2006 (1) TMI 258
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....cancelled by the Reserve Bank as per the first proviso to sub-section (6) of section 45-IA, prior opportunity ought to have been given by sending a rectification notice for taking necessary steps to comply with the provisions or conditions. No such opportunity had been given in this case. Therefore, the order dated 6-8-2005 cancelling the Certificate of Registration is not sustainable. (2)The Reserve Bank issued show-cause notice on 18-10-2004 calling upon the petitioner to show cause for the following charges : (i)The Company was carrying on the business of a non-banking financial institution without having a net owned fund of Rs. 25 lakhs, which is mandatory under Clause (b) of sub-section (1) of section 45-IA of the Act. (ii)The Company had accepted and continued to hold the public deposits in violation of the provisions. (iii)The Company failed to produce the documents required by the Reserve Bank of India, thereby violated the provisions of section 45N(2) of the Act. After receipt of the show-cause notice, a reply was sent. Without referring to the reply notice, the final order, namely the impugned order was passed on 6-8-2005 on the other following grounds : (a)The net ....
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....te Authority. (B)The first proviso to section 45-IA(6) of the RBI Act provides that before cancelling the Certificate of Registration, RBI should give an opportunity to the Company by issuing rectification notice indicating the violation of provisions. No such opportunity was given. Hence, the order is vitiated. (C)The impugned order cancelling the Certificate of Registration would refer to the various issues. But, these issues were not raised in the show-cause notice to enable him to give explanation for those issues. Therefore, the principles of natural justice have been violated. (D)The second proviso to section 45-IA(6) would give the opportunity of personal hearing. Accordingly, personal hearings were given and the matter was discussed with the officials of Chennai. But, the impugned order was passed by the different officials who had not heard the matter. So, this is violation of the second proviso. (E)The irregularities found in the show-cause notice have been completely rectified. The net owned fund stood increased on 22-12-2003 upon conversion of Ordinary Preference Shares into Compulsorily Convertible Preference Shares. By virtue of the merger on 24-6-2004 with two ot....
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....) to (g) of sub-section (4), the cancellation can be done. 13. Clause (iv) would indicate failure to comply with any direction issued by the bank relating to maintenance of accounts and failure to make the books available for inspection when so demanded by the inspecting authority. 14. Clause (v) would refer to the prohibition from accepting deposit by an order made by the bank. 15. Mr. A.L. Somayaji, the learned senior counsel appearing for the Bank, the respondent would emphatically state that the first proviso would get attracted, only when the cancellation order was passed on the grounds mentioned in clause (ii) or (iii) of sub-section (6) of section 45-IA alone, but the present case is not only on the grounds mentioned in Clause (ii) or (iii) of sub-section (6) of section 45-IA, but referable to grounds mentioned in clauses (iv) and (v ) also and, therefore, the failure to invoke the first proviso would not invalidate the impugned order. While making such submission, the alternative argument advanced by the counsel for the respondent-Bank is that public interest is involved in this case and as such, the first proviso is not mandatory. 16. In brief, the learned senior couns....
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.... for the appellant would politely and strenuously submit that existence of the alternative remedy which is inefficacious is not a bar to approach High Court under Article 226 and that the alternative remedy is not to be availed in a case of patent illegality where even the source of power is not clear to the person who exercised it and especially when the appellant-Company has totally complied with all the conditions of registration and directions issued by the RBI and request this Court to permit him to urge other points. For the above proposition, he would cite the following authorities : (1)Whirlpool Corpn. v. Registrar of Trade Marks AIR 1999 SC 22; (2)State of H.P. v. Ambuja Cement Ltd. AIR 2005 SC 3936; (3)Asstt. Collector of Central Excise v. Jainson Hosiery Industries AIR 1979 SC 1889; (4)Central Inland Water Transport Corpn. v. Brojo Nath Ganguly AIR 1986 SC 1571. 21. In the light of the above persuasive request, we have allowed him to make detailed submissions on other points made by the learned senior counsel in order to find out whether such a patent illegality has been committed by the authority concerned so as to entertain the writ petition to give the relief sou....
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....uld submit that new issues have been decided in the impugned order in respect of which no opportunity was given to the appellant. 26. On the contrary, it is contended by the learned senior counsel for the respondent that subsequent to RBI's letter dated 5-1-2004 and the show- cause notice dated 18-10-2004, several correspondence were made between the authority and the appellant and those issues are found available in the other documents with reference to which opportunity was given to the appellant for making his submission. 27. Therefore, we are not inclined to look into the nitty gritty details of the various documents including the show-cause notice and final order as it would amount to undertaking the job of appreciating the technical and minute materials. On the other hand, it would be appropriate for the Appellate Authority to look into all the documents available with the Department as well as with the appellant prior to the impugned order since the Appellate Authority is having more expertise and technical knowledge to understand those issues which are said to be referred to in various documents by way of correspondence between the authority and the appellant culminating ....
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.... officer different from the one who heard the parties. However, the proceedings were not in the nature of formal judicial hearings. They were in the nature of meetings and full minutes were recorded of all the points discussed at each meeting. It has not been brought to our notice that any salient point urged by the petitioners has been missed. On the contrary, the order itself summarises and deals with all the important objections of the petitioners. This circumstance has not, therefore, caused any prejudice to the petitioners." 31. In the light of the above observation, it is contended by the counsel for the respondent that it is an institutional hearing and as such, no prejudice has been shown by the counsel for the appellant in order to make the impugned order invalid. It is specifically contended that the Customs Act and the Central Excise Act, the Commissioner of Excise and Customs are specifically designated to take decision as per section 122 of the Customs Act and section 144(c) of the Central Excise Act. But, in this Act, the individual officers are not specifically designated. As such, the hearing in this case is an institutional hearing and decision is finally taken by....
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....on-dent would state that the appellant has been consistently violating the provisions of RBI Act as well as the directions issued by the Bank from time to time and thus, the appellant has been indulging in the activities against the public interest. 36. On hearing the arguments on these lines from the respective counsel, it is clear that the stand of the appellant on the basis of the various documents is that all the directions issued by RBI have been fully complied with and on the other hand, the stand taken by the learned senior counsel for the respondent is that there is a chequered history which would show that the appellant has been consistently violating the conditions of the COR and has not been complying with the directions given by the RBI. 37. The list of events would indicate that from 5-1-2004, the RBI has been sending letters to the appellant pointing out various irregularities, violation of the conditions and giving out directions. Then, on 12-1-2004, the appellant sent a reply. Thereafter, there was some inspection. Ultimately, on 18-10-2004, show-cause notice was issued. On receipt of the reply dated 6-11-2004, the Company Representatives were personally heard on ....