Allowed

Muthoot Finance Ltd. v. State of Karnataka

Karnataka HC13 Sept 2021WP/5616/2017

Case brief

AI extract

What is this about?

The High Court of Karnataka, through a common order, allowed multiple writ petitions filed by Muthoot Finance Ltd. branches. The court quashed notices issued by various local authorities requiring trade licenses for Non-Banking Financial Institutions, holding that the acts of running NBFIs were not covered as 'Banking' in the local statutes (which read 'Baking' due to a typo) and lacked constituti

What did the court decide?

Notices dated 15.09.2016, 05.12.2016, 24.01.2017, 28.09.2015, and 06.12.2016 issued by the respondents were quashed.

Muthoot Finance Ltd. Vs State of… — Constitutional and Fundamental Rights | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 13^TH DAY OF SEPTEMBER, 2021

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BEFORE

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THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

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WRIT PETITION No.5619/2017 (LB-RES)

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C/W

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WRIT PETITION No.65601/2016 (LB-RES) WRIT PETITION No.5616/2017 (LB-RES) WRIT PETITION No.5618/2017 (LB-RES) WRIT PETITION No.5621/2017 (LB-TAX) WRIT PETITION No.5622/2017 (LB-RES)

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IN WRIT PETITION No.5619/2017

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BETWEEN

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MUTHOOT FINANCE LTD., TURUVEKERE BRANCH, REPRESENTED BY SMT.VIDHYA NANDHINI.I., D/O INBASEKARAN, CHIEF MANAGER (ADMINISTRATION) MUTHOOT FINANCE LIMITED., TRIVENI ROAD, YESHWANTHPUR, BENGALURU – 560 022.

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... PETITIONER

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(BY DR.AMIT DESHPANDE, ADVOCATE (PHYSICAL HEARING))

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AND

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STATE OF KARNATAKA REPRESENTED BY CHIEF SECRETARY, GOVERNMENT OF KARNATAKA, VIDHANA SOUDHA, BENGALURU – 560 001.

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THE URBAN DEVELOPMENT DEPARTMENT REPRESENTED BY PRINCIPAL SECRETARY, VIDHANASOUDHA, BENGALURU – 560 001.

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CHIEF OFFICER TOWN PANCHAYAT TURUVEKERE TALUK TUMAKURU DISTRICT TUMAKURU - 560 099.

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... RESPONDENTS (BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 AND R2 (PHYSICAL HEARING)

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SRI V.F.KUMBAR, ADVOCATE FOR R3 (VIDEO CONFERENCING))

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH NOTICE DTD:15.9.2016 ISSUED BY THE R-3 AT ANNEXURE-F AND TO DIRECT THE R-2 NOT TO INSIST UPON OBTAINING THE TRADE LICENSE.

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IN WRIT PETITION No.65601/2016

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BETWEEN

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MUTHOOT FINANCE LTD., CHANDAPURA BRANCH, REPRESENTED BY SRI SUDARSHAN T.G., S/O GAVIYAPPA. AGED ABOUT 28 YEARS, CURRENTLY CLUSTER BRANCH MANAGER MUTHOOT GROUP. CHANDAPUR – 560 099 NOW AT BENGALURU.

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... PETITIONER

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(BY DR.AMIT DESHPANDE, ADVOCATE (PHYSICAL HEARING))

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AND

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STATE OF KARNATAKA REPRESENTED BY CHIEF SECRETARY,

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GOVERNMENT OF KARNATAKA, VIDHANA SOUDHA, BENGALURU – 560 001.

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CHIEF OFFICER TOWN MUNICIPAL COUNCIL, CHANDAPUR CIRCLE, ANEKAL TALUK, BENGALURU RURAL DISTRICT, BENGALURU – 560 099.

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... RESPONDENTS

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(BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 (PHYSICAL HEARING); R- 2 IS SERVED)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE DTD: 05.12.2016 AT ANNEXURE - G ISSUED BY THE R- 2.

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IN WRIT PETITION No.5616/2017

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BETWEEN

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MUTHOOT FINANCE LTD., N.R.MOHALLA BRANCH, MYSURU, REPRESENTED BY SMT. VIDHYA NANDHINI I., D/O INBASEKARAN, CHIEF MANAGER (ADMINISTRATION) MUTHOOT FINANCE LIMITED., TRIVENI ROAD, YESHWANTHPUR, BENGALURU – 560 022.

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... PETITIONER

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(BY DR.AMIT DESHPANDE, ADVOCATE (PHYSICAL HEARING))

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AND

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STATE OF KARNATAKA REPRESENTED BY CHIEF SECRETARY, GOVERNMENT OF KARNATAKA, VIDHANA SOUDHA, BENGALURU – 560 001.

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THE URBAN DEVELOPMENT DEPARTMENT REPRESENTED BY PRINCIPAL SECRETARY, VIDHANASOUDHA, BENGALURU – 560 001.

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THE COMMISSIONER MYSURU CITY MUNICIPAL CORPORATION, MYSURU – 570 001.

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... RESPONDENTS

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(BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 AND R2 (PHYSICAL HEARING); SRI MOHAN BHAT, ADVOCATE FOR R3 (VIDEO CONFERENCING)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH NOTICE DTD:24.1.2017 BY THE R-2 NOT TO INSIST UPON OBTAINING THE TRADE LICENSE.

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IN WRIT PETITION No.5618/2017

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BETWEEN

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MUTHOOT FINANCE LTD., MALUR BRANCH REPRESENTED BY SMT. VIDHYA NANDHINI.I., D/O INBASEKARAN, CHIEF MANAGER (ADMINISTRATION) MUTHOOT FINANCE LIMITED., TRIVENI ROAD, YESHWANTHPUR, BENGALURU – 560 022.

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... PETITIONER

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(BY DR.AMIT DESHPANDE, ADVOCATE (PHYSICAL HEARING))

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AND

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STATE OF KARNATAKA REPRESENTED BY CHIEF SECRETARY,

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GOVERNMENT OF KARNATAKA, VIDHANA SOUDHA, BENGALURU – 560 001.

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THE RURAL DEVELOPMENT DEPARTMENT REPRESENTED BY PRINCIPAL SECRETARY, VIDHANASOUDHA, BENGALURU – 560 001.

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CHIEF OFFICER

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MUNICIPAL COUNCIL MALUR, KOLAR DISTRICT, KOLAR – 563 130.

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... RESPONDENTS

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(BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 AND R2 (PHYSICAL HEARING);

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SRI RAMESH KUMAR R.V., ADVOCATE FOR R3 (VIDEO CONFERENCING)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH NOTICE DTD:24.1.2017 ISSUED BY THE R-3 AT ANNEXURE-F AND TO DIRECT THE R-2 NOT TO INSIST UPON OBTAINING THE TRADE LICENSE.

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IN WRIT PETITION No.5621/2017

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BETWEEN

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MUTHOOT FINANCE LTD., TAVAREKERE BRANCH, MAGADI MAIN ROAD, REPRESENTED BY SMT. VIDHYA NANDHINI I., D/O INBASEKARAN, CHIEF MANAGER (ADMINISTRATION) MUTHOOT FINANCE LIMITED., TRIVENI ROAD, YESHWANTHPUR, BENGALURU – 560 022.

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... PETITIONER

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(BY DR.AMIT DESHPANDE, ADVOCATE (PHYSICAL HEARING))

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AND

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STATE OF KARNATAKA REPRESENTED BY CHIEF SECRETARY, GOVERNMENT OF KARNATAKA, VIDHANA SOUDHA, BENGALURU – 560 001.

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THE RURAL DEVELOPMENT DEPARTMENT REPRESENTED BY PRINCIPAL SECRETARY, VIDHANASOUDHA, BENGALURU – 560 001.

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CHIEF OFFICER VILLAGE PANCHAYAT TAVAREKERE, MAGADI ROAD, MAGADI TALUK, RAMANAGARA - 562 130.

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... RESPONDENTS (BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 AND R2 (PHYSICAL HEARING);

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R- 3 IS SERVED)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE BEARING NO.313 DTD:28.9.2015 ISSUED BY R-3 AT ANNEXURE-F AND TO DIRECT THE R-2 NOT TO INSIST OBTAINING THE TRADE LICENSE.

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IN WRIT PETITION No.5622/2017

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BETWEEN

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MUTHOOT FINANCE LTD., TUMAKURU BRANCH, HULIYUR ROAD, TUMAKURU, REPRESENTED BY SMT. VIDHYA NANDHINI I., D/O INBASEKARAN, CHIEF MANAGER (ADMINISTRATION) MUTHOOT FINANCE LIMITED.,

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... PETITIONER

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TRIVENI ROAD, YESHWANTHPUR, BENGALURU – 560 022.

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(BY DR.AMIT DESHPANDE, ADVOCATE (PHYSICAL HEARING))

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AND

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STATE OF KARNATAKA REPRESENTED BY CHIEF SECRETARY, GOVERNMENT OF KARNATAKA, VIDHANA SOUDHA, BENGALURU – 560 001.

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THE RURAL DEVELOPMENT DEPARTMENT REPRESENTED BY PRINCIPAL SECRETARY, VIDHANASOUDHA, BENGALURU – 560 001.

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CHIEF OFFICER

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MUNICIPAL COUNCIL CHIKKANAYAKANA HALLI TUMAKURU DISTRICT TUMAKURU - 560 099.

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... RESPONDENTS

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(BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 AND R2 (PHYSICAL HEARING);

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SRI V.F.KUMBAR, ADVOCATE FOR R3 (VIDEO CONFERENCING))

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH NOTICE DTD:6.12.2016 BY THE R-3 AT ANNEXURE-F AND TO DIRECT THE R-2 NOT TO INSIST UPON OBTAINING THE TRADE LICENSE.

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THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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Petitioners in these cluster of petitions call in question notices dated 15.09.2016, 05.12.2016, 24.01.2017, 28.09.2015 06.12.2016 passed by the respondents - Authority, whereby, calling the petitioners to obtain trade licenses to run their Non Banking Financial Institutions.

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Since issues are common, the petitions are taken up together, considered and disposed of in this common order.

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Heard Dr. Amit Deshpande, learned counsel appearing for the petitioners, Smt. Prathima Honnapura, learned Additional Government Advocate appearing for the State, Sri V.F.Kumbar, Sri Mohan Bhat and Sri Ramesh Kumar R.V., learned counsel appearing for the other respondent and perused the material on record.

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For the sake of convenience, the averments in writ petition No.5619/2017 are taken into consideration.

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Respondent No.3 – Town Panchayat of Turuvekere Town Panchayat (hereinafter referred to as ‘the Panchayat’ for short) issues notice to the petitioner calling upon the petitioner to obtain trade license for running Non-Banking Financial Institution from the hands of the Panchayat. The notice that is issued by the Panchayat is ostensibly exercising its power under Section 256 of the Karnataka Municipalities Act, 1964 (hereinafter referred to as ‘the Act’ for short). Section 256 of the Act deals with certain activities not to be undertaken in the premises without obtaining license, the provision reads as follows.

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256. Premises not to be used for certain purposes without licence: —

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(1) No person shall use or permit to be used any premises for any of the following purposes without or otherwise than in conformity with the terms of a licence granted by the Municipal Commissioner or Chief Officer in this behalf, namely:—

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(a) any of the purposes specified in Part I of Schedule XIII;

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(b) any purpose which is, in the opinion of the Municipal Commissioner or Chief Officer dangerous to life, health or property or likely to cause a nuisance;

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(c) keeping horses, cattle or other quadruped animals or birds for transportation, sale or hire or for sale of the produce thereof; or

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(d) storing any of the articles specified in Part II of Schedule XIII except for domestic use of any of those articles: Provided that the municipal council may declare that premises in which the aggregate quantity of articles stored for sale does not exceed such quantity as may be prescribed by bye-laws in respect of any such articles shall be exempted from the operation of clause (d).

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(2) The Government may by notification direct that no premises within a distance of two miles of the limits of a municipal area shall be used for any one or more of the purposes mentioned in Part I or II of Schedule XIII without a licence obtained from the Municipal Commissioner or Chief Officer of the municipal area concerned and except in accordance with the conditions specified in such licence and thereupon the provisions of this Act and the rules and

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bye-laws thereunder applicable to any premises within the municipal area referred to sub-section (1) shall be applicable to the premises outside the municipal area:

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Provided that no such notification shall take effect until the expiry of thirty days from the date of its publication in the official Gazette.

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(3) In prescribing the terms of a licence granted under this section for the use of premises as mills or iron yards or for similar purposes the Municipal Commissioner or Chief Officer may, when he thinks fit, require the licensee to provide a space or passage within the premises for vehicles for loading and unloading purposes.

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(4) The municipal council shall fix a scale of fees to be paid in respect of premises licensed under sub-section (1) or sub-section (2):

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Provided that no such fee shall exceed five hundred rupees per annum.

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(5) Where a licence is granted under this section for the use of any place outside the limits of the 1[municipal

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area]1, the municipal council shall pay to the local authority within the limits of which such place is situated, such proportion of the fee received by the municipal council for the grant or renewal of such licence as the Government may, by general or special order, determine.

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(6) Whoever uses any premises in contravention of subsection (1) or (2) or (3) or of any bye-law made under sub-clause (iv) of clause (b) of sub-section (1) of section 324 shall be punished with fine which may extend to two hundred rupees, and with further fine which may extend to forty rupees for every day on which such contravention is continued after the date of first conviction.

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(7) Upon a conviction being obtained under this section in respect of any premises used for any purpose referred to in clause (a) or (b) of sub-section (1), the magistrate shall on the application of the municipal council, but not otherwise, order such premises to be closed, and thereupon appoint persons or take other steps to prevent such premises being used for any purpose referred to in cause (a) or (b) of subsection (1).”

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(emphasis supplied)

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The items specified in Schedule XIII Part 1 of the Act, are the ones which are not to be run without obtaining license at the hands of the Municipality. Schedule XIII Part I of the Act, reads as follows:.

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“INVENTORY.

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(here state particulars of property distrained).

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SCHEDULE XIII. (Section 256). PART I.

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PURPOSES FOR WHICH PREMISES MAY NOT BE USED

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WITHOUT A LICENCE.

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Carrying out any of the following trades or

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operations connected with trades:—

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1. Banking.

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2. Cinematograph films. Shooting of.

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3. Cinematograph films by any process whatsoever.

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Treating of .

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4. Chillies or masala or corn or seeds. Grinding of by mechanical means.

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5. Cloth, yarn or leather in indigo or in other colours. Dyeing or printing of.

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6. xxxxxxxxxxx”

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(emphasis supplied)

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The first item which cannot be run without a license from the

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hands of the Panchayat depicts as ‘Banking’ which in fact is not

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‘Banking’ but ‘Baking’. The Kannada version of the schedule reads as ‘¨sÀnÖ ¸ÀÄqÀÄªÀÅzÀÄ’. Therefore, it is a typographical error in Schedule XIII Part 1 insofar as it pertains to ‘Baking’ which is misread as ‘Banking’. It is on the strength of this error, respondent No.3 has issued notice without application of mind. The issue in the connected writ petitions is also similar to this writ petition.

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Insofar as writ petition No.5616/2017 is concerned, the notice is issued by Mysuru City Corporation under Section 353 of the Karnataka Municipal Corporations Act, 1976. Section 353 of the Karnataka Municipal Corporations Act, no where confers power upon the Corporation to issue notice to Non Banking Financial Institution for obtaining license to run a Bank.

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Therefore, on this short ground that Non Banking Financial Institutions need not obtain license to run their Banks, the writ petitions deserve to succeed as the aforesaid

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notices issued are ostensibly without jurisdiction. For the

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aforesaid reasons, the following:

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ORDER

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i. The writ petitions are allowed.

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ii. The notices dated 15.09.2016, 05.12.2016, 24.01.2017,

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28.09.2015 06.12.2016 stand quashed.

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iii. The petitioners in all these writ petitions would be entitled to all consequential benefits that would flow from the quashing of the said notices.

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Sd/JUDGE

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nvj CT:MJ

Muthoot Finance Ltd. v. State of Karnataka

Case brief

What is this about?

What did the court decide?

Muthoot Finance Ltd. v. State of Karnataka

Case brief

What is this about?

What did the court decide?

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