Saturday, March 6, 2021

"Tamasuk" or money lending business in Tarai: Boon for lenders, bane for borrowers

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On and off the bench, judges and court officials have persistently spoken against flood of litigation and frequent recourse to courts as more cases result more disputes in society and more disputes lead to more frustration and anger.   

Frustration and anger among the less fortunate people rise because of economic gulf in the society. The needy ones have to approach the money lenders at the time of need. In fact, borrowing and lending is not an illegal tender but the truth and fairness ought to be upheld in entire money-lending business.

The lenders firstly inquire about the borrower’s status and loan security. To put it simply, money lenders do not want to lend money to a person who has no assets that could be auctioned by the court at the instance of non-payment of loan. In this article, the scribe will explain how loan business has become a boon for money lenders and bane for borrowers in Tarai-Madhesh.  

As a judicial officer posted in Province-2 of Nepal, the scribe finds the district courts of Tarai good platforms for money lenders to recoup their loans from defaulting parties. On a daily basis, Tarai courts register a plethora of cases of non-payment of loan as mentioned in the deed of loan (Tamasuk). The plaintiffs, the loan providers, file plaints with intent to retrieve the principal amount with interest.

What annoys the scribe is that no one is there to ask the money lenders, who appear as plaintiffs, about their source of income. In Tarai, there is a practice of claiming thrice in case of non-payment of loan or default. An example: If Mr. A, a money lender, provides loan to Mr. B with a sum of Rs. 100,000/-, then Mr. A will prepare a loan deed of Rs. 300,000/- in which Mr. B will agree, on record, to pay Rs. 300,000/- with interest at the rate of 10 percent annually within a stipulated period which is prescribed in the deed.   

The high voltage drama starts in case of any default or breach of agreement or say in case of non-payment of loan on time. Money lenders find the benches of courts as perfect forums for realizing their claims. As law recognizes documents, which have evidentiary value, the courts pass judgments in favor of money lenders who have produced the original copy of loan deed. So, money lending business has become an easy means of earning quick bucks.

A judge recording the statement in money lending case (or cases relating to loan deed) is not empowered to inquire about the source of income of the loan provider. Simply put, a judicial officer, while recording the statement of the witnesses and the loan provider, is not empowered to ask the creditor to justify his source of income. An officer of court cannot ask a money provider to prove if there was any banking transaction on the date when he had provided the sum to the borrower. So, in loan cases, the source of income remains outside the purview of judicial determination.

Another example: Mr. X, a money lender, has earned NPR 20,00,000/- through illegal means and wants to convert that black money into white money. Mr. X requests his friend Mr. Y to become a borrower of loan on paper. Then, Mr. X and Mr. Y reach an agreement of framing a loan deed where it would be shown that Mr. Y is the borrower of Rs. 20,00,000 from Mr. X. The deed was made in backdate, i.e., before Bhadra 1, 2075 (17 August 2018), the date of implementation of National Civil Procedure Code, 2074 BS.

In the deed, it is mentioned that Mr. Y would be making payment of loan taken from Mr. X on or before January 15, 2020. Now, Mr. X sues Mr. Y for non-payment of loan. After three days of filing of the case, Mr. X approaches the court to withdraw the case, saying the defendant Mr. Y has deposited the sum in his bank account, so there is no use in contesting this case. Then the judge allows him to withdraw the case. This way, Tamasuk works as a magic wand to convert the black money into white money.

Though the National Civil Procedure Code obliges the lenders and borrowers to register their Tamasuk in local bodies, the prevailing laws do not empower the officers of the local bodies to obligate the lenders to reveal the source of income in the deed.  

Money lending has emerged as a profitable business in Tarai. There is no law on record that obliges money lenders to justify their source of income. If the borrower has taken a loan of Rs 10,00,000 he will be asked to agree on a loan deed of Rs. 30,00,000. There is a mutual understanding that if the borrower reimburses the loan on time, he has to pay Rs. 10,00,000/- with interest but in case of any default, he has to face legal consequences and the law will recognize the things stated in writing, i.e., the loan of Rs. 30,00,000/-.

It is high time the government enacted a law to protect the interests of borrowers and curb the illegal or oppressive policies and procedures of the lenders. In fact, it is shameful for a country that observes rule of law to let a bunch of people engaged in making their black money into white money in broad daylight go scot-free.

Poor people are becoming poorer and the rich becoming richer and that too in a legally protected manner.

The Tamasuk business should be regulated and monitored, for the republic deserves to protect the interests of underprivileged people.

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Published on 17 January 2021