In a victory to Reserve Bank of India (RBI), a division bench of the Madras High Court has set aside a single judge order that ordered restoration of Certificate of Registration (CoR) of non-banking financial companies (NBFC) cancelled by the central bank for non-compliance of the enhanced net owned fund (NOF) norms.
The bench also directed the NBFCs to approach the appellate authority within 30 days and raise their concerns to get the greivances redressed.
RBI had notified an enhanced NOF holding by all NBFCs on March 27, 2015, which stipulated them to have `1 crore as NOF as of April 1, 2016 and `2 crore as of April 1, 2017. The stipulation of NOF was not maintained by several NBFCs and show-cause notices were issued by the RBI to them. RBI had cancelled the CoR of over 1,500 NBFCs for non-compliance.
Subsequently, a number of NBFCs approached the high court with writ petitions against the cancellation of CoR and the single judge bench ordered in favour of the NBFCs, directing to restore the CoRs and extending time to the companies to comply with the requirements till March 31, 2019.
Following this, RBI filed an appeal and the division bench of justice T S Sivagnanam and justice V Bhavani Subbaroyan issued an order setting aside the earlier order.
The bench, after considering various arguments from the parties, observed that the order passed by the single bench extending the time for compliance of the NOF requirement till March 31, 2019 was without jurisdiction, and consequently, liable to be interfered with.
Allowing the appeal, the court said that the writ petitions filed by the companies stand disposed and directed them to file appeal within a period of 30 days from the date of receipt of a copy of the judgment.
The court asked them to raise all contentions before the appellate authority including the contention that as of now, all of the companies which filed petition have complied with the requirement of `2 crore of NOF and request the appellate authority to accept the compliance under the relevant notification to enable them to carry out their business.
The division bench observed that such prayer should be considered by the appellate authority on merits and in accordance with the law. The petitioner companies include Nahar Finance & Leasing, Lodha Finance India, Senthil
Finance and Valluvar Development Finance who argued that the stipulation by RBI was contrary to the provisions of the RBI Act, 1934 and against the principles of natural justice.
RBI had argued that instead of approaching the court, there was an appeal remedy available and the companies have filed the writ petitions without approaching the appellate authority.
While allowing the appeal by RBI, the division bench held that the writ petitions by the companies were not maintainable in the light of the statutory appeal remedy available in the statute.