2008 (6) TMI 352 - SC - Companies Law

Power of Reserve Bank to give directions - Held that - The interest of justice would be subserved if we, in exercise of our discretionary jurisdiction under article 142 of the Constitution of India, direct that 50 per cent of the amount which was forfeited be refunded by the appellant to the respondent within three months from the date of this judgment and the balance 50 per cent would be considered as forfeited in terms of the provisions of the agreement. However, if the appellant fails to pay the said amount within the stipulated period the same will carry an interest at the rate of 8 per cent p.a. which will be calculated from the date when the above mentioned period expires till the date of payment.

Summary

Issues:
Challenge to order granting interim protection to Respondent No. 1 by Allahabad High Court, Lucknow Bench without giving an opportunity to present the case.

Analysis:
The appellant issued a show-cause notice to Respondent No. 1 on 9-5-2008, followed by a detailed reply on 2-6-2008. Respondent No. 1 claimed discussions were held before the reply submission. Subsequently, an order dated 4-6-2008 restrained the company from accepting deposits. Respondent No. 1 alleged lack of fair opportunity before the appellant, impacting employees, agents, staff, and depositors. The High Court stayed the order on 5-6-2008, directing compliance with the appellant's directions. The writ petitioner was barred from accepting new deposits maturing beyond June 2010, with the matter listed for July 2008.

Analysis:
The Reserve Bank of India's senior counsel argued that the interim order favored the writ petition without allowing the appellant to present its case fully. Allegations of illegalities and lack of transparency were raised regarding the show-cause notice and the order. Respondent No. 1's counsel contended that presenting the case before the appellant could have shown the unnecessary nature of the actions contemplated in the show cause.

Analysis:
After hearing both parties, the Supreme Court directed the Reserve Bank of India to provide Respondent No. 1 with an opportunity to present its case and substantiate its reply to the show-cause notice. While acknowledging the adherence to natural justice principles, the Court deemed a hearing necessary due to the case's peculiar nature. The Court specified that this direction was specific to this case and not a general rule. Respondent No. 1 was instructed to appear before the Reserve Bank of India on 12-6-2008 without further notice to present relevant materials. Until the matter was re-evaluated by the Reserve Bank of India, the order dated 4-6-2008 was suspended, along with the High Court's interim protection to Respondent No. 1. The Court clarified that no opinion on merits was expressed, and the appeal was disposed of accordingly.