Jayant Patel, J.@mdashAs common questions arise for consideration in all the petitions, they are being considered by common judgment.
2. In all the petitions, the challenge by the petitioners is the initiation of the action of the respondent authorities under Bombay Money Lenders Act, 1946 (hereinafter referred to as "Money Lenders Act/M. L. Act"). Basis of all the petitions are that the petitioners are Non-Banking Finance Companies (N.B.F.Cs.) registered under the Companies Act and they are being regulated and governed by the provisions of Reserve Bank of India Act, 1934 (with the amendment and more particularly Chapter-IIIB) (hereinafter referred to as "R.B.I. Act"). They are under the control and supervision of Reserve Bank of India for the purpose of issuance of instructions and guidelines, therefore, they are not governed by the provisions of M.L. Act which is a State Act. As the concerned Registrar under M. L. Act has issued notice calling upon the petitioners to produce the accounts and documents for verification as to whether the provisions of M. L. Act are being complied with or not, failing which the fine and the other consequence may arise by initiation of the action under the M. L. Act, all the petitioners have approached to this Court by the present petitions for challenging the legality and validity of the action of issuing notice by the concerned Registrar under the M. L. Act.
3. It is an undisputed position that neither the petitioners are registered under M. L. Act as money lenders nor have obtained any licence under M. L. Act. It may be recorded that M. L. Act is a State Act enacted by the State legislature for the then State of Bombay and has been adopted in Gujarat State for its enforcement and is in operation in Gujarat State. Whereas R.B.I. Act is a Central Act enacted by the Parliament.
4. In order to examine the controversy, reference to certain provisions of R.B.I. Act would be relevant and more particularly Chapter 3B of the R.B.I. Act which has been inserted by Act No. 55 of 1963. The objects and reasons for insertion of Chapter-IIIB would assume importance in order to better understand the controversy. The same reads as under:
The existing enactments relating to Banks do not provide for any control on companies or institutions, which although they are not treated as Banks, accept deposits from the general public to carry on other business which is allied to Banking. For ensuring more effective supervision and management of the monetary and credit system by the Reserve Bank, it is desirable that the Reserve Bank should be enabled to regulate the conditions on which deposits may be accepted by this non-Banking companies or institutions. The Reserve Bank should also be empowered to give any financial institution or institutions directions in respect of matters, in which the Reserve Bank, as the Central Banking institution of the country, may be interfered from the point of view of control over the credit policy. The Reserve Bank''s powers in relation to commercial Banks should also be enhanced and extended in certain directions, so as to provide for stricter supervision of the operations and working of such Banks.
5. The aforesaid makes it clear that the intention of the Parliament to insert the provisions of Chapter-3IIIB inter alia is to control and regulate the conditions for acceptance of the deposit and to control the credit policy of Non-Banking Finance Companies and the financial institutions (hereinafter referred to as "N.B.F.C").
6. At this stage, it would be profitable to advert the observations made by the Apex Court in the case of
Interpretation must depend on the text and the context. They are the basis of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are import. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then Section by Section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the Sections, clauses, phrases and words may taken colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses, we must look at the Act as a whole and discover what each Section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court construed the expression ''Prize Chit'' in Srinivasa and we find no reason to depart from the Court''s construction.
7. Reference to certain provisions of the said Chapter in R.B.I. Act would also be relevant.
Section 45I(a) defines "business of a non-Banking financial institution" means carrying on of the business of a financial institution referred to in the Clause (c) and include business of a non-Banking financial company referred to in Clause (f)."
Clause 45I(c) provides for the definition of "financial institution" which means any non-Banking institution which carries on as its business or part of its business any of the activities of; whetherby way of loans or advances or otherwise and others. But it does not include the institution which carries on its principal business of agricultural operations or industrial activity.
Section 45IA requires registration of such non-Banking financial institutions.
Section 45IB provides for maintenance of the percentage of assets, etc. Section 45IC provides for reserve fund.
Section 45J provides for regulation of prospectus etc. and the pertinent aspect is that Section 45JA has been inserted in this Chapter by amending Act No. 23 of 1987 which reads as follows:
(1) If the Bank is satisfied that, in the public interest or to regulate the financial system of the country to its advantage or to prevent the affairs of any non-Banking financial company being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the non-Banking financial company, it is necessary or expedient so to do, it may determine the policy and given directions to all or any of the non-Banking financial companies relating to income recognition, accounting standards, making of proper provisions for Bank and doubtful debts capital adequacy based on risk weights for assets and credit conversion factors for off balance-sheet items and also relating to deployment of funds by a non-Banking financial company or a class of non-Banking financial companies generally, as the case may be, and such non-Banking financial companies shall be bound to follow the policy so determined and the directions so issued.
It may also be recorded that the object and reason behind Act No. 23 of 1987, whereby the aforesaid provisions of Section 45JA was inserted in the R.B.I. Act, inter alia provides for regulating the acceptance of the deposit by such non-Banking financial companies and ensure the repayment of such deposits.
Section 45K provides for power of R.B.I. to collect the information from non-Banking financial companies.
Section 45L provides for the power with the R.B.I. to call for the information from financial institutions and to give directions in order to regulate the credit system of the country to its advantage.
Section 45M of the Act provides for the duty of non-Banking financial institutions to furnish information.
Section 45MA provides for powers and duties of auditors.
Section 45MB provides for power of the R.B.I. to prohibit acceptance of deposits.
Section 45MC provides for power of R.B.I. to file winding-up petition. Section 45N provides for inspection.
Section 45NA provides for prohibition of solicitation of deposits by unauthorized persons.
Section 45NB provides for disclosure of information.
Section 45NC provides for powers with the R.B.I. to grant exemption.
Section 45Q provides for overriding effect which is relevant and which reads as under:
45Q. Chapter IIIB to override other laws:
the provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time-being in force or any instrument having effect by virtue of any such law.
The provisions of this Chapter shall have the overriding effect and shall stand over any law inconsistent therewith for the time-being in force or any instrument having effect by virtue of law.
8. The aforesaid provisions of Chapter-IIIB of R.B.I. Act goes to show that the Parliament by insertion of the said Chapter has intended to authorise the regulation of the activities of business through R.B.I. as per the Banking Regulation Act and such regulation of Banking business activities of non-Banking financial institutions includes the acceptance of the deposit and also the deployment of its funds for private advance and investment of such funds.
9. The Bombay Money Lenders Act enacted in the year 1946 by the State Legislature was enacted with the purpose to regulate and control the transaction of money lending in the State. Reference to certain provisions of the Money Lenders Act would also be relevant.
Section 2(9) of the M.L. Act provides for definition of the "loan" which reads as under:
"loan" means an advance at interest whereof money or in kind, but does not include:
(a) deposit of money or other property in a Government Post Office, Bank or in any other Bank or in a Company or with a Co-operative Society;
(b) a loan to, or by, or a deposit with any society or association registered under the Societies Registration Act, 1860 (XXI of 1860) or any other enactment relating to a public, religious or charitable object;
(c) a loan advanced by Government or by any local authority authorised by Government;
[(cc) a loan advanced to a Government servant from a fund, established for the welfare or assistance of Government servants, and which is sanctioned by the State Government;]
(d) a loan advanced by a co-operative society;
(d1) an advance made to a subscriber to, or a depositor in, a Provident Fund from the amount standing in his credit in the fund in accordance with the rules of the fund;
(d2) a loan to or by an Insurance Company as defined in the Insurance Act, 1938 (VI of 1939)];
(e) a loan to, or by Bank;
(f) an advance made on the basis of a negotiable instrument as defined in Negotiable Instruments Act, 1881 (XXVI of 1881), other than a promissory note;
[(g) except for the purposes of Sections 23 and 25,:
(i) a loan to a trader;
(ii) a loan to a money lender who holds a valid licence; or
(iii) a loan, by a landlord to his tenant for financing of crops or seasonal finance, of not more than Rs. 50 per acre of land held by the tenant;
(iv) a loan advanced to an agricultural labourer by his employer;]
Section 2(10) provides for the definition of Money Lender which reads as under:
(10) "money lender'' means:
(i) an individual, or
(ii) an undivided Hindu Family; or
(iii) [xxx]
[(iiia) a company, or]
(iv) an un-incorporated body of individuals, who or which
(a) carries on the business of money lending in the [State]; or
(b) has his or its principal place of such business in the [State];
The aforesaid Section 2(10) of the M.L. Act does provide for inclusion of a Company and the word "Company" is defined as per the Section 2(4) which defines the "Company" means as defined in the Companies Act or formed under the Act of U.K. or Royal Chapter of Letters Patent or by an Act of Legislature of a British possession.
Section 3 provides for appointment of Registrar and Section 4 provides for maintenance of the Register of money lenders. Section 5 provides for bar of moneylending business in the area except under licence and except in accordance with the terms of the licence. Section 6 provides for application for licence and Section 7 provides for grant of licence. There are powers and control for the supervision with the Registrar for cancellation of the licence etc. Section 21 of the M.L. Act provides for non-obstante clause in suit, if there is any breach of the provisions of Sections 18 or 19. the same reads as under:
21. Procedure of Court in suit regarding loans: Notwithstanding anything contained in any law for the time-being in force, in any suit to which the Act applies:
(a) Court shall, before deciding the claim on merits, frame and decide the issue whether the money lender has complied with the provisions of Sections 18 and 19;
(b) If the Court finds that the provisions of Sections 18 or 19 have not been complied with by the money-lender, it may, if the plaintiffs claim is established, in whole or in part, disallow the whole or any portion of the interest found due, as may seem reasonable to it in the circumstances of the case and may disallow costs.
Section 25 of the Act provides the enabling power with the State Government to limit the rate of interest, which reads as under:
25. Limitation on rates of interest : (1) The (State) Government may from time to time by notification in the Official Gazette fix the maximum rates of interest for any local area or class of business of money-lending in respect of secured and unsecured loans:
(2) Notwithstanding anything contained in any law for the time-being in force, no agreement between a money-lender and a debtor for payment of interest at rates exceeding the maximum rates fixed by the [State] Government under Sub-section (1) shall be valid and no Court shall in any suit to which the Act applies award interest exceeding the said rates.
[(3) [If any money lender or a person advancing a loan specified in Sub-clause (g) of Clause (9) of Section 2 makes an oral or written demand or charges or receives] from a debtor interest at rate exceeding the maximum rate fixed by the (State) Government under Sub-section (1) he shall, for the purposes of Section 34, be deemed to have contravened the provisions of this Act.]
10. Two aspects deserves to be noted : one is that the M.L. Act is essentially with the purpose of regulating transaction of money lending and it enables the State Government to control the rate of interest in the field of money lending. The second aspect is that at the time when the M.L. Act was enacted by the State Legislature, or the amendment made from time to time which is upto 1963 by Gujarat Act No. 44 of 1963, there was no provision made under R.B.I. Act for regulation of the Banking business of non-Banking financial companies since Chapter-IIIB has been inserted on the statute book with effect from 16-11-1963 and the further pertinent aspect is that Section 45Q was inserted on 1-2-1964 in R.B.I. Act. Section 45JA, as referred to hereinabove, has come into force w.e.f. 9-1-1997.
11. The next aspect to be considered is the applicability of M.L. Act to a non-Banking financial institution or non-Banking financial companies. As observed earlier, Central Act (R.B.I. Act) provides to regulating of the Banking business by non-Banking financial institution through Reserve Bank of India, whereas, the State Act (M. L. Act) provides for regulating the transaction of money lending by the money lenders. The business of non-Banking financial companies as defined in Explanation II of Section 45I provides as under:
Any credit given by a seller to a buyer on the sale of any property (whether movable or immovable) shall not be deemed to be deposit for the purposes of this clause
[(c) "financial institution" means any non-Banking institution which carries on as its business or part of its business any of the following activities, namely:
(i) the financing, whether by way of making loans or advances or otherwise, of any activity other than its own.
12. The aforesaid shows that the business of N.B.F.C. which is sought to be controlled and regulated by Chapter-IIIB of R.B.I. Act includes the financing whether by way of loan or advances or otherwise. Further, Section 45J of the said Act enables the R.B.I. to determine the policy and issue directions to such N.B.F.C. which includes the matter relating to deployment of funds by N.B.F.C. The conjoint reading would go to show that the business of financing by such N.B.F.C. is regulated by the provisions of Chapter-IIIB of the R.B.I. Act. There are enabling power with the R.B.I. to issue such instructions and directions and they are binding to N.B.F.C. It can hardly be disputed that the charging of rate of interest for the loans or advances is not an integral component of such business. The regulation of such business of giving loan or advances can be equated with the moneylending. Therefore, the situation confronted with is that the State Act as existed prior to the insertion of Section 45JA did provide for regulation of the business of moneylending by the State Act. Whereas by subsequent legislation enacted by the Parliament, such business of moneylending by N.B.F.C. is sought to be regulated through R.B.I. The aforesaid is coupled with the circumstance that Section 45Q of R.B.I. Act enacted by the Parliament provides for overriding effect, if there is inconsistency to any other law for the time-being in force or any instrument having having effect by virtue of any other such law.
13. At this stage, reference to the certain observations made in the decision of this Court in the case of
Therefore, if the interpretation of Mr. Shelat is accepted as that of Section 39 that it is only the University has the right to open a Post-Graduation Centre, then in that case, such would result into curtailing the operation of the laws made in the Parliament as against the State Legislature by virtue of Section 39 of the Act. It is by now well settled, as per the principles for interpretation of the statutes, that attempt on the part of the Court first will be to reconcile the different statutory provisions so as to allow them to operate independently and if such is not possible, the Court may read down the provisions so as to leave room for operating the legislature having overriding effecting and if there is a direct conflict, either the provisions may be declared in operative or may be ultimately struck down as ultra vires. It is not in dispute that the subject of M.Ed., is of higher education covered by Entry No. 66, and consequently, in the field of Parliament to make laws for regulating the education. Therefore, the State Legislature even if is on the statute book has to make room for operation of the laws made by the Parliament when covered by the subject of Parliament.
14. The examination of the situation in light of the aforesaid goes to show that Parliament has not made the law for regulating the business of moneylending activity in the country by all persons including N.B.F.Cs.. But, it has made law for regulating the activities of loans and advances by specific class of persons, viz. N.B.F.Cs. Whereas, the State law provides for controlling and regulating the business of moneylending for all persons which includes the Companies registered under the the Companies Act. The minute examination of the definition of the word ''Company'' under the M. L. Act refers to only the Companies defined under the Companies Act, 1913, or the Companies formed in pursuance of the Act of U.K. or by Royal Charter of Letters Patent, or by an Act of Legislature of British possession. It does not refer to the Companies registered under the Companies Act, 1956. If the said provisions of M. L. Act is liberally interpreted keeping in view the principles of purposive interpretation, it would include the Companies registered under the Companies Act, 1956, like the petitioners herein. If the literal interpretation is considered, M. L. Act may not apply to the petitioning companies which are registered under the Companies Act, 1956, but the liberal interpretation would show that M. L. Act may be made applicable to subsequent companies registered under the Companies Act, 1956. It may be that in absence of any specific law made by the Parliament, the provisions of State legislature of M. L. Act may be made applicable for such Companies. However, once the Parliament having enacted the law for regulating the activities of loans and advances through R.B.I. of such Companies which are covered in the definition of N.B.F.C. or which are termed as N.B.F.C. under Chapter-IIIB of the Act, if the application of M. L. Act to such N.B.F.Cs. are allowed to continue, there would be overlapping of the State legislature over the laws made by the Parliament to that extent. As observed earlier, when the State legislature enacted M. L. Act, for the Companies like N.B.F.Cs. in the present case, activities were not being regulated by any laws of the Parliament. It is only after the insertion of the Chapter-IIIB, more particularly after 1997 by insertion of Section 45JA, the regulation is made and business is controlled in the field of credit by such N.B.F.Cs. through R.B.I. As observed earlier, the said provisions of Chapter-IIIB applies with non-obstante clause as provided u/s 45Q of R.B.I. Act. Therefore, if provisions of Chapter IIIB of R.B.I. Act is allowed to operate qua N.B.F.Cs. so far as relating to moneylending with the application of M. L. Act for moneylending by such N.B.F.Cs., not only the anomalous situation may arise, but there would also be conflict of both the laws qua applicability of the Companies which are N.B.F.Cs. However, Chapter-IIIB of the R.B.I. Act applies to only Companies which are N.B.F.Cs., whereas, M.L. Act applies to all Companies. Therefore, in order to reconcile the situation, the provisions of M. L. Act and more particularly Section 4 providing for the definition of the Companies deserves to be read down to the extent that the Companies which are N.B.F.Cs. and covered and regulated by the provisions of Chapter-IIIB of the R.B.I. Act, would not be covered in the definition of Companies under M. L. Act. The aforesaid appears to be just and proper in order to reconcile both the statutes allowing them to operate instead further examining the constitutional validity of the M. L. Act and more particularly the definition clause as provided u/s 2(4) in light of the specific law made by the Parliament by insertion of Chapter-IIIB under R.B.I. Act.
15. Even otherwise also, as observed earlier, the State legislature has to make room for enforceability of the laws made by the Parliament. It is not the case of the State that the subject of money lending is exclusively under the State List and the Parliament has no competence to enact the law for regulating the business of the Companies like N.B.F.Cs. Therefore, under these circumstances, if the laws made by the Parliament is to operate over the earlier laws made by the State legislature, it would be reasonable to hold that the Companies which are covered under Chapter-IIIB of R.B.I. Act, would not be falling under the definition of the word Company u/s 2(4) of the M. L. Act.
16. It may be incidentally recorded that R.B.I. in the said letter dated 26-7-2005 to the Principal Secretary (Finance) of the State Kerala, copy whereof is produced at Annexure-H in Spl.C.A. No. 13163 of 2008 has stated for avoiding duality of regulation and regulatory or legislative overlapping for N.B.F.Cs. and for exempting the N.B.F.Cs. from the applicability of the Kerala Money Lenders Act. Paragraphs 3, 4, and 5 reads as under:
3. The registration is being granted to N.B.F.Cs. on assessment and evaluation of various factors laid down in the R.B.I. Act. The Bank had issued detailed directions to the N.B.F.Cs. on the acceptance of public deposits and compliance with the prudential norms relating to income recognition asset classification, provisioning, etc. the Bank is closely supervising the N.B.F.Cs. allowed to accept public deposits through a comprehensive mechanism comprising on-site examination on C.A.M.E.L.S. pattern, off-site surveillance, a sensitive market intelligence system and initiating necessary supervisory action wherever necessary. The statutory auditors of N.B.F.Cs. have also been made responsible for direct reporting to the Bank on the contravention of the R.B.I. Act/Directions by the N.B.F.Cs. noticed by them during the course of their audit. These measures broadly aim at protecting the interests of the depositors as also ensuring the soundness of the financial system.
4. Therefore, in order to avoid duality of regulation and any regulatory legislative overlapping, it is considered necessary that N.B.F.Cs. registered with Reserve Bank may be exempted from the provisions of Kerala Money Lenders Act operating in the State. In this regard, we had earlier written to all the Government of States and Union Territories vide our letter D.O. D.N.B.S. (P.D.) No. 396/6.30/2001-2002 dated October 30, 2001 (copy enclosed). Subsequently, we had also requested you in the matter vide letter D.N.B.S. (P.D.) No. 150/6.30/2002-2003 dated August 21, 2002 and further vide D.O.. D.N.B.S. (P.D.) No. 720/06.30/2002-2003 dated April 3, 2003 (copies enclosed). However, it is observed that Kerala Money Lenders Act continues to be applicable to the registered N.B.F.Cs., as well.
5. May I, therefore, request you to kindly look into the matter and consider exempting the N.B.F.Cs. registered with the Reserve Bank of India from the Kerala Money Lenders Act in order to avoid duality/overlap of regulation.
The aforesaid shows that the as per the R.B.I., on account of the enforcement or applicability of Kerala Money Lenders Act in the State of Kerala, there is duality and overlapping of Regulations of the functioning and business of N.B.F.Cs. which deserves to be avoided.
17. The learned Counsel for the petitioner had relied upon the decision of this Court (Coram : P. B. Majmudar, J.) in the case of Sundaram Finance Ltd. v. State of Gujarat reported at 2006 (2) GLH 362 for contending that this Court in the said decision did rule that if the license is not obtained under the M.L. Act by N.B.F.C, it is not an offence.
18. Whereas, the learned G.P. relied upon the another decision of this Court (Coram : M. R. Shah, J.) in the case of
19. The pertinent two aspects deserve to be recorded; one is that in both the cases, the question arose for commission of the offence and quashing of the complaint. In both the decisions, this Court proceeded for examining the definition of the word "trader" or the word "loan" for further examining the requirement of the licence. In none of the decision, this Court had an occasion to examine the operation of the law made by the Parliament by subsequent legislation over the laws made by the State of M. L. Act nor had an occasion to examine the definition of the word ''Company'' under the M.L. Act so as to make room for operation of the law made by the Parliament of Chapter IIIB under the R.B.I. Act for regulating the business of the companies which are N.B.F.Cs. In none of the case this Court had an occasion to examine as to whether the provisions of M. L. Act can be applied to the Company having character of N.B.F.C. and covered by Chapter IIIB of R.B.I. Act nor the Court had an occasion to examine as to whether there is overlapping of the laws made by the Parliament vis-a-vis the laws made by the State Legislature. Further, the pertinent aspect is that in none of the case the attention of the Court was drawn to the provisions of Section 45Q of R.B.I. Act having non-obstante clause with an overriding effect over any other law for the time-being in force or any other instruments having effect by any such law. In any case, this Court in none of the decision had an occasion to examine the question as to whether the competent authority under the M. L. Act had power or competence to initiate the proceedings by issuing notice to the N.B.F.C. or not. Therefore, when the issue is not considered and/or not decided in light of the enforceability of the laws made by the Parliament over the State Legislation, it can hardly be accepted that the issues, which arise for consideration in the present case are covered in either way by the aforesaid decision of this Court.
20. Mr. Jani learned Government Pleader appearing for the State authorities did rely upon the decision of Kerala High Court in the case of
21. Firstly, when the aforesaid decision was rendered by the Kerala High Court on 10-3-1995 (though reported in 2001), Section 45JA authorizing the R.B.I. to determine the policy and issue directions was not on the statute book which has come into effect from 9-1-1997 by Act No. 23 of 1997. As observed earlier Section 45JA controls the field of enabling power with the R.B.I. to issue directions to accept deposits and deployment of fund by N.B.F.Cs. Further, the matter has not been examined by the High Court of Kerala in the said decisions for making room by the State Legislature to operate the laws made by the Parliament and in respect to a specific field covered by loans and advances to be made by N.B.F.Cs. in its business. Further, in decision of Kerala High Court, the matter was examined in light of the definition of the word "person" under the General Clauses Act, whereas under M. L. Act there is specific definition of the word "Company". In view of these peculiar circumstances, with respect, I cannot concur with the ultimate conclusion held by the High Court of Kerala that the provisions of M. L. Act would apply to the companies which are N.B.F.Cs..
22. Mr. Jani learned Government Pleader for the State Government heavily contented that, as on today, R.B.I. has not issued any instruction to control the chargeability of rate of interest in the transaction of loan by N.B.F.Cs., whereas the State under M. L. Act, for all money lenders has prescribed the rate of interest. If this Court, holds that the provisions of M. L. Act would not apply to the companies like N.B.F.C., they would be at the liberty to charge exorbitant rate of interest from the loanees and may result into permitting exploitation of the loanees. It was therefore submitted that keeping in view the object behind the M. L. Act this Court may hold that the control under the M. L. Act would apply also to the loans given by N.B.F.Cs.
23. It is true that the essential purpose of M. L. Act is to regulate the transaction of money lending and certain provisions of the M. L. Act do provide for protection against exploitation by the money lenders. At the same time, Chapter IIIB and more particularly Section 45JA of the R.B.I. Act enables the R.B.I. to issue such directions as may be required for controlling and regulating the credit policy in the country which includes for deployment of fund by N.B.F.C. for loans and advances. It is by now well accepted that status of R.B.I. is like that of a Bankers'' Bank and as an expert for management of the monetary and credit system in the country. The communication produced by the petitioner in Spl.C.A. No. 12457 of 2009 at Annexure-C provides for the instructions issued by R.B.I. of Fair Practices Code for N.B.F.Cs. Further, the copy of the letter dated 26-7-2005 produced at Annexure-H in the compilation of Spl.C.A. No. 13163 of 2008 shows that R.B.I. has addressed letter to the Principal Secretary (Finance) of the State of Kerala to examine the avoidance of dual Regulation and Legislative overlapping for N.B.F.Cs., possibly because of the aforesaid decision of the Kerala High Court in the case of Line Hire-Purchase and Leasing Co. (Pvt.) Ltd. (supra) taking the view that the provisions of Kerala Money Lending Act can apply to the N.B.F.Cs.
24. The aforesaid goes to show that the R.B.I. has issued instructions for charging a fair rate of interest. If the State Government is of the view that because of no specific rate of interest provided by R.B.I. in the instructions for chargeability of the rate of interest to the loans and advances by N.B.F.Cs. and the resultant situation is of permitting exploitation, it would be for the State Government to draw the attention of the competent authority of R.B.I. in this regard with the material in support thereof and when R.B.I. is clothed with the power u/s 45JA, it will be for the State to request the R.B.I. to issue specific directions for a particular rate of interest or otherwise. No final opinion deserves to be expressed by this Court more particularly because it is for the R.B.I. to examine all the relevant aspects and to issue appropriate directions or instructions, if required to N.B.F.Cs. keeping in view the object of supervision over the credit policy and monetary fund of such N.B.F.Cs.
25. In any case, the provisions of the Constitution is supreme over all sentiment, may be of the State Government or the Central Government. If the scheme of the Constitution provides for making room for operation of laws made by the Parliament for a particular class of Companies over the State legislature, its effect cannot be diluted nor can be dissected on such contention as sought to be canvassed. Therefore, leaving the State Government to draw the attention of R.B.I. for making appropriate representation for such purpose, and expecting the R.B.I. to play proactive role as per the provisions of Section 45JA of R.B.I. Act, no further view deserves to be expressed in this regard and the matter is left therewith the only observation that on such contentions the applicability of M. L. Act to the Companies like N.B.F.C. cannot be maintained.
26. Mr. Jani, learned G.P. for the State authorities had also contended that the matter is at the stage of show-cause notice for initiation of the process under M. L. Act and the petitioners can appear before the authorities under the M. L. Act by showing cause including for non-applicability of the provisions of M. L. Act to them. Therefore, keeping in view the said aspects, this Court may decline the entertainment of the petition under Articles 226 and 227 of the Constitution.
27. It is by now well settled that if the initiation of the action is wholly without jurisdiction, it would be a case for entertainment of the petition under Articles 226/227 of the Constitution and the bar of self-imposed restriction would apply only in cases where the initiation of action is not without jurisdiction or is not in purported exercise of power under the relevant statute. The observations and discussions as made hereinabove, goes to show that when the provisions of M. L. Act qua the Companies like N.B.F.C. is not applicable, the initiation of the action of issuing notice by concerned Registrar under the M. L. Act can be said to be wholly without jurisdiction. Therefore, it appears to the Court that the self-imposed restriction in exercise of the power under Articles 226/227 in the cases of existence of alternative remedy under the statute should operate as a bar in entertainment of the present petitions. Further, in any case, the concerned Registrar under the M. L. Act is the creature of the statute of the M. L. Act and enjoys the power within the purview of the Act. He would not be in a position to examine the wider question of enforceability of the laws made by the Parliament vis-a-vis the laws already in existence made by the State legislature nor will have any competence or jurisdiction to read down the definition of the word Company under the M. L. Act so as to exclude N.B.F.C. Therefore, under these circumstances, when the action is found to be wholly without jurisdiction of this Court, in view to the reading down of the definition of the word Company under the M. L. Act, neither the bar of self-imposed restriction by this Court to the jurisdiction under Article 226/227 of the Constitution should be allowed to operate nor any useful purpose would be served, more particularly, when the concerned Registrar under the M. L. Act will have no power or competence to decide various questions which are required to be considered and as considered by this Court as stated hereinabove. Hence, the contention raised by the learned Government Pleader cannot be accepted.
28. In view of the aforesaid observations and discussions, the impugned notices for initiation of the action under the M. L. Act against all the petitioner Companies cannot be sustained and deserves to be quashed and set aside. Hence, they are quashed and set aside.
29. The petitions are allowed accordingly. Rule made absolute. No order as to costs.
