Merely Advancing Money To People Doesn't Ipso Facto Make A Party "Money Lender": Bombay HC
Suit based on promissory notes and dishonoured cheques does not fall within the definition of "loan" under the 2014 Act
The Bombay High Court has held that mere advancement of money does not ipso facto make a party a “money lender”, and such a determination requires evidence. Consequently, the bar under Section 13 of the Act cannot be invoked at the threshold, and the recovery suit cannot be rejected under Order VII Rule 11 CPC.
On the legal position, the Court observed that a suit based on promissory notes and dishonoured cheques does not fall within the definition of "loan" under Section 2(13)(j) of the Maharashtra Money Lending Act, 2014 and that the burden lies on the defendant to establish, even prima facie, that the plaintiff is engaged in the business of money lending.
Furthermore, that while deciding an application under Order VII Rule 11 CPC, the Court must confine itself to a meaningful reading of the plaint and determine whether the suit is ex facie barred by law or merely an illusory attempt to avoid rejection. It further held that the principles governing rejection of plaints apply equally to commercial suits, as no separate standard has been prescribed.
Justice Gauri Godse observed, “…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”.
“…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. As per the well-settled legal principles discussed above, a suit filed on the promissory notes and the dishonoured 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”, the bench further observed.
Senior Advocates Navroz Seervai and Prateek Sakseria appeared for the applicant-defendant, and Senior Advocate Gaurav Joshi appeared for the plaintiff.
In the present matter, the Bench was dealing with an application filed by Hubtown Limited seeking rejection of a commercial suit under Order VII Rule 11(d) of the Civil Procedure Code, 1908. The defendant had argued that the plaintiff, Ashok Commercial Enterprises, was engaged in money-lending without a valid licence, and thus, the suit was barred under Section 13 of the Act.
Rejecting this contention at the preliminary stage, the Court emphasised that whether a party qualifies as a “money lender” requires examination of facts, including elements such as continuity, system, and business activity, which cannot be determined without evidence.
The Court noted that the suit was based on dishonoured cheques and promissory notes, and at this stage, it could not be conclusively held that the transactions fall within the statutory definition of a “loan” so as to attract the bar under the Act.
The Court relying on settled legal principles, observed that simply advancing money to another party does not automatically bring the lender within the rigours of money-lending legislation. Before such a conclusion is drawn, it must be established that the person is engaged in the business of money lending within the meaning of the statute, the Court said.
Calling the power to reject a plaint a “drastic” one, the Court said that it must be exercised sparingly and only when the bar to the suit is evident on the face of the pleadings.
Accordingly, the Court dismissed the interim application and allowed the suit to proceed to trial.
Cause Title: Hubtown Limited v. Ashok Commercial Enterprises [Neutral Citation: 2026:BHC-OS:1601]
Appearances:
Applicant-Defendant: Navroz Seervai, Senior Advocate, Prateek Sakseria, Senior Advocate, Nishit Dhruva, Yash Dhruva, Niyati Mechant, Harsh Sheth i/b MDP Legal, Advocates.
Plaintiff: Gaurav Joshi, Senior Advocate, Gaurav Mehta, Chaitanya D. Mehta, Sonali Aggarwal i/b M/s. Dhruve Liladhar & Co., Advocates.