Legal Question in Civil Litigation in India

Legal position of money lenders

Dear All

I want to know legal position regarding �Money lenders� charging 5 to 20% interest per month.

These persons rope boys from well to do families who are out of track, fell victims of alcohol/drugs, get signed cheques and signatures on blank papers and then black mail them to extort money, these people although get blank papers signed from borrower, but do not give any receipt of interest received, if some one fails to pay, they threatened boys of telling their families, if if this does not work, they start threatening families of victims, if they cannot extort money from family, these people fill 4-5 times amount given to boy in cheques, get cheques bounced and file complaint u/s 138.

I want to know the legal remedies in such a cases and clarification on following issues:-

a) Can any person do money lending or there is Reserve bank guidelines on issue.

b) If �money lender fills amount, name of drawer in his handwriting instead of borrower handwriting, Can this cheques be challenged in court while degfending complaint u/s 138.

c) Can borrower or his family file criminal complaint against money lender for criminal breach of trust, cheating , extortion etc.

d) Is there any NGO helping victims of such a extortio


Asked on 7/12/08, 3:40 am

3 Answers from Attorneys
Aniruddha Pawse Aniruddha.P.Pawse Advocates

Re: Legal position of money lenders

a) Refer money lending act also.

b)Yes

c)Yes if proof is available

d)There has to be.

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Answered on 7/15/08, 6:05 am
Sanjay. K. Dixit, Advocate. Sanjay K Dixit, Advocate @ Karnataka Bar Council Enrolement No: "KAR/898/2007"

Re: Legal position of money lenders

Dear Friend ,

Ofcourse regulations & rules will be there under the RBI guidelines, any money lenders they can only charge interest legally from 5% to 24% per annum, & it shall not exceed the same limitation.

And those money lenders should be registered one, otherwise they shall not be competant to recover the money lended through court of law.

If they extort you get signed through blank cheques, papers make a complaint to the concerned police jurisdiction, if they are not willing to take complaint, then make an detailed complaint application drafted to the 1st Class, or 2nd Class Magistrate with respect to your jurisdiction under 190 (1) (c) of the C.R.P.C 1973.

Thank you,

Kind Regards,

sanjay k. dixit

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Answered on 7/12/08, 7:12 am
Bhaskaran D Bhaskar Associates

Re: Legal position of money lenders

Firstly, it is your fault to borrow money from the so called high interest chargers.

At the time of borrowing your aim was only to get money and you did not bother to see the future of what will happen if you give your blank cheque.

Now when the time has come for repayment you defaulted.

No money lender will try to extort money if you are correct. After agreeing to pay heavy interest you are now backing out. I am not supporting the moneylender but what about your oral agreement that you had with him when you gave the cheque?

Cheque being a negotiable instrument if it is filled by the lender himself it is still valid. Though the filling of the cheque should be with the borrower's consent. So, here too you don't have defence.

The police are advised not to entertain any complaints u/s 138 of N.I. Act.

So the best way I would advise is to compromise the matter and settle the accounts.

My advise to all is never borrow money with moneylenders, utilise the Banks which give loans. Here too knock the door of ONLY Nationalised Banks to avoid harrasment.

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Answered on 7/12/08, 10:38 am


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