The central legal point established in the judgment is that a money lender without a license is barred from maintaining a suit under the Karnataka Money Lenders Act, 1961.

JUDGMENT :

M.G. UMA, J.

1. The appellants being defendants in O.S. No. 49 of 2006 have preferred this appeal being aggrieved by the judgment and decree dated 27.10.2009 passed in R.A. No. 336 of 2007 on the file of the learned II Additional District Judge, Tumakuru (hereinafter referred to as ‘First Appellate Court’ for brevity) wherein, the suit of the plaintiff was decreed by allowing the appeal and setting aside the judgment and decree dated 27.09.2007 passed in O.S. No. 49 of 2006 on the file of learned Civil Judge, Senior Division Turuvekere (hereinafter referred to as 'the Trial Court' for brevity), which has dismissed the suit filed by the plaintiff.

2. For the sake of convenience, parties are referred to as per their status and rank before the Trial Court.

3. The appeal was admitted vide order dated 28.07.2010 and the following substantial question of law was formulated:

“Whether the lower Appellate Court was justified in decreeing the suit when the plaintiff who was doing money lending business had no required licence to carry on such business?”

4. Brief facts of the case are that, the respondent-plaintiff filed O.S. No. 49 of 2006 against the defendants-appellants for recovery of money of Rs. 2,60,000/- with interest at the rate of 18% per annum from the date of filing of suit till the date of realization. It is contended by the plaintiff that late S.T. Kumaraswamy, the husband of defendant No. 1 and father of defendant Nos. 2 and 3 had borrowed hand loan of Rs. 2,00,000/- from the plaintiff on 08.01.2003, agreeing to repay the same with interest at 18% per annum. Towards repayment of the hand loan, the said S.T. Kumaraswamy had issued the cheque bearing No. 924291 dated 08.02.2003 for Rs. 2,00,000/-. When the cheque was presented for encashment, same was dishonoured as there was insufficient funds in the account of the drawer, as per endorsement dated 18.07.2003. When the legal notice was issued calling upon the borrower to repay the loan amount, he failed to repay the same. Therefore, private complaint in PCR No. 57 of 2003 was filed for the offence punishable under Section 138 of the Negotiable Instruments Act (for short 'the NI Act').

5. It is stated that during the pendency of private complaint, the said S.T. Kumaraswamy died on 21.01.2004. The defendants are the wife and children who succeeded to the estate of the deceased S.T. Kumaraswamy. Therefore, they are liable to repay the loan to the plaintiff. It is stated that the plaintiff was demanding S.T. Kumaraswamy to repay the loan amount and after his death, he demanded the defendants to repay the same. But in spite of that, they have not repaid the loan amount. Therefore, the plaintiff sought for recovery of principal amount of Rs. 2,00,000/- and interest of Rs. 60,000/- from the defendants.

6. On service of notice, the defendants have entered appearance before the Trial Court and defendant Nos. 2 and 3 have filed common written statement denying the contention taken by the plaintiff. It is contended that the plaintiff is the money lender and had not followed the Rules and Regulations as contemplated under the Karnataka Money Lenders Act, 1961 (for short ‘the Act of 1961’). He has not served all account extract of the statement of account to the defendants. Since he was not having any licence, the suit of the plaintiff is not maintainable.

7. It is also contended that late S.T. Kumaraswamy was running areca nut Mandi at Sampige Village, Turuvekere Taluk just in front of the house of the plaintiff. About a year earlier, there was fire accident in the house of the plaintiff and the plaintiff shifted his house hold articles to the areca Mandi of the deceased S.T. Kumaraswamy. Thereafter, he arranged his house and shifted the articles. In the meantime, S.T. Kumaraswamy found that his cheque leaves were missing. Accordingly, the said S.T. Kumaraswamy intimated his banker about the missing of cheque leaves. In the meantime, the said S.T. Kumaraswamy suffered paralysis on hi