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Supreme Court: NBFCs are not amenable to writ jurisdiction under Article 226 of Constitution.

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The Supreme Court has held that Non Banking Finance Companies cannot be called a public body though they are duty bound to follow and abide by the guidelines provided by the Reserve Bank of India.


In a recent case, the Single Judge entertained a Writ Petition filed against a NBFC, though it was aware that the Respondent – Company did not have the status of the “State” under Article 12 of the Constitution, with the reasoning that, since the financier had acted contrary to some interim order, the petitions merited entertainment.


In appeal before the Division Bench, the bench opined that petition should not have been entertained as the NBFC is not a “State” and the transaction between the petitioner and the respondent does not involve any public function. =


The matter went in appeal before the Supreme Court, who upheld the view taken by the Division Bench. 


The court observed that  the NBFC has its duty towards its account holders, and not the public. Its orders and actions are confined to its account holders and borrowers and to its employees. 


If a public duty or public function is involved, any body, public or private, concerned or connection with that duty or function, and limited to that, would be subject to judicial scrutiny under the extraordinary writ jurisdiction of Article 226 of the Constitution of India.


The NBFC was a private company carrying on banking business as a Scheduled bank cannot be termed as a company carrying on any public function or public duty.


The court dismissed the petition. 

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