In Brief
This landmark judgment upheld the supremacy of the Reserve Bank of India Act's Chapter III-B over State money lending laws when applied to NBFCs. The Court held that Chapter III-B constitutes a complete regulatory code for NBFCs, covering all aspects of their business from registration to winding up. Although both the RBI Act (Union List, Entry 43) and State money lending statutes (State List, Entry 30) are constitutionally valid, Parliamentary legislation is constitutionally dominant when both address the same subject-matter. The Court rejected arguments that RBI's non-intervention in interest rates created a gap for State regulation, emphasizing that RBI's broad power to determine policy and issue directions extends to all NBFC activities. Consequently, NBFCs registered under the RBI Act cannot be subjected to dual regulation under State money lending laws like the Kerala and Gujarat Acts.
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