Judgment 1. Heard learned counsel for the parties. 2. Reserve Bank of India (hereinafter referred to as the RBI) as constitued under the Reserve Bank of India Act, 1934 (hereinafter referred to as the Act), has filed this petition praying, inter alia, to wind up M/s Helios Finance & Investment Ltd. (hereinafter referred to as the Company), which was incorporated as a public limited loan company on 8.5.1990 with an authorized share capital of Rs. three crores divided in equity shares of Rs. 100.00 each. 3. The capital clause of the Memorandum of Association of the Company provides that it shall be a Non-Banking Financial Loan Company conducting higher purchase business subject to the directions issued by the RBI but shall not carry on any banking business as defined in the Banking Regulation Act, 1949. 4. A team of RBI Officers inspected the books and accounts of the Company in July 1996 with reference to its financial position as on 31.3.1995 and noticed that the Company had accepted deposits to the tune of Rs. 692.84 lacs at the relevant time under various scheme i.e. daily/ monthly/recurring and Fixed Deposit Schemes but had invested only a sum of Rs. 0.51 lacs in approved Govt. Securities and thereby had violated the provisions contained in paragraphs 6(i)(b), 6(i)(c), 6(3) and 16 of the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 (hereinafter referred to as the 1987 directions). The RBI having noticed that the Company was accepting recurring deposits and its activities were akin to the activities of a Residuary Non-Banking Company, advised the Company under letter dated 21.8.1996, Annexure-A to the counter affidavit to take immediate steps to bring its operations and activities in tune with the provisions of the 1987 directions and to inform the RBI about the steps taken/to be taken in that regard with further direction to the Company to furnish paragraph-wise comments on the contraventions enumerated in the said letter dated 21.8.1996, Annexure-A to the counter affidavit within 30 days of its receipt. 5. It appears, the Company having received letter dated 21.8.1996, Annexure-A, informed the RBI under letter dated 17.9.1996, as contained in Annexure-B series, that the Company has already invested in Government Securities a sum of Rs. 50 lacs and within a period of further two months, the investment in Government Securities will be raised to Rs. two crores. 5. It appears, the Company having received letter dated 21.8.1996, Annexure-A, informed the RBI under letter dated 17.9.1996, as contained in Annexure-B series, that the Company has already invested in Government Securities a sum of Rs. 50 lacs and within a period of further two months, the investment in Government Securities will be raised to Rs. two crores. It was further pointed out that the Fixed Deposits with public sector banks were more than the prescribed limit and net owned fund of the company shall also be enhanced soon. It was further pointed out that the Punjab National Bank, South Gandhi Maidan, Patna has been nominated as Companys Banker where certificates are to be kept for safe custody kept. Explanation for delayed submission of balance-sheet together with the balance-sheet upto financial year, 1995 was submitted and request was made to grant further time to comply with the 1987 directions. The RBI considered the contents of the aforesaid letter dated 17.9.1996, Annexure-B to the counter affidavit but was not satisfied with the explanation contained therein. For failure to comply with the 1987 directions the RBI issued show cause notice dated 31.10.1996, Annexure-C to the counter affidavit calling upon the Company to show cause within 15 days of its receipt as to why the Company should not be prohibited from accepting the deposits from any member of public, including the existing depositors in exercise of powers vested in the RBI under Sec. 45K of the Act and also further proceeding be not initiated against the Company and its Directors for the contraventions of the 1987 directions as contemplated in Sections 58B and 58C of the Act. 6. In reply to the aforesaid show cause notice dated 31.10.1996, Annexure-C, the Company under their letter dated 6.12.1996, Annexure-D submitted Audited Balance-sheet, Profit & Loss Account and Directors Report for the year ending on 31st March, 1996, Text of Statement in lieu of Advertisement, Return in Schedule A, Photocopy of the receipts of the amount invested in Government Securities and Auditors Certificate with further clarification that the Director (Finance) and one authorized representative of the Company shall attend the office of the RBI shortly as also filed supplementary reply dated 17.12.1996. While action on the show cause notice dated 31.10.1996 and its reply dated 6.12.1996, Annexures-C and D remained pending, the Company on 3.7.1997 applied for registration before the RBI under the provisions of Sec. 45(1) (A) of the Act. While the said application for registration remained pending, the RBI having considered the allegations contained in the show cause notice dated 31.10.1996, Annexure-C that the Company was not complying with the provisions of 1987 directions together with the replies filed by the Company dated 6/17.12.1996, passed prohibitory order dated 15.7.1997, Annexure-3 restraining the Company from accepting deposit with immediate effect from any person, including existing depositors in any form whether by way of subscription/instalment to any scheme floated by the Company or by way of renewals under any such schemes/deposits or otherwise as the investment of the Company in approved Govt. Securities was only to the extent of 12.41% of deposit liability as on March 31, 1996 against the required 70% to be maintained under the 1987 Directions. 7. Having received the restraint order dated 15.7.1997, Annexure-3, the Company filed representations dated 21/ 25.7.1997, Annexures-G and G/1 to the counter affidavit and another representation dated 30.7.1997 before the RBI and submitted that the Company be granted 9 months/ 3 years to comply with the directions contained in paragraphs 6(1 )(b) and 6(1) (c) of the 1987 Directions respectively meanwhile also to permit the Company to operate its bank accounts so as to clear the dues of the depositors. The RBI under letter dated 16.8.1997, Annexure-4 permitted the Company to operate its bank accounts for making repayments to the depositors and meeting bona fide office expenses but also advised the Company to submit a monthly cash flow statement duly certified by the Companys Auditors. Under letter dated 22.8.1997, Annexure-J to the counter affidavit, the RBI, however, rejected the request of the Company for exemption under Sec. 45NC of the Act. During the period September/November, 1997, the RBI undertook inspection of the financial position of the company as on 31.3.1997 as the RBI had learnt that the Company was not complying with the instructions contained in the restraint order dated 15.7.1997, Annexure-3 and further undertook a scrutiny of the bank account of the Company with the Punjab National Bank, South Gandhi Maidan, Patna, which revealed 1160 instances of bouncing of cheques issued by the Company within a short span of two months. 8. 8. The findings of the Inspection Team is as follows: (i) Net owned fund of the Company is (-) Rs. 708.67 lacs as on 31.3.1997 as against the minimum requirement of Rs. 25 lacs under the Act. (ii) Realizable value of assets was Rs. 2710.34 lacs as against the total outstanding liabilities of Rs. 3419.01 lacs. (iii) Public deposits were Rs. 3220 lacs as on 31.3.1997. (iv) Company violated the provisions of 1987 Directions as the Company invested Rs. 377.90 lacs in its group companies. (v) Company continued to disobey the directions contained in prohibitory order dated 15.7.1997 as it failed to submit its return. 9. In the light of aforesaid findings of the Inspection Team of the RBI a show cause notice dated 23.6.1998 was served on th e Company calling upon them to show cause as to why their application for registration dated 3.7.1997 filed under Sec. 45(1)(A) be not rejected. It appears, no reply to the said show cause notice dated 23.6.1998 was furnished and the RBI under orders dated 10.8.1998, Annexure-6 rejected the request to register the Company as a Non-Banking Financial Institution which order was forwarded to the Company under Memo dated 18.8.1998 and is contained in Annexure-6, perusal whereof indicates that the request for registration has been rejected on various grounds indicated in the order, including the ground that net owned fund of the Company was negative at Rs.708.67 lacs and it failed to comply with the instructions contained in the restraint order dated 15.7.1997 together with the provisions of the 1987 Directions and further it was reported that the financial position of the Company had become precarious as complaints regarding non-payment of matured deposits were being received. Having rejected the request of the Company for granting registration under order dated 10.8.1998, Annexure-6, the RBI proceeded to file the instant Company petition under Sec. 45 of the Act for winding up the Company, as according to the RBI all the ingredient of Sec. 45MC were made out in the instant case since the Company failed to make payment to the depositors after maturity of the Bond/Scheme. In this connection reference was also made to the order of the Company Law Board, Calcutta dated 28.9.1999 as contained in Annexure-2 to the petition at flag 5, which was not complied with by the Company, 1160 instances of bouncing of cheques was noticed by the Inspection Team of the RBI when they examined the books of accounts of the Company with their bankers, Punjab National Bank, South Gandhi Maidan, Patna. Paragraph 7 of the Company petition read with Balance-sheet of the Company, Annexure-1/A to the main petition itself indicated that the financial condition of the Company was not sound, as net owned fund of the Company was negative at Rs. 708.67 lacs. 10. Although the Company has filed counter affidavit but has not been able to dispel the aforesaid assertions of the RBI regarding its financial position as also the fact that it could not comply with the directions/scheme formulated by the Company Law Board, Calcutta for repayment to its depositors together with the fact that 1160 cheques issued by the Company for repayment bounced which fact was established in course of inspection of the Bank account of Company maintained with its Banker and that the net owned fund of the Company was negative at Rs. 708.67 lacs as on 31.3.1997. 11. It was submitted on behalf of the Company that the 1987 Directions were contrary to the provisions contained in Sec. 45IA and IB of the Act and the finding of the RBI that the net owned fund of the Company is in negative is also contrary to the aforesaid provisions as from the statement made in paragraph 43 of the counter affidavit, it will appear that the net owned fund of the Company is Rs. 29.89 lacs as has been indicated in the balance-sheet of the financial year ending 31.3.1997. In this connection, it was also submitted that the detailed calculation of the net owned fund has been given in paragraph no. 55 of the counter affidavit and with reference to sub-clause (b) of Sec. 451 A, it was submitted that the Company was only required to have a net owned fund of Rs. 25 lacs and as it is having the net owned fund of Rs. 29.89 lacs, statutory provisions have not been violated and the entire action against the Company is wholly misplaced. 25 lacs and as it is having the net owned fund of Rs. 29.89 lacs, statutory provisions have not been violated and the entire action against the Company is wholly misplaced. It was further submitted with reference to the averments made in paragraph 80 of the counter affidavit that the assertion of the RBI that it is not able to pay its debt is also not correct. 12. In rejoinder, learned counsel for the RBI submitted that the manner in which the Company has calculated its net owned fund as Rs. 29.89 lacs is wholly contrary to the statutory provisions as also the RBI Directions including the manner in which net owned fund is required to be calculated. It is further submitted that there has been no reply on behalf of the Company to the assertion of the RBI that after inspection of the bank accounts, 1160 instances of bouncing of cheques issued by the Company was noticed by the Inspection Team of the RBI within a short span of two months and thus there should be no difficulty to conclude that the Company is in a financial mess and it is in public interest that it should be wound up at an early date as it has already been prohibited by the RBI from receiving deposits. 13. Having heard counsel for the parties and having perused the documents annexed with the petition and the counter affidavit, I am satisfied that the Company is in a financial mess and is unable to pay its debts and should be wound up in public interest. I, therefore, direct that the Company be wound up under the provisions of Sec. 45MC of the Act read with Sec. 433 of the Companies Act, 1956. The Official Liquidator, attached to Patna High Court who was earlier appointed as provisional liquidator of the Company under this Courts order dated 8.10.1999 be appointed as the Liquidator of the Company and he is directed to take necessary actions as provided under the Companies Act, 1956.