M.C.Jain, J. - (1.) This petition for the winding up of the respondent-company has been filed by the Reserve Bank of India ('the bank') under Section 45MC of the Reserve Bank of India Act, 1934.
(2.) The petition is based on these allegations : The petitioner bank is the regulatory authority for non-banking financial companies (NBFCs) and has been conferred with such powers under Chapter III-B of the Act as amended by the Amending Act of 1997. The powers conferred on the bank, inter alia, relate to the issuing of registration certificate to NBFCs, prescribing prudential norms, issuing directions, prohibiting NBFCs from accepting deposits, filing of winding up petitions etc. In exercise of powers conferred on the bank by the various provisions of the Act, it has issued Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 ('the Directions') to regulate acceptance of deposits by the companies carrying on the business of non-banking financial institutions. The respondent-company was, therefore, bound to follow these directions. The respondent-company was incorporated on 14-11-1972 and as NBFC was bound by the Directions of the bank as amended from time to time. It has paid-up capital of Rs. 12.14 lakhs as per the audited balance-sheet for the year ending on 31-3-1997. The main object of the respondent-company as per its memorandum of association is to mobilize funds, generate savings, to create deposits for the purpose of lending or investment and to carry on and transact by introducing mobile banking facilities in rural and urban areas. The respondent-company which has been carrying on the activities of a RNBC for over a decade never approached the bank for classification. After the Amending Act of 1997 NBFCs are prohibited by Section 45-IA of the Act from commencing or carrying on the business of non-banking financial institution without obtaining a certificate of registration from the bank. The company submitted an application dated 26-6-1997 to the bank for issue of certificate of registration. An inspection of the books and accounts of respondent-company under Section 45N of the Act was conducted by the officers of the bank with reference to its financial position as on 31-3-1997. Based on the inspection and information available on record a show-cause notice dated 27-5-1998 was issued to the respondent-company, indicating that for the reasons stated therein it was not fulfilling the conditions as contained in sub-section (4) of Section 45-IA. Its explanation was called for as to why its application for registration should not be rejected. The respondent-company submitted its reply dated 12-6-1998 which was examined by the bank. It was not found to be satisfactory and the application of respondent-company for certificate of registration was rejected by a speaking order dated 17-9-1998 passed by the bank. The fact situation was that the respondent-company had failed to repay the deposit amounts and was continuously violating the norms of the Act and the directions issued thereunder by the bank from time to time. As the application of the respondent-company for certificate of registration was rejected by the bank, it became disqualified to carry on the business. The continuance of business by the respondent-company is detrimental to the public interest and to the interest of the depositors. The bank also received complaints dated 9-11-1998, 5-12-1998,6-1-1999, 14-1-1999, 3-7-1999 and August, 1999 from different persons (made mention of in paragraph 11 of the petition) concerning the payment of deposits due to be made by the respondent-company.
(3.) Thus, as per the petitioner-bank the respondent-company is liable to be wound up for three reasons: (i) it is unable to pay its debt; (ii) it has become disqualified to carry on the business because of rejection of its application for issuance of certificate of registration; and (iii) continuance of business by it is detrimental to the public interest and to that of the depositors.;