{"id":242443,"date":"2001-12-05T00:00:00","date_gmt":"2001-12-04T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/reserve-bank-of-india-vs-rockland-leasing-ltd-on-5-december-2001"},"modified":"2016-01-27T07:28:02","modified_gmt":"2016-01-27T01:58:02","slug":"reserve-bank-of-india-vs-rockland-leasing-ltd-on-5-december-2001","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/reserve-bank-of-india-vs-rockland-leasing-ltd-on-5-december-2001","title":{"rendered":"Reserve Bank Of India vs Rockland Leasing Ltd. on 5 December, 2001"},"content":{"rendered":"
Delhi High Court<\/div>\n
Reserve Bank Of India vs Rockland Leasing Ltd. on 5 December, 2001<\/div>\n
Author: M B Lokur<\/div>\n
Bench: M B Lokur<\/div>\n<\/p>\n
<\/pre>\n
JUDGMENT<\/p>\n
         Madan B. Lokur, J.  <\/p>\n
 1.                    There  are a very large number of  substantive
\n          petitions pertaining to M\/s Rockland Leasing Ltd.  (for
\n          short Rockland) pending in this Court.  The Registry of
\n          this  Court  informs me that, additionally,  there  are
\n          more than 500 applications pertaining to Rockland which
\n          have  been  disposed  of and another  500  applications
\n          which need to be disposed of.\n<\/p>\n
 2.                   Considering  the  fact that a large number  of
\n          litigants  were  concerned with the disposal  of  these
\n          matters pertaining  to Rockland, I fixed the cases  for
\n          final  disposal on a day to day basis with effect  from
\n          19th  November, 2001 at 2.00 pm.  Arguments were  heard
\n          in  part  on  that  day, and  were  concluded  on  20th
\n          November, 2001 when judgment was reserved.\n<\/p>\n
 3.
\n                   A  large  number of litigants were present  in
\n          Court  on  both the above days.  However, no one  apart
\n          from  Col.  S.K.  Singh wished to add anything to  what
\n          was  lucidly  submitted  by  learned  counsel  for  the
\n          parties.\n<\/p>\n
 4.                    Submissions  were  essentially   made  in  two
\n          cases.  CP 93 of 2001 is a winding up petition filed by
\n          the  Reserve  Bank  of India under  the  provisions  of
\n          Section  45-MC  of the Reserve Bank of India Act,  1934
\n          (for  short  the  RBI  Act).    The  prayer  is,  quite
\n          naturally, for winding up the affairs of Rockland.\n<\/p>\n
 5.                    The  second case is Company Appeal No.4 (B) of
\n          1998  filed by Rockland under the provisions of Section
\n          10-F  of  the  Companies  Act,   1956  (for  short  the
\n          Companies Act).  The prayer of Rockland in this case is
\n          for  setting  aside  the order dated  26th  June,  1998
\n          passed by the Company Law Board in F.No.15\/14\/97.  This
\n          order  was passed under the provisions of Section 45-QA
\n          of  the  RBI Act.  Certain directions for repayment  of
\n          deposits were given by the Company Law Board (for short
\n          CLB)  which were obviously not acceptable to  Rockland,
\n          hence the appeal.\n<\/p>\n
 6.                    All  the  other  petitions  were  for  various
\n          reliefs against Rockland, including its winding up.\n<\/p>\n
 7.
\n                   It  stands to reason, and all learned  counsel
\n          agreed that if the winding up petition filed by the RBI
\n          succeeds,  then  the appeal filed by Rockland  and  all
\n          other   petitions   and     applications   are   really
\n          infructuous.   It  is  on  this   basis  that  I   have
\n          proceeded,  making it necessary to first deal with  the
\n          petition filed by the RBI.\n<\/p>\n
 8.
\n                   Rockland  was incorporated in March, 1984 with
\n          its  registered  office  in Delhi.  Its  objects  were,
\n          inter alia, to “undertake the business of finance, hire
\n          purchase,  leasing  and to finance lease operations  of
\n          all kinds…”\n<\/p>\n
 9.                    According to the RBI, Rockland was carrying on
\n          the  business  of a non-banking financial  company  (or
\n          NBFC) as defined in Section 45-I(f) of Chapter III-B of
\n          the RBI Act.  This reads as follows:-\n<\/p>\n
   “45-I.  Definitions  <\/p>\n
                In  this  chapter,  unless the  context  otherwise
\n               requires –\n<\/p>\n
                (a) and (b) xxx xxx xxx  <\/p>\n
            (c)  “financial institution” means any non-banking
\n               institution  which  carries on as its business  or
\n               part   of  its  business   any  of  the  following
\n               activities, namely:\n<\/p>\n
                (i)   the  financing,  whether  by way  of  making
\n                     loans  or  advances  or  otherwise,  of  any
\n                     activity other than its own;\n<\/p>\n
               (ii)  the  acquisition  of shares,  stock,  bonds,
\n                     debentures   or  securities   issued  by   a
\n                     government  or  local   authority  or  other
\n                     marketable securities of a like nature;\n<\/p>\n
                (iii) letting  or  delivering  of any goods  to  a
\n                     hirer  under  a hire-purchase  agreement  as
\n                     defined  in  clause (c) of section 2 of  the
\n                     Hire-Purchase Act, 1972 (26 of 1972);\n<\/p>\n
                (iv)  the  carrying  on of any class of  insurance
\n                     business;\n<\/p>\n
                (v)   managing,  conducting  or   supervising,  as
\n                     foreman,  agent or in any other capacity, of
\n                     chits  or kuries as defined in any law which
\n                     is for the time being in force in any State,
\n                     or any business, which is similar thereto;\n<\/p>\n
               (vi)  collecting,  for  any purpose or  under  any
\n                     scheme  or  arrangement  by  whatever   name
\n                     called,  monies in lump sum or otherwise, by
\n                     way of subscriptions or by sale of units, or
\n                     other instruments or in any other manner and
\n                     awarding prizes or gifts, whether in cash or
\n                     kind, or disbursing monies in any other way,
\n                     to persons from whom monies are collected or
\n                     to any other person,  <\/p>\n
               but  does  not  include   any  institution,  which
\n               carries on as its principal business, –\n<\/p>\n
                (a)   agricultural operations; or<\/p>\n
               (aa)  industrial activity;  or  <\/p>\n
               (b)   the  purchase  or sale of any  goods  (other
\n                     than  securities)  or the providing  of  any
\n                     services;  or  <\/p>\n
               (c)   the   purchase,  construction  or  sale   of
\n                     immovable  property,  so, however,  that  no
\n                     portion  of the income of the institution is
\n                     derived  from  the financing  of  purchases,
\n                     constructions or sales of immovable property
\n                     by other persons;\n<\/p>\n
                Explanation:   For  the purposes of  this  clause,
\n               “industrial activity” means any activity specified
\n               in  sub-clause  (i)  to (xviii) of clause  (c)  of
\n               section  2  of the Industrial Development Bank  of
\n               India Act, 1964 (18 of 1964).\n<\/p>\n
                (d) and (e) xxx xxx xxx  <\/p>\n
 (f) “non-banking financial company” means –\n<\/p>\n
 (i)  a financial institution which is a company;\n<\/p>\n
 (ii) a  non-banking institution which is a company
\n                    and  which has as its principal business  the
\n                    receiving  of  deposits, under any scheme  or
\n                    arrangement or in any other manner,or lending
\n                    in any manner;\n<\/p>\n
 (iii) such  other non-banking institution or class
\n                    of  such institutions, as the bank may,  with
\n                    the   previous   approval  of   the   Central
\n                    Government   and  by   notification  in   the
\n                    Official Gazette, specify.”\n<\/p>\n
 10. The  definition abovementioned was incorporated  in
\n          the  RBI  Act by the Reserve Bank of India (Amendment)  Act,
\n          1997  with  effect  from 9th January,  1997.   Consequently,
\n          Rockland  was governed and bound by the existing  directions
\n          of  the  RBI including the Non-Banking  Financial  Companies
\n          (Reserve Bank) Directions, 1977 as amended.\n<\/p>\n
 11.                   These  directions included, among other things, the
\n          definition  of  an “equipment leasing company” and an  NBFC.
\n          Direction 2 defined these terms as follows:-\n<\/p>\n
                “(dd)   “equipment  leasing   company”  means  any
\n               company  which is a financial institution carrying
\n               on  as  its  principal  business, the activity  of
\n               leasing  of  equipment  or the financing  of  such
\n               activity; (with effect from 22nd August, 1984) <\/p>\n<\/blockquote>\n
 (l)  “non-banking  financial  company”  means  any
\n               hire-purchase  finance, investment, loan or mutual
\n               benefit financial company and an equipment leasing
\n               company  but does not include an insurance company
\n               or  a  stock exchange or stock  broking  company;”
\n               (with effect from 26th June, 1989)  <\/p>\n<\/blockquote>\n
 12.                   Sometime  in  1993,  Rockland claims  to  have  got
\n          itself  registered as a Category I Merchant Banker with  the
\n          Securities  & Exchange Board of India (or SEBI) for a period
\n          of  three  years,  that is, till 16th October,  1996.   This
\n          period  was  extended  for  another three  years  till  16th
\n          October,  1999.   According  to Rockland,  its  business  of
\n          “equipment  leasing’ was actually an “industrial concern” as
\n          defined  in Section 2(c) of the Industrial Development  Bank
\n          of  India Act, 1964 (for short the IDBI Act).  The  relevant
\n          portion of the definition reads as follows:-\n<\/p>\n
  “2.  Definitions – In this Act, unless the context otherwise requires, –\n<\/p>\n
 (a) & (b) xxx xxx xxx  <\/p>\n
 (c) “Industrial concern” means any concern engaged
\n               or to be engaged in, –\n<\/p>\n
 (i) to (xv) xxx xxx xxx  <\/p>\n
 (xvi) leasing,  sub-leasing  or giving on hire  or
\n                     hire-purchase    of     industrial   plants,
\n                     equipments,   machinery  or   other   assets
\n                     including vehicles, ships and aircraft;”\n<\/p>\n
 13. The  view  sought to be canvassed by  Rockland  was
\n          that  as a result of the above, it ceased to be a “financial
\n          institution”  as  defined in Section 45-I(c) of the RBI  Act
\n          since  in terms of Clause (vi)(aa) thereof it carried on  an
\n          industrial   activity.   Moreover,  since  it  was   not   a
\n          “financial  institution”,  it  could not be an NBFC  as  per
\n          Section 45-I(f) of the RBI Act.\n<\/p>\n
 14.   The  consequence of this contention of Rockland was
\n          that  since  it was not an NBFC, no petition for winding  up
\n          its  affairs  was  maintainable  under the  RBI  Act.   This
\n          contention will, of course, be dealt with at the appropriate
\n          place.\n<\/p>\n
 15. Furthermore,  according  to Rockland,  SEBI  issued
\n          Notification  S.O.837(E) dated 9th December, 1997  directing
\n          all merchant bankers to cease to be an NBFC.  This direction
\n          was  complied with and Rockland ceased to be an NBFC.   This
\n          was  another  ground set up by Rockland for questioning  the
\n          maintainability of the winding up petition filed by the RBI.\n<\/p>\n
 16. Be  that  as it may, the audited balance  sheet  of
\n          Rockland  as  on 31st March, 1997 (as revealed  in  Co.A.(B)
\n          No.4\/1998)  shows  that  its  paid up  capital  was  Rs.7.12
\n          crores  and  its reserves and surplus were  Rs.9.07  crores.
\n          The net worth of Rockland was Rs.16 crores, while its public
\n          deposits were Rs.20.96 crores.\n<\/p>\n
 17. Notwithstanding  these figures and the  contentions
\n          referred  to above, Rockland applied to the RBI on 3rd July,
\n          1997  for a Certificate of Registration under the provisions
\n          of Section 45-IA(2) of the RBI Act as an NBFC.  The RBI had,
\n          quite  naturally, to satisfy itself by an inspection of  its
\n          books  that Rockland fulfills the conditions for the purposes
\n          of  considering  its application for registration.  This  is
\n          the   requirement  of  Section   45-IA(4),  which  reads  as
\n          follows:-\n<\/p>\n
 “45-IA.  Requirement of registration and net owned
\n               fund  <\/p>\n
 (1) xxx xxx xxx  <\/p>\n
 (2) Every non-banking financial company shall make
\n               an  application  for registration to the  bank  in
\n               such form as the bank may specify:\n<\/p>\n
 PROVIDED  that a non-banking financial company  in
\n               existence  on the commencement of the Reserve Bank
\n               of  India  (Amendment)  Act, 1997  shall  make  an
\n               application  for  registration to the bank  before
\n               the  expiry  of six months from such  commencement
\n               and   notwithstanding   anything    contained   in
\n               sub-section  (1)  may  continue to  carry  on  the
\n               business  of  a non-banking financial  institution
\n               until  a certificate of registration is issued  to
\n               it or rejection of application for registration is
\n               communicated to it.\n<\/p>\n
  (3) xxx xxx xxx  <\/p>\n
 (4)  The bank may, for the purpose of  considering
\n               the  application  for registration, require to  be
\n               satisfied  by  an inspection of the books  of  the
\n               non-banking  financial  company or otherwise  that
\n               the following conditions are fulfillled:-\n<\/p>\n
 (a)   that the non-banking financial company is or
\n                     shall be in a position to pay its present or
\n                     future  depositors in full as and when their
\n                     claims accrue;\n<\/p>\n
 (b)   that   the   affairs  of   the   non-banking
\n                     financial  company are not being or are  not
\n                     likely   to  be  conducted   in   a   manner
\n                     detrimental  to the interests of its present
\n                     or future depositors;\n<\/p>\n
 (c)   that the general character of the management
\n                     or   the   proposed    management   of   the
\n                     non-banking  financial company shall not  be
\n                     prejudicial  to  the public interest or  the
\n                     interests of its depositors;\n<\/p>\n
 (d)   that  the non-banking financial company  has
\n                     adequate  capital  structure   and   earning
\n                     prospects;\n<\/p>\n
 (e)   that  the public interest shall be served by
\n                     the  grant of certificate of registration to
\n                     the   non-banking  financial    company   to
\n                     commence  or  to  carry on the  business  in
\n                     India;\n<\/p>\n
 (f)   that   the   grant    of   certificate    of
\n                     registration shall not be prejudicial to the
\n                     operation and consolidation of the financial
\n                     sector  consistent  with monetary  stability
\n                     and  economic growth considering such  other
\n                     relevant  factors  which  the bank  may,  by
\n                     notification   in  the   Official   Gazette,
\n                     specify;  and  <\/p>\n
 (g)   any  other condition, fulfillment or which in
\n                     the  opinion of the bank, shall be necessary
\n                     to  ensure  that  the   commencement  of  or
\n                     carrying  on  of the business in India by  a
\n                     non-banking  financial company shall not  be
\n                     prejudicial to the public interest or in the
\n                     interest of the depositors.”\n<\/p>\n
 18.                   For  carrying out its duties under the RBI Act,  an
\n          inspection  of  Rockland was undertaken by the  RBI  between
\n          12th  and  22nd  September,  1997 under  the  provisions  of
\n          Section 45-N of the Act.  This reads as follows:-\n<\/p>\n
 “45-N.  Inspection  <\/p>\n
 (1) The bank may, at any time, cause an inspection to  be  made  by one or more of  its  officers  or
\n               employees  or  other persons (hereinafter in  this
\n               section referred to as the inspecting authority) –\n<\/p>\n
                (i)   of  any non-banking institution, including a
\n                     financial  institution, for the purposes  of
\n                     verifying the correctness or completeness of
\n                     any  statement,  information or  particulars
\n                     furnished  to the bank or for the purpose of
\n                     obtaining  any  information  or  particulars
\n                     which the non-banking institution has failed
\n                     to  furnish  on being called upon to do  so;
\n                     or<\/p>\n
                (ii)  of  any  non-banking   institution  being  a
\n                     financial institution, if the bank considers
\n                     it  necessary  or expedient to inspect  that
\n                     institution.\n<\/p>\n
               (2)  It  shall  be the duty of every  director  or
\n               member of any committee or other body for the time
\n               being vested with the management of the affairs of
\n               the  non-banking  institution or other officer  or
\n               employee  thereof  to   produce  to the inspecting
\n               authority  all  such  books,  accounts  and  other
\n               documents  in his custody or power and to  furnish
\n               that authority with any statements and information
\n               relating  to  the business of the  institution  as
\n               that  authority  may required of him, within  such
\n               time as may be specified by that authority.\n<\/p>\n
                (3)  The inspecting authority may examine on  oath
\n               any  director  or member of any committee or  body
\n               for  the time being vested with the management  of
\n               the  affairs  of  the non-banking  institution  or
\n               other  officer or employee thereof, in relation to
\n               its   business   and  may   administer   an   oath
\n               accordingly.”\n<\/p>\n
 19.                Additionally,  in  exercise of powers conferred  by
\n          Section  45-MA(3)  of  the  RBI Act,  M\/s  Dewan  &  Gulati,
\n          Chartered Accountants were appointed by the RBI to conduct a
\n          special  audit of the accounts of Rockland with reference to
\n          its  financial position as on 31st March, 1997 and to submit
\n          a  report to it.  The broad parameters of the special  audit
\n          were  indicated  in  the letter dated  31st  December,  1997
\n          appointing M\/s Dewan & Gulati.\n<\/p>\n
 20.                  Section 45-MA(3) of the RBI Act reads as follows:-\n<\/p>\n
             “45-MA.  Powers and duties of auditors  <\/p>\n
 (1) & (2) xxx xxx xxx  <\/p>\n
              (3)  Where  the bank is of the opinion that it  is
\n               necessary  so  to do in the public interest or  in
\n               the interest of the non-banking financial company,
\n               or  in the interest of depositors of such  company
\n               it  may at any time by order direct that a special
\n               audit of the accounts of the non-banking financial
\n               company  in  relation to any such  transaction  or
\n               class  of  transactions  or  for  such  period  or
\n               periods,  as may be specified in the order,  shall
\n               be  conducted and the bank may appoint an  auditor
\n               or  auditors  to  conduct such special  audit  and
\n               direct  the auditor or the auditors to submit  the
\n               report to it.”\n<\/p>\n
 21.                   Soon  thereafter,  the  RBI issued  two  directions
\n          being  No.DFC.114\/DG(SPT)-98  dated  2nd January,  1998  and
\n          No.DFC.115\/DG(SPT)-98  of  the  same date.  Only  a  passing
\n          reference  has  been made to these two Notifications in  the
\n          pleadings,  but it appears that the RBI prohibited all NBFCs
\n          from  accepting  deposits if they did not possess  a  credit
\n          rating  of  minimum  ‘A’  from any  approved  credit  rating
\n          agency.   Perhaps, because of this, Rockland wrote a  letter
\n          dated  8th  January,  1998 to the RBI stating  that  it  had
\n          decided  “in favor of retaining the fee based activities of
\n          Merchant Banking and discontinue financing operations.  From
\n          now on, the Company has stopped all fund based operations as
\n          a  NBFC.” This was preceded by an appropriate resolution  of
\n          the Board of Directors of Rockland on 6th January, 1998.\n<\/p>\n
 22.                 Rockland  also  wrote to the RBI on  14th  January,
\n          1998  expressing its unhappiness over the recent events  but
\n          proposed  to  “discharge our liabilities of Public  Deposits
\n          within  a period of three years starting from January,  1998
\n          for  repayment  in the ratios of 40:30:30  corresponding  to
\n          this period.”\n<\/p>\n
 23. Notwithstanding these events, the RBI decided to go
\n          ahead  with its special audit by M\/s Dewan & Gulati.   This,
\n          however,  met with little or no success because Rockland did
\n          not  co-operate with the Chartered Accountants.  This was so
\n          intimated to the RBI by letters dated 15th January, 1998 and
\n          12th  May,  1998.   In fact, in the letter dated  12th  May,
\n          1998, M\/s Dewan & Gulati have gone so far as to say:-\n<\/p>\n
                 “This all action on the part of Company shows that
\n               Company  is not interested in getting the  special
\n               audit  done and for this they adopted strategy  to
\n               waste  time in correspondence, so that time  limit
\n               provided  to us for audit is expired and they  can
\n               be  exempted  from  the  special  audit.   In  our
\n               opinion  the Company does not want their  accounts
\n               to  be checked, as the Company seems to be indulge
\n               in defrauding depositors.”\n<\/p><\/blockquote>\n
 24.                   The  say  of  Rockland  in  this  context  is  that
\n          although  it  was  ready  and   willing  to  repay  all  its
\n          depositors in three years time (as per the letter dated 14th
\n          January, 1998), it was not permitted to do so because of two
\n          subsequent   Notifications   dated    31st   January,   1998
\n          superceding  the  earlier directions of 2nd  January,  1998.
\n          These  Notifications are described as the NBFC Acceptance of
\n          Public Deposits (Reserve Bank) Directions, 1998 and the NBFC
\n          Prudential  Norms  (Reserve Bank) Directions, 1998.  In  any
\n          case,  according  to Rockland, these Notifications were  not
\n          applicable  to  it since it had withdrawn as an NBFC on  8th
\n          January, 1998.\n<\/p>\n
 25.                    Whatever  be the position, on 10th February,  1998,
\n          the  RBI sent a detailed notice to Rockland stating that  in
\n          view  of various factors (of which nine were outlined),  its
\n          application  for the grant of a Certificate of  Registration
\n          under  Section  45-IA(2)  of  the RBI Act to  carry  on  the
\n          business  of  an  NBFC could not be granted.   Rockland  was
\n          given  time  to  represent  against the  letter  dated  10th
\n          February, 1998.\n<\/p>\n
 26.                    Rockland  did send a detailed representation  dated
\n          19th  February,  1998 setting out its case and concluded  by
\n          withdrawing  its  application dated 3rd July, 1997  for  the
\n          grant of a Certificate of Registration.\n<\/p>\n
 27.                    The  letter  dated  19th  February,  1998  sent  by
\n          Rockland  met  with  a rather stern response from  the  RBI,
\n          which  stated  in  its  letter dated  16th  April,  1998  as
\n          follows:-\n<\/p>\n
                 “In this connection, we advise that till such time
\n               the  entire  outstanding public deposits  held  by
\n               your company as on date are repaid in terms of the
\n               instructions    contained      in     Notification
\n               No.DFC.118\/DG(SPT)\/98  dated  31st January,  1998,
\n               your  company  will  continue to fall  within  the
\n               ambit  of our regulations and cannot be allowed to
\n               withdraw  its  registration  application  at  this
\n               stage.   Further, you are also advised to  furnish
\n               us  with  the  position of repayment  of  existing
\n               deposits held by the company.”\n<\/p><\/blockquote>\n
 28.                   This  was followed by a prohibitory order dated 9th
\n          June, 1998 issued by the RBI to Rockland.  In paragraph 3 of
\n          this prohibitory order, it was noted that it had come to the
\n          notice  of the RBI that Rockland had solicited deposits from
\n          the  public in February, 1998 by advertising that its  fixed
\n          deposits are secured by way of first charge on its assets by
\n          a  trust  called Investors Trust of India.  The  RBI  stated
\n          that it had received complaints from the depositors that the
\n          so-called  Trust  is nothing but an extension  of  Rockland,
\n          apparently created to mislead the public.  As far as the RBI
\n          was concerned, this clearly indicated that Rockland had been
\n          accepting   deposits  despite  its   prohibitions  and   the
\n          Resolution  of the Board of Directors of Rockland dated  6th
\n          January, 1998.\n<\/p>\n
 29.                  Consequently,  in  paragraph 5 of the letter  dated
\n          9th  June,  1998 the RBI expressed its satisfaction that  it
\n          would  not be in public interest to allow Rockland to accept
\n          further deposits from the public.  Therefore:-\n<\/p>\n
            (1)   In  exercise of powers conferred by Section 45-K  read
\n                with  Section  45-MB(1) of the RBI Act,  Rockland  was
\n                prohibited  from  accepting  deposits  with  immediate
\n                effect.   Rockland was also prohibited from  accepting
\n                deposits from any person in any form whether by way of
\n                fresh deposits or renewal deposits or otherwise.\n<\/p>\n
         (2)   In  accordance with the provisions of Section 45-MB(2)
\n                of  the RBI Act, Rockland was prohibited from selling,
\n                transferring, creating a charge or mortgage or dealing
\n                in  any manner with its property and assets except for
\n                the  purpose  of  repayment of deposits  held  by  it,
\n                without  the prior permission of the RBI for a  period
\n                of six months.\n<\/p>\n
 30.                   After   having   considered    all   these   facts,
\n          circumstances  and various features, the RBI was of the view
\n          that   Rockland  had  failed  to  fulfilll   the   conditions
\n          enumerated   under   Section  45-IA(4)  of  the   RBI   Act.
\n          Consequently,   its  application  for   a   Certificate   of
\n          Registration  to  carry  on  the business  of  an  NBFC  was
\n          rejected by a letter dated 9th June, 1998.\n<\/p>\n
 31.                   Feeling  aggrieved  by  the order dated  9th  June,
\n          1998,  Rockland resorted to two remedies.  Firstly, it filed
\n          an  appeal  under the provisions of Section 45-IA(7) of  the
\n          RBI  Act.   Rockland neither appeared at the hearing of  the
\n          appeal, nor did it ask for an adjournment.  Accordingly, the
\n          appeal  was  dismissed  on 17th  January,  2001.   Secondly,
\n          Rockland  filed  CW No.3433\/1998 in this Court for  quashing
\n          the  order dated 9th June, 1998.  Again, it took no interest
\n          in  this case, which had apparently become infructuous.   In
\n          any  event,  it  came  to be dismissed  in  default  on  1st
\n          November, 2000.\n<\/p>\n
 32.                   In  the  meanwhile, some depositors appear to  have
\n          complained   to  the  Company   Law  Board  (CLB)  regarding
\n          non-payment  of  its  deposits.  Rockland was heard  on  9th
\n          June,  1998.   It also filed a reply dated 18th  June,  1998
\n          contending,  inter alia, that in view of the mismatch in its
\n          cash flow resulting from the RBI guidelines of 31st January,
\n          1998,  Rockland was repaying the deposits in accordance with
\n          those guidelines.\n<\/p>\n
 33.                   On  a  consideration of the facts of the case,  the
\n          CLB  passed  an  order  dated  26th  June,  1998  under  the
\n          provisions  of  Section 45-QA(2) of the RBI Act wherein  the
\n          following schedule of repayment was ordered:-\n<\/p>\n
  “(a)  All  deposits up to Rs.10,000\/- to be repaid
\n                     in full by 31st December, 1998;\n<\/p>\n
 (b)   All  deposits  exceeding Rs.10,000\/-  up  to
\n                     Rs.50,000\/-  to be repaid in two Installments
\n                     namely 50% by 31st December, 1998 and 50% by
\n                     31st December, 1999;\n<\/p>\n
               (c)   All  deposits above Rs.50,000\/- to be repaid
\n                     as under:-\n<\/p>\n
                      30% by 31st December, 1998<\/p>\n
                     30% by 31st December, 1999<\/p>\n
                     40% by 31st December, 2000<\/p>\n
               (d)   All  requests for repayment on compassionate
\n                     grounds  shall be repaid within one month of
\n                     the request in case the company is satisfied
\n                     with  regard to the grounds namely,  serious
\n                     illness, old age, marriage in the family and
\n                     other pressing commitments;\n<\/p>\n
                (e)   Interest  of the deposits shall be continued
\n                     to  be repaid regularly as per the  existing
\n                     terms and conditions of deposits;”\n<\/p>\n
 34.                    This  order  of the CLB dated 26th June,  1998  was
\n          challenged  by  Rockland  in Co.A.(B) 4\/1998 filed  in  this
\n          Court  on  or about 20th July, 1998 under the provisions  of
\n          Section  10F  of  the Companies Act, 1956.  This  reads  as
\n          follows:-\n<\/p>\n
               “10F.   Appeals against the orders of the  Company
\n               Law Board.  –\n<\/p><\/blockquote>\n
                Any  person aggrieved by any decision or order  of
\n                the  Company  Law Board may file an appeal to  the
\n               High  Court  within  sixty days from the  date  of
\n               communication  of  the  decision or order  of  the
\n               Company  Law  Board to him on any question of  law
\n               arising out of such order:\n<\/p><\/blockquote>\n
                Provided  that  the  High  Court  may,  if  it  is
\n               satisfied  that  the  appellant was  prevented  by
\n               sufficient cause from filing the appeal within the
\n               said period, allow it to be filed within a further
\n               period not exceeding sixty days.”\n<\/p><\/blockquote>\n
 35.                   On  12th August, 1998, learned counsel for Rockland
\n          agreed  to  abide  by  the directions given by  the  CLB  in
\n          sub-paragraphs  (a),  (d) and (e).  Rockland  was,  however,
\n          directed  by this Court to go on paying interest on deposits
\n          to all the depositors irrespective of their amount deposited
\n          till  repayment.   On  compliance, the directions  given  in
\n          sub-paragraphs (b) and (c) were stayed.\n<\/p>\n
 36.                    On  18th December, 1998, this Court passed an order
\n          clarifying  that any complaint filed by any depositor either
\n          with  the  police or before a Magistrate or a  Civil  Court,
\n          will  not  be  entertained without the  permission  of  this
\n          Court.\n<\/p>\n
 37. On  25th  January,  1999,  this  Court  passed  the
\n          following order:-\n<\/p>\n
               “It is submitted by some counsel appearing for the
\n               depositors  that  while staying the  operation  of
\n               directions  contained  in the order dated 26  June
\n               1998  of  the  Company Law Board, this  Court  had
\n               issued  certain directions to the petitioner,  one
\n               of  them being that the appellant company will  go
\n               on   paying  interest  on   deposits  to  all  the
\n               depositors  irrespective of their amount deposited
\n               till repayments, but the appellant company has not
\n               complied  with these directions.  Needless to  say
\n               that  the stay of operation of the aforenoted  two
\n               sub-paras  was  subject to the  appellant  company
\n               complying  with  the directions contained  in  the
\n               order  dated 12 August 1998 and if these have  not
\n               been  complied  with, it cannot be said  that  the
\n               operation  of  even the two  aforenoted  sub-paras
\n               remains stayed.”\n<\/p><\/blockquote>\n
 38.                   The  orders passed by this Court apparently had  no
\n          effect on Rockland.  Consequently, on 28th April, 1999, this
\n          Court vacated all interim orders in the following words:-\n<\/p>\n
                 “However,  on a pointed query by this Court, it is
\n               submitted  by  learned counsel for  the  appellant
\n               that  against  a sum of Rs.9,17 crores, due to  be
\n               paid  to  various  depositors   by  the  appellant
\n               company  as  on 31 December 1998 in terms  of  the
\n               impugned  order, only a sum of Rs.7.70 crores  was
\n               paid.   Thus, admittedly the appellant company has
\n               not  even  complied with the order passed  by  the
\n               Company  Law Board, which it seeks to challenge in
\n               this  appeal.   Under   the  circumstances,  while
\n               clarifying  that in the present appeal there is no
\n               stay  of operation of the impugned order dated  26
\n               June 1998, the protection granted to the appellant
\n               in  terms of order dated 18 December 1998 is  also
\n               withdrawn.”\n<\/p><\/blockquote>\n
 39.Apparently  to  avoid any further  adverse  orders,
\n          Rockland moved CM 6041\/1999 in CW 3433\/1998 on 1st May, 1999
\n          contending that the prohibition in the order dated 9th June,
\n          1998  passed by the RBI was valid only for six months (which
\n          period  had  elapsed) and, therefore, the writ petition  had
\n          become infructuous.\n<\/p>\n
 40. This  application  was  opposed by  the  RBI  which
\n          replied  that the prohibition contained in the letter  dated
\n          9th June, 1998 had been extended for a further period of six
\n          months  by  an  order dated 4th May, 1999.  This  order  was
\n          sought  to  be  served  on   Rockland,  but  had  come  back
\n          undelivered.\n<\/p>\n
 41. As  mentioned above, since Rockland took no further
\n          interest  in  the writ petition, it came to be dismissed  on
\n          1st November, 2000.\n<\/p>\n
 42. It  seems that the RBI also received a large number
\n          of  complaints  from  various   sources  and  also  obtained
\n          information  that the order of the CLB dated 26th June, 1998
\n          was  not  being complied with by Rockland.  In fact, on  6th
\n          May,  1999 an officer of the RBI was sent to the  registered
\n          office  of  Rockland  to ascertain  the  position  regarding
\n          repayment  to  the  depositors,  but it  was  found  locked.
\n          Accordingly,  in view of Section 54-B(4AAA) of the RBI  Act,
\n          by  a show cause notice dated 15th June, 1999, Rockland  was
\n          asked  to  show cause why penal action be not taken  against
\n          it.   The  show cause notice came back undelivered with  the
\n          remarks  “intentionally  avoided  to  take  delivery”.   The
\n          notice  sent  to  the  Directors   of  Rockland  came   back
\n          undelivered   with  the  remarks   “left”.   The  CLB  also,
\n          independently,  intimated  the  RBI by a letter  dated  17th
\n          August, 1999 that after the passing of the order of the CLB,
\n          Rockland had not filed any affidavit.\n<\/p>\n
 43. In  view  of  these  facts, RBI  filed  a  Criminal
\n          Complaint No.753\/1999 in the Court of the learned Additional
\n          Chief  Metropolitan  Magistrate  (ACMM),  New  Delhi.   This
\n          complaint  was  filed on 21st August, 1999 against  Rockland
\n          and  its  Directors under the provisions of Section  51-E(1)
\n          read  with Sections 45-QA, 58-B, 58-C and 58-B(4AAA) of  the
\n          RBI Act.  The learned ACMM took cognizance of the offence on
\n          9th September, 2000 and summoned all the accused.\n<\/p>\n
 44. Thereafter  on  4th October, 1999, J.M.Chawla,  the
\n          Chairman-cum-Managing  Director of Rockland appeared in this
\n          Court  in  the Company Appeal and stated that  if  necessary
\n          protection  is granted to him, and he is allowed to  operate
\n          his  offices,  he would be able to deposit at  least  Rs.1.5
\n          crores  with  the Registrar of this Court.  He undertook  to
\n          deposit  Rs.5 lakhs within three days with the Registrar  of
\n          this  Court to be distributed to some of the depositors  who
\n          are  in urgent need of money.  Orders which had earlier been
\n          passed restraining the arrest of J.M.Chawla were, therefore,
\n          continued.\n<\/p>\n
 45. Pursuant  to the order passed on 4th October, 1999,
\n          J.M.Chawla  did deposit Rs.5 lakhs in this Court, which  was
\n          distributed  to various depositors.  On 5th November,  1999,
\n          J.M.Chawla  undertook  to deposit a further amount of  Rs.15
\n          lakhs  by  15th November, 1999 and Rs.95 lakhs on or  before
\n          4th December, 1999.\n<\/p>\n
 46. On  6th  November, 1999, J.M.Chawla stated that  he
\n          would  deposit Rs.20 lakhs on or before 31st December,  1999
\n          and  Rs.75 lakhs on or before 31st January, 2000.  This  was
\n          not  done.  Consequently, on 21st February, 2000, this Court
\n          observed, inter alia, as follows:-\n<\/p>\n
                 “Despite  repeated  orders  of   this  Court,  the
\n               appellants    have   failed    to   deposit    the
\n               cheques\/demand  drafts  for  Rs.20 lakhs  and  the
\n               balance amount of Rs.75 lakhs.  The conduct of the
\n               appellants is reprehensible.”\n<\/p><\/blockquote>\n
 47. It appears that subsequently Rockland deposited two
\n          cheques  of  Rs.10  lakhs each in this Court but  both  were
\n          returned    with   the     remarks   “insufficient   funds”.
\n          Consequently, on 16th March, 2000 the protection against the
\n          arrest of the Appellants was withdrawn forthwith.\n<\/p>\n
 48. Notwithstanding  all  this,  the Court  thought  it
\n          appropriate  to  give another opportunity to the parties  to
\n          sit  together  and  negotiate and suggest the  best  way  of
\n          protecting  the  interest  of the depositors,  and  enabling
\n          Rockland  to  repay the debts.  A meeting was held for  this
\n          purpose  in the chamber of Mr.Anoop Bagai, Advocate on  23rd
\n          September,  2000.  The Minutes recorded at that meeting read
\n          as follows:-\n<\/p>\n
 “MINUTES OF THE MEETING HELD ON 23.9.2000 AS<\/p>\n
               PER  ORDERS  PASSED  BY   THIS  HON’BLE  COURT  ON
\n               18.9.2000  <\/p>\n
 1.    No  direct  payments to be made by  company\/
\n                     directors  to  depositors  but  only through
\n                     Court.\n<\/p>\n
  2.    Rs.40 lakhs to be transferred immediately to
\n                     this  Hon’ble  Court  out   of  Rs.60  lakhs
\n                     deposited  by  the  purchaser in  Suit  Nos.
\n                     470\/2000,  471\/2000 and 472\/2000 pending  in
\n                     this Court.\n<\/p>\n
  3.    For  the  present  in  Phase-I  25%  of  the
\n                     Principal  amount shall be deposited by  the
\n                     company  in this Hon’ble Court by  31.1.2001
\n                     which  includes Rs.40 lakhs aforesaid.   The
\n                     principal  amount  constitutes   the   total
\n                     amount   of  depositors   who  are   already
\n                     appearing in this Court in person or through
\n                     counsels.  Rest of the depositors initiating
\n                     the  proceeding  later,  would be  dealt  in
\n                     Phase-II.    Question  as  to   payment   of
\n                     interest   will   be   decided   later   on.\n<\/p>\n
                     Remaining amount to be paid as under:\n<\/p>\n
  i)   25% by 31.3.2001.\n<\/p>\n
 ii)  25% by 31.8.2001  <\/p>\n
 iii) 25% by 31.12.2001   <\/p>\n
 4.    Protection  to all Directors\/staff,  subject
\n                     to   continuing  to   comply  the  aforesaid
\n                     deposit schedule.\n<\/p>\n
  5.    Criminal cases filed by depositors appearing
\n                     in this Court shall get the same adjourned.\n<\/p>\n
  6.    List of depositors as stated in para 3 above
\n                     to  be filed in Court by 29.9.2000 by 4 P.M.
\n                     with copies to the petitioner and Mr.  Anoop
\n                     Bagai.\n<\/p>\n
   7.    Petitioner  shall obtain 34-A within 6 weeks
\n                     regarding  property  No.    E-346,   Greater
\n                     Kailash-I,  Delhi, after paying the dues  of
\n                     Income  Tax and House Tax etc.  which  shall
\n                     be  paid out of Rs.60 lakhs deposited by the
\n                     purchasers in Court as setout in para to (2)
\n                     above.”\n<\/p>\n
 49. Soon  thereafter,  on 28th September, 2000  it  was
\n          stated  by  learned counsel for Rockland that his client  is
\n          prepared  to abide by the decision taken in the meeting held
\n          on  23rd September, 2000.  The Court directed the  Appellant
\n          (probably  J.M.Chawla)  to “file an affidavit on  or  before
\n          9.10.2000  conveying  his willingness to abide by  the  said
\n          decision  and  undertaking to this Court that he would  make
\n          payment  to the depositors as suggested in the meeting  held
\n          on  23.9.2000.”  This affidavit of undertaking was filed  by
\n          J.M.Chawla.\n<\/p>\n
 It seems that Rockland or at least the Directors of
\n          Rockland  owned property bearing No.E-346, Greater  Kailash,
\n          Part-I, New Delhi.  It was agreed by all concerned that this
\n          property  be sold and Rs.40 lakhs be made available to  this
\n          Court  from  the  sale proceeds of the  property  for  being
\n          disbursed to the depositors.  This amount of Rs.40 lakhs was
\n          eventually transferred to the Company Court for distribution
\n          among the creditors.  This is so recorded in the order dated
\n          13th December, 2000 passed in the Company Appeal.\n<\/p>\n
 50. In the meeting held on 23rd September, 2000, it was
\n          also agreed that:-\n<\/p>\n
                 “…the appellant company shall deposit 25% of the
\n               principal  amount  in  this  Court  by  31.1.2001.
\n               (This amount includes the sum of Rs.40 lakhs which
\n               stands transferred to this Court).  Another 25% of
\n               the  principal  amount shall be deposited  by  the
\n               appellant  company by 31.3.2001 and another 25% by
\n               31.8.2001 and the remaining 25% by 31.12.2001.  As
\n               per  the  agreement the question as to payment  of
\n               interest  will  be decided later on.   Mr.   Anoop
\n               Bagai points out that as per the consolidated list
\n               filed by him, the total principal amount is around
\n               Rs.6,80,00,000\/-.   It  means that  the  appellant
\n               will  have  to  deposit  in this Court  a  sum  of
\n               Rs.1,30,00,000\/-  (after  adjusting   the  sum  of
\n               Rs.40,00,000\/-)  by  31.1.2001 and  the  appellant
\n               will  have  to  deposit Rs.1,70,00,000\/-  each  by
\n               31.3.2001, 31.8.2001 and 31.12.2001.”\n<\/p><\/blockquote>\n
51.  The payments to be made by J.M.Chawla, as mentioned
\n          above,  were  not made.  Therefore, by an order  dated  26th
\n          April, 2001 he was asked to explain through an affidavit why
\n          he  has  not  complied with this Court’s  order  dated  13th
\n          December,  2000  and why action should not be taken  against
\n          him  for disobeying the order of the Court.  J.M.Chawla  has
\n          since filed his affidavit dated 22nd May, 2001.\n<\/p>\n
 52. It  may be mentioned, en passant, that by the order
\n          dated 13th December, 2000 it was directed that the Directors
\n          of  Rockland, that is, J.M.Chawla, Arun Chawla, Tarun chawla
\n          and  Ms.Indu Chawla shall not be arrested in connection with
\n          or pursuant to any complaint filed by any depositor till the
\n          next date (that is, 16th February, 2001).  The next date has
\n          come and gone.  The interim order effectively continues till
\n          date.\n<\/p>\n
 53.Additionally,  in  the  Company   Appeal  filed  by
\n          Rockland,  it  was directed on 30th October, 2001 that  till
\n          the  disposal of the Company Appeal, J.M.Chawla shall not be
\n          arrested in connection with or in pursuance of any complaint
\n          filed by any of the depositors.\n<\/p>\n
 54. On  or about 13th March, 2001, the Reserve Bank  of
\n          India  filed C.P.No.93\/2001 praying, inter alia, for winding
\n          up  the  affairs  of  Rockland and to  take  charge  of  its
\n          properties,  assets,  books  of account, etc.  This  CP  was
\n          filed  under the provisions of Section 45-MC of the RBI Act.
\n          This reads as follows:-\n<\/p>\n
                “45-MC.  Power of bank to file winding up petition  <\/p>\n
   (1)   The   bank,  on   being  satisfied  that   a
\n               non-banking financial company –\n<\/p>\n
          (a)  is unable to pay its debt; or  <\/p>\n
          (b)  has  by  virtue of the provisions of  section
\n                    45-IA  become  disqualified to carry  on  the
\n                    business    of   a   non-banking    financial
\n                    institution;  or  <\/p>\n
                (c)  has   been  prohibited  by   the  bank   from
\n                    receiving  deposit by an order and such order
\n                    has  been  in force for a period of not  less
\n                    than three months;  or  <\/p>\n
             (d)  the  continuance of the non-banking financial
\n                    company is detrimental to the public interest
\n                    or  to  the  interest of  depositors  of  the
\n                    company,  <\/p>\n
              may  file  an application for winding up  of  such
\n               non-banking  financial company under the Companies
\n               Act, 1956 (1 of 1956).\n<\/p>\n
                (2)  A  non-banking  financial  company  shall  be
\n               deemed  to  be  unable to pay its debt if  it  has
\n               refused  or has failed to meet within five working
\n               days  any lawful demand made at any of its offices
\n               or branches and the bank certifies in writing that
\n               such company is unable to pay its debt.\n<\/p>\n
                (3)  A copy of every application made by the  bank
\n               under  sub-section  (1)  shall  be  sent  to   the
\n               Registrar of Companies.\n<\/p>\n
                (4)  All the provisions of the Companies Act, 1956
\n               (1  of  1956) relating to winding up of a  company
\n               shall  apply to a winding up proceeding  initiated
\n               on  the  application made by the bank  under  this
\n               provision.”\n<\/p>\n
 55.                    It  does  not need any scholarly study  to  realize
\n          that  on the basis of the facts narrated above, the  winding
\n          up  of Rockland will be covered by all the above clauses  of
\n          Section 45-MC of the RBI Act.\n<\/p>\n
 56.                    The  audited balance sheet of Rockland for the year
\n          ending  31st  March, 1997 shows that its net worth  is  less
\n          than its liabilities.  The CLB in its order dated 26th June,
\n          1998  passed  under  Section  45-QA  of  the  RBI  Act   had
\n          nevertheless  directed Rockland to repay all deposits up  to
\n          Rs.10,000\/- in full by 31st December, 1998.  The rest of the
\n          amounts  could  be  paid  later.  But, this  was  not  done.
\n          Rockland was also directed to repay on compassionate grounds
\n          within  one  month  of  the  request  in  case  the  company
\n          (Rockland)  is satisfied with regard to the grounds, namely,
\n          serious  illness,  old  age,  marriage  and  other  pressing
\n          commitments.  I was told by some of the depositors who spoke
\n          out  of turn or interjected during the hearing of the  cases
\n          that  this  was  also  not  adhered  to  in  several  cases.
\n          Finally,  Rockland was directed to continue to pay  interest
\n          on  the deposits on the existing terms and conditions of the
\n          deposits.  Even this was not done.\n<\/p>\n
 57.                    On  12th August, 1998, learned counsel for Rockland
\n          agreed  to abide by the above directions of the CLB, but  to
\n          no  effect.   It  is  hard  to  believe  that  under   these
\n          circumstances,  it can ever be imagined that Rockland was in
\n          a real position to pay its debts.\n<\/p>\n
 58.                    To   make  matters  worse,   M\/s  Dewan  &  Gulati,
\n          Chartered  Accountants  were appointed to conduct a  special
\n          audit  of  the  accounts  of Rockland.  Not  only  were  the
\n          Chartered  Accountants not allowed to carry out the  special
\n          audit  but their time was wasted by Rockland giving them the
\n          impression  that  Rockland does not want its accounts to  be
\n          audited,   since   it  seems  to  “indulge   in   defrauding
\n          depositors”.  Therefore, in the absence of all necessary and
\n          relevant material, one doesn’t even know the extent to which
\n          Rockland has “defrauded” or milched its depositors.\n<\/p>\n
 59.                   On  14th January, 1998, Rockland informed RBI  that
\n          it  proposes to discharge its liabilities within a period of
\n          three  years  starting from January, 1998  onwards.   Almost
\n          four  years have gone by, but the depositors have still  not
\n          received  their principal investment, let alone the interest
\n          thereon.\n<\/p>\n
 60.                   The  Board of Directors of Rockland had, apparently
\n          resolved  in January, 1998 not to solicit deposits from  the
\n          public.   This  was later on discovered by the RBI to  be  a
\n          camouflage  since Rockland continued to solicit deposits  by
\n          advertising  that  its fixed deposits are secured by way  of
\n          first charge on its assets by a trust called Investors Trust
\n          of India.\n<\/p>\n
 61.                   Rockland  did, of course, take steps to secure  its
\n          interests  by  filing a Company Appeal in this Court.   This
\n          met  with little or no success.  But, Rockland chose not  to
\n          challenge any order which could be construed as “adverse” to
\n          it.   On  the  contrary, during 1999  more  than  sufficient
\n          indulgence  was  given to Rockland to make deposits in  this
\n          Court.   While some deposits were made, other cheques issued
\n          by  Rockland  bounced  and a major deposit  of  Rs.95  lakhs
\n          (later  reduced to Rs.75 lakhs) was never made.  In fact, on
\n          21st February, 2000, this Court described the conduct of the
\n          Appellants as “reprehensible”.\n<\/p>\n
 62.                   Time  and  again this Court had been  indulgent  to
\n          J.M.Chawla,  Arun  chawla, Tarun Chawla and  Ms.Indu  Chawla
\n          whose  arrest  had been stayed for considerable  periods  of
\n          time.   Even  this had no effect on the  Appellants  because
\n          when  they were summoned to Court, either by the issuance of
\n          a bailable warrant or a non-bailable warrant, the same could
\n          not  be executed.  These persons appeared in Court only when
\n          it suited them to do so.\n<\/p>\n
 63.                   The  Appellants had represented to this Court  that
\n          they  had immoveable property in Mumbai and Goa which  could
\n          be  sold off to pay the depositors.  On 29th May, 2001, this
\n          Court appointed two advocates as joint Commissioners to sell
\n          these properties.\n<\/p>\n
 64.                   As  regards the property in Goa, the  Commissioners
\n          reported  on  8th August, 2001 that they received no  offers
\n          for the sale of the said property.  It was further stated in
\n          paragraphs 4 to 6 of their Report as follows:-\n<\/p>\n
 “4.   That, however, on inspection of the property
\n               in  question  it was observed by  the  undersigned
\n               Commissioners  that the said property belonging to
\n               the appellant company is located on the IInd floor
\n               of a building, in which all the flats\/offices were
\n               lying  vacant  and  were not being used  by  their
\n               owners\/occupants  since many months\/years.  It was
\n               also observed that there was no electricity on the
\n               said  floor of the building and it seemed that the
\n               building   was  not  being   maintained   by   the
\n               occupants\/owners  of the said building, except for
\n               the  ground  floor  of the building  where  Indian
\n               Overseas Bank was running its activities.\n<\/p>\n
                5.    Thus   as  per   the  observations  of   the
\n               undersigned   Commissioner’s,  the   property   in
\n               question  is  not  in a condition  in  which  many
\n               buyers  are expected to be interested, looking  at
\n               its  maintenance and the business prospects of the
\n               area  in  which the building is situated  and  its
\n               depleted condition.\n<\/p>\n
                6.     That     nevertheless    the    undersigned
\n               Commissioners,  with a view to get the property in
\n               question   valuated,   approached   one   of   the
\n               Government  Valuers, Sh.S.N.Bhobe.  The said Govt.
\n               Valuer,  Shri S.N.  Bhobe finalised his report  on
\n               5.6.2001   and   handed    over    the   same   to
\n               Commissioner’s, according to which the fair market
\n               value of the property in question si Rs.4,96,000\/-
\n               only.”\n<\/p>\n
 65.                   As  regards the Mumbai property, the position seems
\n          to  have been worse.  The Commissioners visited the property
\n          on  two  consecutive  days for about 3-4 hours but  did  not
\n          receive  any  offer.  On the other hand, the office  of  the
\n          society  in  which the property was situated,  informed  the
\n          Commissioners  that up to June 2001, the Appellants owed  the
\n          Society  Rs.1,82,564\/- towards maintenance and other service
\n          charges.   The  Commissioners even approached  the  Official
\n          Liquidator attached to the Bombay High Court for providing a
\n          Government  approved valuer for preparing a Valuation Report
\n          regarding the fair market price of the property in question.
\n          However, the Commissioners have received no Valuation Report
\n          as yet pertaining to the Mumbai property.\n<\/p>\n
 66.                   In  paragraph 13 of their Report, the Commissioners
\n          categorically  stated  that till date they have received  no
\n          concrete  offers for the sale of the properties in Mumbai or
\n          Goa.   Rockland had, however, received some offers  earlier.
\n          The  authenticity  of these offers can only be a  matter  of
\n          conjecture.  It may be mentioned that on 29th May, 2001 J.M.
\n          Chawla  had agreed to accompany the Commissioners to Goa and
\n          Mumbai  provided  he is given protection from arrest.   This
\n          protection  was  granted by this Court but J.M.  Chawla  did
\n          not  accompany  the  Commissioners “as he was stated  to  be
\n          unwell during that time.”\n<\/p>\n
 67.           An  effort  was also made by this Court to  resolve
\n          all  problems  between  the parties and a meeting  for  this
\n          purpose was also held between all of them on 23rd September,
\n          2000  in the Chamber of Mr.  Anoop Bagai, Advocate.  Certain
\n          decisions  were taken at this meeting and J.M.  Chawla  also
\n          filed  an affidavit agreeing to abide by the decisions taken
\n          in the meeting, but all this was to no effect.\n<\/p>\n
 68.     Learned  counsel for Rockland time and again sought
\n          the  indulgence  of  this  Court to  allow  his  clients  an
\n          opportunity  to  run  their offices and to  recover  amounts
\n          allegedly  due to them from their lessees to repay the debts
\n          to  all  the  depositors.  He squarely  blamed  the  various
\n          directions  of  the RBI for this state of affairs.  On  18th
\n          September,  2000,  an  opportunity  was  given  to  Rockland
\n          despite  the  objections  of   the  depositors.   (This  had
\n          resulted  in the meeting held on 23rd September, 2000).  The
\n          acceptance  of the request, however, had no positive  effect
\n          on   the  outcome  of   the  proceedings.   Further  similar
\n          entreaties  made by learned counsel for Rockland during  the
\n          course of hearing had, quite naturally, to be rejected.\n<\/p>\n
 69.                  In  the  context  of these submissions  of  learned
\n          counsel for Rockland, it must be remembered that the Supreme
\n          Court  has said in General Finance and Investment Co.   Ltd.
\n          Vs.   Reserve  Bank  of  India, (1992) 2 SCC  344  that  the
\n          reasonableness  of  directions given by the RBI have  to  be
\n          looked  at  from  the point of view of the  depositors,  for
\n          whose  safeguard they have been issued.  The  reasonableness
\n          of  the directions has not to be looked at from the point of
\n          view  of  the  Company  to whom such  restrictions  will  be
\n          irksome  and  may, therefore, be regarded  as  unreasonable.
\n          (Paragraphs 19 and 20 of the Report).\n<\/p>\n
 70.                   On  a  consideration of the various aspects of  the
\n          case,  I  have no hesitation in concluding that Rockland  is
\n          unable  to pay its debts and its continuance is  detrimental
\n          to  the public interest or to the interest of the depositors
\n          of  the  Company.  The provisions of Clauses (a) and (d)  of
\n          Section  45-MC(1)  of  the  RBI Act have  been  violated  as
\n          contended by learned counsel for the RBI.\n<\/p>\n
 71.                   Rockland   had  applied  for   a   Certificate   of
\n          Registration  on  3rd  July, 1997 under  the  provisions  of
\n          Section  45-IA(2)  of  the RBI Act.   This  application  was
\n          rejected  by the RBI on 9th June, 1998.  An appeal preferred
\n          by  Rockland  against  this  order  was  dismissed  on  17th
\n          January,  2001 and CW No.3433\/98 preferred in this Court was
\n          dismissed in default on 1st November, 2000.  The order dated
\n          9th  June, 1998 has, therefore, attained finality.  In terms
\n          of  Section  45-MC(1)(b)  of  the   RBI  Act,  Rockland   is
\n          disqualified from carrying on the business of an NBFC.\n<\/p>\n
 72.                   Finally,  by  the same order dated 9th June,  1998,
\n          Rockland was prohibited from receiving deposits for a period
\n          of  not  less  than three months.  The prohibition  was,  in
\n          fact,  for  six  months and was later extended by  an  order
\n          dated  4th  May,  1999 by another six months.   Whether  the
\n          extension  could  have been granted or not, as contended  by
\n          learned  counsel for Rockland, is really of no  consequence.
\n          The  fact  is that there was a prohibition against  Rockland
\n          from  receiving deposits for a period of not less than three
\n          months.\n<\/p>\n
 73.                   Consequently,  RBI had more than enough material to
\n          conclude  that Rockland has not satisfied the provisions  of
\n          Clauses (b) and (c) of Section 45-MC(1) of the RBI Act.\n<\/p>\n
 74.                   Looked at, therefore, from any point of view, there
\n          is  no option but to order the winding up of the affairs  of
\n          Rockland in terms of Section 45-MC of the RBI Act.\n<\/p>\n
 75.                   Consequently,  Co.A(B) 4\/98 filed by Rockland  does
\n          not  survive and is dismissed as such.  It may be  mentioned
\n          that learned counsel for the RBI did contend that the appeal
\n          was not maintainable under the provisions of Section 10F of
\n          the  Companies Act, 1956 but it is now not necessary to deal
\n          with this contention.\n<\/p>\n
 76.                  Learned counsel for the RBI relied upon a certified
\n          copy  of Writ Petition No.32498 of 1998 decided by a learned
\n          Single  Judge  of  the  Andhra Pradesh High  Court  on  13th
\n          December,  1999  (Dr.Pinna  N.R.  Vs.  The  Commissioner  of
\n          Police,  Hyderabad  & Ors.).  This decision really does  not
\n          render  much  assistance  on the merits of the  case  simply
\n          because  the prayer therein was for an order or direction to
\n          the   Respondents   therein  to   make  an  enquiry   before
\n          registering any crime against the Petitioners therein as and
\n          when  any  complaint  or information is  placed  before  the
\n          officials about any alleged complaint.\n<\/p>\n
 77.                   That  case  also concerned the taking  of  deposits
\n          from  various  individuals and the business of financing  by
\n          hire  purchase.  The company had 12,000 depositors and about
\n          3000  debtors.   The  depositors association  had  naturally
\n          evinced  keen interest in the case and had provided valuable
\n          information  to  the Court and the authorities from time  to
\n          time.\n<\/p>\n
 78.                   Despite  this, the Court expressed its helplessness
\n          in  coming to the aid of the gullible depositors.  The Court
\n          said:-\n<\/p>\n
                 “The  Reserve  Bank  has   only  power  either  to
\n               prosecute  under  Chapter  V  of  the  Act  or  to
\n               recommend  for  winding up under Section 45-MC  of
\n               the   Act.   Even  the   complaints  made  by  the
\n               depositors  are only registered under Section  420
\n               of I.P.C.  But the most important question is fate
\n               of   the  depositors  who   had  made  savings  by
\n               sacrificing  their  essential need and to  utilise
\n               the  same  during  post   retirement  life.   They
\n               deposited  with the petitioners under a fond  hope
\n               that  they  got reasonable returns on  their  hard
\n               earned  money.   That  proved  to be  a  myth  and
\n               misery.   The depositors are more than 11,000, and
\n               they  are virtually on the streets as on the date,
\n               as  the first petitioner is now stating that he is
\n               not  in  a position to repay any amount.  Even  if
\n               the   first   petitioner  –   Managing   Director,
\n               including  those connected with the offences viz.,
\n               past  directors  and  promoters are  sent  to  the
\n               prison,  the  question still remains that  whether
\n               the  court has done any justice to the depositors.
\n               Sentencing  the  offenders and committing them  to
\n               the  prison is one thing than ensuring the  return
\n               of  deposits  to  the  poor  depositors  who  made
\n               deposits  from  every  nook  and  corner  of  this
\n               country.  This court also takes judicial notice of
\n               the  present trend that number of the  non-banking
\n               financial  companies  have received huge  deposits
\n               from  the  people of this country  by  mesmarising
\n               (sic)  them  with  heavenly  pleasures  and  these
\n               companies  have  lifted their boards itself  in  a
\n               very  short time.  In Andhra Pradesh itself, there
\n               are  many such instances which are being  reported
\n               in the press every day.  What is the solution that
\n               has to be carved to arrest the situation?  Can the
\n               State  be  a  mute  spectator  when  huge  amounts
\n               running  into  crores of innocent public is  being
\n               mis-used  and  misappropriated  by  the  financial
\n               institutions.   The Provisions of the R.B.I.   Act
\n               have  only  regulated the conduct  of  Non-Banking
\n               Financial  Institutions  after   the  issuance  of
\n               registration  certificates.  But, the institutions
\n               which  have  already collected deposits as on  the
\n               date  of coming into force the amended  provisions
\n               in  1997  and  which were refused  certificate  of
\n               registration  by Reserve Bank of India and  failed
\n               to  refund  the deposits, no provisions  has  been
\n               made  to  deal with such companies.  The  fate  of
\n               these depositors with such companies is hanging in
\n               fire.  Therefore, a grave situation arisen wherein
\n               the  State is required to deal with it with  stern
\n               hands.”\n<\/p><\/blockquote>\n
79.                    I  am  afraid  that  this Court  is  in  no  better
\n          position  to help the depositors in this case.  We all  know
\n          that  the answer to the problem is blowin’ in the wind,  but
\n          somebody with vision has to recognise it.\n<\/p>\n
 80.                   Similarly,  in  Reserve Bank of India  Vs.   Krishi
\n          Export  Com.Corpn.   Ltd., 2001 CLC 150, winding up  of  the
\n          Respondent  was  sought in the Allahabad High Court  on  the
\n          ground  that (i) it is unable to pay its debts, (ii) it  has
\n          become  disqualified  to  carry on the business  because  of
\n          rejection  of its application for issuance of certificate of
\n          registration  and  (iii)  continuance of business by  it  is
\n          detrimental  to  the  public  interest and to  that  of  the
\n          depositors.  (Paragraph 3 of the Report).\n<\/p>\n
 81.                   Referring  to  the inability of the Company to  pay
\n          its  debts,  the Court held in paragraphs 38 and 39  of  the
\n          Report that:-\n<\/p>\n
                “38.  …The company started defaulting in payment
\n               from  September 1998 onwards.  It was the own case
\n               of  the  respondent company that it  had  accepted
\n               total  deposits to the tune of Rs.54 Crores  under
\n               various  schemes  as  on 30.9.1998;  that  it  had
\n               stopped   accepting  deposits   with  effect  from
\n               September,  1998.  It was also its case that there
\n               had  been  unavoidable  delay   in  honouring  the
\n               commitments  towards repayment of deposits back so
\n               of  mismatch  of  cash inflow  and  outflow.   The
\n               admission  of  the company is there that  a  large
\n               number  of deposits are outstanding for  repayment
\n               on  maturity.  It was also the case of  respondent
\n               company  before the CLB that due to change in  the
\n               policy  of  the Reserve Bank of India relating  to
\n               non-banking  financial  companies   and  also  the
\n               sluggish  economy of the country and the financial
\n               unsatisfactory  working  of  some   of  the  major
\n               players in this field, the faith of the public was
\n               shattered  and  all  the  depositors  had  started
\n               demanding  repayments which was highly  impossible
\n               for  the  company to repay.  The admission of  the
\n               company  was  that  despite its best  efforts,  it
\n               could not make any payment to the depositors since
\n               September,  1998.   Even  its   working  came   to
\n               standstill  and  all  the offices had to  be  shut
\n               down.  However, it contended that aggregate amount
\n               of  its asset as on 30.9.1998 was around  Rs.54.60
\n               Crores.  According to the company, its liabilities
\n               towards  deposits and interest were to the tune of
\n               Rs.54  Crores.  It appears that such assertion  of
\n               the respondent company swayed the CLB to approve a
\n               scheme  for  repayment.   The  discussion  that  I
\n               intend  to make a shortwhile later would show that
\n               actually  the liability of the respondent  company
\n               was  far  in excess of its assets which has to  be
\n               taken to mean that it is unable to pay its debts.\n<\/p><\/blockquote>\n
               39.   In any view of the matter, the admissions of
\n               the  respondent company before the CLB referred to
\n               above  leaves  not  the slightest doubt  that  its
\n               office  had  shut  down,  it  had  stopped  making
\n               payments  since  September, 1998 and  the  primary
\n               reason  was that fresh deposits were not coming to
\n               it  after  September,  1998.   It  gives  a  clear
\n               inkling  that  the trick or hidden secret  of  its
\n               operation over the years was that out of the fresh
\n               deposits,  it  was making the payments of  earlier
\n               deposits  but there was a sizeable gap between its
\n               liabilities  and  assets, the former being for  in
\n               excess  than  the latter.  It could pay its  debts
\n               only  by accepting fresh deposits.  Indeed,  there
\n               could  be no end to it as it was to be an unending
\n               cycle and at any given time, the last set or group
\n               of depositors was to be the sufferer.  The reality
\n               that in spite of the introduction of Chapter III-B
\n               in the Reserve Bank of India Act, the Reserve Bank
\n               was also not very conscious about the discharge of
\n               its   duties   by   effectively  controlling   the
\n               non-banking  financial institutions.  But when the
\n               grip came to be tightened with the amending Act of
\n               1997  introducing the requirement of  registration
\n               of   non-banking  financial   companies  with  the
\n               Reserve  Bank,  the  loophole came to  surface  on
\n               inspection  made by the Reserve Bank to decide the
\n               application  of  the  respondent company  for  the
\n               issuance of certificate of registration.”\n<\/p><\/blockquote>\n
 82.             It was then concluded in paragraph 42 of the Report
\n          that  it was “crystal clear” that the company was unable  to
\n          pay its debts.\n<\/p>\n
 83.                   As  regards  the  absence  of  any  Certificate  of
\n          Registration,  the  Allahabad  High  Court  dealt  with  the
\n          problem  in the following manner in paragraphs 23 and 24  of
\n          the Report:-\n<\/p>\n
               “23.   …The respondent submitted an  application
\n               for registration to the Bank under Section 45-I(2)               of   the  Act.   The   said  application  of   the
\n               respondent  was rejected by the Bank on 17.9.1998.
\n               The  contention  of  the learned counsel  for  the
\n               respondent  is  that the said order  of  rejection
\n               passed  by the Bank declining registration to  the
\n               respondent  is not final.  Attention of the  Court
\n               has  been  invited to sub-section (7)  of  Section
\n               45-IA  of Reserve Bank of India Act, which runs as
\n               under:  –\n<\/p><\/blockquote>\n
                “45-IA.  Requirement of registration and net owned
\n               fund.  –\n<\/p><\/blockquote>\n
               (7)  A company aggrieved by the order of rejection
\n               of application for registration or cancellation of
\n               certificate  of registration may prefer an appeal,
\n               within  a  period of thirty days from the date  on
\n               which  such order of rejection or cancellation  is
\n               communicated  to it, to the Central Government and
\n               the  decision  of the Central Government where  an
\n               appeal  has  been preferred to it, or of the  Bank
\n               where  no  appeal  has been  preferred,  shall  be
\n               final:\n<\/p><\/blockquote>\n
                Provided that before making any order of rejection
\n               of   appeal,  such  company   shall  be  given   a
\n               reasonable opportunity of being heard.”\n<\/p><\/blockquote>\n
           24.  It is not disputed by the petitioner that the
\n               respondent  has  preferred an appeal  against  the
\n               order  of  the  Bank dated  17.9.1998  before  the
\n               Central  Government and the same is pending.   The
\n               submission  from  the side of respondent  is  that
\n               since  its  appeal is pending before  the  Central
\n               Government,  the order of rejection passed by  the
\n               Bank  declining registration of it (respondent) is
\n               not  final  and  as such the Bank cannot  rely  on
\n               ground  (b) of sub-section (1) of Section 45-MC of
\n               the  Act to back its winding up petition.  On  the
\n               other  hand,  the argument of learned counsel  for
\n               the  petitioner  is  that no stay order  has  been
\n               passed  by  the  Central  Government  staying  the
\n               Bank’s  order  dated 17.9.1998.  This Court is  of
\n               the  opinion that no stay order is required to  be
\n               passed by the Central Government to put a brake to
\n               the  operation  of  rejection   order  during  the
\n               pendency  of  the appeal.  Sub-section (7) of  the
\n               Section  45I-A is couched in clear and unambiguous
\n               terms  that  where an appeal is preferred  against
\n               the  rejection of application for registration  to
\n               the  Central  Government,  the   decision  of  the
\n               Central  Government shall be final.  The order  of
\n               the   Bank   rejecting     the   application   for
\n               registration  shall  be final only when no  appeal
\n               has  been  preferred.   Therefore,   stay  of  the
\n               operation of rejection order passed by the Bank is
\n               automatic  on  the  filing of the  appeal  by  the
\n               aggrieved party, as respondent in the present case
\n               has done.  So, to come to the point, ground (b) of
\n               sub-section (1) of Section 45-MC of the Act cannot
\n               be  relied upon by the petitioner to support  this
\n               winding-up petition.”\n<\/p>\n
 84.                   I  am  afraid, it is not possible for me  to  agree
\n          with  the view of the Allahabad High Court.  Firstly because
\n          it  does  not  seem to be correct, with respect,  that  “The
\n          order of the Bank rejecting the application for registration
\n          shall  be  final  only when no appeal has  been  preferred”.
\n          What  if  no appeal is filed – is the order of  rejection  a
\n          dead letter?\n<\/p>\n
 85.                  Moreover,  a  “final” order in a case such as  this
\n          refers only to an order against which no appeal is provided.
\n          There  is  no bar to recourse to a writ of  certiorari.   In
\n          fact,  this remedy was resorted to by Rockland by filing  CW
\n          No.3433\/1998 in this Court.\n<\/p>\n
 86.                   In  Regina  v.   Medical Appeal Tribunal  Ex  parte
\n          Gilmore,  (1957)  QB 574 CA, it was said on page 583 of  the
\n          Report:-\n<\/p>\n
                “The  second point is the effect of section  36(3)
\n               of  the  Act  of  1946 which  provides  that  “any
\n               decision  of  a  claim or  question  “…shall  be
\n               final.”  Do  those  words preclude  the  Court  of
\n               Queen’s  Bench from issuing a certiorari to  bring
\n               up the decision?\n<\/p><\/blockquote>\n
                This is a question which we did not discuss in Rex
\n               v.   Northumberland Compensation Appeal  Tribunal,
\n               Ex parte Shaw, because it did not there arise.  It
\n               does arise here, and on looking again into the old
\n               books  I find it very well settled that the remedy
\n               by  certiorari  is never to be taken away  by  any
\n               statute  except  by  the most clear  and  explicit
\n               words.  The word “final” is not enough.  That only
\n               means  “without appeal.” It does not mean “without
\n               recourse  to  certiorari.” It makes  the  decision
\n               final  on  the  facts, but not final on  the  law.
\n               Notwithstanding  that the decision is by a statute
\n               made  “final,”  certiorari  can  still  issue  for
\n               excess  of jurisdiction or for error of law on the
\n               face of the record.”\n<\/p><\/blockquote>\n
 87.               Similarly, on page 585 of the Report, it was said:\n<\/p>\n
                 “In  my  opinion, therefore,  notwithstanding  the
\n               fact  that  the statute says that the decision  of
\n               the  medical appeal tribunal is to be final, it is
\n               open  to this court to issue a certiorari to quash
\n               it for error of law on the face of the record.”\n<\/p><\/blockquote>\n
 88.
\n                   In  Pyx Granite Co.  Ltd.  v.  Ministry of  Housing
\n          and  Local  Government and Others, (1960) AC 260 HL, it  was
\n          stated on page 285-286 of the Report:-\n<\/p>\n
                 “I  come now to the second question which must  be
\n               decided.  It was submitted by the respondents that
\n               the  court  had no jurisdiction to  entertain  the
\n               action.   It was urged that section 17 of the  Act
\n               supplied  the only procedure by which the  subject
\n               could  ascertain  whether permission is  necessary
\n               for  the  development of his land.   That  section
\n               enacts  that  if any person who proposes to  carry
\n               out “any operations on land …  wishes to have it
\n               determined   …   whether  an   application   for
\n               permission  in  respect thereof is required  under
\n               this  Part  of  this  Act  having  regard  to  the
\n               provisions  of  the development order, he may  …
\n               apply to the local planning authority to determine
\n               that   question.”   This    matter   is   somewhat
\n               complicated  by the fact that under other sections
\n               of  the  Act  the  Minister   may  “call  in”  the
\n               application   for  his   own  determination.   But
\n               nothing   turns   on  this,   for,   whether   the
\n               application  is  heard in the first place  by  the
\n               local planning authority and then on appeal by the
\n               Minister  or  is heard in the first place  upon  a
\n               “call  in”  by the Minister, his determination  is
\n               expressed  to  be final.  The question is  whether
\n               the  statutory  remedy is the only remedy and  the
\n               right  of  the  subject to have  recourse  to  the
\n               courts  of  law is excluded.  Obviously it  cannot
\n               altogether  be excluded;  for, as Lord Denning has
\n               pointed  out, if the subject does what he has  not
\n               permission   to  do   and  so-called   enforcement
\n               proceedings are taken against him, he can apply to
\n               the court of summary jurisdiction under section 23
\n               of  the Act and ask for the enforcement notice  to
\n               be quashed, and he can thence go to the High Court
\n               upon  case stated.  But I agree with Lord  Denning
\n               and Morris L.J.  in thinking that this circuity is
\n               not necessary.  It is a principle not by any means
\n               to be whittled down that the subject’s recourse to
\n               Her  Majesty’s courts for the determination of his
\n               rights  is  not  to be excluded  except  by  clear
\n               words.”\n<\/p><\/blockquote>\n
 89.                   It  was  further  held on page 304  of  the  Report
\n          that:-\n<\/p>\n
                 “I  can find no sufficient ground for holding that
\n               section  17  provides  an   exclusive  method   of
\n               determining  questions  of  the kind to  which  it
\n               relates,   and   deprives  the   courts   of   the
\n               jurisdiction  which  they  ordinarily  possess  of
\n               determining  by  declaration   questions  of  that
\n               description.\n<\/p><\/blockquote>\n
                Clear  words  would be necessary to  produce  this
\n               result,  and  paying  due regard to the  terms  of
\n               section  17,  and to the argument that it must  be
\n               read  in  conjunction with sections 15 and  16,  I
\n               cannot  find any sufficient indication that it was
\n               intended  to oust the jurisdiction of the court on
\n               any  question  which  might  have  been  made  the
\n               subject of an application under section 17.”\n<\/p><\/blockquote>\n
 90.                Pyx  Granite  was referred to by  the  Constitution
\n          Bench  in Dhulabhai v.  State of Madhya Pradesh,<\/a> .  After discussing the entire case law, the Supreme Court
\n          stated  the  legal position in paragraph 32 of  the  Report.
\n          This  conclusively shows that the decision in Krishi  Export
\n          Com.   Corpn.   Ltd.  to this extent is not,  with  respect,
\n          correct.\n<\/p>\n
 91.                   One  needs hardly add that a writ of certiorari  in
\n          our  country  is  a constitutional remedy  which  cannot  be
\n          whittled down by a statute.\n<\/p>\n
 92.                   In  so  far as the third ground is  concerned,  the
\n          Allahabad  High Court had this to say in paragraphs 49,  50,
\n          54 and 55 of the Report:-\n<\/p>\n
                “49.  I would now address myself to another ground
\n               taken  in  the  winding  up  petition,  viz.,  the
\n               continuance  of non-banking financial business  by
\n               the  respondent  company  is  detrimental  to  the
\n               public   interest  or  to   the  interest  of  the
\n               depositors  of the company which is ground (d)  of
\n               sub-section (1) of Section 45-MC of the Act.\n<\/p><\/blockquote>\n
                50.  Coming to grips on this question, it is to be
\n               noted  that  the interest of the depositors is  of
\n               paramount  importance.  On the fair assessment  of
\n               the  facts and material on record, it is  apparent
\n               that the director(s) of the company have conducted
\n               the  operations of the company in such a way as to
\n               jeopardize  the  interest  of   large  number   of
\n               depositors  whose  hard  earned   money  has  been
\n               exposed  to great risk.  By not making  investment
\n               out of the collected deposits as prescribed by the
\n               Bank in its directions, the respondent company has
\n               failed  to protect the interest of the  depositors
\n               and  has  rather jeopardized their  interest.   As
\n               such  the continuance of the non-banking financial
\n               business  by the respondent company is detrimental
\n               to  the interest of the depositors as also to  the
\n               public interest.\n<\/p><\/blockquote>\n
           54.   The  reply dated 12.5.1998 submitted by  the
\n               respondent  to  the show cause notice of the  Bank
\n               says  that  without  going  into  the  details  of
\n               calculation  arrived at by the Reserve Bank,  they
\n               could  only  say  that if they  had  repaid  their
\n               liabilities  in past 26 years, why they would  not
\n               be  able to repay the same in future.  The fact is
\n               that  the  only  secret of the  operation  of  the
\n               respondent  company  over  the years has  been  to
\n               repay  the  previous  depositors   out  of   fresh
\n               deposits, at the same time squandering and eroding
\n               part  of  the deposits and making  investments  in
\n               contravention  of the statutory directions  issued
\n               by  the  Bank.   But it stands exposed that  at  a
\n               given  time viz., on 31.3.1997 its liabilities for
\n               exceeded  its  assets.  It would be recalled  that
\n               there  has been simultaneous stoppage of inflow of
\n               fresh  deposits  and  repayment   of  the  earlier
\n               depositors’ money.\n<\/p>\n
                55.  So, the above discussion is indicative of the
\n               fact that the financial position of the respondent
\n               company  is  far below the level prescribed  under
\n               the  Act and continuance of non-banking  financial
\n               business  by  it  is  detrimental  to  the  public
\n               interest   as   also  to   the  interest  of   the
\n               depositors.   At  the given time, it is not  in  a
\n               position  to repay its depositors and simply wants
\n               to  carry  on business on the strength of  getting
\n               fresh  deposits.  It would be an unending  vicious
\n               circle  as  whenever  the things are  required  or
\n               desired  to  be  squared,  the  last  set  of  the
\n               depositors  would be the losers.  Operation of the
\n               non-banking  financial  company in such a  way  is
\n               necessarily  detrimental  to the interest  of  the
\n               public at large including those of the depositors.\n<\/p>\n
 93.      No  doubt the High Court discussed in great  detail
\n          the reply given by the Company to show cause notice, but the
\n          facts  of  the case before me are so obvious that I  do  not
\n          think it necessary to get into such an exercise.\n<\/p>\n
 94.                   I  have  deliberately quoted extensively  from  the
\n          decisions  of the Andhra Pradesh and Allahabad High  Courts.
\n          The  reason  is  to bring home the point that  the  kind  of
\n          problem  that  I  am dealing with is not isolated  –  it  is
\n          widespread;   it  affects a large number of people and  runs
\n          into  crores  of  Rupees.  It is time,  therefore,  for  the
\n          concerned  people  to wake up and not keep their  eyes  wide
\n          shut.\n<\/p>\n
 95.                   It  was  contended by learned counsel for  Rockland
\n          that his client was not an NBFC in view of the provisions of
\n          Section  45-I  of  the RBI Act.  This argument needs  to  be
\n          summarily  rejected.   There  is  nothing  to  suggest  that
\n          Rockland  was  not carrying on any business of financing  or
\n          that  it was not a financial institution.  On the  contrary,
\n          these facts are not doubted.  Furthermore, it was discovered
\n          by  the  RBI  that  even after the  Board  of  Directors  of
\n          Rockland  had resolved in January, 1998 not to accept  fresh
\n          deposits,  Rockland  continued  to  do so.   The  fact  that
\n          Rockland was a Merchant Banker recognised by the SEBI at the
\n          relevant  time  also, does not detract from the  conclusions
\n          arrived  at.   It  is possible that as  a  Merchant  Banker,
\n          Rockland  was not entitled to function as an NBFC – but that
\n          it  unabashedly chose to do so, cannot be used by it to  its
\n          advantage.  Similarly, the contention of learned counsel for
\n          Rockland that due to the provisions of Section 2(c) (xvi) of
\n          the  Industrial  Development  Bank of India Act,  1964,  his
\n          client  cannot be classified as a “financial institution” or
\n          an NBFC has only to be stated for outright rejection.  There
\n          can,  therefore, be no doubt that the writ petition filed by
\n          the RBI against Rockland is maintainable.\n<\/p>\n
 96.                   Reference  was made, on occasion, to CA 556\/2001 in
\n          the  Company  Appeal.   This application was  filed  on  7th
\n          April,  2001  by  Rockland,  which  briefly  summarizes  its
\n          grievance, namely, that the order of the CLB was contrary to
\n          the directions of the RBI which allowed time to all NBFCs to
\n          repay  in three years time, reducing its liability by  1\/3rd
\n          every  year  and  that the schedule of payments  was  highly
\n          onerous as it envisaged 70% of the payment in the first year
\n          itself.    The  application  then   sets  out  the   various
\n          proceedings  and  steps taken by Rockland to  liquidate  its
\n          debts.   Eventually,  in  paragraph 24 of  the  application,
\n          Rockland   asks  for  rescheduling   the  payments  to   the
\n          depositors on certain lines.\n<\/p>\n
 97.                   Given  the  conduct of Rockland and its  Directors,
\n          there  is  nothing to suggest that the application was  made
\n          bona  fide – it appears to have been a last ditch attempt to
\n          further  buy  time.  Rockland took no concrete steps  during
\n          the pendency of the application to show that it really meant
\n          to  fulfilll  its  “commitments.” The  application  does  not
\n          deserve  to  be  entertained  and is  rejected.   It  is  so
\n          ordered.\n<\/p>\n
 98.                   What  is  eventually the relief to be granted?   No
\n          doubt,  the RBI has made out a case for winding up Rockland.
\n          The  consequences  of Section 45-MC(4) of the RBI  Act  must
\n          follow.   Rockland  is  ordered to be wound up and  all  its
\n          properties,  assets,  books, etc.  should  be  expeditiously
\n          taken  over  by  the Official Liquidator  attached  to  this
\n          Court.   Since the task for the Official Liquidator will  be
\n          enormous  (he is already busy in the affairs of  liquidation
\n          of  several companies), he is entitled to, and should,  take
\n          the  assistance  of the Official Liquidator attached to  the
\n          Mumbai  High Court especially with regard to the  immoveable
\n          properties  in  Mumbai and Goa.  From the orders  passed  by
\n          this  Court,  it appears that the Economic Offences Wing  of
\n          the  Crime Branch is already associated in the investigation
\n          of  the affairs of Rockland.  It is directed to continue  to
\n          do so, along with the Official Liquidator.\n<\/p>\n
 99.                   Since it is the RBI which has sought the winding up
\n          of  Rockland,  the  Governor  of the RBI  should  spare  the
\n          services  of  one (or more) officer to assist in getting  to
\n          the bottom of the affairs of Rockland.\n<\/p>\n
 100.                   I have no doubt about the enormity of the task, but
\n          it is surely not insurmountable.\n<\/p>\n
 101.                   All  the  concerned  officers will, of  course,  be
\n          entitled   to   take  the   assistance  of  the   Income-tax
\n          authorities  and I am sure the concerned Chief Commissioners
\n          will render all help, both logistical and otherwise.\n<\/p>\n
 102.                  All  officers  will, however, appreciate  that  the
\n          interests of the depositors is of primary concern.\n<\/p>\n
 103.           It  is directed that subject to any further  orders
\n          that  may  become  necessary, all assets and  properties  of
\n          Rockland  presently in this Court will be handed over to the
\n          Official  Liquidator  by  the Registry of this Court  on  or
\n          before 31st January, 2002.\n<\/p>\n
 104.                   All  interim  orders or injunctions passed by  this
\n          Court,  including  those staying the arrest  of  J.M.Chawla,
\n          Arun  Chawla,  Tarun  Chawla and Ms.Indu Chawla  are  hereby
\n          vacated.   Cases proceeding in various fora against them  or
\n          Rockland  should continue, if not already concluded.  If any
\n          arrests  are required to be made for executing or  enforcing
\n          any  order,  the various fora (including the Courts) may  do
\n          so.  The period of incarceration will, of course, be decided
\n          by  the concerned forum which may also decide if the  period
\n          of incarceration is to run concurrently or consecutively.\n<\/p>\n
 105.                   A  word  about  the depositors.   They  have  shown
\n          considerable  restraint  –  there  is  no  doubt  about  it.
\n          However,  like many hundreds, if not thousands of others, it
\n          cannot  be  said if they will ever get back their  deposits,
\n          let  alone  the  interest thereon.  The cases  that  I  have
\n          extensively  quoted  (the Andhra Pradesh and Allahabad  High
\n          Court cases) show that the law is essentially a paper tiger.
\n          It  needs  to be repeated that someone in  authority  should
\n          look   into  this,  so  that   future  depositors  are   not
\n          financially  ruined.  In fact, paragraph 6 of the  Statement
\n          of Objects and Reasons for the 1997 Amendment to the RBI Act
\n          notices  this  situation,  but provides no remedy  and  then
\n          there  is  the  sound of silence.  This paragraph  reads  as
\n          follows:-\n<\/p>\n
                 “There  are  reports of several finance  companies
\n               and  unincorporated bodies having failed to  repay
\n               the   deposits    collected    from   unsuspecting
\n               depositors who have been tempted by the attractive
\n               returns  and incentives offered.  Concern has been
\n               expressed  in several quarters on the need to take
\n               urgent  steps  to regulate the activities of  such
\n               companies and unincorporated bodies.”\n<\/p><\/blockquote>\n
 106.                   As  a  result  of this discussion,  CP  93\/2001  is
\n          allowed  and  Rockland is ordered to be wound up.   Co.A.(B)
\n          4\/1998  is  dismissed.  All the connected company  petitions
\n          and  applications are disposed of in view of the above.  The
\n          officers  who have been directed or authorised to look  into
\n          the  affairs of Rockland will work out their own  procedures
\n          and  modalities  to  carry out their task.   They  will,  no
\n          doubt,  sympathetically look into any grievance made to them
\n          by  any  depositor, who is, of course, free to lodge his  or
\n          her claim with the Official Liquidator.\n<\/p>\n
 107.              By the order dated 26th April, 2001, J.M.Chawla was
\n          required  to  file  an affidavit explaining why he  has  not
\n          complied  with this Court’s order dated 13th December,  2000
\n          and  why  action  should  not  be  taken  against  him   for
\n          disobeying  the  order of the Court.  J.M.Chawla  has  since
\n          filed his affidavit in this regard.\n<\/p>\n
 108.      Prima  facie,  it  appears   that  J.M.Chawla   has
\n          committed contempt of Court.\n<\/p>\n
 109.      The  Registry  will  register a case for  suo  motu
\n          civil  contempt  of Court alleged to have been committed  by
\n          J.M.Chawla.   After  registration, the contempt petition  be
\n          then  listed before the appropriate Bench along with  copies
\n          of the orders dated 13th December, 2000 and 26th April, 2001
\n          and the affidavit dated 22nd May, 2001 filed by J.M.Chawla.\n<\/p>\n
 110.  While costs ought to be imposed on Rockland, I have
\n          my  doubts  if they can ever be recovered.  Therefore, I  do
\n          not make any order for payment of costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court Reserve Bank Of India vs Rockland Leasing Ltd. on 5 December, 2001 Author: M B Lokur Bench: M B Lokur JUDGMENT Madan B. Lokur, J. 1. There are a very large number of substantive petitions pertaining to M\/s Rockland Leasing Ltd. (for short Rockland) pending in this Court. The Registry of this […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-242443","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nReserve Bank Of India vs Rockland Leasing Ltd. on 5 December, 2001 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/reserve-bank-of-india-vs-rockland-leasing-ltd-on-5-december-2001\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Reserve Bank Of India vs Rockland Leasing Ltd. on 5 December, 2001 - 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