Reserve Bank Of India vs Kirloskar Investments And Finance Ltd on 24 December, 2010

[Cites 13, Cited by 1]

Karnataka High Court

Reserve Bank Of India vs Kirloskar Investments And Finance Ltd on 24 December, 2010

Equivalent citations: 2011 (2) AIR KAR R 44, 2011 CLC 597 (KAR)

Bench: Subhash B.Adi

 

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 24TH DAY OF DECEMBER 2010 
BEFORE V 4 E

me HONBLE MRJUSTICE SUBHASH B.'A1)Iv  9'
COMPANY PETITION N'<')'."2"/'2ooo .
COMPANY PETITION Nos.26o/1999,26: /1999,..t1'1.7/2905, " .
116/2005,113/2005,259/1999,258{I999,25?1;999,
214/1999, 26.2'/'.1999 V ' "  

IN CO.P.2[ 2000
BETWEEN:

Reserve Bank. of India V V V'   . ..

A Statutory Corpogration'Establishedw   .. 
Under the Resenre--..Baﬁ1_:--.'_ofvIndiaﬁct; 1934,

Having its Central sZ")'ffieVe'at. Cefiiirgd Qffi'e,e"Bui1dir1g,
Shahid Bhagat Singh7Mvarg,_y  V  "  

Mumbai -- V406OQ1if,andi:'?Braneh'es, inter Alia,

At No. 10//Nrup--9thnLnga'-Read; -

Bangalore 560 001.. *    

Represented herein by its] ,9 "

General Manager. 9 _  

C.S.Murtjr1y'.    '" ' __ PETITIONER

    &fPaﬂ1't1'idge, Aclx/S.)

Eﬁiirleskar I11y.='e':3t'vri~ie11ts and Finance Ltd..

AfCo1npar;y 'i1:1c01*p0rated under the

" 'Pr0"vi_siQns of. the Companies Act. 1956
 Having tits Registered Office at

4213"' FIo0F_,5'C' Block. Unity Buildings

 J..C.E{pad, Bangalore ~ 580 002. .. RESPONDENT

'{-Buy.""Sri.S.J.Sanghavi ACGSC, Poevaiah <3: C0.,Advs. for

-E~1espo11dent Cozmliittee; Holia & Holla, Acivs; M/5 Tukaram S Pai. Advs. for applicants in CA 1024/2005; Sri. Aditya Sondhi. Adv.

for Ex- Melnagcnicnt; Smt.\/eena Jadhav, Adv. for ROC; Sreevatsa Assis.. Adv. for applicant in CA 665/08; Sreenivasa Rao Adv. for R--l1 82 R~l9 in CA.665/08; Smt'.P1'abha I\/Iirrthy. Adv. for appellant' in CA.6l3/2008; Sri. Saji P.J0hn._Adv_'.9'{01* applicant in CA. 611/09: S1'i.S.K1'1'shna Mu1'thy,...__Adv'.a-";~fﬁ)'ru Objectorz Sri. P.B.Appaiah, Adv. for applicant in CA;Q37}"O'9 ~ 80/10} IN C0.P.260[1999 BETWEEN:

Mrs. D.S.Sunii.a A / P~Galgale Taluka- Ka rgal Dist~Kolhapur Maharashtra State.

[By K.M.ShiVayogi_swamy, AND: A Kirloskar inve_stnVie'rits.V_a'nd 'Eiﬁa,nc.e _Ltd., Unity BuilClAi_11g_2""Flecr, B.lo"c.k, J.C.R0ad, Bazjigaloree 550 002;" "

Branch at No. 1.887, E Ward Rajarampuri 91" lane,;K0lhapu1"v-.5 4'18 008. *7_(E§yA Sri;D9.K';'Prahalad Raﬁ Adv") BETWEISN: ' ' Mr. P_R."Favva1'. A/ p Asurle Porlc 9' " '::"ITal'unka -- Kaveer, Dist» Kolhapur ' 1VIa»haraS.hi.1'a State. _ lg.Mlshivayogiswamy, Adv.) .. RESPONDENT .. PETITION ER

-x .3 * AND:

Kirloskar Investments and Finance Ltd. Unity Building. 2"" Floor. 'C' Block. J.C.Road. Bangalore -- 560 002. Branch at No.1887. E Ward Rajarainpuri 9"' lane, Kolhapur -- 416 008. (By Sri.D.K.Praha1ad Rao. Adv.,) IN C0.P. 1 17(2005 BETWEEN:

1. Mrs. Mandakini. D.Paiiai3kar--'_$ Wife ofShr1'. Dattatrayai ' _ Aged about 7} years v

2. Mr.Sanj1'V pgiiazggar _ L Son of Shri 'i"3ati:.atraya_: "

Aged about 4f5'yea1's:-~ " "

Pctii:iioner"Nof.. 1 & 7:2' _ Residing at No;.Z}/22 ._ Hedda-rjar Wadi 'No.,1 __ Gokhale Road (S':o1§ith)»-- V Dadar 4' V' E. ~ 400 Q28.

1{By:MI%aj'es11_i&._Rajcsh_. AdVs.] AND;

._ E'§ir1oska«1' In§;esi'I;ier1t.s and Finance Ltd. A Company incorporated under the W " " Proirisioris of-the Indian Companies Act, 1956 Having i1"t--s& Registered Office at 2'f"'E'1Voor_,A"C' Block. Unity Buildings J.c.Rpad, Bangalore W 560 002 "RepVreseni.ed by its lvianaging Director.

{By M/s Poovayya <3: Co., Advs..] .. _ .. PETITIONERS .. RESPONDENT IN CO.P. 1 16[ 2005 BETWEEN:

M1".L.D.Pa1"uIekar Son of Dinkar Aged about 67 years Residing at No.105 Ramakrishna Niketan Dada Saheb Rege Marg ~ Mumbai M 400 028 j; '1:'?E:<ifi*r:.o.;\:i'EV§_2yi' (By M/s Rajesh 81. Rajesh. Advs.) _ AND:

Kirloskar Irivestments and Finanoe"I';Ld;',' A Company incorporated under the V . " _ V _ Provisions of the Indian Companiets-.1'iC.'i, it -- Having its Reg'1stered._Officeat, _ . ' A 2"" Floor, 'C' B1oc1g..--Un--ity Eiui1din.gs._ ._ J.C.Road, Bangalore 1' Represented by 'its' A ' » Managing*DireCi;o'r}:vV . _' .. RESPONDENT [By M / s Pooyayya &:Co'.».. IN co.P;M35;sg26o5yAA '- 1 A ' 11111 ~ "

.111 A Mrs.":S.----Patankar "' . '«V_Vife'' of'-S_hrij - Sanj iv ' .Aged abofLf_'.tf39 years Mr. san_}iv" Patankar Son of1~Shri Dattatraya " Aged about 45 years V' Petitioiler No.1 & 2 Residing at No. 4/22 7 Heddarjar Wadi No.1, Gokhale Road (South) Dadar, Mumbai M 400 028. .. PETITiONERS (By M/s Rajesh 81 Ra_jes1i, AdVs.] 1999 4' _a§:'19ii§Ei§N:

AND:

Kirloskar Investments and Finance Ltd.._ A Company incorporated L1 nder the Provisions of the Indian Companies Act, 1956 Having its Registered Office at. 2"" Floor, 'C' Biock. Unity Building J.C.Road, Bangalore ~ 560 002 Represented by its Managing Director.

{By M/s Poovayya 82 Co.. Adi/s.,) IN CO.P.259[1999 BETWEEN:

Mr. S.S.GayakwaC;1" 9 9 A/P-Pimpalgaona 2 F1. Taluka -- Shahtrowadi' _ Dist» Koihapuor 99 _ 9' _ Maharashtra State.» _v 7': 9 (By K.M.Shi'va3--/ogii AND:

I~'Kirloskar'~I11vesi.mentai aI'1C§' 'Finance Ltd.. "runny .au:ioc1i'n.fg, 92¢: Floor. 'C' Biook. J;f3.Roadv,oABanga'}oi*e.-- 590 002. Braneh"_a1 No'."'1887;~F3 Ward Rajarampuri 9"' laiie,"Ko}hapf{:_r.i« 416 008. {By sr1.o.;§.i>;§aha1ad Rao, Adv.,} Supali ' " -A,~/ P--SaEvaI1 Taluka -- Karveer 9 .. aaSp.oND§ENfF' .

. . PETITIONER . . RESPONDENT AND:

"'"' "

_('}-

D1st-- Kolhapur Maharashtra State.

(By K.M.Shivayogi Swamy. Adv.) AND:

Kirloskar Ir1.Ves{meI1ts and Finance Ltd"

Unity Building. 2*"? Floor. 'C' Block. J.C.Road. Bangalore ~ 580 002. Branch at N0..1887, E Ward Rajarampuﬁ 9 A' 9 9"" lane, Kolhapur -- 416 008. {By Sri.D.K.Prahalad Rae, Adv.,) IN CO.P.25'7[1999 BETWEEN:

M1'. A.S.Ha1'dika.1< 4 A/P-Huparl 5 .

T aluka --» Hatkangale 7.;__ D1st-- Kolhapiii' = 9. '71 Maharashtra Staté.%_.«.V_ "

[By K.M.Shivay§g: 7suﬁar_1i3,r',' V 'I_(ifl'os}ga1' Eri&'és1ﬁ'x3_nts and Finance Ltd., U;aiiy.BuilAd'ir1«g'; _2"f¥ Floor, 'C' Block, J.ca'.'-Road,'Iss_n«ga1o.re--':-- 560 002. Branch at No. 1;887Z E Ward R-ajarampuri '91?' lane":._K0l_hapu'r - 416 008.

" " 5 '(:3y%"'s;1,D.1§.;?Ea.ha_1ad Rao, Adv. ,) 'C.o.-P..1a14g1999 " Tanaji Dinkar Yadav S / 0 Dinkar Yadav .. PETITIQNER .. m;3p:QNI):€i\T'r 9.

.. PETITIONER .. RESPONDENT :_.4-AND:

if 9:

~»«~"~:«~ ' " 2"---~ Age: 36 years Occ: Business.

R/o at Post. Warnanagar Taluk Panhala Dist: Kolhapur Maharastra State.

{By K.M.Shivayogi Swamy, Adv.) AND:

.. PET1T1O'N.Ei:§"- V' i is K Kirloskar Investments and Finance Li.d.b,l@ Unity Building, 21" Floor, 'C' Block. J.C.Road, Bangalore -- 560 002. Branch at No. 1887, E3 Ward Rajararnp.1_ii*i _ 9"' lane, Kolhapur -- 416 008? {By Sri.D.K.Prahalad Rao, A&»;",)--. IN C0.P.262[1999 BETWEEN:

Mr. S.A.Mitha_ri "

A/P-shirchj ' _ _ Taluka --- Ka_._rve_er, Di'ste._vKol»h'ap-ur_ ' ' MaharashtraState.--

( By K. M.S_hivajogi Sw.aVn--1yA,A I9] I{iif1os.kar.I1ivesii%I1ehis and Finance Ltd., Unity f3uilding«,.VV2=i'.<T-Floor, 'C' Block, V J.C.Road'; Bar1galr3.i*e W 560 002.

"Branch'---at N_o'.'l887, E Ward Rajarampur-1 9.7918316, Kolliapur _ 416 008.

.sri;r3.uK.i5'raha1ad Rao, Adv.,) . RESPONDENT .. PETITIONER .. RESPONDENT

-- l"ﬁ(ion1pai1y Petition No.2/2000 is filed under Section 45l\/EC Reserve Bank. of India Act, 1934 read with Partsvll of the companies Act. for the reasons stated therein this }~Ion'ble Court may be pleased to wind up the respondent company viz., K11-loskar Iiivesiiiients & Finance I..1d., & ei.c., all by the depositors for winding up of Company under Section 439 read with Section 433(e) & Et) further read with Sectio-n.._{l34 of the Companies Act.

3. Company Petition Nos.l18/2005, and"

117/2005 are by the holders of ::Rede.ernab_le:4,_C-urnulativei' Preference shares. These petitions are tiled uridevr 'Section 433(6) and [0 read with Section _thell'CornpVanies Act for winding up of respondent;'-;'_CornpanyA,Vi"

4. Depositors_:c1aim an amount of ?1,00,000/W is not refunded even afteI'_i.t:.srnat:u1'i?:y_.VV issued statutory notice on 8.7. 1S3i9A9, the Company on 27.?.1999, despite the reéceliptbf "notice*--,._the Company has not made the _ payrnent," it has' iqgcanié incapable of paying the deposited the holders of Redeemable Cumulative claim that, they are holding 2000, 0 _8000"'andv___v2':'300such shares respectively, neither the dividend the aniount. has been paid. Their holding up of shares is C but a deposit of money with the Company. Though was issued to the Company, however no amount has A " been paid, as such, the Company has become incapable of paying the ainonnt: along with dividend from £997. The Company replied to the statutory notice stating therein--"--that;, Reserve Bank of India has filed a Company Petition up and this Court. has appointed a Committee "

Justice K.A.SwaIni, the then Ciiiei':-Justice it Dr.K.Sreenivasan to look after the !oi'CCC'th_:e however, the Company i.s not aware oi'.__the "of": the* V appointment.

5. Since the Cpompanyudid paynient despite the statutory that the Company has become pnrpose would be served in Cs'-ioiijglht for winding up of the Company" C = , Company-- Petition No.2 / 2000 is by the Reserve Bank of A*._India,W:(in_'isAtioift.'~._'fR.B.i."} seeking winding up of the Company inéenzittaVV'sifatingV'iV'that, respondent ~« Company has become V _ unable to--..Vpay':C'ttiie debt, is disqualified to carry on the business A.non--ban:king ﬁnancial institution under Section 45--1A of the has been prohibited from receiving deposits. cont.int1ance of the non--bank.ing financial company is " detrimental to the public interest and to the interest of the depositors oi" the Company and accordingly. sought. for winding up of the Coinpany and for appointment' of Official Liquidator.

7. In all these cases. the petitioners have sou'g.ht'~.._foif winding up of the respondent ~ Company, Company Petit.ions have been clubbed a11dy_heard"'toge'the:~._ v"For.v' the purpose of disposal of these casyesg"fa.et.s'*,as. l'state§d.__ int Company Petition No.2/2000 arevreferredl.l

8. Petitioner «M R.B.I.... is ayboldy Ceorporate._estab1ished under the provisions oi' 'Actlihaifiiiglll'istisocentral office and branch oiiice as nientioned'"inf"theA._catist: titgle. R.B.1. is a regulatory authoiityiflor 'bilonsﬁanlgiiifg 'Financial Business in general on such business in particular.

RB}. issues'.4_clertifi'catel registration enabling financial coniparvfges i.e.. l\i-on--'Banking Financial Companies (for short "i\"tBFCs*"}' is» car" onvnmstich business. rescribinf rudential . . .13' P E P nor1ns._ prohibiting l\iBFCs front accepting the C it " depolsits. It to tile a company petition for winding up __iinder S€Cl:l():_11l45l.\/EC of the Act. Section 45~»lA oi' the Act laid dow'n<that any company proposing to carry on the business of a __non..-baiikiiig firiancial institution as defined in Section 45--IC of t.h.e..3Ac:t, can do so only alter obtaining a certificate of registration under Chapter 11113 of the Act. Respondent M Company had applied For issue of certiﬁcate on 4.7.1997. Under Section 45--IA sub-section (-4) of the Act, R.ZB.l. hasl.Vpo:9ve1' to inspect the books of accounts of an applicant registration cei'til"icate in order to satisfy itiself .tl"i-ed"

conditions specified under Section 45-LA{4}p_havebeen--.con;vpliedT with. Between 25.5.1999 to 1.7.1999, the oi*l'lcials,lioflthe R:-4sl'."i'v.i V conducted the inspection. During tlie:.l'coui'seV"o;fi it is revealed that the financi':a'l~..p_ lliévspovndent -- Company was Very poor. itl repayment of matured depositsfatidapplftad in violation of the Aceeptanceiol' issued by the R.B.1.

In View ollftlie 'd'u1'ing the inspection, R.B.l. issued a sho\Viv,__ea1,ise' _1iotiL?e:ll"dated 9.8.1999 calling upon the "1f€SpOI1dt_§:':'Iili 4-. Conipanyv to show cause as to why its application for ,ce;?t,ificatdcs1f l'€.giSi1'allOl3 should not be rejected. H alleged that, the Company has not Vniaint':ai4fied"--Vtilted';liquid assets in the form of unencumbered 99 Vsecu1'it'ies at the specified percentage of its deposits during the period between April 1998 and l999 and the said act of the Company is Violative of n"Sectio1i1 4541.3 subsection (1) of the Act. By 315' March 1999, 1}. Respondent ~ Company did not pay the interest on the deposits as per APDD. It had failed to repay the izite-.1fest from the date of mattzrity till the date of repayiiient;yiatdhe. contracted rate of interest. it is in Vioiation of pa1'a'gj:japVha--.§iVV M para {l0} of the APDD.

12. The form of app}icati.o'n.___for aceepta11{:e'd'otfydepifgsits used by the Company did not cont'ain_tpa_1:tiCtitats i1'e1atiir1g to the credit rating assigned for:_._it;.e address of the Branch of the Company -the Consumers Disputes correctness of the financiai V. i~ Company. role and 1'esponsi1::yi.V1'it.yv clause to be signed by the appiieanti the Company had violated the proyvi_sio'ns'u'oftpay1'ag'faph"¥.?} subwpara (12) ciause (ii) of the A. .....

Rvesgiyondent. W Company had neither issu.ed V V' adV€I't«i._S€11'?:€':'EI:' }i'o1' soliciting, deposits nor had submitted to the a ..sv£.,_a;t.er11ent. in lieu of advertisement: after 22*" August is violative of pa1"ag1'aph~éi» subwpara (13) of the (é/95'"

_16--

14. Respondenf ~«~ Company had not recorded in the register of deposits maintained by it, {he dates of Claim made by the deposimrs and the reasons for delay in repayn1e"n1d'~.of deposits beyond ﬁve working days, which is paragraph~4 sub~para (16) clause [i) suo~p1ause_{e]'a--nd >{'g).:oI'-htliedé APDD.

15. Respondent W Company the rninjmum st.atL1tory depreciation onxthe l_ease'd'--a_ss'ets after they turned non--per{'o1'ming assefs. The :Co'm_panyy did not adhere to the Accounung Standards and._G.oVic?ian--eev.'Notes" issued by the Insiitute of Charte19ed.e.ZXcr:o:i-.1ntanis 'o{'.V.iVr1rii'a.,..xy'hich is vioiative of pa1'agrapr:ey;;o"Vv Financial Companies Prude11tialvv"Nom1s Directions, 1998 [for short "Prudent? ai Norri;s_:V1)ire*c'L1;

"" Company has not provided for depreeja'i.aion._in~ i"nye:;t'n1e11t to the extent ol' Rs.276.9-4 lakhs and d has ﬁhereE3y_yioiaifed the provisions of paragraph 6 sub--para (2) "the P1'L1~de":?1.ie1I Norms Directions. " _ R<:s1')(mden1, «M» Company did not classify certain leased V' odassetis in accordance with the norms siipLI.Iat:ed for classification of Non~Id'erf<mning The respondent »- Company has thereby violated th.e provisions of paragraph-7 sub--para (1) of the Prudential Norms Di1'eetion.s.

18. The amount of provisions made by the resporideiit against ]\lon--wPei'1'ormi11g Assets was found to be lesis...1.h.a,ne- provisions reqt.1i.red to be made. The shortlali in"'prov:ijsio'ning--.C_ was to the tune of Rs.3,2'74.11 vv'r1ieh of parag1'ap11--8 Of the Prudential Norins

19. The realizable value of " !'.he'resi5onde11t -- Company at; Rs.11,853.1.2:'~~lakh_sh'mvva--s:'.' thanV°it's' outside liabilities at Rs.i7,/404.21 respondent "-- Company cannot:..be,_dEem:ed to_:.be'.a'so1venti eompany. it has failed to 1'iia.intai.1i'minirnuin 'capital adequacy standards and thereby 'vtolla1,_e;cl"thlenprovisions of paragraph--l0 sub-para 4_.(.1) of l5ri:dent'ial Directions.

~ '..[jl1'i)'t'1<'§'_.V§'VH"T.'.lrE1€'. was given to the respondent, -- Company to before 28.8.1999 and also having made clear that, '*--ii' no reply is received in time, R.B.1. would assume t'hat:* t.:.IC1__e 1'es'po1'1der1i. -- Company has no representation to make __a_ga'i11s't.'t.11e proposed action. In this regard, on 13.8.1999, even

--._vari'otis }.)ress reports appeared indicating that the aggrieved depositors of the respondent -- Company had been thronging offices of the respondent ~ Company seeking repayment of their deposits and the Police intervention became necessary to disperse the crowd. The Directors and the Chairrna;nV_:'o,fT~the Company had also resigned, new Directors were _ 12.3.1. by order dated 13.8.1999 prohihited th.e"'CsEnpany'--w1t:h'w immediate effect from accepting the d.epo_sit.s?fron1...ai1y'personsD in any manner whether by wayof fresh 'deposits; 'or'jrenewals or V' ; otherwise. It had also directedvlvlélnopvt to traiistfer, create charge or mortgage or theinproperties and assets of the Cornpany,_ was asked to show cause It was also directed to send Athe}Board of Directors within 15 daysrﬁfurthervhdireéetedi'--_to'--. produce a certificate from the auditor of theCorr1pany to the effect that, the _._Compa§r1y had notaccepted any fresh deposit or alienated the andvA.wa:s'--.directed not to make any default in repayment of their maturity. by issuing a show cause V _ notice"davted'v1"3.8.1999. The Company Chairman resigned on . .'Z'!';Ei-l99§';¢ The Chairman, Vice~ChairInan, Whole time President and Company Secretary, ali resigned. and Directors were inducted. New Directors requested for one "Vmonth extension of time. Time was granted up to l.9.i999 .1g_ for submission of reply io the show cause notice dated 28.8.1999. By a fax message dated 31.8.1999, Company sought time till Septeniber I999.

21. there was no explanation, reply andfeo'Ir--ipl~i.afiL:Ve" _ with the directions and the norms, R.B.l. four1.d--ihiai riot"

possible io grant" further extension, no exI.en}sioi1.wlas however, Company by its letterkdated ll8.9l."1999 its reply to 'the show cause notice.ll"'Clonsidei5i1ig&_llAtiie reply, the RBI. found 'that, the reply; noflsaiisfacivory. as 1.lie"lCompany did not rriainiain liquid assets l:Che*"pe1'-i§od__li7rom April 1998 to March 1999, i.l:oogg§i 'it xizas gdireciied' iio eonilply with the same. Respondeni: Vikas Patras [IVPs).

RespoI1denli--.--l Coniparij~liad_:li'eekoned accrued interest on IVPs towards 'CO11'1})lllE31iCC'. i.AI:_el'i'equire'meni of maintaining liquid 'C IV; not quoted securities nor they have 'any value before maturity. Respondent --

Conipsiiy in making ihe -repayments oi' deposits on its the liquidity is iotally mismatched. In the l1C€}}¢ljVr,'Ci;.l.qietllrespondeni - Company admiiied, the del'"ault in oi" deposits on the date of maturity and several l1£1\-"£3 also approael'1ed the Company Law Board. The l'€SOl{.ll.i()i1 oi' i'.l'](i? eoiiipaiiy to mobilize fresh deposits is i.n

- 20- violation of the R.B..I. directions. not paying the interest between the date of1nat.u1*ii.y and payment. etc, were all Considered by the R.B.l. and found that the reply given is not satislae_tory-._._ll~...y

22. The amount of provisions made by the.--A4resp.ondler1t'Al ' Company against Non Performing AsseAt.s..was_' ll than the provisions required to be "'n1a:de;~ Thel" shorulall provisioning was ?3,274. 11 lak.hls_,v'*Respo'ndent_ has . L' understated the losses by not e_hléiu:gi1'igv t1"1.e "Novn Performing Assets provisions to The realizable value of the assetsxol' theA"Co.rnpa11y'»tyatl..?fiyll',8'5f3.12 lakhs was less than its_ outsitariding l..ti_ilabil,.itieVs'llat'"l?17,4O4.21 lakhs. Cornpanyv has ' also 1,hatMthe realizable value of its asset.s is less them liabiliti.es.

Con'sidlering a.llll'tl"1.ese factors and in the public H.il';.terest:'and also inlltheinterest of the deposit.ors, R.B.I. found "c;.t_': "Qertificate of registration is neither in the interest ot'v_1..li'el1:_p}ublic nor in the interest of the depositors nor . ,!C'..,on1pany_hA'as satisfied the requirement for grant of Certificate of i'e'gi.stration. Accordingly. it passed an order rejecting the _.__l"applic.at;io1i for grant of Certificate of registration and appointed _ll"a Special Oflictei' for a period of one year by its order dated '"».in_the change of management, " « «~ action 1.9.1999. Pursua1'1t to t.he rejection of the application for grant. of certiﬁcate of registration and discussion with the representative of the respondent - Company. COII1p§1VIly!>'.\_7VV3.S advised to submit". the action plan of the Compaijybased ;_oAnp scrutiny being carried out by the new mana.gement'*pri'or to and. u after take over of the Company; details opf_palSj:3e'ts borrower--vvise and deposit--vvise;: changes in the.eons'titution*of'*op the management/Board of jhihelginalnies of Directors, their add1'esses; 'prof Company agreed to advice its Bangalore with the Special Officer. to protect the interest of the deposli't'olr_syandotheif institlutions like banks; and evolve a policy' forVu'r;.§kiUg_I%Epaynients to small depositors and to those deposiitors'forllnaeheting their urgent expenses and to _ submit'; to the R.B.Al,_the changes in the constitution, however, in response the.._discussion and proceedings of the meeting on did not issue any reply. as such, 9 9' _prohibitory' oifders contained in the rejection of the application it'44'r.con.tinued=nnt;il further orders. Even after three months after _thel'=rneeting, the Company accepting the submission had not furnished the taken. In these circunistances. the R.B.l. having found that the respondent -- Company is unable to pay debt and had become disqualiﬁed to carry on non-banking financial business and liabilities exceeding the reaiizabie vaiue o.f_ the assets, non--payrnent oi" depositors' money exceeding..__j'til1e deposits contrary to directions found that, required to be wound up in the larger :i_nterest';o'i'__the 'p__u'i:1ie_L in particular. the interest of the dej3----osi'tors, [bankers creditors. Accordingly, sought for

24. Sim.il.ar1y. so111e'of have also filed company petitions, not repay the deposit ainount amount due to them. hhhh H

25. of the Company Petition, the I'€SpOi1Cle»fll. - fiied statement of objections interaiia two legal'"p'roceedings. one before the Company 1ia_w"f7';aoléi;rr,li:Sandieit:S§-ction 45~QA of the Act and another before the for NBI+"Cs are pending. There.fo:'e.

.«.._\l7~'/'l.I)ding ugo iiion filed now has no bonaﬁde as it would resuit two legal proceedings becoming infructuous. bl'..__l'l€esh;oz1de1'ii' «~ Company has filed an appeal C.A.128/ 1999 "a.g,ainst the order of rejection of grant of certiﬁcate oi' ThC1"€fO1"€T, the said order cannot be treated as registration.

having become final. Company has also filed an application C.A.307/2000 for staying the winding up p1'oceedinpgs_," 3 from this, it also stated that, Company is worth tltar. ?}O0 crores. Company has a good t:'acl{"reco.rd sot':'t;'usin'ess,'ﬁ profits. dividends, debt servicing, howei/_ei"'._ general 'indu's--t.1'ial"

recession and bad recoveries, and Profits have been adversely» afi'ect:peti"ilnithe-».I_ast'tyvo-yE:a1's. The gross income, percentage dividend amount would reveal the ' the Company.

Company has dejxreloprrient business also right: from crores of rupees. The total estin121t,ed ,cVon:struoi.ion is 8.04.8-41-6 sq.ft. in Bangalore, Mys_oi'c_a'nd "Coa..rI.n'other places. it is to the tune of

4...3,9l,25.lgsqtt. legal proceedings, prohibitory orders. "recession, _Vdi7a::+ti'c..Vi'a_]l in demand and prices in the real estate ma'i'ké'i..$?, theACC.orn.pany could not repay the matured deposits on V the dtte (lat-.i.:e.s'vi'ro111 FC.bI'L1E.11'y/lV1E11"Cl"i 1999 onwards and about depos'it.;o1*s in this background have approached the Law Board and the Company Law Board has the niatter as KIF l to 26/45QA/SRB/99. The "company Law Board is llearing the matter. The Company Law f Board has been (:or1fei'i'ed with the power under Section 45~QA of the Act. Company Law Board has directed the R.B.I. to serve copies of their applications to the Company and the 1'€SpO3"'_}Cl1E'..i1t.

-- Contpany has already tiled the Counter to the said In View of the niattei' pending before the CorﬂpaI'_1_Y._Law it has fully seized of the matter andizhlcﬁoiislidering' t'nfe--_;natterll'« relating to repayment of the depo.si_ts, R}B.l'.--._being:a Regullatoiyll' Authority instead of helping the an early disposal of the ease.on_&_rnerilt." spovliesllland has prayed to the orders eoittralryll before the Company Law the R.B.I. are actuated by ieggiai pending before the Company l'Law up would not safeguard the interest. of 4_depos"it_olfsl. = Tl"ifi.e4 Company has already invested huge arnot.i1'it. in joi»nt:deVe1op1ne11t.. it will materially affect the A'~Co,n1'pany in i'.r.:,eo.very and it will cause litigation risk and on aeéo_ti'n_t,p.of""i.h;eylit..igat'.io11. no one else would be able to continue if and eo'mpleIt.e -the property projects. The grounds alleged by the not warrant for tmnding up of the Company. The has complied with the directions. despite that. the has si)t,1.gl1t for winding up of the Company. In fact. 'about ?l.5O eroi'es llave been realized and the depositors have been repaid to the extent.. The new Directors of the Company inducted on 27.7.1999 are striving hard to revive the Company and RB]. has been kept informed of t.he progress and has been i.1'1i'orn1ed of the difficulty faced. The Chief;"Exeg:'L1_tiye_, Chief Genera} 'avianager and two Genera] Managjers '=a'1'e_ all"

experienced persons. In order to revive theCo;:npai1y,"'zarions A' officers were examined. Meetingsgof the s'hare-holders have been conducted. If the winding up orde.red the efforts made 'oecorne c1ose4'"c11apte'r_ ends of justice, court should not petition. On these and va1'iot:s~'o{.her con__tenti:o11s..Athe"--res_pondent w Company opposed the op.

26. dated 6.1.2000 directed the petitionervto ~v¢"'copy oA1'._the"bCVpetition along with Annexure and also the apAp1i(:vat;o1i on the respondent. By order dated Court disposed of Company Application Nos..'3:/"200(d).« 307/2000 filed in coxrlpsgy Petition r'~Io.2/\:\VI}:iei'ei.r1, appointment of provisional liquidator 450 of the Act was sought and also for stay of pioccedirigs, an appeal is pending before the Authoiity for non~'oanking financial company registration. This Court after hearing, disposed of the (""2" .

-35, appiieations staying? the company proceedings in Company Petition No.2/2000. however. the said interim order gifanted was vacated and other two applications Collséquﬁiiiftlyvtt"w.'ti'C1'€~ disposed 01".

27. By order dated 30.7.2001, A2 notice. the orders passed in OSA No.V2A,{2V0OO permitting the RBI to move the order preventing the company ppztyiijtpgtviththyebainountdvvithout the written permission of the R.B.1. except payment of 'thaparties to move the Division Bench the matter is seized by the by its order dated 29.6.2001 1 530/2000 and 2030/2000 and OSA _No.2a/?,Q0O_tnteifatttit dismissing MFA Nos.1530/2000 hand ,~:f2AO0iO. and a'i'io'vving OSA No.2/ 2000 by setting aside .ty4'.--..1.2000 and directed the Company Court to 2 proceexdd \'§f']..t.}.1"'{:_1di.F3V:: Company Petition No.2/2000 in accordance with law:i+'t1i't,11e1', permitted the R.B.I. t:o move the Company Court. tor intzerini. directions.

28. Considering, the nature of dispute, interest of A ~ _ ..deposit.ors and reqtiirenient of disbursement of the amount to %tvE..

M23"

committee was to make the payment of all the depositors on pro--rata basis. Out of SLR amount, R.B.I. agreed to give such permissions, the officers of the Company also undertooiilaltogive fuii co--operation to the committee. Committee was_i'equ§;~steVd__to. submit its report once in three months. In p_ursVu'aenVceT'of £his._ order, the committee took charge of the coinpany to time it has submitted its report, nearly more V33 re'ports7g have been submitted in the matteri'so:.f:'affpairsV and the action taken by the all~._are by this Court. In the Company No.3i2/2002 under Rule 9 of. i959 was filed for approval of the jaIrra'ngemefr1ftrArriadelubetween the committee of the managemeritv and..ytheliaridowiriers. The said application was ﬁled by thel"'c_oimni'tte'e.C'Fhis-. Court after hearing, by its order dated, 51.2003 accepted the offer of the owners for return to"«.._Vthe owners with all the liabilities and ::accepted by company and salvage what is it .i3ossil3--ie iiiFid.A<f"'miximize returns with minimum loss to the terms of money and time. After a prolonged a.negotiation between the committee and the land owners, the owners agreed to take over the project in "as is where is " basis" on payment of Rs.2. i7 Crores which is higher by 2 iakhs gggi than the highest. bid received in response to the advertisement. In addition to that, the land owners also agreed to provide at their own expense the amenities of swimming pool. club ihougse. ete., which were conimitted by the Company. _ to pay at market value for the unused co1is'tru_cti--on':'ir1ateri«a1s of -« .. the value of ? 6 lakhs lying at the:=csite,..g'd1A'lf1I,rsg, would receive 2' 2.83 Crores [roriigtrhe land' owners 'V"«7\.vT>:'1tl:'l01'l;1L.'ﬂ}.€."'.' company incurring any expendi'tui'e.i_and the 's.aid'vl:\/leriqoraiidurn of Understanding was Ai_s'1~gnedh loetween the committee of management and in this regard, each of the laIitl'?::xg\fi1cvr:=.ha«:_i towards the agreed coiisideratiori and"efach-.orie*._of* 'them was to pay the balance committee was of the opinion that, the A/ie::;;ar;i1i"a1i':i:s' of:'°I1J.1iderst:anding is in the interest of __.the corripaiay spe'cia1ly the shareholders and the depositors and sought foi'.perraissio1i to accept the arrangement and to hand the land owners rather than to any other _ person.

Though the said application was opposed by the .___""."coVrr1pany and others also. This Court found that the offer made uldtby the land owners is just and proper and the committee of managenient was justified in accepting the said proposal and it 9%./X . ( , 4304 requires to be approved by the Company Court. Accordingly, by the said order, the Memorandum of Understanding .p"n'y.ypthe Coitiniittee was approved subject to granting 90 land owners to deposit the balance of amount. F'urther~ordered that, the landowners shall provid:c'Nat"'the.ir _:own._ ei<'pe'nse amenities of swimming pool, club houS_6.7as peragreed '1.¢'r~ms;._ They shall deposit a sum of .he_1n'g,Aﬁh_eojf the".

construction material lyingon "IT-:_e sale'i1'1-..fa.¥Jour of the landowners shall be complied with Memorandum Court also permitted other person to putforth vyany by the landowners within 'of order and accordingly, it disposed of the "Compaiiy Application No.31 2/2002. A.vi1'tue""of°the Memorandum of Understanding irito h'et.;w'een the Committee of Management and land owners, theLi:é)ii'i:t. development agreement entered into by the 'Companyx 'ajmd the Developers stood cancelled. The Company '~ were heard from time to time and dining the pendency the Company i3'etition committee of management also filed its "report. as directted and several company applications were filed and were disposed of. This Court: also granted an opportunity to

--3l--

the respondent. Company to explore the possibility of reviving the Company and in this regard the Company also had filed revival scheme. Another Company Application No. 1024 .6/3 the landowners was filed for approval interalia seeking' _ or the MOU dated 6.6.2002 as ordered m Cor1f1_pa_.nyf.ApApli(:atior1--..6 No.3}.2/2002. The said application vvas :alylo}.ve.d by order dated 31.3.2008. This_4_CourtA.after con.sideringlltlaelﬂ earlier applications and orders'Vi'e».:p:assed OSA No.13/2003 against A_ord'erW_ 2 Application No.312/2002 recorded the for the Company that, hasfno the MOU subject to enhance the This Court found that, there are':._20-.1an.dowiiers_on:Sy..Nols.66/1, 66/2, 66/3 and 66/4 of Adugodi vi.llage. jointly entered into an agreement __for jyoint :developr_n:en.t of the said land, whereunder 4 residential/ycgonirnercial complexes known as Madhuban, and Radhika. KIFL having engaged it _coI1tra--cto::j's; -.et)n1pleted the construction of Madhnban and teomplexes, while Gopika Complex was completed to itlll1.el'e:1:t'er1t ol' 64.200/e. Radhika Complex was at the stage of eeexeéavation. In 1999. M/SKEFL became unable to complete the " works, in l€1'}i1'l.'5 of the joint development agreements. Secured a

-32» quotat.ion specilically iroin M/ s. Land Marks Builders and Developers who proposed to pay ? 3.84 Crores in 30 months' time, to take over the right and interest, ﬂowing from the_jo_int development on "As is where is basis", while the__l;andjovvriers'«A submitted their proposal to pay ?' l.8 Crores. oi'-, Management having taken over the ﬂoated an invitation to tenderyin relation; to l;8.l{'l,I1g"V ovelf thee?' rights and obligations flowing the' development agreement, on "As is whereis responded to by the land owners by making including providing anieiiitieailgysiichhaséwimniilng Club house, etc. and purchase? at the site, by giving up the claim*.for. -~3'Crores for breach, due to non- performance' joint development agreement by __KiFL ,,f_t')'Eii'1d to Vubelivreasonable and accordingly held that, IA'~._Con'xpany_iA.ppli'eation No.3l2/2002 is allowed and Company Application:l{.o___ 2005 is rejected as unnecessary, wherein the n1'a--11agerne'nt company wanted to rewtender. The landowners

37."'--~.lfe-..:e, directed to deposit Rs.3.'7O Crores within 30 days before

--7['h"('_VVC()i"I;III)&1I1'\_' and accordingly. the application was disposed of.

31. E--leard Sri Vijayshankai'. learned Senior Counsel for it he the RBI. Sri Poovay_va. learned counsel for Committee of %£ _33, Management. and Sr} Aditya Soundhi. for the respondent Company.

32. Sri Vijayshankar, iearned Senior Counsel €::ti?d):ifi1it1;€(31 that, Section 451A of the RBI Act prohibits ~ banking financial business without (_:.e3.'tificate.V'of"-registrfation. RBI is conferred with a power to '».5ee;'g<"windi_11'g the Company in case the purp-')s'e.._ of the co1n_pany.__is.3 not-_"

satisfactory. The Company has notttftxlﬁiied theitrequirement of Chapter 3(b) of the Act..---.._xWith«out.d.thei:.t.'be_ing Certificate of Registration in favour Company has accepted the dep0si}t.is.'V ind'-t.his'"regard;" 'show cause notice was issued itsﬂapplication for registration should ndt. reject'ed~.._:In._:tt2e..*'show cause notice, R.B.I. has stated the ground' oifh't--he'*v_i'aViiLire of the Company in its purpose "and a'cting_;._i1'i.._c.ontraventio11 of the provisions of the Act. The the repiy by t.he Company, has rejected thetapp1icat:i()ii'j_foei' grant of Certificate of Registration to carry on ' business, ;'i«:1_e Company has admitted that, it has not repaid the ajnioiintto the depositors on the maturity. it is also admitted interest is paid for depositors for delayed payment. It is not in dispute. that'. the net worth of the assets of the company is than the outside iiability. Further. the joint (We -34- development ag1'eement to develop the properties between the Company and the developers has been cancelled. Landowners have takeli over the lands for the development. and the,sa_n"1e has been accepted by this Court. Without there _ of Registratioii. the company has accepted t1je~-de:poVsit:s.«. .. assets of the Company is worth of ?' :37 Crores if ':3 whereas, ? 60 Crores is the otiitstandliiigl'liabiliotyl;Allliesel';facts."xp which cannot be disputed and that, the company is not in a has become disqualified to carry on ﬁnancial institution and the provisions of the Act and lias in conftitavienptioii 0i"APDD. The R.B.l. has been coi'ifei*red \«vit}i1"thet plovv'er._to seek winding up of Company, for violation the provis'ion.s--lthe Act. Section 4.»5--IA of the Act prohibits" the iiorrbanking business without the Certificate of deviating from main business to another

4.»5--Q of the Act has got over--riding effect. _ The new proposed also lacks bona--fide, as the not shown the source of finance and liquid if assetstitrzirnzicéity to re--pay'. in turn, it is deviating from the main ,...l¢lb§;siness. As such, the material available on record does ~ hestablisli laeyond reasonable doubt that the company has tit' -35- sufiered all disqualification and has become incapable of pei-i'orming and the interest of the public and the depositors and the creditors would be protected if the company is W0l1'i71w£§l':"L1'f>)';.,'

33. To support his contention he relied onthe 'dd-ee--isi'h-zit ~ reported in AIR 1961 Calcutta 144 iiithe ll"

TAHANG Vs. GOENKA CO1\/iMERlC§IAI,"'e..Fi3Ai€i_{ submitted that. in case of nonibanking-fiiiaiiciall'i.iistitut§ions,.:> majority of the substratum of the.,:Coumpany.:lhas gone, the Company is liable to be l\r"i«'.9C._).t;fi1Cl"_Vl,1[);v;vlf"'l;.l:i.f?iA.Sh;E1I'eh()ld€I'S do not derive any benefit there frQ.tri:',_ it e}o{;1e1"""t;,e"eeeeiuded that, the Company siiouid tip'; "case, on the facts and figures, theltlornpaiiy substratum has disappeared. '-

34, He i'elvied."-on."another decision reported in AIR ll 1&5} anVci"s'ubmit;ted that, in case of disappearance ofeqtiitable ground to wound up the company partic,__ular]y the subject matter of the company is gone, or . the ()b_l€(ilvl-C11' which it was incorporated has substantially failed, it is*_.ii'i1possible to carry on the business of the Company _.._l'exc:epi' at a which means that there is no reasonable hope _ ubthat. the object of the trading at a profit can be attained, or the § : (_ mﬂﬁo existing and probable assets are insufficient to meet the existing liabilities. Faiiure of any one of these tests would be a good ground to wind up the Company.

35. Reier1'ing E0 the above decision, he Subiﬁi't't§€d.__:t,i;iat,.'~. even from sliowing oi' the Company, it is Clear it_iVsi.not in 'a ' position to revive. even the proposed tscherriejvvould inoi.;e,nsure' profit. but it 111-ay result in loss and thejrnain objeet. the Company was i1icorporated"i'i>..iVTs* no nio_re-in ..:'f.:3XiSl.€I1C€. Therefore, when the main'*~objegitWoi'*-téiiei"Company Heannot be fulfilled. the question of Coinpairijt also does not arise.

He i'ti'rtlﬁIer the iudgnient reported in 1983 Vol. 53, V"Coi1_-ipany=."Cases"=.ahd submitted that, it is not permissible t'o__4(€'t1:V111ge the "business of the Company for which it is iiicoz-;'poi<.atecl whenCsuli«sirat;un1 of the Company has lost. If theCV'o--inpaiIAiy"h.as failedmon various grounds of contravention of the Act. failure by the Company to maintain the'reqitiisitfetiiriuiid assets. its negative net owned fund, its high .pe1'oent.age of"iio11--perforrning assets, short provisioning and . '''--.{a'i!Li1T€ to'=ol*)se1'v'e. credit: exposure norms. The continuance of Coinpalijiy as 211 i'1on--banking ﬁnancial institution would be I'€VlIL'il'1g the Company. Company cannot indulge in nonwdoing ,37_ detri1'nen'taI to the public interest. and to the interest of the depositors. In such circumstances. petition under Seeiion

453./EC of the Reserve Bank. of India Act. 1934 for Company by Reserve Bank of India is not only n'i«:atintainlab°ie I but is jt.1SI.ifi€¥d in seeking winding up o}"Ithe'C0n";.paf1Y.:"'

37. To support: this, he relied-on the j_I.'1tZl§_§IT1€'11l:' re.p_ortel:I in 2002 Vo.l.II.I Company Cases page the of the Hirnachal Pradesh High' Vol. 122 Company Cases pag€_ 762 identical ease.

Himaehal I31*adesh of Section 45i\/[C of the Acl:t_.. of the Company.

38. Tlie the' jiidgment report in AR 1962 SC 137 "i heisheltithat.l\x?indi'ia_g up of application of the Reserve _._Banl< in violz:tt_ioi1 ol':Artiele 14, l9[l]{i) and {g} and 301 of lvthe Coiistit t1.tion*oi' India and it is in the public interest. I ' relied on the decision reported in AIR 2007 3079*, Vol.45 Company Cases page 87, l980 Vol.50 C:on..i1:.ia"ri_.y Cases 202 to submit that, there is no possibility of _ :'ba11ki1'1g bt.1si.ness and xvhen the substrattim of the Company is J

-33, lost. it cannot be contnmecl and would be oppose to the public policy and to the interest, ofthe public and the depositors.

40. On the other hand Sri Aditya Soundhi;"ll.ea1_9ned counsel siibmitted that, Section 391 of the ~ provides for 1'e\-*i\/al of the Company 8,1'l(itl1€ reVV'ival'_"sc'her'11e is effectively to the benefits of the deposit4ors._'tan::l i's.ir1.the'inf'te&re:st of the public. it should be accepted.

business is not akin to the object _Comp'any§ "It also one of the business of the nonA;b'anki'ng§.co'tn.p£1hy..p If the company is exclusively doing non-banl{_ing_ any other objects, in such ;::as'«::,,i: cé-_nriot"ldiverft 'its-business. But in this case, Me1h()i*2ii'1{"iU:11 oi7QAi*ticle of the Company shows that the company apai-'f ii-om.ld_oing--~._n'o«n~ibanking financial business. it also caijrv on rez:lV_estate. because of non recovery of the amount latte (:on1pany'."""the substratum of the company has "r1341':;§til'1ceV1".--# the business of the Company is not in violation of. provisions of the Act, as the application for _i'egistx'ation}_is still pending. Section 451A sub--section(2) is in_se:rted..pl)y Act 23 of 1997. The company has filed an appeal 'W,__ot1es§ti<J11i.1.1g the order of rejection of the application for V W ""registi*a1ion..

,3gt

41. Nonbztxikiilg company can continued to act while its application is pending and till it is rejected there is no bargthe transactions of the company are bonqfide transaction~.~--. f V. ' , A'

42. He relied on the order passed in ll submitted tliat. the direction by the,Di:visior17Ben:c'hvtasftoi accept the better offer. The nilanagentent hadlvilplrlovposed to -. L' protect the interest. of the the bid amount. to 3' 4 Croi-es.j~..._..l}'I0l\R'EléV¢§,.i ./hot taken into consideration in right of the constitution of for Company has been suppo1'lii.:,g V:'tl1'elvl'e1epositors, it had never failed in revival scheme and submitted that; ready to deposit 3 10 Crores subject. fr). a(":c:cz/litiérltteFof the.' revised revival scheme. Now the nIa1'ke't.._h'a:-sf%m.proved and' the Company is in position to revive its s'(:heine"'«andl'Asoaght for acceptance of the revised revival q.,vschen1ej.ll}le_l'lstibmitted that, as against the claim of 26 'lea,.,.,.4..(':rores 'ElSvill11(Iv()1]1(3 Tax, the appeal is pending before the 'i'ribt.u'ial. It is the committee of management has not el'fecti_vc steps in getting the appeal expedited. The 'disposal oi" the. said appeal would have reduced the liability" On rﬁil?/.'

-49» these subrnission he sought for dismissal of the company petitions.

the points for consideration are;

(i) As to whether the etebee-em company is lost? __ V' . 'd V {ii} Whether the outside "iiir,tTI:v»ility of --eor7§pany is more than ,_the value" the assets ofthe x V V

(iii) Whether. the eond_Ltet' oj"'.the"eoir:pany affairs "

44. "di.spi1te are; the respondent company e<a1istiti1iieiVi:L:as,ﬁ§~ggdnfbanking financial company. It is also not had issued an advertisement nealling the "in:te_n'ding depositors for deposit of the i'e--pay the said amount on its maturity It is aiso not in dispute to carry on the vbusii'1es's i:or1--banking financial business. Company is ., toVVoht:ain certificate of registration U.i'id6i' Section 45~IA 'Reserve Bank of India Act. it is in this context it is better refer to the relevant provision which reads as under:

Section 45»~IA: Requirement of registration and net owned'/'wid:~ (1) Notwithstanding anything contained in

43. in the light of the submissions made b§;";the_ ' ,4}.

this Chapter or in any other law for the time being in force, no r1on--bcu1icing financial company sh.:i'tt,j commence or carry on the business of a non--bariIctnQ:'--,e.."vv. ﬁnancial ir'1st"ttttt.ioI1 without; _ A 4' .9 {aj obtatnirtg a certificate of registration.:i"étssu.edA Lmder I,/fits Chapter; and '9 V i V {b} having the net owned furtdiof 'ruje:1tg2ﬁue..iaidi"

rupees or such othet»'._timount; not exceeciingj two ttzundred latch rupees";-as-the Bank may by not:tftcation in the' . pspecjy. . ..

45. "It is aisoanot in.Adispt;te'*ti";at; .r_egis.t'ration certificate has not been fgifailtfedt. Reading o.:';séaicsﬁ 4-5~IA of the Act prohibits froni --.ca1'i:r1j,:.iii1go'n--.bt1'siness non--bankir1g financial institution wiI"1'1oiit:obts.i.ni11g"Certificate of registration under the Act.

'It' is not.'in_____:;iispute that, without even securing V"cerii:i'iCE1vtVe,.._d.cp0si"i:s_ have been collected and according to the aVer;n«e'ntsV'V company petition, the public deposits 99 inc tune. of Rs. 10927.53 iakhs as on 1.1.1998. it 9 i'}'}21'I, as on 30.9.1999, the amount of Rs.2,690.47 '."I'c'.'i__1'{1"1.V9:'9l'1.E'iAci !.;>ec":on1e due towards re--payment of deposits on their :j_n:i21'tt'x:rit.y. in the objection statement filed by the company it is "étd1"nit'ted tliat. on £1(.'.('.()'L.1l'lt of rescission of lack of recovery, the IM424 re-payment lias not beeii made. In the connected petitions ﬁled by the dep(:>si1o1's and the redeemable cumulative preteifenee shareholders it stated that. the Company has payment. it has not paid the dividend from 1997. 'the properties of the Company were also at1ctio11ed;'b§ the ¢_eotn1ri1ittec_ the owners of the lands have purchased"t_he'_san1e'which isglalso'--.. accepted by this Court. The eomr11i.tt"ee corist.itu'ted'_=bjf,this eourt it has submittecl scveial reports and the*m'embers of the committee have requested'th.erelieve them from the mai121gt:111c2i'1t.: Reserve Bank of India has :_. relive him from the managen1ven_t_i,V ha-Isddtopined that, there is no possibilit§:;r1VV_A<>l7. All attempts made by them have ll'ai_ied.v ~~is""..»t.also not possible to repay the _a.mount§ the d.e"po_sitors.: as the outstanding liability is more :.".vt1'!vE:J'.l"i~'It'll€'T As far as possible, the Committee of maziageitieh-til"hasﬁdisbursed the amount to the depositors. The revivaI""sch;=:i'1:1trproposed by the company also do not ensure its W o'.t"'a".1:i(*o1'i1<-'-,'.. does not show as to how the liability 4"'oiti1'st'a~r:d'li11g,g wit} be discharged. No definite source of generation V':'o:f'_..iIreoi11e. 'l'l"1c: s<'hcu'1e is very vogue, does not ensure the A"'--«possib1'Ii.ty of 'Elie repaynieni, towards the depositors. In turn, 43- the COH"1pé1I}_\-' wants to do the business other than the business of 1'101'l~b8l1k§1'1g iinanciai inst'itu.tion.

47. This matiei' has been pending from 2000 anctfijom 200i onwards a.i'te1' the Committee of n.iaI1agen'1Ve_n'tV.j' funet'ioning._ the committee has submitted its."1epc:ifts.' The_ ' reports themselves disclosed that, fLij.1'Ctio'Iii;1g"'.oi7this is not in the interest' of the pubiie nor in the i:I);_teres't ofA'the'--.. depositors and the opinion of comrnittee_'.=management shows that. there is no pos'sibi1it_\,="o'i 1'eVivai.of theteonivpariy.

48. Taking into eonsici'erVati:on:b the.'oiitsttandirig liability and the assets oi}'th'e. _e"om1i).aI1}/ and"the*:i'epQrits of the committee of manage.ine--1i1'1 aiicifa-.1.Aso .sbt:i*ieA.i'ir1a1ieiai position of the company as on the c.i':i2_.§-zicji' tiling' ofittttie petition itseif, the authorised __eapitai._§ofu the i"es1*JAo_;it1ent: Company was ? 56 Crores. paid~up in7.vs1*1_:a1'er(::1b'itA;4iE.§zwas ? I6 Crores 69 Lakhs, whereas, the o1i'ts_ta't_idéhg'"ii.ai9iiit3? is much more than the reaiisable vaiue of the assets.-.f'Ne:.3i'i'1y 3.' 174 Crores is the outstanding liabiiity as it 3'.4A"'ag'ainjst ? Crores the realisabie assets. "thus, there is no "I1iaf;ei'1«Jbeiween the value of the assets as against the ou.t':stai1c_1i1'ig liability.

7414411

49. Consideriiig all circumstances and the contentions. when there is Iiarclly any disputes as regards to the erosion of the substratum. on broader ground it would be just"i.and equitable and proper to wound up the cor1'ipaiViy;_i' ::"'I_'l;l€ shareholders have mot derived any benefit._.V[;jL'.'casié':'~ appea1'a.1'i1e.e of the subsi:1'at;uri1 of thei:corri[5ai1y';_ it1'is._p'erVmissib1'Ve to the Co11"ipa1'1y Court to order for windiiigup of theljcoinpanyt V

50. 11 is clear from the 1'ecorErS.:tthat, matter of the compa1'iy has gone .with«.which the company was irieorporatecl subostiaritiallyifal1'e;j*5.ffthe' revised scheme also shows that. rrofzipziny is' iVr1t--ei'1d.ing to do real estate business i.c. tm§»bti.sitri.ess"different from non--banking business. Even the 'proposed 'i'e;vis:ib.le'~sc'heme is considered, it does not ensure_a1iy 151*c>I'Vi':cvarici it is likely to cause more loss. These V"e.ircu§__;is1;ai,1(:ets do e'stab1isl'1 that, the company is not in a 9p_osit.io:i to i;().\;'l'g't? "and it is also not in the interest of the public. Aslthet c<)1'i11ia_i_i35 not permitted to carry on the business for 'iwhich it is*g1or iricorporated, mainly because there is a reference V1'eal.,est.ate business. it is not substantial business for which ' *coiiipai1y iiim1*1:)orated.

(swim

51. There no prohibition for the Company Court to Consider the Conipany Petition under Section 45MC of RBI Act even on the ground t'h.at':. the appiieation is the Conipany law' }E3oard. If the continuation of Company as a 11on~b2.1nking financiat detrinleiatai to the public interest depositors. 2'1 petition under 'oft: Act Certainty I1']21iI'1T£1il18_b1(I.

52. From the niateriail oni"1'eeor.d_Vitfcatinot be disputed that, [i) C',o1'11_,;5'an3'r" t:a.'r-tied" ' -_non~hanking ﬁnancial tttt vCrith'outd'""h'ai/ing certification of A '-r'eg.isti'afi'i»oii Section 45--IA of the RBI Act.

(ii) " uitsé hltiyﬁliifiji. Vt0___.rev"ive is not substantially the sCa..1'1.1e bti._si1';ess~;" but it is some other business, . vvhic§1i'--isVt1<)tvthe main business of the company. {iii}-f": 'I:"!;1cé i*e211i.é'e'at')§e assets of the Company is much less than the outstanding debt. It is totally 'V ' "jcii.s';i§i*oport'ionate to the assets. [iv] V. . '1"%;c cieposito1's' amounts have not been paid on 1':11E11'tt1'i't_\f and in case whether they are paid, they are not }.)aid with interest. for the delayed 21 : '1'1--r 1:. am p _\1 L1 (/:,:_W

(vii)

(viii)

(ix) H(:'(2illSidCl;l:ilg V' ' ~ . 'xtheselu ' V' circumstances' ~4i(nw Some oi't.1'1e assets have been already sold and 21ppr()]31'i2-1.t.ed towards payment. of depositors by the eoi'1'11'11ii.t.ee oi' management.

'l'l1e1'e 21 due of ?' 26.94.83.144/§''''t--owegi''C1siv"

iiieoiiie 'E'z».12-L itseii'.

"'4:\?C',I1 taking into Consideration' the eiizjrﬂleiasvsetls it oi' the Company. it does ';1ol;._ei}en substazitiégliy 11'1ee1'.. the liability.

The revival ofthe C}om.j:)aIiy..LAwoul&i'cause more loss than C()1np._:my E'iz;-1s'lf'2iile.i:i« all c:o1.i'rits. and '--r.irt)1'isidei'i»1;1§g.t.h'e_ iizterest of depositors. creditors =._2'u1<i others. ,_i't'~--.,%_isl reasonable to windup the tIi')"}'l'1V_[;l)Ei'f!ly; 'l"i1e«"'bossibility of nor1--revival of the t:o1'11p2ii'iy...is4.also evident from the long pendeney A v._o.l:A.'t'l1e eoiiipany petitions. For last 10 years Wit .i.ll"1<-:A}9.l3'l.e assistance of committee of management .l'ii1j_;'1i:lc'cl by Justice K.A.Swamy, the then Chief Ji.1si,i(.:e oi' Madras High Court, nothing has i11l§)l'U\/'€d. in turn. the committee itself has opiiiecl i.l1a.t._ the revival. of Company is not

1.)os::3ib}e. Tliese eiieumstances do show that. l<e.e1)i1'1g, iliese matters pending would cause 111o1'(* hEl.1'1'1I] than solving the problem of the (it-é1')<.>sit()1"s and others.

the (f()7'I'lpC1I"l.l.;'flilliled to do. Therefore, winding up of the <'ompan;.; was to be ordered and advertised U'tf(')l.lI' a'.(,"u'ly r1eu,.vspaper's two of which would be in i.>c,>:':'1ac>1tlCu' in the State. 9

54. Si11:i1;.1r1_v 2--is held in 21 dc:-zcrision reported jih- page 151 in the 1':1z:1i1¢--.*1' of OPBASRA S/O AND OTI"'1l§RS K/\I'1"I-{AL CO'E'1'Ql\I CO. LTD. 51%" pan} 6, wliich readsoes under':'--.. "The usual testsjE:--i_r deter.n;in'tng whether the Slt.l)SII'(.'llfLLIT1 Q!' the Company;'hasrd»isappeared are when {(1) the SLLly3E'.(?l'_~fI1(1l'_i€I' trhev-eorrtpany is gorte. or the ' iuiiich it was lI1C()I'})OIfCl-_l€'Cl;i:--'l:1.aS.V S.ubstan_ti_all'y 'jailed, or (C) it is ir7'i;)oss::i'l3le"----t t'e'3'.._earrjg_VL the business of the COFT'!].)ClIl'§./[ 'e,~::';ept at:-.a"loss"'which means that there is ~r--:0" ~-rt7e't;{soi'i%;l'l9le'ghope "that the object of the trt?.<,Iir_:g. (fitv-"_r--:.t_ 'p!fQf';tl"'ear1 be attained, or {d} the €3,'<il:'§lifI"L\(} mitt.'«.':prob.ab--!e"assets are instgfﬂcient to :neet=,t.Ite existing"'---liabilities, vide In re Cine Iricl.z.tsIr"'i<?sV'and Recording Co. Ltd., AIR 1942 Bom. I-{--'(4'll-{iv-1"-:'§:£'V(V?f' any one of these tests is deemed a A grc')ii:'zd_]er"wir1ding up of the company. There , s_.<.=(.$n:.x;_ "to be no reasonable hope that this " _ 'VCT{)l?'1}_).C"l»!l:;lj.__llﬁlll be able to carrying on its business, tVh.1'r__ri': tit" uiasjormed proﬁtably."

rL0ok.i.11g~~ i1 'ijhonlu :'11'1_v ;'11:g1e. I do not find there is any justification ._ Con'li1'11ni:'1_g !'L:_11(.:tio1'1ir1g of the company. 62 992% I --

-49-

55. In the cieeisio1'i of the Calcutta High Court reported in 1980 V0150 in the n1i1t't,e1* of BOMBAY GAS COMPANY Vs. P£INDUS'l'AN :Vli53RCAN"'E'ILI'i3 BANK LTD., it is held tEija'E:: T' "Bcinlciiig business was the parari1ou:it.V:artt;ls» H mciiin ul_)fc?('t arid business of the company~.iaiid all _ other e.l.ai.ises were merely iFiCfde'I'1tjal'QT arilc'ill_ary-A;o ' A the saiirl banking businessfor,i-liar}? shame "way~-.._or=.:;~ other, comieered with the sanie. These Could. not-be' V' said to he an irtdepeiioient business as"'tljtf1lf not permissible under sectiori 5 of't'he=A_VC,t. Further, it was <*learfron1 the provisi-oris,V oj'se'i:«1':ion 6(fi)(o) of the Act Isliciii y'th_e Celiihﬁal "'--£}overnn"ieht, by rzoii}"ic(.i_iion.. specrified a f;)rni"'--of Ibiisiness which would lac tau;/i.i.lfor a 'ba:"i'kihg...Coriipany to engage inu-esti_(',zr.iIi'.on. Sec7t'i'on.6(2)-- _n_1alce_s&"'it." 'clear that a bClI'IlCiI'l§';:(.T€-f1i}J(1I1y_ coiild 'rioillengage itself in any jorm Qfi..l:;'.llSi'im >._;_~;s. other their what was referred to in seci".ion_..76(l')faft, apfpeareel from section 7 that no C()l'l'_lpClI'l';ljV "'or«:.;[lrri1_,Coitlci earrij on the business of b(:'tll1kllIl'i;;.V fgiri 'li::ll:I{i_li'(;I.V.:l' Linlessl the word "bank", "lJt'2_rika;§r"'. or "7i'3--Ct!:"llC_lil'igV is used.

56. TE1h'iiiff iiito i'ioi1side1'ation the above circumstances A' and "this (:,i'ir.v(é'ii.r;;_71i1i.zrzis"'i1iiI<e1i place during the pencieney of these l"ACo'1;1sp'au§«Peiis i{>1'i:..,: amcl revival scheme filed by the Company, I do not l'l'l1_(1."i"l::}V_<*"i'l'.t" is zmy justii'icati.on to revive the Company. It twill not*~I;(:';.eiiher iii the interest 01' the public or in the interest 'vof _th'e-. (iC'[)()%;ii€)l"5-'~ or the creditors or the shareholders or ""anlyboci'\,-= lo m1'i:iiii.ie the fLl.I'}Cl,iO1'li11f.:{ oi" the company. Petitions "ufor \.vinc.lii1g up is {)('l"E(fliI1g for iost more than 9 years, nothing / av' ~50» has in1;)rove('§ ;-md it. has caL1sed more damage than serving interest of the tte1)osiE(')1's.

57. I11 allow 1T1'1c> Cozlrpz-my 'i'et.:'ti.ons for Vvinding up. Acct)-i'i:liI14sg'ff.L:'*3-.pa-ssh-.b the t"o11o\\'i11g:

(1') {ii} {iii} ilwse. <211'cu1I1st.a1"1ces. I have no 0piion.."m§cepiVV to (..'or1z;.)ar1y Pet'iiion i\fo.2/.

'1'! re respondent - Coliriphiidis to} be wound up. it A A it '1'! 'ac ()__[;_'1_"1'.(7icJ,l to discharge the ._'§t(.It:I.iZ()':i:,'ij ciiiiies iIi_ihVderVihe"Coa*npanies Act. I5if=Iiii<V>:'1ei9i.is .direcied to serve the copy of this order V on I1:.e_i€cQ'isii*c1fA'Q:!"Companies within 30 days. I"-"E=::'§'tt')rv:er is'v.di'r.ecied to take out advertisement in .I7':;~'1'A.i'(_.jt£'.'*.a'h iVci'::ii'iy newspaper "The Hindu" and also in a 'v"'«_:V.'}.;'i1tI.ii'1"Li:t.(t'Ct daily newspaper within 14 days from the .':.i.§<; «(I4 of receipt of copy of this order. {1:~I')r' {IJEU 1€e_c;:'str_z; is directed to serve two certified copies of rim; order on the Qﬂicial Liquidator.

'I'!':<= Committee of Management appointed by this (mu:-I by order dated 8.8.2001 stands dissolved Sziigjt-'("f' to the £'rans_fc-3r Qf assets and liabilities and I'){mi{..~; Q/\ac_rc?c)1.tnts to the Qffictal Liquidator. {viii} '1"m-» ('ror'mcc:£.eci Company Petitions m'z., 2fIi{.),/ 1999. 261 /1999, : 1 7/2005, _ 1 .'>%s'4;'1_»3(.'){):'5. 259/1999, 258/ .9» .2 : 2 1999 and 262 / 1 999 jdtispétseti 'Q; tgrgto Q5' .1 E10 enter passed in . Petittoéﬁ. / * 9 {tr} f\I<.'m(') (fated 5.3.201Ou'VLS..ttir1ds Q)";

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