2001 (6) TMI 784 - HC - Companies Law

Summary

Issues:
Prosecution under section 58A(6)(b) applicability, Scheme of 'Poorna Viswaas' in relation to Non-Banking Financial Companies (NBFC) rules, Competency of the Registrar of Companies to file a complaint.

Analysis:
1. Prosecution under section 58A(6)(b) Applicability:
The petitioners argued that the prosecution under section 58A(6)(b) is not applicable to the first petitioner-company as it is a non-banking financial company exempted under section 58A(7)(b). They contended that the advertisement inviting deposits was part of an asset securitization scheme and not a deposit under NBFC rules. The defense emphasized that the Registrar of Companies lacked jurisdiction to initiate the complaint. However, the respondent countered, stating that the advertisement clearly invited deposits from the public, making the company liable under section 58A. The court noted the specific assertion by the complainant that section 58A applied to the petitioner-company, emphasizing that the trial court should determine exemption status during trial based on evidence.

2. Scheme of 'Poorna Viswaas' in Relation to NBFC Rules:
The petitioners claimed that their scheme, 'Poorna Viswaas,' did not constitute a deposit under NBFC rules or section 58A. They argued that as a loan company applying for NBFC registration, they were exempt from delivering the advertisement to the Registrar of Companies. However, the court found the advertisement clearly solicited deposits from the public, contradicting the petitioner's assertion of asset securitization without guaranteed maturity amounts. The court stressed that the trial court should decide the exemption status during trial based on presented evidence.

3. Competency of the Registrar of Companies to File a Complaint:
The petitioners challenged the competency of the Registrar of Companies to file the complaint, citing a notification authorizing specific RBI officers to launch prosecutions under section 58A. The defense contended that the Registrar of Companies was the competent authority to file the complaint, as per section 621 of the Companies Act. The court upheld the Registrar's competency to file the complaint, dismissing the petition on grounds of meritlessness. It affirmed the maintainability of the complaint filed by the Registrar of Companies, the primary competent officer designated for launching prosecutions under section 621 of the Companies Act.