Can NBFC purchases a property after RBI have cancelled its license?

-

 

Shubham Budhiraja[1]



NBFC license cancelled by RBI because NBFC failed to keep the minimum capital requirements and meanwhile the NBFC acquired a property as winner bidder during SARFESI proceedings but the SDM refused to record mutation on name of NBFC for simple reason that RBI has cancelled the NBFC license and therefore there is no authority. The HC has set aside such an order and direct SDM to register the mutation because NBFC is first a company under companies act and then a NBFC according to license issued by RBI. Mere because the license is cancelled by RBI that does not prevent such a company to acquire a property or sell them on its own name because the cancelled NBFC is continuing as a company for all the purposes as per companies act and such a company being a separate legal entity can acquire property on its own name[2].  

 

(I)          Certificate of registration as an NBFC is different from the certificate of registration as a company. As can be seen from Section 45-I(f) of the Act, an NBFC is primarily a Company. One of the prerequisites of being an NBFC is that of it being a company. An entity is formed as a company under the provisions of the Companies Act, 1956 or the Companies Act of 2013 (for short 'the Companies Act'), as the case may be. Once an entity becomes a company, if it has the objects as contemplated under the Companies Act, it can apply to register as an NBFC.

 

(II)       Registration as a Company and registration as an NBFC are under different and distinct statutes. A company registered under the Companies Act, is a legal entity by itself. The existence of a company is determined by the registration under the Companies Act, while registration as an NBFC determines different type of activities, such a registered company can indulge in.

 

(III)        When the existence as a company is not in dispute, it is entitled to acquire properties and continue its legal existence. Merely because the CoR to function as an NBFC is cancelled, that will not deprive the petitioner of its legal character as a company. The Company existence as a legal entity capable of holding properties remains unscathed, in spite of the cancellation of its registration as an NBFC.

 

(IV)          Cancellation of registration as an NBFC, midway during the securitization proceedings, will not result in the entity losing the opportunity to continue the proceedings under the SARFAESI Act to recover amounts due to it.


[1] Advocate, Delhi High Court, Associate Company Secretary, Member-Delhi High Court Bar Association,

9654055315, Shubhambudhiraja02@gmail.com

[2] WP(C) NO. 18263 OF 2021, HIGH COURT OF KERALA AT ERNAKULAM

Comments

Post a Comment

Popular posts from this blog

Whether a person can be appointed as an arbitrator if his daughter is married to the son of the eldest brother of one of the parties in the arbitration proceedings?

-
Image
    Shubham Budhiraja [1] Two brothers running a family business in the form of a company and dispute arise between them and both decide to resolve through arbitration. During course of arbitration proceedings, one of party filed Section 14(2) r/w Section 15 Petition filed challenging mandate of arbitrator as being terminated because son of arbitrator is married to daughter of eldest brother of one of party and thus should be disqualified under Section 12(5) being ‘close family relationship’. The Hon’ble Delhi High Court declined the relief and held that neither the Seventh Schedule of the A&C Act nor the IBA Guidelines define the expression ‘close family relationship’. The plain language of Entry no. 9 indicates that it is not the legislative intent to render a distant relative of the parties to be ineligible for being appointed as an arbitrator, if both the parties so agree. It is not sufficient that the arbitrator is related to any one of the parties; the relationship must
Read more

ELECTRONIC EVIDENCE: THE UNFERTILE CROP

-
Image
ELECTRONIC EVIDENCE: THE UNFERTILE CROP SHUBHAM BUDHIRAJA [1] Digital images are no different from the droplets of rain that fall, merge, and then divide: there is no telling whether the droplets that split are identical to the droplets that came together to form the larger droplet [2] . INTRODUCTION Law may be divided into substantive and procedural laws. The laws by which rights, duties and liabilities are defined are called substantive law whereas laws which prescribe mode by which application of substantive law is regulated are called procedural law. Law of Evidence is a judicial recognition to the system of logical reasoning. The Indian Evidence act, 1872 is a bunch of 167 sections divided into 11 chapters and 3 parts. Part II, Chapter V is headed as “of Documentary Evidence” is of relevance for our discussion in this article. At the threshold, it is submitted that the proving of oral evidence are in contrast to the proving of documentary
Read more

REPUGANCY UNDER ARTICLE 254 & TEST OF VALIDATING LAW

-
Image
  Shubham Budhiraja [1] [1] Company Secretary, LLB Final Year,DU & Bcom (H) The land acquisition falls in concurrent list and parliament in year 2013 has introduced a new act which provides for rehabilitation, compensation and procedure on land acquisition of property. The State of T.N has made 3 different state laws w.r.t. land acquisition which was struck off by the High Court. Thereafter, state of TN in year 2019 enacted the same law but with president assent under Article 254 to avoid the repugnancy with 2013 act under Article 254. The appeal filed before apex court w.r.t. repugnancy of 2019 state law with 2013 central law & test of validating the struck off law. The Supreme Court observed as: VALIDATING A LAW WITH RETROSPECTIVE EFFECT Case Law Relevant Remarks National  Agricultural  Cooperative  Marketing  Federation  of India Ltd. & Anr. vs. Union of India & Ors, (2003) 5 SCC 23 The legislati
Read more