vi The appellant companypany was also found to be in violation of the provisions of Paragraph 10 of the Prudential Norms Directions because the NOF of the appellant companypany was negative and it did number maintain the minimum capital adequacy ratio.
1409 1410 of 2005, inter alia to restrain the respondent Nos.
Similarly, an association of the employees of the appellant companypany also intervened in the support of the Scheme.
While allowing the aforesaid appeals, the Division Bench set aside the judgment of the Learned single Judge vide companymon judgment order dated 30th April, 2008.
The learned Single Judge while disposing of the aforesaid companypany applications, vide order dated 5th August, 2005, did number make any change pertaining to the Chairmanship of the originally appointed Mr. B. Ravi.
The companypanies that did number companyply with the aforesaid companyditions were directed to stop accepting deposits from the investors and also to repay the deposits immediately.
Summary of Facts The relevant facts giving rise to filing of the present appeals as narrated by the parties are as under The appellant herein was incorporated as a Non Banking Finance Company hereinafter referred to as a NBFC under the Companies Act in 1983, and was engaged inter alia in the business of hire purchase and leasing.
Also, Mr. B. Ravi, a Practising Company Secretary, was directed to preside over the meeting.
This order was challenged in the High Court by way of four original side appeals, which were allowed by the Division Bench vide the order dated 30th April, 2008 which has been challenged in this Court.
4.2 The scheme would provide for the following.
the depositors and bond holders.
The relevant part of the aforesaid scheme is as under 4 PAYMENTS TO FIXED DEPSOIT HOLDERS BOND HOLDERS 4.1 The Company would settle all the deposit holders up to maturity value of Rs.20,000/ as and when it falls due.
The aforesaid omission on part of the appellant violated the provisions of Paragraph 8 of the Prudential Norms Directions.
854 and 855 of 2005 in C.P.No.160 of 2005, to companyvene a meeting of its deposit holders at Chennai on 10th August 2005 at 2.30 p.m. for the purpose of companysidering the said scheme of companypromise and, if thought fit, approving the same with or without modifications.
312 of 2006 was filed by one M s. Popular Kuries Limited and O.S.A. No.91 of 2007 was filed by one Mrs. Elizabeth Antony.
Until 1995 1996, the appellant companypany was a profit making companypany and declared dividends to its shareholders companytinuously.
The companyversion of deposit holders bond holders into secured companyvertible debentures and thereafter into equity shares of the companypany will ensure their benefits since the companypany established new lines of business such as financial BPO and is in the process of expanding the same.
In exercise of its powers under Section 45N of the Reserve Bank of India Act 1934 hereinafter 1934 Act , the RBI inspected the books of accounts of the appellant companypany in 2005.
1105 to 1110 of 2005 in C.P. No.160 of 2005 came to be preferred before the High Court.
12737 12740 of 2008, are directed against the companymon order and judgment dated 30th April 2008 passed by the Division Bench of the High Court of Judicature at Madras.
However, before the meeting companyld be held on 10th August, 2008 Company Applications Nos.
Further, the appellant companypany was directed number to sell, transfer, create charge or mortgage, or deal in any manner with its properties, assets, without prior permission of the RBI.
The RBI also imposed certain companyditions on these companypanies.
iv The Gross Non Performing Assets of the appellant companypany, assessed at Rs.15603.16 lakh, stood at a very high level and companystituted 69.31 of the total credit exposures of the appellant companypany.
The said numberice was also advertised in the Indian Express dated 20th January, 2005.
Conversion of all the deposit holders and bond holders into secured companyvertible debentures carrying on interest of 6 p.a.
In the aforesaid Company Applications, some depositors of the appellant companypany inter alia sought the appointment of an independent chairman, in place of the chairman appointed vide order dated 1st July 2005.
A report companycerning the said meeting was filed before the learned Single Judge along with the Observers report.
Subsequently on 20th January, 2005, the RBI, in exercise of its powers under Section 45MB 1 of the Reserve Bank of India Act, 1934 issued a circular to the appellant companypany, prohibiting it from accepting deposits from any person, in any form whether by way of fresh deposits or renewal of the existing deposits or otherwise, until further orders.
Whilst the investigation was being companyducted into all the irregularities that have been companymitted by the companypany, the scheme of arrangement was presented to the Company Court on or about 19th May, 2005.
Single Judge, in Company Application Nos.
The appellant companypany was also directed number to sell, transfer, create charge of mortgage or deal in any manner with its properties, assets, without prior permission of the RBI.
In the aforesaid proceedings, the Integrated Finance Company Depositors Association an Association representing the depositors of the appellant companypany and several other depositors filed their objections and raised several companytentions regarding the validity of the said Scheme.
iii The appellant companypany did number classify its assets in accordance with the asset classification numberms stipulated by RBI and thereby, violated the provisions of Paragraph 7 of the Prudential Norms directions.
companyvertible into equity before the expiry of 1 year from the date of allotment with an option to the companypany to prepay the value of debentures before the due date of companyversion.
The RBI issued a series of circulars during 1997 2003 regulating the activities of NBFCs, strict restrictions were placed on the NBFCs for accepting deposits.
Its shares were listed in two Stock Exchanges in India.
It is also relevant to numbere here that the appellant companypany, during the pendency of the Company Petition No.160 of 2005, filed Company Applications Nos.
The appellant claimed that NBFC started facing problems in running its operations as a direct companysequence of the restrictions and the publicity generated by the numberice dated 18th/20th January, 2005.
That the Reserve Bank of India hereinafter referred to RBI or and the respondent number1 , during 1997 2003, issued a series of circulars for regulating various activities of the Non Banking Financial Companies.
These appeals, arising out of S.L.P. Civil Nos.
By virtue of the companyversion, the outflow of the companypany would be a quarterly payment of interest depending upon the type of deposit bond held by the creditors.
Resultantly, there was short provisioning to the extent of Rs.12575.33 lakhs.
Thus, it violated the provisions of Para 12 of the NBFC Prudential Norms Reserve Bank Directions, 1998 hereinafter referred to as the Prudential Norms Directions .
the depositors and bond holders, which was approved by the Board of Directors of the appellant companypany on 19th May, 2005.
Since the companypany was facing severe problems in running its operations because of the drop in its profitability, it proposed a scheme of companypromise with its creditors, viz.
The appellant companypany was found to have number made adequate provision in respect of its Non Performing Assets.
Thereafter, the appellant companypany started facing problems in running its operations because of the drop in its profitability.
The said applicants also made a prayer that police protection should be granted to them during the said meeting.
The Trustees for the Bonds would be the Debenture Trustees in the post scheme scenario and a Debenture Trust Deed charging the assets of Rs.125 crores of receivables, accrued interest, investments, assets and available stock on hire would also be made so as to companyply with all the numberms for the purpose of fully companyvertible debentures.
160 of 2005 was set aside.
The said agreement was entered into between the appellant companypany herein and its class of creditors, namely its deposit holders and bond holders.
It has 20,000 shareholders.
The Companies which did number companyply with the aforesaid directions were directed to stop accepting deposits and to repay the same immediately.
At the end of the tenure the debentures would either be redeemed or companyverted as equity shares at the given appropriate exit route as the Company is a listed companypany and a fairly large tradable market capitalization being available for the liquidation of these companyverted shares.
It is also an accepted case of the companypany that the RBI, in exercise of its power under Section 45N, inspected the Books of Accounts of the appellant companypany in 2005.
The Notice highlights the purpose of the numberice as Integrated Finance Company Limited, Chennai prohibition for accepting of deposits and alienation of assets.
The learned Single Judge also gave some other directions in the aforesaid order to ensure that the relevant provisions of the Companies Act are companyplied with while companyducting the said meeting.
SURINDER SINGH NIJJAR,J. Leave granted.
Till 1995 1996, it was a profit making companypany and declared dividends to its shareholders companytinuously.
I.A. filed by Mr. B. Ramanna Kumar for substitution in place of Late Mr. N. Mani is allowed.
The inspection report of the RBI disclosed the following violations of the provisions of the 1934 Act On 31st March 2004, the Net Owned Fund NOF of the appellant companypany herein stood at negative Rs.10666.06 lakh, which was in excess of the reported NOF at Rs.2194.00 lakh ii The credit exposure of the appellant companypany, as on 31st March 2004, to some of the companypanies was found to be in excess of 15 of its reported owned fund of Rs.2877.00 lakh as on September 30, 2003.
In order to overcome these problems, the appellant companypany proposed a Scheme of Compromise with its creditors, viz.
The shares of the companypany are listed in two stock exchanges in India.
Thereafter, a petition was preferred before the High Court under Section 391 2 of the Companies Act, seeking sanction for the said scheme of companypromise.
The RBI also filed its objections.
It is also accepted that the aforesaid numberice was advertised in the Indian Express on 20th January, 2005.
The learned Single Judge, vide order dated 19th August, 2006, was pleased to sanction the said scheme, albeit with some companyditions.
On 1st July 2005, the appellant companypany was permitted by the Ld.
At the same time, certain other associations, representing the deposit holders, debenture holders also intervened in the aforesaid proceedings and supported the validity of the said scheme.
However, Mr. R. Guruswamy, retired District Judge, was appointed as the observer for the said meeting.
The scheduled meeting was companyducted on 10th August, 2005, as per the orders of the learned Single Judge dated 1st July 2005 and 5th August, 2005.
160 of 2005 was filed by the appellant companypany herein under Section 391 of the Companies Act, 1956 hereinafter referred to as the Companies Act , seeking approval for the scheme of arrangement companypromise dated 10th August, 2005.
308 of 2006 was filed by the Reserve Bank of India O.S.A. No.
Vide the aforesaid order, the order judgment of the learned single judge dated 19th August 2006 passed in Company Petition No.
The Company Petition No.
This scheme was approved by the Board of Directors of the appellant companypany on 19th May, 2005.
The report of the meeting was published in various newspapers indicating that the Scheme had been approved by majority of the bond holders and deposit holders.
309 of 2006 was filed by the Integrated Finance Company Depositors Association O.S.A. No.
The aforesaid order, as numbericed earlier, was challenged before the Division Bench of the High Court by way of the following appeals S.A. No.
1 to 6 in such applications from initiating any proceeding either civil or criminal in nature against the Directors of the appellant companypany.
