Delhi High Court
B.S. Sehgal And Ors. vs Reserve Bank Of India And Ors. on 24 September, 2002
Author: A.K. Sikri
Bench: S.B. Sinha, A.K. Sikri
JUDGMENT A.K. Sikri, J.
1. Before dealing with these applications, it would be appropriate to state the scope of the present writ petition filed by the petitioners. It will help in understanding the controversy involved and the circumstances in which the present applications are filed in the instant writ petition. It may be mentioned that dealing with one of the aspects of the matter relating to respondents 30-34, this court in its detailed order dated 12th May, 2000 had taken note of the nature of the present writ petition and it would be appropriate to restate the same. The very para of that order is in the following words:
"This petition purportedly involving interest of a large number of investors in some of the non-banking financial companies has been filed by way of public interest litigation in this court. The petitioners claim to be investors in one company or the other arrayed as respondents. Besides individuals, petitioner No. 3 has beee styled as Public Action Forum which does not appear to be a registered body. Since various companies having diverse facts have been arrayed as respondents, the Court felt that it was difficult to proceed with the petition. The facts involving each company or group of companies are different and the investors are also by and large different. Therefore, putting all of them together and combining them in on petition has led to practical difficulties in proceeding with the case. The court had put this difficulty to the learned counsel for the parties and accordingly it was decided to hear the counsel separately with respect to each company or each group of companies on the question of being retained as a respondent in this petition.
Accordingly, we have heard the learned counsel for the parties with respect to respondents 30 to 34 who are Sahara Group of Companies. This order deals with the Sahara Group of Companies only."
2. This court, accordingly, in the aforesaid order dated 12th May, 2000 dealt with applications in the writ petition relating to Sahara Group of companies and ordered deletion of these respondents who were arrayed as the respondents 30-34 after finding no merit in the applications made against the Sahara Group. The concluding para of that order reads thus:
"In the result, having regard to the submissions made on behalf of the RBI and the Sahara Group, we find no merit in the allegations made against the Sahara Group. The learned counsel for the petitioner was unable to controvert any of the submissions made on behalf of the concerned departments. The petitioners have been only banking upon the Comptroller and Auditor General report which in our view cannot be used against the Sahara Group in the facts of the present case. It is ordered that the names of respondents 30 to 34 be deleted from the array of parties. An amended petition be filed within four weeks deleting respondents 30 to 34 from the array of parties and deleting the averments qua the said respondents."
3. In these CMs we are now concerned with the Kuber Group of companies who are imp leaded as respondents 43 and 44. The allegations against these respondents are contained in para 38 of the writ petition wherein it is averred that the companies of the Kuber Group have indulged in the numerous irregular business activities and have diverted the money raised from the general public. It is stated that M/s Kuber Mutual Benefits Ltd. is a company which is registered as mutual benefit company with Reserve Bank of India (RBI). It is accordingly subjected to the directions of the RBI for such mutual benefit company issued from time to time. The allegations are that this Group has flouted such directions and provisions of law and some of the irregularities are as follows:
(a) Kuber Mutual Benefits Ltd. is not supposed to open offices outside the municipal limits of the district where it is registered. However, this company/Group has not only opened offices all over India but has also enrolled members from all over India and has collected large amount of money. This has been done by opening offices under different companies of the group, whereas investments are being raised in the name of Kuber Mutual Benefits Ltd. and other financial companies of Kuber Group.
(b) This group has also floated yet another company and is publishing daily newspaper in the name of 'Kuber Times' under this company.
This newspaper and other several such ventures of this group have been incurring losses to the tune of crores of rupees. These loses are being met from the money generated through the hard-earned savings and the investments made by innocent investors who have been investing in various finance companies of this group.
(c) As per the provisions of the Mutual Benefits Act, such companies are not allowed to invest the money generated through their investors, only into certain specified activities, such as providing loan against security of jewellery etc. that too only to its members. However, Kuber Mutual Benefits Ltd. has diverted and siphoned off investment made in its Mutual Benefit company into different ventures and has violated the provisions of RBI directions in this regard. The Income Tax Department had conducted raids on the premises of this group and had reportedly found several incriminatory documents and evidence in regard to gross violation of serious nature. However, for certain reasons best known to the Income Tax Department, no effective and deterring steps were taken against this group thereafter.
(d) Similarly, other companies of Kuber Group such as Kuber Buildwell Ltd., Kuber Floritech Ltd., Kuber Finance & Investments, Kuber Publications are still indulging in numerous irregular business activities and are still siphoning off and diverting and/or collecting funds from general public.
4. Mr. Sunil Kumar Bharti, learned counsel appearing for the petitioners expatiated the aforesaid irregularities with reference to the provisions of law and submitted that as per the provisions of the Mutual Benefits Act, the NIDHI companies are not allowed to generate money from the general public/non-members. The company is not supposed to open offices outside the municipal limits of the district where it is registered. The said company has almost 400 offices all over the country raising money from the general public. The guidelines/directions relating to their operations and deployment of funds are issued by the Department of Company Affairs, Government of India. He also referred to the order dated 13th August, 1998 passed by this court and subsequent press releases which are related to Kuber Mutual Benefits Ltd. and not other companies of the group. The cheque of other companies were dishonoured after passing of this order. As on date most of the offices of the companies of the Kuber Group are closed. It is also submitted that by any stretch of imagination it cannot be said that there is any effect of the aforesaid order/press release on other group companies. Even if there is any effect of the aforesaid order in other companies, it proves the siphoning off funds and inter-se transfers between the companies of the group.
5. He further alleged that the modus operandi of the Kuber Group is to lure the general public, to depart them with their valuable property/money and after receiving the money, siphon off the money by showing (self made, intentional) losses, benami transfer of money from the bank accounts in benami names. It is also stated that the Kuber Group employs influential people in their companies in order to gain the confidence of the general public. Besides this group repeatedly gives large number of advertisements in various leading newspapers offering high rate of interest to the investors. This group has also advertised various misleading advertisements in the leading newspapers about this writ petition and their subsequent apology. In support of this submission, affidavit of Ms. Kaushalya Devi who was working as agent of Kuber Group and collected Rs. 12 lacs for this group has been filed who deposited the amount under the names/heads of different companies in this group's branch office at Faridabad. This affidavit gives the detail in regard to the investments collected by her and some of the incriminating documents pertaining to the different companies of this Group are annexed with the writ petition. She has paid Rs. 5 lacs from her resources by taking loan against GPF, selling her property etc. One Ms. Sumitra Devi had invested in the fixed deposit scheme of one of the company/firm viz. Kuber Builders of Kuber Group. Photocopies of the affidavit of Ms. Sumitra Devi and the documents of her investment as well as cheque of Rs. 875/- as interest and banker's limitation in regard to dishonour of the cheque are annexed with the petitioner. His further submission is that willingness shown by this Group to return the money of the investors was also fuss and the representation to this effect did not match the action. In any case, their liabilities were more than the assets. Having regard to the course of conduct of Kuber Group, the leaned counsel submitted that this court should appoint a Receiver/administrator for selling the assets of Kuber Group. He also referred to similar orders passed by the High Court of Mumbai in a writ petition where Mr. Justice M.L. Pendse (Retd.) is appointed as the Receiver.
6. The allegations qua Kuber Group contained in the writ petition are refuted by the respondent No. 44 by means of affidavit dated 26th November, 2001. It is contended in this reply affidavit that the petition against this Group has been filed by the petitioners for vested and mala fide intentions and the name of Kuber Mutual Benefits Ltd. has been dragged as an afterthought by certain people to settle personal scores. It is mentioned that there are no specific allegations against these respondents in the writ petition who have been arrayed as respondents without any iota of evidence. On the other hand, these respondents maintain that their had never been any default in repayment of money to even a single depositor before 13th August, 1998 the day on which the restraint order was passed by this court in this writ petition rendering these respondents helpless. According to the respondents, therefore, the petitioners proved to be an anti-public interest vis-a-vis investors of the Kuber Group. Highlighting the details to these effects as even in the affidavit, Mr. Vikas Pahwa submitted that the Kuber Group started the business of deposits and lending money in the year 1980. The Kuber Group in the last 20 years of functioning opened as many as 450 branches all over the country and gave direct and indirect employment to as many as 50000 persons. The working of the group was fully transparent and it was always punctual in making repayments to the deposits which has given it tremendous confidence and trust to the investors and the group became one of the leading finance companies of the country. The group completed numerous cycles of deposits and their repayments. It has given excellent returns to its depositors by way of interest on deposits. In the month of May, 1997 a search was conducted by the Income Tax Department under Section 132(1) of the Income Tax Act and the premises of the respondent No. 44 were raided and apart from seizing some documents, FDRs worth Rs. 29 crores of the Kuber Group had also been seized although the said FDRs were clearly shown in the balance sheet of the company and also in the books of accounts for income tax return purpose. On 13th August, 1998 the court restrained all the respondents and also principal company of the respondent No. 44 from selling their assets except in the normal course of business. On 14th August, 1998 wide publicity was given to the order of this court which created a panic situation and as a result the depositors stared demanding the return of their deposits, apprehending that perhaps the company had failed and is incapable of returning the deposit to the investors. As a matter of fact, media publicity commencing from this order heralded the beginning of an embarrassing situation for the respondent companies. On 31st August, 1998 on the submission made by the Kuber Group that the Kuber Group is a solvent group and is in a position to pay back to its investors, this court directed the RBI to file the status report of the financial condition of Kuber Group. The RBI after conducting a comprehensive investigation into the affairs of the company filed the status report of the Kuber Mutual benefit Company Ltd. as on 30th August, 1998. The report clearly mentioned that the company has a total asset of Rs. 213.18 crores whereas the total liabilities are Rs. 211.87 crores. In the column of solvency, the RBI stated:
"The realizable value of assets of the company are Rs. 212.06 crores which exceeds, its total outside liabilities of Rs. 211.8 crores by Rs. 0.91 crores. The company is therefore deemed to be solvent as on 31.8.1998."
Against the column of inspection observation, it was stated:
"The company's liquidity position not being comfortable it should reduce, their exposure in real estate to bring about improvement in its liquidity."
7. Thus according to the Kuber Group although it was solvent company which was discharging its obligation qua the depositors faithfully and honesty, because of the present writ petition and the court order dated 13th August, 1998 passed in this case, snowballing effect started. First, because of wide publicity given to this court order a panic like situation was created and depositors started remanding the return of their money RBI followed the suit and wide letter dated 5th April, 1999 prohibited Kuber Mutual Benefits Ltd. from accepting the deposits from the pubic with immediate effect whether by way of fresh deposits or renewal or otherwise which gave jolt to its functioning. Thirdly, the investors started approaching local police stations for registering of criminal cases and on 20th April, 1999 the Delhi Police registered an FIR No. 126/99 under Sections 420/406/409/120-B of the Indian Penal Code as a result of which Sh. P.K. Sharma, the Managing Director of this company was arrested on 4th June, 1999.
8. It is submitted that the company still wants to make payment, and therefore, on 18th August, 1999 it entered into a scheme/agreement with the association of investors which was recorded before Sh. K.S. Mohi, Metropolitan Magistrate, New Delhi whereby the company offered two prime properties situated at Greater Kailash, Part-I, New Delhi to be disposed off for the purpose of repaying the deposits to the investors. However, due to slump in the real estate market, the properties could not be sold and in the meantime, the RBI vide letter dated 9th September, 1999 issued directions under Section 45-MB(2) of the RBI Act restraining the company from dispossessing/alienating/transferring or mortgaging the properties of the company except for selling the properties for the purpose of repayment of deposits held by the company, without prior permission of the RBI.
9. In these circumstances, the company filed CM No. 10632/99 in this writ petition seeking permission to sell the aforesaid two properties which permission was granted vide order dated 3rd November, 1999 and appointed Sh. Dalip Singh, a retired District & Sessions Judge as a court commissioner with directions to him to sell the properties and deposit the sale proceeds in the court. However, the properties could not be sold. According to this reply affidavit, as per the provisional balance sheet for the period ending 31st March, 2000, value of the assets is still more than the liabilities but stalemate is created because of the writ petition and the orders passed herein as well as directions given by the RBI because of which credibility of the company got eroded in one stroke. The company is not receiving any deposits after 13th August, 1998. Accordingly, inflow of money stopped and outflow increased drastically on much higher side. The picture is painted in paras 8 to 12 in the following words:
"Para 8: That it is submitted that the total business empire comprising of 450 branches and 50000 people associated with the Kuber Group collapsed and its day to day affairs came to a standstill after completing 19th year of brilliant functioning due to many reasons but primarily due to the illegal seizure of FDRs presently worth over Rs. 29 crores in the year 1997 resulting into loss of liquidity and ex-party orders issued by this Hon'ble Court in an instant petition filed by 5 investors against various companies including Kuber Mutual Benefits Ltd. wherein this Hon'ble Court restrained all the companies including KMBL not to dispose off the assets except in the normal course of its business.
Para 9: That due to loss of liquidity (FDRs) and unnecessary embargo KMBL found it very difficult to repay immediately to its members although it was fully capable of refunding full amount in the normal course of its business as the assets of the company are more than the liabilities. This chaos as stated above resulted in large scale registration of criminal/other cases all over the country. In this chaotic condition the Reserve Bank of India vide order dated 5.4.1999, also prohibited KMBL from accepting deposits, which resulted in the total breakdown of the business cycle of the company, which is para materia to the functioning of any of the scheduled Bank of the country. Inspite of all these problems the company had repaid about Rs. 91 crores till June 1999 to its investors, thereby substantially reducing the total liability of the company by this amount. The same could not be continued further as after June 1999 the whole family of the Chairman Sh. P.K. Sharma herein was arrested.
Para 10: It is submitted that the Kuber Group inspite of being a solvent group having assets more than the liabilities, is not in a position to fulfill the commitments of making the payments on time, due to the restraint orders passed by the RBI and the illegal seizure of the FDRs worth Rs. 29 crores by the Income Tax Department and the slash in the real estate market, making the sale of the two properties quite difficult.
Para 11: It is submitted that the applicant be allowed to adjust their properties with the deposits of the Kuber Group, while the RBI has granted permission in writing and have also stated in an affidavit before this Hon'ble Court that the assets of the petitioners are more than the liabilities.
Para 12: The applicant states that the Kuber Group is still in a position to make all the demands of the investors in good esteem, as the assets of the company are spread all over the country and want to make the payment to all the investors. Since it is the liability of the company and company has never refused to discharge its liability, hence company should be given a free hand to meet out its liability in any manner and in the given situation the court may monitor periodically the progress made in the reduction of the company liabilities in so far as repayment of the investors money are concerned."
10. The Kuber Group still maintains that it is in a position to repay to all the investors. In this respect, the learned counsel referred to the writ petition pending in Mumbai High Court and the orders passed therein which facilitates the Kuber Group to prepare a scheme for repayment of the depositors. It was pointed out that the Group had filed scheme for completing the unfinished projects in Mumbai within a time bound frame. There is an unfinished building in Mumbai called 'KUBER CITADEL' which is 85% ready wherein the company has already invested about Rs. 20 crores. Only Rs. 2 crores are required to complete the building which could thereafter be sold for about Rs. 30 crores.
11. At this stage, it would be apposite to take note of the stand taken by the Government functionaries involved, namely, the RBI, the SEBI and the Income Tax Department etc.
12. Paras 35 to 39 of the counter affidavit filed on behalf of the RBI relate to the averments in respect of the Kuber Group. It is stated in these paras that so far as Kuber Mutual Benefits Ltd is concerned, it is a NIDHI company and the RBI has only limited jurisdiction over the activities of the company. The RBI had carried out inspection with reference to its financial position as on 31st March, 1998 and the position in this respect is revealed as under:
"The inspection report revealed that the reliable value of assets of the company is deficient to the extent of Rs. 7.12 crores compared with its outside liabilities of Rs. 258 crores. However, it is noticed that the company had brought down its deficit from Rs. 49.8 crores in 1997 to Rs. 7.12 crores in 1998 and improved its Net Owned Fund negative position to positive position of Rs. 1.24 crores. The irregularities observed during the present inspection have been forwarded to the Government of India for necessary actions. This is being done since the operational matters are regulated by the directions issued by the Department of Company Affairs of Government of India. As regards the violations noticed in respect of RBI directions, a letter has been issued to the company directing it to remove these violations and to regularise these aspects. It is further noticed that the company has not defaulted in the repayment of its fixed deposits and no complaint in this regard is made. Since the company had failed to furnish full information as required by this respondent a show cause notice dated January 19, 1998 was issued against this company as to why criminal proceedings should not be initiated. However, the company has subsequently furnished the details."
13. These averments reveal that there were certain procedural irregularities of trivial nature committed by this company and this company had removed even these irregularities after show cause was issued against it by the RBI. As far as financial health of the company is concerned, as per the RBI, the deficit of assets over the liabilities of the company was brought down from Rs. 49.8 crores in the year 1997 to Rs. 7.12 crores in the year 1998 and improved its net owned fund from negative position to positive position of Rs. 1.24 crores. Notwithstanding this deficit, even as per the RBI this company had not defaulted in the repayment of its fixed deposit and no complaint in this regard was made to it.
14. It is further stated by the RBI that the policy relating to sanction of loans and advances by nidhi companies is regulated by the Department of Company Affairs and the RBI has not issued any directions in this regard. In view thereof, the RBI has refuted the allegations of violating the RBI directions by the Kuber Group of companies as baseless. However, in respect of certain advance given by M/s Kuber Mutual Benefits Ltd. to its employees, the RBI has found the irregularities of the following nature:
"On random perusal of the secured loans granted by the company against mortgage of immovable property, it was observed that an amount of Rs. 52.45 crores were granted to 32 employee-members (except one who is only a member). In certain cases incomplete documentation were found viz. absence of schedule of the property said to be annexed with Mortgage Deed, date of allotment of the property to the allottee and the date of transfer of the property to Kuber Mutual Benefits ltd., its valuation etc. In view of the deficient documentation, 15% of the outstanding loan is considered irrecoverable. Instances of certain large advances granted to staff members have come to the knowledge of this respondent and the same have been conveyed to the Department of Company Law Affairs for necessary action, if any."
15. Commenting upon the allegations made by the petitioners in respect of M/s Kuber Mutual Finance Ltd. and Kuber Auto General Ltd, two NBFCs regulated companies of this Group the RBI has clarified its position in the following words:
"As a matter of fact, an order was issued in 1992 prohibiting the Kuber Finance Ltd. from accepting fresh deposits. As revealed in the recent inspection conducted in September 1998 that order of adhered to by the company. Hence, the allegation that further action imminently required in respect of this company is totally misleading and factually incorrect. As regards the Kuber auto General Finance Co. Ltd. the recent inspection conducted in September 1998, revealed the financial status of the company is satisfactory and no serious detrimental features were noticed. As such, the allegation that immediate further action is required to be taken is baseless and denied."
16. In the penultimate para of the affidavit, the RBI has commented upon the present writ petition by stating:
"I respectfully submit that as repeatedly pointed out by the Hon'ble Supreme Court, the petitioners should not be allowed to misuse the judicial forum of this court in the guise of the alleged public interest. The petitioners' averments, as discussed above, are being reckless, baseless they appear to be made with malafide intention and also misleading this court. Under these circumstances in the interest of justice this Court may be pleased to impose exemplary costs on the petitioners so as to prevent the petitioners from making further attempts of misusing the judicial forum.
17. In so far as respondent No. 3, the Securities and Exchange Board for India (SEBI) is concerned, it has clarified the position in respect of issue of share capital by various companies of Kuber Group, inter alia, mentioning that on receipt of offer documents of these companies by SEBI it had examined the same and given certain observations including incorporation of risk factors in Board on the first page of the transcripts and issuance of certain directions from time to time. Since in the present writ petition we are not concerned with the issuance of the share capital of these companies but with acceptance of deposits by the companies from various depositors and repayment of these depositors with interest, it is not necessary to narrate the stand of the SEBI, as taken in the counter affidavit, in detail.
18. We have given our utmost consideration to various aspects of the matter as pointed out by the counsel for different parties appearing before us.
19. At the outset, it may be mentioned that in so far as business of financial institutions is concerned, much depend on the trust and faith of public in such financial institutions. These institutions thrive and progress on the confidence of the depositors and once such faith is shaken that may sound death knell of these institutions. For, these financial institutions generate the money from public who make deposits with the financial institutions. On the basis of such corpus created after generating the money from the public, the financial institutions lend the same to the business houses or others in need thereof and in this process their business goes on . The money which is accepted by these financial institutions, whether banks or nidhi company like the Kuber Group, is for particular duration. Thus from various depositors when such money is collected, the institutions know the period for which deposit is made by a particular depositor and going by these calculations, a financial institution can make the assessment of the period for which amount of money would be available to it and on that basis it is able to learned the same to the debtors. However, in such circumstances, if the depositors make demand to withdraw the money before the maturity it may disturb the entire planning and calculations and bring in equilibrium in their functioning. It is well known that even if for wrong reasons a particular financial institution comes to disrepute and public faith is shaken, the depositors may start withdrawing their money by making demand for the refund of the amount even if the period for which they had blocked it with the institution has not expired. Even one such incident may have the same effect as throwing one stone in the otherwise calm water of a river stirring and disturbing its calmness. It appears that same thing has happened in the instant case by filing the writ petition by the petitioner. The company was not doing as and as it was projected In fact even as per the report of the RBI based on comprehensive investigation into the affairs of the company as on 30th August, 1999, it was found that the total assets of the company were more than liabilities. It not necessary to repeat what the RBI has stated in its counter affidavit. In no uncertain terms, the stand taken by the RBI is that it was a viable company. In fact the RBI has challenged the petitioners' bona fides in filing the present writ petition. Even the SEBI did not find the functioning of the Kuber Group as objectionable warranting any stern action. In fact the position which was as on 30th August, 1998 when this petition was filed, was not that dismal. No doubt the Kuber Group was facing some difficulties, same were because of general slump in the market. However, it could have tide over such difficulties and overcome the hiccups.
20. Thus, there appears to be some force in the submission of the Group that filing of the present writ petition and wide publicity to the court's order dated 13th August, 1999 created a panic like situation and the depositors started demanding the return of their money even when the due dates had not matured. The RBI also issued prohibitory orders directing the M/s Kuber Mutual Benefits Ltd. not to accept the deposits from the public. The officials of the company were hounded when scores of FIRs were filed with the police authorities. Naturally, it was bound to adverse effect on the functioning of this Group.
21. It may be mentioned at this stage that the function of the court, when such petitions are filed and the matter is brought up before the court for the first time, is very delicate. The court may be in dilemma. There are numerous institutions where bogus financial institutions or other companies, after collecting the huge money from depositors, have eloped. The depositors, most of whom are the persons belonging to the middle and salaried class, lose their hard earned life savings. Sometimes, an immediate order is required to salvage the situation and recovering whatever money is available with the company so that the depositors are able to get as much as possible. Some legal mechanism has to be found out in order to ensure that such depositors are not financially ruined. It is not that the concerned authorities are oblivious of the problem. It may be mentioned that paragraph 6 of the Statement of Object and Reasons for the 1997 amendment to the RBI Act notices this situation in the following words:
"There are reports of several finance companies and unincorporated bodies having failed to repay the deposits collected from unsuspecting depositors who have been tempted by the attractive returns and incentives offered. Concern has been expressed in several quarters on the need to take urgent steps to regulate the activities of such companies and unincorporated bodies."
22. Apart from expressing the aforesaid concern, no legislative steps have been taken with the result such petition and causes keep pouring in the courts and the court faces the dilemma of the kind narrated above. If the cause is genuine and the interim order is passed, situation to some extent may be salvaged in so far as interest of the depositors is concerned.
23. However, on the other hand, when a wrong cause is brought before the court against a company which is not otherwise insolvent or is indulging in malpractices, an order of this nature may not only finish the otherwise solvent company but make it difficult for the depositors to realise their money which they could have recovered otherwise in normal course. The present case appears to be belonging to later category of cases.
24. This petition is filed by the petitioners involving number of financial institutions. All such group of companies are clubbed into one petition. Further, the allegations which are made against many of such groups do not give precise details and particulars. That is precisely the case as far as Kuber Group is concerned. As already noted above, they are contained in para 38 of the writ petition. There allegations are general and vague. Details are sought to be given at the time of arguments when gloomy and grim picture of the state of affairs of the company is painted. This situation also, if at all, is the outcome of the present writ petition. It may be stated at this stage that the petitioners had imp leaded the Sahara Group of companies also as parties and vide order dated 12th May, 2000 this court directed deletion of those respondents finding that no case was made out against them. In the detailed order, the court made the following observations against the petitioners:
"We also find merit in the submission made by Shri Gopal Subramanium, Senior Advocate about the bona fide or petitioners 2 and 4 in filing the present petition against the Sahara Group of companies. The fact that petitioner No. 2 invested a small amount in one of the financial companies of Sahara Group only three days before the institution of the petition and made wild allegations against the said Group about financial irregularities shows that the conduct of petitioner No. 2 is not honest and bona fide. He has not come to court with clean hands. It must have taken time for preparing a lengthy petition of the present type containing various allegations against the Sahara Group of Companies and if petitioner No. 2 made his investment knowing all such irregularities in advance, why make a grievance of it? It cannot be said that the petitioner is acting bona fide. The entire purpose of making the small investment seems to be to gain locus standi to file the present petition. This is a petition under Article 226 of the Constitution of India and such a conduct in our view disentitles the petitioner to seek any relief. Same is the position regarding petitioner No. 4 who knowingly concealed the fact that he had been substituted in an investment scheme in place of the original investor. In fact he paid the substitution fee in this behalf for which receipt has been placed on record by the company. He concealed all these facts from the court and rather made an allegation against the company of adopting dubious means by receiving investment in one name and issuing the receipt in another name. These averments were false to the knowledge of the petitioner No. 2 and the petition is liable to be dismissed on this ground alone so far as the said petitioner is concerned."
25. It appears that same is the position of the petitioner vis-a-vis the present Group. It may further be noted that in its order dated 12th May, 2000 the court had also relied upon the stand of the RBI by observing:
"Coming to the role of the RBI, it has been categorically stated by the learned Addl. Solicitor General that the Bank has done whatever was required to be done on its part under the law and the rules. The Bank has felt satisfied and according to the Bank, no action is called for against the Group at present. Besides the categorical statement made in court, reference was invited to the affidavit filed on behalf of the RBI wherein the Bank has detailed the statutory provisions and its role in the context of these statutory provisions and the rules. The Bank has conducted the required investigation and made report according to which nothing objectionable has been found against the Sahara Group of Companies. We also note that the petitioners have made only general allegations that the officials of the Bank have colluded with the management of the concerned companies. There is not a single allegation against any individual officer which could be replied to or dealt with. The general allegations can neither be replied to nor can be relied upon. The petitioners have simply stated that the officers have colluded. Which officer has colluded and to what extent and with whom has not been stated. Such baseless allegations cannot be dealt with and have to be ignored."
26. We have also noted the stand of the RBI in the instant case which is almost of similar nature.
27. However, what is discussed above is the position which was up to August, 1998 when the present writ petition was filed. No doubt, the petitioners have unnecessarily imp leaded the Kuber Group of companies and have done incalculable damage. However, the position as of today is totally different. Clock cannot be turned back. Confidence of depositors in M/s Kuber Mutual Benefits Ltd. has eroded. It is difficult to instil this confidence in public again. It is a matter of record that hundreds and thousands of depositors are waiting to receive their money who have not been able to get it back even when the term of their deposits expired long ago. The company can survive provided it is able to pay back the money of the depositors. As already pointed out above in para 14 of the affidavit filed on behalf of the Kuber Group, it maintains that it can still repay all the investors but this assurance of the Group is based on certain conditions which are to the following effect:
1. The repayment can be made once the properties worth Rs. 18.11 crores are sold under the supervision of the Court Commissioner appointed by this court and money can be deposited in the registry of this court for reimbursement to the investors of the Kuber Group.
2. The repayment can be made if this court directs the Income Tax Department to disburse the amount involved from the FDRs worth about Rs. 29 crores, illegally seized by the department of Income Tax while a search was conducted by them on 13.5.1997.
3. The repayment of the deposits can be adjusted by the properties available for the adjustments with the Kuber Group in any part of the country. The Reserve Bank of India vide letters dated 29.9.1999 and 24.2.2000 have allowed the respondent company to adjust the deposits of the investors with the properties.
4. The payment can also be made if KUBER CITADEL (85% ready) the building in Mumbai worth about Rs. 30 crores is completed and same is available for sale or adjustment of the deposits. The building has to be completed within six months of the orders being passed by the Mumbai High Court.
28. While some of the aforesaid conditions may not be workable and further that this was suggested much earlier when the reply affidavit was filed by this Group, in order to secure the interest of the depositors and to make an endeavor to rapay the depositors, we deem it proper that this Group is given another opportunity to prepare a workable scheme keeping in view the ground realities and the present scenario.
29. Consequently, while we are not inclined to proceed on the basis of this petition filed by the petitioners qua the Kuber Group of Companies, still keeping in view the public interest and since the matter has travelled thus far, we deem it proper to pursue the matter ourselves for finding a viable solution to the problem.
While doing so, we have in mind the interests of the Kuber Group as well as thousands of small depositors. endeavor is that depositors are also able to retrieve maximum amount of their deposits and company is also able to survive, if possible.
30. With this intention in mind, we direct this Group, namely, respondents No. 43 and 44 to submit fresh scheme also keeping in view the orders of the Mumbai High Court in the pending petition within a period of eight weeks from today. Based upon the nature of the scheme submitted by this Group, further directions as deemed proper can be issued.
31. The matter is listed for directions on 13th November, 2002.
32. All these CMs stand dismissed.