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2022 Supreme(Jhk) 338
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Sujit Narayan Prasad, J.
Wellfare Buildings and Estates Pvt. Ltd., A company registered under the Companies Act through its Chief Executive Officer, D.V.R. Prabhakar, S/o. D.V.J. Rao - Petitioner
Versus
The State of Jharkhand through its Chief Secretary, Jharkhand Mantralaya - Respondents
W.P.(C) No. 1982 of 2013
Decided On : 01-09-2022
For the Petitioner:Mr. L.C.N. Sahdeo, Advocate, Mr. Yash Raj Gupta, Advocate
For the Respondents: Mr. Kishore Kumar Singh, SC V; Mr. Vishnu Prabhakar, AC to SC V; Mr. Abhishek Sinha, Adv.; Mr. Rohit Ranjan Sinha, Adv.
Interference at the show-cause notice stage should be rare and not routine, and should only occur if the notice suffers from jurisdictional error.
Headnote:
Non-Banking Financial Company - Real Estate Business - Companies Act, 1956, Reserve Bank of India Act, 1934, SEBI Act, 1992 - The court discussed the petitioner's business activities, the scrutiny by Reserve Bank of India and SEBI, and the jurisdictional error in the issuance of the notice. The court emphasized that interference at the show-cause notice stage should be rare and not routine, and dismissed the writ petition as premature.
Fact of the Case:
The petitioner, a real estate company, sought to quash a notice sealing its branch for allegedly operating as a Non-Banking Financial Company (NBFC) without proper documentation. The petitioner contended that it was engaged in real estate business and not under the purview of NBFC regulations.
Finding of the Court:
The court found that the notice did not suffer from jurisdictional error and dismissed the writ petition as premature, directing the petitioner to pursue the grievance before the Deputy Commissioner, Koderma.
Issues: Jurisdictional error in the issuance of the notice, applicability of NBFC regulations to the petitioner's real estate business.
Ratio Decidendi: The court emphasized that interference at the show-cause notice stage should be rare and not routine, and should only occur if the notice suffers from jurisdictional error. The court found that the notice did not suffer from jurisdictional error and dismissed the writ petition as premature.
Final Decision: The writ petition was dismissed as premature, with the petitioner directed to pursue the grievance before the Deputy Commissioner, Koderma.
JUDGMENT :
1. The instant writ petition has been filed under Article 226 of the Constitution of India for quashing notice dated 11.02.2013 issued in Miscellaneous Case No. 13 of 2013 by which it has been informed that one of the branches of the petitioner-company situated at Koderma has been sealed as the petitioner–company has failed to show any paper for doing business as Non-Banking Financial Company; and further to direct the respondents-authorities to unlock the premises of the petitioner-company at Koderma and release the bank account of the petitioner.
2. The brief facts of the case, as per the pleadings made in the writ petition, read as under:
The petitioner is a registered company under the Companies Act, 1956 and is engaged in business of Real Estate, mainly sale and purchase of plots and flats, since 1999. The company also promotes its own properties and offers its services for marketing of the products and services of similar business establishment through its marketing team.
The company has advertised and disseminated all the information regarding functioning of the company and customers, after being satisfied with the policy of the company, have booked property and have paid advance to the company, which is being properly maintained in the books of account of the company. Further, as a part of the business transaction the company is receiving the plot amounts in installments and the same is reflected as property advance in the financial statements of the petitioner-company, which forms part of the audit accounts. The company also allots part of its land to its customers as collateral security for the amount of property advance. Furthermore, the advance receipt towards property booking, till the entire value of property is received, is classified as liabilities in the book of accounts and only when entire value of property is received, the same is treated as sale and moved to sale of property.
It is the case of the petitioner that some confusion had arisen regarding working of the company and the matter was enquired from the Department of Non-Banking Supervision of Reserve Bank of India, which did not notice any illegalities with the working of the petitioner and held that since the company is engaged in the business of Real Estate, it does not come under the purview of Non-Banking Financial Company (NBFC) or National Housing Bank, however, requested the Patna Office of Reserve Bank of India to give advice in the matter, as would be evident from communicated of Reserve Bank of India dated 03.09.2011. Thereafter, the Department of Regulation and Supervision of Reserve Bank of India, Patna Branch had conducted enquiry regarding working of the petitioner-company, which has held that the petitioner-company does not fall under the category of NBFC and is engaged in the business of Real Estate business and there is no regulatory measure for the same.
It has further been stated that similar complains, with respect to working of the company, was made before the authority of the respondent-State, whereupon enquiry was conducted but no irregularities was found, as would be evident from Memo No. 648 dated 13.08.2012.
It is stated that the aforesaid letter was duly communicated to all the Deputy Commissioners in the State requesting them that no action is required to take under NBFC Regulation for Real Estate Business but the Deputy Commissioner, Koderma, even after receipt of such letter sealed the office premise of petitioner-company at Koderma and issued notice dated 11.02.2013 in Miscellaneous Case no. 13 of 2013 by which it has been informed one of the branches of the petitioner-company at Koderma has been sealed as the petitioner–company has failed to show any paper for doing business as Non-Banking Financial Company.
Being aggrieved with the impugned notice, the petitioner has approached this Court invoking the power conferred to this Court under Article 226 of the Constitution of India for redressal of grievance
