Reserve Bank of India vs Himachal Grameen Sanchayka Ltd.

Kuldip Chand Sood, J.—Learned counsel for the petitioner states that the order dated 19.6.2001 have been complied with. Objections have been removed. Compilation be taken on record.

Company Petition No. 6 of 2001

Admit. Notice returnable within six weeks.

Company Application No. 29 of 2001

The petitioner, Reserve Bank of India, has filed this company petition, u/s 45MC of the Reserve Bank of India Act (''RBI Act'' for short) read with Section 450 of the Companies Act for winding up of the respondent company. According to the petitioner-bank, the respondent is a non-banking financial company within the meaning of Section 451(f) of the RBI Act. Case of the petitioner-bank is that the respondent company submitted an application in July, 1997, for issuance of a certificate of registration under the provisions of Section 45-IA of the RBI Act. To consider this application -- an inspection was carried out regarding the financial health of the company on 31.3.1997. This inspection was conducted by P.L. Mittal and Company, Chartered Accountants. On inspection, it was found that the net owned fund of the company was at (-) Rs. 886.66 lakhs as on 31.3.1997 whereas the public deposits held by the company were to the tune of Rs 737 lakhs on 31.3.1999. The ''capital to risk weighted assets ratio'' (CRAR) was assessed to be nil. The outside liabilities of the company were Rs. 1,167.99 lakhs as on 31.3.1997 as against the assets of Rs. 742.50 lakhs on that date. The company, in the circumstances, in the opinion of the petitioner-bank, was not solvent. The company failed, according to the petitioner-bank, to maintain liquid assets as contemplated u/s 45-IB of the Act. It violated concentration norms and had high level of non-performing assets. The respondent-company was found to have invested huge amount in the immovable property. It was also discovered by the petitioner-bank that the respondent had advanced huge sums to Himachal Grameen Sanchayka, a partnership firm, Sanohayka Mail, a proprietary concern, and Sanohayka India Ltd. in which the directors of the company were interested. The auditors in the report pointed out that the respondent-company had violated the various provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. The petitioner-bank also scrutinised the books of the company on 9.8.1998. Such scrutiny disclosed violation of the directions issued by the petitioner-bank.

In these circumstances, noticed above, a show cause notice was issued to the respondent-company on 24 September, 1999 calling upon it to show cause as to why its application for certificate of registration may not be rejected (Annexure VI). The respondent-company did not offer any explanation to the show cause notice. However, vide letter dated 26.10.1999, [the company] requested the petitioner-bank to give time upto 15 December, 1999 (Annexure VII).

According to the petitioner-bank, taking into consideration, the relevant facts, affairs of the company and failure of the company to comply with the statutory provision of the RBI Act and directions issued by the petitioner-bank, [the petitioner bank] rejected, vide its orders dated 7 January, 2000, the application of the respondent-company for issuance of certificate of registration u/s 45-IA of the RBI Act. The company was disqualified u/s 45-IA of the Act to carry on the business of a non-banking institution.

The petitioner-bank, on 18 January, 2000, in exercise of the powers u/s 45MB(2) of the Act, restrained the respondent-company from accepting deposits from any person by way of renewal or otherwise. The respondent-company was also directed not to sell, transfer, create, charge or mortgage or deal in any manner with its property without prior written permission of the petitioner-bank till further orders.

The petitioner-bank, it is stated, received large number of complaints, complaining about non-payment of deposits by the deposits with the company. It was discovered that large number of complaints were pending before the various Consumer Disputes Redressal Forums in the State. Taking all these factors into consideration the petitioner-bank took a view that company was unable to pay its debts.

It is in this background [that the] petitioner prays for winding up of the company.

By this application, petitioner-bank prays for the appointment of provisional liquidator without notice. According to the petitioner the District Consumer Forum Shimla, has directed the auction of the properties of the respondent-company of execution of the awards to some of the depositors passed by the Consumer Forum. The sale of some of the properties was scheduled to be held on 30 and 31 August, 2001.

Mr. Rajiv Sharma, learned counsel for the petitioner-bank, prays that if properties of the respondent-company are auctioned at the instance of few depositors in execution of the award(s) passed in their favour by District Consumer Redressal Forum, then it will result in grave injustice to the majority of the depositors who have not been able to approach the Consumer Forum inasmuch as they would never be able to get repayment of their deposits. Execution of those awards, it is contended, would be detrimental to the interest of class of depositors as a whole ; particularly, the poorer and the less informed depositors who could not afford or otherwise were disable to approach the forums. Mr. Sharma, learned counsel for the petitioner-bank submits that it is necessary in the larger public interest that provisional liquidator without notice to the respondent-company is appointed. Mr. Sharma further contends that issuance of such notice would be counter productive and would jeopardise the winding up petition filed by the petitioner-bank.

Having heard Mr. Rajiv Sharma, learned counsel for the petitioner, and taking into consideration the entirety of the circumstances, as detailed in the petition and the application on the affidavit of Shri Sardana Singh, General Manager, Department of Non-Banking Supervision, Reserve Bank of India, Chandigarh, and the fact that the bank has satisfied itself that respondent company is unable to pay its debts and has prohibited the company from receiving deposits vide its order dated 18.1.2000 (Annexure IX) ; and the fact that certificate of registration has been declined to the company by the petitioner-bank vide orders dated 7.1.2000 (Annexure VIII), petitioner-bank in my view is prima facie entitled to ask for winding up of the respondent company.

Section 450 of the Companies Act provides for the appointment of a provisional liquidator without issuance of notice to the company for special reasons.

Taking into consideration the averments made in the petition and application, detailed above, I am satisfied that it is necessary to appoint a provisional liquidator without issuance of notice to the respondent company to protect and preserve the assets of the company pending the orders of winding up in larger public interest, particularly, in the interest of majority of the depositors of the respondent-company and also for the reasons that the assets of the respondent-company are not transferred, alienated or otherwise dealt with save and except in the interest of the depositors.

I, accordingly, allow this application and appoint the official liquidator, attached to this court, with all such powers as provisional liquidator of the respondent-company with a direction to immediately take charge of the company''s property, assets, books of accounts and other relevant papers and documents.

The application is disposed of.

Company Application No. 10 of 2001

In view of the order passed in the C.A. No. 29 of 2001, this application does not survive, and the same is accordingly disposed of.