MONEY LENDING BUSINESS WITHOUT REGISTRATION

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  • #3139

    Sir,

    my friend is doing money lending business without registration of Pvt Ltd Company , and he has taken promissory notes and cheques from debtors and filed number of civil suits and 138 cases against default debtors, is it legal…? or is it crime…?
    what is the procedure to do money lending business in India…?

    REGARDS
    KS REDDY

  • #3141

    It depends on the relevant law being applicable in the concerned State. The States have their own Moneylenders Acts. It is possible that a particular state does not have such Act. You have to check it in your own state.

    For example, there is the Punjab Registration of Money-Lender’s Act, 1938, which is applicable in Delhi also. This Act provides for registration and licensing of moneylenders. Section 3 of this Act prohibits any suits and applications by moneylenders for recovery of loan, etc., if he is not registered and does not have licence as a moneylender:

    3. Suits and applications by money-lenders barred, unless money-lender is registered and licensed.- Notwithstanding anything contained in any other enactment for the time being in force, a suit by a money-lender for the recovery of a loan, or an application by a money-lender for the execution of a decree relating to a loan, shall after the commencement of this act, be dismissed, unless the money-lender-

    (a) at the time of the institution of the suit or presentation of the application for execution; or

    (b) at the time of decreeing the suit or deciding the application for execution-

    (i) is registered; and

    (ii) holds a valid licence, in such form and manner as may be prescribed; or

    (iii) holds a certificate from a Commissioner granted under section 11, specifying the loan in respect of which the suit is instituted, or the decree in respect of which the application for execution is presented; or

    (iv) if he is not a registered and licensed money-lender, satisfies the Court that he has applied to the Collector to be registered and licensed and that such application is pending; provided that in such a case, the suit or application shall not be finally disposed of until the application of the money-lender for registration and grant of license pending before the Collector is finally disposed of.”

    So, check the relevant law in your state. Consult a local lawyer.

         


    Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles.

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