HYDERABAD: In a significant ruling, the Hyderabad High Court has held that the unaccounted money lent to others cannot be a legally enforceable debt.
Justice M Satyanarayana Murthy upheld an order of the lower court which said that “if the amount lent by the money lender, who did not possess the license under the AP (Telangana region) Money Lenders Act, it can safely be held that the cheques were not issued towards discharge of legally enforceable debt.”
The judge was dismissing an appeal filed by a private money lender of Hyderabad challenging dismissal of his case for recovery of `2 lakh under the Negotiable Instruments Act (NI Act) which was given as loan to the respondent-accused. As for the case, the lower court dismissed the case on the ground that the complainant who is the money lender did not possess the licence under the Act and he is an Income Tax assessee and he himself admitted during the cross examination that the amount which was given to the respondent- accused through cheque was not disclosed in the tax returns.
The lower court held that when the amount was not shown in the IT returns, it would become unaccounted money and thereby it is not legally recoverable.
Aggrieved with the same, the money lender moved the high court for relief. After hearing the appeal and perusing various court judgments and rule of law, Justice Satyanarayana Murthy said that “it is clear that when the accused could rebut the presumption under Section 138 of the NI Act then the burden will shift on to the complainant and he has to prove that the cheques were issued towards discharge of legally enforceable debt or liability.”
“In the present case, the complainant failed to establish that the cheques were issued towards discharge of legally enforceable debt. Moreover, the amount lent by the complainant to the accused is an unaccounted money. Therefore, such debt is not recoverable”, the judge pointed out while dismissing the appeal.