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2025 Supreme(Telangana) 1320
IN THE HIGH COURT OF TELANGANA
K. SUJANA, J.
Tammana Seetaramanjaneyulu Died Per L.R. - Appellant
Vs.
Chittimalla Sudhakar Rao R/o Srikrishna Colony, Warangal DT - Respondent
Appeal Suit No.61 of 2007
Decided On : 19-08-2025
Advocate Appeared:
For the Appellant : Vedula Srinivas
For the Respondent: T S Praveen Kumar
A money lender lacks standing to recover a loan if they do not possess a valid license at the time of lending, under the Money Lenders Act.
Headnote:(A) Andhra Pradesh Money Lenders Act - Sections 2(4), 2(7), 3 and 9(2) - Dismissal of suit for recovery of loan amount - Plaintiff failed to hold a money lending license at the time of the loan transaction - Plaintiff claimed Rs.3,50,000/- with interest @ 36% p.a. from defendant, but trial court found plaintiff to be a money-lender without a license, leading to dismissal of the suit. (Paras 5, 6, 15, 16)
(B) Money lending without license - Definition of money-lender requires systematic activity; isolated transactions do not qualify - Dismissal upheld as plaintiff did not demonstrate that he was not a professional money-lender. (Paras 8, 10, 14)
Facts of the case:
Plaintiff lent Rs.3,50,000/- to defendant under a promissory note, interest 36% p.a. Defendant denied borrowing the amount and contended the loan was illegal due to lack of money lending license on the date noted. The trial court dismissed the suit, leading to this appeal.
Findings of Court:
Trial court's finding that the plaintiff acted as a money-lender without a license held correct. Dismissal of the suit was justified.
Issues: Whether dismissal for lack of money lending license was legally sound.
Ratio Decidendi: The absence of a money lending license at the time of the loan transaction barred recovery, reinforcing the necessity of licensure under the Money Lenders Act.
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. loan agreement acknowledgment and disputes (Para 1 , 2 , 3) |
| 2. court findings on licensing implications (Para 5 , 10 , 11 , 12 , 14 , 15 , 16) |
| 3. arguments regarding licensing and money lending (Para 7 , 8 , 9) |
| 4. verdict on appeal dismissal (Para 17) |
JUDGMENT :
K. Sujana, J.
This appeal is filed by the appellant-plaintiff aggrieved by the judgment and decree dated 27.10.2006 passed in O.S.No.89 of 1998 on the file of III Additional District Judge, Warangal. The suit was filed for recovery of Rs.5,25,000/- with future interest @ 36% p.a., on the principal amount of Rs.3,50,000/-.
2. The defendant, who was involved in a small export business, became acquainted with the sons of plaintiff, who owns a rice mill business. As they belonged to the same caste, the family members of both parties became acquainted with each other. The defendant would often borrow money from the plaintiff and his family members. On 01.08.1997, the plaintiff lent Rs.3,50,000/- to the defendant under a promissory note, with interest @ 36% p.a, for the defendant's joint Hindu family needs and rice mill business. The defendant's father had also requested the plaintiff over the phone to advance the loan. Despite promising to repay within a month, the defendant failed to do so, and instead kept postponing the repayment on various pretexts. Plaintiff then issued a legal notice on 19.02.1998, which was returned after seven days with the endorsement "addressee seven days absent, hence returned to the sender." As such, plaintiff filed the said suit.
3. The defendant denied all the material allegations in the plaint, including acquaintance between his family and the plaintiff's family, and the alleged execution of promissory note. However, he admitted that both parties belonged to the Vysya community and knew each other through Sri T. Babu Rao, the eldest son of plaintiff, with whom the defendant had business dealings and joint ventures. These ventures were terminated in the first half of 1997 due to the differences between them. The defendant claimed that he never borrowed Rs.3,50,000/- from the plaintiff on 01.08.1997, and that the demand promissory note is a forged and fabricated document. He also stated that he had no knowledge of the demand notice and denied the incidental allegations. Without prejudice to his above contentions, the defendant argued that the plaintiff's conduct in charging interest at 36% per annum suggests that he is a money lender. The defendant claimed that he learnt that plaintiff was carrying on the business of lending money at exorbitant interest rates, compounded at 36% per annum, without obtaining necessary money lending license under the Andhra Pradesh (Telangana Area) Money Lenders Act (for short ‘Money Lenders Act’). Therefore, the defendant contended that the suit is not maintainable. The defendant also raised additional grounds, stating that the suit should have been filed against the Joint Hindu Family, and that the present suit is bad for non-joinder of necessary parties. Hence prayed for dismissal of the suit with exemplary costs.
4. Basing on the said pleadings, the trial Court framed two issues. On behalf of the plaintiff, Pws.1 and 2 are examined and Exs.A.1 to A.7 are marked. On behalf of the defendant, he himself was examined as Dw.1 and Exs.B.1 and B.2 are marked.
5. After hearing both sides and the material placed on record, the trial Court dismissed the suit on the ground that plaintiff is not holding any money lending license on the date of execution of promissory note. As such, he is not entitled for recovery of the said amount. Aggrieved by the said judgment, this appeal is filed by the plaintiff.
6. Heard Ms. Vedula Chitralekha, learned counsel appearing on behalf of Sri Vedula Srinivas, learned Senior Counsel appearing for the appellants and Parismita Saihia, learned counsel appearing on behalf of Sri T.S.Praveen Kumar, learned counsel for the respondent. During pendency of appeal, the first appellant-plain
