1. Present winding up petition is filed by the Reserve Bank of India (RBI) against M/s. Sahara India Financial Corporation Limited (SIFCL) under Section 45-MC of Reserve Bank of India Act 1934 (RBI Act). The proceedings are being held as per procedure prescribed by Part VII of the Companies Act, 1956. SIFCL is a Residuary Non-Banking Financial Company (RNBFC).

2. Sub-section (1) of Section 45-MC of RBI Act provides the grounds on which RBI can file a winding up petition against the NBFCs. Subsection

(4) further provides that the provisions of Companies Act 1956, relating to winding up of a Company, shall apply to a winding up proceeding initiated by RBI under Section 45-MC of the RBI Act. Section 45-MC reads as follows:-

"45MC. Power of Bank to file winding up petition.

(1) The Bank, on being satisfied that a non-banking financial company,–

(a) is unable to pay its debt; or

(b) has by virtue of the provisions of section 45-IA become disqualified to carry on the business of a non-banking financial institution; or

(c) has been prohibited by the Bank from receiving deposit by an order and such order has been in force for a period of not less than three months; or

(d) the continuance of the non-banking financial company is detrimental to the public interest or to the interest of the depositors of the company, may file an application for winding up of such non-banking financial company under the Companies Act, 1956.

(2) A non-banking financial company shall be deemed to be unable to pay its debt if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the Bank certifies in writing that such company is unable to pay its debt.

(3) A copy of every application made by the Bank under subsection

(1) shall be sent to the Registrar of Companies.

(4) All the provisions of the Companies Act, 1956 relating to winding up of a company shall apply to a winding up proceeding initiated on the application made by the Bank under this provision."

3. Petitioner RBI claims that all the four grounds, provided under Section 45-MC (1), are made out and the petition is filed on all of them.

4. The facts of the case, as per RBI are, that, it is a body corporate established by the RBI Act, inter alia, to regulate the issue of Bank notes and keeping of reserves with a view to secure monetary stability in India and generally to operate the currency and credit system of the country to its advantage. The RBI Act, 1934 was amended by RBI (Amendment) Act, 1997 (23 of 1997). By the said amendment, Chapter III-B was added to the RBI Act, 1934, providing RBI power to register and regulate Non-Banking Financial Companies (NBFCs) including Residuary Non-Banking Companies (RNBCs).

5. In exercise of powers under Section 45-J and 45-K of RBI Act, the RBI issued Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 (for short, RNBC Directions). RBI under the RBI Act and the RNBC Directions, regulates the deposit acceptance activities of the RNBCs. Chapter III-B of the RBI Act provides for compulsory registration of NBFCs/RNBCs with RBI and stipulation of minimum net owned funds requirement, creation of reserve fund and transfer of certain percentage of profits every year to the said fund and the prescription of liquidity requirement. The RBI is vested with powers to issue guidelines with regard to other activities of NBCFs/RNBCs including income recognition, accounting standard, provisions for bad and doubtful debts, capital adequacy, etc. The purpose is to ensure sound and healthy operations and the quality of assets of these companies. Under Section 45-N of the RBI Act, RBI is vested with powers to cause an inspection of any Non-Banking Institutions including financial institutions. The RBI is also empowered to issue directions to the auditors of NBFC to order special audit of NBFCs, prohib