Supreme Court to check menace of unlicenced, 'Shylockian' money lending

The Supreme Court has decided to step in and explore ways to check on unlicenced money lending and aid hapless borrowers who fall prey such unregulated Shylockian money lenders [Raj Kumar Santoshi v. Prashant Malik]..Justices CT Ravikumar and Sanjay Karol lamented that the growing menace of unlicensed money lending leads to hard consequences for the layman borrower."We are mainly peeved and pained by instances where ordinary laymen take such loans and are at last driven to streets or driven to commit suicide, on account of lenders entertaining Shylockian attitudes," the Court said in its July 23 order. The Court noted that in order to escape law, such unlicensed money lenders avoid frequent transactions and give huge loans for interest intermittently.This, the Court said, is because under laws like the Punjab Registration of Money Lenders Act of 1938, transactions will come under the purview of money lending business, only if the concerned lender had been effecting continuous transactions of such nature."To fall outside the purview of money lending business laws, prudently (or cunningly?) some such lenders avoid continued transaction and give huge loans only for interest, intermittently," the Court noted..In other words, unlicensed money lenders often evade laws that regulate "money lending businesses" by giving out infrequent or "friendly" loans, the Court observed."More often that not, despite repaying the amount actually advanced, the borrower is constrained to pay sometimes double the amount or more, towards interest," the Court added.Therefore, it decided that it will examine how such cases could be regulated, so that helpless borrowers are not doomed in debt traps. In cases where such unregulated loans involve huge amounts, tax evasion concerns also arise, the Court further remarked. "We will regulate such instances and rescue the hapless who happen to borrow loans and then are doomed in debts. In cases where huge amounts involve (amounts) such as ₹50 lakhs as also in crores, besides overreaching of the provisions under money lending laws huge evasion of tax may also (be) involved," the Court said.Considering the gravity of the issue, the Court proceeded to suo motu implead the Union of India and the Delhi government as parties to the case to examine the larger issue of unregulated money lending..The Court was dealing with a case in which "friendly" loans were said to have been advanced, totaling an amount of about ₹85 lakhs.The borrower was later sued by the lender in a cheque bouncing case. The Delhi High Court refused to quash a summons issued by a trial court to the borrower, prompting him to approach the Supreme Court for relief.On July 23, the top court observed that this was not an isolated case where "friendly loans" eventually ran into huge amounts.The Court deprecated such acts, while drawing a parallel between such unregulated money lenders and Shylock, the unscrupulous money lender and antagonist in William Shakespeare's Merchant of Venice.The Court said that such money lending, made under the guise of "friendly advances", often run into crores and the borrower are often pushed to the brink.The Court will hear the case next on August 23.In the meanwhile, an interim order earlier issued by the top court to prevent the trial court from passing any final order in the cheque bounce case will continue, the Bench added..Senior Advocate Manan Kumar Mishra, and advocates Durga Dutt, Anjul Dwivedi, Rohit Priyadarshi, Ajay Kumar, Priyanshu Upadhyay, Sai Girdhar, Rashi Verma, and Pradeep Yadav, appeared for the appellant.Advocates Vijay Kumar, Jai Pal Singh, Dhiraj Kumar and Avinash Kr Lakhanpal apepared for the respondent..[Read Order]