Case Law Details
RBG Leasing And Credit Limited Vs Reserve Bank of India & Anr. (Delhi High Court)
In the case of RBG Leasing And Credit Limited Vs Reserve Bank of India & Anr., the Delhi High Court addressed the cancellation of the petitioner’s Non-Banking Financial Company (NBFC) registration due to failure to meet the mandated Net Owned Fund (NOF) of Rs. 200 lakh by the specified deadline. The petitioner, an NBFC since May 2001, was subject to RBI’s regulatory framework, which required NBFCs to maintain an NOF of Rs. 100 lakh by March 2016 and Rs. 200 lakh by March 2017. While the petitioner managed to achieve the required NOF by March 2018, they were issued a show cause notice for non-compliance with the initial deadline. Despite submitting a response, the RBI deemed it unsatisfactory and proceeded to cancel the company’s Certificate of Registration (COR). The petitioner appealed, but the appellate authority upheld the cancellation order, even though the required NOF had been reached by March 2019.
The Delhi High Court found that the matter was similar to previous cases involving other NBFCs, where courts had set aside such cancellation orders. Based on the petitioner’s submission and similar precedents, the court set aside both the RBI’s cancellation order and the appellate authority’s decision. The case was remitted to the RBI for fresh consideration, instructing the bank to reassess the petitioner’s compliance and additional materials. The court granted the petitioner the opportunity to file a detailed representation within 15 days, urging the RBI to reconsider the case in light of current regulations. This decision reopens the case, giving the NBFC another chance to justify its compliance with the NOF requirement.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This hearing is being conducted through hybrid mode.
W. P.(C) 8603/2020 & CM APPL. 51354/2024 (For early hearing)
2. This application has been moved on behalf of the applicant/petitioner for an early hearing and disposal of the present matter.
3. Learned counsels for the respondents are present on advance notice through video conferencing.
4. Mr. K.C. Mittal learned counsel for the petitioner has urged that the present matter is squarely covered by several decisions passed by this Court and the impugned order assailed in the present writ petition is only required to be set aside and the matter is required to be remanded back to the respondent No.1 i.e. Reserve Bank of India [“RBI”] for fresh consideration.
5. Ramesh Babu learned counsel for the respondent No.1 submits that he has no objection if the relief prayed by the learned counsel for the petitioner is granted.
6. Having heard the learned counsels for the parties and on perusal of the record, in a nutshell, the petitioner, which is a NBFC1 since 16.05.2001 has invoked writ jurisdiction of this Court under Article 226 of the Constitution of India seeking quashing of impugned order dated 09.04.2020 passed by the Appellate Authority (Department of Financial Service) Ministry of Finance under Section 45IA (7) of the Reserve Bank of India Act, 1934.
7. Evidently, the respondent No.1 has been passing certain directions to provide regulatory framework for the functioning of the NBFCs, particularly in regard to attaining NOF2 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 [“SCN”] by respondent No.1 for non-maintenance of NOF as per revised regulatory guidelines notified on 11.03.2016.
8. Although, a reply dated 11.06.2018 was filed, the same 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 Lacs had been achieved as on 31.03.2019, passed the impugned order dated 09.04.2020, and thereby, affirming the cancellation of COR of the petitioner by RBI.
9. In the said backdrop, attention of this Court is invited to the decision of the Co-ordinate Bench of this Court in case titled as Premier Capital & Securities Private Limited v. Union of India3 wherein the facts were somewhat similar. The issue appears to be covered by the decisions of this Court in M/S BHC Finance and Leasing Pvt Ltd. v. Union of India & Ors4., in W.P.(C) 3637/2020 dated 16.08.2022 titled as Nirma Credit and Capital Pvt Ltd. v. Union of India & Anr., in W.P.(C) 4236/2020 dated 02.11.2022 titled as Apple Portfolio Limited v. Union of India and W.P.(C) 258/2020 dated 22.11.2022 titled as Eynthia Tie-up Pvt. Ltd. v Union of India & Ors.
10. In view of the above, the instant writ petition also requires to be dealt with on similar terms. At the cost of repetition, learned counsel for the respondent No.1 submits that they would abide by whatever decision that will be taken by this Court.
11. Accordingly, the instant writ petition is disposed of with the following directions:
“i. The order passed by the RBI dated 25.09.2018 and the impugned order dated 09.04.2020 passed by the Appellate Authority order are hereby set aside.
ii. The matter is remitted back to the RBI for fresh consideration, which shall take a decision on the basis of material produced by the petitioner before this court and the subsequent material to be produced before RBI, within 15 days from the date of receipt of the copy of the order passed today.
iii. 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 instant writ petition.
iv. All the rights and contentions of the parties are left open.”
12. The present writ petition along with the pending application stands disposed of on the above terms.
Notes:
1 Non Banking Financial Company
2 Net Owned Fund
3 W.P. (C) 11062/2022 dated 08.11.2023
4 W.P. (C) 5991/2020 dated 08.08.2022
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