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Judgment
The writ petitioners were functioning as a Non-Banking Financial Company within the meaning of 45(1A) of the Reserve Bank of India Act. By a
notification dated 27th March, 2015, the Reserve Bank of India (RBI) mandated that the Net Owned Fund (NOF) of inter alia the petitioners should
be above Rs.2 crores.
Two months thereafter the RBI, by communication dated 26th May, 2014, permitted the Non-Banking Financial Companies to amalgamate with other
concerns/entities subject to prior No Objection Certificate (NOC) granted by the RBI. Accordingly, with a view to achieve NOF of Rs.2 crores, the
petitioners applied for sanction of amalgamation with five other companies and sought a NOC from RBI. No formal reply was ever given, either by
issuing NOC or rejecting the same. Between 2014 and 2019, the RBI repeatedly asked for documents of the proposed amalgamation by the writ
petitioners.
By an order dated 21st November, 2019, after issuance of show cause notice, four months prior thereto RBI cancelled the licence of the writ
petitioners as an Non-Banking Financial Company (NBFC).
An appeal preferred therefrom was also rejected by the Appellate Authority vide order dated 10th June, 2021. The writ petitioners argued before this
Court that had the NOC for amalgamation being issued by the RBI, they would have met the threshold qualification of Rs.2 crores of NOF.
According to the petitioners, they had always supplied documents in connection with the NOC, but the RBI kept on asking for more documents.
Admittedly, no formal communication granting NOC has either been there. The issue of grant or refusal of NOC, according to the petitioners, is vitally
connected to the cancellation of the petitioners’ registration as NBFC.
This Court has carefully considered the request of RBI made from time to time and the replies have been given by the petitioners. One submission
made by Mr. Kundu, learned counsel for RBI, is that it is not known even today as to whether any of the other companies with whom amalgamation
was proposed, are also NBFCs.
The matter requires to be dealt with after receiving affidavits. Let affidavit-in-opposition be filed by the respondents within a period of four weeks
from date; reply thereto, if any, be filed by the petitioners within a period of two weeks thereafter. Liberty to mention for early hearing after
completion of affidavits.
This Court is not inclined to entertain a prayer for stay of the order of cancellation of registration, since allowing the petitioners to function in the
backdrop of non-furnishing documents and non-fulfillment criteria, may not be in public interest.
Ms. Chatterjee, learned counsel for the petitioners, has prayed for liberty to enable the petitioners/NBFC to collect the outstanding dues from persons
to whom lending has already occurred when the petitioners were functioning as NBFC. The petitioners are permitted to collect and recover all dues
from their borrowers and deposit the same in an account to be opened with the State Bank of India, Kolkata Main Branch, jointly with the Manager of
the Reserve Bank of India, Kolkata. The account shall only receive deposits and credits. No amount shall be removed from the said account without
the express leave of this Court. No amounts or outstanding dues of any borrower/debtor shall be written off.
Needless to mention the State Bank of India shall submit monthly statement of the said account to the Manager, Reserve Bank of India, Kolkata.
The pendency of the writ petition shall not prevent the RBI from passing any formal orders on the petitioners’ request for NOC.