Allahabad High Court
Reserve Bank Of India A Statutory Body ... vs M/S Sahara India Financial Corporation ... on 15 February, 2019
Author: Vivek Chaudhary
Bench: Vivek Chaudhary
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH [AFR] [Reserved Judgment] Court No. - 19 Case :- COMPANY PETITION No. - 7 of 2015 Petitioner :- Reserve Bank Of India A Statutory Body Established Under Respondent :- M/S Sahara India Financial Corporation Ltd. Counsel for Petitioner :- Pritish Kumar Counsel for Respondent :- Kumar Ayush Hon'ble Vivek Chaudhary,J.
1. Present winding up petition is filed by the Reserve Bank of India (RBI) against M/s. Sahara India Financial Corporation Limited (SIFCL) under Section 45-MC of Reserve Bank of India Act 1934 (RBI Act). The proceedings are being held as per procedure prescribed by Part VII of the Companies Act, 1956. SIFCL is a Residuary Non-Banking Financial Company (RNBFC).
2. Sub-section (1) of Section 45-MC of RBI Act provides the grounds on which RBI can file a winding up petition against the NBFCs. Sub-section (4) further provides that the provisions of Companies Act 1956, relating to winding up of a Company, shall apply to a winding up proceeding initiated by RBI under Section 45-MC of the RBI Act. Section 45-MC reads as follows:-
"45MC. 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 unable to pay its debt if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the Bank certifies in writing that such company is unable to pay its debt.
(3) A copy of every application made by the Bank under sub-section (1) shall be sent to the Registrar of Companies.
(4) All the provisions of the Companies Act, 1956 relating to winding up of a company shall apply to a winding up proceeding initiated on the application made by the Bank under this provision."
3. Petitioner RBI claims that all the four grounds, provided under Section 45-MC (1), are made out and the petition is filed on all of them.
4. The facts of the case, as per RBI are, that, it is a body corporate established by the RBI Act, inter alia, to regulate the issue of Bank notes and keeping of reserves with a view to secure monetary stability in India and generally to operate the currency and credit system of the country to its advantage. The RBI Act, 1934 was amended by RBI (Amendment) Act, 1997 (23 of 1997). By the said amendment, Chapter III-B was added to the RBI Act, 1934, providing RBI power to register and regulate Non-Banking Financial Companies (NBFCs) including Residuary Non-Banking Companies (RNBCs).
5. In exercise of powers under Section 45-J and 45-K of RBI Act, the RBI issued Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 (for short, RNBC Directions). RBI under the RBI Act and the RNBC Directions, regulates the deposit acceptance activities of the RNBCs. Chapter III-B of the RBI Act provides for compulsory registration of NBFCs/RNBCs with RBI and stipulation of minimum net owned funds requirement, creation of reserve fund and transfer of certain percentage of profits every year to the said fund and the prescription of liquidity requirement. The RBI is vested with powers to issue guidelines with regard to other activities of NBCFs/RNBCs including income recognition, accounting standard, provisions for bad and doubtful debts, capital adequacy, etc. The purpose is to ensure sound and healthy operations and the quality of assets of these companies. Under Section 45-N of the RBI Act, RBI is vested with powers to cause an inspection of any Non-Banking Institutions including financial institutions. The RBI is also empowered to issue directions to the auditors of NBFC to order special audit of NBFCs, prohibit acceptance of deposits by NBFCs and for filing of application for winding up of NBFCs (Section 45-MC).
6. SIFCL was originally incorporated on 7.8.1987 and registered as Sahara India Savings & Investment Corporation Ltd., with the Registrar of the Companies, Uttar Pradesh. The Company commenced its business on 11.8.1987 and thereafter changed its name to SIFCL, with effect from 23.11.1994. SIFCL is an NBFC and is, thus, under the regulatory control of RBI, as per Chapter III-B of the RBI Act. By the nature of its business SIFCL is classified as RNBC, which receives deposits under any scheme/arrangements by way of contributions or subscriptions or by sale of units or certificates or other instruments or in any other manner. SIFCL was issued a certificate of registration for the said purpose under Section 45-IA of the RBI Act. The same is required for its business activities, which are to be conducted in compliance with the provisions of RBI Act and the directions, instructions, guidelines and circulars issued by RBI from time to time, either generally or specifically.
7. RBI caused inspection of SIFCL, at annual intervals, under Section 45-N of RBI Act. It was found that deposits taking activities of SIFCL were not in conformity with the prudent practice and RBI directions, guidelines etc. Since the viability of the business of the SIFCL was being negatively affected, RBI by various meetings and letters, in an around the year 2007, advised it to plan its alternate business and move out of RNBC model and complete such transition within a period of three years from 1.4.2007. SIFCL, though, initially agreed to move out of the business of acceptance of deposits but later on did not take any steps and never came out of the RNBC model, to any alternate business plan. Broadly RBI found violation of the following statutory instructions/ circulars:-
"(i) Maintenance of directed investments in violation of para 6 (1) RNBC (RB) Directions, 1987.
(ii) Payment of minimum rate of interest prescribed under para 5 of RNBC (RB) Directions, 1987.
(iii) ALM guidelines stipulated in Company Circular 15 dated June 27, 2001.
(iv) KYC norms stipulated for opening of deposit accounts and the details on the agents of the company deployed for deposit mobilisation, in Company Circular No.48 dated February 21, 2005 and 45 dated December 30, 2004.
(v) Intimating depositors in time of maturity of their deposits and repayment of deposits on maturity in terms of directions in para 5A of RNBC (RM) Directions, 1987."
8. Since the SIFCL failed to abide by the instructions issued by RBI and, further, looking into its deposit size, a show cause notice dated 9.5.2008 was issued by the RBI calling upon SIFCL to show cause why it should not be prohibited from accepting deposits. An opportunity of hearing was provided to SIFCL and after considering the reply and the entirety of the matter, in public interest and to protect the interest of depositors, RBI issued a prohibitory order dated 4.6.2008 under Section 45-K of RBI Act.
9. The said order dated 4.6.2008 was challenged by a Writ Petition No.5059 (M/B) of 2008 and the High Court by its order dated 5.6.2008, stayed the same. Against order dated 5.6.2008, RBI filed SLP No.(C) 15091 of 2008 before the Supreme Court. Leave was granted and the SLP was converted to Civil Appeal No.4193 of 2008 and was disposed of by order dated 10.6.2008. The operative paragraph-5 and 6 of the said order dated 10.6.2008 of Supreme Court reads as under:-
"5. After hearing learned counsel for the parties, we are of the view that in view of the peculiar facts involved, it would be appropriate for the appellant Reserve Bank of India to give an opportunity of hearing to Respondent No.1 so that it can, if so advised, place materials to substantiate its stand taken in the reply to the show cause notice. Learned counsel for the appellant is right in his submission that the principles of natural justice have been followed in the present case. But an opportunity of hearing would be appropriate, because of nature of proceedings. It shall not be construed as if we have stated so to be applicable in all cases. Because of the peculiar nature of the case, we are directing to be so done. We, therefore, direct that Respondent No.1 shall appear without any further notice before the designated authority of the Reserve Bank of India on 12.06.2008 when the matter shall be heard. It is open to Respondent No.1 to place such material on which it proposes to rely upon. Needless to say the authority shall consider all the relevant aspects of the case and pass a fresh order. Till the matter is disposed of afresh by the Reserve Bank of India, the order dated 04.06.2008 shall not be given effect to. At the same time, the interim protection given by the High Court to Respondent No.1 shall also not be operative. Since the entire matter is being disposed of in this appeal, there is no need for the High Court to deal with the writ petition. We make it clear that we have not expressed any opinion on merits.
6. The appeal is disposed of accordingly."
10. By the said order, Supreme Court required SIFCL to appear before RBI without further notice and permitted RBI to pass a fresh order after hearing SIFCL. In compliance of directions issued by Supreme Court opportunity of hearing was provided by RBI. SIFCL also made certain proposals during the said hearing. Thereafter, a detail order dated 17.6.2008 was passed by RBI, relevant portion of which reads as follows:-
"5. During the hearing on June 16, 2008, SIFCL stated that it has since maintained directed investments equal to 100% of the Aggregate Liability to Depositors (ALD) on a point to point basis but it is not compliant with the requirements of paragraph 6 of RNBC directions in so far as the balance is required to be maintained as at the end of the second preceding quarter which will be much more than the outstanding ALD on a given date as the ALD is on a downward growth. SIFCL also stated that it will update the data base with the correct address of the depositors and that with respect to any new account it will be 100% compliant with the KYC norms.
6. In addition to the above, on June 16, 2008, SIFCL submitted a letter to the RBI containing its proposals and requested that the same be considered before passing the final order. The said proposals of SIFCL are extracted below.
"(i) We will not accept any new deposits which matures beyond June 30, 2011 and will stop accepting installment of existing deposit accounts also with effect from that date. The ALD will not exceed Rs.15,000 crores (rounded off) as of June 30, 2009, Rs.12,600 crores (rounded off) as of June 30, 2010 and Rs.9,000 crore (rounded off) as of June 30, 2011. Thereafter, the ALD will get reduced automatically to zero by 2015 with the repayment of deposits at maturity.
(ii) We will submit within a period of sixty days from today, a comprehensive business plan indicating the financial structure.
(iii) We will reconstitute the Board of Directors of our company within a period of thirty days from today and the Board shall consist of 50% of such independent directors who are acceptable to Reserve Bank of India. The appointment of these additional independent directors will be got ratified at the ensing Annual General Meeting of the company. The above arrangement will continue till such time as all depositors are paid in full,
(iv) Appointment of statutory auditors from the panel of auditors suggested by Reserve Bank of India shall be made in the ensuing Annual General Meeting of the company envisaged by August 31, 2008.
(v) We will continue to comply with all the requirements of the applicable provisions of the Reserve Bank of India Act and the directions, guidelines, instructions and circulars issued thereunder."
7. The RBI had by its letter of April 16, 2007, advised SIFCL to plan an alternate business and move out of the RNBC model and to complete the process of transition within a period of 3 years commencing from April 1, 2007. SIFCL did not give any positive plan for an exit which was satisfactory for over a year. This fact together with non-observance of various RBI's directions made the RBI to issue a show cause notice on May 9, 2008 to prohibit acceptance of further deposits by SIFCL. SIFCL has now submitted its difficulties in making an exit by 2010 and submitted a request for an orderly exit for RBI's consideration.
8. After a careful consideration of the present proposals of SIFCL and the assurances given by it to comply with the directions of the RBI, RBI passes the following fresh order in partial modification of its order of June 4, 2008.
ORDER
9. In view of the above, on being satisfied that to protect the interests of depositors and in public interest, it is necessary and expedient so to do, in exercise of the powers vested in RBI under Section 45K(3) of RBI Act, 1934, RBI here passes a fresh order containing the following directions:
(i) SIFCL is hereby directed not to accept any new deposit which matures beyond June 30, 2011 and to stop accepting instalments of existing deposit accounts also with effect from that date. The Aggregate Liability to Depositors will not exceed Rs.15,000 crore (round off) as of June 30, 2009, Rs.12600 crore (rounded off) as of June 30, 2010 and Rs.9,000 crore (rounded off) as of June 30, 2011.
(ii) SIFCL shall repay the deposits as and when they mature and bring the ALD to zero on or before June 30, 2015.
(iii) SIFCL shall not treat non-payment of installments under any running daily deposit or other recurring deposit schemes by depositors after June 30, 2011, as a default by depositor and SIFCL shall be liable to pay the agreed rate of interest on the amounts actually held by it for the entire term of the deposit as if there was no default.
(iv) SIFCL shall continue to comply with the requirements of directed investments under paragraph 6 of RNBC Directions with respect to its ALD.
(v) SIFCL shall ensure 100% compliance with KYC norms for all new deposit accounts.
(vi) SIFCL shall subject to (i) (ii) (iii) above, strictly comply with the requirements of all the applicable provisions of the RBI Act, the directions, guidelines, instructions and circulars issued by RBI there-under from time to time until such time as all the deposits are repaid with interest in full. For repaying the depositors, SIFCL shall first apply its income and investments other than the investments it is required to maintain under paragraph 7 of RNBC Directions.
(vii) SIFCL shall, without prejudice to the above, be entitled to carry on its other business activities in accordance with law.
(viii) SIFCL shall submit a comprehensive business plan before the close of business on 16th August, 2008.
10. SIFCL proposed that as is the practice for all large financial institutions governed by RBI and in keeping with quality corporate governance, SIFCL, will (a) reconstitute the Board of Directors of SIFCL while a period of thirty days from June 16, 2008 so that the Board shall consist of 50% of such independent directors as are acceptable to Reserve Bank of India, (b) get the appointment of these independent directors ratified at the ensuring Annual General Meeting of the company and continue the said arrangement till such time as all depositors are repaid in full, and (c) appoint statutory auditors from the panel of auditors suggested by Reserve Bank of India at the ensuring Annual General Meeting of the company envisaged by August 31, 2008 and continue to appoint statutory auditors each year from the panel suggested by Reserve Bank of India till all depositors are repaid in full. The said undertaking of SIFCL shall form a part of this order.
11. A copy of this Order be served on SIFCL with instructions to comply with the Order. The attention of SIFCL shall be drawn to the provisions of Sections 45K(4), 58B and 58C of the RBI Act as to the consequences of not complying with this Order. For the benefit of the depositors and the members of the public, this Order shall be given reasonable publicity.
sd/- illegible (Gopalakrishna) Executive Director 17.06.2008"
11. SIFCL, however, continued to run the Company in illegal manner, violating different directions and policies declared by RBI. Some of violations were noticed by the statutory auditors of SIFCL and were duly reported by them in their reported dated 14.1.2015. Relevant portion of the report reads as under:-
"A. Major sale of Directed Investments after the balance sheet date of March 31, 2014 and subsequent utilisation of the same.
(i) The Hon'ble Supreme Court has passed an order dated June 4, 2014, vide which it modified its earlier order dated November 21, 2013, thereby allowing the Sahara Group of Companies to encash FDs, Bonds and securities held by Sahara Group of Companies, subject to the condition that the full sale consideration of the securities should be deposited in the designated Bank Account of SEBI viz. 'SEBI Sahara Refund Account' bearing no.012210110003740 with Bank of India, BKC Branch, Mumbai. After April 1, 2014, an amount of Rs.124.87 crores, comprising of sale proceeds of Directed and Other Investments, have been transferred to 'SEBI Sahara Refund Account' without obtaining prior approval of Reserve Bank of India, for sale of directed investments.
(ii) The Company has estimated demands for payments towards depositors' liability during the months of August 2014 and September 2014 amounting to Rs.266.60 crores (Annexure I) and of Rs.400.00 crores (Annexure II) respectively, which were not representative of past trend of repayments made to the depositors. Based on these estimates the Company has sold directed investments amounting to Rs.524.98 crores, without obtaining prior approval of Reserve Bank of India. However, the actual repayments to the depositors during these months were approximately to the tune of Rs.3.03 crores and Rs.3.18 crores respectively.
As appearing from the books of account, out of the proceeds from the above sale of directed investments, the Company has divested Rs.484.67 crores (Annexure III) to Sahara India, a Partnership Firm and has not utilised the same towards repayment to depositors' liability or for depositing in to 'SEBI Refund Account'.
(iii) The sale of directed investments amounting to Rs.524.98 crores, during the months of August 2014 and September 2014, has resulted into a shortfall of Rs.477.48 crores in the maintenance of directed investments as required under Para 6 of Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 as at September 30, 2014.
(iv) The Company has lent Rs.484.67 crores to Sahara India a Partnership Firm and thus not complied with Para 20 of Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 which restrict lending of funds to single party not exceeding fifteen percent of its Owned Funds.
B. Latest position of Directed Investments and Aggregate Liability to Deposit (ALD) holders as per Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 to find out the ALD gap after the subsequent event.
Statement of Directed Investments and ALD (Rs. In Crores) Investment 31.03.2014 30.06.2014 31.07.2014 30.09.2014 45-IB 203.91 206.54 196.86 112.61 6(1)(a) 36.95 45.03 45.39 46.04 6(1)(b) 701.30 581.22 585.27 128.84 Total 942.16 832.79 827.52 287.49 Secured Loan (Note 1) 729.59 728.35 727.99 727.30 (Note 2) Total Directed Investments 1,671.75 1,561.14 1,555.51 1,014.79 Position of ALD (Note 1) 1,492.27 1,479.52 1,476.26 (Note 3) 2nd Proceeding Quarter 30.09.2013 31.12.2013 31.03.2014 31.03.2014 ALD Position as per above 1,538.49 1,512.96 1,492.27 1,492.27 Overall Shortfall of Para 6 Not Applicable Not Applicable Not Applicable 477.48 (Note 4) Shortfall in Para 6(1)(a) (Note 4) 116.90 106.266 103.83 Notes:
1. Secured loans/ALD are stated as gross and not at net values wherever it is squared off as necessary systems report was not made available to us.
2. As complete information is not made available to us for review and for issue of monthly certificates we have given approximate information for the months subsequent to July, 2014.
3. Information for ALD subsequent to July 2014 is not made available to us.
4. The Company has not complied with sub limits of Directed Investments as laid down in Para 6(1)(a) of Residuary Non-Banking Companies (Reserve Bank) Directions, 1987. For the month of September 2014 there is overall shortfall of Rs.477.48 crores and accordingly shortfall as per Para 6(1)(a) and 6(1)(b) has not been worked out.
C. Amount of unclaimed deposit as per latest information available.
Statement of Unclaimed ALD (Deposits Matured but not claimed) Particulars 31.03.2014 30.06.2014 31.07.2014 31.09.2014 Deposits Matured but not claimed (Rs.Crores) 1,083.38 1,08648 1,087.70 1,089.13 Number of Accounts (Nos.) 1,24,15,953 1,24,69,615 1,24,88,842 1,25,18,652 * amounts/numbers as provided to us by the management and not audited by us.
We have not perform audit tests for the purpose of expressing an opinion on individual balances of accounts or summaries of selected transactions such as those enumerated above and, accordingly, we do not express an opinion thereon."
12. RBI sought further information from the auditors and, by their communication dated 18.2.2015, the auditors again informed that SIFCL has not provided its Financial Statements as at and for the year ended March 31, 2014 duly signed by the Directors and Company Secretary of the Company till 18.2.2015. Accordingly, the Final Auditors' Report on the Financial Statements of the Company and till date Auditors' Report and Financial Statements could not be signed by its Chartered Accountants. By the said report it was also informed that large number of securities were also sold by SIFCL in the year 2014. In the said background, RBI moved an application before the Supreme Court, as certain matters relating to insolvency status were pending and orders with regard to all sister concern were passed therein restraining Sahara group from selling its properties. On application of SIFCL Supreme Court passed detail order on 24.2.2015. Relevant portion of the order dated 24.2.2015 reads thus:-
"In the circumstances, we allow Reserve Bank of India to initiate such action as may be otherwise legally permissible under the provisions of the Reserve Bank of India Act and the Regulations framed thereunder and to pass appropriate orders on the subject after hearing the parties. A copy of the order so passed shall be placed on record."
13. By the same order, Supreme Court further directed:-
"In the light of the controversy raised before us in relation to the utilisation of the maturity amount/sale value of the "directed securities", we deem it fit to direct that the Saharas will not transfer, alienate or encumber the remaining "directed securities" if any provided by Sahara India Financial Corporation Limited (SIFCL)."
14. In the said background, on 10.3.2015, RBI issued a detail show cause notice to SIFCL pointing out all the violation being committed by it and thereafter calling upon it in the following manner:-
"12. Therefore, you are hereby called upon to give your explanation in writing on the failure of your company to comply with the directions issued by the Bank and the contraventions committed by the company as described above on or before March 25, 2015. Your explanations in this regard may be submitted to the General Manager, Reserve Bank of India, Kanpur before the date specified above. In case you desire to avail any opportunity for personal hearing, the same may be requested in your written explanation. Please take further notice that if you failed to submit satisfactory explanations as stated above, the Reserve Bank may proceed to take action against you under the provisions of the Reserve Bank of India Act, 1934 which may, inter alia, include cancellation of your certificate of registration under section 45 1A (6), filling winding up petition under section 45 MC, initiation of criminal proceedings for offences punishable under section 58B of that Act etc. as may be open to the Bank under law without giving you any further opportunity to show cause against any such action.
13. This is issued without prejudice to the action that the Bank may take against you pursuant to Bank's earlier show cause notices ((i) DNBS.KAN.No.2156/21.12005/2013-14 dated April 29, 2014 on penal interest Rs.1,10,109.00 for shortfall in prescribed investment and (ii) No.DNBS.KAN.No.2160/21.12.005/2013-14 dated April 29, 2014 on imposition of penalty of Rs.6,00,000/- under section 58 G of the Reserve Bank of India Act, 1934, respectively."
15. It would be worth noting that the General Manager issued the said show cause notice and SIFCL submitted a reply dated 28.4.2005 to the General Manager, RBI, Kanpur only. In the said reply, though, certain figures and financial statements were referred to, but any statement duly audited by the Chartered Accountant did not support the same. In reply to paragraph 3 and 6 of the show cause notice, SIFCL admitted that it is in the process of winding up of business activities as per RBI directions, as it states:-
"3 & 6. We mention that as per RNBC Directions, we have to maintain the Directed Investments of today against the Aggregate Deposit Liability of second proceeding quarter, e.g. suppose Company has ALD on 30.09.2014 as Rs.500 crores and as on 31.03.2015 as Zero, then for complying RNBC Directions as on 31.03.2015, Company has to maintain Directed Investments of Rs.500 Crores even the ALD as on 31.03.2015 is Zero. The compliance of RNBC directions is must while Company is running its business activities but when it is winding its business activities as per RBI directions, it should only ensure that repayment of depositors are being done without any delay or default which we are doing and also maintaining Directed Investments against ALD on point to point basis which was sufficient to make the payment to depositors by the Company. You will appreciate that RNBC Directions were made to regulate operating Companies which in most cases are suppose to grow and therefore rules were made that RNBC Companies maintain Directed Investments equal to Aggregate Deposit Liability of second preceding quarter. We have already communicated to Reserve Bank of India vide our letter No.SIFCL/STAT./AS/FEB.-15/06 dated 23.02.2015 that the Company has been making repayment of the deposits without failed to its esteemed depositors. As at 31st Dec, 2014, the aggregate deposit liability net off secured loan against deposit was Rs.698 Crores approximately against which the book value of directed and discretionary investments (securities) which were readily realisable was around Rs.320 crores. However, there was a shortfall of Rs.378 crores on point to point basis but the entire amount of aggregate deposit liability are backed by adequate/quality assets including fixed assets of the Company which is evident from the books of accounts which market valuation is much much more than the gross liability and there will not be any shortfall at all in making the repayment of deposit liability to the esteemed depositors of the company.
Further, the Aggregate Deposit Liability of the Company net off secured loan against deposit is Rs.689.64 crores as on 31st March, 2015.
4 & 5. A general chaotic situation has developed in the Para Banking field due to SEBI-Sahara issue and due to acute problem of payments in the field due to attachment of accounts of group entities. People were queuing for the payments in the service centres and also at many places under violent situation and workers were facing threatening etc and it even created panic amongst the field force including Hon'ble depositors of Sahara India Financial Corporation Limited. In such circumstances our service centres/workers were asking for entire payment advice from the Head-Quarter and that too backed by fund. The funds were sent to region office bank accounts of Sahara India Financial Corporation Limited and as the situation in the field was very chaotic and the regional workers tried to prevent the situation from going worst and in order to control law and order situation in the field offices, they transferred the fund to service centres of Sahara India and because of this whatever non compliance has been done, it has not been done intentionally but due to chaotic situation which might otherwise forced for closure of the entire business activities of the Group resulting loss of employment to the lacs of people, law and order situation and non repayment to the esteemed depositors/investors and the entire money has been used only for discharging of public liabilities and this saved the goodwill of the group which has never defaulted in repayment to its esteemed depositors/investors/creditors since its inception. In field our esteemed depositors/investors including workers do not know or understand any constitution, they only know 'Sahara'.
7. The Company is not able to make payment of salaries to its employees since last 6 months and therefore many concerned Officials have submitted their resignations from the services of the Company including the Chief Financial Officer of the Company who has submitted his resignation w.e.f. 01.02.2015. The Company had intimated to RBI about such resignations from time to time. We are in the process of appointing new Officials including Chief Financial Officer at the earliest and shall be able to file Statutory and Supervisory returns to RBI.
8. As regard to the appointment of Independent Directors as advised by Reserve Bank of India in the meeting held on 9.4.2014 with the officials of RBI and Company Secretary, we will be submitting the name of 5 persons for consideration of RBI to appoint any 2 of them as Independent Directors in the Board of the Company.
11. The Reserve Bank of India vide its order dated 17.6.2008 has directed the Company to bring down its deposit liability to Zero by 30.6.2015. As per the provisions of Company Act, 2013, any amount will be unclaimed, only after 7 years from the date of maturity, if it remains as unclaimed, then thereafter it will be transferred to Investor Education and Protection Fund under Companies Act. The amount of Rs.1086 crores as mentioned by the Statutory Auditors as unclaimed amount as on 30.6.2014 is unclaimed amount on that date which can be claimed by the esteemed depositors at any time. It is not correct to conclude that Rs.1086 crores had been unclaimed forever.
You will appreciate that we have opened Escrow Account with Punjab National Bank, Mahanagar Branch, Lucknow with Rs.10,000/, details of which had already been communicated to you. We mention that unclaimed amount as on 30.6.2015, if any, shall be deposited in the Escrow Account as aforesaid. However, in the meantime, you are requested to kindly take up the matter with Securities and Exchange Board of India to transfer the proceeds retained by West Bengal Infrastructure Development Finance Corporation Ltd. (11.85%) Bond of West Bengal Infrastructure Development Finance Corporation Ltd., face value Rs.24 crores) which was invested by the Company in the aforesaid Bond out of the depositors' money."
16. Thus, the aforesaid reply by itself shows that the Company was accepting the violations being committed by it regularly. It also admitted, amongst other violations, that despite opening the Escrow account, only by Rs.10,000/-, SIFCL never deposited any amount, as required by RBI and also assured by it, in the said Escrow account. SIFCL, also failed to submit its returns since August, 2014 and thus, failed to comply with the requirements of paragraph 4 of RNBC Directions, 1987.
17. In personal hearing held on 9.6.2015 SIFCL also admitted that it is not able to repay the depositors, as it is unable to locate them and they are not coming forward to claim their deposits. In fact, amongst others, RBI found that SIFCL was not in a position to submit a proper list of depositors and the list provided by it was not containing address/full address, bank details, whether payment was made by cheque or cash, whether beneficiary is depositor or investor and as to whether mandated interest was paid. It found that SIFCL did not follow the KYC guidelines issued by RBI. Further, the data was also not certified by the Statutory Auditors of the SIFCL. It also failed to submit list of depositors as on 31.5.2015 and 30.6.2015, as per undertaking given during the personal hearing and the SIFCL failed to deposit the unclaimed amounts in the Escrow account. In the said background, RBI being satisfied that the SIFCL failed to fulfill the conditions of the order dated 17.6.2008, issued to it under Section 45-K (3) of RBI Act, and there exist grounds, as mentioned in Section 45-1A (6A) of the RBI Act, for cancellation its registration, proceeded to pass order dated 3.9.2015 whereby Certificate of Registration (CoR) of SIFCL was cancelled under Section 45-1A. The relevant portion of the order dated 3.9.2015 reads as follows:-
"26. Taking into consideration all the relevant facts, developments and affairs of the company, the Bank is satisfied that the company has failed to fulfill the conditions of the Speaking Order dated June 17, 2008 issued to it under the powers vested in the Bank under section 45-K (3) of RBI Act, 1934 and there exist the grounds as mentioned in section 45-IA (6) of the RBI Act, 1934 for cancellation of the CoR issued to the company. No purpose would be served by giving time upto June 30, 2018 as requested by the company. It would be prejudicial to public interest and interest of its depositors and stakeholders if the company is allowed to continue with its registration as Non Banking Financial Company. The company has been given adequate opportunity of being heard.
27. In these circumstances, the CoR No.12,00152 dated December 3, 1998 issued to M/s. Sahara India Financial Corporation Ltd. is hereby cancelled under sub section (6) of section 45-IA of 1934. The company will, however, continue to be governed by the relevant provisions of the RBI Act, 1934, till it repays all the outstanding public deposits. The company is directed to submit the quarterly reports and monthly return showing the details of repayment of deposit amounts.
28. A copy of this order may be communicated to the company."
18. In the aforesaid background, finding SIFCL, amongst others, to be violating the provisions of RBI Act, not being able to pay its debts, its CoR cancelled and, thus, finding grounds for winding up under Section 45-MC made out, the present winding up petition is filed by RBI. It is claimed by SIFCL that against the order dated 3.9.2015 of RBI, it has filed an appeal before the Central Government under Section 45 (1) A (7). However, no orders are passed on the same till date. Therefore, RBI submits that a case for winding up of SIFCL is made out on all the grounds stated in Section 45-MC of RBI Act and, thus, this Court may pass appropriate orders including order for appointment of provisional Liquidator.
19. Learned counsel for respondent SIFCL, Sri Jaideep Narain Mathur, raised a preliminary objection with regard to maintainability of this petition. His submission is that the language used in Section 45-MC (1) is "The Bank, on being satisfied". Emphasis of Sri Mathur is on the words, "on being satisfied". His submission is that there has to be a satisfaction of RBI before filing of a winding up petition. Such a satisfaction is to be recorded in writing by a reasoned and speaking order and the said order is to be passed by the RBI or the appropriate authority of RBI having power to do so. Since there is no such order annexed with the present petition, recording such satisfaction, therefore, the present winding up petition is not maintainable. In support of his submissions, Sri Mathur strongly relies upon the judgments reported in 1994 (4) SCC 269: Indian Nut Products and others. Vs. Union of India and others; (2008) 144 Com Cas 780 (Delhi): JVG Leasing Ltd. In Re; (2015) 17 SCC 324: State of Uttar Pradesh and others. Vs. Aryaverth Chawal Udyog and others.
20. On this issue submission of Sri Prashant Chandra, counsel for RBI is that there is no necessity of passing a separate order, as the details given and record, filed with the winding up petition itself, shows satisfaction of the RBI for filing present winding up petition. He submits that RBI can place record before this court to satisfy it about need for filing the present winding up petition. He further submits that in fact SIFCL is not disputing that on merits the present petition could be filed. The objection is raised on technicality only, that there does not exist any prior decision of RBI, recording a categorical decision, for filing the present winding up petition. Sri Prashant Chandra places reliance upon the judgments in case of Reserve Bank of India Vs. Krishi Export Com. Corpn. Ltd., 2000 SCC OnLine All 1150: 2001 All L J 506 and State of Haryana Vs. Hari Ram Yadav and others, (1994) 2 SCC 617.
21. Lets first consider judgments relied upon by SIFCL. So far as the case of Indian Nut Products (supra) is concerned, the same relates to the Kerala Cashew Factories (Acquisition) Act, 1974. Section 3 (1) of the said Act of 1974 provides as follows:-
"Order of acquisition.- (1) The Government may, if they are satisfied-
(a) that the occupier of a cashew factory does not conform to the provisions of law relating to safety, conditions of service or fixation and payment of wages to the workers of the factory; or
(b) that raw cashew nuts allotted to a cashew factory by the Cashew Corporation of India are not being processed in the factory to which allotment has been made or that such nuts are being transferred to any other cashew factory; or
(c) that there has been large scale unemployment, other than by way of lay off or retrenchment, of the workers of a cashew factory, by order published in the Gazette, declare that cashew factory shall stand transferred to, and vest in, the Government:
Provided ........."
22. In the said case, on being satisfied the Government could pass an order as a result of which factory would stand transferred and vested in the State Government. In the said background, paras 10 and 11 of the judgment read:-
"10. It is well-settled that if a statute requires an authority to exercise power, when such authority is satisfied that conditions exist for exercise of that power, the satisfaction has to be based on the existence of grounds mentioned in the statute. The grounds must be made out on the basis of the relevant material. If the existence of the conditions required for the exercise of the power is challenged, the courts are entitled to examine whether those conditions existed when the order was made. A person aggrieved by such action can question the satisfaction by showing that it was wholly based on irrelevant grounds and hence amounted to no satisfaction at all. In other words, the existence of the circumstances in question is open to judicial review.
11. It cannot be disputed that serious consequences follow on the basis of the order passed by the Government on grounds mentioned in clauses (a), (b) and (c). Hence it is all the more necessary that the Government furnishes the full particulars on the basis of which the Government claims to be satisfied that there is a case for taking over the factory. As already pointed out above, there is not even an assertion in the notice that there has been any unemployment much less large scale unemployment. The ground simply says that the Government was of the opinion that the closure of the factory " will lead to a large scale unemployment". We are of the view, that in the facts and circumstances of the present case, the notice issued to the petitioners with the so-called grounds was not in accordance with the requirement of the provisions of sub-section (1) of Section 3 of the Act. The notices issued to different petitioners are, therefore, declared to be null and void. Consequent thereto, the order dated 6-7-1988 is also quashed.
23. Again, the case of Aryaverth Chawal Udyog (supra), relates to U.P. Trade Tax Act, 1948. Section 21 of the U.P. Trade Tax Act provides that if the Assessing Authority has reasons to believe that the whole or any part of the turnover of the dealer, for any assessment year or part thereof, has escaped assessment to tax, it would have power to re-visit the same. The relevant paragraphs 16, 17 and 19 of the said judgment read as under:-
"16. The relevant section of the Act is reproduced hereunder for convenience of our discussion:
"21. Assessment of tax on the turnover not assessed during the year. --(1) If the assessing authority has reason to believe that the whole or any part of the turnover of the dealer, for any assessment year or part thereof, has escaped assessment to tax or has been assessed to tax at a rate lower than that at which it is assessable under this Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it may consider necessary assess or reassess the dealer or tax according to law:
Provided that the tax shall be charged at the rate at which it would have been charged, had the turnover not escaped assessment, or full assessment, as the case may be:
Explanation I.--Nothing in this sub-section shall be deemed to prevent the assessing authority from making an assessment to the best of its judgment.
Explanation II.--For the purposes of this section and section 22, 'assessing authority' means the officer or authority who passed the earlier assessment order, if any, and includes the officer or authority having jurisdiction for the time being to assess the dealer.
Explanation III.--Notwithstanding the issuance of notice under this sub-section, where an order of assessment or reassessment is in existence from before the issuance of such notice, it shall continue to be effective as such, until varied by an order of assessment or reassessment made under this section in pursuance of such notice.
(2) Except as otherwise provided in this section, no order of assessment or reassessment under any provision of this Act for any assessment year shall be made after the expiration of two years from the end of such year or March 31, 1998, whichever is later:
Provided that if the Commissioner on his own or on the basis of reasons recorded by the assessing authority, is satisfied that it is just and expedient so to do authorises the assessing authority in that behalf, such assessment or reassessment may be made after the expiration of the period aforesaid but not after the expiration of four years, from the end of such year notwithstanding that such assessment or reassessment may involve a change of opinion."
17. Section 21(1) of the Act provides, that, if the assessing authority has reason to believe that the whole or any part of the turnover of a dealer, from any assessment year or part thereof, had escaped assessment of tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under the Act, or any deductions or exemptions have been wrongly allowed in respect thereof, the assessing authority may, after issuing notice to the dealer and making such inquiry as it considers necessary, assess or reassess the dealer to tax according to law.
19. Under section 21(1) of the Act, the reassessment proceedings can only be initiated if the assessing authority has "reason to believe" that there is a case of escaped assessment and not otherwise. It is now trite law that whenever a statute provides for "reason to believe", either the reasons should appear on the face of the notice or they must be available on the materials which have been placed before him. (See Aslam Mohd. Merchant v. Competent Authority [2008] 14 SCC 186)."
24. I find that the aforesaid judgments are about cases, where, on being satisfied, the authority had power to pass such order, which would impact any settled right of the petitioner and the same would either divest him of property, as in the case of Indian Nut Products (supra) where the factory would stand vested in the Government, or would cause reopening of the assessment proceedings which stand concluded and adjudicated between the parties and where their rights stand settled, or would have any other serious consequence upon their established rights.
25. In the present case, the only power that RBI exercises, on being satisfied under Section 45 MC (1) of the RBI Act, is to file a winding up petition before the Court. It does not in any manner impact any right of the petitioner vested in it.
26. During the course of arguments, it was specifically put to Sri Mathur, counsel for SIFCL, as to what rights of petitioner are impacted by filing of winding up petition. Sri Mathur could only submit that it would cause a serious doubt about the continuation of the Company and affect its market. However, beyond that, he could not point out any serious civil consequence or divesting of any other settled right of SIFCL.
27. Sri Mathur also relied upon the judgment in the case of JVG Leasing Ltd. (supra). In the said judgment the Delhi High Court, in paragraph-10, framed the following questions for determination:-
"10. In this backdrop, two questions arise for determination, namely:-
(a) non-banking finance company which is denied licence by the RBI under section 45-IA of the RBI Act or a company whose license is cancelled under the aforesaid provisions, has to be necessarily wound up under section 45 MC of the RBI Act? Or to put it otherwise, whether a scheme for revival/arrangement in respect of such a company can be entertained allowing it to divert its business activity and start some business other than non-banking finance business for which it was primarily incorporated?
(b) Whether the scheme proposed by the company is feasible enough to permit it to put it to the shareholders and the creditors?"
28. The relevant discussion is in paragraphs 16 to 21 of the judgment, which are quoted below:-
"16. In this backdrop one has to examine the special power given to the Reserve Bank of India under section 45 MC of the Act to file the petition seeking winding up of the company. Under Section 439 of the Companies Act the categories of persons who can file winding up petition are specifically mentioned and the RBI is not named therein. However, notwithstanding the same the Legislature wanted specific power to be conferred upon the RBI to seek winding up of erring NBFC. However, section 45 MC is more than mere enabling provision as it contains the specific grounds on which the RBI can file winding up petition. It may be noted that section 433 of the Companies Act stipulates the circumstances under which a company can be wound up. However, as far as petition of RBI under section 45MC of the RBI Act is concerned, it is not that the RBI shall file a petition on the grounds mentioned in section 433 of the Companies Act. On the contrary, sub-section (1) of section 45 MC of the RBI Act lists four circumstances under which the RBI can file such a petition. Apart from the ground of inability to pay the debt, which is common with section 433 of the Companies Act, other grounds are peculiar to non-banking financial institutions. These grounds relate to the malfunctioning of such NBFCs, namely, (b) has by virtue of the provisions of section 45-IA become disqualified to carry on the business of a nonbanking financial institution; (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; and (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.
17. Therefore, if any of these conditions exist in a particular case, Legislative considered it proper that (a) such a company should be wound up (b) rather than conferring power on another agency/authority like Registrar of Companies or the Company Law Board, it is specifically to the regulator, namely, the RBI, as the regulator is in a better position to enlighten the court on these aspects. It may further be notices that sub-section (1) of section 45MC empowers the RBI to file a petition on any of these grounds "on being satisfied", that one of such grounds in case of an NBFC exists. Thus, even before filing such an application bank has also to satisfy itself about the existence of such a ground on which it proposes to file the application for winding up of such NBFC. As per the procedure adopted by the RBI, such satisfaction is arrived at only after the bank conducts the inquiry/investigation into the affairs of such NBFC. When irregularities are found out, even show-cause notice is given to such a company and it is heard in the matter. Before passing an order under section 45 MC or passing an order prohibiting such NBFC from receiving deposits from the public. There is a remedy of appeal provided to the affected company.
18. The intention of the Legislature in making these provisions is, thus, obvious. Those companies which are formed and incorporated as nonbanking financial companies and carry out their business in violation of the regulatory mechanism provided under the RBI Act have no right to exist and should be wound up. ?Thus, Legislature in no uncertain terms mandated that such companies have no right to exist, otherwise there was no necessity for providing the provision of winding up. The situation could be remedied by prohibiting such a company from doing the business as nonbanking financial institution thereby permitting them to do some other business. Parliament, in its wisdom, considered that it would not be a sufficient safeguard and, therefore, provided for extreme measure of winding-up of these companies as the solution for checking the menace of dubious practices which could be adopted by these companies. I may immediately add here that when a petition is filed by the RBI under section 45MC of the RBI Act, it is for the court to examine as to whether in a given case whether the orders of winding up of such a company are to be passed or not. However, once it is found that any of the grounds mentioned in sub-section (1) of section 45MC exists and the company should be ordered to be wound up.
19. It would not be permissible for such a company to take a detour by coming out with a plea that it is ready to do some business other than nonbanking financial business and should be permitted to do so and under such a cloak file a scheme of arrangement,. A company which is essentially a non-banking financial company and has suffered winding up order because it violated the financial discipline provided under the RBI Act, as it has no right to exist as NBFC and is to be wound up. When any of the conditions for winding up, as laid down in sub-section (1) of section 45MC is satisfied, it is obvious that irregularities committed by it are serious enough justifying its winding up. In the process it is normally established that the depositors are either duped or the actions of such a company were detrimental to the public interest. Would it be wise to allow such a company to continue to function by diverting its business activity? More so, when its incorporation and existence was, hitherto as a non-banking financial institution? The regulatory regime provided by the Legislature by way of amendments in the RBI Act is applicable to non-banking financial companies and section 45-I (f) provides definition of NBFC in the following terms:
"(f) 'non-banking financial company' means--
(i) a financial institution which is a company;
(ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner;
(iii) such other non-banking institution or class of such institution, as the bank may, with the previous approval of the Central Government and by notification in the official gazette, specify.]"
20. If such a company is allowed to do some other business, confidence of the public can be shaken. Legislature, it is obvious, did not intend this course for such a company. If the promoters/shareholders want that some other business activity should be done, they can always incorporate another company with some other name and do such a business.
21. When the matter is looked into in the aforesaid perspective, I am not convinced with the interpretation given by him to sub-section (4) of section 45MC of the Act and to suggest that since all the provisions of the Companies Act apply to such winding up petitions, provisions of section 391 to 394 shall automatically apply, more so when any of the grounds stated in clauses (b) to (d) of sub-section (1) of section 45MC is satisfied. The position may be different if the petition is filed only on the ground of inability of the NBFC to pay the debt. In that case, if the court is of the opinion that such a company is in a position, the court may in that case consider such a scheme which course of action would be in the interest of the depositors as they would be in a position to get back that money under the scheme if such scheme is found to be viable. This is the only exception which can be made to the general proposition laid down above with the rider that even in such cases the court would consider the scheme with much circumstances. Otherwise, as rightly contended by Mr. Dushyant Dave, learned senior counsel appearing for the RBI, it would amount to permitting the petitioner to do something indirectly which it cannot do directly. The petitioner has got money from depositors. Assets are acquired from the funds created in the form of such deposits and now, the company wants to do some other business with those assets thereby retaining the funds of those depositors and wants to pay them in phased manner as envisaged in the proposed scheme.
29. In the aforesaid case, the issue was different and not as is being raised in the present case, i.e. as to whether, without there being a reasoned order, winding up petition can be filed. The dispute in the said case was that whether, on there being a feasible scheme for revival available, the power under Section 45-MC could be exercised for winding up. The Court while discussing the matter came to the conclusion that the RBI is a regulator, which is empowered by the Parliament, in the specific circumstances, to file a winding up petition, as it is the best judge. Therefore, the aforesaid judgment also does not support the case of petitioner in any manner.
30. Now lets consider the judgments relied upon by Sri Prashant Chandra, counsel for RBI, on this issue. In Krishi Export (Supra) case an issue was raised, as to whether, without there being a reasoned order passed, winding up petition under Section 45 MC could be filed by RBI. This court in paragraphs 18 and 19 of the said judgment held:-
"18. Another broad argument of the learned counsel for the respondent is that before filing a winding up petition under Section 45-MC of the Reserve Bank of India Act it (Bank) is required to be satisfied as to the existence of one or the other contingencies enumerated in the section warranting the filing of the winding up petition. It has been submitted that such a satisfaction of the Bank is necessary prelude for the filing of the winding up petition which is wanting in the present case. It has been reasoned that the satisfaction about the existence of certain conditions enumerated in this section before filing a winding up petition is a duty to be performed by the Bank and not the power conferred on it. The line of reasoning adopted and suggested by the learned counsel for the respondent is that the power of Deputy General manager (DNBS) to sign and verify the winding up petition is not synonymous to the duty to be performed by the Bank regarding being satisfied about the existence of one or other eventualities enumerated in Section 45-MC for filing winding up petition. To my mind, the present winding up petition cannot be thrown over board on the basis of play of words or on an apologetic approach. The point of the matter is that the Deputy General Manager (DNBS) who has filed and verified this petition has been found to be an authorised and competent officer to do so, as held in the discussion made hereinabove. The petition has been filed by the Bank (R.B.I.) through Deputy General Manager (DNBS). It is not so that Deepak Singhal, who has filed and verified this petition, is an imposter. The petition has been filed by him on behalf of the Bank and it shall be deemed to have been filed by the Bank. The officer above named has not filed the petition in his personal capacity or for some personal case or private profit or for some ulterior motive of his own out of animosity against the respondent or some like person.
19. However, it is also pertinent to state that the question of satisfaction as mentioned in the opening part of Section 45-MC of the Reserve Bank of India Act loses much of its significance because ultimately it is for the Court to form an opinion on the basis of the material placed on record as to whether the ground exists for allowing the winding up petition. It would be recalled that as per Section 45-MC (4) of the Reserve Bank of India Act, all the provisions of the Companies Act, 1956 relating to winding up petition of a company apply to winding up proceedings initiated on the application made by the Bank under this provision. Section 443 of the Companies Act relates to the powers of the Court hearing a winding up petition. On hearing a winding up petition, the Court may dismiss it, make any interim order that it thinks fit; or make an order for winding up of a company or any other order that it thinks fit. It is thus clear that many options are open to the Court depending upon the facts and circumstances of each case. The point that I wish to emphasize is that ultimately it is the Court hearing winding up petition which has to come to a decision as to what order is to be passed in a particular case. The truth of the matter is that the winding up petition in question has been found to be entertainable and maintainable as discussed in the earlier part of this order. It is, however, a different question that the Court would examine in subsequent discussion the merits of the winding up petition as per the requirements of Section 45-MC of the Act in the light of the material placed before it. But the respondent's contention is liable to be rejected that the petition has been filed without satisfying the requirement of satisfaction of the Bank which is a pre-condition for the filing of winding up petition."
31. In para 19 aforesaid, this Court has categorically held that the winding up petition cannot be thrown over board, as ultimately it is for the Court to form an opinion, on the basis of material placed before it, as to whether the grounds exist for allowing the winding up petition.
32. So far as State of Haryana case (supra) is concerned, the order under challenge was a suspension order, and the provision required "on being satisfied that it is necessary or desirable to place under suspension a member of the service against whom, disciplinary proceedings are contemplated or pending". In the said background it was argued in the said case, that, the impugned order nowhere says that the Governor of Haryana was satisfied that it was either necessary or desirable to place applicant under suspension. Attention is drawn to para 10 of said judgment which reads:-
"10. We find it difficult to agree with the said view of the tribunal. The mere fact that the impugned order of suspension does not contain a recital that the Governor was satisfied that it is either necessary or desirable to place Respondent I under suspension does not, in our opinion, render the said order invalid. The law is well settled that in cases where the exercise of statutory power is subject to the fulfilment of a condition then the recital about the said condition having been fulfilled in the order raises a presumption about the fulfilment of the said condition, and the burden is on the person who challenges the validity of the order to show that the said condition was not fulfilled. In a case, where the order does not contain a recital about the condition being fulfilled, the burden to prove that the condition was fulfilled would be on the authority passing the order if the validity of the order is challenged on the ground that the said condition is not fulfilled. Reference, in this context, may be made to the decision of this Court in Swadeshi Cotton Mills Co. Ltd. v. State of U.P.1 wherein it has been observed: (SCR pp. 432 and 434) "The validity of the order therefore does not depend upon the recital of the formation of the opinion in the order but upon the actual formation of the opinion and the making of the order in consequence. It would therefore follow that if by inadvertence or otherwise the recital of the formation of the opinion is not mentioned in the preamble to the order the defect can be remedied by showing by other evidence in proceedings where challenge is made to the validity of the order, that in fact the order was made after such opinion had been formed and was thus a valid exercise of the power conferred by the law. The only exception to this course would be where the statute requires that there should be a recital in the order itself before it can be validly made.
* * * We cannot accept the extreme argument of Shri Aggarwala that the mere fact that the order has been passed is sufficient to raise the presumption that conditions precedent have been satisfied, even though there is no recital in the order to that effect. Such a presumption in our opinion can only be raised when there is a recital in the order to that effect. In the absence of such recital if the order is challenged on the ground that in fact there was no satisfaction, the authority passing the order will have to satisfy the court by other means that the conditions precedent were satisfied before the order was passed. We are equally not impressed by Shri Pathak's argument that if the recital is not there, the public or courts and tribunals will not know that the order was validly passed and therefore it is necessary that there must be a recital on the face of the order in such a case before it can be held to be legal. The presumption as to the regularity of public acts would apply in such a case; but as soon as the order is challenged and it is said that it was passed without the conditions precedent being satisfied the burden would be on the authority to satisfy by other means (in the absence of recital in the order itself) that the conditions precedent had been complied with."
33. Thus, submission of Sri Prashant Chandra is that the law is settled that there is presumption about fulfillment of condition in favour of authority which passed the order. He further submits that in a case where the order does not contain recital about condition being fulfilled and the order is challenged on the said ground, the burden to prove that the condition was fulfilled would be on the authority passing the order by placing material before the court. Thus, the said law is settled by the Supreme Court since the time of Swadeshi Cotton Mills Co. Ltd. Vs. State of U.P. AIR 1961 SC 1381, and is also again reiterated in the aforesaid judgment of State of Haryana (supra). I find force in the submission of Sri Prashant Chandra, that, RBI can satisfy this Court, by placing record before it, with regard to its satisfaction for filing the present petition.
34. In addition to above, in my opinion, the following decisions of the Supreme Court are also relevant for our purposes. In these decisions Supreme Court has held that where the decision is purely administrative in nature, having no civil consequence, validity of such decisions can not be disputed in separate proceeding but can be raised in the proceedings to be initiated, as the present winding up proceedings.
(i) State of Madras Vs. C.P. Sarathy and another, AIR 1953 SC 53
(ii) M/s. Avon Services Production Agencies (P) Ltd. Vs. Industrial Tribunal, Haryana and others, (1979) 1 SCC 1
(iii) R.M. Narayana Chettiar and another. Vs. N. Lakhmanan Chettiar and others, (1991) 1 SCC 48
(iv) Govindbhai Gordhanbhai patel and others. Vs. Gulam Abbas Mulla Allibhai and others (1977) 3 SCC 179 Relevant portions of the aforesaid judgments read as follows:
State of Madras Vs. C.P. Sarathy and another:-
"16. This is, however, not to say that the Government 'will be justified in making a reference under section 10 (1) without satisfying itself on the facts and circumstances brought to its notice that an industrial dispute exists or is apprehended in relation to an establishment or a definite group of establishments engaged in a particular industry, and it is also desirable that the Government should, wherever possible, indicate the nature of the dispute in the order of reference.s. The observations in some of the decisions in Madras do not appear to have kept this distinction in view."
M/s. Avon Services Production Agencies (P) Ltd. Vs. Industrial Tribunal, Haryana and others.
"6. ... The power conferred on the appropriate Government is an administrative power and the action of the Government in making the reference is an administrative act. The formation of an opinion as to the factual existence of an industrial dispute as a preliminary step to the discharge of its function does not make it any the less administrative in character. Thus the jurisdictional facts on which the appropriate Government may act are the formation of an opinion that an industrial dispute exists or is apprehended which undoubtedly is a subjective one, the next step of making reference is an administrative act. The adequacy or sufficiency of the material on which the opinion was formed is beyond the pale of judicial scrutiny. If the action of the Government in making the reference is impugned by a party it would be open to such a party to show that what was referred was not an industrial dispute and that the Tribunal had no jurisdiction to make the Award but if the dispute was an industrial dispute, its factual existence and the expediency of making a reference in the circumstances of a particular case are matters entirely for Government to decide upon, and it will not be competent for the Court to hold the reference bad and quash the proceedings for want of jurisdiction merely because there was, in its opinion, no material before Government on which it could have come to an affirmative conclusion on those matters (see State of Madras v. C. P. Sarathy) (1)."
R.M. Narayana Chettiar and another. Vs. N. Lakhmanan Chettiar and others:-
"17. A plain reading of section 92 of the Code indicates that leave of the court is a pre-condition or a condition precedent for the institution of a suit against a public trust for the reliefs set out in the said section: unless all the beneficiaries join in instituting the suit. if such a suit is instituted without leave, it would not be maintainable at all. Having in mind, the objectives underlying section 92 and the language thereof. it appears to us that, as a rule caution, the court should normally, unless it is impracticable or inconvenient to do so, give a notice to the proposed defendants before granting leave under section 92 to institute a suit. The defendants could bring to the notice of the court for instance that the allegations made in the plaint are frivolous or reckless. Apart from this. they could, in a given case, point out that the persons who are applying for leave under section 92 are doing so merely with a view to harass the trust or have such antecedents that it would be undesirable to grant leave to such persons. The desirability of such notice being given to the defendants, however, cannot be regarded as a statutory requirement to be complied with before leave under section 92 can be granted as that would lead to unnecessary delay and, in a given case, cause considerable loss to the public trust. Such a construction of the provisions of section 92 of the Code would render it difficult for the beneficiaries of a public trust to obtain urgent interim orders from the court even though the circumstances might warrant such relief being granted. Keeping in mind these considerations, in our opinion, although, as a rule of caution, court should normally give notice to the defendants before granting leave under the said section to institute a suit, the court is not bound to do so. If a suit is instituted on the basis of such leave, granted without notice to the defendants, the suit would not thereby be rendered bad in law or non-maintainable. The grant of leave cannot be regarded as defeating or even seriously prejudicing any right of the proposed defendants because it is always open to them to file an application for revocation of the leave which can be considered on merits and according to law."
Govindbhai Gordhanbhai patel and others. Vs. Gulam Abbas Mulla Allibhai and others:-
"13. The answer to the second question turns on the answer to two subsidiary questions (i) whether in according or declining to accord permission under the proviso to section 63(1) of the Act, the Collector or the officer authorised by the State Government in that behalf acts in an administrative capacity or a judicial or a quasi-judicial capacity and (ii) whether the aforesaid order dated December 8, 1958 passed by the Prant Officer, Thana was one on merits or otherwise. Turning to the question (i), it has to be ob- served that there is nothing in section 63 of the Act to indicate that in exercising his jurisdiction under the proviso to sub-section (1) of the section, the Collector or the authorised officer has to act judicially or in conformity with the recognised judicial norms. There is also nothing in the aforesaid Section of the Act requiring the Collector or the authorised officer to determine any question affecting the right of any party. The function which the Collector or the authorised officer discharges under the aforesaid proviso is, therefore, an administrative one and not judicial or quasi-judicial."
35. The law settled by the supreme court by the aforesaid judgments is fully applicable in the present case as, admittedly, no right of SIFCL is impacted by the decision of RBI to file the present winding up petition. The correctness of the decision of RBI to file the present petition can be disputed by SIFCL in the present proceedings only and RBI can place record before this Court to substantiate its stand, which it has duly done.
36. The second submission raised by Sri Mathur is that winding up petition ought to have been filed by the Reserve Bank of India or by an officer duly authorised by it. There is no authority issued in favour of the General Manager who has filed the present petition, therefore, he could not have filed the present petition. The said issue is already considered and decided by this court, after taking into consideration scheme of RBI Act and all the relevant regulations and notifications etc., in Krishi Export Case, paragraph 17 of which finds:-
"17. It is crystal clear from the discussion made hereinabove that Deepak Singhal as Deputy Manager of DNBS is the competent person authorised under the Scheme of Reserve Bank of India Act and the Regulation/ Notification made thereunder to file the instant winding-up petition and to verify the same. The petition filed by him is in accordance with the provisions of the Reserve Bank of India Act and also meets the requirement of Rule 21 of the Companies (Court) Rules, 1959. There is no delegation of delegation as complained of by the learned counsel for the respondent. The act of the Committee of the Central Board is to be taken as of Central Board itself except for matters specifically reserved by the Act for Central Government or Central Board. Under valid authority, the Committee of Central Board of the Bank has issued notification dated 11.9.1998, relevant provisions whereof have been reproduced above to clear the mist. It is not ultra vires. Hyper-technical objection based on hairsplitting has been advanced by the respondent to challenge the maintainability of this winding-up petition which has been filed by the Bank through Deepak Singhal, Deputy General Manager, DNBS. On scrutiny, the hollowness of this objection is exposed. I, therefore, reject the preliminary objection raised by the respondent attacking the maintainability of this winding-up petition. The Rulling of Hukum Chand v. Union of India, (1972) 2 SCC 501: AIR 1972 SC 2427 referred to above also has no application here."
37. Thus, this Court categorically found that the petition cannot be thrown out only on the ground that the same is signed by the Deputy General Manager. In the present case, further, as is already referred to above, the show cause notice was issued by the General Manager and its reply was also required to be submitted before the General Manager at Kanpur, who has filed the present winding up petition. Therefore, in view of the said judgment of Krishi Export (supra), it cannot be said that the present petition could not have been filed through General Manager. I find no reason to disagree with the aforesaid view.
38. Third submission of Sri Mathur is that against the order passed under Section 45-IA-(6) of the RBI Act, an appeal is already filed by SIFCL before the Central Government as per sub-section (7) of Section 45-IA of the RBI Act, which provides that an order passed on appeal by the Central Government shall be final. Therefore, till the disposal of appeal, the order passed by RBI is not final and cannot be given effect to. For convenience, Section 45-IA (6) and (7) are reproduced below:-
"(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 fulfill 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 requirements of any law or any direction or order issued by the bank under the provisions of this Chapter; or
(c) to submit or offer for inspection its books of accounts and other relevant documents when so demanded by an inspecting authority of the bank; or
(v) has been prohibited from accepting deposit by an order made by the bank under the provisions of this Chapter and such order has been in force for a period of not less than three months:
PROVIDED that before canceling a certificate of registration on the ground that the non-banking financial company has failed to comply with the provisions of clause (ii) or has failed to fulfill any of the conditions referred to in clause (iii) the bank, unless it is of the opinion that the delay in canceling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the non-banking financial company, shall give an opportunity to such company on such terms as the bank may specify for taking necessary steps to comply with such provisions or fulfillment of such condition:
PROVIDED FURTHER that before making any order of cancellation of certificate of registration, such company shall be given a reasonable opportunity of being heard.
(7) A company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government and the decision of the Central Government where an appeal has been preferred to it, or of the bank where no appeal has been preferred, shall be final:
PROVIDED that before making any order of rejection of appeal, such company shall be given a reasonable opportunity of being heard."
39. Sri Mathur in support of his submissions, places reliance upon paragraph 23 of Krishi Export (supra) case which reads:-
"23. It is not disputed by the petitioner that the respondent has preferred an appeal against the order of the Bank dated 17.9.1998 before the Central Government and the same is pending. The submission from the side of respondent is that since its appeal is pending before the Central Government, the order of rejection passed by the Bank declining registration of it (respondent) is not final and as such the Bank cannot rely on ground (b) of sub-section (1) of Section 45-MC of the Act to back its winding up petition. On the other hand, the argument of learned counsel for the petitioner is that no stay order has been passed by the Central Government staying the Bank's order dated 17.9.1998. This Court is of the opinion that no stay order is required to be passed by the Central Government to put a brake to the operation of rejection order during the pendency of the appeal. Sub-section (7) of the Section 45-IA is couched in and unambiguous terms that where an appeal is preferred against the rejection of application for registration to the Central Government, the decision of the Central Government shall be final. The order of the Bank rejecting the application for registration shall be final only when no appeal has been preferred. Therefore, stay of the operation of rejection order passed by the Bank is, automatic on the filing of the appeal by the aggrieved party, as respondent in the present case has done. So, to come to the point, ground (b) of sub-section (1) of Section 45-MC of the Act cannot be relied upon by the petitioner to support this winding-up petition."
40. I respectfully disagree with the aforesaid observation made in para 23 of the judgment of Krishi Export case. Sub-section (7) only provides that the order would attain finality after disposal of appeal. But there is no provision, which provides that the order would become inoperative merely on filing of appeal. There is no provision providing for automatic stay of order passed by RBI, merely on filing of appeal. An appeal is a creation of statue. An appeal will lie only if it is so provided in the statue. Its scope and procedure shall be as is provided there. The power, to grant or not to grant an interim order or the extent to which an interim order can be granted or an automatic stay of the impugned order, would be governed by the language of the Statute. In sub-section 7 there is nothing, which provides for an automatic stay of the impugned order, on filing of an appeal before central government. Sub-section 7 only provides that the order of RBI shall be final, in case an appeal is filed against the same, on the appeal being finally decided. But, that is a case with any appeal, whether such a line is there or not in the statue. If an appeal is filed against an order, the impugned order becomes final only on final disposal of the appeal. But the same would not mean that such an order will not be given effect during the pendency of appeal, unless stayed by the appellate court. If this interpretation, as submitted by Sri Mathur, is accepted, than no stay order would be required in any appeal, as the order under appeal will become final only on final disposal of the appeal and, thus, a stay order will have to be presumed. Such can not be the interpretation of sub section 7. Thus this submission of Sri Mathur is also rejected. The order of RBI remains operative, as there is no stay order passed in the appeal of SIFCL, till now.
41. Further, Sri Prashant Chandra, learned counsel for RBI submits that till date, the said appeal is not even entertained and has not been heard even for admission and the notices on the said appeal are not issued as yet. SIFCL, except for filing of said appeal, has not taken any steps for arguing the same even for admission. In the said circumstances, it cannot be said that the appeal has been entertained by the Central Government. Thus, there is no question of there being of any stay of order of RBI. I fully agree with the submission of Sri Prashant Chandra. Neither the language of sub-section (7) provides for any automatic stay of order of RBI nor, in absence of any order showing application of mind by Central Government in entertaining the appeal, such an argument can be raised by SIFCL. SIFCL at least ought to have taken steps for arguments before the Central Government. There is nothing on record to show that it could not appear before the Central Government to argue the matter, on stay or otherwise or approach any court for such directions, in last so many years. Therefore, I do not find any force in the submission of SIFCL. Even otherwise, at best, the same would impact only ground (b) of sub-section (1) of Section 45 MC of RBI Act and not other grounds which are being pressed by RBI for winding up SIFCL.
42. Sri Mathur also feebly argued that ALD now stands reduced to 500 to 600 Crores only. I do not see how the same, even if presumed to be correct, is of any help to his case. The public is not paid its money and the Escrow account is still empty, license of SIFCL stands cancelled and SIFCL has not given any proposal to RBI for any other business, but, had admitted in its reply to RBI that it is in process of closing its business.
43. After all the aforesaid arguments on behalf of SIFCL had been heard over many days and the court had placed its queries, on 13.09.2018, SIFCL filed an application praying that the winding up petition can not be heard by this court and the matter stands transferred to National Company Law Tribunal (NCLT). Strong emphasis was made that this application has to be decided first, and this case cannot be decided on merits. In fact, a statement was also made before the court, that, all the earlier counsels appearing for SIFCL were withdrawn and the new senior counsel insisted that he shall argue only the aforesaid application and nothing else and the court is bound to decide the application first. The order passed on 13.09.2018 shows the stand taken by SIFCL and reads:-
"Order on application:-
(C.M. Application No.99260 of 2018) Supplementary affidavit filed is taken on record.
Order on petition:-
In this case, hearing was started by Sri Prashant Chandra, learned Senior Advocate assisted by Sri Pritish Kumar, learned counsel for petitioner on 21.08.2018 when counsel for petitioner submitted his arguments for the petitioner-Reserve Bank of India. Thereafter from 23.08.2018, 24.08.2018, 28.08.2018, 29.08.2018 and 30.08.2018 Sri Jaideep Narain Mathur, learned Senior Counsel assisted by Sri Kumar Ayush, learned counsel for the respondent Company M/S Sahara India Financial Corporation Ltd. continued his submissions.
Since arguments could not be completed, as Mr. J.N. Mathur was going out of country, hence, on his request, the matter was fixed for today. It was assured that the matter would be concluded either today or latest by tomorrow.
Today Sri Vikas Singh, learned Senior Advocate has stood up submitting that he would be making submissions on an application which the respondent company has filed yesterday in the registry and this Court should summon the said application.
On being informed to him that Sri J.N. Mathur, learned Senior Advocate has nearly concluded his arguments and he is supposed to argue the matter today, he submits that Sri J.N. Mathur is no more having instructions in the matter.
Thereafter, Sri J.N. Mathur and Sri Kumar Ayush have also appeared before the Court and submitted that they have no instructions in the matter.
This is nothing but a delaying tactics on part of the respondent company. After a matter has been heard at length, without assigning any reason and without leave of the Court, it is most inappropriate to withdraw a counsel and come up with a new counsel. The arguments were nearly completed, therefore, permission to a new senior counsel, at this stage, cannot be granted.
It would have been a different situation if a new senior counsel would have come up along with the earlier counsel so that the arguments would not be repeated. But this is not the situation. In fact going strictly as per law, neither Sri J.N. Mathur, the earlier senior counsel nor Sri Kumar Ayush, the earlier instructing counsel is having any instructions. Without there being any instructing counsel for the respondent company, Sri Vikas Singh, learned senior advocate also cannot be permitted to argue the case.
Therefore, I have no option but to close the arguments of the respondent company.
Mr. Prashant Chandra, learned senior advocate for the petitioner and Sri Savitra Vardhan Singh, learned counsel for respondent no.2 Registrar of Companies are present. Sri Prashant Chandra, learned Senior Advocate for the petitioner is permitted to make his submissions in rejoinder arguments at 03:00 P.M. Post Lunch Order:-
After the aforesaid order was passed, Sri Prashant Chandra, learned Senior Advocate for the petitioner started his arguments at 03:00 P.M. After ten minutes of his arguments, Sri Kumar Ayush, counsel for the respondent company came and sat in the court and started taking notes for the respondents. It was again inquired from him as to whether he would like to argue the matter, he informs that he has no instructions in the matter.
Sri Prashant Chandra, learned Senior Counsel for the petitioner has concluded his rejoinder arguments.
Order reserved.
It goes without saying that the application which has been filed by the respondent company which shall come before this Court tomorrow would be taken into consideration while passing orders in the matter.
dt. 13.09.2018"
44. Against the said order an SLP No. 25517 of 2018 was filed and the supreme court, on 24.09.2018, passed the following order:-
"Application for exemption from filing certified copy of the impugned order is allowed. Having regard to the order that is proposed to be passed we are of the view that no prejudice will be caused to the respondent if it is directed that the petitioner may be allowed to file written arguments before the High Court within seven days from today. We, therefore, order accordingly. On consideration of the written arguments to be filed, if the High Court is of the view that further arguments would be required it will be open for the High Court to hear the learned counsel for the petitioner. Until the aforesaid exercise is completed, judgment in the matter reserved for pronouncement may not be pronounced. Special Leave Petition is disposed of in the above terms."
45. On 8.10.2018 an application along with the written submissions, signed by Sri Kumar Ayush advocate, earlier instructing counsel, who on the last date had informed that he had withdrawn from the case, came up before the court on which following order was passed:-
"(Order on C. M. Application No. 108880 of 2018) No one is present for the applicant/opposite party to press or argue this application.
Judgment in this case is already reserved.
Put up with record.
After lunch at 02:15 p.m., a mention is made by Sri Kumar Ayush, learned counsel appearing for the respondent. He submits that written submissions may be taken on record. The same are taken on record. It was specifically put to Sri Kumar Ayush if he or senior counsel would like to argue the case today. He submits that he is not in a position to reply the same. He submits that some future date may be fixed as he is not prepared today. This is nothing but an attempt to delay the proceedings of the case.
The judgment in this case is already reserved. Hence his prayer for fixing further date is rejected."
46. Against the said order dated 8.10.2018 also an SLP No. 28560/2018 was filed which was dismissed by the following order dated 13.11.2018:-
"Heard learned counsel for the petitioner and perused the relevant material. We find no merit in the special leave petition. The same is, accordingly, dismissed."
47. I first proceed to decide the application of SIFCL with regard to transfer of this petition and further objections raised by them in their written submissions, before looking into their conduct in court. The Application No.99993 of 2018, dated 12.9.2018, by SIFCL for transferring the present Company Petition to NCLT having territorial jurisdiction, is filed on two grounds. The first ground is narrated in paragraph 3 to 8 of the said application, wherein the same SIFCL claims that vide amendment of Companies Act, 2013 and consequent notification No.-SO 1932 (E) dated 1.6.2016, the NCLT has been made functional. By notification No.SO 1933 (E) of the same date, the NCLAT has also been made operational and by notification No.SO 1934 (E), sub-sections (a) and (b) of Clause-1 of Section 434 of Companies Act, 2013 (2013 Act) has been brought into force. Further, with effect from 15.11.2016, Section 434 has been further amended and after amendment all pending proceedings relating to winding up of companies, under the Companies Act, stood automatically transferred to the concerned NCLT as per mandate of Section 434 (1) (c) of 2013 Act, with effect from 15.11.2016 and, thus, this Court became functus officio and lost jurisdiction to hear the matter after 15.11.2016. Reliance for the aforesaid purpose is placed upon the judgment of Calcutta High Court in CA No.563 of 2014 dated 22.3.2017 Prasant Kumar Mitra Vs. India Steam Laundry (P) Ltd. and the judgment passed by Division Bench in appeal from the said judgment in APO No.112/2017 dated 5.9.2018.
48. Second ground taken, in paragraph 9 and 10 of the said application, is that Insolvency and Bankruptcy Code (Second Amendment) Act 2018 has, with effect from 6.6.2018, inserted another proviso to Section 434 (1) (c) and now, under the same, a party can file an application for transfer of proceedings and Court may transfer such proceedings to NCLT. Thus SIFCL prays, under the said proviso, for transfer of the present petition to NCLT.
49. So far as the first ground is concerned, the same, on the face of it, cannot stand for more than one reason. Firstly, the submission that the proceedings shall stand transferred from 15.11.2016, is in itself misconceived. Different provisions of Companies Act, 2013 were enforced, by separate notifications, on different dates. Section 434 of the Companies Act, 2013 was also enforced, in parts, on different dates. Section 434 (1)(a) and 1(b) were enforced w.e.f. 01.06.2016 by notification number 1934(E) dated 01.06.2016. Sub clause 1(a) and 1(b) are not applicable with regard to winding up proceedings and it is only Section 434 (1)(c) which relates to winding up proceedings. Before Section 434 (1)(c) could be enforced, Companies (Removal of Difficulties) Fourth Order, 2016 amended the same w.e.f. 15.12.2016. Thus amended section 434 (1)(c) for the first time was enforced w.e.f. 15.12.2016 only by notification number SO-3677(E) dated 07.12.2016. Therefore, for the first time, Section 434 (1)(c) came in force is from 15.12.2016. Prior to 15.12.2016 Section 434 (1)(c) was never enforced. Therefore, there is no question of transfer of any pending winding up proceedings under Section 434 (1)(c) from 15.11.2016 or from any date prior to 15.12.2016.
50. Further Section 434 of the Companies Act, 2013 which came in force, as aforesaid, from 15.12.2016, has been amended from time to time and as on date reads as follows:-
Section 434. Transfer of certain pending proceedings-
(1) On such date as may be notified by the Central Government in this behalf,--
(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of section 10E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act;
(b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order:
Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and
(c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer:
Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government:
Provided further that any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (ord. 6 of 2018), may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of corporate Insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (31 of 2016):
Provided further that only such proceedings relating to cases other than winding up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Court shall be transferred to the Tribunal.
Provided also that-
(i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or
(ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts;
shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959;
Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the Ist April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.
(2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this Section."
51. Present winding up petition is filed under Section 45 MC of the RBI Act and not under the Companies Act, 1956. The power, to file a winding up petition as well as power to pass a winding up order, is only under Section 45-MC of the RBI Act. Only for the purposes of procedure, the provisions of Companies Act,1956 are adopted. The substantial power does not flow from the Companies Act, 1956 but flows from the RBI Act. Section 434(1)(c) uses the words "all proceedings under the Companies Act, 1956". These are not proceedings under the Companies Act, 1956 but are proceedings under Section 45-MC of the RBI Act. Therefore, Section 434(1)(c) is not attracted to the present proceedings.
52. Further Section 434(1) is divided in three clauses. So far as clause (a) and (b) are concerned, the same do not relate to winding up proceedings and therefore, they are of no relevance for the present case. It is clause (c) of Sub-section-1 which is of relevance to us. Clause-(c) came into force w.e.f. 15.12.2016. The first proviso to the said sub-clause (c) provides that only such winding up proceeding shall stand transferred to the Tribunal as may be prescribed by the Central Government. The Central Government for the said purposes issued a notification No.-G.S.R. 1119(E) dated 07.12.2016 prescribing the Companies (Transfer of Pending Proceedings) Rules, 2016 (Transfer Rules, 2016). Rule 1(2) of the Transfer Rules, 2016 provides that except rule 4, rest of the rules would come into force w.e.f. 15.12.2016. Rule 3 provides for transfer of cases other than winding up. Rule 4 relates to voluntary winding up cases. It is Rule 5 and 6 which relates to winding up cases, other than voluntary winding up, pending under the old Act. Therefore, Rule 5 and Rule 6, being of relevance to our case, are being quoted below:-
"5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.-
(1) All petitions relating to winding up of a company under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Companies Act, 2013, exercising territorial jurisdiction and such petitions shall be treated as applications under Sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code:
Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within six months from the date of this notification, failing which the petition shall abated:
(2). All cases where opinion has been forwarded by Board for Industrial and Financial Reconstruction, for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the Act, pursuant to section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall continue to be dealt with by such High Court in accordance with the provisions of the Act.
6. Transfer of pending proceedings of Winding up matters on the grounds other than inability to pay debts.--All petitions filed under clauses (a) and (f) of section 433 of the Companies Act, 1956 pending before a High Court and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal exercising territorial jurisdiction and such petitions shall be treated as petitions under the provisions of the Companies Act, 2013 (18 of 2013)."
53. As is clear from the above, that, Rule 5 only pertains to cases filed under Section 433(e) of the Companies Act, 1956 and Rule 6 relates to petitions filed under Section 433 (a) and (f) of Companies Act, 1956. The present petition is not filed under the aforesaid sections of Companies Act, 1956 but is filed under Section 45 MC of the RBI Act and, hence, the said Rules 5 and 6 are not applicable to the same.
54. The judgment of Calcutta High Court relied upon by the SIFCL in case of Prasant Kumar Mitra (Supra), in the very first line of first paragraph, states that:-
"1. Company Petition No.611 of 1998 filed under Section 155, 237, 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956 along with connected applications have been assigned to me by the Hon'ble the Chief Justice for hearing and disposal. At the very outset the question arose as to whether or not the High Court still has jurisdiction to hear and dispose of the said company petition in view of Section 434 of the Companies Act, 2013, (hereinafter referred to as 'the 2013 Act') having come into force recently...................."
Further paragraphs 23, 24, 25, 26 of the aforesaid judgment state:-
"23 By notification No. 3676 (E) dated 7 December, 2016, the Central Government made the Companies (Removal of Difficulties) Fourth Order, 2016 which came into effect from 15 December, 2016. The said Order provides as follows:-
"In the Companies Act, 2013, in Section 434, in sub- Section (1), in Clause (c ), after the proviso, the following provisos shall be inserted, namely;-
''Provided further that only such proceedings relating to cases other than winding up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal:
Provided further that- (i) All proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or
(ii) The proceedings relating to winding up of companies which have not been transferred from the High Courts;
Shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules,1959'."
24. It is clear that with effect from 1 June, 2016, all applications complaining of oppression and mismanagement of a company have to be made before the NCLT. The question is what happens to a proceeding like the present one being an application complaining of oppression and mismanagement under Secs. 397 and 398 of the 1956 Act which was filed in th is Court in the year 1988. Mr. Mookherjee and Mr. Sen, learned Senior Counsel, would both contend that because of Sec. 68 of the Amendment Act, 1988 which was never repealed, the present application has to be heard and disposed of by this Court. With great respect for Mr. Mookherjee and Mr. Sen that I have, I am unable to accept this contention. My reasons are as follows.
25. Section 68 of the Amendment Act, 1988 was a transitional provision. It did not preserve the jurisdiction of the High Court generally. It only provided that proceedings pending in the High Court just before the commencement of the Amendment Act, 1988 would continue in the High Court notwithstanding that the CLB would have exclusive jurisdiction to entertain and dispose of such applications from the date of commencement of the Amendment Act, 1988. However, Sec. 434 (1)(c) of the 2013 Act carries an absolutely clear mandate that all proceedings under the Companies Act, 1956 including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies before the date of coming into operation of that Section in the High Court shall stand transferred to the NCLT. The word all means all. It admits of no exception. The use of the word including in the said sub-Section cannot by any stretch of imagination mean that the words ''all proceedings under the Companies Act' have to be under stood as proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies. The word including in that sub-Section is only clarificatory. I have no doubt in my mind that each and all proceedings instituted under the Companies Act, 1956 including the proceedings like the present one, pending in the High Court as on 15 December, 2016 stand transferred to the NCLT. It is an automatic transfer by operation of law. No sanction of the court is required. It is a statutory mandate and has to be followed whether such mandate is wise or not. All that the Court is required to do is to send the records of this Court to the NCLT.
26. Perhaps the only exception that has been carved out is by the Companies (Removal of Difficulties) Fourth Order, 2016 which has been extracted above. The present proceeding is not one where orders have been reserved after conclusion of hearing and thus does not come within the exception."
55. The aforesaid clearly shows that the petition before the Calcutta High Court was with regard to mismanagement of the affairs of the company filed under the Companies Act, 1956. The same was not a winding up petition filed under Section 433 of the Companies Act, 1956. The same was not at all a winding up petition filed under Section 45MC of the RBI Act, as is the present case. Thus, the Calcutta High Court never considered the issues involved in the present case, in the aforesaid judgments. Thus, on facts and the issues involved, the judgments, of Single Judge and of the Division Bench in Special Appeal, of Calcutta High Court cannot be applied to the present case as are clearly distinguishable.
56. In view thereof, as per first proviso to Section 434 (1)(c), only such winding up proceedings are to be transferred which are covered by the Transfer Rules, 2016 and since, the present winding up proceedings, as already found, are not covered by the aforesaid rules, the same are saved from being transferred.
57. Coming to the second leg of submission for transfer, that, the second proviso to Section 434 (1)(c) provides that any party to winding up proceedings, pending before any Court immediately before the commencement of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 (the said proviso has come into force w.e.f. 06.06.2018), may file an application for transfer of such proceedings and the Court may transfer all such proceedings to the Tribunal. The prayer is made by SIFCL, in the aforesaid application bearing Application No.99993 of 2018, for transferring the present proceedings to NCLT.
58. There is no reason given in the entire application as to why the present winding up proceedings should be transferred. It is no doubt correct that power under this second proviso is given to the Court to transfer any winding up proceedings which remains pending before High Court on 06.06.2018. The proviso would no doubt be applicable to such proceedings which are not transferred under the Transfer Rules, 2016. However, the proviso does not say that these proceedings would automatically stand transferred. Rather it leaves the discretion with the Court, where the winding up proceedings are pending, to transfer the same or not to transfer the same. There have to be reasons to exercise such power. In the present case, entire application is silent as to why power to transfer the winding up petition should be exercised by the Court and the winding up petition should be transferred. I find that this Court has heard this matter at great length. In fact, both the parties before filing of the present application completed nearly all the arguments on merits of the case. The Court had also placed all its queries to counsels for both the parties. Therefore, I do not find the request made at this stage to be a bona fide request. Having argued the matter at length and having faced the queries, it is most inappropriate on part of the respondents to move such an application, that too without any reasons, what to say of strong reasons. Such application or request could have been made any time after 06.06.2018, when the proviso came in force, till the times the arguments in the case were initiated. Such a request also could have been made before initiating the arguments as a preliminary request. To raise such a request, after the conclusion of arguments on merits, cannot be called bona fide. Further, since nothing is said in the application, I find no reason to allow the application. The request of SIFCL for transfer of case under the second proviso is rejected.
59. In paragraph 2.1 of the written submissions dated 01.10.2018, counsel for SIFCL has referred to four applications filed by it. So far as application bearing C.M. Application No.99993 of 2018, dated 12.09.2018, with regard to transfer of case is concerned, the same is already considered above and is rejected. The rest of the applications are being considered now.
60. The second application bearing C.M. Application No.7683 of 2016, dated 18.01.2016 is filed for vacating the order dated 16.09.2015 passed by this Court. The third application being C.M. Application No.94843 of 2018 dated 28.08.2018 is filed seeking partial modification of ex-parte order dated 16.09.2015 passed in the present petition, to enable respondent company to deposit the amount of ALD in the Escrow Account. Both the applications are filed almost for the same relief, that is for vacation or modification of the same order dated 16.09.2015. In view therefore, both the applications are being considered together. The order dated 16.09.2015 reads as follows:-
Heard Sri Anil Tiwari, learned Senior Counsel assisted by Sri Pritish Kumar, learned counsel for the petitioner.
Considering the order of the Hon'ble Supreme Court dated 24.2.2015 passed in I.A. Nos.47-55 in C.P. (C) No.412 and 413 of 2012 in C.A. No.9813 & 9833 of 2011 and C.P. (C) No.260 of 2013 in C.A. No.8643 of 2012 wherein petitioner has been allowed to initiate such action as may be legally permissible under the provisions of the Reserve Bank of India Act and the Regulations framed thereunder, and the averments made in the company petition which has been preferred by the Reserve Bank of India under Section 45-M.C. of the Reserve Bank of India Act, 1934 read with Part VII of the Companies Act, 1956 prima facie case has been made out for issuance of notice to opposite party.
Let notice be issued both ways to the opposite party, returnable at an early date.
In the meantime, the opposite party is restrained from alienating its assets and diverting its funds, subject however, to any order passed or to be passed by the Hon'ble Supreme Court in any proceeding before it.
61. There is nothing in the aforesaid order whereby respondent has been restrained from depositing the amount of ALD in the Escrow account. Only order is that the respondent company is restrained from alienating its assets and diverting its funds subject to any order passed or to be passed by the Hon'ble Supreme Court. Therefore, there is no restriction imposed by this Court. It appears that the applications are filed only to somehow linger on the proceedings, as for years together, the respondent company has not deposited the required amount in the Escrow account and now only lame excuses are being made up. There is also no proof that such amount is available with SIFCL.
62. Another objection is raised by the SIFCL by its fourth application bearing C.M. Application No.82611 of 2016, dated 23.08.2016. The said application merely prays that accompanying supplementary affidavit be taken on record. Paragraph-2 of the supplementary affidavit states:-
"That the present petition is not maintainable at the thresh hold in view of notification dated 06.03.1997 bearing no.DFC(COC) No.99/FD(JRP)/97 issued under Section 45 NC of the RBI Act 1934. The said notification clearly provides that Section 45 MC of the Act shall not apply to any Non Banking Finance Company, doing the business of insurance, holding a valid certificate of registration issued under Section 3 of the Insurance Act, 1938 (IV of 1938) and Doing the business of a stock broker or sub-broker holding a valid certificate of registration obtained under Section 12 of the Securities and Exchange Board of India Act, 1992 (No.15 of 1992)."
The relevant portion of Notification dated 06.03.1997 reads as follows:-
"Notification DFC.(COC) No.99/ED(JRP)-97 dated March 6, 1997:-
The Reserve Bank of India, on being satisfied that it is necessary so to do, in exercise of its powers conferred under Section 45NC of the Reserve Bank of India Act, 1934 (2 of 1934) hereby declares that:-
(1) the provisions of Section 45IA, 45IB, 45IC, 45MB and Section 45MC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company.
(a) doing the business of insurance, holding a valid certificate of registration issued under Section 3 of the Insurance Act, 1938 (IV of 1938)
(b) being a stock exchange, recognised under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956; and
(c) doing the business of a stock-broker or sub-broker holding a valid certificate of registration obtained under Section 12 of the Securities and Exchange Board of India Act, 1992 (No.15 of 1992)."
63. The Certificate of Registration is attached as Annexure-SA-3 to the said supplementary affidavit. The said Certificate of Registration granted under section 3(2A) of the Insurance Act, 1938 is in favour a company namely "Sahara India Life Insurance Company Limited" dated 06.02.2004. The said insurance registration is not in the name of respondent SIFCL but in the name of an entirely different company. The notification dated 06.03.1997 provides that certain provisions of RBI Act including Section 45-MC "shall not apply to any Non Banking Finance Company, doing business of insurance, holding a valid certificate of registration issued under Section 3 of the Insurance Act, 1938 (IV of 1938)". Since, SIFCL itself is not holding certificate of registration under Section 3 of the Insurance Act, 1938, therefore, notification dated 06.03.1997 is not applicable on it. Merely because it is holding shares of another company, which is having such a certificate, will not make the notification dated 06.031993 applicable upon it. Thus, there is no force in the objection raised in the aforesaid application/supplementary affidavit dated 23.08.2016.
64. As found above, none of the aforesaid applications is having any force and thus all the applications are rejected.
65. Since this Court, in view of aforesaid and amongst others, finds that SIFCL has failed to pay its dues, is disqualified under Section 45-IA of RBI Act, is prohibited by RBI to receive deposits, its continuation is detrimental to public interest and interest of its depositors, it has itself admitted that it is on way to close its business activities and has not proposed any alternative business plan to RBI till now, petitioner-RBI is entitled to the prayer sought from this Court and the objections and arguments made by the respondent SIFCL have no force and are rejected.
66. Now, lets look into the conduct of the respondent SIFCL with regard to delaying/bench hunting tactics adopted before this Court. I have already noted above in detail the orders passed by this Court on the prayers made by SIFCL after the arguments on merits were nearly completed. The same is also repeated in writing in paragraph-5.6 to 5.8 of the written submissions dated 01.10.2018 filed by Sri Kumar Ayush, instructing counsel for the respondent SIFCL, where SIFCL states:-
"5.6. The respondent submits that in view of the aforesaid submissions, in the present proceeding, an issue has arisen as to whether this Hon'ble Court has jurisdiction after 15.12.2016 to deal with the present Winding Up petition which need to be adjudicated first, as a 'Preliminary Issue' before any adjudication on the merits of the winding up petition.
5.7. Since, the issue relating to jurisdiction was raised for the first time by way of an application filed on 12.09.2018, in consonance with the principle of natural justice and fair play, it is imperative if the arguments relating to jurisdiction and consequent transfer of the petition to NCLT are heard in open Court. The applicant respondent prays accordingly. The applicant respondent assures this Hon'ble Court that no repeated arguments would be made and the submissions will be made only on those aspects which have not been argued as yet.
5.8. The applicant further submits that if this Hon'ble Court reaches to the conclusion, after hearing the oral submissions of the respondent on the issue of jurisdiction and maintainability of the Winding Up petition, then this Hon'ble Court may grant an opportunity of detail hearing on the merit of the petition, as the opportunity of hearing was suddenly closed on 13.09.2018 when the Senior Counsel wanted to argue the application on maintainability and had informed the Court that if the application of maintainability were to be rejected, he was ready to argue the matter on merits as well as on the same day without seeking any adjournment. It was made clear that there was no attempt to delay the matter. In any manner the perusal of the record of proceeding will make it clear that the respondent no.1 has not made any attempt to delay the proceedings.
67. Sri Kumar Ayush, learned counsel who has signed and filed these written submissions was present on all the dates when the matter was heard on merits. It was in his presence that Sri Jaideep Narain Mathur, earlier senior advocate, had sought an adjournment for his London visit and had assured the Court that on his return he would conclude the case in a day or two. It was on this request that the matter was fixed for 13.09.2018. Thus, to raise preliminary issue of maintainability of petition after arguing the entire matter on merits and to insist that the Court is bound to decide the said issue now as preliminary issue, pass an order on the same, and in case the Court rejects the same, thereafter to hear the matter on merits, is highly improper. The matter had been argued on merits. It was open for the SIFCL to argue any other objection including the objection of maintainability of petition. However, it is not open for any party to insist as to how the Court should deal with its objections and at what stage. At best, a request can be made, but no party can insist upon a Court that it would not argue the case on merits or would argue the case on merits only after objections raised by it is decided by the Court. It is the discretion of the Court to see as to whether any objection is to be decided as a preliminary objection, before proceeding with the matter on merits, or to hear all the objections and petition simultaneously and decide the entire matter by one common order. A party or his counsel cannot put court to condition that "if the application on maintainability were to be rejected, he was ready to argue the matter on merits". This only shows that after the queries had been made by the Court during lengthy arguments, the respondent SIFCL was only trying to somehow find a way out so that the matter is not decided on merits. The same is also clear from the conduct of SIFCL when on 13.09.2018 in the morning its counsels appearing in the case, more particularly its instructing counsel, withdraw from the case, but came and sat in Court post lunch to note the rejoinder arguments of petitioner and after a few days filed written submissions under his own signatures and again appeared to seek adjournment when the written submissions came before the Court. Can it be said that the statement made by the instructing counsel of withdrawal from case on 13.09.2018 was true and bona fide? The answer that comes to me is, No. Proceedings were stage managed on 13.09.2018 only to get the matter lingered and keep the same pending. This Court is suffering from one of the highest pendency of cases in this country. The luxury to hear the matter again and again is not available. There are large numbers of litigants waiting for their turn to get their matter taken up. Their right to get their matter heard and decided from this Court is of equal importance to this Court as that of the respondent SIFCL.
68. It would also be relevant to look into the previous conduct of the respondent SIFCL in this case. In this case, hearing was started earlier by another Hon'ble Judge of this Court on 07.04.2016. The matter was heard on 11.04.2016, 19.04.2016, 20.04.2016, 12.05.2016, 16.05.2016, 17.05.2016 and 20.05.2016. Lengthy hearing was granted. Thereafter the case was fixed for 25.05.2016. On 25.05.2016 another senior advocate came from Delhi and sought an adjournment on the ground that he is not yet briefed properly in the case. The order dated 25.05.2016 speaks for itself and is quoted below:-
"A mention has been by Sri Kapil Sibbal, Senior Advocate from Delhi for adjourning the matter today. He made a personal submission that he could not be briefed properly to argue the matter as his engagement came only yesterday evening. He says that only a week's time may be granted to him to assist the Court and argue the matter.
This Court observed that since the date was fixed on the request of counsel for opposite party Sri J. N. Mathur, Senior Advocate, hence, it will not proper to adjourn the matter in absence of counsel for the petitioner. He was required to inform counsel for the petitioner and then his request would be considered.
Mr. Prashant Chandra, Senior Advocate assisted by Sri Pritish Kumar, learned counsel for the petitioner appeared on the call of the Court. He submitted that he is not opposing the plea of adjournment moved by Sri Kapil Sibbal on personal grounds. At the same time, he insisted that since the matter was fully argued by Sri J. N. Mathur and it was to be concluded today, hence, provisional liquidator may be appointed and books of accounts may be handed over to him.
Considering the rival contentions and the position, the Court feels that personal reasons of a counsel cannot be ignored and since Sri Kapil Sibbal has given a categorical assurance to the Court of assistance on the next date, the matter is adjourned today.
The request of Sri Prashant Chandra may be considered on the next date fixed.
On the joint agreement of the parties, list/put up this case on 13.7.2016. "
69. Counsel for SIFCL had given a categorical assurance to the Court and on his assurance, the matter was adjourned to 13.07.2016. On 13.07.2016, or on any dates thereafter, the senior counsel from Delhi never appeared in the case. In fact, he only came on 25.05.2016 and never thereafter. The order dated 13.07.2016 states:-
Sri Prashant Chandra, Senior Advocate assisted by Sri Pritish Kumar, learned Counsel for the petitioner insisted to press the application for appointment of Official Liquidator as Provisional Liquidator.
Sri Arohi Bhalla, learned counsel for the opposite party (Company) has submitted that this Court has already restrained the Company from alienating its assets and diverting its funds subject to any order passed or to be passed by Hon'ble Supreme Court in any proceeding before it. He further submits that Reserve Bank of India vide order dated 03.09.2015 has already cancelled the licence of the Company and, therefore, the Company cannot accept any deposit from the public. The order dated 03.09.2015 is pending consideration in an Appeal before the Central Government and as such the Company is not in a position to accept any deposit from any one.
Sri Arohi Bhalla has also brought to the notice of the Court that Sri Kapil Sibbal, Senior Advocate, who is to argue the matter, on account of his personal difficulty could not attend the Court today, therefore, some other date may be fixed sometime in the month of August, 2016. He proposed 17th, 18th, 24th, 25th & 26th, August, 2016.
Sri Prashant Chandra, Senior Advocate vehemently opposed the request of Sri Arohi Bhalla for adjournment of the case.
Considering the aforesaid facts and in the interest of justice, the case is adjourned for the day. List this case on 17.08.2016. It is made clear that on the next date, the case will not be adjourned in any manner on the request of opposite party.
In the meantime, it is open for the petitioner to file rejoinder affidavit to the detailed counter affidavit of opposite party.
70. Thus, despite lengthy hearings, the matter got adjourned, merely because a new senior counsel was introduced, who requested that since he is not properly instructed with the case, the case may be adjourned. I am convinced that now a similar second attempt is made to somehow scuttle the hearing. This can be called nothing but an attempt to bench hunting or to somehow scuttle the hearing and keep the matter pending before this Court. At this stage, I may refer to a judgment of Supreme Court reported in (2014) 8 SCC 470; Subrata Roy Sahara Vs. Union of India wherein even the Supreme Court has deprecated the conduct for creating pressures upon the Court in a wrongful manner. Sri Subrata Roy Sahara happens to be a promoter of SIFCL. From the above, it is clearly indicated that the SIFCL is repeatedly using dilatory tactics to somehow scuttle the hearing of the case. Therefore, I am satisfied that a mere warning would not suffice to send a strong message.
71. Thus, looking into the conduct of SIFCL, I impose a cost of Rs.5 Lakhs upon the Directors of SIFCL collectively, which they shall deposit within 30 days from today with the State Legal Services Authority of this Court at Lucknow and produce a receipt of its payment to the Senior Registrar of this Court within the aforesaid period of 30 days. In case of failure on their part to deposit the said cost, it shall be open for the Senior Registrar of this Court to proceed against them and recover the costs as arrears of land revenue.
72. For the reasons and findings already given above, I am satisfied that a case on all the four grounds of Section 45MC-1 of the RBI Act is made out against SIFCL.
73. In view of aforesaid, a case for advertising the petition in accordance with Rule 24 of the Companies (Court) Rules, 1959 is made out. Hence, petitioner RBI is directed to advertise the petition in accordance with Rule 24 of the Companies (Court) Rules, 1959. The notice of the petition be advertised as per rules in two newspapers namely 'Hindustan Times' in English and in "Hindustan' in Hindi in their Lucknow editions. The petition shall also be published in the official gazette of the State fixing 02.04.2019 as the next date of hearing of the petition. The petitioner shall also file an affidavit of service in compliance of the aforesaid directions by the next date fixed.
74. Looking into the aforesaid facts and circumstances of the case, to preserve the assets of the company, the Official Liquidator attached to this Court is appointed Liquidator provisionally of Sahara India Financial Corporation Limited (SIFCL) together with all its assets, papers, books of accounts, documents and files etc. He is directed to proceed forthwith and take charge of all properties and effects of the company and its management. SIFCL and officers of SIFCL/all persons concerned are restrained from operating any bank account of SIFCL and its funds without leave of this Court till Official Liquidator takes charge. SIFCL is directed to fully co-operate with the Official Liquidator in smooth and immediate handover, as directed above.
75. List this case on 02.04.2019.
76. A copy of this order shall be supplied by office immediately to the Official Liquidator of this Court as well as the Senior Registrar of this Court without any costs.
Order Dated: 15.02.2019 Rajneesh DR-PS)/Arti