Published On: Mon, Mar 17th, 2025

HC nixes challenge to microfinance ordinance | Bengaluru News

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HC nixes challenge to microfinance ordinance

Bengaluru: While dismissing a petition by Karnataka Hire Purchase Association, the high court observed that the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025, does not traverse the realm of secured transactions by regulated entities like the petitioner.
In his ruling, Justice Nagaprasanna said that the ordinance shields those trapped in the labyrinth of unsecured micro loans extended without collateral, targeting an annual income of Rs 3 lakhs or less, which is clearly defined by the Reserve Bank of India. “Therefore, the ordinance has taken birth from the womb of social justice; it nowhere depicts arbitrariness. The grievance of the petitioner is, on the face of it, imaginary and unacceptable.”
The petitioner had argued that definitions in the ordinance are “so ambiguous” that they would take away anybody’s right under different statutes, as all hypothecations or mortgages are to be released from the date of promulgation of the ordinance. It further argued that the ordinance, by commanding the immediate release of security and prohibiting future collateralisation, imperils the very lifeblood of the petitioners’ business.
The govt countered saying the association cannot claim to be an aggrieved party as the ordinance is in no way connected to them.
After perusing materials on record, Justice Nagaprasanna pointed out that the ordinance, conceived in response to cries of the vulnerable — farmers, women, workers, and marginalised groups — seeks to rescue them from usurious moneylenders and microfinance entities who, as public knowledge and legislative record show, have wielded unconscionable recovery methods, often driving debtors to despair and death.
“A thread of reasonableness runs through the object of the law. Courts must always be loath to strike down a measure of this kind unless compelled by an egregious violation of constitutional mandates. I find none,” the judge observed while dismissing the petition.





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