The Madras High Court is set to consider the constitutional validity of a new Tamil Nadu law that restricts coercive recovery actions by money lending entities, amid petitions filed by various NBFCs.
Madras High Court Reviews Petition Against Tamil Nadu Loan Recovery Law
The Madras High Court has responded to a petition challenging the constitutional validity of the Tamil Nadu Money Lending Entities (Prevention of Coercive Actions) Act, 2025. A Division Bench comprised of Justices GR Swaminathan and V Lakshminarayanan issued notice on the petition filed by the Madras Hire Purchase Association and several financial entities including Senthoor Motor Finance and Todi Investors (India) Pvt Ltd.
The petitioners argue that the new law imposes excessive restrictions on the ability to recover loans, which they claim is detrimental to their operations and business models. The court’s decision to invite the Union government and State of Tamil Nadu to respond indicates the potential for a significant judicial review of the law's implications.
This case stands as a pivotal moment for NBFCs and other lending entities in India, as its outcome could reshape the legal landscape governing loan recovery processes. Practitioners and stakeholders in the finance and banking sectors should closely monitor the developments of this case.
