sum exceeding Rs. 3 Lakhs made
on the basis of a negotiable instrument would not fall within the
definition of the word 'loan' as defined in the said Act. It is
further held that once there is no loan involved, there is no
question of the rigours of Section 13 being attracted at all
because the sine qua non for the provisions of Section 13(1) to
apply is that a money lender ought to have advanced a loan
and at the time it was lent, such money lender did not have a
valid licence. It is therefore held that "To put it in a nutshell,
without a loan (as defined in the Money Lending Act of 2014
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itself) being involved, there is no bar on any court to pass a
decree".
10. The Division Bench in Deepak Raheja, on considering
the facts of the said case, held that, even assuming that the
bills of exchange were given as collateral security, they cannot
be said not to form the basis of the loan, as loans are often
given on the basis of collateral security. Hence, the suit filed on
the promissory notes and the dishonoured cheques was held to
be squarely covered by the exclusion in clause (j) of Section
2(13) of the said Act. The Division Bench further held that the
onus of proving or establishing even prima facie at the stage of
summons for judgment that the plaintiff carries on the business
of money lending is on the defendant. It is further observed that
merely advancing money to people does not ipso facto make a
party a money lender, and that before he can be termed a
money lender, he has to fall within the parameters of the said
Act.
11. The Division Bench in Deepak Raheja, discussed the
legal principles settled in Fauzan Shaikh, where another
Division Bench of this Court was dealing with a challenge to a
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constitutional validity of clauses (j) and (k) of Section 2(13) of
the said Act, which challenge had been mounted on the
premise that there was manifestly, arbitrary and
unconstitutional discrimination between loans given without
interest and loans given with interest. It was observed by the
Division Bench in Deepak Raheja that the decision in Fauzan
Shaikh is by no means a blanket declaration that any and every
advancement of money is for interest, which is on the basis of
negotiable instruments, would automatically become 'a loan' by
a money lender under Section 2(13) of the said Act. The
Division Bench, therefore, held that if such an interpretation is
accepted, then the provisions of section 2(13)(j) would be
rendered otiose.
12. The learned Division Bench in Fauzan Shaikh held that
the person who grants a loan or advances money at interest on
the basis of a negotiable instrument other than the promissory
note or on the basis of hundi is not covered under the exclusion
under clause (j) and (k) of sub-section (13) of Section 2 of the
said Act. Therefore, the grant of a loan or the advancement of
money at interest on the basis of a promissory note or hundi is
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covered by the exceptions.
13. In Khyati Realtors, the learned Single Judge of this Court
was dealing with a company petition for winding up. The
respondent in the said petition, while opposing winding up,
raised one of the defences that the petitioner was a money
lender carrying on the business of money lending, and that the
transaction referred to in the company petition was a loan
transaction within the meaning of the Bombay Money Lenders
Act, 1947. This court held that when a defence of money
lending is available to the respondent, he must conclusively
prove that the petitioner is engaged in the business of money
lending or if enough material is placed on record to draw an
inference that the petitioner is engaged in a money lending
business, it can only be dispelled by leading detailed evidence.
It is observed that there is a distinction between the petitioner
being in the money lending business and the transaction being
a money lending transaction. The decision in Marine Container
Services was also referred, which held that for a transaction to
be a money lending business, there must be a system,
repetition, and continuity and that an isolated transaction will
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not be affected by the embargo under the said Act. This Court
held that on the basic facts, coupled with the assertion
regarding the business of money lending without a license, are
placed on record, it would be up to the petitioner to show that it
is not so. Therefore, it was held that the issue would require
examination of evidence and that, when the burden shifted to
the petitioner, the petitioner would have to lead evidence to
discharge it, and such an exercise cannot be done in the
summary jurisdiction while entertaining a petition for winding
up.
14. In Summary Suit No. 203 of 2013, filed by the plaintiff
against Parekh Aluminex Limited on the basis of dishonoured
cheques, while granting conditional leave to defend to the
defendant therein, it was held by the learned Single Judge that
a loan advanced against a negotiable instrument is, in terms,
excepted from the application of the Bombay Money Lenders
Act, 1946. The 1946 Act is repealed by the said Act of 2014.
This decision was confirmed by the learned Division Bench, in
Parekh Aluminex, by holding that Section 2(9)(f) of the 1946
Act expressly excludes an advance made on the basis of the
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negotiable instrument as defined under the Negotiable
Instruments Act, from the definition of the term loan. The
exception under clause (f) of the definition of loan in Section
2(9) of the 1946 Act is similar to Section 2(13) (j) of the 2014
Act. In another suit filed by the plaintiff against Kamla Shakti
Developers, the learned Single Judge, while deciding the
summons for judgment, referred to the legal principles settled
in Parekh Aluminex and held that the allegation against the
plaintiff to be an unlicensed money lender is made in more than
one case and in each case a finding has been returned in
favour of the plaintiff that they are not money lenders.
15. Thus, based on the plaintiff's pleadings, 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. As held by the learned Division Bench in Deepak Raheja,
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unless a Court is satisfied that at the time when the loan or any
part thereof to which the suit relates was lent, the money lender
held a valid licence, the suit cannot be dismissed. Thus, without
a loan as defined in the said Act being involved, there is no bar
on any court to pass a decree.
16. As held by the learned Single Judge of this Court in
Khyati Realtors, 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.
17. The Hon'ble Apex Court in Correspondence, RBANMS
Educational Institution, referred and relied upon the legal
principles settled by the Hon'ble Apex Court in Dahiben Vs
Arvindbhai Bhanushali8, and held that it is a bounden duty on
the Court to discern and identify a fictitious suit which on the
face of it would be barred. In the present case, the applicability
of the bar under Section 13 of the said Act cannot be
8 (2020) 7 SCC 366
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ascertained at this stage and warrants a trial. In Dahiben, the
Hon'ble Apex Court held 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.
18. Therefore, on a meaningful reading of the plaint, the
basic question to be decided while dealing with the application
filed under Order VII Rule 11 of the Code is whether based on
the averments in the plaint and the supporting documents the
suit can be held as bar under any law or something purely
illusory has been stated with a view to getting out of Order VII
Rule 11 of the CPC. In the amendments made applicable to the
commercial division and commercial courts, the provision of
Order VII Rule 11 of the CPC are not amended, and thus the
legal principles for rejection of the plaint in Order VII Rule 11 of
the CPC would also apply to the suits filed in the commercial
courts and commercial division.
19. As per the well-settled legal principles discussed above,
a suit filed on the promissory notes and the dishonoured
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cheques is held to be squarely covered by the exclusion in
clause (j) of Section 2(13) of the said Act. The onus of proving
or establishing, even prima facie, that the plaintiff carries on the
business of money lending is on the defendant. 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. Hence, in the present case, the plaint cannot be rejected
at the threshold.
20. For the reasons recorded above, the interim application is
rejected.
(GAURI GODSE, J.)
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