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Anil Agrawal (Retired)     04 January 2009

Money Lenders Act

Does a non banking finance company which requires registration with the RBI also requires licence under the Bombay Money Lenders Act, 1946, before carrying on the business of advancing loans etc?


Learning

 28 Replies

Manish Singh (Advocate)     04 January 2009

no, scope of money lenders act of states are different than nbfc so no separate registeration is required. 

Manish Singh (Advocate)     04 January 2009

no, scope of money lenders act of states are different than nbfc so no separate registeration is required. 

AEJAZ AHMED (Legal Consultant/Lawyer)     05 January 2009

Dear Sir,


As the company is governed by the RBI Act, it is not subject to the Bombay Money Lenders Act. A Bombay HC ruling states that once you are registered under the central act, the state laws will not apply.

PALNITKAR V.V. (Lawyer)     05 January 2009

Money Lenders Act is not applicable.

Anil Agrawal (Retired)     05 January 2009

 Please read he last para. The RBI has clearly stated that even such companies are governed by the State laws unless exempted by the State Government specifically.


 


Before the State Information Commission, Maharashtra – Complaint


under Section 18 of RTI Act, 2005.


Complaint No.2007/236/02


 


Shri Kewal Semlani, 52, Jolly Maker Chambers No.2, Nariman Point, Mumbai 400 021.


... Complainant


 


PIO & Dist. Dy. Registrar of Coop Societies Mumbai (1), Mumbai City, Malhotra House, Mumbai 400 001.                                                                                             


... Respondent


 


GROUNDS


 


Mr. Kewal Semlani of Mumbai had given application to the PIO and Deputy Registrar of Coop. Societies, Mumbai City (1), Mumbai on 2.8.2007 seeking the following information:


“ (i) Exemptions under Bombay Money Lenders Act 1946 to Citifinancial Consumer Finance India Ltd. (CCFIL) Mumbai;


(ii) The period to which the information relates: 1.4.2004 till the date of providing information;


(iii) Description of the information required: Certified true copies of:


a) Specific provisions of Bombay Money Lenders Act 1946 under which CCFIL are exempted from Bombay Money Lenders Act, 1946;


b) Details of all other Complaints, except those holding banking licence from RBI, which are exempted from Bombay Money Lenders Act – 1946 because of permission obtained by them from RBI for carrying on business in Maharashtra


c) Any other information, relevant to the above;


d) The information should be provided in print format as well as in e-format (CD) if available.”


He received reply on 9.8.2007 that the information sought in his application does not come under the definition of the information, therefore, his application is filed. Being aggrieved by this, he has complained to this Commission u/s 18 of the Act on 21.8.2007. Taking into consideration the public interest involved in this complaint it was heard on priority on 18.9.2007 when Shri Kewal Semlani,


Complainant and Mr. Patil, Dy. Registrar was present. After hearing both the parties it transpired that District Deputy Registrar seem to be of the view that since the said complaint - Citifinancial Consumer Finance India Ltd. (CCFIL) has got licence from RBI they come under the control of RBI , therefore, there is no question of taking any action under Mumbai Money Lenders’ Control Act, 1946 and this was informed by them by letter dt. 10.7.2007, based upon which the application under RTI Act, 2005 was done. Mr. Semlani produced a copy of letter he received from RBI dt. 13.8.2007, stating that even such companies are not exempt from the State laws unless the State Government has specifically exempted them. The Deputy Registrar promised that in view of the letter from RBI he will re-examine the matter and provide the information asked by the Complainant early. This position was accepted by the Complainant, Mr. Semlani, therefore, the complaint application is disposed off.


 


ORDER


Complaint application is thus disposed off.


(Dr. Suresh V. Joshi)


Chief Information Commissioner


Place: Mumbai.


Date: 19.9.2007


 


 


 

1 Like

Anil Agrawal (Retired)     05 January 2009

 Dear Sir,


Can I get the ruling of the High Court. Tks/regards,


Anil

Manish Singh (Advocate)     05 January 2009

Dear Mr. Agrawal,


money lenders act governs those persons who/ whichlends money but it does not expand its scope to the persons who/ which accepts public deposits etc.


there are two kind of NBFCs- 1. which accepts public deposit and 2. which do not accept public deposits.


NFCs which do not accept public deposits have to be registered under the money lenders act of the state if not excluded under the act. some states have excluded companies or incorporated bodies from the purview of the act but n MAHARASHTRA govt may exclude such bodies by notification which it hasnt notified yet. 


the party in your case was a NBFC which didnt have the authority to accept public deposite so it was mandatory for it to have a registeration under the money lenders act.


the bombay HC that once you are registered under the central act, the state laws will not apply. 

Selvam P (Advocate)     07 January 2009

Dear Sir,


Kindly provide the Bombay HC ruling with citations and that of the Cause Title, so that it may be more useful.


Thanks and regards,


P.SELVAM

RAKHI BUDHIRAJA ADVOCATE (LAWYER AT BUDHIRAJA & ASSOCIATES SUPREME COURT OF INDIA)     07 January 2009

I do agree with my Ld. Friends

Anil Agrawal (Retired)     07 January 2009

 I am afraid I can't agree that registration under central laws obviates the necessity of getting a licence under the State law. The two laws are different, the administering authorities are different and punishment for violation is also different. The Citi Financial Services is a NBFC floated by the Citi Bank. It obtained registration from the RBI which confirmed that it was obliged to obtain licence under the State law also.

Anil Agrawal (Retired)     12 January 2009

 Can any learned friend supply with a copy of the judgement referred to in the following article:



Thursday, February 15, 2007



Money Lenders Act applicable to NBFCs: Kerala HC


 

Money Lenders Act applicable to NBFCs: Kerala HC

Staff Reporter


 








High Court round-up

 


 


 


 


Kochi: The Kerala High Court on Wednesday held that the provisions under the Kerala Money Lenders Act were applicable to the non-banking financial institutions in the State.


Justice K. Balakrishnan Nair made the ruling while dismissing a batch of writ petitions seeking to declare that the Act would not be applicable to their institutions.


The petitioners contended that the non-banking institutions were established under the Reserve Bank of India Act. Therefore, it would not come under the provisions of the Kerala Money Lenders Act. No company could carry on the business of money lending or other non-banking activities such as hire purchase lending without getting registration from the RBI. These activities were regulated by the RBI.


The Judge observed that the provisions of the State law were meant to safeguard the interest of borrowers. The State law mandated the institutions to obtain licence for using the deposits.


Interest rate


 


The Judge observed that the Government notification fixing the rate of interest chargeable by moneylenders at the maximum limit of 12 per cent would apply to such types of loans for which the interest rate levied by the commercial banks was around 10 per cent. The court, while disposing of certain petitions filed by money lenders against the notification, made it clear that in all other cases where interest rate of the commercial loan was above 12 per cent, the petitioners could ignore the notification.


 


 


 


 


 


 


 



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Anil Agrawal (Retired)     16 January 2009

 These are two separate Acts. The mixing of RBI Act and Money Lenders Act does not arise. Registration is a must under both the Acts for a NBFC.

Sanjeev Dudhat (Lawyer)     22 January 2009

Thanks


The entire discusssion was very analytic and infromative

Sanjeev Tewatia (Advocate)     22 January 2009

thanks for your details


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