NBFCs outside the Bombay Money Lenders Act without notification, as RBI law overrides State regulation

A non-banking financial company governed by Chapter IIIB of the Reserve Bank of India Act, 1934 cannot be treated as a money-lender under the Bombay Money Lenders Act, 1946 unless the State Government issues a notification under Section 2(10)(v). The court held that the RBI Act occupies the field for such companies and that Section 45-Q gives Chapter IIIB overriding effect over the State law. In the absence of the required notification, State authorities lacked jurisdiction to continue criminal or penal proceedings under the Bombay Money Lenders Act, 1946, and the proceedings were liable to be quashed.

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Issues: Whether a Non-Banking Financial Company could be proceeded against under the Bombay Money Lenders Act, 1946 in the absence of a notification bringing it within the definition of money-lender.

Analysis: The applicant was registered as a Non-Banking Financial Company and was governed by Chapter IIIB of the Reserve Bank of India Act, 1934. The Court relied on earlier binding decisions holding that, unless the State Government issued a notification under Section 2(10)(v) of the Bombay Money Lenders Act, 1946, such companies did not fall within the statutory definition of money-lender. The Court further held that the regulatory field regarding such companies stood occupied by the Reserve Bank of India Act, 1934, and that Section 45-Q gave overriding effect to Chapter IIIB over the State enactment. As no notification was produced, the State authorities lacked jurisdiction to continue criminal or penal proceedings under the Bombay Money Lenders Act, 1946.

Conclusion: The proceedings against the applicant could not be sustained and were required to be quashed.

Ratio Decidendi: In the absence of a notification under Section 2(10)(v) of the Bombay Money Lenders Act, 1946, a Non-Banking Financial Company governed by Chapter IIIB of the Reserve Bank of India Act, 1934 does not fall within the definition of money-lender, and proceedings under the State Act are without jurisdiction.

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