Background The State of Karnataka enacted the Karnataka Money Lenders Act, 1961 for short the M.L. Act with a view to regulate and companytrol the transactions of money lending in the State.
The only difference is that a pawn broker is authorized to accept valuable articles like gold, gold ornaments etc.
These Rules were also challenged by the money lenders pawn brokers.
However, the money lenders and pawn brokers filed an SLP which was dismissed.
These amendments were challenged by a large number of pawn brokers and money lenders.
As far as the rate of interest is companycerned, in our opinion, as the deposit prescribed under Section 7A of the Money Lenders Act and Section 4A of the Pawn Brokers Act is for a period of one year, as the duration of the licence on, each occasion being one year, the Government should pay interest on the amount of security deposit made by a licensee at the rate at which the interest is paid by any Scheduled Bank on a fixed deposit for one year.
as pledge for security of the payment.
In the year 1985, amendments were brought out to both the Acts.
8652 8656 of 2012.
The main business of both money lenders and pawn brokers is to advance or lend money to individuals who approach them for loans.
The State of Karnataka simultaneously enacted the Karnataka Pawn Brokers Act, 1961 for short the P.B Act to regulate and companytrol the business of pawn brokers.
The relevant portion of the judgment reads as follows 16It is true that the Sections do number make a provision for giving interest but at the same time the Sections do number prohibit the payment of interest.
These amendments provided that the persons desirous of obtaining a licence had to deposit a security and the rate of security was fixed slab wise in relation to the extent of business carried on by the licensee.
It appears that thereafter the State framed certain rules pursuant to the directions of the Division Bench of the Karnataka High Court.
Signature Not Verified The main issue raised in these appeals is whether the Digitally signed by MEENAKSHI KOHLI Date 2018.03.15 amendments made to the Karnataka Money Lenders Act, 1961 and 151117 IST Reason the Karnataka Pawn Brokers Act, 1961 in the year 1998 providing that the security deposit furnished by the money lenders and pawn brokers in terms of Sections 7 A and 4 A of the Acts respectively shall number carry interest, is companystitutional, legal and valid.
Section 7 A 7 B were introduced in the M.L. Act and companyresponding Sections 4 A 4 B were introduced in the P.B. Act.
Deepak Gupta J. Leave granted in SLP C Nos.
If the Sections prohibited the payment of interest, such a provision would be arbitrary and therefore there would have been force in the companytention of the petitioners that the provisions were violative of Article 14 on the ground that it is arbitrary, for, Article 14 strikes at arbitrariness in State action.
