Failure to Meet Rs. 200 Lakh Net Owned Fund Mandate within Deadline: Delhi HC sets aside Cancellation of NBFC Registration [Read Order]
The Bench remanded the case to RBI for reconsideration in light of numerous similar matters adjudged by the Delhi High Court
Delhi High Court – NBFC Registration – NBFC – Delhi HC – Cancellation – Taxscan
Delhi High Court – NBFC Registration – NBFC – Delhi HC – Cancellation – Taxscan
The Delhi High Court in a recent decision set aside an Order passed by the Reserve Bank of India ( RBI ) cancelling the Certificate of Registration of a Non-Banking Financial Company on account of failing to accrue an amount of Rs.200 Lakh as their Net Owned Fund (NOF) within the Deadline set by RBI.
The present Writ Petition and allied Civil Miscellaneous Application were lodged by RBG Leasing and Credit Limited seeking to quash the impugned order passed by the Appellate Authority (Department of Financial Service), Ministry of Finance under Section 45 IA(7) of the Reserve Bank of India Act, 1934.
The RBI by virtue of the powers vested in it, provides directions for the Regulatory Framework governing the numerous entities within its purview. As matters stood, RBI’s notification dated 27.03.2015, and gazetted on 11.03.2016 required all NBFCs to maintain NOF of Rs.100 Lakhs by the end of March 2016 and Rs.200 Lakhs by the end of March 2017.
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The Petitioner failed to accrue Rs.200 Lakhs by the stipulated date and achieved the same by 12.03.2018. The Petitioner was subsequently slapped with a Show-Cause Notice ( SCN ) by RBI for non-maintenance of NOF as per the Notification mandated 11.03.2016.
The Petitioner, being aggrieved by the proposition of the SCN preferred an Appeal before the Appellate Authority (Department of Financial Service), Ministry of Finance claiming that an amount of Rs.204.98 Lakhs had been achieved by the Petitioner as on 31.03.2019.
The Appellate Authority, on 09.4.2020, dismissed the Petitioner’s Appeal and passed an Order affirming the Cancellation of Registration by RBI.
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The Single-Bench of the Delhi High Court chaired by Justice Dharmesh Sharma considered its own Decisions in the cases of Premier Capital & Securities Private Limited v. Union of India (2023) and M/S BHC Finance and Leasing Pvt Ltd. v. Union of India & Ors. (2022) among others while setting aside the RBI’s Order Cancelling the Registration of Petitioner and the Order-in-Appeal by the Appellate Authority.
Additionally, the Petitioner was directed to adduce material evidence supporting their case within a period of 15 days from the date of receipt of the copy of the High Court Order.
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The Delhi High Court, while remitting the case back to RBI for fresh consideration, advised them to take a fresh and pragmatic approach in taking a final decision on the Cancellation of Certificate of Registration of the Petitioner NBFC while being well within the bounds of the Law.
To Read the full text of the Order CLICK HERE
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