Money Lenders Act: SC to examine police powers

The Supreme Court has agreed to examine if the provisions of the Karnataka Money Lenders Act, 1961, would come in the way of police authorities to conduct search and seizure at places where illegal money-lending business was being carried out.

A bench of Justices N V Ramana and S Abdul Nazeer issued notice to the Karnataka government on a plea challenging a June 22, 2017 judgement of the High Court of Karnataka which had quashed the criminal proceedings against a group of money lenders.

Acting on a batch of petitions filed by money lenders under Section 482 of the Criminal Procedure Code, the HC has held that under Section 15 of the Act, it was only the registrar and the assistant registrar or any other person, authorised by the state government for that purpose, who can enter into the premises of the money lenders to inspect and seize documents and to verify whether the business of money lending is carried on in accordance with the provisions of money lending or not.

Challenging the HC's conclusion, advocates Sanjay M Nuli and Mallahara Rao, contended that Section 15 was an enabling provision and it could not be construed to debar the police authorities from performing their duties.

Nuli was representing Veerabasappa, a Koppal resident, who filed a special leave petition, challenging quashing of an FIR registered at Gangavathi town police station against Shanmukhappa Singanal, his son Suresh, and Mahesh in 2015 for the offences under the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004, and under Section 420, 504 and 506 of IPC.

In his complaint, Veerabasappa claimed he took a loan of Rs 8.32 lakh from Shanmukhappa and others and paid back total Rs 34 lakh, including exorbitant interest, to them.

But the accused misused some cheques issued by him and initiated proeedings against him under the Negotiable Instruments Act and further demanded Rs 24 lakh.

The HC, however, granted relief to the accused in the case filed by the petitioner as well as in other similar cases after concluding that the police authorities did not follow the procedure mandated under the Criminal Procedure Code as they conducted raids on the premises of the accused and seized some documents before registering the FIR.

The petitioner challenged the HC's findings, contending that on receipt of information about cognisable offence, it is bounden duty of the police to inspect, search and seize the relevant material even before completing the necessary formalities like recording information in the dairies of registering FIR.