Supreme Court to Address Unlicensed Money Lending and ‘Shylockian’ Practices in India

The Supreme Court of India has taken a significant step towards examining and regulating the unlicensed money lending business that has ensnared numerous borrowers into severe debt traps. This initiative is particularly focused on lenders who display a ‘Shylockian’ attitude— a reference to the merciless moneylender in William Shakespeare’s “The Merchant of Venice.”

Justices CT Ravikumar and Sanjay Kumar, while deliberating on a related cheque bounce case involving Bollywood film producer and director Raj Kumar Santoshi, recognized the urgent need to address this growing societal menace. Santoshi is embroiled in a financial dispute with Prashant Malik, who allegedly agreed to invest Rs 2 crore in Santoshi’s film “Saragarhi” but later reneged after only providing a fraction of the promised sum.

The justices expressed deep concern over the distressing impact of such exploitative lending practices, noting that they often lead to catastrophic outcomes for ordinary people, including homelessness or suicide. They observed that even substantial loans, sometimes amounting to crores, are given under the guise of friendly advances, which then lead to exorbitant interest demands—often doubling the principal amount or more.

The court’s July 23 order highlighted its intent to regulate such activities, especially those that cleverly evade the provisions of existing money lending laws and involve significant tax evasion. The bench has summoned responses from the Centre and the Delhi government to further this cause.

In the meantime, the Supreme Court has restrained the trial court in Delhi from issuing any final orders in the ongoing case against Santoshi until the next hearing scheduled for August 23. This case, initiated by Malik, accuses Santoshi of dishonoring cheques under the Negotiable Instruments Act.

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Further complicating the matter, Santoshi has returned a portion of the funds and contested the allegations, arguing that the cheques were security measures and not meant to cover the claimed amounts due to partial repayments made earlier.