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2023 Supreme(Online)(MP) 10497
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK AGARWAL
ON THE 21st OF DECEMBER, 2023
WRIT PETITION No. 15838 of 2020
BETWEEN:-
BHARAT FINANCIAL INCLUSION LIMITED (FORMERLY
KNOWN
AS
INDUSIND
FIANANCIAL
INCLUSION
LIMITED),
A
COMPANY
INCORPROATED
UNDER
COMPANIES ACT,2013,
HAVING
ITS
REGISTERED
OFFICE AT ONE INDIABULLS CENTRE, TOWER 1,, 8TH
FLOOR 841 SENAPATI BAPAT MARG, ELPHINSTONE,
MUMBAI - 400 013 AND HAVING A BRANCH OFFICT AT
M. N. 84, DATTA TOWNSHIP, IN FRONT OF SPORTS
CLUB, BARELA WITH BRANCH CODE 28:06, JABALPUR
(MADHYA PRADESH)
.....PETITIONER
(BY SHRI BRIAN D'SILVA - SENIOR ADVOCATE ASSISTED BY SHRI
AVIRAL SAHAI - ADVOCATE AND SHRI DARSHAN PATANKAR -
ADVOCATE)
AND
1.
THE STATE OF MADHYA PRADESH THROUGH
THE
SECRETARY,
FINANCE
DEPARTMENT,
MANTRALAYA, BHOPAL (MADHYA PRADESH)
2.
JOINT
DIRECTOR, INSTITUTIONAL
FINANCE,
MADHYA PRADESH, C WING, FIRST FLOOR
VINDHYACHAL
BHAWAN
BHOPAL
(MADHYA
PRADESH)
3.
DISTRICT COLLECTOR JABALPUR COLLECTOR
OFFICE, SOUTH CIVIL LINES JABALPUR (MADHYA
PRADESH)
4.
SUPERINTENDENT
OF
POLICE JABALPUR
SUPERINTENDENT'S OFFICE
POLICE
LINES,
SOUTH
CIVIL
LINE
JABALPUR
(MADHYA
PRADESH)
.....RESPONDENTS
(BY SHRI SUBODH KATHAR - GOVERNMENT ADVOCATE)
1
Signed by: TULSA SINGH
Signing time: 30-12-2023
13:31:17
Signature Not Verified
This petition coming on for hearing this day, the court passed the
following:
Siddharth Singh,Advocate General
The definition of "financial establishment" under the Madhya Pradesh Nikshepakon Ke Hiton Ka Sanrakshan Adhiniyam, 2000 includes entities that receive deposits under any scheme or arrangement or in any other manner.
Headnote:
BANKING OUTLET - FINANCIAL ESTABLISHMENT - DEFINITION
Fact of the Case:
The petitioner, a company involved in non-banking transactions, challenged an order issued by the Joint Director, Institutional Finance, under the Madhya Pradesh Nikshepakon Ke Hiton Ka Sanrakshan Adhiniyam, 2000 (Act of 2000), alleging that the petitioner was engaged in banking activities without authorization from the Reserve Bank of India (RBI). The petitioner contended that it was not a "financial establishment" as defined under the Act of 2000 and that the impugned order was arbitrary and illegal.
Finding of the Court:
The court held that the petitioner was a "financial establishment" within the meaning of the Act of 2000 and that the impugned order was not arbitrary or illegal. The court found that the petitioner was engaged in activities that fell within the definition of "banking outlet" as defined by the RBI and that the petitioner was collecting deposits and providing other financial services to customers.
Issues: Whether the petitioner was a "financial establishment" within the meaning of the Act of 2000.
Ratio Decidendi: The court interpreted the definition of "financial establishment" under the Act of 2000 to include entities that receive deposits under any scheme or arrangement or in any other manner. The court also found that the petitioner was engaged in activities that fell within the definition of "banking outlet" as defined by the RBI, including accepting deposits, encashing cheques, and providing loans. The court held that the petitioner was therefore a "financial establishment" and that the impugned order was not arbitrary or illegal.
Final Decision: The petition was dismissed.
This petition is filed by the petitioner-company being aggrieved of order
dated 26/08/2020 (Annexure-P/10) passed by the Joint Director, Institutional
Finance, Vindhyachal Bhawan, Bhopal wherein it is noted that in terms of RBI
circular No.RBI/2016-17/306 DBR.No.BAPD.BC.69/22.01.001/2016-17, May
18, 2017 in Clause-3.1.1 there are provisions in regard to banking outlet. The
petitioner company is not entitled to carry on any of the banking activities, but
in violation of the RBI guidelines since petitioner has indulged in banking
transactions, thus appropriate action be taken against the petitioner company
under the provisions of Criminal Procedure Code and Madhya Pradesh
Nikshepakon Ke Hiton Ka Sanrakshan Adhiniyam, 2000 (hereinafter referred to
as the 'Act of 2000' for short).
2. It is submitted that as the petitioner is a company involved in non-
banking transactions, therefore, it is submitted by Shri Brian D'Silva, learned
senior counsel that earlier petitioner-company was registered as NBFC with
RBI. It is a wholly owned subsidiary of IndusInd Bank Limited, which is a
Scheduled Bank.
3. A Scheme of Amalgamation was submitted to the National Company
Law Tribunal for amalgamation of the petitioner-company with IndusInd Bank
Limited wherein it is shown that Bharat Financial Inclusion Limited is an
Amalgamating Company whereas IndusInd Bank Limited is Amalgamated
Company. After amalgamation of Bharat Financial Inclusion Limited with
IndusInd Bank Limited, IndusInd Bank Limited transferred its business
correspondent business to transferee company namely IndusInd Financial
2
Inclusion Limited on slump basis. Thereafter with a view to use goodwill of the
petitioner-company, IndusInd Financial Inclusion Limited has been renamed as
Bharat Financial Inclusion Limited.
4. It is submitted that Bharat Financial Inclusion Limited is a public
company and consequent to amalgamation, it started looking after non-banking
business. Attention is drawn to the RBI circular dated June 24, 2014 bearing
No.RBI/2013-14/653 DBOD. No.BAPO.BC.122/22.01.009/2013-14. It is
submitted that as per this circular, scope of activities are defined as under :
" Scope of Activities
The scope of activities may include (i) identification of
borrowers; (ii) collection and preliminary processing
of loan applications including verification of primary
information/data; (iii) creating awareness about savings
and other products and education and advice on
managing money and debt counselling; (iv) processing
and submission of applications to banks; (v) promoting
nurturing and monitoring of Self Help Groups/Joint
Liability Groups/Credit Groups/others; (vi) post-
sanction monitoring; (vii) follow-up for recovery; (viii)
disbursal of small value credit; (ix) recovery of
principal/collection of interest; (x) collection of small
value deposits; (xi) sale of micro insurance/mutual fund
products/pension products/other third party products
and (xii) receipt and delivery of small value
remittances/other payment instruments."
5. It is submitted that petitioner being a BC i.e. Business
Facilitator/Correspondent, certain transactions were put through them in terms
of para-10 of the said circular which reads as under :
"Transactions put through BC.
As engagement of intermediaries such as Business
3
Facilitators/Correspondents
involves
significant
reputational,
legal
and
operational
risks,
due
consideration should be given by banks to those risks.
The banks should adopt technology-based solutions for
managing the risk, besides increasing the outreach in a
cost effective manner. The transactions should
normally be put through ICT devices (handheld
device/mobile phone) that are seamlessly integrated to
the Core Banking Solution (CBS) of the bank. The
transactions should be accounted for on a real time
basis and the customers should receive immediate
verification of their transactions through visuals (screen
based) or other means (debit or credit slip).
In formulating their schemes, banks may, int
