2019 (4) TMI 1627 - HC - Indian Laws

Principles of natural justice - cancellation of certificate of registration - section 45-IA (7) of the Act of 1934 - HELD THAT - In the facts of the present case, the petitioner was issued a show cause notice, to which the petitioner replied in writing. In its reply, the petitioner acknowledged that there was default on the part of the petitioner in meeting the requirement of having a net owned fund of ₹ 200 lakhs as at March 31, 2017. Principles of natural justice do not require that, a delinquent has to be given an oral hearing at every time or at every stage. It is sufficient compliance of the principles of natural justice when, a delinquent issued a show cause notice delineating the charges which is required to be met and is afforded a reasonable opportunity of making a representation with regard thereto. In the present case, in its reply the petitioner did not ask for an oral hearing to be granted. The second proviso to Section 45-IA(6) does not mandate an oral hearing to be given. Requirement of a statute to hear the parties does automatically translate into a right of oral hearing at every stage or any stage for that matter. It would be sufficient compliance with the requirements of the second proviso to Section 45-IA(6) allows the notice an opportunity to make a representation and considers such representation in an impartial manner, with an open mind, fairly and in accordance with law. Section 45-IA(7) explanation provides the formula by which the net owned fund that, a company carrying on a business as a non-banking financial companies, is required to be calculated. Nothing is placed on record to suggest that, the calculation of net owned fund by applying the formula prescribed in the statute is in excess of ₹ 200 lakhs as on March 31, 2017. The impugned order contains reasons. It is not vitiated by breach of principles of natural justice. Petition dismissed - decided against petitioner.

Summary

Issues:
Challenge to order of cancellation by RBI under Reserve Bank of India Act, 1934 based on net owned fund calculation and principles of natural justice.

Analysis:
The petitioner contested the cancellation order issued by RBI under the Reserve Bank of India Act, 1934, arguing that the authorities did not consider the true net owned fund available to the petitioner as of March 31, 2017. The petitioner referred to the definition of "net owned fund" and a certificate from statutory auditors to support compliance with RBI's requirement of a net owned fund of ?200 lakhs. The petitioner also claimed a lack of opportunity for oral hearing before the decision, citing the second proviso of Section 45-IA (6) of the Act. However, the court noted that the requirement for an oral hearing is discretionary, and compliance with principles of natural justice is met when a delinquent is given a reasonable opportunity to make a representation, which the petitioner had in this case.

The court highlighted Section 45-IA (7) of the Act, which defines "net owned fund" and the RBI notifications mandating a net owned fund of ?200 lakhs by March 31, 2017. Despite the petitioner's argument that the total assets would increase the net owned fund, the court emphasized that the calculation must adhere to the formula provided in the statute. As the impugned order contained valid reasons and was not in breach of natural justice principles, the court found no grounds to interfere with it.

In conclusion, the court dismissed the writ petition challenging the cancellation order, emphasizing that the authorities had not erred in their decision-making process, and the petitioner's contentions regarding net owned fund calculation and principles of natural justice were not upheld.