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2003 (7) TMI 574

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..... ocks, debentures, debenture stocks, bonds, obligations and securities issued and guaranteed by any company, Corporation, firm or person whether incorporated or established in India or elsewhere. 2. To act as financial consultants, management consultants and provide, advice services, consultancy in various fields, general administrative secretarial, commercial, financial, legal, economic, labour, industrial, public relations, scientific, technical, direct and indirect taxation and other levies, statistical, accountancy, quality control and data processing. 3. To take part in the formation, supervision or control of the business of operations of any company or undertaking and for that purpose to act as an issue House. Registrars and Share Transfer Agents, Secretaries, Financial Advisers or Technical Consultants or in any other capacity and to appoint and remunerate any directors, administrators or accountants or other experts or agents. 4. To receive money on deposits at interest or otherwise for fixed periods, and to lend money on any terms that may be thought fit and particularly to customers or other persons or corporations having dealings with the company. The company shall .....

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..... ng to the depositors. Order of winding up would forestall such process. 7. For proper appreciation of fact and law involved herein sections 45-MC and 45-IA of the said Act, 1934 being relevant herein are quoted herein-below : "45-IA. Requirement of registration and net owned fund. (1) Notwithstanding anything contained in this Chapter or in any other law for the time being in force, no non-banking financial company shall commence or carry on the business of a non-banking financial institution without ( a )obtaining a certificate of registration issued under this Chapter; and ( b )having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding two hundred lakh rupees, as the Bank may, by Notification in the Official Gazette, specify. (2) Every non-banking financial company shall make an application for registration to the Bank in such form as the Bank may specify : Provided that a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 shall make an application for registration to the Bank before the expiry of six months from such commencement and notwithstanding anything contained .....

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..... k may, by notification in the Official Gazette, specify; and ( g )any other condition, fulfilment of which in the opinion of the Bank, shall be necessary to ensure that the commencement of or carrying on of the business in India by a non-banking financial company shall not be prejudicial to the public interest or in the interest of the depositors. (5)The bank may, after being satisfied that the conditions specified in sub-section (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose. (6) The Bank may cancel a certificate of registration granted to a non-banking financial company under this section if such company ( i )ceases to carry on the business of a non-banking financial institution in India; or ( ii )has failed to comply with any condition subject to which the certificate of registration had been issued to it; or ( iii )at any time fails to fulfil any of the conditions referred to in clauses ( a ) to ( g ) of sub-section (4); or ( iv )fails ( a )to comply with any direction issued by the Bank under the provisions of this Chapter; or ( b )to maintain accounts in accordance with the requiremen .....

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..... (2) The book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with ( i )subsidiaries of such company; and ( ii )companies in the same group, to the extent such amount exceeds ten per cent of ( a ) above. (II) Subsidiaries and companies in the same group shall have the same meanings assigned to them in the Companies Act, 1956. 45-MC. Power of Bank to file winding up petition. (1) The Bank, on being satisfied that a non-banking financial company, ( a )is unable to pay its debt; or ( b )has by virtue of the provisions of section 45-IA become disqualified to carry on the business of a non-banking financial institution; or ( c )has been prohibited by the Bank from receiving deposit by an order and such order has been in force for a period of not less than three months; or ( d )the continuance of the non-banking financial company is detrimental to the public interest or to the interest of the depositors of the company, may file an application for winding up of such non-banking financial company under the Companies Act, 1956. (2) A non-banking financial company shall be deemed to be .....

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..... nothing but an investment company. The principal business of the company was to borrow money from public by accepting public deposits and to invest the same in shares and in other form. The said business activity in my view, squarely comes within the mischief of section 45-IA of the said Act, 1934. Hence, once the company becomes disqualified to carry on Non-Banking Financial Business there could be no other activity left open to the company to carry on. From the records annexed to the pleadings it would appear that the RBI was compelled to take such action on the basis of complaints made by various depositors with regard to re-payment of public deposits. The company themselves admitted the factum of non-payment of deposits that had resulted in protracted litigation before the Company Law Board. Hence, in my view, existence of the company in the commercial world would be contrary to public interest. 10. It was also contended on behalf of the company that in case an order of winding up is passed it would disturb the regular process of repayment of the deposits in terms of the order of Company Law Board. In my view, once the company is wound up under section 45-MC of the said Act .....

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