The Supreme Court of India has ruled in a case that NBFCs are not moneylenders under the Moneylenders Act.
All the petitions from various states were clubbed and Finance Industry Development Council (FIDC) had also filed an intervening application, which was accepted. The matter came up on April 26, 2022, and arguments were advanced by the counsels of Sundaram Finance on behalf of all the NBFCs. FIDC was represented by Justice (retd.) Chella Kodanda Ram and FIDC’s impleading application was allowed. After the conclusion of arguments, the matter was reserved for orders. The orders were pronounced on Tuesday.
The Supreme Court has ruled in favour of FIDC. Mahesh Thakkar, Director General, FIDC, says: The long battle has come to an end in our favour after 15 years. Consequently, all criminal cases filed against the officers of the NBFCs will stand quashed. The appeals filed by the NBFCs against the judgment of the division bench of the Kerala High Court were allowed and the appeal filed by the Gujarat government against the order of the division bench of the Gujarat High Court was dismissed on the following grounds:
- Chapter III B of the RBI Act is a complete code in itself.
- There is a clear conflict between RBI Act and Moneylenders Act which conflict cannot be reconciled.
- Sec. 45Q of the RBI Act has an overriding effect over the moneylenders’ Act.
- The state has no power to regulate the moneylending business of NBFCs.
- In conclusion, Kerala and Gujarat Moneylenders Act have no application to the NBFCs, registered under RBI Act and regulated by RBI.