MONEY LENDING ORDINANCE

Arrangement of Sections

1. Short title.

1A. Prohibition of the carrying on of the business of money lending by certain persons.

1B. Prohibition of suit or other proceedings in respect of money lent in certain circumstances.

2. Re-opening of money-lending transactions.

3. Prescription.

4. Meaning of return being excessive.

5. Observance of rule that interest shall not exceed principal.

6. Meaning of undue influence.

7. Exclusion of certain classes of transactions.

8. Duty of persons carrying on money-lending business to keep accounts.

9. Duty of persons carrying on money-lending business to give copies of accounts and receipts.

10. Particulars to be set forth in promissory notes.

11. Protection of bona fide holder for value.

12. Penalties for false statements and representations.

13. Penalty for taking fictitious or blank promissory note as security.

14. Meaning of "fictitious”.

15. Besetting residence of debtor.

16. Loans to women or children of householders by money lenders visiting the residence of any person.

17. Burden of proof.

18. Protection of lenders against frivolous and vexatious pleading of the Ordinance.

SCHEDULE

2 of 1918,

9 of 1954,

11 of 1963,

1386-18-2005.

AN ORDINANCE to provide for the better regulation of money-lending transactions, and the prohibition of the carrying on of the business of money lending by certain persons.

[Date of Commencement: 1st August, 1918]

1. Short title.

This Ordinance may be cited as the Money Lending Ordinance.

1A. Prohibition of the carrying on of the business of money lending by certain persons.

(1) On or after the first day of January, 1964, no person shall carry on the business of money lending if such person—

(a) is an individual who is not a citizen of Sri Lanka; or

(b) is a foreign company; or

(c) is a foreign firm:

Provided, however, that the preceding provisions of this subsection shall not apply to any foreign firm or foreign company approved for the purposes of this subsection by the Minister in charge of the subject of Finance by Order published in the Gazette.

(2) Any person who contravenes the provisions of subsection (1) shall be guilty of an offence and shall, on conviction after summary trial before a Magistrate, be liable to a fine not exceeding one thousand rupees or to imprisonment of either description for a term not exceeding six months, or to both such fine and imprisonment.

(3) In any prosecution of any person for an offence under this section, the burden of proving that such person is a citizen of Sri Lanka, or is not a foreign company or foreign firm, shall lie on such person.

(4) In this section—

(a) "citizen of Sri Lanka” means any individual who is a citizen of Sri Lanka under any law for the time being in force relating to such citizenship;

(b) "foreign company” means a company to which Part XI of the Companies Ordinance(Repealed and replaced by the Companies Act, No. 17 of 1982.) applies, other than any commercial bank within the meaning of the Monetary Law Act or any life insurance company; and

(c) "foreign firm” means a firm—

(i) consisting of two partners one of whom is not a citizen of Sri Lanka, or both whom are not such citizens; or

(ii) consisting of more than two partners at least one of whom is not a citizen of Sri Lanka.

[S 1A ins by s 48(1)(b) of Act 11 of 1963.]

1B. Prohibition of suit or other proceedings in respect of money lent in certain circumstances.

No suit or other proceedings shall be instituted or maintained in any court in respect of any money lent if such money was lent on or after the first day of January, 1964, by any person carrying on the business of money lending in contravention of the provisions of subsection (1) of section 1A.

[S 1B ins by s 48(2) of Act 11 of 1963.]

2. Re-opening of money-lending transactions.

(1) Where proceedings are taken in any court for the recovery of any money lent after the commencement of this Ordinance, or the enforcement of any agreement or security made or taken after the commencement of this Ordinance in respect of money lent either before or after the commencement of this Ordinance, and there is evidence which satisfies the court—

(a) that the return to be received by the creditor over and above what was actually lent (whether the same is charged or sought to be recovered specifically by way of interest, or in respect of expenses, inquiries, fines, bonuses, premier, renewals, charges, or otherwise), having regard to any sums already paid on account, is excessive, and that the transaction was harsh and unconscionable, or as between the parties thereto, substantially unfair; or

(b) that the transaction was induced by undue influence, or is otherwise such that according to any recognised principle of law or equity the court would give relief; or

(c) that the lender took as security for the loan a promissory note or other obligation in which the amount stated as due was to the knowledge of the lender fictitious, or the amount due was left blank,

the court may re-open the transaction and take an account between the lender and the person sued, and may, notwithstanding any statement or settlement of account or any agreement purporting to close previous dealings and create a new obligation, re-open any account already taken between them, and relieve the person sued from payment of any sum in excess of the sum adjudged by the court to be fairly due in respect of such principal, interest, and charges as the court, having regard to the risk and all the circumstances, may adjudge to be reasonable; and if any such excess has been paid or allowed in account by the debtor, may order the creditor to refund it; and may set aside, either wholly or in part, or revise, or alter any security given or agreement made in respect of money lent, and if the lender has parted with the security may order him to indemnify the borrower or other person sued.

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