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Issues: (i) Whether the writ petition seeking directions to the Reserve Bank of India to act against an NBFC was maintainable under Article 226; (ii) whether, on the facts placed before the Court, the RBI had failed to exercise its supervisory powers so as to justify directions for intervention, suspension of the Board, and appointment of administrators and auditors.
Issue (i): Whether the writ petition seeking directions to the Reserve Bank of India to act against an NBFC was maintainable under Article 226.
Analysis: Chapter III-B of the Reserve Bank of India Act, 1934 was treated as a complete code governing NBFC supervision, and Section 45Q was applied to give it overriding effect over inconsistent laws. The writ jurisdiction under Article 226 was held to be available where a statutory authority fails to perform a duty or fails to exercise powers vested in it, and the existence of parallel proceedings before the NCLT and NCLAT did not by itself defeat maintainability.
Conclusion: The writ petition was held to be maintainable.
Issue (ii): Whether, on the facts placed before the Court, the RBI had failed to exercise its supervisory powers so as to justify directions for intervention, suspension of the Board, and appointment of administrators and auditors.
Analysis: The material on record, including the RBI's status report, showed alleged breaches relating to leverage ratio, acceptance and conversion of OCDs/CCPS without approval, non-submission of returns, and serious concerns regarding mismanagement and possible diversion of funds. The Court held that such circumstances warranted exercise of supervisory control to prevent further prejudice to investors and stakeholders, and that directions could issue in aid of enforcement of the statutory regime governing NBFCs.
Conclusion: Directions for RBI intervention, suspension of the Board, appointment of an interim committee of administrators, and special audit were justified.
Final Conclusion: The petition succeeded and the Court granted supervisory and protective reliefs to secure the affairs of the NBFC and safeguard stakeholder interests.
Ratio Decidendi: Where a statutory regulator vested with continuous supervisory powers over an NBFC fails to act despite material indicating regulatory breaches and mismanagement, the High Court may invoke Article 226 to compel performance of the statutory duty and issue protective directions consistent with the overriding scheme of the special statute.
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