BENGALURU: The Karnataka High Court on Monday upheld the constitutional validity of the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025.
Dismissing the petition filed by the Karnataka Hire Purchase Association questioning the validity of the ordinance, Justice M Nagaprasanna clarified that the ordinance does not traverse into secured transactions undertaken by regulated entities like the petitioner.
On the contrary, it carves out a protective shield specifically for those trapped in the labyrinth of unsecured micro loans extended without collateral, targeting an annual income of Rs 3 lakh or less, which is clearly defined by the Reserve Bank of India. The grievance of the petitioner is, on the face of it, imaginary and unacceptable, the judge said.
The petitioner, an association of motor vehicle/asset financiers who are said to be engaged in the business through hypothecation, hire purchase and leasing models, contended that the ordinance has taken away rights as all hypothecations or mortgages are to be released from the date of promulgation of the ordinance.
The ordinance by commanding immediate release of security and prohibiting future collateralisation imperils the very lifeblood of the business of the petitioner, it said.
The court said the ordinance, conceived in response to safeguard the vulnerable - farmers, women, workers and marginalized groups - inter alia seeks to rescue them from usurious money lenders and microfinance entities who, as public knowledge and legislative record bear testament, have wielded unconscionable recovery methods, often driving the debtors to despair and death.