Delhi High Court Sets Aside Interim Relief Allowing NBFC To Continue Business After RBI Cancels Registration

The Delhi High Court has set aside an interim order that allowed Reliant Credits (India) Limited, a non-deposit-taking Non-Banking Financial Company (NBFC), to continue its Non-Banking Financial Institution (NBFI) business despite cancellation of its Certificate of Registration (CoR) by the Reserve Bank of India (RBI).

A Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia held that the Single Judge had not adequately considered RBI's findings and the wider public interest before granting the ad-interim protection.

“RBI, as the sectoral regulator, passed the Cancellation Order upon consideration of the relevant material, and the same was affirmed by the Appellate Order, 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 Bench observed.

Reliant Credits, an NBFC registered in Kerala, was granted its CoR by RBI in 2001. Following an inspection in 2023, RBI allegedly found material statutory and regulatory violations. The company subsequently submitted a compliance report acknowledging several violations and deficiencies identified by RBI.

The regulator issued a show-cause notice proposing cancellation of the CoR and, after a personal hearing, its Executive Director cancelled the registration in September 2025, citing regulatory violations and non-compliance. The statutory appeal against the cancellation was dismissed in June 2026.

After the statutory appeal was dismissed, Reliant Credits approached the Delhi High Court challenging the cancellation and appellate orders. Although a Vacation Bench initially declined interim relief, the Single Judge on July 30, 2026, stayed the orders insofar as they restrained the company from carrying on NBFI business. RBI challenged that protection before the Division Bench.

RBI argued that allowing Reliant Credits to continue NBFI business effectively restored a CoR that had already been cancelled. It also argued that the Single Judge had not properly considered the regulatory findings, the public-interest implications, and the risks to customers and the financial system from allowing the company to continue operations.

The company maintained that the alleged defaults had been rectified and that enforcing the cancellation would bring its NBFI business to a standstill and prejudice its employees and borrowers.

The Bench reiterated that interim relief requires consideration of a strong prima facie case, balance of convenience and the likelihood of irreparable injury. It held that the Single Judge's order did not disclose any prima facie consideration of RBI's submissions or the findings recorded in the Cancellation Order and Appellate Order.

The Cancellation Order and Appellate Order had recorded that the general character of the company's management was prejudicial to public interest and that no public interest would be served by allowing it to continue the business. The Division Bench held that these findings meant a higher threshold of balance of convenience was required before permitting the company to resume NBFI 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,” the bench ruled.

The court held that Reliant Credits would not suffer irreparable loss. It noted that the company could continue day-to-day banking transactions and recover existing loans. The restraint was confined to NBFI business, which the Bench clarified meant disbursing fresh loans to new customers.

The Bench stressed that courts should ordinarily accord due deference to sectoral regulators such as RBI because of their specialised expertise and statutory responsibilities.

“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,” it observed.

The bench found no demonstrated perversity, violation of natural justice, or procedural irregularity in the Cancellation Order or Appellate Order at this stage.

It said the merits of the company's challenge could be considered only after RBI files its counter affidavit.

The Division Bench also held that RBI's appeal was maintainable. It found that the Single Judge's interim order had the “trappings of finality” because it effectively granted the substantive relief sought in the writ petition by allowing Reliant Credits to resume NBFI business despite the cancellation of its CoR.

The court accordingly set aside the interim order insofar as it stayed the cancellation.

For Appellant: Senior Advocate Rajeeve Mehra, Ramesh Babu M.R, Advocates Nisha Sharma and Shreya V Mehra

For Respondents: Senior Advocates Sandeep Sethi, Malvika Trivedi, Advocates Digish Shah,Anushree Kapadia, Krisna Gambhir, Shreya Sethi, Pranay Bhardwaj, Pragya Jaishwal and Shailendra