A winding up petition under Section 45-MC of the RBI Act is not maintainable against a company that is not registered as a Non-Banking Financial Company (NBFC) with the Reserve Bank of India.

JUDGMENT :

(Narendra Kumar Vyas, J.)

1. This appeal has been preferred by the appellant-Reserve Bank of India being aggrieved with the Order dated 24.11.2017 passed by Single Bench of this Court in Company Petition No. 2/2004 whereby the learned Single Judge has dismissed the petition on the count that petition for winding up under Section 45-MC of the Reserve Bank of India Act, 1934 read with provisions of the Banking Regulation Act, 1956 is not maintainable.

2. The brief facts as reflected from the record are that the appellant/RBI is a statutory regulating authority for Non-Banking Financial Companies (NBFCs) empowered under Chapter III B of the Act (as amended by the Reserve Bank of India (Amendment) Act, 1997) for issuing certificate of registration to NBFCs, prescribing Prudential Norms, issuing Directions, prohibiting NBFCs from accepting deposits, filing winding up petitions etc. The respondent Company has been carrying on the business of receiving deposits under different schemes and was classified by the RBI as a Residuary Non Banking Company (RNBC). The respondent Company has been issued a memo dated 19th December, 1992 advising the company of its classification as a RNBC is required to comply with the RBI directions contained in Residuary Non Banking Companies (Reserve Bank) Directions 1987. The respondent Company submitted an application dated 4th July, 1997 to the appellant for grant of registration certificate acknowledging itself to be a RNBC which was rejected by the appellant vide its order dated 28.10.1999 and 02.11.1998. It is further case of the appellant that the respondent's net owned fund was revealed negative in the inspection conducted in the month of November, 2001, as such it was disqualified to carry on the business of Non Banking Financial Company under Section 45-I A of the Act of 1934, consequently, prohibitory order dated 14.10.1998 was issued and a show cause notice was also issued as to why its application for grant of certificate of Registration be not rejected. The respondent submitted its reply. The respondent was inspected and it was found that respondent was still accepting deposits even after prohibitory order, therefore, the appellant rejected the application filed by the respondent.

3. Being aggrieved, the respondent filed W.P. No. 5131 of 1998 before the High Court of Madhya Pradesh challenging the prohibitory order. The said petition was disposed off on 24.09.2001 with a direction to the appellant that the competent authority who has passed the prohibitory order shall examine the case and pass a reasoned order since various technical issues are involved in the case and till the matter is decided restrained the respondent from withdrawing any amount or accepting any deposits till the matter is decided by the higher forum with the appellant. Pursuant to the direction passed by the Hon’ble High Court of Madhya Pradesh, the Assistant General Manager, Reserve Bank of India, Bhopal passed a reasoned order on 10.12.2001 and held that the respondent is not entitled to accept money from the public. Thereafter, the appellant filed company petition before this Court for winding up of respondent company under Section 45-MC of the Act of 1934 read with the provisions of the Act of 1956 registered as Company Petition No. 2 of 2004 for appointment of Official Liquidator of the respondent to wind up as per the Companies Act, 1956 .

4. Learned Single Judge vide the impugned order found that though the appellant is under obligation to grant registration certificate under the provisions contained in Section 45-IA (1)(a) of the Act of 1934, but the respondent's application for grant of registration has been rejected by express order of the RBI on 28.10.1999. Thus, it would not satisfy the meaning of Non- Banking Financial Company for the purpose of Section 45-MC of the Act of 1934. It has also been held that the company petition can be filed under Section 45-MC of the Act of 1934 only against a Non-Banking