Partly allowed

M/s.Sks Microfinance Limited,1-10-60 to 62,Ashoka v. The District Collector,Collectorate,Khammam

Telangana HC18 Apr 2023WP/4363/2010

Case brief

AI extract

What is this about?

This common order disposes of multiple writ petitions by NBFCs challenging the validity of State Micro Finance and Money Lenders Acts. Relying on the Supreme Court judgment in Nedumpalli Finance, the court held that NBFCs registered with the RBI are excluded from the purview of these State enactments.

What did the court decide?

State Money Lenders/Micro Finance Acts declared inapplicable to NBFCs registered under the RBI Act. Impugned circulars and panchanama set aside.

M/s.Sks Microfinance Limited,1-10-60 to 62,Ashoka Vs… — Banking and Recovery | Telangana HC (2023)

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t³³⁰³ I

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HIGH COURT FOR THE STATE^{OF TELANGANA} AT HYDERABAD (Special Original Jurisdiction)

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TUESDAY, THE EIGHTEENTH DAY OF^APRIL TWO THOUSAND AND TWENTY^THREE

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PRESENT

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THE HON'BLE SRI JUSTICE J. SREENIVAS^RAO

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WRIT PETITION NO: 20148^{4363 AND113430F 2010}

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wP NO.20148 0F 2010

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Between:

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SKs Mrcrofinance Ltd.,, 1-10-60^{to 62, Ashoka RaghupatiChambers Opposrte} Shopers Stop. Begumpet, Hyderabad^- 500^{016,rep. by rts SeniorReglonal} I\ilanager, Mr. K. Vilay Kumar

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...pETtloNER

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AND

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1 The Project Officer,, lntegrated Tribal Development^{AuthorityUtnoo.r Adrlabad} Drstnct

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The District collector, collectorate,^{Adilabad,Adilabad District}

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3 The Tahsildar, Utnoor, Adilabad^District

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The Station House Officer,, Utnoor, Adilabad^District

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5 The Station House Officer,^{Narnoor, Utnoor Mandal,Adilabad OFll?on} or*r.

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Petrtron under Atticle 226 of the Constitution^{of lndiapraylngthat rn the} crrcumstances stated in the affidavit^{filedtherewith, the High Court may be} pleased to rssue a wnt, one in the nature of a writ of Mandamus or^{any other} appropnate writ. direction or order declaring^{the Circular Lr No T P M U} 14412010 dated 26th July 2O10 issued by^{the 01 st Respondent.The Prolect} Offrcer lntergrated Tribal Development^{Authority, Utnoor, AdrlabadDrstrrctas} illegal. arbitrary. viotative of the^{provisionsof the Andhra Pradesh ( Andhra} Regron Scheduled Areas ) Money-Lenders^{Regulatlon.1 960 and Arttcles141 6} and 21 of the Constitution of lndia and^{set aside the same,andconsequently} dtrect the respondents not to interfere^{with the finance business of the petltroner} company rn the interest^{of justice}

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l.A. NO: 1 OF 201O{WPMP. NO:¹⁵⁵⁶⁴ o^{F 2010)}

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Petition under Section 151 CPC^{praying that in the circumstances state} d rn the affrdavrt frled in support of the^{petition, the HighCourt may be pleased to} suspend the operatron of the^{CircularLr.No.T.P.tt/.U1441201Odated 26thJuly}

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2010^{rssued by the 1st RespondentThe Prolect Officer' lntegratedTribal} Development^Authortv' 'tnoo' oo""o'o^o:"::": ': ::.f:"":l'il fj::ilj direct^{the respondentsnot to interfere wlth the buslr} petitioner

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that^{in the circumstancesstated} rn" :: :::'::: in the^{affidavrt frled rn supportof the petition' the High """1} amend^{the Petrtioner in Wrrt Petitlon In the name of Bharat Financialinclusron} Limited^{and substltutethe name of the Petitioner SKS MicrofinanceLimitedwrth} Bharat^{FlnancrallncluslonLimltedwith head officeat My Home Tycoon' 3rd} Froor,^{Block A Kundanbagh BegumpetMarnRoad, Hyderabadin the causetrtle} and^{intertm orders wherever the name reflects and pass}

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IA NO Petitron^10F2023under S ectron^{'151 CPC praying that in the circumstancesstated} support^{ot the petrtion the High Court may be pleased.to} in the^{affrdavrt frledtn} by substitutrng^{the name of the Petitionerhereln in the} amend^{the causetltle} *o ,O,1oU^{of 2010 and all lA's And WPMP 25564 of 2010} cause^{title rn the W P} lilP No^{1 165 of 2012) in W P No 20148} and^{lA No 1 /2012 (WP}

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A. NO^{10F2012 WVM P. NO1165 0F 2012t:}

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Between:

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1 The^{ProlectOffrcerIntegratedTrrbalDevelopmentAuthority Utnoo'r Adilabad} Drstrrcl , r-^r6^r^r2re Adllabad,^{AdilabadDistrict}

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, rhe Drsr'rct colrector X"oIi,#i;,i;;;f--....pEilnoNERS J Tne^{TansrldarUtnoor}

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AND

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1 :I:r::'{ll:'"o"-::t,:,'grt%l",fif^{i."J'.it1t#llti?:'S"::?3BB:".^::} ...RESP.NDENT/PEr'r..NER

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ii;"',.u,.q;,^{"v7x-vi]avk"at}

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2 3 i l:^{3 E ii :: E 3 I 3E 3[ls3 i,Y,]i"""%' iiii'if '|/l? iSiil oou', o', o 3'i[l$o" o,n} " Petrtlon^{under Sectlon15'1CPC prayingthat in the circumstances statedIn}

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the^{affrdavLt fried rn supportof the petrtton the High Court maybe pleasedto} vacate^{thernterrm orders dt 16 08 2010' rn WPNo' 20148of 20'10}

IA NO:^{1 0F 2021}

Between:

21 +ffi SEli^{Sl [3X i3 3[l3El,Yii",il; til1X?"?i5liloo} "' o' o^o] l'IL"l,,,^{o *. *,}

¶38

AND

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lSKSMlcroflnanceLtd',1-10.60to62,Aq[o.I?lashuoatiChambshooers stop^{eesumpJi 'i;i:;;;'i'-'"sotoio'i"p bv its s} e^nror rsopposlte^Resional Mariager.^{Mr. K Vr]ay Kumar} ...RESPoNDENT/PET'r,.NER

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...RESPoNDENT/PET'r,.NER

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2 The^{ProjectOfficer" lntegratedTribal DevelopmentAuthority Utnoo r Adrlabad}

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, ?itJtBL,,,",^{collector'collectorate'Adilabad'Adilabad District} ; ii.rE i;;;iGr',^{Utnoot' AdilabadDistrict}

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...RESPoNoENrs

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PetitlonUndersectronl5lCPCprayingthatinthecircumstancesstated rn the affrdavrt^{fired in support of the petition, the Highcourt may be preasedto} vacate the^{interrmorders dated 16/08/2010in WPMP No'25564in 2010rn WP}

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No 20 148^{rn 201O}

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Counsel^{for the Petitioner:SRILOKIREV PREETHAM REDDY}

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Counsel^{for Respondent No' 1: AGP FOR SOCIALWELFARE}

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Counsel^{for Respondent Nos' 2 & 3: AGP FOR REVENUE}

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Counsel^{for Respondent Nos' 4 & 5: AGP FOR HOME}

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WP NO:^{4363 0F 2010}

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BeNveen:

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Uil:$,PeHf{i{il';':r+hi:iifu'[".if:}i:'Jf^{l$,fi.nri:',t#rr} 38^years PETITIONER

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AND

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1 The Distrrct Collector'^{Collectorate Khammam' Khammam Distrlct} i +i:^{B[B"d ]',::flitrlalltaXlalllanmnmBi?lill"tn''oo' o'"'''} . ?iJt83t^{collectorBHADRACHALAM" Khamm.am Drstrict} e i I i;;'il;^{l r'iui r ara o att i'H't"a nffl#'J5[3} [[[3[ t"nTf"'j'f t,,,,,., 9 Ii: B8t"l^{B?::il'l'f3'A'',4"i",;;##i#,khammamilJillllr.} * o. r * "o

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Petition under^{Arltcle 226 of the Constitutionof lndia prayingthat ln the} the High Court^{may be} circumstances^{stated intheaff rd a vrt frled therewith'} one tn the^{nature of writof} mandamus or^{any other} pleased to issue^{a wrlt} appropriate^{writ directron or order declaring the proceedlngsLetter No 602/LM/09} datedTS,20oglssuedbytheflrstreSpondentaSlllega|'arbrtrary,violativeofthe provisions of the^{AndhraPradesh(Andhra Regron ScheduledAreas) Money-} Lenders^{Regulation,1960.andArtrclesl4'16 and 21 of the Constitutionof lndia} andSetasidethesameandconSeqUentlydireCttherespondentsnottointerfere withe the^{finance busrness of the petltloner company in the interest of justice}

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l.A. NO:^{1 OF 201o(WPMP NO: 5641 OF 2010)} . Petition under^{sect'o'iffi=CF;;-y'rlgthat rn the circumstancesstated} intheaffidavitfiledlnsupportofthepetitlontheHlghCourtmaybepleasedto suspend the^{proceedrngsLetter No 602/LlM/Ogdated 7 8 2009 issued by the first} respondent^{ln the lnterest of lusttce}

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NO 32364 0F²⁰¹⁶⁾ l.A. NO:1^OF2016(WPMP Petition under Sectron^{15'1CPC PraYtngthat tn} the ctrcumstances^stated in the affrdavlt^{frledin support of the petrtron the Hlgh} Court may^be Pleased^to amend the^{petrttoner rn WrrtPetrttonln the nameof} Bharat Financial^inclusion Microf inance^{Limited with} Limited and^{substrtutethe nameof the PetrtlonerSKS} at My Home^{TYcoon' 3rd} Bharat Financral^{lnclusron Llmrted with head offlce} Floor, Block^{A. Kundanbagh BegumpetlVlarn Road Hyderabadln the cause title} and interlm^{orders wherever the name reflects}

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Counsel^{for the Petitioner:SRI LOKIREV PREETHAM REDDY} Counsel for^{RespondentNos l & 3 to 5: AGP FOR REVENUE} Counsel^{for RespondentNos2 & 6: AGP FOR HOME}

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{

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Counsel for Respondent^{No.7: AGP FOR SOCIAL WELFARE}

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W P NO: 11343^{OF 2010}

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Between:

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M/s SKS Microfinance^{limited.Rep by its Sr ZonalManager.} -(Member Servrce) A Gooal Krrshna. S/o^{Srinivasulu1-10-60to 62, AshokaRaghupatl} Chamb6rs Opi. Snoppers^{Stop, Begumpet,Hyderabad} ...pE,.oNER

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AND

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The District Collector/Agent^{to Govenment', Khammam, Khammam district} 2 The Aoencv Divtstonal 6ffrcer,,^{Bhadrachalam, Khammam district} 5 rne rinsrt<jar Dummugudem,^{Dummugudem (M),Khammam,} 3li$&b.*r, Petrtron under A(icle 226 of^{the Constitution of lndiapraying that in the}

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circumstances stated^{in the affidavttfiledtherewith,the High court may be} pleased to lssue an order.^{drrecttonor writ, more particularlyone in the nature of} writ of tvlandamus declaring^{the proceedings/panchanamaof the 3rd respondent.} dt 5-5-2010 serztng^{the premrsesof the petitionerwithout anynotice'without} passrng any orders^rs tllegal arbrtrary^{violativeof principlesof natural justice and} provrsrons of the Andhra Pradesh^{(Andhra Region ScheduledAreas) Money} - Lenders Regutatron.^{1950 and Articles 14, 16 and21 of the constitutionof lndta} and consequently dtrect^{the respondents not to interfere with the finance bustness} of the^{petrtronercomPanY}

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LA. NO: 1 OF 2010(^{WPMP.NO: 14414 OF 2010)}

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Petrtron under Sectron¹⁵¹ CPC^{praying that inthe circumstancesstated in} the affrdavrf filed^{in support of the petition, the High Court may be pleased} suspend the operatron^{of the proceedlngsof the 3rd respondent dt 05-05-2010} pendrng drsposal of the^{matn wP}

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l.A. NO: 1 O^{F 2016(WPMP.NO: 32332oF 2016)}

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Petrtron under Section^15'l CPC Pr^{aying that in the circumstancesstated in}

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the affrdavrt frled^rn support^{of the petition, the High Court may be pleasedto}

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{

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permit Petitioner^{to continuethe Writ Petitionrn the nameof BharatFrnancial} lnclusion Limited^{and substltutethe name of the PetitionerSKSMicrofinance} Limited with^{BharatFlnancial lnclusronLrmrted with headoffice at My Home} Tycoon, 3rd^{Floor, Block A, KundanbaghBegumpet MarnRoad' Hyderabad in the} cause title^{and interim orders wherever the name reflects}

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Counsel forthe^{Petitioner:SRI LOKIREV PREETHAM REDDY}

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Counsel for^{Respondent Nos'1 & 3: AGP FOR REVENUE}

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counsel for^{RespondentNo 2: AGP FOR SOCIALWELFARE}

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The Court made^{the following:COMMON ORDER}

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I \

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HON'BLE SRI JUSTICE J. SREENT/AS RAO

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WRIT PETITION Nos.2O148 4363 and 11343 of2O1O

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COMMON ORDER

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Whcn thc multlcrs are taken up for hearing, Sri.Lokircv Prerctham Redcl-v, lcarncd counsel appearing for the pctitioncrs, lt.:rrncd Assistant Government Pleader for Social Well:,rrc :r1:1tc'aring lor respondent No. 1, Iearned Assistant^{(ior.ernnrt'rrt} Pleader lor I?cvcnue appearing for respondent Nos.2 :rncl i] and learned Assistant Government Plearler ir1;pcaring lor respondent Nos.4 and 5 submit th:rt simrlirr sr-rlrjcct matters have corne up for consideration bclirr.c tlr<' Hon'ble Division Bench in W.P. No.2589 I ol 2O l0 arirl []itti'fr :rnd t[rc Division Bench was pleascd to clisl;r.rst- ol tlrosc !'r1t pctitions on 14.O2.2023 and reqnesterl tlrt' Cor-rrt t() dispose of thcse writ petitions in terms of the or'<lt'rs tlaterl 14.O2.2023 passed in the above u'rit pct it i() n s.

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[n vieu of tlrc srr [rntissions rnzrdc by the respective parties, these \,rit pettti()ns :tre disposcd of in terms of the orders pirsst rl in W.P.No.2589 I <.rf 20lO and Batch dated 74.O2.2(o',23.

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'lhe impugned circular vide [-r.No.T.P.M.U.l44 of 20 1O, dated 26.07.2O7O issued bv thc respondent No.1 in W.P.No.2O14a of 20IO and the impugned proceedings vidc Letter No.6O2/LM/09, dated O7.08.2OO9 issued by thc respondent No.1 in W.P.No.4363 o{' 20 lO zrre set asidc.

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In view of thc orclers, W.l,.No- I 1343 of 201O dcclaring the irnpugned procecciings/ 1;irnchanamar of thc respondent No.3 datcd O5.O5.2O l0 scizing thc prcmiscs of the petitioner is also liable to be clccl:rr'<'cl :rs illegal.

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Accordingly, thesc n,rit peliti(,trs are disposecl of. Tl-rere shall be no order as to costs.

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Miscellaneous pctrtions, i[ :rrtr'. pt'rr<ling in (ltis rvr-it pct ition, shall stand closccl.

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SD/.K.SREERAMA MUR Y ASSISTANT REGIST

//TRUE COPY'

SECTION FFICER

To,

The Project Officer,, lntegrated Tribal^{Development Authority Utnoo,r Adilabad} District

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The District Collector, Collectorate, Adilabad.^{Adrlabad District}

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The Tahsildar, Utnoor, Adilabad^District

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The Station House Officer,, Utnoor,^{Adilabad District}

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The Station^{House Officer,} Narnoor,^{Utnoor Mandal, Adilabad Distnct}

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The^{District Collector, Collectorate, Khammam, Khammam District}

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The Superintendent of^{Police, Khammam, Khammam District}

cD-*d-

[]o

i I

The Sub collector,PALoNCHA-5071 15, Khammam Drstrict, chitoor District, Chittoor.

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The Sub Collector, BHADRACHALAM,, Khammam District

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10.The Tahsildar, Mulkalapalli Mandal, tr/ulkapalli,Khammam District

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11.The Station House offiier, Mulakapalli police station, fnammam bistrict 12.The Project Director, ITDA, Bhadrachalam, Khammam Distriii^{- -' ''}

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jq IIre 4S.en9y Divisionat Officer,, Bhadrachaiam, Khammam district

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lhe lahsildar, Dummugudem,, Dlmmugudem (M), Khammam, District. 15.One CC to Sri Lokirev Freerham ReOOy"nOvocaie ?biudi^- '-^--'*

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Two CCs to GP For Revenue, High Court for the Siite of telanoana. IOUT] 16 ffsj3: Is 3E F3I 8sr,: #!11:":iil,'fr,J::".13:i,"j l?j?Jgi+i,nyJ; ', tOUI

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(Al91g_wjth a copy of Order dated 14.02.2023 in W.p.No.25B91 ol 2010 and batch)

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Two CD Copies MBC BS

HIGH COURT

{

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DATED:^1810412023

COMMON ORDER

WP NO: 20'148,4363^{AND 11343 OF 2010}

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DISPOSING^{OF THE WRIT PETITIONS}

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A
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@ H'#

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WITHOUT COSTS

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IICJ & CVBRJ W.P.Nos.25891 of 20 1O&batch

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THE HON'BLE THE CHIEF JUSTICE UJJAL^BHTIYAN

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AND

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THE HON'BLE SRI JUSTICE C.V.BHASKAR^REDDY

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WRIT PETITION Nos.25891 of 2O10 25a94^{of 2OlO} 2 5999 of 2OLO and 3823 of 2Ol2

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COMMON ORDER:^{(Per the Hon'bletheChief JustrceUlall3hugan)}

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This order will dispose of Writ^{Petition Nos.2 589 1 of} 2O1O,25a94 of 2O1O, 25999^{ot 2O I O and 3a23 ot 2012.}

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We have heard Mr. D.Prakash Reddy,^learned Senior Counsel representitrg Ir{r.^{LokirevPreethamReddy,} learned counsel for the^petrtror-rer in^W.P.No.2589 I of^2O1O; Mr. L.Ravi Chander, learned Senior^{Counselrepresenting} Mr. Keshav Bhoopal, learned c:orrnsel for^{the petitioner in} W.P.No.25894 of 2OIO; and Mr. Saurabh Bindal,^Iearned counsel representing Mr. Keshar' tshoopal^{for the petitioners in} W.P.Nos.25999 of 201O & 3823 ot 2012.^{We have also heard} Mr. A.Sanjeev Kumar, learned^{Special GovernmentPleader}

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4 HCJ & CVBRJ W.P.Nos.25891 oJ 2O 1O&bcttclt

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attached to the office of learned Additiona,l Advocate General representing the State of Telangana; Mr. Govind Reddy, learned Special Counsel representing State of Andhra Pradesh; and Mr. B.Nalin Kumar, Iearned counsel representing Rescrwe B:rnk of India (RBI).

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Initially the present batch of writ petitions $rre filerl questioning the constitutional validity of the Anrl h rzr Przidesh Micro Finalce lnstitutions (Regulation of Money Le rrcling) Act, 20 1 1 on the ground that it was beyor-rd t he Icqislartive competence of the Andhra Pradesh Legislaturc. We nrar,, mention that petitioners are Non-Banking Financral Corporatiorrs (NBFCs) registered under the Rescr','c Bank olIrrdia r\ct, 1934 (briefly referred to hereinafter as 'the Rtsl r\ct') ancl regulatcd by the RBI.

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The above writ petitions were disposed of b-v tlris Court ufule thc judgment and order dated 11.O2.2013 takir-rg thc view that on thc same subject matter, a Ccntral Bill of 20 I 2 rvas pending before the Union Parliament.

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HCJ & CVBRJ W.P.Nos.2589l of 20 I O&batch

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This was assailed by the NBFCs before the Supreme Court by filing Special Leave Petitions which was admitted into civil appeals, being Civil Appeal No.4244 of 2Ol9 and batch.

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In the meanwhile, the Andhra Pradesh Reorganization Act, 2Ol4 came into effect from 02.06.2014 bifurcating the composite State of Andhra Pradesh into the States of Telangana and Andhra Pradcsh. Resultantly, the Andhra Pradesh Micro Finance Institutions^(Regulation and Money Lending) Act, 201 I^(was erdoptecl by thc State of Telangana whereafter a new enactment being^{Telangana Micro} Finance Institutions (Regulation of Monev Lending) Act,^{2O I I} came to be enacted.

¶141

7 . In Civil Appeal No.4244 of^2O 19 and batch, Supreme Court passed an order on 25. I 1.2019 taking the^view that the High Court could not have abclicated^{its responsibility} of deciding on the legislative comPctcnce of the^Andhra Pradesh Micro Finance Institutions^(Regulation of^Moncy

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6 HCJ & CVBRJ W. P. Nos. 2589 1 of 2O 1 O&batch

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Lending) Act, 20li (briefly referred to hereinafter as 'the 2011 Act') merely on the footing that a Central Bill of 2012, allegedly on the samc subject matter, was pending before the Union Parliament. Resultantly, Supreme Court set aside the judgment and order dated I l.O2.2Ol3 and restored the writ petitions to file. The High Court of Telangana at Hyderabad rvas dirccted to dispose of the writ petitions as early as pos s ib le

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l This is how the writ petitions are again before this

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Court

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Though the initial challenge to the 2O11 Act was on the srollncl of lack of legislative competence, during pendenc,v ol the r.r'rit pctitions. Supreme Court in NedumPalli Finance Company Limited v. State of Keralar, Civil Appeal No.5233 ol 2Ol2 decidecl on 10.O5.2O22, since reported rn 2022 SCC OnLinc SC 588. l'ras uphelcl the Gujarat High Court judgment

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2022 SCC OnLine SC 588

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I]CJ & CVBRJ W.P.Nos.2589 1 of 20 I O&batch

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declaring the Gujarat Money knders^{Act, 201 1(briefly} referred to hereinafter as the Gujarat^{Act') as u nconstitutional.}

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We may mention that legislature o[ the State^of Kerala had enacted the Kerala^Money knders^{Act, 1958} (briefly referred to hereinafter as 'the Kerala Act') to regulate the interest to be charged by^{money lendersand to provide} protection to borrowers. A batch of writ^{petitions rvas filed} before the Kerala High Court^{questioning the vahdity of the} Kerala legislation. A learned Sing1e Judge^{of the Hrgh Courtof} Kerala had dismissed the batch^{of writ petitions, n'hichorder} rvas confirmed by the division bench of the^{Keral:i High Court.} lt w:rs thereafter that NBFCs operating^{in the State o[ Kerala} filcd civil appeals before the Supreme^Court.

¶152

The Bombay Money Lenders Act,^{1946rvhich u'as} applicable to the State of Gujarat^{was invokedby the Registrar} against NBFCs operating in the^{State of Gujaratin the year} 2OO9. Challenging such action, the^{NBFCs operntingin the} State of Gujarat approached the^{High Court olGujarat-}

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HC] & CVBRJ W. P. Nos. 2589 1 of 20 I O&batch

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During pendency of the writ petitions before the Gujarat High Court, the decision of the Kerala High Court came. A learned Single Judge of the Cu.;arat High Court did not agree with the view taken by the Kerala High Court and quashed the notices issued to the NBFCs under the Bombay Money Lenders Act, 1946. Thereafter, legislature of the State of Gujarat enacted the Gujarat Act. A fresh bzrtch of writ petitions were filed before the Gujarat lIrgh Court seeking a declatation that the provisions of thc Gujarat Act are not applicable to NBFCs registered urrder the RBI Act. Division bench of the Gujarat High Court .rllos,ccl the writ pctitions holding that the Gujarat Act wirs tLltre uLrcs rlle⁽ or)stttLltion for legislative incompetence to the extent th:rt tt sor-rght to have control over NBFCs registered under thc RBI r\ct. Agerinst the aforesaid decision of the Gujarat Higl'r Court, a nunrber of civil appeals were filed by the State of Gujarat br:fore t he Supreme Court.

¶156

I 1. Both sr:ts ol civrl altpeals were heard together in Nedumpalli Finance Company Limited (supra). Question for consideration belorc rhe Strprcrnc Court was whether NBFCs

¶157

HCJ & CVBRJ W.P.Nos.2589l of 20 I O&batch

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regulated by the RBI in terms of the provisions of Chapter III-B of the RBI Act could also be regulated by State enactments, such as, the Kerala Act and the Gujarat Act. At the outset, Su preme Court made it clear that legislatures of the States of Kerala and Gujarat had the competence to enact a law for regulation of the business of money lending which is traceable to Entry 30 of List II of the Seventh Schedule to the Constitution. Therefore, what was considered by the Supreme Court u,as whether after enactment of a law by the Parliament for incorporation and regulation of NBFCs, such NBFCs would cor)tinuc to be regulated by the State enactments also on the ground that those may fall within the definition o[ the expression^"money lenders" under the State enactments. After zr thorough examination of ail relevant aspects of the mattcr including Chapter III-B of the RBI Act, Supreme Court helcl as fo llorv s:

¶160

'(r t() Orrce rt is fotrnd that Chapter tll-B of the RBI Act pr ovirlcs :r srrpervisory role for the RBI to overscc thc lirn( tr()nLnq of NlJIrCs, from the time of their birth (by wa1 olr(.qrslrirtror)) trll Ihe tinrc of their commercial death^(by wa, oi

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HCJ & CVBRJ W.P Nos.2589l of 20 I O&batch

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wrnding up),:rll ar:lrvties ol NIll"Cs automatically come under the scanncr ol RBL As il^(o s((llrcrlcc, thc single aspect of taking carc o[ the intercsl^()l llr(' borrowers which is sought to be achieved l)v rhc Statc cD.i(llrl('nts gcts subsumed in the provisions of Clriiptcr II{ B^'

¶164

1 f . i. Thus, it has bccr-t hcld that the aspect relating to protecting the intcrcst of thc borrowers which is sought to be achieved by the State enact rrrents gets subsumed in the provisions of Chapter III-B o1 the RBI Act. Thereafter Supreme Court adverted to the doctrine' of ecLipse and observed that while the RBI Act is traceable onlv to the entries in List-I, the State enactments are traccable only to entries in List-ll. Therefore, qucstion o[ rc1;r.rgnirnc,r, under Article 254 of the Constitution r.,,otrlrl not ar ist'. Nonctheless Supreme Court held that Section 45-Q of the RRI A<'t conlers ovcrriding effect upon Chapter Ill-B ot the ltBl Act over other laws. Besides, Chapter III-B is a complete Codc rn rtsclI Re.lecting the contention of the States of Gr,rjarat and Kcr:rla tllat the laws cnacted by them are in addition to thc provisions of Chaptcr III-B, Supreme Court held that provisions o['Cl.rapter III-B would eclipse the

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provisions of the State enactments insofar NBFCs are concerned. Finally, Supreme Court held that the Kerala Act and thc Gujarat Act would have no application to NBFCs registered under the RBI Act and regulated by the^{RBI Act.} Consequently, all the appeals ftled by^{NBFCs against the} judgment of the Kerala High Court were allowed and all the appeals filed by the State of Gujarat against the^judgmentof the Gujarat High Court were dismissed.

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I I .2. While pronouncing the above^judgment, an application for im pleadment was frled before the Supreme Court [:-v .r person claiming to have lodged a criminal complaint .rgainst an NBFC in the State of Tamil^Nadu. Supremc Cor-rrt cl:rrified that though it had not examined provrsions of the Tamil Nadu Pawn Brokers Act, 1943 and the Tamil Naclu Mone-r' Lenders Act, 1957, the^principles of^law laid dorvn rn Nedumpalli Finance Company Limited^(supra) would eqr-rerlly apply to these State enactments also.

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In the hearing today, we have examined the scheme and provisions of the Andhra Pradesh Micro Finance Institutions (Regulation of Moncy Lending) Act, 2O I I as well as the Telangana Micro Finance lnstrtutions (Regulation of Money knding) Act, 2O11 and we find that both the enactments are pai materia to the Kerala Act as lveLl as to the Gujarat Act.

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That being the positron, while u,e decline the relief sought for in the writ petitions i.e., to dcclzr.re the above two Acts as unconstitutional, however following the decision of the Supreme Court in Nedumpalli Finance Company Limited (supra), we hold that Nts[.-Cs opcrating in the States of Telangana and Andhra Praclcslr rcgistcrcd r,r,rth the RBI would be excluded from thc pun,icw ol t hc :rbor.c two enactments. In other words, the two en.{ctn)cnts rvill h:rve no application to NBFCs operating in the twr) Sl:lres of Telangana ancl Andhra Pradesh which are registerccl r-rnclcr the RBI Act and regulated by RBI.

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