The bench of Justice Dharmesh Sharma while quashing the order passed by the RBI remitted the matter back to the RBI for fresh consideration, which shall take a decision on the basis of material produced by the petitioner and the subsequent material to be produced before RBI, within 15 days.
The petitioner, which is a NBFC since 16.05.2001 has invoked writ jurisdiction of the Court under Article 226 of the Constitution of India seeking quashing of impugned order passed by the Appellate Authority (Department of Financial Service) Ministry of Finance under Section 45IA (7) of the Reserve Bank of India Act, 1934.
The RBI has been passing certain directions to provide regulatory framework for the functioning of the NBFCs, particularly in regard to attaining NOF and it came out that notification dated 27.03.2015, which was Gazetted on 11.03.2016, provided that all types of NBFCs are required to maintain NOF of Rs. 100 Lacs by the end of March 2016 and Rs. 200 Lacs by the end of March 2017. Evidently, the petitioner achieved NOF of Rs. 200 Lacs by 12.03.2018. However, it was issued a Show Cause Notice by RBI for non-maintenance of NOF as per revised regulatory guidelines notified on 11.03.2016.
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Although a reply was filed, it was held to be not satisfactory. An appeal was preferred against the cancellation of Certificate of Registration (COR) vide order dated 25.09.2018 before the Appellate Authority, which, as per the petitioner despite finding that NOF of Rs. 204.98 Lakh had been achieved as on 31.03.2019, passed the impugned order, and by, affirming the cancellation of COR of the petitioner by RBI.
The grievance of the petitioner that it was not granted a reasonable opportunity of being heard before the petitioners were visited with the cancellation order, is also meritless.
It is clear on a reading of Sub-Section (3) of Section 45-IA, that the said Sub- Section deals only with the situation as it arose upon enactment of Act 23 of 1997, whereby Section 45-IAwas introduced for the first time. Sub-Section (3) of Section 45-IA has, therefore, exhausted itself out and it cannot be invoked in respect of subsequent enhancement of NOF requirement in terms of the Section 45-IA(1)(b). The notification in question was issued by the RBI after 18 years of the enactment of Act 23 of 1997, (whereby Section 45- IA was inserted in the RBI Act). By then, Sub-Section (3) had already worked itself out. The petitioners have not brought to our notice any provision in the Act which stipulates the minimum time period that the RBI was obliged to grant to non-banking financial companies to achieve the enhanced NOF. In the absence of any statutorily prescribed period, the RBI could grant any reasonable time for attainment of the NFO of Rs. 200 lakhs.
The court while disposing of the writ petition stated that if the petitioner files a detailed representation before the RBI explaining all circumstances and places on record the relevant material to justify the same, let the same be considered by the RBI afresh, in accordance with law, including the extant regulations without being prejudiced by the stand taken in the writ petition.
Case Title: RBG Leasing And Credit Limited Versus RBI
Case No.: W.P.(C) 8603/2020
Date: 04/09/2024
Counsel For Appellant: K.C. Mittal
Counsel For Respondent: Ramesh Babu
