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Issues: (i) Whether the non-banking financial company was liable to be wound up under section 45MC of the Reserve Bank of India Act, 1934 on the grounds that it was unable to pay its debts, had become disqualified to carry on business, was under a prohibition on receiving deposits, and that its continuance was detrimental to public interest and the interests of depositors; (ii) Whether an application under section 391(1) of the Companies Act, 1956 for convening meetings of shareholders and creditors was maintainable after commencement of winding up proceedings.
Issue (i): Whether the non-banking financial company was liable to be wound up under section 45MC of the Reserve Bank of India Act, 1934 on the grounds that it was unable to pay its debts, had become disqualified to carry on business, was under a prohibition on receiving deposits, and that its continuance was detrimental to public interest and the interests of depositors.
Analysis: The company had failed to comply with the statutory requirements governing registration and conduct of non-banking financial business, including maintenance of the prescribed financial position and liquid assets. Its net owned fund was found to be negative, deposits remained unpaid on maturity, thousands of claims before consumer fora were pending, and the Reserve Bank had already prohibited it from accepting deposits and dealing with its assets. These circumstances brought the case within the statutory grounds for winding up under section 45MC.
Conclusion: The grounds for winding up were made out, and the petition for winding up was maintainable and justified.
Issue (ii): Whether an application under section 391(1) of the Companies Act, 1956 for convening meetings of shareholders and creditors was maintainable after commencement of winding up proceedings.
Analysis: Once winding up proceedings had commenced, an application for compromise or arrangement in relation to the company could be maintained only by the liquidator. An application by the company itself was therefore not competent in the facts of the case.
Conclusion: The application under section 391(1) was not maintainable and was dismissed.
Final Conclusion: The company was ordered to be wound up, and the company's separate application for convening meetings under the compromise and arrangement provision was rejected for want of maintainability.
Ratio Decidendi: A non-banking financial company may be ordered to be wound up where statutory disqualifications, persistent default in repayment of deposits, regulatory prohibition on receiving deposits, and detriment to depositors and public interest are established; after commencement of winding up, an application for compromise or arrangement under section 391 can be maintained only by the liquidator.
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