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TMI Blog2019 (4) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... se investment (assets) is not known and the reasonableness of the proposed exchange ratio could not be ascertained. Such accounts showing "zero" income and showing huge investments as assets must be said to be not inspiring confidence. If there are huge investments as assets and it shows that financial assets are more than non-financial assets and income from operation is zero without its break up between financial income and non-financial income, the required criteria to determine the principal business of the company being finance company gets met. The National Company Law Tribunal not being satisfied from the case put up by the appellant declined to accept the scheme and we find it difficult to interfere with the impugned order. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir scheme of arrangement so that appellants Nos. 1 to 8-transferor companies could amalgamate with appellant No. 9-company. The petition of the appellants came to be rejected and hence the present appeal. 2. It appears that the appellants had filed first motion before the hon'ble High Court of Delhi by filing C. A. (M) No. 153 of 2015. The hon'ble High Court was pleased to dispense with the requirement of convening meetings of equity shareholders, secured and unsecured creditors of the companies in view of their consent being obtained. The appellant then filed joint petition for sanction of scheme of amalgamation before the hon'ble High Court vide second motion C. P. No. 868 of 2015 under sections 391 to 394 of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s zero , it could not be said that both the conditions as mentioned in RBI Circular were satisfied. It has been argued by learned counsel for the appellant that when the income was zero it could not be said that financial assets are more than 50 per cent. of the total assets and income from financial assets is more than 50 per cent. of the gross income, which according to counsel was requirement under RBI Circular No. RBI/2006-07/158 DNBS (PD) C. C. No. 81/03.05.002/2006-07, dated October 19, 2006, copy of which has been filed as annexure 11. 5. The Regional Director did not appear to contest in this appeal in spite of service of notice. 6. We have heard learned counsel for the appellant and perused the record. A copy of the report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. RBI-2006-07/158 DNBS (PD) C. C. No. 81/03.05.002/2006-07 dated October 19, 2006 which states that 'That company will be treated as a non-banking financial company (NBFC) if its financial assets are more than 50 per cent. of its total assets (netted off by intangible assets) and income from financial assets is more than 50 per cent. of the gross income'. Further, if the companies are carrying out NBFC activity, they are to obtain prior written permission from RBI with regard to the proposed scheme of amalgamation as per RBI Notification No. DNBS. (PD)27 5/GM(AM)02014 dated May 26, 2014. Transferor company Nos. 1, 2, 4, 5, 6 have no activity being carried out as reflected in their respective profit and loss statement for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had made their submissions to the Regional Director through letter dated March 15, 2016 were unable to convince the Regional Director regarding the issue of NBFC. Report shows that the Regional Director was satisfied that the appellant companies were prima facie engaged in investment activities or extending loans and advances to certain parties like corporate bodies and there was no mention that these companies are registered with the RBI as NBFC to carry on such business. 9. Paragraph 2 of the RBI Circular dated October 19, 2006 (which has been referred by the Regional Director) may be reproduced. The same reads as under : In this regard, it is further clarified that the business of non-banking financial institution (NFI) means a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. If there are huge investments as assets and it shows that financial assets are more than non-financial assets and income from operation is zero without its break up between financial income and non-financial income, the required criteria to determine the principal business of the company being finance company gets met. The National Company Law Tribunal not being satisfied from the case put up by the appellant declined to accept the scheme and we find it difficult to interfere with the impugned order. 12. Section 45-I of the Reserve Bank of India Act, 1934 in clause (a) has defined business of non-banking financial company as under : Definition.-In this Chapter, unless the context otherwise requires,- (a) 'business of a no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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