Isolated loan versus money lending business: cheque dishonour prosecution sustained where existing liability was proved.

A solitary advance supported by an agreement, promissory note and cheque is not treated as the business of money lending under the Bombay Money Lenders Act, 1946 unless there is material showing a continuous lending business. The Act distinguishes an isolated loan from money lending business, and a negotiable-instrument based advance is also relevant to that distinction. Where the cheque is issued against an existing liability and the ingredients of dishonour, notice and non-payment are proved, section 138 of the Negotiable Instruments Act, 1881 remains maintainable. On that reasoning, the transaction was held outside the money-lenders law and the cheque dishonour prosecution was sustained.

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Issues: Whether a solitary advance of money, supported by agreement, promissory note and cheque, constituted a transaction of money lending within the Bombay Money Lenders Act, 1946 so as to render the debt unenforceable and the prosecution under section 138 of the Negotiable Instruments Act, 1881 not maintainable.

Analysis: The relevant statutory framework distinguishes between the business of advancing loans and an isolated advance. Section 2(2) of the Bombay Money Lenders Act, 1946 defines money lending as the business of advancing loans, while section 2(9)(f) excludes an advance based on a negotiable instrument other than a promissory note. The evidence showed a single transaction, with no material to establish that the complainant was carrying on a continuous money lending business. The cheque was issued when the liability already existed, and the mere reference to security in the promissory note did not displace the enforceable liability. In that situation, the transaction was not hit by the money lenders law, and the ingredients of section 138 were satisfied, including dishonour, notice and failure to pay.

Conclusion: The solitary advance did not amount to money lending business under the Bombay Money Lenders Act, 1946, and the cheque was issued towards an existing liability. The conviction under section 138 of the Negotiable Instruments Act, 1881 was therefore sustained and the acquittal set aside.

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