2013 (2) TMI 820 - HC - Indian Laws

Summary

Issues involved:
The issue involves quashing and setting aside the orders and proceedings of Criminal Case No.289 of 2008 pending before Metropolitan Magistrate, Ahmedabad, under the provision of Bombay Money Lenders Act, 1946, initiated on a complaint by the respondents against a limited company incorporated as a Non Banking Financial Company.

Judgment Details:

Issue 1: Interpretation of the Bombay Money Lenders Act, 1946
The Division Bench confirmed that Non Banking Finance Companies are not covered by the definition of 'money-lenders' under the Act, and State authorities lack jurisdiction to take regulatory or penal measures against such companies. The judgment highlighted the importance of notification under Section 2(10)(v) to bring Non Banking Financial Companies under the Act.

Issue 2: Regulatory Authority of Reserve Bank of India
The applicant, a Non Banking Financial Company, holds necessary licenses from the Reserve Bank of India under the RBI Act, 1934, which overrides other statutes. The company's activities, financing commercial vehicles, do not classify it as a Money Lender under the State Act. The RBI has full control over NBFCs, including the authority to take regulatory and penal actions in the interest of depositors.

Issue 3: Lack of Notification and Legal Standing
The State Government failed to produce any notification under Section 2(10)(v) to bring Non Banking Financial Companies under the Money Lenders Act. The absence of such notification, coupled with the company's compliance with RBI regulations, led to the quashing of the criminal proceedings against the applicant. The judgment emphasized the overriding effect of Chapter IIIB of the RBI Act on the Bombay Money Lenders Act, 1946.

Conclusion:
The Court allowed the application, quashing the criminal proceedings under the Bombay Money Lenders Act, 1946, against the Non Banking Financial Company. The lack of notification and the company's adherence to RBI regulations were pivotal in determining the State's lack of jurisdiction in penalizing or regulating such entities.