The appellants being defendants in OS No.49 of 2006

have preferred this appeal being aggrieved by the judgment

and decree dated 27.10.2009 passed in RA 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 OS No.49 of 2006 on the file of learned

Civil Judge, Sr.Dn., 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.

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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 OS 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

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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

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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 his right hand.

Therefor