Court underscores deference to RBI's expertise in financial regulation, stressing that interim relief cannot override larger public interest without cogent reasons
In a significant judgment delivered on September 7, 2026, the Delhi High Court (Division Bench) allowed the Reserve Bank of India's (RBI) appeal against an interim order that had stayed the cancellation of the Certificate of Registration (CoR) of Reliant Credits India Ltd, a non-deposit-taking Non-Banking Financial Company (NBFC). The Court set aside the interim relief granted by a Single Judge which had permitted Reliant Credits to continue its NBFC business despite RBI's regulatory cancellation.
The case arose after RBI, exercising its powers under the Reserve Bank of India Act, 1934, conducted an inspection of Reliant Credits in late 2023 and found material statutory and regulatory violations. Despite repeated opportunities to rectify these defaults, including a show cause notice and a personal hearing, RBI concluded that the NBFC had failed to comply with regulatory requirements and consequently cancelled its CoR in September 2025. This decision was affirmed by the statutory Appellate Authority.
Reliant Credits challenged the cancellation before the Kerala High Court and later filed a writ petition in the Delhi High Court. A Single Judge of the Delhi High Court granted an interim stay on the cancellation order, allowing the NBFC to continue its business operations pending adjudication. The RBI challenged this interim order through a Letters Patent Appeal before the Division Bench.
The Division Bench, comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia, analyzed the principles governing the grant of interim relief, including the necessity of a strong prima facie case, balance of convenience, and risk of irreparable harm. The Court observed that the interim order failed to adequately consider the larger public interest and the regulatory framework established by RBI. It noted that the cancellation order was the outcome of a comprehensive regulatory process involving inspection, risk assessment, compliance reports, and hearings.
The Court emphasized the specialized expertise and statutory mandate of the RBI as the sectoral regulator responsible for maintaining monetary stability and safeguarding the financial system. It held that judicial review must respect the autonomy and specialized knowledge of such regulators and should not substitute judicial discretion for regulatory judgment absent manifest arbitrariness or violation of natural justice.
The Division Bench found that the interim order effectively reinstated the NBFC's registration without a cogent basis, thereby undermining the regulatory scheme and exposing customers and the financial system to risk. It also clarified that no irreparable harm would be caused to Reliant Credits as it was permitted to continue existing loan recovery and day-to-day transactions but was restrained only from fresh lending activities.
Further, the Court ruled that the Letters Patent Appeal was maintainable as the interim order bore the trappings of finality by granting the substantive relief sought at the interlocutory stage.
Consequently, the Division Bench set aside the interim stay and restored the RBI's cancellation order and appellate affirmation, directing the Single Judge to expeditiously decide the pending interim relief application on merits. The Court expressly refrained from commenting on the ultimate merits of the writ petition, leaving all substantive issues open for final adjudication.
This judgment reaffirms the judiciary's cautious approach towards interfering with expert regulatory decisions, balancing individual hardships against the paramount concern of public interest and financial system stability.
Bottom Line:
Regulatory oversight and judicial review - Courts must exercise caution while interfering with determinations made by sectoral regulators like RBI, which possess specialized expertise and operate within statutory frameworks to safeguard public interest.
Statutory provision(s):
Reserve Bank of India Act, 1934 Sections 45-IA(6), 45-IA(7), 45-N; Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation) Directions, 2023
Reserve Bank of India v. Reliant Credits India Ltd, (Delhi)(DB) : Law Finder Doc Id # 2980747
