Maharashtra Courts Must Check Moneylenders’ Licences Before Enforcing Promissory-Note Loans, Supreme Court Says

The applicant sought clarification of the Supreme Court’s judgment dated 26 May 2026, which had partly restored proceedings under Sections 138 and 141 of the Negotiable Instruments Act, 1881 (NI Act), arising from dishonoured cheques issued to repay loans evidenced by promissory notes.

The applicant contended that the judgment should not govern proceedings in Maharashtra, where Section 2(13)(j) of the Maharashtra Money-Lending (Regulation) Act, 2014 does not exclude advances against promissory notes from the definition of “loan”; accordingly, an unlicensed lender’s loan may be unenforceable under that Act.

An intervenor opposed clarification, submitting that the judgment’s application should be determined by the courts hearing individual cases.

Section 2(13)(j) of the Maharashtra Money-Lending (Regulation) Act, 2014 excludes advances on negotiable instruments other than promissory notes; an advance at interest against a promissory note therefore remains a “loan” under that Act.

Section 4 prohibits money-lending without a licence, and Section 13 renders such a loan unenforceable.

Under the Explanation to Section 138 of the NI Act, the debt must be legally enforceable.

By contrast, the Tamil Nadu Money-Lenders Act, 1957 excludes advances made on the basis of a negotiable instrument, as discussed by the Court.

The Court also referred to its order of 6 April 2026, which stated that proceedings brought by a private money-lender should ordinarily be stopped at the threshold unless the lender produces a licence or shows that the money was not advanced at interest.

The Court observed that its 26 May 2026 judgment concerned the sufficiency of the allegations for proceeding against certain accused under Sections 138 and 141 of the NI Act; it had not examined the Tamil Nadu or Maharashtra money-lending statutes.

It noted the relevant statutory distinction: unlike the Tamil Nadu Act, the Maharashtra Act does not exclude advances against promissory notes, meaning such advances may be subject to its licensing prohibition and enforceability bar.

However, the Court left the effect of that bar on any particular cheque or recovery proceeding to be determined by the court seized of the matter, if the issue is raised, on its merits.

It left the parties at liberty to raise the Maharashtra Act issue before the trial court or a superior court for determination on the merits.

The clarification application and the miscellaneous application were disposed of accordingly.