No help for lender of black money

The Hyderabad High Court has ruled that unaccounted money lent to others cannot be legally enforceable debt.

The Court upheld an order of lower court that: “If the amount lent by the moneylender who did not possess licence under the AP (Telangana Area) Money Lenders Act, it can safely be held that the cheques were not issued towards discharge of legally enforceable debt.”

Justice M. Satyanarayana Murthy was dismissing an appeal by a private moneylender of the city challenging dismissal of his case for recovery of `2 lakh under the Negotiable Instruments Act (NI Act) given as loan to the respondent/accused.

The lower court dismissed his case on the grounds that the complainant, who is a moneylender did not possess a licence under the Act.

Besides, he himself admitted during the cross-examination that the amount given to respondent through cheque was not disclosed in his tax returns though he was an Income Tax assessee.

The trial court ruled that when the amount was not shown in I-T returns, it would be unaccounted money and thereby not legally recoverable. In the appeal, Justice Satyanarayana Murthy, referring to various judgments and rules of law said that “It’s clear that when the accused could rebut the presumption under Section 138 of the NI Act, the burden will shift on the complainant and he has to prove that the cheques were issued towards discharge of legally enforceable debt or liability”.

The judge noted that “in the present case, the complainant failed to establish that the cheques were issued towards discharge of legally enforceable debt. Moreover, the amount lent is unaccounted money. Therefore, such debt is not recoverable.”