The Supreme Court set to address the serious problem of unlicensed, exploitative money lending practices. Recognizing the severity of the situation, the Court has decided to include the Union of India and the Delhi government as parties to the case. This move aims to ensure a comprehensive examination and resolution of the issue.
New Delhi: The Supreme Court decided to address the issue of unlicensed money lending and support borrowers who become victims of such unregulated lenders.
Justices CT Ravikumar and Sanjay Karol expressed their concern about the increasing problem of unlicensed money lending, which often has severe repercussions for ordinary borrowers.
The Court stated in its order on July 23,
“We are deeply troubled by cases where regular individuals take such loans and ultimately find themselves destitute or driven to suicide due to the lenders’ predatory practices,”
The Court observed that to avoid legal repercussions, these unlicensed lenders often engage in fewer transactions and provide large, interest-bearing loans intermittently. This tactic allows them to evade laws like the Punjab Registration of Money Lenders Act of 1938, which regulates money lending activities based on continuous transactions.
The Court remarked,
“To remain outside the jurisdiction of money lending laws, some lenders cleverly (or deviously?) limit their transactions and give substantial loans sporadically,”
The Supreme Court highlighted the tactics of unlicensed money lenders who often evade regulations by providing infrequent or “friendly” loans. The Court observed that these lenders circumvent laws governing “money lending businesses” through this practice.
The Court noted,
“More often than not, despite repaying the principal amount, the borrower is forced to pay sometimes double or more in interest,”
In response, the Court decided to explore ways to regulate such cases to protect borrowers from falling into debt traps. It also raised concerns about tax evasion in cases involving substantial sums of money.
The Court stated,
“We aim to regulate such instances and rescue borrowers who find themselves trapped in debt. In cases involving significant amounts, such as Rs. 50 lakhs or more, tax evasion is also a concern,”
Recognizing the seriousness of the issue, the Court took the initiative to include the Union of India and the Delhi government in the case to address the broader problem of unregulated money lending.
The case in question involved “friendly” loans totalling approximately Rs. 85 lakhs, which led to the borrower being sued for cheque bouncing. The Delhi High Court refused to quash the trial court‘s summons to the borrower, prompting an appeal to the Supreme Court.
On July 23, the Supreme Court noted that this was not an isolated incident, as “friendly loans” often escalate to large amounts. The Court condemned these practices, likening unregulated money lenders to Shylock, the notorious moneylender from Shakespeare’s Merchant of Venice.
The Bench added,
“The Court will hear the case again on August 23. Meanwhile, the interim order preventing the trial court from issuing a final decision in the cheque bounce case will remain in effect.”
Senior Advocate Manan Kumar Mishra, along with advocates Durga Dutt, Anjul Dwivedi, Rohit Priyadarshi, Ajay Kumar, Priyanshu Upadhyay, Sai Girdhar, Rashi Verma, and Pradeep Yadav, represented the appellant.
Advocates Vijay Kumar, Jai Pal Singh, Dhiraj Kumar, and Avinash Kr Lakhanpal appeared for the respondent.
Read Order: [Raj Kumar Santoshi v. Prashant Malik].