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Judgment
Heard Shri Prashant Chandra, Senior Advocate, assisted by Shri Piyush Kumar Agarwal, appearing for the petitioner and Shri S.K. Kalia Senior Advocate, assisted by Shri Pritish Kumar, learned Counsel appearing for opposite party No. 2.
Notice on behalf of opposite party No. 1 has been accepted by Shri Ritu Raj Awasthi, the learned Assistant Solicitor General of India.
The learned Counsel for the petitioner submits that against the show cause notice dated 9.5.2008, a detailed reply was submitted by the petitioner on 2.6.2008 before the opposite party No. 2 and by the impugned order dated 4.6.2008, the petitioner has been restrained from accepting deposits from the existing depositors and fresh depositors. He further submits that after the show cause notice dated 9.5.2008, on the request of the petitioner a meeting was held on 20.5.2008 and thereafter each point mentioned in the show cause notice was suitably replied by the petitioner in his reply dated 2.6.2008, but in a most hurriedly manner the impugned order has been passed. He further submits that the impugned order prohibits the petitioner from carrying on business as a Residuary Non-Banking Finance Company and as such violative of the fundamental right guaranteed under Article 19(1)(g) of the Constitution of India. He further submits that between 16th April 2007 and 9th May 2008 the working of the petitioner has improved in all spheres and the petitioner has obeyed the directions issued by the Reserve Bank of India from time to time and has kept the Reserve Bank of India also informed and there was no emergent development for taking this drastic step prohibiting the petitioner from accepting fresh deposits from the investors. He further submits that there are 4.5 crores Account Holders with the petitioner and about Seven Lakh people are working to manage the accounts and if the impugned order is not stayed the depositors who are not before this Court will suffer huge losses. He further submits that there were no complaints from the investors and only on the basis of inspection made under the provisions of Section 45-N, the impugned show cause notice was issued to the petitioner.
Shri S.K. Kalia, Senior Advocate, appearing on behalf of the opposite parties submits that the certificate of registration as provided u/s 45IA of the Reserve Bank of India Act, 1934 was issued to the petitioner in the year 1998 and since then the petitioner was not following the directions issued by the R.B.I. and the petitioner was not maintaining the record in accordance with the terms and conditions of the licence, the impugned show cause notice dated 9.5.2008 was issued to the petitioner. He further submits that the reply submitted by the petitioner was duly considered by the competent authority before passing the impugned order. He further submits that the deposit taking activity of the petitioner was not inconformity with the prudent practices and the Reserve Bank of India directions and instructions and as such there is no illegality in the impugned order. He further submits that on the request of the petitioner, a meeting dated 20.5.2008 was convened in which the managing worker of the petitioner participated and even thereafter the irregularities were not removed and the Company has been continuously defaulting in maintenance of directed investments.
We have considered the submissions made by the learned Counsel for the parties and gone through the record.
The petitioner is a Residuary Non-Banking Finance Company and is regulated by the provisions of Chapter III-B of the R.B.I. Act, 1934 and the directions issued thereunder.
It is admitted case of the parties that a certificate of registration was issued to the petitioner by the Reserve Bank of India, under the provisions of Section 45IA of the Reserve Bank of India Act, 1934. The petitioner has alleged that there are about 4.25 Crores depositors'' accounts who are mainly from the lower middle classes of society. The petitioner has also alleged that about 7.00 Lakh employee, field staff and agents are working with the petitioner in its 1508 service centers all over the country who will lose their livelihood. On the basis of inspections made by the officials of the Reserve Bank of India, a show cause notice dated 9.5.2008 was issued to the petitioner. After the issuance of the notice, on the request made by the petitioner, a meeting was convened on 20.5.2008 and personal hearing was given to the petitioner, thereafter, on 2.6.2008, the petitioner submitted his reply to the show cause notice. In reply dated 02.06.2008 to the show cause notice dated 9.5.2008 the petitioner submitted an action plan to accept further deposits for only two years. The record reveals that the Reserve Bank of India through letter dated 16.4.2007 had given time to the petitioner till 15.4.2010. Admittedly after submission of the reply dated 02.06.2008 to the show cause notice dated 9.5.2008 no opportunity was afforded to the petitioner before passing the impugned order.
The petitioner has alleged that no complaints were ever made by the depositors to the Reserve Bank of India.
As large number of investors/depositors will be affected by the impugned order as they will be deprived of depositing their money and continuing to deposit their money with the petitioner, in various schemes launched by the petitioner and large number of employees, agents, staff will lose their livelihood, we have no option except to stay the operation and enforcement of the impugned order dated 4.6.2008 till further orders of this Court. The petitioner shall not accept any new deposit whose maturity will be beyond June, 2010.
Since the Reserve Bank of India has mentioned in the impugned order that the deposit taking activities of the petitioner are not in conformity with the practices and directions and guidelines issued by the Reserve Bank of India, we direct that the petitioner shall complete all the required formalities and will follow the directions issued by the Reserve Bank of India from time to time.
List this petition in the last week of July, 2008.
In the meantime, the opposite parties may file counter affidavit.