The Supreme Court of India has declined to clarify whether its earlier judgment on cheque dishonour proceedings applies to cases involving unlicensed money lenders across India. A Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria held that the applicability of state money-lending laws must be examined by the concerned courts on the merits of individual cases.
Background
The applicant, Vyomesh Mahipatray Shah, sought clarification of the Supreme Court's judgment dated May 26, 2026, concerning proceedings under Sections 138 and 141 of the Negotiable Instruments Act, 1881. Those provisions deal with cheque dishonour and offences involving companies or other entities.
The applicant argued that Maharashtra's money-lending law differs from Tamil Nadu's legislation. Under the Tamil Nadu Money-lenders Act, 1957, advances made through negotiable instruments are excluded from the definition of a loan. However, Maharashtra's Money-Lending (Regulation) Act, 2014, does not exclude advances made against promissory notes.
He contended that an interest-bearing advance against a promissory note by an unlicensed money lender in Maharashtra remains subject to the statutory restrictions, even when a cheque is provided as security.
The Bench explained that Section 2(13)(j) of the Maharashtra Act excludes advances against negotiable instruments other than promissory notes. Consequently, an interest-bearing advance against a promissory note falls within the law's definition of a loan.
The Court clarified that unlicensed money lending of this nature is prohibited under Section 4, while Section 13 restricts the enforceability of such loans. Therefore, such a debt would not qualify as a legally enforceable debt for the purposes of Section 138 of the Negotiable Instruments Act.
Referring to its earlier order dated April 6, 2026, the Court reproduced the following direction:
"Therefore, the Courts should ensure that the proceedings instituted by such private money lender are nipped in bud, whether Civil or Criminal, unless the money lender at the threshold produces license for money lending or shows that money was not advanced by him at interest."
The Court also noted that a money lender in Maharashtra must produce a licence at the threshold in cheque dishonour or recovery proceedings.
The Bench explained that its May 26 judgment had not examined the specific provisions of either the Tamil Nadu or Maharashtra money-lending legislation. Therefore, it had not determined how those laws would apply to the applicant's contention.
The Court held that the issue must be considered by the concerned court if a party raises it in pending proceedings. It stated:
"Since the judgment dated 26.05.2026 has not dealt with the provisions of the Tamil Nadu Money-lenders Act, 1957 or the Maharashtra Money-Lending (Regulation) Act, 2014, the clarification, as sought for, is not required and the parties would be at liberty to raise the issue before the concerned Trial Court or the superior Courts."
The Supreme Court disposed of the miscellaneous application, declining to issue the requested clarification. It left the parties at liberty to raise the issue before the concerned trial court or superior courts for consideration on its own merits.
