2000 (10) TMI 917 - HC - Companies Law

Issues Involved:
1. Competence and authority of the petitioner to file the winding-up petition.
2. Maintainability of the winding-up petition.
3. Grounds for winding up: inability to pay debts, disqualification to carry on business, and detriment to public interest and depositors.

Issue-wise Detailed Analysis:

1. Competence and Authority of the Petitioner:
The respondent-company challenged the authority of Deepak Singhal, Deputy General Manager of RBI, to file the winding-up petition, arguing that he was not a director, secretary, or principal officer as required by Rule 21 of the Companies (Court) Rules, 1959. The court examined the relevant provisions of the Reserve Bank of India Act and the General Regulations. It concluded that Deepak Singhal was authorized under Regulation 18(2) and Regulation 19 to file and verify the petition on behalf of RBI. The court rejected the respondent's preliminary objection, stating that the petition was filed by a competent officer and was maintainable.

2. Maintainability of the Winding-up Petition:
The respondent argued that the conditions prescribed by section 45MC(1) were not satisfied and that the petition was premature since an appeal against the rejection of the registration certificate was pending before the Central Government. The court noted that the appeal's pendency did not automatically stay the rejection order, and the RBI's satisfaction regarding the grounds for winding up was sufficient for filing the petition. The court emphasized that it ultimately had to form an opinion based on the material presented.

3. Grounds for Winding Up:
a. Inability to Pay Debts:
The court examined the financial position of the respondent-company, noting that it had stopped making payments to depositors since September 1998 and had shut down its offices. The balance sheet as on 31-3-1997 showed liabilities exceeding assets, with accumulated losses and significant unsecured loans. The court found that the respondent was unable to pay its debts, as evidenced by its admissions before the Company Law Board (CLB) and the financial data.

b. Disqualification to Carry on Business:
The respondent's application for a registration certificate was rejected by the RBI on 17-9-1998. The court acknowledged that the appeal against this rejection was pending, but it did not stay the rejection order. Therefore, the respondent was disqualified from carrying on its business as a non-banking financial company.

c. Detriment to Public Interest and Depositors:
The court highlighted that the respondent-company's operations jeopardized the interests of depositors and the public. The company's financial position, negative net owned funds, and inability to meet statutory investment requirements indicated that its continuance was detrimental to public interest and depositors. The court noted that the directors had conducted the company's operations in a manner that exposed depositors' money to significant risk.

Conclusion:
The court admitted the winding-up petition for advertisement on the grounds that the respondent-company was unable to pay its debts and that its continuance was detrimental to public interest and depositors. The court ordered the publication of the notice in specified newspapers and the Official Gazette and maintained the interim order restraining the respondent from transferring or encumbering its assets.

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