Calcutta High Court Rules: Plaintiff Not Required to Obtain License for One-Time Financial Accommodation

07 May 2024 8:19 AM

By: Admin

In a recent judgment delivered by the Calcutta High Court, the Hon’ble Justice Krishna Rao ruled that the plaintiff, in a case involving a one-time financial accommodation, is not required to obtain a license under the Bengal Money Lenders Act, 1940. The judgment, delivered on July 7, 2023, sheds light on the maintainability of the suit and the scope of judgment on admission.

“Every loan is a debt, but every debt is not a loan. Thus, by laying stress on the business trait of the lending, the Bengal Money-Lenders Act, 1940 contemplates a professional money-lender” – [Para 17]

The case, titled Smt. Mita Surana vs. Surendra Singh Bengani (CS 13 of 2021), involved the plaintiff seeking a sum of Rs. 35,32,534/- as a one-time financial accommodation provided to the defendant. The plaintiff had agreed to lend Rs. 50,00,000/- to the defendant at a 15% annual interest rate for a short period. The defendant made partial repayments but eventually defaulted on the remaining amount.

The defendant raised a preliminary objection, arguing that the plaintiff did not have a valid license to lend money under the Bengal Money Lenders Act, 1940, and thus the suit was not maintainable. However, Justice Krishna Rao, in his judgment, concluded that the plaintiff’s one-time financial accommodation did not amount to a moneylending business. The court emphasized that occasional lending of money, even at a remunerative interest rate, does not automatically constitute a moneylending business.

Justice Krishna Rao further noted that the defendant had admitted receiving the loan amount and had not denied the existence of the promissory note and account confirmations. The court held that no triable issues were raised by the defendant, allowing the plaintiff’s prayer for final judgment on admission.

The court’s ruling provides clarity on the requirements for maintaining a suit under the Bengal Money Lenders Act, 1940, and highlights the significance of judgment on admission. Justice Krishna Rao’s judgment stated, “To be engaged in the ‘business of money-lending,’ the activity must be systematic, regular, repetitive, and continuous, and must generate an appreciable revenue.”

This judgment sets a precedent that one-time financial accommodations, without a regular moneylending business, do not necessitate obtaining a license. It also emphasizes the importance of speedy resolution of cases based on admissions, discouraging the raising of frivolous defenses to prolong litigation.

The judgment by Justice Krishna Rao serves as a notable interpretation of the Bengal Money Lenders Act, providing clarity and guidance for future cases involving similar circumstances.

Date of Decision: 07.07.2023

Smt. Mita Surana vs Surendra Singh Bengani.