Himachal Pradesh High Court
Himachal Grameen Sanchayka Ltd. And ... vs Reserve Bank Of India on 13 December, 2001
Equivalent citations: II(2003)BC361
Author: C.K. Thakker
Bench: C.K. Thakker, M.R. Verma
ORDER C.K. Thakker, C.J.
1. This appeal is filed by the appellant, Himachal Grameen Sanchayka Ltd. ('company', for short) against an order passed by the learned Company Judge on 3 September, 2001, in Company Application No. 29 of 2001 in Company Petition No. 6 of 2001, titled as Himachal Grameen Sanchayka Ltd. and Anr. v. Reserve Bank of India [since reported as (2002) 1 Comp LJ 546 (HP)]. By the said order, the learned Company Judge allowed the application filed by the Reserve Bank of India ('RBI' for short) under Section 45MC of the Reserve Bank of India Act, 1934 (hereinafter referred to as 'the RBI Act') read with Section 450 of the Companies Act, 1956 (hereinafter referred to as 'the Act') and ordered appointment of the Official Liquidator, attached to this court, with all powers as provisional liquidator of the company with a direction to immediately take charge of the company's property, assets, books of accounts and other relevant papers and documents.
2. It was the case of the RBI that the appellant-company is non-banking financial company as defined in Clause (f) of Section 45IA of the RBI Act. The company submitted an application in July, 1997, for issuance of certificate of registration for carrying of business for non-banking financial institution under the RBI Act. Inspection was carried out regarding financial position of the company by the RBI Act as on 31 March, 1997. The inspection was conducted by P.L. Mittal and Company, Chartered Accountants. On inspection, it was found that whereas the net owned fund of the company was (-) Rs. 886.66 lakhs as on 31 March, 1997, the public deposits held by the company were (+) Rs. 737 lakhs as on 31 March, 1999. The capital to risk weighted assets ratio (CRAR) was assessed as 'Nil'. The outside liabilities of the company were Rs. 1,167.99 lakhs as on 31 March, 1997, as against assets of the company of Rs. 742.50 lakhs. In the opinion of the RBI, therefore, the company was not solvent. According to the RBI, the company failed to maintain liquid assets as contemplated by section 45IB of the RBI Act. The company, according to the RBI, also violated concentration norms and had high level of non-performing assets (NPA). The company was found to have invested huge amount in the immovable property. It was discovered by the RBI that the company had advanced huge sum to Himachal Grameen Sanchayka, a partnership firm, Sanchayka Mail, a proprietary concern and Sanchayka India Ltd., in which the directors of the company were interested. In the audit report, it was mentioned that the company had violated various provisions of the Non-banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. The RBI scrutinised the books of the company on 9 August, 1998, which revealed violation of directions issued by the RBI.
3. Notice was, therefore, issued by the RBI to the company on 24 September, 1999, calling upon the latter to show cause on or before 9 October, 1999, as to why its application for certificate of registration should not be rejected. The company neither offered any explanation nor submitted a reply, nor prayed for extension of time before 9 October, 1999. It, however, sought extension of time upto 15 December, 1999 by an application dated 26 October, 1999, i.e., after the period mentioned in the notice (which was 9 October, 1999) was over.
4. On 7 January, 2000, an order was passed by the RBI rejecting the application submitted by the company.
4.1 In paragraphs 7 and 8 of the order, it was observed:
"Considering all, the relevant facts, developments and the affairs of the applicant company, and taking into consideration the failure of the company to comply with the statutory provisions laid down in Reserve Bank of India Act, 1934, and the direction issued thereunder, the company failed to satisfy the statutory conditions contained under Sub-section (4) of Section 45IA of the Act, 1934. Since it is mandatory on the part of the bank to be satisfied that the conditions contained under Sub-section (4) of Section 45IA of the Act are fulfilled before exercising its power to grant a certificate of registration, and the bank is not so satisfied for the reasons stated above, the applicant company is not entitled for a certificate of registration to carry on the business of a non-banking financial institution as contemplated under Section 45-IA of the Act. Hence, the application of the company deserves to be rejected and, accordingly, the said application is hereby rejected.
In view of the above, you are hereby directed, in exercise of the powers conferred under Section 45K of Reserve Bank of India Act, 1934, to furnish the exact amount of deposit liabilities including the accrued interest thereon as on the date of the said order rejecting your application for issue of certificate of registration. You are also further directed to furnish the complete information about the assets and properties with necessary detailed particulars held by your company as on that day along with your plan of action for repayment of entire deposit liabilities with fund flow and repayment schedule of deposits. The said information should reach this office within a period of thirty days from the date of receipt of this direction."
4.2 The resultant effect of the order was that the company was held disqualified under Section 45IA to carry on business of a non-banking institution.
5. For completion of facts, it may be stated that on 18 January, 2000, an order was passed by the RBI under Sub-section (1) of Section 45MB of the RBI Act stating therein that in the circumstances mentioned in the order, the RBI was satisfied that it was absolutely necessary to take immediate action to protect the interests of the depositors in public interest as any delay would cause irreparable damage to the depositors. The company was, therefore, prohibited from accepting further deposits with immediate effect from any person in any person, whether by way of renewal or otherwise. The company was also directed to comply with the order passed by the RBI by taking appropriate steps.
6. On the same day, by a separate order passed under Sub-section (2) of Section 45MB of the RBI Act, the RBI also directed the company not to sell, transfer, create charge, mortgage or deal with in any manner its property and assets without the prior written permission of the RBI until further orders.
7. The company was also directed by the RBI to submit to the RBI within fifteen days from the receipt of the order a resolution passed by the Board of directors of the company that it would not alienate any assets of the company without the prior permission of the RBI except for the purpose of repayment of matured deposits and payment of interest on deposits.
8. On 7 March, 2000, a communication was addressed by the RBI to the company, inter alia, alleging therein that in spite of rejection of certificate of registration of carry on business, certain irregularities were committed by the company. The company was, therefore, directed by the RBI, in exercise of powers under Section 45K of the RBI Act, to furnish the exact amount of liabilities including the accrued interest thereon on the date of the order of rejection of the application of the company, i.e., 7 January, 2000, and to furnish complete information about the assets and properties of the company with necessary detailed particulars along with plan of action for repayment of entire deposit liabilities with fund flow and repayment schedule of deposits.
9. On 17 May, 2000, a reply was submitted by the company to the RBI explaining the position of the company. It also enclosed the repayment schedule of maturities and properties said to have been attached in certain consumer cases. A request was made by the company to grant sufficient time to consolidate its position and to come out from the legal battle with its investors as well as from the employees. It was stated:
"we trust that you will consider our case sympathetically and allow us time for filing balance sheet for the year 1998-99 and other statements mentioned above up to 30 September, 2000, to enable us to come out from the crisis."
10. It further appears that depositors have approached the RBI and complaints were made that even though the date of maturity had passed, the amount had not been re-paid to them. A communication was addressed to the RBI by the Registrar of H.P. State Consumer Disputes Redressal Commission, Shimla, on 27 November, 2000, stating therein regarding awards passed by the commission and amounts due. Proceedings were also initiated by depositors before the Consumer Forums for getting the orders passed by the Commissions executed.
11. In the aforesaid state of circumstances, the RBI filed Company Application No. 10 of 2001 in Company Petition No. 6 of 2001 under Section 450 of the Act read with Rule 9 of the Companies (Court) Rules, 1959, for appointment of provisional liquidator.
11.1 In paragraph 5, it was stated:
"That the conduct of the respondent as evident from the facts stated in the main company petition is that it is unable to pay debts and that many awards/attachment orders have been passed against it by various Consumer Redressal Forums. Execution of the said awards by only some of the depositors would be detrimental to the interest of the entire class of depositors of the company as a whole, more particularly, the poorer and the less informed depositors who could not afford to approach such forums. It is necessary in the interest of justice that all the properties and books of the company are vested in the provisional liquidator immediately so that the company is prevented from alienating its assets. Any notice of the application would completely jeopardise the present winding up petition, which has been filed by he petitioner as the apex bank in public interest, and interest of the financial system of the country. An ex parte order for appointment of provisional liquidator by dispensing with notice under Section 450(2) of Companies Act and enabling him to take immediate custody of all the assets and other relevant records of the company of all the assets and other relevant records of the company is necessary in the facts and circumstances of this case to protect public interest, and to enable a true state of affairs as regards the financial health of the company to be available in this Hon'ble court."
11.2 A prayer was, therefore, made to dispense with issuance of notice Sub-section (2) of Section 450 of the Act and to enable to RBI to take immediately custody of all the assets and other relevant records of the company for taking appropriate steps.
11.3 In Company Application No. 29 of 2001, a prayer was made by the RBI for expediting appointment of provisional liquidator, inter alia, on the ground that a news item had appeared in 'Divya Himachal' dated 28 August, 2001, that an order was passed by the District Consumer Forum, Shimla, for auctioning the properties owned by the company at Shimla and at other places, and auction was fixed on 30 and 31 August, 2001. It was stated that if the properties would be auctioned at the instance of some depositors, 'irreparable loss will be caused to the depositors, who are poor and who are not able to approach the consumer forum for seeking necessary reliefs'. It was further stated that 'majority of the depositors who have not approached the forum will not get anything out of the said auction'. According to the RBI, it was not in the public interest to allow only a few depositors to recover their dues at the cost of other depositors, particularly, the less informed and the poor. The RBI stated that it was satisfied that continuance of the Himachal Grameen Sanchayaka Ltd., a non-banking financial company, was detrimental to public interest, and also detrimental to the interest of the depositors of the company.
11.4 In paragraph 11, the RBI stated:
"That the conduct of the respondent as evident from the facts stated in the main company petition is that it is unable to pay debts and that many awards/attachment orders have been passed against it by various Consumer Redressal Forums. Execution of the said awards by only some of the depositors would be detrimental to the interest of the entire class of depositors of the company as a whole, more particularly, the poorer and the less informed depositors who could not afford to approach such forums. It is necessary in the interest of justice that all the properties and books of the company are vested in the provisional liquidator immediately so that the company is prevented from alienating its assets. Any notice of the application would completely jeopardise the present winding-up petition which has been filed by the petitioner as the apex bank in public interest and interest of the financial system of the country. An ex parted order for appointment of provisional liquidator by dispensing with notice under Section 450(2) of Companies Act and enabling him to take immediate custody of all the assets and other relevant of the company is necessary in the facts and circumstances of this case to protect public interest and to enable a true state of affairs as regards the financial health of the company to be available in this Hon'ble court."
11.5 The following prayers were made by the RBI:
"(i) That in view of the urgency and the risk to the assets of the company and the interest of the public, the matter may be taken up for passing urgent orders forthwith.
(ii) That the production of certified copy of the order of the District Consumer Forum be dispensed with.
(iii) That pending the hearing and final disposal of this petition, the Official Liquidator, attached to this Hon'ble Court, Himachal Pradesh, or some other fit and proper person be appointed as provisional liquidator of the said company to take charge of company's properties and assets, its books of accounts, papers, vouchers and other documents with all powers under the Companies Act, 1956.
(iv) That pending the hearing and final disposal of this petition, an ad interim injunction be granted, restraining the respondent, its servants, agents and assigns from encumbering, transferring alienating and disposing of any of the assets of the respondent:
(v) That the District Consumer Forum, Shimla, be directed not to confirm the scale and disburse the proceeds of the auction sale to the parties before it but to deposit the entire proceeds in this Hon'ble court for being disbursed to all the depositors and creditors of the respondent company in accordance with the law.
(vi) that such further and other orders may be passed as this Hon'ble court deems fit and proper in the facts and circumstances of the case."
12. The learned Company Judge after hearing the learned counsel for the RBI and taking into account the circumstances allowed the application and appointed the Official Liquidator, attached to the High Court, with all such powers as provisional liquidator of the company and disposed of the application. The said order passed by the learned Company Judge of this Court is challenged by the company in the present appeal.
13. We have heard Mr. Inder Singh, Senior Advocate, instructed by Mr. Y. Paul and Mr. Vijay Thakur, Advocates, for the appellants and Mr. Kuldip Singh, Senior Advocate, instructed by Mr. Rajiv Sharma, Advocate, for the RBI.
14. Mr. Singh, learned senior counsel for the appellant, raised many objections. He contended that the order passed by the learned Company Judge is proper, illegal and unlawful. The counsel submitted that it was incumbent on the learned Company Judge to issue notice to the company as required by Sub-section (2) of Section 450 of the Act and to afford opportunity of hearing. Since it was not done, the order is inconsistent with the violative of statutory provisions and is liable to be set aside. According to he learned counsel, the provisions of Sub-section (2) of Section 450 have also not been complied with and no 'special reasons' have been recorded in writing as to why the Company Court thought it fit to dispense with the notice. It is also urged that irrespective of the statutory provisions of Section 450(2) of the Act, principles of natural justice and fair play also required issuance of notice and affording of opportunity of hearing. Since it was not done, the order deserves to be quashed and set aside being violative of fair play in action. The counsel contended that the relevant and germane factors have not been considered by the RBI as well as by the learned Company. Judge and irrelevant and extraneous circumstances have been taken into account, which had vitiated the action of the RBI and also the order passed by the learned Company Judge.
15. Even on merits, no case had been made out for appointment of provisional liquidator and that too without hearing the company, submitted the counsel. The company contended that the date of maturity had not come and the depositors were not entitled to claim any amount before due date. Had an opportunity been afforded by the learned Company Judge, the company would have satisfied and convinced the court that no such order could have been passed as prayed by the RBI.
16. A grievance was also made by the counsel that the RBI for taking impugned action of cancellation of certificate took into account audit reports and other materials, copies of which were never supplied to the company. It is settled law, urged the counsel, that if an authority intends to rely on material, the same has to be supplied to the opposite party so as to enable it to offer explanation, if any. By not doing so, the RBI has acted illegally, arbitrarily and unreasonably.
17. Mr. Singh also stated that it was the case of the RBI itself that notice was issued to the company in September, 1999, and the order was passed rejecting the application of the company on 7 January, 2000. There was considerable delay on the part of the RBI in approaching this court for appointment of provisional liquidator, inasmuch as the present petition was filed on 17 April, 2001. Even thereafter, there was a long delay. The order impugned in the present appeal by the company was made by the learned Company Judge as late as on 3 September, 2001. Thus, there was interval of more than 4 1/2 months between the date of filing of the petition by the RBI and passing of the order by the learned Company Judge. If notice could have been issued to company, no prejudice would have been caused to the RBI, submitted Mr. Singh. On all these grounds, according to the counsel, the order passed by the learned Company Judge is liable to be set aside by remitting the matter to the learned Company Judge by issuing directions to issue notice, to afford opportunity of hearing to the company and to decide the matter afresh.
18. Mr. Singh, learned Senior Advocate, on behalf of the RBI, on the other hand, supported the order passed by the learned Company Judge. According to him, action was taken by the RBI in consonance with law after observing principles of natural justice and fair play. He stated that notice was issued to the company on 24 September, 1999, and the company was called upon to show cause as to why application should not be rejected. The company was to submit such explanation on or before 9 October, 1999. Neither was explanation offered nor was extension sought before that period. It was only on 26 October, 1999, that time was sought upto 15 December, 1999. The company did not care to enquire whether the application was granted and time was tended. The RBI was constrained to pass an order on 7 January, 2000. The counsel stated that even upto the date of order, no explanation was submitted by the company. Thus, there was sufficient time for the company. The action was taken on 7 January, 2000. It was also submitted on behalf of the RBI that the company was intimated about he irregularities committed by it. The depositors also made grievance to the RBI that they had not been repaid the amount, to which they were entitled. According to the counsel, from the record it was clear that the date of maturity had come. Even though the orders were passed by the RBI on 18 January, 2000, under Sub-section (1) of Section 45MB as well as Sub-section (2) of Section 45MB of the RBI Act restraining the company from taking any amount by way of deposit and/or dealing with the property, the company did not comply with those orders. Meanwhile, certain awards were made by the Consumer Commission, and in some cases, payment was also made to depositors. Taking into account those circumstances, the RBI considered it to be its duty to take appropriate action, which was in the larger interest of other depositors, particularly, poor and [those] unable to approach the Consumer Forums. If in the light of all the facts and circumstances, in application was made by the RBI and the learned Company Judge was satisfied, and an order was passed in exercise of power under Sub-section (2) of Section 45-O, it cannot be said that the Company Judge had committed any illegality, which deserves interference in the appeal. The counsel, therefore, submitted that the appeal deserves to be dismissed.
19. Having heard the learned counsel for the parties, in our opinion, it cannot be said that by passing the impugned order and making appointment of provisional liquidator, the learned Company Judge has acted contrary to law or the order is otherwise vulnerable.
20. It is, no doubt, true that an action of winding up of the company is a serious one and appointment of provisional liquidator ought to be taken carefully and cautiously. It is also correct that, as a rule, before appointing a provisional liquidator, the court shall issue notice to the company and afford reasonable opportunity of making a representation.
21. Section 450 of the Act, which provides for appointment of provisional liquidator, reads thus:
"Appointment and power of provisional liquidator.- (1) At any time after the presentation of a winding up petition, and before the making of a winding up order, the court may appoint the official liquidator to be liquidator provisionally.
(2) Before appointing a provisional liquidator, the court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless for special reasons to be recorded in writing, the court thinks fit to dispense with such notice.
(3) Where a provisional liquidator is appointed by the court, the court may limit and restrict his powers by the order appointing him or by a subsequent order;
but otherwise, he shall have the same powers as liquidator.
(4) The official liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator of the company, on a winding up order being made.
21.1 A bare reading of the above section makes it obligatory on the Company Judge to issue notice and afford opportunity to the company to make representation before appointment of provisional liquidator 'unless, for special reasons to be recorded in writing, the court thinks fit to dispense with such notice'. The question, therefore, is not whether the court has power to dispense with the notice and order appointment of provisional liquidator, but whether special reasons have been recorded by the Company Judge in writing.
22. The counsel for the company placing reliance on the decisions in Punjab Pictures Ltd., Karnal v. Jhabar Mal Gangadhar Chokani AIR 1949 EP 139; State of Orissa v. Dr. (Miss) Binapani Dei and Ors. AIR 1967 SC 1269 ; Smt. Maneka Gandhi v. Union of India and Anr. AIR 1978 SC 597 ; Swadeshi Cotton Mills, etc. v. Union of India etc., etc. (1982) 1 Comp LJ 309 (SC) : AIR 1981 SC 818, contended that an order passed in violation of principles of natural justice is void ab initio and cannot be said to be an order in the eye of law. He also drew our attention to Kiran Singh and Ors. v. Chaman Paswan and Ors. AIR 1954 SC 340 for the proposition that when the court has no jurisdiction, territorial or pecuniary or in relation to subject matter of the suit, the order is non est in law and null and void.
23. So far as the proposition laid down in the above cases is concerned, the other side did not dispute and, in our opinion, rightly. In the instant case, however, in our view, it cannot be said that the order passed by the learned Company Judge was without jurisdiction. The legislature, which enjoined on the Company Judge to issue notice by using the expression shall, with the same pen and ink, enabled him to dispense with such notice and opportunity to make representation to the company, 'if he thinks fit for special reasons to be recorded in writing' to do so. In the instant case, in our opinion, the learned Company Judge has recorded reasons, which can be said to be special reasons within the meaning of Sub-section (2) of Section 450 of the Act.
23.1 The learned Company Judge stated:
"Having heard Mr. Rajiv Sharma, learned counsel for the petitioner and taking into consideration the entirety of the circumstances, as detailed in the position and the application on the affidavit of Sh. Sardana Singh, General Manager, Department of Non-Banking Supervision, Reserve Bank of India, Chandigarh, and the fact that the bank has satisfied itself that respondent company is unable to pay its debts and has prohibited the company from receiving deposits vide its order dated 18.1.2000 (Annexure IX) and the fact that certificate of registration has bee declined to the company by the petitioner-bank vide orders dated 7.1.2000 (Annexure VIII), petitioner-bank, in my view, is prima facie entitled to ask for winding up of the respondent company.
Section 450 of the Companies Act provides for the appointment of a provisional liquidator without issuance of notice to the company for special reasons.
Taking into consideration, the averments made in the petition and application, detailed above, I am satisfied that it is necessary to appoint a provisional liquidator without issuance of notice to the respondent company to protect and preserve that assets of the company pending the orders of winding up in larger public interest, particularly, in the interest of majority of the depositors of the respondent-company and also for the reasons that the assets of the respondent-company are not transferred, alienated or otherwise dealt with save and except in the interest of the depositors."
23.2 The above order makes it clear that the learned Company Judge before passing the order and before exercising powers of Section 450 of the Act, took into consideration 'the entirety of the circumstances', as detailed in the petition and the application on the affidavit of Shri Sardana Singh, General Manager, Department of Non-Banking Supervision, Reserve Bank of India, Chandigarh. He also noted that the bank had satisfied itself that the respondent-company was 'unable to pay its debts and had prohibited the company from receiving deposits', etc. The learned Company Judge was conscious of the fact that the certificate of registration was declined to the company and taking into account all attenuating [extenuating?] circumstances, in his view, the RBI was prima facie entitled to ask for winding up of the company.
24. Keeping in mind, all the facts and circumstances, the learned Company Judge proceeded to observe that he was satisfied that it was necessary to appoint provisional liquidator without issuance of notice to the company to protect and preserve the assets of the company pending the orders of winding up in larger public interest, particularly, in the interest of majority of the depositors of the company as also for the reason that the assets of the company are not transferred, alienated or otherwise dealt with save and except in the interest of the depositors.
25. As held by the Supreme Court in Birajmohan Das Gupta v. State of Orissa and Ors. AIR 1967 SC 158 principles of natural justice would apply to the first date fixed for hearing. Thereafter, if the matter is adjourned, it is not necessary to give further notice for the adjourned date.
26. In the instant case, notice was issued by the RBI on 24 September, 1999, and time was granted up to 9 October, 1999. Neither was a reply submitted nor was extension sought. It was, therefore, not necessary for the RBI to wait for any reply or for an application for extension. The order passed by the RBI, hence, cannot be said to be illegal or contrary to law.
27. To us, the order is also in consonance with Sub-section (2) of Section 450 of the Act as special reasons have been recorded by the learned Company Judge for dispensing with he notice required under Sub-section (1) of Section 450 of the Act. If it is so, obviously, it cannot be said that the provisions of the Act have not been complied with or the order is violative of principles of natural justice or fair play.
28. It is, no doubt, well settled the apart from statutory provisions, if an action adversely affects rights of a party or results into civil consequences, natural justice has to be complied with. In other words, principles of natural justice do not supplant the law of the land, but supplement it. At the same time, it cannot be ignored that there may be cases, where immediate and preventive action is required to be taken and, in such cases, strict application or observance of rules of natural justice may not be insisted upon. The reason being that the party sought to be affected thereby cannot be said to have been treated in an unfair manner. In the instant case, from the record, it is amply clear that the RBI had issued notice to the company before rejecting the application made by the company. Notice was issued and the company was called upon to offer explanation, if any, within the stipulated period. It was the company who defaulted in submitting reply. Within the stipulated period, neither was the reply submitted nor was extension sought. Even, thereafter, when the extension was sought, it did not care to enquire from the RBI whether extension was granted or not. In any case, even during that time, i.e., 15 December, 1999, no explanation was offered. The RBI in the light of the allegations levelled and circumstances mentioned, passed an order on 7 January, 2000. On 18 January, 2000, two orders were passed under Section 45MB(1) as well as [45MB[(20 of the RBI Act. Even thereafter, the company continued its activities with impunity ignoring the directions issued by the RBI. Certain awards were passed by the Consumer Commission and some depositors were able to recover the amount, properties of the company were sought to be attached and auctioned and with a view to protect interest of large number of depositors, the RBI came forward and applied to the court for appointment of provisional liquidator, and narrated the circumstances, which compelled the RBI to seek appointment of provisional liquidator without issuing notice to the company. In our opinion, it cannot be said that in the light of cumulative facts and circumstances, no power could have been exercised under Sub-section (20 of Section 450 of the Act and no order of appointment of provisional liquidator could have been passed by the learned Company Judge, ex parte.
29. Mr. Singh submitted that the so called reasons said to have been recorded by the learned Company Judge cannot be said to be 'reasons', much less 'special reasons'. We are unable to uphold the said contention. When it was stated that the learned Company Judge took into consideration entirety of the circumstances as detailed in the petition and the application that the RBI was satisfied that the company was unable to pay its debts and in the larger public interest, and to protect the interests of majority of depositors, the action was required to be taken, 'special reasons' can be said to exist as well as recorded and the action was in conformity with law.
30. Almost a similar question arose before the High Court of Gujarat in Piramal Financial Services Ltd. v. Reserve Bank of India (2001) 5 Comp LJ 228 (Guj) : (2001) 104 Comp Cas 299 (Guj). There also, an order was passed by a Company Judge under Sub-section (2) of Section 450 of the Act and provisional liquidator was appointed without issuing notice to the company.
30.1 The said order was challenged before the Division Bench in appeal. It was contended before the Division Bench that 'special reasons' were not recorded by the Company Judge. The Company Judge observed in the order dispensing with notice under Sub-section (2) of Section 450 by stating that having gone through the averments made in the application, he was satisfied that the powers under Sub-section (2) of Section 450 were required to be exercised. The Division Bench, upholding the order, observed that when it was stated by the Company Judge that having gone through the averments made in the application, the Company Judge was satisfied, it can be said that all the averments made by the applicant were considered by the Company Judge, and on the basis of those averments and allegations, the power was exercised. The order, therefore, could be said to be in conformity with Section 450(2) of the Act.
31. In our opinion, in the light of what was stated in the order, and particularly, in paragraphs extracted hereinabove by us, there was application of mind by the learned Company Judge, who had taken into account relevant facts and circumstances as mentioned in the petition as well as application made by the RBI and various orders passed by the RBI. The learned Company Judge was also aware that the RBI, taking into account the larger interest of majority of depositors, vis-a-vis assets of the company, exercised power, which was in conformity with law.
32. As observed by the Supreme Court in Joseph Kuruvilla Vellukunnel v. Reserve Bank of India and Ors. (1963) 1 Comp LJ 56 (SC) : AIR 1962 SC 1371, the Reserve Bank is a banker's bank, and lender of the last resort'. Its objective is to ensure monetary stability in India and to operate and regulate the credit system of the country. It has, therefore, a perform a delicate balance between the need to preserve and maintain the credit structure of the country by strengthening the rule as well as apparent creditworthiness of the banks operating in the country, and the interest of the depositors. The RBI thus, according to apex court, occupies a place of 'pre-eminence' to ensure the monetary discipline and to regulate the economy or the credit system of the country as an 'expert body'.
32.1 If the RBI has been made sole judge to decide whether affairs of a particular banking company were being conducted prejudicially to the interests of the depositors, normally, a court of law would not interfere with the decision of such body and order of winding up of such company on the application of the RBI. Such a provision, therefore, in the opinion of the Supreme Court (majority), could not be held ultra vires or unconstitutional.
33. A similar vie was taken by the Supreme Court in the subsequent decision in Peerless General Finance and Investment Co. Ltd. and Anr. v. Reserve Bank of India, (1992) 1 Comp LJ 351 (SC) : AIR 1992 SC 1033.
34. Regarding supply of records and materials also, our attention was invited by the learned counsel for the RBI to Section 45NB of the Act, which relates to disclosure of information. It declares that any information relating to non-banking financial company contained in any statement of return submitted by such company under the provisions of Chapter III-B or obtained through audit or inspection or otherwise by the bank shall be retreated as confidential and shall not, except otherwise provided in the section, be disclosed'.
35. Again, the action has been taken by the RBI in larger public interest and taking into account the interest of large number of depositors. Considering all the facts and circumstances, the learned Company Judge exercised power under Sub-section (2) of Section 450 of the Act and, in our opinion, the company cannot make grievance against such order.
36. For the foregoing reasons, the appeal deserves to be dismissed and is, accordingly, dismissed. Notice discharge. No costs.