Mansi Finance cheque-bounce ruling never decided the Maharashtra money-lending bar, Supreme Court says

Justice Prashant Kumar Mishra and Justice N.V. Anjaria dispose of a clarification plea, holding that the 26 May 2026 judgment did not examine the Tamil Nadu or Maharashtra money-lending Acts and that trial courts must decide any Section 13 bar themselves.

A Supreme Court judgment that restored a Chennai finance company’s cheque-bounce prosecution does not travel to Maharashtra as a charter for unlicensed money lenders. On 29 October 2026, a bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria disposed of a miscellaneous application seeking clarification of the Court’s 26 May 2026 judgment in M/s Mansi Finance (Chennai) Ltd. v. M. Lalitha, Criminal Appeal No. 2849 of 2026. The bench held that the May judgment had never examined either the Tamil Nadu Money-lenders Act, 1957 or the Maharashtra Money-Lending (Regulation) Act, 2014, so no clarification was needed. Whether a loan advanced on a promissory note by an unlicensed lender in Maharashtra is a legally enforceable debt under Section 138 of the Negotiable Instruments Act, 1881 is for the trial court, or a superior court, to decide when the plea is raised.

The order, written by Justice Mishra, is short and marked non-reportable. But in the course of declining the clarification the bench recorded, in plain terms, how the Maharashtra statute differs from the Tamil Nadu one, and repeated its own April 2026 direction that courts in Maharashtra must ask a private lender for a licence at the threshold.

A Chennai judgment and a Mumbai borrower

The May judgment arose out of proceedings under Sections 138 and 141 of the NI Act. Mansi Finance had lent money to the accused, who executed promissory notes in its favour and issued cheques towards repayment. The cheques bounced. The accused went to the High Court to quash the complaint, arguing that they were neither signatories to the cheques nor in charge of the day-to-day affairs of the Society, and that the complaint lacked the foundational averments needed to fix vicarious liability under Section 141. The High Court quashed the proceedings. The Supreme Court partly allowed the company’s appeal and restored the prosecution against three of the four accused who had gone to the High Court.

The applicant before the bench, Vyomesh Mahipatray Shah, is not a party to that dispute. His own case is pending in Maharashtra. He moved Miscellaneous Application No. 3002 of 2026 asking the Court to clarify that the May judgment does not apply to Section 138 proceedings started by unlicensed money lenders in Maharashtra who advance money at interest against a promissory note, whether or not a cheque or any other security accompanies it. His case was that such proceedings continue to be governed by the Court’s order of 6 April 2026 in MA No. 1176 of 2026 in SLP (Crl.) No. 5485 of 2024.

The argument turned on a difference in drafting. In Tamil Nadu, Shah said, loans advanced through a promissory note fall under the Tamil Nadu Money-lenders Act, 1957, which excludes an advance made on the basis of a negotiable instrument; a debt secured by a negotiable instrument, including a promissory note, therefore remains a legally enforceable debt in that State. The Maharashtra Act does not carry the same exclusion for a promissory note. In Maharashtra, an advance at interest against a promissory note, even one accompanied by cheques, is a loan and falls within the prohibition on unlicensed money lending in Section 4 of that Act. Since the May judgment was premised on loans advanced on promissory notes, Shah feared it would be treated as having pan-India application, and asked the Court to say otherwise.

Ashok Commercial Enterprises, an intervenor, objected. The application was not maintainable, it argued: the judgment of 26 May 2026 did not need clarifying, and it was for the court concerned anywhere in the country to examine its ratio and apply it to the facts of each case. The bench heard senior counsel for the parties and perused the papers.

Two statutes, one phrase apart

The bench began with the text. Section 2(13)(j) of the Maharashtra Act, it noted, excludes from the definition of a loan an advance on a negotiable instrument “other than a promissory note”. That carve-out is what separates the two States. Under the Maharashtra Act, unlike the Tamil Nadu Act, an advance at interest against a promissory note is not excluded and would indeed be a loan governed by the statute. Lending against a promissory note without a licence is prohibited by Section 4 of the Maharashtra Act, and such a loan is not enforceable under Section 13. It follows, the bench said, that in Maharashtra, unlike Tamil Nadu, such a debt is not a legally enforceable debt for the purpose of the Explanation to Section 138 of the NI Act. In any proceeding on dishonour of a cheque, or in recovery proceedings, the money lender in Maharashtra “has to produce a licence to satisfy the Court at the threshold”.

The bench then set out paragraphs 4 and 5 of its 6 April 2026 order in MA No. 1176 of 2026, the order Shah relied on. That order had recorded that for unlicensed money lending against promissory notes, whether or not accompanied by other security such as a cheque or title deeds, a statutory bar already exists in State money-lending law; that even a licensed lender is bound by the rule of Dam Dupat, which bars interest exceeding the principal actually disbursed; that there is a further statutory disability against enforcing such a loan; and that such lending is a punishable offence under the State law. Courts, the April order said, should ensure that “proceedings instituted by such private money lender are nipped in bud”, civil or criminal, unless the lender produces a licence at the threshold or shows that the money was not advanced at interest.

Why no clarification was needed

Having said that much about the Maharashtra Act, the bench declined to read any of it into the May judgment. Paragraph 11 of that judgment, it pointed out, had recorded the principal contention of the parties who sought quashing before the High Court and before the Supreme Court. That contention concerned signatories and vicarious liability under Section 141. There had been no occasion for the Court to examine, or to record a finding on, the applicability of either the Tamil Nadu Act or the Maharashtra Act.

The question Shah wanted answered therefore remains open in the ordinary way. If there is a bar under Section 13 of the Maharashtra Act on an unlicensed lender initiating proceedings to recover a loan, on the ground that a loan involving a pronote in favour of an unlicensed lender in Maharashtra is contrary to statute and so does not constitute a legally enforceable debt under the Explanation to Section 138, that question is to be examined by the court concerned, if the plea is taken before the court where the matter is pending, or before any superior court, on its own merits. Because the May judgment had not dealt with either money-lending statute, the bench held that the clarification sought was not required. The parties were left at liberty to raise the issue before the trial court or the superior courts.

Order

IA No. 183707 of 2026 seeking clarification was disposed of with the above observations. Miscellaneous Application No. 3002 of 2026 in Criminal Appeal No. 2849 of 2026 stands disposed of accordingly. The judgment of 26 May 2026 restoring the Section 138 proceedings against three of the four accused in Mansi Finance is untouched.