Madras HC | Are Advocates barred from doing money lending business with their clients? Read HC’s opinion in light of SC decision

Madras High Court: G.K. Ilathiraiyan, J., addressed a petition wherein it was reiterated that Advocates are barred from having any business transaction or loan transaction with his client as the same amounts to professional misconduct.

Purpose of filing the present petition was to quash the proceedings taken place by the Judicial Magistrate for the offences punishable under Section 138 Negotiable Instruments Act against the petitioner.

Respondent who is an advocate appeared on behalf of the petitioner in a case cheated him along to the tune of Rs 7 lakhs and also misused the cheque issued by the petitioner and filed a false case against him.

Contentions

Lack of Jurisdiction

The alleged cheque was presented for collection before the Indian Bank, Madras High Court Branch whereas the complaint was lodged before the Judicial Magistrate, without any jurisdiction.

Hence, the complaint was liable to be quashed for lack of jurisdiction.

Further, the petitioner also relied upon the decision of Bridgestone India (P) Ltd. v. Inderpal Singh, (2016) 2 SCC 75.

Default in Notice

Another point raised by the petitioner was that the statutory notice by the respondent did not fulfil the procedures laid down under Section 138 NI Act and 15 days time is to be given for repayment under the provisions of NI Act which has not been given to the petitioner.

Fiduciary Relationship

Respondent misused the fiduciary relationship with his client and the continuation of the above complaint is harassment to the petitioner for choosing such a person for defending his case.

As per Rule 49(1) C of the Advocates Act, the Advocate is barred from having any business transaction or loan transaction with his client. Therefore the entire complaint is liable to be quashed.

Counsel for the petitioner, A. Edwin and Counsel R. Krishnakumar for the respondent.

Analysis and Decision

Complainant’s case is that the petitioner had borrowed a sum of Rs 24 lakhs for the development of his business and for personal expenditure. He also assured that he would pay interest on the borrowed amount. Thereafter in order to repay the part of the amount, he issued a cheque of Rs 9,45,000 and the same was presented for collection but the same was returned for the reason that “Exceeds Arrangement”.

Section 138 (c) of NI Act:

The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Respondent issued a notice asking the petitioner to repay the cheque amount within a period of 7 days, whereas according to the above-stated Section, the notice period should have been 15 days.

Relying on the Supreme Court’s decision in B. Sunitha v. State of Telangana, (2018) 1 SCC 638, Bench held that when there is a specific bar for doing money lending business that too with his own client, the act of the respondents will amount to professional misconduct.

Hence the entire proceedings initiated against the petitioner is nothing but clear abuse of process of law.

Further, the Supreme Court decision in  Bridgestone India (P) Ltd. v. Inderpal Singh, (2016) 2 SCC 75, held that the place where the cheque is delivered for collection i.e., the branch of the payee or holder in due course, where the drawee maintains an account, would be determinative of the place of territorial jurisdiction.

Hence, in the instant case respondent ought to have filed the complaint within the jurisdiction of Indian Bank, High Court Branch. Therefore, the complaint cannot be sustained against the petitioner. [Ilakkia Raja v. T. Umamaheswaran, Crl. OP No. 1157 of 2020, decided on 29-07-2020]

2 comments

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    Some peoples , especially those doing wrong practice in motor accident cases are involving this unfair activities. They were bought law decrees in private law colleges situated in other states. Bench and bar have to take action in this aspect, automatically this type of issues will be solved

  • Avatar

    Devika, Thanks for bringing this to our notice… many advocates indulge in this …. and innocent people are being harassed.

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