HC refuses to stay state ordinance against MFIs

By S A Ishaqui

Hyderabad. Oct 23 : The Andhra Pradesh High Court on Friday refused to stay the ordinance issued by the state government to rein in micro finance institutions.
However, the High Court also gave a breather to the MFIs by allowing them to carry on with their business provided they adhered to Sections 9 and 16 of the AP Micro Finance Institutions (Regulation of Moneylending) Ordinance 2010.

These sections prohibit MFIs from collecting money beyond the principal amount and using strong arm tactics against borrowers.The HC was dealing with petitions filed by the Micro Finance Institutions Network (MFIN), SKS Micro

Finance Ltd and Spandana Sphoorty Financial Institutions, who sought a stay on the ordinance complaining that it had brought their transactions to a halt.
A division bench comprising Chief Justice Nisar Ahmad Kakru and Justice Vilas V. Afzulpurkar directed the petitioners to apply for registration under the ordinance within a week.

The High Court ordered micro finance institutions to register under the ordinance issued by the government to rein them. Pending registration, the MFIs shall carry on their business and file their returns before the competent authority within 48 hours, the court added.

The authority should pass orders on these applications within the time frame prescribed under the rules, said the bench.

The bench made it clear that if there was any violation, the state could launch prosecution, but no arrest should be made till further

orders of the court. The bench added that the orders would remain in operation till next date of hearing.The advocate-general, Mr D.V.
Seetharama Murthy, told the court that the government has decided to grant registration to MFIs within 24 hours.