Circulars imposing additional registration requirements on financiers contravene the Motor Vehicles Act, as statutory provisions cannot be overridden by executive orders.

JUDGMENT :

S. MANU, J.

1. First petitioner in W.P.(C)No.26909/2015 is an association of individuals engaged in financing of motor vehicles. It is a society registered under the Tamil Nadu Societies Registration Act, 1975. Second petitioner is a member of the 1^st petitioner and he is doing hire-purchase finance business. Petitioners in W.P.(C)No.26015/2015 are also persons engaged in financing for motor vehicles.

2. Since the reliefs sought in these writ petitions are virtually the same, these cases were heard together.

3. Petitioners are aggrieved by Circular Nos.13/2011 dated 13.06.2011, 14/2011 dated 28.06.2011 and 19/2015 dated 22.07.2015 issued by the Transport Commissionerate, Thiruvananthapuram. In the first circular issued on 13.06.2011 the Transport Commissioner stated that the actions to be taken by the Motor Vehicles Department when motor vehicles are being registered and hire-purchase agreements are terminated are explained in Section 51 of the MOTOR VEHICLES ACT , 1988 and Rules 60 and 61 of the Motor Vehicle Rules, 1989. Endorsements are being made under Section 51 without examining the credentials of the financing companies. Such practices were causing difficulties to the vehicle owners and also to the Department. The Department sought advice of the Reserve Bank of India as to who all can be considered as financiers. The Reserve Bank opined that financial institutions as defined under Section 45 -I(c) of the RBI Act, 1934 (including Hire-purchase Companies registered under the Companies Act, 1956) have to apply for registration under Section 45 -IA of the RBI Act to carry on business as non-banking financial company. Therefore, the Transport Commissioner directed that at the time of making endorsements with respect to hire-purchase agreements and hypothecation agreements it must be insisted that certificate of registration provided under the Reserve Bank of India Act shall be produced. It was clarified that these directions would not apply in the case of institutions already functioning in the banking sector. Further, it was directed that the instructions shall be followed with effect from 01.07.2011.

4. By Circular No.14/2011 dated 28.06.2011, it was clarified that Circular No.13/2011 was modified to the effect that in the absence of certificate of registration under the RBI Act, production of license obtained under the Kerala Money Lenders Act, 1958 would suffice. Circular No. 19/2015 was issued on 22.07.2015, directing that endorsements regarding hypothecation, in addition to the financing institutions mentioned in the previous circulars, can also be made for Co- operative Banks under the control of the Reserve Bank of India, Co-operative Societies under the Co-operative Societies Act, and Hire-purchase Institutions registered under the Hire-purchase Act of 1972.

5. Petitioners contend that they are not providing loans or receiving any deposits. They are involved only in hire- purchase transactions. Hence, they contend that they are not money lenders as contemplated under Section 2 (7) of the Kerala Money Lenders Act. Under the law governing hire- purchase, the owner of the motor vehicle will be the hire- purchase finance company/institution, and the registered owner will be only a hirer under the hire-purchase finance company/institution. This ownership will be specifically incorporated in the agreement of the hire-purchase though the vehicle will be used by the hirer. When registration is done, an endorsement will be made in the registration certificate regarding the nature of the claim of the financier as provided under Section 51 (1) of the MOTOR VEHICLES ACT , 1988. Under the said provision, making an entry in the certificate of registration is required when the vehicle is held under a hire-purchase, lease or hypothecation agreement. Petitioners contend that the circulars issued by the Transport Commissioner are improper and illegal as the instructions issued are not in tune with the provisions of Section 51