State enactments regulating money lending do not apply to Non-Banking Financial Companies registered under the RBI Act, as established by the Supreme Court.

ORAL ORDER

In this petition, the petitioner has sought the following reliefs :-

"WHEREFORE, the Petitioner above named humbly prays that this Hon'ble Court be pleased to quash the FIR in Crime No.0056/2012 against the Petitioners herein, for the alleged offences punishable under sections 3 & 4 of Karnataka Money Lenders Act , 1961 and section 28 of Karnataka Prohibition of Charging Exorbitant Interest Act , 2004; pending in the file of Civil Judge (Jr.Dn) & JMFC-2 Court, JLB Road, Mysore City, in the interest of justice."

2. Heard learned counsel for the petitioner and learned additional SPP for respondent No.1 and perused the material on record.

3. A perusal of the material on record will indicate that the petitioner is charged with the offences punishable under Sections 3 and 4 of the Karnataka Money Lenders Act , 1961 as well as Section 28 of the Karnataka Prohibition of Charging Exorbitant Interest Act , 2004.

4. In identical circumstances, in the case of the petitioner herein in Writ Petition No.18597 of 2012 and connected petitions, the co-ordinate Bench of this Court has held as under:

"COMMON ORDER

Heard Sri Jayakumar S. Patil and Sri Shashi Kiran Shetty, learned Senior Counsels along with Sri B. Ravishankar, Sri Deviprasad Shetty, Sri Dayanand S. Patil, Sri S.R. Hegde, Sri C.K. Nandakumar, Sri M.S. Varadarajan, Sri Jai M. Patil, Sri Shivarudrappa Shetkar, learned counsels for the petitioners, Sri M. Vinod Kumar, learned Additional Government Advocate for respondents 1 to 6, Smt Rashmi Subramanya, learned counsel for the 7^th respondent. Perused the writ petitions papers.

2. It is submitted that in all these writ petitions, petitioners/Non-Banking Financial Companies (for short ‘the NBFCs’) registered under the Reserve Bank of India Act , 1934, (for short‘the RBI Act’) and regulated by RBI are before this Court praying for a declaration to declare that the State Enactments i.e., the Karnataka Prohibition of Charging Exorbitant Interest Act , 2004 (for short‘the 2004 Act’), and the Karnataka Money-Lenders Act, 1961 (for short‘the 1961 Act’), are not applicable to the petitioners and also to quash the consequential orders.

3. Learned Senior Counsels Sri.Jayakumar S. Patil and Sri. Shashi Kiran Shetty on behalf of the petitioners contend that both the State enactments under challenge in these petitions are against the legislative competence of the State Government. Since the petitioners’ NBFCs are registered and functioning under the RBI Act, falls under the ambit of 1956 Act. Further, it is submitted that Reserve Bank of India is the regulatory body for the petitioners’ NBFCs and the State Acts such as Karnataka Money- Lenders Act, 1961 and Karnataka Prohibition of Charging Exorbitant Interest Act , 2004 are State enactments under Entry 30 of List-II of Schedule VII of the Constitution of India, are not applicable to petitioners. The petitioners are covered by the 1956 Act enacted by the Parliament under Entry 43 of List-I of Schedule VII. Provisions of 1956 Act has made it clear that it would have overriding effect in respect of any inconsistencies therewith contained in any other law.

4. Learned Senior Counsel would submit that the question of law raised in these writ petitions were the subject matter of Civil Appeal No.5233/2012 [Nedumpilli Finance Company Limited V/s. State of Kerala and Others] before the Hon'ble Apex Court. The Hon'ble Apex Court was examining the question as to whether Non- Banking Financial Companies regulated by Reserve Bank of India in terms of the provisions of Chapter III-B of RBI Act, can also be regulated by the State Governments such as Kerala Money Lenders Act, 1958 and Gujarat Money Lenders Act, 2011. While answering the said question, the Hon'ble Apex Court has made it clear that the State Enactments would have no application to NBFCs, which are registered under the 1934 Act. It is further submitted that both the above State Acts, which are under challenge are enacted by the State Government