TMI Blog2011 (4) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... ng noticed that the representation preferred by the appellant -writ petitioner is pending with the Authorities, disposed of the writ petition by the impugned order dated 14th December 2009 with a direction to decide the said representation, giving rise to the appeal. ( 3. ) The other appeals, i.e. Letters Patent Appeals Nos. 1094, 1095 and 1097 of 2010, have been preferred by State of Gujarat or its Authorities against the common judgement dated 13th January 2010 passed in four different writ petitions, wherein learned Single Judge held that the Bombay Money -Lenders Act, 1946, would not be applicable to the companies, which are Non -Banking Financial Companies (hereinafter referred to as 'N.B.F.Cs.') and governed by Chapter III of the Reserve Bank of India Act, 1934 (hereinafter referred to as 'the R.B.I. Act'), and thereby set aside the notices issued by the Assistant Registrar (Money -Lending) to four different companies under the Money -Lenders Act. ( 4. ) The questions required to be determined in these appeals are : - (i) whether the Bombay Money -Lenders Act, 1946, apply to the Non -Banking Financial Companies? and (ii) whether the Bombay Money -L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it that if Chapter III of the R.B.I. Act is read in its entirety, it would mean that these provisions are made for protection of the interest of the depositors. There is no provision in this Chapter by which a borrower, who has taken loan from N.B.F.Cs., is granted protection. ( 8. ) Learned Counsel for the State would further contend that the Circular dated 24th May 2007 issued by the Reserve Bank of India refers to charging excessive rates of interest by N.B.F.Cs as against Fair Practices Code. There are no steps indicated by Reserve Bank of India against N.B.F.Cs. to be taken in such circumstances. The provisions contained in Chapter IIIB of R.B.I. Act, as amended in 1997, according to him, have been introduced altogether for different objects and purpose, and do not meet with the requirement of the provisions contained under the Money - Lenders Act. While assailing the common judgment dated 13th January 2010 rendered by the learned Single Judge, learned A.G.P. would contend that the learned Single Judge has allowed the writ petitions solely on the ground that in view of Chapter IIIB of the R.B.I. Act, the provisions of Money -Lenders Act will not apply to N.B.F.Cs., therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, which will be dealt with at appropriate stage, and submitted that no interference is called for against the common judgment dated 13th January 2010 passed by the learned Single Judge. ( 12. ) We have heard learned Counsel appearing on behalf of the parties, perused the record and considered the provisions of law referred to above and different decisions of the Supreme Court and Federal Court. ( 13. ) For the determination of the issue, it is important to notice the relevant provisions of the Money - Lenders Act and the R.B.I. Act. The Bombay Money -Lenders Act, 1946 : - Sec.2 contains 'Definitions', sub -Sec.(2) relate to 'business of money -lending', sub -Sec.(4) defines 'Company', sub -Sec.(6) defines 'interest', sub -Sec.(9) defines 'loan' and sub -Sec.(10) defines 'money -lender'. The definitions of 'business of money -lending', 'Company' and 'money -lender', being important for determination of the issue, are quoted hereunder : - Sec.2(2). business of money -lending means the business of advancing loans whether or not in connection with or in addition to any other business; Sec.2(4). C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) formed in pursuance to an Act of Parliament, (iii) formed by Royal Charter or Letters Patent, or (iv) by an Act of Legislature of the British Possession. It do not include any Company under the Indian Companies Act, 1956. ( 15. ) Under Sec.2(10) 'money -lender' includes : - (i) an individual, (ii) an undivided Hindu family, (iii) a Company i.e.: (a) a Company as defined under the Indian Companies Act, 1913, (b) a Company formed in pursuance of an Act of Parliament, (c) a Company formed by Royal Charter or Letters Patent and (d) a Company formed by an Act of Legislature of British Possession (iv) an incorporated body of individuals, and (v) other banking financial or any institution which the State Government may, by notification in the official Gazette specified in this behalf. ( 16. ) From the aforesaid provisions of the Money -Lenders Act, it will be evident that (i) no Company incorporated under the provisions of the Indian Companies Act, 1956, is covered by Money -Lenders Act, and (ii) in absence of any notification issued by the State Government, no banking financial or any institution carries on the business of money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person, but does not include any institution, which carries on as its principal business, (a) agricultural operations, or (aa) industrial activity; or Explanation. - For the purposes of this clause, industrial activity means any activity specified in sub -clauses (i) to (xviii) of clause (c) of Section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964); (b) the purchase, or sale of any goods (other than securities) or the providing of any services; or (c) the purchase, construction or sale of immovable property, so however, that no portion of the income of the institution is derived from the financing of purchases, constructions or sales of immovable property by other persons; (e) 'non -banking institution' means a Company, corporation, or co -operative society; (f) 'non -banking financial Company' means - (i) a financial institution which is a Company; (ii) a non -banking institution which is a Company and which has as its principal business the receiving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, and such non - banking financial companies shall be bound to follow the policy so determined and the direction so issued. (2) Without prejudice to the generality of the powers vested under sub -Section (1), the Bank may give directions to non -banking financial companies generally or to a class of non banking financial companies or to any non -banking financial Company in particular as to - (a) the purpose for which advances or other fund based or non -fund based accommodation may not be made; and (b) the maximum amount of advances of other financial accommodation or investment in shares and other securities which, having regard to the paid -up capital, reserves and deposits of the non - banking financial Company and other relevant considerations, may be made by that non -banking financial Company to any person or a Company or to a group of companies. Reserve Bank of India has complete regulative control and regulative power as evident from different provisions of Chapter IIIB, including Secs.45 -IB, 45 -IC, 45J, 45K, 45L, 45M, 45MA. Interest of the depositors has been taken care u/Sec.45 -MB, which deals with 'power of bank to prohibit acceptance of deposit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enders Act. ( 20. ) Per contra, it will be evident that 'Company' as defined in Sec.3 of the Indian Companies Act, 1956, come within the definition of Section 45 -I(aa) of the R.B.I. Act. Sec.3 of the Indian Companies Act, 1956, defines 'Company', including the companies integrated under the Indian Companies Act, 1956, Indian Companies Act, 1982, Indian Companies Act, 1913, etc. as evident from the said provision, which reads as follows : - 3.Definitions of Company , Existing Company , Private Company and Public Company . - (1) In this Act, unless the context otherwise requires, the expressions Company , existing Company , private Company and public Company shall, subject to the provisions of sub - Section (2), have the meanings specified below : - (i) Company means a Company formed and registered under this Act or an existing Company as defined in clause (ii); (ii) existing Company means a Company formed and registered under any of the previous companies laws specified below : - (a) any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866.) and repealed by that Act; (b) The Indian Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), and such companies shall be deemed, for the purposes of this Act, to have been formed and registered outside India : - (a) a Company the registered office where of is in Burma, Aden or Pakistan, and which immediately before the separation of that country from India was a Company as defined in clause (i) of subSection (1); (3) Every private Company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid -up capital of less than one lakh rupees, shall, within a period of two years from such commencement, enhance its paid -up capital to one lakh rupees. (4) Every public Company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid -up capital of less than five lakh rupees, shall within a period of two years from such commencement, enhance its paid -up capital to five lakh rupees. (5) Where a private Company or a public Company fails to enhance its paid -up capital in the matter specified in sub -Section (3) or sub -Section (4), such Company shall be deemed to be a defunct Company within the meaning of Section 560 and its name shall be struck off from the register by the Registrar. (6) A Company registered under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke laws with respect to any matter for any part of the territory of India not included 2[in a State] notwithstanding that such matter is a matter enumerated in the State List. ( 23. ) Entry 30 of List -II of the 7th Schedule relates to 'money -lending' and 'money -lenders' apart from 'relief of agricultural indebtedness'. Legislature of a State has exclusive power to make law for such State or any part thereof, but it will be subject to clause (1) and (2) of Art.246. Therefore, if any law has been made by the Parliament in its exclusive power in respect to matters enumerated in List -I or List -III in the 7th Schedule, the law in respect of such matter, if any, enacted by the Legislature of any State, shall be subject to the law made by the Parliament. Thus, a State Act is always subject to a Central Act. ( 24. ) Sec .45Q of the R.B.I. Act referred to above makes it clear that the provisions of Chapter IIIB of the R.B.I. Act shall have the overriding effect notwithstanding anything inconsistent therewith contained in any other law, which includes the Money -Lenders Act, a State law, which is quoted hereunder : - 45Q. Chapter IIIB to override othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Art.254 is not complex. The real problem can be only noticed while determining whether a particular State law is repugnant to a Central Act. In case of Shyamakant Lal v. Rambhajan Singh reported in AIR 1939 FC 74 the Federal Court laid down the principle of construction in regard to repugnancy, relevant portion of which reads as follows : - When the question is whether a provincial legislation is repugnant to an existing Indian law, the onus of showing its repugnancy and the extent to which it is repugnant should be on the party attaching its validity. There ought to be a presumption in favour of its validity, and every effort should be made to reconcile them and construe both so as to avoid their being repugnant to each other; and care should be taken to see whether the two do not really operate in different fields without encroachment. Further, repugnancy must exist in fact, and not depend merely on a possibility: 'Their Lordships can discover no adequate grounds for holding that there exists repugnancy between the two laws in districts of the Province of Ontario where the prohibitions of the Canadian Act are not and may never be in force: (1896) AC 348 at pages 369 -7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amountcy does not operate merely because the Dominion has legislated on the same subject matter. The doctrine of 'occupied field' applies only where there is a clash between Dominion Legislatic and Provincial Legislation within an area common to both. Where both can co -exist peacefully, both reap their respective harvests. (Please see : Canadian Constitutional Law by Laskin - pp. 52 -54, 1951 Edn.). 64. Many more decisions were brought to our notice, bearing on paramountcy, 'occupied field,' repugnancy and inconsistency. They were elaborated by Counsel sufficiently to convince us that lawyer's law is divorced from plain semantics and common understanding of Constitutional provisions becomes a casualty when doctrinal complexities are injected. May be every profession has a vested interest in the learned art of incomprehensibility for the laity. Law, in the administration of which the Bench and the Bar are partners, probably lives up to this reputation. ( 30. ) The parameter of repugnancy has been laid down by the Supreme Court in the case of M. Karunanidhi v. Union of India reported in (1979) 3 SCC 431, wherein the Supreme Court observed as under : - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aws, the Industrial Disputes Act and the Rajasthan Act tread on the same field and both laws deal with the rights of dismissed workman or employee. But these two laws are not inconsistent or repugnant to each other. The basic test of repugnancy is that if one prevails the other cannot prevail. That is not the position in this case. ... ( 32. ) In the case of Ahmedabad Mill Owners' Association v. I.G. Thakore reported in (1964) 5 GLR 705 a Division Bench of this Court while upheld the validity of State legislation observed that the object of the two statutes may be similar and yet there would be no repugnancy if they supplement each other and co -exist if the paramount legislation does not cover the entire field occupied by the State law and is not inconsistent with the latter. ( 33. ) In the present case, we have noticed that State Government has not issued any notification u/Sec. 2(10)(v) of the Money Lenders Act bringing banking financial or any institution within the definition of 'money -lender'. A 'Company' as defined under sub -Sec.(4) of Sec.2 of the Money -Lenders Act, which includes a 'Company' under Indian Companies Act, 1913, though com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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