The Karnataka High Court has delivered its judgment in the Writ Petition, challenging the constitutional validity of the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance, 2025.
Upholding the constitutional validity of the Ordinance, the Court provided a significant clarification that directly addresses the concerns raised by the Association.
In its ruling, the Hon’ble Court affirmed that motor vehicle and asset financing businesses, including those represented by KHPA, do not fall within the purview of the Ordinance.
This clarification ensures that legitimate asset financing operations will not be affected by the provisions meant to regulate microfinance institutions engaging in unsecured lending to economically vulnerable sections.
The Karnataka High Court also placed reliance on the Reserve Bank of India (RBI), which defines microfinance loans as collateral-free loans given to households with an annual income of up to ₹3,00,000.
The Court has given a clear and favourable clarification stating that KHPA does not fall under the purview of the Ordinance, which was precisely the relief sought in the Writ Petition. After issuing this clarification, the Court accordingly upheld the validity of the Ordinance.
Karnataka High Purchase Association (KHPA) was represented by Senior Advocate Uday Holla, assisted by Sanjay H Sethiya, Founder & Managing Partner, Law Square, Akshatha Prasad M D, Senior Associate, Law Square.
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