H. Navrathanmal Lunkar, Proprietor, K.K. Credit Corporation vs The State of Tamil Nadu

Vinod K. Sharma, J.—The Petitioner has challenged the vires of the Tamil Nadu Prohibition of Charging Exorbitant Interest Act, 2003,

(hereinafter referred to as ""the Act"") to be unconstitutional, insofar as it pertains to motor vehicle financing in any form whatsoever.

The Petitioner is engaged in the business of motor vehicle financing.

The case of the Petitioner, is that the agents of the Petitioner are not able to effect repossession of secured vehicles or demand repayment, in

terms of the Agreement executed between the Petitioner and the borrower.

It is also the case of the Petitioner, that unscrupulously borrower is able to avoid payment, by threatening to lodge a police complaint under the

Act.

The Object of the Act reads as under:

In order to obviate the difficulties experienced by the public at large, falling prey to any person charging exorbitant interest like daily vatti, hourly

vatti, kandhu vatti, meter vatti and thandal, the Government have decided to prohibit lending money for such exorbitant interest and to provide for

stringent punishment therefor and decided to enact a new legislation for the purpose. Accordingly, the Tamil Nadu Prohibition of Charging

Exorbitant Interest Ordinance, 2003 (Tamil Nadu Ordinance 2 of 2003) was promulgated by the Governor on the 9th JUNE 2003 and the same

was published in the Tamil Nadu Government Gazette Extraordinary, dated the 9th June 2003.

The only ground, on which the constitutional validity of the Act, has been challenged, is that the activities of the financiers, who are not the

money lenders, can be regulated, only through the Parliamentary Legislation, as such the matter falls under Entry 45 of List I of VII Schedule of the

Constitution.

This contention is totally mis-conceived, in view of the decision of the Hon''ble Supreme Court, in the case of K.K. Baskaran Vs. State rep. by

its Secretary, Tamil Nadu and Others, , wherein while dealing with the similar challenge, the Hon''ble Supreme Court was pleased to lay down as

under:

The main submission of the Learned Counsel for the Appellant in challenging the Tamil Nadu Act, which was also the main submission in

challenging the Maharashtra Act, 1999, was that the said Act is beyond the legislative competence of the State Legislature as it falls within Entries

43, 44 and 45 of List I of the Seventh Schedule to the Constitution. It was also submitted that the impugned Act is liable to be struck down as the

field of legislation is already occupied by legislation of Parliament being the Reserve Bank of India Act, 1934; the Banking Regulation Act, 1949;

the Companies Act, 1956; and the Criminal Law Amendment Ordinance, 1944 as made applicable by the Criminal Law (Tamil Nadu

Amendment) Act, 1977. It was also contended that the Tamil Nadu Act was arbitrary, unreasonable and violative of Articles 14, 19(1)(g) and 21

of the Constitution. We are of the opinion that none of these submissions has any merit.

The second ground, on which the constitutional validity of the Act challenged, is that fixing 9% simple interest for secured loan transactions, and

12% for unsecured loan transactions, is highly unreasonable, and therefore, cannot be sustained.

This contention, is again, totally misconceived. The constitutional validity of the Act, cannot be challenged, only on the ground, that the rate of

interest fixed does not suit a person. In any case, the object of the Act is to regulate charging of exorbitant interest like daily vatti, hourly vatti,

kandhu vatti, meter vatti and thandal etc., A reading of the Act shows, that the interest has been ordered to be regulated as per Tamil Nadu

Money Lenders Act 1957. The fixation of interest, therefore, cannot be a ground to hold the Act to be unconstitutional, specially when it is

regulated by a well defined statute.

The Learned Counsel for the Petitioner then contended, that Section 9 of the Act, is ultra vires the provision of Section 306 of Indian Penal

Code.

Section 9 of the Act reads as under:

Abetment of Suicide:Where a debtor or any member of his family commits suicide and if it is shown that immediately prior to such suicide, the

debtor or any member of his family was subjected to molestation by any person, the person who has advanced loan shall, unless the contrary is

proved, be deemed to have abetted the commission of such suicide.

Explanation:-For the purpose of this Section, ""member of family"" means the spouse, unmarried daughter or unmarried son.

This contention of the Learned Counsel for the Petitioner, is again, misconceived. Section 9 of the Act does not cover the field covered u/s

306 I.P.C. Section 9 of the Act, only lays down the presumption, which is rebuttable, and therefore, Section 9 of the Act also cannot be said to be

ultra vires, as contended.

Faced with this situation, the Learned Counsel for the Petitioner contended, that the intention of the Petitioner is not to challenge the

constitutional validity of the Act, but to seek the declaration, that the Act does not apply to the Petitioner, who is dealing with the motor vehicle

finance.

Vinod K. Sharma, J.

Vs / Dpn/

This prayer is totally mis-conceived, as no declaration as prayed for, can be issued, as applicability of an Act has to be decided, on the facts of

each case, and no general declaration can be issued, declaring the Act, not to be applicable to a particular person or set of persons, as prayed.

For the reasons stated, finding no merit, this writ petition is dismissed.

No costs.