The Punjab Prohibition of Interest on Private Loans Acts 2022 (the “PPI Act”) repeals its predecessor legislation, the Punjab Prohibition of Private Money Lending Act 2007.
In light of Islamic injunctions, the PPI Act aims to prohibit the business and practices of private money lending and advancing loans and transactions based on interest. This legislation, therefore, was enacted to cover all the aspects of the mischief of private money lending and ancillary matters.
Applicability
The PPI Act is applicable only in the province of Punjab. However, similar legislations exist for other provinces also.
Prohibition on Private Money Lending
Section 3(1) of the PPI Act provides that no money lender, either in an individual capacity or otherwise, shall lend money or advance loans to any person or entity to receive interest on the loan. In other words, Section 3 makes charging interest on a private loan illegal and punishable.
Section 3(1) Provides:
3.Prohibition of Private Money Lending
No money lender, either individually or in a group of persons, shall lend money for any moveable or immoveable good or in kind or any other purpose or advance loan to any person for the purpose of receiving interest thereon, nor shall carry on an interest-based transaction in the Province.
Exemption for Financial Institutions
The prohibition on charging interest for money lenders does not apply to the Federal Government, Provincial Government, or any Financial Institute, including the State Bank of Pakistan, commercial or investment banks, a leasing company, a modaraba, or other entities as provided in Section 2(a) of the Financial Institutions (Recovery of Finances) Ordinance, 2001. In other words, all these entities are exempted from the applicability of the PPI Act.
Punishment for Contravention of Section 3(1)
Any moneylender who charges interest on a private loan or debt shall be punishable by a minimum imprisonment of three years, extendable up to ten years. The imprisonment may be of either description, i.e., simple or rigorous. The offender shall also be liable to pay fines of up to one million rupees (Rs 1,000,000).
The punishment is provided in Sub-Section (2) of Section 3, which reads:
3 (2)Whoever contravenes the provisions of sub-section (1) shall be punished with imprisonment of either description, which may extend to ten years but shall not be less than three years, and shall also be liable to a fine not exceeding one million rupees
Punishment for Abetment
The PPI Act not only provides for punishment for a money lender who charges interest on a loan thereof but also makes punishable anyone who intentionally aids and assists the money lender in recovering interest on the advanced loans. Thus, anyone who abets or assists the money lender in recovering interest on loans shall be liable to the same punishment as the money lender himself.
Section 4 of the PPI Act reads:
4. Punishment for Abetment
Whoever intentionally and willfully abets, engages, assists, or aids the money lender in lending money or in the recovery of interest or interest-based transaction in contravention of sub-section (1) of section 3 shall also be liable to the same punishment as provided in subsection (2) of section 3 of this Act.
Punishment for Molesting the Debtor
Molesting the debtor to force him to pay back the loan or interest on such loan is also made punishable by the PPI Act. Anyone who obstructs, uses violence or criminal force or criminally intimidates the debtor or his family intending to force the debtor to pay shall be punished with imprisonment up to five years and a fine of up to five hundred thousand rupees.
Punishment for molesting the debtor is provided in Section 5 of the PPI Act, which reads:
5. Punishment for Molestation
Whoever molests any borrower or debtor, whether on his behalf or behalf of anybody else, intending to force such borrower or debtor to pay back any loan or debt or any part thereof or any interest thereupon, shall be punished with imprisonment of either description for a term which may extend to five years and shall also be liable to fine up to five hundred thousand rupees.
Cognizance of Offences
All offenses under the PPI Act are cognizable and non-bailable. This follows that a police officer can arrest the offender without a warrant from the magistrate.
Extinguishment of Liability to Pay Interest
The PPI Act, in addition to prohibiting the creation of future liability for interest on loans, extinguishes every obligation of any debtor to pay interest on an existing loan.
Conclusion
The PPI Act aims to extend protection to individuals from being exploited at the hands of private money lenders. Private money lenders have no authority to charge interest on the loans advanced by them. However, this prohibition is only for Private persons. Any financial institution or the Government, both provincial and federal, is exempted from the application of this Act. A Private money lender who contravenes the provisions of the PPI Act is punishable under the Act.
