HIMACHAL GRAMEEN SANCHAYKA LTD Vs. R B I

JUDGEMENT

(1.) This appeal is filed by the appellant - Himachal Girameen Sanchayka Ltd. ('Company', for short) against an order passed by the learned Company Judge on 3/09/2001, in Company Application No. 29 of 2001 in Company Petition No. 6 of 2001, titled as Himachal Grameen Sanchayka Ltd. and another v. Reserve Bank of India. By the said order the learned Company Judge allowed the application filed by the Reserve Bank of India ('RBI', for short) under Section 45MC of the Reserve Bank of India Act, 1934 (hereinafter referred to as 'the RBI Act') read with Section 450 of the Companies Act, 1956 (hereinafter referred to as 'the Act') and ordered appointment of Official Liquidator, attached to this Court, with all powers as Provisional Liquidator of the Company with a direction to immediately take charge of the Company's property, assets, books of accounts and other relevant papers and documents.

(2.) It was the case of the RBI that the appellant-Company is non-banking financial company as defined in Clause (f) of Section 45IA of the RBI Act. The Company submitted an application in July, 1997 for issuance of Certificate of Registration for carrying of business for non-banking financial institution under the RBI Act. Inspection was carried out regarding financial position of the Company by the RBI as on 31/03/1997. The inspection was conducted by M/s. P. L. Mittal and Company, Chartered Accountants. On inspection, it was found that whereas the Net Owned Fund of the Company was (-) Rs. 886.66 lacs as on 31/03/1997, the public deposits held by the Company were (+) Rs. 737 lacs as on 31/03/1999. The Capital to Risk Weighted Assets Ratio (CRAR) was assessed as 'Nil'. The outside liabilities of the Company were Rs. 1167.99 lacs as on 31/03/1997 as against assets of the Company of Rs. 742.50 lacs. In the opinion of the RBI, therefore, the Company was not solvent. According to the RBI, the Company failed to maintain liquid assets as contemplated by Section 45IB of the RBI Act. The Company, according to the RBI, also violated concentration norms and had high level of Non-Performing Assets (NFA). The Company was found to have invested huge amount in the immovable property. It was discovered by the RBI that the Company had advanced huge sum to Himachal Grameen Sanchayka, a partnership firm. Sanchayka Mail, a proprietary concern and Sanchayka India Ltd. in which the Directors of the Company were interested. In the audit report, it was mentioned that the Company had violated various provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. The RBI scrutinized the books of the Company on Augus 9/08/1998, which revealed violation of directions issued by the RBI.

(3.) Notice was, therefore, issued by the RBI to the Company on 24/09/1999 calling upon the latter to show cause on or before 9/10/1999, as to why its application for Certificate of Registration should not be rejected. The Company neither offered any explanation nor submitted a reply not prayed for extension of time before 9/10/1999. It, however, sought extension of time up to 15/12/1999 by an application dated 26/10/1999, i.e. after the period mentioned in the notice (which was 9/10/1999) was over.