Khushi Gupta
Published on: May 11, 2022 at 16:49 IST
The Kerala Money Lenders Act, 1958 is not applicable to Non-Banking Finance Corporations (NBFC) registered under the Reserve Bank of India Act and regulated by the Reserve Bank, the Supreme Court has ruled.
A Bench comprising Justice V Ramasubramanian and Justice Hemant Gupta stated, “We are of the considered opinion that the Kerala Act and the Gujarat Act will have no application to Non-Banking Finance Corporations registered under the Reserve Bank of India Act and regulated by Reserve Bank of India.”
The Kerala Government had earlier directed the NBFC to obtain licence under the Kerala Money Lenders Act, 1958 which was challenged before the High Court. The High Court dismissed a Plea by the NBFC, prompting them to file an Appeal in the Supreme Court.
“From the time of their birth till the time of their commercial death, all activities of Non-Banking Finance Corporations automatically come under the scanner of Reserve Bank of India. Since the regulations issued by Reserve Bank of India are binding on Non-Banking Finance Corporations, it is clear from the above that all aspects of Non-Banking Finance Corporations are regulated by Reserve Bank of India and nothing is left untouched,” the Order said.
Lawyer R K Nair, who represented the NBFC said, “The above ruling settles the long-standing question regarding the applicability of state Money Lenders legislations to the Reserve Bank governed Non-Banking Finance Corporations. The Supreme Court has clarified that consequent to this Order, the Money Lenders Acts of the other States shall also have no application on such Non-Banking Finance Corporations.”