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TMI Blog2002 (9) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... as Co. A. 4-b/98 were heard together by the learned company judge and a common judgment dated 5-12-2001 has been given. In the said judgment learned Single Judge has allowed CP 93/2001 ordering winding up of the appellant company and dismissed Co. A. 4-B/98 of the appellant. 2. Company Appeal 3/2002 is directed against the decision in CP 93/2001 and Co. A. 10/2002 is against that part of the order by which the Company Judge has dismissed the Company Appeal 4-B/98. Both these appeals were heard together. 3. In his elaborate judgment covering various facets of the case, the learned Company Judge has taken note of the factual matrix of the matter and has also referred to the statutory provisions. It would, therefore be unnecessary to do this exercise all over again in detail. However, for the sake of clarity, wherever necessary, these facts and statutory provisions would be referred to and expanded. 4. It may be stated at the outset that all the parties before the learned Company Judge agreed that if the company petition filed by the Reserve Bank of India succeeds then the company appeal against the order of the CLB filed by Rockland would be infructuous. The learned Singl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s over the directions regarding inspection of its records but still pressed for discharging the liability of public deposit within three years starting January, 1998 for repayment in the ratio of 40:30:30 corresponding to this period. However, RBI decided to go ahead with the said audit by Dewan Gulati. It could not succeed as the appellant did not cooperate with the C.As. Thereafter on 10-2-1998 RBI sent a detailed notice to the appellant stating that in view of various factors its application for grant of certificate of registration for carrying on business of NBFC could not be granted. The appellant sent a detailed representation dated 19-2-1998 setting out its case and concluded by withdrawing its application dated 3-7-1997 for grant of certificate of registration. Notwithstanding the proposed withdrawal of application, RBI vide its reply dated 19-2-1998 communicated to the appellant that till the entire outstanding public deposit held by it were repaid in terms of RBI notification dated 31-1-1998, the appellant company will continue to fall within the RBI Regulation and cannot be allowed to withdraw its registration application at that stage. Thereafter the prohibitory ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he machinery of the RBI and it issued shows cause notice on 15-6-1999 to the appellant asking why penal should not be not taken against it. As the notices sent to the company and its directors came back undelivered with the remarks" Intentionally avoided to take delivery" and "left" respectively, the RBI filed criminal complaint No. 753/99 in the Court of Additional Chief Metropolitan Magistrate, New Delhi on 21-9-1999. The learned ACMM took cognizance of the offence on 9-9-1999 and summoned all the accused. 10. Thereafter in March, 2001, RBI filed a company petition 93/2001 for winding up the affairs of the appellant and took charge of its properties, assets and books of account etc. The aforesaid company petition and appeal have been disposed of by the learned Single Judge in the manner already mentioned above. Before we proceed to deal with the contentions raised by the appellant, it would be apposite to summarise the discussion made by the learned Single Judge in the impugned judgment. We may mention that the main fact which influenced the Company judge to pass the impugned order can be summarized as under : ( a )During the pendency of the appeal against the order of CLB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d resulted in the meeting held on 23-9-2000). The acceptance of the request, however, had not positive effect on the outcome of the proceedings. Further similar entreaties made by learned counsel for Rockland during the course of hearing had, quite naturally, to be rejected. In the context of these submission of learned counsel for Rockland, it must be remembered that the Supreme Court has said in General Finance and Investment Co. Ltd. v. RBI [1992] 2 SCC 344 that the reasonableness of directions given by the RBI have to be looked at from the point of view of the depositors, for whose safeguard they have been issued. The reasonableness of the directions has to be looked at from the point of view of the company to whom such restrictions will be irksome and may, therefore, be regarded as unreasonable. (paragraphs 19 and 20 of the report) On a consideration of the various aspects of the case, I have no hesitation in concluding that Rockland is unable to pay its debts and its continuance is detrimental to the public interest or to the interest of the depositors of the company. The provisions of clauses ( a ) and ( d ) of section 45-MC(1) of the RBI Act have been violated as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther submitted that the appellant had all the intention to pay to the depositors and only for this reason it had made proposal on 14-1-1998 before the CLB and even the RBI was informed about the payment which the appellant proposed to make to the depositors in three years in the ratio of 40:30:30 although RBI guidelines had not come into existence at that time which were issued on 30-1-1998. It was further submitted that even in reply to show-cause notice the appellant had expressed its intention to pay the depositors. Learned counsel further referred to leasing assets from whom money was to be recovered and tried to demonstrate therefrom that once this money is recovered the appellant would be in a position to pay its debtors particularly when the appellant was in a possession of certain properties as well for which it was making genuine attempts to sell the same. It was also argued that the appellant was still a solvent company as is clear from its balance-sheet and it had sufficient assets to repay the debtors. He tried to butteress his submission by pointing out that on 31-3-1997 the dues payable were 20.96 crores which had come down to Rs. 3.6 crores on 26-7-2001. The amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the filing of the petition amounts to an abuse of the process of the Court. If the petition is admitted, it is still open to the company to move the Court that in the interest of justice or to prevent abuse of the process of the Court, the petition be not advertised..." (p. 788) 16. To the same effect is the judgment of Gujarat High Court in the case of MVI Ahmadur Rehman ( supra ). Obviously, these judgments do not apply to the fact situation obtaining in the instant case. 17. He submitted that attempt of the Court should be to rehabilitate the company and winding up order should be passed only as a last resort. 18. In a nutshell, it may be stated that the contention of the appellant was threefold : ( a ) RBI had no jurisdiction in the matter inasmuch as the appellant was not NBFC; ( b ) the appellant had all the intentions to pay its debtors and was still a solvent company and therefore the order of winding up should not have been passed; and ( c ) such orders were passed contrary to the provisions of the Company Court Rules. 19. Learned counsel for the respondent, including Mr. Luthra appearing for the Official Liquidator, countered the aforesaid submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any business of financing or that it was not a financial institution. On the contrary, these facts are not doubted. Furthermore, it was discovered by the RBI that even after the Board of Directors of Rockland had resolved in January, 1998 not to accept fresh deposits, Rockland continued to do so. The fact that Rockland was Merchant Banker recognized by the SEBI at the relevant time also, does not detract from the conclusions arrived at. It is possible that a Merchant banker, Rockland was not entitled to function as an NBFC - but that it unabashedly chose to do so, cannot be used by it to its advantage. Similarly, the contention of learned counsel for Rockland that due to the provisions of section 2( c )( xvi ) of the Industrial Development Bank of India Act, 1964, his client cannot be classified as a financial institution or an NBFC has only to be stated for outright rejection. There can, therefore, be no doubt that the writ petition filed by the RBI against Rockland is maintainable." 23. We are in agreement with the aforesaid observations. Coupled with the fact that the Company has been under the jurisdiction of RBI ever since its inception and it voluntarily applied for r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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