9911796707
|
Home
Issues Involved:
1. Solvency and financial stability of the respondent Company. 2. Compliance with statutory provisions under the RBI Act. 3. RBI's actions and directives towards the respondent Company. 4. Company's response to RBI's directives and show-cause notice. 5. Complaints from depositors and legal actions against the Company. 6. RBI's petition for winding up of the Company. 7. Company's application under section 391(1) of the Companies Act. 8. Final judgment and order of winding up. Issue-wise Detailed Analysis: 1. Solvency and financial stability of the respondent Company: The respondent Company, a non-banking financial company, was found to have a negative Net Owned Fund of (-) Rs. 886.66 lakhs as of March 31, 1997, and public deposits of (+) Rs. 737 lakhs as of March 31, 1999. The Capital to Risk Weighted Assets Ratio (CRAR) was assessed to be nil, and the outside liabilities amounted to Rs. 1167.99 lakhs. The RBI concluded that the Company was not solvent. 2. Compliance with statutory provisions under the RBI Act: The Company failed to maintain liquid assets as required by section 45-IB of the RBI Act, violated concentration norms, and had high levels of Non-Performing Assets (NPA). It also invested in immovable property and advanced significant sums to entities in which its directors had interests, violating the Non-banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. 3. RBI's actions and directives towards the respondent Company: Upon discovering these issues, the RBI issued a show-cause notice on September 24, 1999, and subsequently rejected the Company's application for a Certificate of Registration on January 7, 2000. The RBI also prohibited the Company from accepting deposits and from dealing with its properties and assets without prior written permission. 4. Company's response to RBI's directives and show-cause notice: The Company failed to respond adequately to the RBI's show-cause notice and did not provide a satisfactory explanation. It requested an extension of time but did not address the RBI's concerns regarding its financial position and compliance with statutory provisions. 5. Complaints from depositors and legal actions against the Company: Numerous complaints were received by the RBI regarding non-payment of deposits by the Company. More than 3000 complaints were pending before various Consumer Fora, and some depositors had obtained awards against the Company for non-payment of matured deposits. 6. RBI's petition for winding up of the Company: The RBI filed a petition for winding up the Company on the grounds that it was unable to pay its debts, was disqualified from carrying on the business of a non-banking financial institution, was prohibited from receiving deposits, and its continuance was detrimental to public interest and the interest of depositors. 7. Company's application under section 391(1) of the Companies Act: The Company filed an application under section 391(1) of the Companies Act for convening a meeting of equity shareholders, secured and unsecured creditors. However, the court held that such an application could only be maintained by the Liquidator once winding up proceedings had been initiated, and therefore dismissed the application. 8. Final judgment and order of winding up: The court concluded that the RBI's satisfaction regarding the Company's inability to pay its debts was justified. The Company had failed to meet the statutory conditions for registration and had not adequately responded to the RBI's directives. Consequently, the court directed the winding up of the Company, appointed the Official Liquidator to take charge, and ordered the liquidation process to be advertised in widely circulated newspapers. Conclusion: The petition for winding up the respondent Company was allowed based on its insolvency, non-compliance with statutory provisions, inability to pay depositors, and detrimental impact on public interest. The Official Liquidator was appointed to oversee the liquidation process.
|
