In the Circular it is noted that as per S.51 of the Motor Vehicles Act, entries have been made in the RC Books in the usual course with regard to the vehicle owners who have purchased the vehicles on obtaining loan/financial assistance from nationalized banks and other financial institutions, However, it is also expressed that some transport financiers and also private financiers are extracting more interest and thus deceiving the vehicle owners. Referring to the provisions of the Money Lenders Act, 1961 and the Rules therein and also based on the letter of the Government dated 14.6.2010, the Commissioner for Transport has issued the Circular to various Regional Transport Officers directing the registering authorities to cross-check private financiers whether they are registered under the Karnataka Money Lenders Act and also whether they are charging interest in excess of the limit prescribed under the Exorbitant Interest Act on the money lent for the purchase of the vehicle and, only after securing the necessary documents in this regard, to make entry of the name of the financier in the RC Book, meticulously.

On the ground that the Circular dated 6.9.2010 issued by the Transport Commissioner to crosscheck and to seek for all necessary documents from private financiers as to whether they have obtained money lending license and whether they are charging interest on the money lent on the basis of the Money Lenders Act and the prohibition imposed therein on charging excess interest, is illegal, the said Circular has been challenged by the Association of private money lenders. They are questioning their authority in insisting for all details before making entry of the names of the financier whether they are registered under the Money Lending Act or not or the rate of interest they are charging.

Heard the counsel representing the parties.

In the course of argument advanced at the Bar in this regard, learned counsel has relied upon a decision rendered by this Court in WP 8460/1996 on 8.4.1996 wherein in a similar situation, this Court has already held that it is not necessary for the RTO to examine the ground upon which the endorsement is issued that is, licence has not been obtained under the provisions of the Karnataka

Money Lenders Act, is totally irrelevant for the purpose of Motor Vehicles Act as such, the endorsement issued by the Commissioner stands quashed and the RTO was directed to reconsider the application without relying upon the ground on which it was returned declining to make entry in the RC Book. It appears, this judgment, so far as not been set aside or distinguished.

In the case of Charanjit Singh Chadha & Ors vs. Sudhir Mehra – (2001) 7 SCC 417) relied upon by the petitioner’s counsel representing the Association with respect to hire purchase contracts are concerned, the Apex Court has opined that it is an executory contract of sale, conferring no right in rem on the hirer until the conditions for transfer of the property to him have been fulfilled and it is held that, if any dispute with regard to hire purchase contract is concerned, it is to be resolved on the basis of the terms incorporated in the agreement. The Apex Court has also observed that the finance charge – difference between the cash price and the hire purchase price, is not interest but, represents a sum to be paid – a privilege being allowed to discharge the purchase price by installments.

S.51 of the Motor Vehicles Act, 1988 provides for making an entry in the RC Book. S.51 mandates, when an application for registration of motor vehicle is made under hire purchase/lease/hypothecation agreement, the Registering Authority shall make an entry in the Certificate of Registration regarding existence of the said agreement. The section also provides for the procedure on such termination of the agreement and transfer, etc.

In the instant case, the petitioners are questioning the Circular which authorizes and insists upon every RTO to make entries