Reserve Bank Of India vs 1.Reliant Credits India Ltd & Anr.

$~41
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 07.09.2026
# CNR No. DLHC010411702026
+ LPA 680/2026, CM APPLs. 59050/2026 & 59051/2026
RESERVE BANK OF INDIA .....Appellant
Through: Mr. Rajeeve Mehra, Senior Advocate,
Mr. Ramesh Babu M.R., Senior
Advocate with Ms. Nisha Sharma and
Ms. Shreya V. Mehra, Advocates.
versus
RELIANT CREDITS INDIA LTD & ANR. .....Respondents
Through: Mr. Sandeep Sethi, Senior Advocate,
Ms. Malvika Trivedi, Senior
Advocate, Mr. Digish Shah, Ms.
Anushree Kapadia, Mr. Krisna
Gambhir, Ms. Shreya Sethi, Mr.
Pranay Bhardwaj, Ms. Pragya
Jaishwal and Mr. Shailendra,
Advocates for R-1.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE TEJAS KARIA
TEJAS KARIA, J. ( Oral )
CM APPL. 59052/2026 ( Exemption )
1. Exemption is allowed, subject to all just exceptions.
2. The Application stands disposed of.
LPA 680/2026
3. The present intra court Appeal assails the order dated 30.07.2026
(“ Impugned Order ”) passed in W.P.(C) 8243/2026 (“ Writ Petition ”) titled
‘ Reliant Credits (India) Ltd v. Union of India & Ors. ’.
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SHARMA
Signing Date:17.09.2026
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4. The brief factual matrix relevant to the present Appeal is as under:
4.1. Respondent No. 1 is a non-deposit-taking Non-Banking Financial
Company (“ NBFC ”) registered in Kerala. In 2001, the Reserve
Bank of India (“ RBI ”) granted it a Certificate of Registration
(“ CoR ”) to carry on NBFC business, which was thereafter
renewed and reclassified from time to time.
4.2. Under Section 45-N of the Reserve Bank of India Act, 1934
(“ RBI Act ”), RBI inspected Respondent No. 1 from 22.11.2023
to 02.12.2023 with reference to its financial position as at
31.03.2023 and allegedly found material statutory and regulatory
violations.
4.3. RBI thereafter prepared a Preliminary Inspection and Risk
Assessment Report (“ Report ”), furnished it to Respondent No. 1
vide letter dated 29.01.2024, and scheduled a video conference
with its management on 30.01.2024.
4.4. Vide letter dated 30.01.2024, RBI communicated its supervisory
concerns for consideration by Respondent No. 1’s Board and
Senior Management and sought monthly compliance reports.
4.5. On 15.03.2024, Respondent No. 1 submitted a compliance report
acknowledging several violations and deficiencies identified by
RBI. In view of the alleged continued non-compliance, RBI
issued a Show Cause Notice dated 26.07.2024 (“ SCN ”) proposing
cancellation of the CoR under Section 45-IA(6) of the RBI Act.
4.6. In its reply to the SCN, Respondent No. 1 further admitted several
regulatory violations and irregularities. On 07.10.2024,
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SHARMA
Signing Date:17.09.2026
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Respondent No. 1 was granted a personal hearing (“ Personal
Hearing ”) before a committee of senior RBI officers chaired by
the General Manager, Department of Supervision, RBI,
Thiruvananthapuram (“ General Manager ”).
4.7. Thereafter, the SCN, Reply to SCN, Personal Hearing minutes,
and RBI’s record were placed before the Executive Director,
Department of Regulation, RBI, Mumbai (“ Executive Director ”).
4.8. Meanwhile, on 10.07.2025, a statutory auditor submitted an
exceptions report for Financial Year 2024–25 (“ Exception
Report ”), recording non-compliance with the RBI’s Master
Direction – Reserve Bank of India (Non-Banking Financial
Company – Scale Based Regulation) Directions, 2023 (“ Master
Directions ”), and other audit observations.
4.9. By order dated 11.09.2025 (“ Cancellation Order ”), the
Executive Director cancelled Respondent No. 1’s CoR under
Section 45-IA(6) of the RBI Act for regulatory violations and
non-compliance.
4.10. On 30.09.2025, Respondent No. 1 challenged the Cancellation
Order under Section 45-IA(7) of the RBI Act before Respondent
No. 2, the Appellate Authority (“ Appellate Authority ”), by filing
a statutory appeal (“ Statutory Appeal ”).
4.11. While the Statutory Appeal was pending, Respondent No. 1
challenged the Cancellation Order in W.P. No. 36676/2025 before
the High Court of Kerala. Vide order dated 09.03.2026, the said
petition was disposed of by High Court of Kerala while extending
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SHARMA
Signing Date:17.09.2026
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the stay of the Cancellation Order until disposal of the Statutory
Appeal.
4.12. The Appellate Authority dismissed the Statutory Appeal vide
order dated 08.06.2026 (“ Appellate Order ”), whereupon
Respondent No. 1 filed the Writ Petition challenging the
Cancellation Order and the Appellate Order.
4.13. Vide order dated 17.06.2026, the Vacation Bench declined
Respondent No. 1’s prayer for ad interim relief against the
Cancellation Order and the Appellate Order.
4.14. Respondent No. 1 challenged the order dated 17.06.2026 in LPA
No. 465/2026. Vide order dated 06.07.2026, this Court declined to
interfere with the order dated 17.06.2026 considering that the
Interim Relief Application was still pending. Accordingly, the
learned Single Judge was requested to decide the Interim Relief
Application expeditiously while keeping all issues including
objection relating to the territorial jurisdiction open.
4.15. Vide the Impugned Order, the learned Single Judge issued notice
in the Interim Relief Application and, until the next hearing,
stayed the Cancellation Order and the Appellate Order insofar as
they restrained Respondent No. 1 from carrying on Non-Banking
Financial Institution (“ NBFI ”) business.
4.16. Aggrieved by the Impugned Order, RBI has preferred the present
Appeal against the Impugned Order.
4.17. During the hearing, Respondent No. 1 obtained instructions on
RBI’s proposal to not to disburse any fresh loan until the Interim
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SHARMA
Signing Date:17.09.2026
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Relief Application is finally decided by the learned Single Judge.
However, the Board of Directors of Respondent No. 1 vide
resolution dated 05.09.2026 decided that any such undertaking
could prejudice the rights, contractual obligations, and expose
Respondent No. 1 to multiple claims and, accordingly, declined to
tender any such undertaking at this stage.
5. Learned Senior Counsel for RBI made the following submissions:
5.1. RBI had cancelled Respondent No. 1’s CoR, and the Appellate
Authority had affirmed that decision. By permitting Respondent
No. 1 to continue NBFI business, the Impugned Order effectively
restored the CoR rather than preserving the status quo . Given the
regulatory and public-interest implications, the learned Single
Judge was required to assess the prima facie case, balance of
convenience, irreparable prejudice, and consequences of
permitting continued operations despite cancellation.
5.2. The Cancellation Order followed a comprehensive regulatory
process comprising statutory inspection, risk assessment, repeated
opportunities for compliance, compliance reports, admissions, the
SCN, and the Personal Hearing. Its legality must be assessed on
the material before RBI when the decision was taken; subsequent
compliance cannot retrospectively invalidate an otherwise lawful
order.
5.3. Respondent No. 1’s claim of subsequent compliance is disputed
and requires examination on cogent material. Similar claims of
rectification were made before RBI, yet the subsequent Exception
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SHARMA
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Report recorded, inter alia , continued non-compliance with RBI
directions and guidelines.
5.4. In the absence of a finding of illegality, irrationality, perversity, or
procedural impropriety, the learned Single Judge ought not to
have substituted the Court’s assessment of regulatory compliance
for that of RBI.
5.5. The Impugned Order is inconsistent with the order dated
17.06.2026 passed by the Vacation Bench refusing to grant the
stay and, in effect, grants the substantive relief sought in the Writ
Petition at an interlocutory stage.
5.6. Permitting Respondent No. 1 to operate despite the Cancellation
Order and the Appellate Order would undermine the RBI Act’s
regulatory framework and expose customers and the financial
system to risk. The balance of convenience, therefore, favours
RBI.
5.7. The Impugned Order is also liable to be set aside for want of
territorial jurisdiction, as no material, essential, or integral part of
the cause of action arose in Delhi; the situs of the Appellate
Authority alone does not make this Court the forum conveniens .
Reliance on Baksish Ahmed v. Union of India , 2026 SCC
OnLine SC 1098, is misplaced as the distinct statutory framework
governing the Border Security Force was involved, where the
controlling authority was situated in New Delhi and consequential
obligations fell upon the Union Government.
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SHARMA
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5.8. Hence, the present Appeal deserves to be allowed and the
Impugned Order be set aside.
6. Learned Senior Counsel for Respondent No. 1 made the following
submissions:
6.1. The present Appeal is not maintainable, as the Impugned Order is
purely ad interim in nature, having been passed before RBI filed
its counter affidavit and reply to the Interim Relief Application.
The Impugned Order does not finally adjudicate the rights and
contentions of the parties or decide any issue conclusively; hence
it does not possess the attributes of a “ judgment ” within the
meaning of Clause 10 of the Letters Patent. Accordingly, the
present Appeal is not maintainable. In support of this submission,
reliance was placed on the decision of this Court in Municipal
Corporation of Delhi vs Krishan Kumar and Ors. , Neutral
Citation: 2025:DHC:321-DB.
6.2. Without prejudice to the objection as to maintainability, the
jurisdiction of an appellate court to interfere with an interlocutory
exercise of discretion is extremely limited. Such interference is
warranted only where the discretion has been exercised
arbitrarily, capriciously, perversely, or in disregard of settled legal
principles. As there is no such infirmity in the Impugned Order,
no interference is warranted in the present Appeal.
6.3. Cancellation of the CoR is disproportionate, particularly as
Section 45-IA(6) of the RBI Act affords an opportunity to rectify
defects before cancellation. The alleged infractions attract
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SHARMA
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separate statutory penalties and do not warrant cancellation of the
CoR.
6.4. If the Cancellation Order is not stayed it would effectively
terminate Respondent No. 1’s NBFI business and impact
hundreds of employees of Respondent No. 1. Hence, denial of
interim protection pending the Writ Petition would render final
relief in the Writ Petition illusory.
6.5. The Personal Hearing was conducted by a committee of senior
RBI officers, whereas the Cancellation Order was passed by the
Executive Director, who had not heard Respondent No. 1. The
procedure adopted therefore violated the principles of natural
justice.
6.6. The learned Single Judge’s prima facie findings that the alleged
defaults were rectified and that the Appellate Authority had not
considered such rectification, and that cancellation was
disproportionate did not amount to substituting the Court’s view
for that of RBI.
6.7. The Impugned Order records that Respondent No. 1 is solvent,
employs over 600 persons, operates 122 branches, and had prima
facie rectified the defaults. It further records that denial of interim
protection would cause grave prejudice and that the balance of
convenience favoured Respondent No. 1. All contentions,
including territorial jurisdiction, were left open, and no final relief
was granted.
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SHARMA
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6.8. Enforcement of the Cancellation Order would halt Respondent
No. 1’s NBFI business and adversely affect its employees and
borrowers.
6.9. Respondent No. 1 has operated under judicial protection since the
Kerala High Court’s order dated 07.10.2025, without prejudice to
RBI, its investors, or the public interest. Vacating that protection
before adjudication of the Writ Petition would effectively close a
solvent company and irreversibly prejudice its employees,
borrowers, investors, and goodwill.
7. We have heard learned Senior Counsel for the Parties and perused the
material placed on record.
8. It is well settled that the grant of interim relief is an equitable and
discretionary exercise, intended to preserve the subject matter of the
proceedings and protect the parties against prejudice pending final
adjudication. The Court must be satisfied that the applicant has established a
strong prima facie case, and that the balance of convenience lies in favour of
granting protection. It must also be considered that any refusal of such relief
would occasion irreparable injury incapable of adequate redress at a later
stage.
9. Accordingly, the Court is required to consider not only the apparent
strength of the applicant’s case, but also the nature and weight of the
defence advanced, the competing rights and interests of the parties, and the
wider consequences likely to arise from the grant or refusal of relief. The
Court must, therefore, balance the risk that denial of interim protection may
render the petition or the ultimate relief therein infructuous against the loss,
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hardship, or prejudice that such protection may cause to the opposing party
or other affected persons. These considerations are interrelated and must be
evaluated cumulatively in the facts and circumstances of each case.
10. In the facts of the present case, RBI has contended that Respondent
No. 1’s assertion that the alleged defaults had been rectified involved
disputed question of facts requiring determination on cogent material once
the Counter Affidavit is filed by the RBI. It is further the case of RBI that
the Impugned Order, without duly considering the concurrent findings
recorded in the Cancellation Order and the Appellate Order, stayed their
operation and permitted Respondent No. 1 to continue carrying on its NBFI
business until the next date of hearing. It is also contended by RBI that the
Impugned Order has undermined the RBI Act’s regulatory framework and
exposed the customers and the financial system to risk.
11. Per contra , Respondent No. 1 contended that the alleged defaults had
been rectified and that the Appellate Authority failed to consider such
rectification. It is further submitted by Respondent No. 1 that permitting the
Cancellation Order to operate would bring its NBFI business to a standstill
and adversely affect its employees and borrowers. Respondent No. 1 also
submitted that continuation of the interim protection granted by the
Impugned Order until the next date of hearing in the Writ Petition would
cause no prejudice to RBI.
12. The Impugned Order has stayed the operation and effect of the
Cancellation Order and the Appellate Order insofar as they restrain
Respondent No. 1 from carrying on NBFI business, until the next date of
hearing in the Writ Petition while observing that Respondent No. 1 had
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SHARMA
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rectified the defaults and that, if upon filing of RBI’s counter affidavit the
Court were to find its case devoid of merit, the CoR could be cancelled and
the Cancellation Order permitted to operate.
13. Although the Impugned Order records the rival submissions
concerning the alleged rectification of defaults by Respondent No. 1, it
observes that those issues would be considered after RBI files its counter
affidavit and the matter was adjudicated on merits. While granting ad
interim relief of the stay of the Cancellation Order and the Appellate Order,
the Impugned Order does not disclose any prima facie consideration of
RBI’s submissions or of the findings recorded in the Cancellation Order and
the Appellate Order for permitting Respondent No. 1 to carry on NBFI
business.
14. The Cancellation Order, which prohibited Respondent No. 1 from
carrying on NBFI business, and the Appellate Order affirming the same,
inter alia , recorded finding that the general character of the management of
Respondent No. 1 was prejudicial to public interest and that no public
interest would be served by permitting it to continue such business.
Accordingly, the balance of convenience was in favour of protecting the
larger public interest as against the prejudice likely to be suffered by
Respondent No. 1 if ad interim relief were declined. Therefore, permitting
Respondent No. 1 to resume NBFI business notwithstanding the
Cancellation Order and Appellate Order required a higher threshold of
balance of convenience to be satisfied.
15. Further, the only prima facie case recorded by the learned Single
Judge is with regard to rectification of the default, which involves
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determination of disputed questions of fact and cannot be determined prior
to filing of the counter affidavit by RBI. Further, no irreparable loss can be
suffered by Respondent No. 1 has been permitted to undertake day-to-day
banking transactions and recover existing loans but was restrained from
carrying out NBFI business. Hence, the submission of Respondent No. 1
that its operations would come to standstill is without any basis.
16. During the hearing of the present Appeal, Respondent No. 1 was
afforded an opportunity to obtain instructions regarding an undertaking that
the Respondent No. 1 will not carry out any fresh loan transactions and
Interim Relief Application can be decided by the learned Single Judge in
timebound manner, however, vide resolution dated 05.09.2026 passed by the
Board of Directors of Respondent No. 1, which was placed on record, it was
resolved that furnishing any such undertaking may materially affect the
rights and protections available to Respondent No. 1 under the Impugned
Order, prejudice its existing contractual obligations, and expose it to a
multiplicity of proceedings and claims. Accordingly, Respondent No. 1
expressed inability to tender the undertaking at that stage.
17. For the foregoing reasons, we are of the considered view that the ad-
interim protection granted by the Impugned Order does not comply with the
settled principles governing the grant of interim relief, namely, the existence
of a strong prima facie case, the balance of convenience, and the likelihood
of irreparable injury. By asserting that the defaults had been rectified,
Respondent No. 1 has acknowledged the existence of such defaults. RBI, as
the sectoral regulator, passed the Cancellation Order upon consideration of
the relevant material, and the same was affirmed by the Appellate Order,
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which specifically recorded that the general character of the management of
Respondent No. 1 was prejudicial to public interest and that no public
interest would be served by permitting it to continue such business. The
Impugned Order has not examined this aspect of public interest while
grating ad-interim stay and only considered the hardship alleged by
Respondent No. 1. The Impugned Order lacks cogent reasons for brushing
aside the larger public interest for protecting the individual interest of
Respondent No. 1.
18. Generally, the Courts must accord due deference to the determinations
of sectoral regulators such as RBI, which possess specialised expertise,
discharge statutory mandates, and remain continuously engaged with the
complexities of the sectors under their supervision. As India’s central bank,
RBI is entrusted with maintaining monetary stability, supervising financial
institutions and safeguarding systemic resilience. Its decisions are informed
by technical expertise, economic data, and policy considerations that
ordinarily fall outside the conventional judicial domain.
19. While judicial review is essential to safeguard constitutional rights
and prevent arbitrariness, its exercise must be calibrated so as not to
encroach upon regulatory autonomy. Interference in the absence of cogent
reasons risks substituting judicial discretion for specialised regulatory
judgment, with potential consequences for financial stability and investor
confidence. The Supreme Court has consistently recognised regulators such
as RBI as expert bodies whose determinations merit due deference unless
shown to be manifestly arbitrary or ultra vires.
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20. In the present case, no perversity, violation of the principles of natural
justice, or procedural irregularity in the Cancellation Order or the Appellate
Order has been demonstrated. The merits of the rival contentions can,
therefore, be considered only after RBI has been afforded an opportunity to
file its counter affidavit. The observation in the Impugned Order that the
CoR could subsequently be cancelled and the Cancellation Order permitted
to operate if Respondent No. 1’s case was found to lack merit cannot, by
itself, justify the grant of interim relief. Before granting such relief, the
Court must be satisfied as to the existence of a strong prima facie case, the
balance of convenience, and the likelihood of irreparable injury.
21. Having regard to the larger public interest involved, the balance of
convenience lies in favour of RBI. Respondent No. 1 would not suffer
irreparable prejudice, as it is permitted to undertake day-to-day banking
transactions and recover existing loans . The restraint is confined only to
carrying on NBFI business i.e., disbursing fresh loans to new customers. In
view of the express public - interest findings recorded in the Cancellation
Order and the Appellate Order, Respondent No. 1 ought not to be permitted
to resume such business at the ad - interim stage , particularly before RBI has
had an opportunity to file its counter affidavit on merits .
22. As regards Respondent No. 1’s preliminary objection that the present
Appeal is not maintainable because the Impugned Order is purely ad
interim , does not finally adjudicate the rights and contentions of the parties
or conclusively determine any issue and, therefore, does not constitute a
“ judgment ” within the meaning of Clause 10 of the Letters Patent, we are of
the considered view that the said objection cannot be sustained. In Union of
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India and Another v. Delhi Race Club (1940) Ltd. and Others , 2026 SCC
OnLine Del 4127, this Court held that an interim order possessing the
trappings of finality is amenable to challenge by way of a Letters Patent
Appeal. It was further held that the expression “ judgment ” in the Letters
Patent must receive a wider construction and cannot be confined to its
meaning under the Code of Civil Procedure, 1908.
23. In the present case, the Impugned Order grants ad-interim relief of
stay of the Cancellation Order and Appellate Order, which is in nature of the
final relief sought in the Writ Petition and, therefore, bears the trappings of
finality. By permitting Respondent No. 1 to resume its NBFI business
notwithstanding RBI’s substantial objections founded upon the larger public
interest, the Impugned Order effectively grants the final relief sought in the
Writ Petition at an interlocutory stage. Having regard to the peculiar facts
and circumstances of the case, we accordingly hold that the present Appeal
is maintainable.
24. Accordingly, the Impugned Order is set aside insofar as it stays the
operation and effect of the Cancellation Order and the Appellate Order
restraining Respondent No. 1 from carrying on NBFI business.
25. It is clarified that we have expressed no opinion on the merits of the
Writ Petition, including the issues concerning rectification of the alleged
defaults by Respondent No. 1, the proportionality of the Cancellation Order,
the alleged violation of the principles of natural justice, or the territorial
jurisdiction of this Court to entertain the Writ Petition. All rights and
contentions of the Parties are expressly left open for adjudication by the
learned Single Judge. We further request the learned Single Judge to
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consider and finally decide the Interim Relief Application, in accordance
with law, at the earliest.
26. The Appeal is accordingly allowed in the aforesaid terms. All pending
Applications, if any, stand disposed of.
TEJAS KARIA, J
DEVENDRA KUMAR UPADHYAYA, CJ
SEPTEMBER 07, 2026 / HK
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