A Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria on October 29 clarified that its judgment dated May 26, 2026, in M/s Mansi Finance (Chennai) Ltd. v. M. Lalitha & Ors. does not establish a pan-India precedent allowing unlicensed moneylenders to maintain complaints under Sections 138 and 141 of the Negotiable Instruments Act, 1881. The Court was hearing a miscellaneous application filed by Vyomesh Mahipatray Shah, who contended that the earlier ruling could be misused by unlicensed moneylenders in Maharashtra to pursue cheque-dishonour proceedings arising from loans advanced against promissory notes.
Why Does the Mansi Finance Judgment Not Apply to Maharashtra?
The Court explained that the 2026 judgment concerned a transaction governed solely by the Tamil Nadu Money-Lenders Act, 1957. Under that statute, advances against negotiable instruments, including promissory notes, are excluded from the definition of a loan. Consequently, a debt secured by a negotiable instrument remains legally enforceable under the Tamil Nadu Act. In contrast, the Maharashtra Money-Lending (Regulation) Act, 2014, under Section 2(13)(j), excludes advances against negotiable instruments other than promissory notes. Therefore, in Maharashtra, an advance against a promissory note, even if accompanied by cheques, constitutes a loan and attracts the prohibition on unlicensed money lending under Section 4 of the Maharashtra Act.
Aspect | Tamil Nadu Money-Lenders Act, 1957 | Maharashtra Money-Lending (Regulation) Act, 2014 |
|---|---|---|
Definition of Loan (Exclusion) | Excludes advances against all negotiable instruments, including promissory notes. | Excludes advances against negotiable instruments other than promissory notes. |
Status of Promissory Note Advance | Not a loan; debt remains legally enforceable. | Constitutes a loan; unlicensed lending prohibited under Section 4. |
Enforceability by Unlicensed Lender | Permitted under the NI Act. | Barred under Section 13; not a legally enforceable debt for Section 138 NI Act. |
Relying on Sections 4 and 13 of the Maharashtra Act, the Bench authored by Justice Mishra held that money lending without a licence is prohibited and loans advanced in violation of the Act are unenforceable. Such loans would not constitute legally enforceable debts for the purpose of the Explanation to Section 138 of the NI Act. The Court expressly stated that moneylenders in Maharashtra must produce the requisite licence at the threshold of civil recovery or cheque-dishonour proceedings.
What Did the Supreme Court Direct Regarding the Application?
The Court declined to issue a formal clarification or modification of its May 2026 judgment, noting that the earlier Bench had not dealt with the provisions of either the Tamil Nadu or the Maharashtra money-lending statutes. It observed that if a bar exists under Section 13 of the Maharashtra Act on the initiation of recovery proceedings by an unlicensed moneylender on the ground that a loan involving a promissory note does not constitute a legally enforceable debt under the Explanation to Section 138 of the NI Act, the issue must be examined by the concerned Trial Court or superior Courts on its own merits. The parties were left at liberty to raise the plea before the appropriate forum where the matter is pending.
The operative part of the order makes clear that the Maharashtra statutory regime imposes a stricter threshold: a moneylender must demonstrate possession of a valid licence at the very inception of proceedings, failing which the debt is rendered unenforceable and the complaint under the NI Act cannot be sustained. This distinction preserves the legislative intent of the Maharashtra Act to regulate money-lending transactions involving promissory notes more stringently than the Tamil Nadu framework.