An unlicensed money lender cannot sue you. The Himachal Pradesh High Court holds he can still prosecute you

The bar in the Registration of Money Lenders Act stops a civil suit and the execution of a decree. It says nothing about a cheque-bounce complaint — and a revision filed in 2014 is decided on that footing twelve years later.

State money-lending statutes exist to keep informal lending inside a licensing system, and they do it by shutting the courthouse door. Under Section 3 of the Himachal Pradesh Registration of Money Lenders Act, 1976, a suit for the recovery of a loan, or an application to execute a decree on one, must be dismissed unless the lender is registered and holds a valid licence — or holds a Commissioner’s certificate, or at least has an application for registration pending before the Collector.

What the section does not mention is a prosecution. On 24 September 2026, deciding a criminal revision of 2014, Justice Rakesh Kainthla held that the silence is decisive.

A loan from 2008, a conviction from 2010, a revision from 2014

The complainant, Ramesh Kumar, said he and the accused, Rita Sharma, were on cordial terms; that she borrowed ₹5,00,000 on 30 September 2008 promising to return it before 4 November 2008; and that when he asked for the money she gave him a cheque of ₹5,00,000 drawn on the Jogindra Central Co-operative Bank, Nalagarh. It was dishonoured for insufficient funds. Notice was served on her on 6 December 2008 and nothing was paid.

Three witnesses proved the case: Madan Lal (CW-1) and A.K. Poswan (CW-2) on the dishonour, and the complainant himself (CW-3). CW-1 deposed in cross-examination that the accused had ₹630 in her account on the date the cheque was presented.

She was convicted on 22 November 2010 by the trial court and sentenced on 24 November 2010 to six months’ simple imprisonment. The Additional Sessions Judge-I, Solan, camp at Nalagarh, dismissed her appeal on 10 September 2014. Criminal Revision No. 347 of 2014 was decided on 24 September 2026 — sixteen years after the cheque, and twelve after the appeal.

Two defences that could not both be true

In her statement under Section 313 of the Code of Criminal Procedure the accused said she had not taken any loan at all; it was her husband who had borrowed ₹2,50,000, and a document had been executed at the time of repayment. No such document was produced. The complainant denied in cross-examination that any agreement for ₹2.5 lakh had been executed with her husband, and the courts below held — rightly, the High Court agreed — that a denied suggestion is not proof of anything.

In the revision petition she said something different: that she had taken a loan of ₹2.2 lakh from the complainant and had returned ₹2.8 lakh. That is contrary to the defence she gave on oath at trial, and the Court said so. Two incompatible accounts of the same transaction do not add up to a probable defence; they cancel.

She had also admitted issuing a blank signed cheque. That admission, far from helping her, engages the presumption: the Court noted the settled position that even a blank cheque leaf voluntarily signed and handed over is enough to trigger Section 139.

Different ink, different hand

Mr. Virender Thakur for the accused argued from the face of the instrument. The body of the cheque was filled in English in blue ink; the signature was in Hindi in black. Different hands and different inks, he said, made the security-cheque defence probable.

The Court held the point immaterial, on Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197. Reading Sections 20, 87 and 139 of the Negotiable Instruments Act together, a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence rebutting the presumption that it was issued for payment of a debt or in discharge of a liability. It is immaterial that somebody else filled in the cheque.

And even if the cheque had been given as security, the Court added, liability would follow: on Hamid Mohammad v. Jaimal Dass, 2016 (1) HLJ 456, an accused is liable for the dishonour of a cheque issued towards security, there being no recital on the instrument confining it to that purpose.

The money-lending point

The remaining argument was that the complainant was a money lender who had produced no licence to advance loans, and that his claim was therefore unenforceable.

The Court answered it twice over. On the facts, the material did not establish that the complainant was carrying on money lending as a profession at all: no interest was shown to have been charged, and the amount on the dishonoured cheque corresponded to the borrowing rather than to any sum inflated by interest — which is what a professional lender’s transaction would look like.

On the law, it went further and held the objection irrelevant even if the premise were granted. The bar under Section 3 of the 1976 Act is attracted only against the institution of a civil suit and against realisation through coercive process of decrees rendered in one. It is not attracted to a complaint under Section 138 of the Negotiable Instruments Act. There is no explicit mandate in the section extending the bar from a civil suit to a criminal complaint, and in the absence of such an exclusionary provision the Court declined to read one in.

That is a clean and usable proposition. An unregistered lender who wants his money through a civil decree is stopped at the threshold. The same lender holding a dishonoured cheque is not, because Section 138 does not prosecute the loan — it prosecutes the dishonour of an instrument the drawer chose to issue.

Outcome

The ingredients were all made out. The accused admitted receiving the notice, the acknowledgement bore her signature, and she admitted she had not paid despite it. The dishonour was proved by the bank memos and by CW-1, whose evidence about the ₹630 balance established that funds were insufficient.

On sentence, the Court cited Bir Singh again for the object of the provision — to infuse credibility into negotiable instruments and to deter their callous issuance without serious intention to honour the promise implicit in them. It then recorded a criticism of the trial court that could change nothing: no compensation had been awarded at all, only the cheque amount, which on R. Vijayan v. Baby, (2012) 1 SCC 260 — where courts are to levy fines up to twice the cheque amount with simple interest at 9% per annum absent special circumstances — was grossly inadequate. But no appeal against the inadequate sentence had been filed, and the High Court left it alone.

The revision failed and was dismissed, with the record of the courts below to be returned along with a copy of the judgment. Ms. Gitika Dhiman appeared for the respondent in place of Mr. Mohit Thakur.