1. Application for rejection of plaint under Order VII Rule 11 CPC in suit for recovery based on dishonoured cheques and promissory notes. (Para 1 )
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2026 Supreme(Online)(Bom) 99
HIGH COURT OF BOMBAY
HON'BLE MS. JUSTICE GAURI GODSE
HUBTOWN LIMITED – Appellant
Versus
ASHOK COMMERCIAL ENTERPRISES – Respondent
IAL/27175/2021
Advocates:
For the Appellants/Petitioners: Navroz Seervai, Prateek Sakseria, Nishit Dhruva, Yash Dhruva, Niyati Mechant, Harsh Sheth
For the Respondents: Gaurav Joshi, Gaurav Mehta, Chaitanya D. Mehta, Sonali Aggarwal
For the Appellants/Petitioners: Navroz Seervai, Prateek Sakseria, Nishit Dhruva, Yash Dhruva, Niyati Mechant, Harsh Sheth
For the Respondents: Gaurav Joshi, Gaurav Mehta, Chaitanya D. Mehta, Sonali Aggarwal
The bar under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014 applies only if the transaction is a ‘loan’ as defined in the Act. Determining whether a party is an unlicensed money lender requires evidence and cannot be decided summarily under Order VII Rule 11 CPC.
Headnote:(A) Maharashtra Money Lending (Regulation) Act, 2014 - Section 13 - Order VII Rule 11 of CPC - Rejection of plaint - Suit filed by unlicensed money lender - Bar under Section 13 - Exception under Section 2(13)(j) - Advance on negotiable instrument other than a promissory note is not considered a ‘loan’ - Without a ‘loan’ as defined in the Act, there is no bar on a court to pass a decree (Paras 9, 11, 15).
(B) Order VII Rule 11 of CPC - Scope of rejection of plaint - Determination of whether a party carries on the business of money lending is a question of fact - Requires examination of evidence and cannot be decided summarily at the preliminary stage (Paras 16, 19).
Facts of the case:
A suit was filed for the recovery of a liquidated sum based on dishonoured cheques and promissory notes. The defendant applied for the rejection of the plaint under Order VII Rule 11(d) of the CPC, arguing that the plaintiff was an unlicensed money lender and the suit was barred under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014. The plaintiff contended that the advances fell under the exclusion in Section 2(13)(j) of the said Act as they were based on negotiable instruments.
Findings of Court:
It cannot be ascertained at the preliminary stage whether the advances and transactions fall under the definition of ‘loan’ under the said Act or the exception under Section 2(13)(j). The allegation of engaging in the business of money lending requires detailed evidence and cannot be dispelled in a summary manner.
Issues: Whether the plaint is liable to be rejected under Order VII Rule 11(d) of the CPC on the ground that the suit is barred by Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014.
Ratio Decidendi: The bar under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014 applies only when a ‘loan’ (as defined in the Act) has been advanced by a money lender without a valid licence. Since an advance based on a negotiable instrument (other than a promissory note) is excluded from the definition of ‘loan’ under Section 2(13)(j), and the factum of carrying on a money-lending business is a matter of evidence, the plaint cannot be rejected at the threshold under Order VII Rule 11 of the CPC.
Result: Interim application rejected.
Legal Category Hierarchy
- practice and procedure
- banking, finance and insurance
- commercial law
Table of Contents
2. Defendant argues suit barred under Section 13, Maharashtra Money Lending Act as plaintiff is unlicensed moneylender; plaintiff invokes exception for negotiable instruments. (Para 2 , 3 )
3. Court analyzed exclusion under Section 2(13)(j) for advances on negotiable instruments; held onus on defendant to prove plaintiff is moneylender; issue requires trial. (Para 11 , 12 , 15 , 16 , 17 , 19 )
4. Plaint cannot be rejected under Order VII Rule 11 when applicability of statutory bar depends on factual determination requiring evidence at trial. (Para 17 , 19 )
5. Interim application for rejection of plaint is rejected; suit is not barred at threshold. (Para 20 )
6. Can a plaint be rejected under Order VII Rule 11 CPC based on a statutory bar requiring factual determination?
No, when the applicability of the statutory bar depends on facts that require evidence and cannot be decided at the threshold, the plaint cannot be rejected. (Para 17 , 19 )
7. Who bears the burden of proof to show that a plaintiff is a moneylender under the Maharashtra Money Lending Act?
The onus of proving, even prima facie, that the plaintiff carries on the business of money lending is on the defendant who raises the defense. (Para 15 , 19 )
8. Is an advance on the basis of a negotiable instrument excluded from the definition of 'loan' under the Maharashtra Money Lending Act?
Yes, under Section 2(13)(j), an advance of any sum exceeding Rs. 3 lakhs made on the basis of a negotiable instrument other than a promissory note is excluded from the definition of 'loan'. (Para 8 , 9 , 10 , 15 )
9. Does merely advancing money to people make a party a moneylender under the Maharashtra Money Lending Act?
No, merely advancing money does not ipso facto make a party a moneylender; the party must fall within the parameters defined under the Act. (Para 10 , 15 , 19 )
10. At what stage can a court decide if a suit is barred under Section 13 of the Maharashtra Money Lending Act?
A court must first be satisfied that a 'loan' (as defined in the Act) is involved; this determination may require trial and cannot be decided at the Order VII Rule 11 stage. (Para 15 , 17 , 19 )
JUDGMENT:
BASIC FACTS:
1. This application is filed by the defendant under Order VII Rule 11(d) of the Civil Procedure Code ('CPC') for the rejection of the plaint on the ground that the suit is barred in view of Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014 ('the said Act'). The suit is filed for recovery of money against the defendant based on the dishonoured cheques issued by the defendant and promissory notes executed by the defendant.
SUBMISSIONS ON BEHALF OF THE DEFENDANT:
2. The submissions made by learned senior counsel for the defendant are summarised as under:
a) As per the pleadings in the plaint, the plaintiff is engaged in the business of builder finance and claims to have advanced loans to the defendant from 2011-2012 at interest rates up to 36% per annum. The plaintiff has pleaded that a loan was granted to the defendant in 2011-2012 for a sum of approximately Rs. 48 Crores, which was subsequently increased to approximately Rs. 510 Crores. The defendant unilaterally issued post-dated cheques for repayment of the loan and executed demand promissory notes from time to time. The cheques, when presented, were dishonoured for the reason 'insufficient funds'. Thus, according to the plaintiff, the suit is filed on the basis of dishonoured cheques and on the defendant's letter admitting acceptance of the loan and liability to repay.
b) The plaintiff has not pleaded that it possesses a mandatory license as required under the said Act. Thus, the plaintiff has deliberately suppressed in the suit that it does not possess a mandatory license. It is only by clever drafting that the factual aspect regarding the money-lending license is suppressed in the plaint. Thus, on a meaningful reading of the pleadings in the plaint, it is apparent that the plaintiff is engaged in the business of money lending without a licence. The plaintiff has allegedly granted loans and advanced interest funds to the defendant at different rates. Accordingly, the plaintiff contends that the defendant has issued demand promissory notes for repayment of the alleged loans. However, the plaintiff has wrongly captioned the notes as bills of exchange.
c) Under Section 13 of the said Act, there is a bar to pass a decree in favour of a money-lender when the money-lender does not hold a valid licence. Thus, Section 13 of the said Act bars a Court from passing a decree in a suit filed by an unregistered money-lender. Therefore, the plaintiff is liable to be rejected under Order VII Rule 11 (d) of CPC. Learned senior counsel for the defendant relied upon the decision of this Court in the case of Fauzan Shaikh Vs. State of Maharashtra , (Criminal PIL (St.) No. 41 of 2019), and the Apex Court's decision in the case of RBANMS Educational Institution Vs. B. Gunashekar , (2025 SCC OnLine SC 793). Learned senior counsel for the defendant, therefore, submits that the suit is an abuse of judicial process where the plaintiff has, by clever drafting, espoused a cause of action which is barred by Section 13 of the said Act.
d) The exclusion under Section 2(13)(j) would not assist the plaintiff in the facts of the present case. According to the learned senior counsel for the defendant, as per the scheme of Section 2(13) of the said Act, a loan means an advance at an interest. Clause (j) of Section 2(13) of the said Act uses the term 'advance' as contradistinguished with other clauses of Section 2(13) which use the terms 'loan' or 'deposit'. Thus, only interest-free advances/ friendly advances without interest are excluded from the definition of 'loan' under Section 2(13) of the Act. Therefore, when there is a component of interest in money given by a money lender to the debtor, the money lender is covered by the rigours of the said Act. In such a situation, the factum of loan being given on the basis of a negotiable instrument or otherwise makes no difference since a component of interest is involved, and hence, such a loan is not excluded from the
