The Kerala Money Lenders Act is inapplicable to Non-Banking Financial Companies regulated by the Reserve Bank of India.

JUDGMENT Sushrut Arvind Dharmadhikari, J.

The present writ petition under Article 226 of the Constitution of India has been filed by the petitioners, praying for the following reliefs:

“(i) declare that the State of Kerala has no authority or jurisdiction to insist the petitioners to take license under the Kerala Money Lenders Act , 1958 to carry on their business, (ii) declare that provisions of the , 1958 is not applicable to Non-Banking Financial Companies like the petitioner companies incorporated under the provisions of the Indian Companies Act and registered with the Reserve Bank of India in terms of the provisions of the Reserve Bank of India Act , 1934, and is controlled and governed by the provisions of the RBI Act, (iii) declare that it is beyond the competence of the State Legislature to impose unreasonable restrictions on the petitioners to carry on its business invoking the provisions under the , 1958, (iv) issue a writ of mandamus or any other appropriate writ, order or direction restraining respondents 1 to 4 from insisting the petitioners to take license under the , 1958 for carrying on their business, (v) call for the records of the case leading to Ext P11 and quash it by the issue of a writ of certiorari or any other appropriate writ or order, (vi) Call for the records of the leading to Exts. P12, P13, P14 & P16, P17, P18 & P19 notices and quash the same by the issue of a writ of certiorari or any other appropriate writ or order, (vii) pass such other orders, directions or writs as may be prayed for and this Hon'ble Court may deem fit and proper in the facts and circumstances of the case.”

2. The brief facts of the case are that the petitioners are Non-

Banking Financial Companies (NBFCs) registered with the Reserve Bank of India under Section 45-IA of the Reserve Bank of India Act . The petitioners are engaged in money lending in the State of Kerala. The case of the petitioners is that, being NBFCs registered under Section 45-IA of the RBI Act, they do not fall within the meaning of ‘person’ as defined under Section 2 (7) of the Kerala Money Lenders Act , 1958.

2.1 The contention of the petitioners is that, even if they fall within the main definition of ‘person’, they are covered by the exception clause (f) of Section 2 (7) of the Money Lenders Act, which excludes institutions established by or under an Act of Parliament or the Legislature of a State from the purview of the Act.

3. The question for consideration before this Court is whether Non-Banking Financial Companies (for short, ‘NBFCs’), regulated by the Reserve Bank of India under the provisions of Chapter III-B of the Reserve Bank of India Act , 1934 (hereinafter referred to as the ‘RBI Act’), could also be regulated by State enactments such as the Kerala Money Lenders Act , 1958.

4. The learned counsel for the petitioners contended that the aforesaid issue was the subject matter in Nedumpilli Finance Company Limited v. State of Kerala and others¹, wherein the Apex Court concluded as follows:

“11 In view of the above, we are of the considered opinion that the Kerala Act and the Gujarat Act will have no application to NBFCs registered under the RBI Act and regulated by RBI. Therefore, all the appeals filed by NBFCs against the judgment of the Kerala High Court are allowed. Likewise the appeals filed by the State of Gujarat against the judgment of the Gujarat high Court are dismissed.

11.1 As a consequence, Transfer Petition (Crl.) No.359 of 2015, shall also stand allowed and the First Information Report filed against the officer of the NBFC for violation of the provisions of the Kerala Act shall stand