Evaan Holdings Private Limited vs. Reserve Bank Of India And Ors

* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Order reserved on: 26 September 2024
rd
Order pronounced on: 23 October 2024

+ W.P.(C) 9877/2024 & CM APPL. 40551/2024
EVAAN HOLDINGS PRIVATE LIMITED .....Petitioner
Through: Mr. Parag Tripathi, Sr. Adv.
along with Mr. Anirudh
Sharma, Mr. Srinivasan
Ramaswamy, Ms. Harshita
Choubey, Ms. Sonali Sharma &
Ms. Vridhi Kashyap, Advs.
versus
RESERVE BANK OF INDIA AND ORS .....Respondents
Through: Mr. Avishkar Singhvi, Mr.
Keshav Sehgal, Mr. Shivam
Gaur, Mr. Kshitij Joshi & Mr.
Aryan Kumar, Advs. for R-2.
Mr. Sidharth Luthra, Sr. Adv.
along with Mr. Dhruv Chawla,
Mr. Yoganshi Singh, Mr.
Ayush Agarwal.
CORAM:
HON'BLE MR. JUSTICE DHARMESH SHARMA
O R D E R
CM APPL. 46471/2024
1. This order shall decide the issue of maintainability of the
present writ petition preferred by the petitioner company invoking
Article 226 of the Constitution of India, 1950, seeking issuance of
1
directions to respondent No.1/RBI to initiate action against
respondent No.2 company i.e. Exclusive Capital Limited in terms of
the provisions contained in Chapter IIIB of the Reserve Bank of India
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Digitally Signed By:PRAMOD
KUMAR VATS
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Act, 1934 [― RBI Act ‖].
2. It should be noted that respondent No. 3 served as an
independent director, while respondent No. 4 was an additional
Director of respondent No. 2 company, and the latter ceasing to
continue w.e.f 30.09.2023. The respondent No. 5 was the Business
Head, and respondent No. 6 was the Company Secretary of respondent
No. 2 company. Additionally, it is stated that respondent No. 2 was
earlier known as UT Leasing Ltd., which was taken over by new
promoters in September 2021. It commenced its operations as a
2
registered NBFC from 16.12.2021, and by its certificate it was
prohibited from accepting any public deposits. Pursuant to a
Resolution dated 21.09.2021, 31,50,00,000 CCPS were issued to
Teesta Retail Pvt. Ltd. by respondent No. 2 company at face value of
Rs. Ten each, along with 8% non-cumulative coupons per annum on
3
each of the CCPS by way of dividend from respondent No. 2.
Furthermore, it is stated that Teesta amalgamated with Siddhant
Commercials Pvt. Ltd. and on 21.05.2024 the petitioner company
purchased the aforesaid number of CCPS from Siddhant.
3. Shorn of unnecessary details, the petitioner company states that
it has substantial shareholding of Rs. 17,50,00,000/- in the nature of
preference shares with respondent No.2 company, which is an NBFC
having an aggregate value INR 175 crores, and it highlights certain
alleged aspects of mismanagement and financial improprieties
including misappropriation and siphoning off funds by respondent

1
Reserve Bank of India
2
Non-Banking Financial Company
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KUMAR VATS
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No.2 company through its Board of Directors, which presently
comprises of Mr. Satya Prakash Bagla, Mr. Achal Jindal and Mr.
Johnson Kallarachal Abraham. The petitioner company laments that
despite lodging complaints dated 24.05.2024 and 21.06.2024 with the
RBI, no action has been taken so far.
4. Learned counsel appearing for respondent No.2 has urged that
the maintainability of the present writ petition was earlier addressed
but the said issue was not decided by this Court while passing the
4
earlier order dated 24.07.2024, and aggrieved thereof, they filed LPA
742/2024 dated 09.08.2024, in which the following operative order
was passed:
―7. In our view, at the moment, the appeal is premature. The
learned Single Judge has not ruled one way or the other, i.e., either
on the preliminary objections concerning maintainability of the
writ action or on the merits of the matter.
8. It is our sense that the observations are exploratory at this stage
and do not advert to the final decision on the issues concerning
preliminary objections or qua the merits.
9. The appeal is, accordingly, closed.
10. Needless to add, the parties will have their complete say before
the learned Single Judge.‖

5. Mr. Parag Tripathi, learned Senior Counsel for the petitioner
company, argued to sustain the maintainability of the instant writ by
inviting attention of this Court to the provisions in Chapter IIIB of the
5
RBI Act and took this Court through the provisions of Section 45H,
45ID, 45MA and 45Q, reiterating what was urged and recorded by this
Court in the earlier order dated 24.07.2024, heavily relying on the

3
Compulsorily Convertible Preference Shares
4
Letters Patent Appeal
5
Reserve Bank of India Act, 1934
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decision by the Supreme Court in the case of Nedum Pillai Finance
6
Company Limited v. State of Kerala , wherein it was held that role
of RBI under the Scheme of Chapter IIIB of the RBI Act is to oversee
functioning of the NBFCs since the time of their birth i.e. the date of
registration till the time of their commercial death i.e. on being wound
up.
6. Mr Tripathi, learned Senior Counsel for the petitioner company
has urged that all the activities of the NBFCs automatically come
under the scanner of the RBI and the aforesaid provisions are
complete code in itself, which are not controlled by any other
provision of law including the Companies Act, 2013. Insofar as
7 8
proceedings before the NCLT , as well as NCLAT , learned Senior
Counsel invited attention of this Court to the Status Report filed by the
respondent No.1/RBI, wherein the supervisory concern of the RBI in
the functioning of the respondent No.2 company are brought to the
fore, upon which we shall delve into later on this order.
7. Further, it is pertinent to point out that learned counsel for the
respondent No.1/RBI urged that statutory auditors have been
appointed only recently and the financial accounts of the respondent
No.2 company are likely to be finalized by 30.09.2024, and it is only
thereafter that the RBI shall decide on action, if any, under Chapter III
B.
8. It was urged by the learned Senior Counsel for the petitioner
company that the aforesaid breaches committed by the Board of

6
(2022) 7 SCC 394
7
National Company Law Tribunal
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Directors of respondent No.2 company are yet to be rectified and even
after directions by the NCLT dated 15.05.02024, as well as the order
of the NCLAT dated 31.05.2024, the Statutory Auditor has not been
appointed in a lawful manner. It was, therefore, urged that not only the
present writ petition is clearly maintainable, but the RBI should be
directed to ensure that respondent No. 2 company should function
under the supervision of the Administration, so as to ensure that its
precious funds are not pilfered and/or wasted for personal
consumption by its Board of Directors.
9. Mr. Sidharth Luthra, learned Senior Counsel for respondents
No. 3 and 6 urged that the fact that the affairs of the respondent No.2
company are being mismanaged is evident from the fact that
independent directors having vast experience of working with NBFCs
have been removed and the control has been vested in inexperienced
directors. It was pointed out that independent directors have been
removed during the pendency of the petition before the NCLT despite
operation of the restrain order, which fortifies the petitioner
company‘s apprehension that the Board of Directors may take steps to
prejudice and jeopardize the investment of the petitioner company,
and therefore, appropriate measures are required to be taken by the
respondent No.1/RBI under Section 45 (i) (e) of the RBI Act.
10. Learned Senior Counsel for respondents No. 3 to 6 also urged
that the answering respondents were often informed of the transactions
undertaken by the respondent No. 2 company only after these
transactions had already been given effect to. Initially the answering

8
National Company Law Appellate Tribunal
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respondents did not raise any alarm and passed such decisions as
routine business transactions. However, they later objected to several
decisions made by the Board of Directors that were prejudicial and not
in the best interest of the company. Emails dated 12.10.2023,
24.01.2024, 05.02.2024 and 06.02.2024, were written by the
independent directors regarding these concerns, but no explanation
were provided for the various acts, omissions and transactions by the
respondent No.2 company, the shareholders, or even the Statutory
Auditors. It was urged that the present management of the respondent
No.2 company has been consistently breaching their financial duties
as directors.
11. Per contra , Mr. Avishkar Singhvi, learned counsel for the
respondent No.2 company, urged that the present petitioner has not
approached the Court with clean hands inasmuch as the entire subject
matter of the present writ petition is under consideration before the
NCLT/NCLAT, and the Directors/management of the respondent
No.2 company are not even made a party. It was pointed out that M/s.
Teesta Retail Private Limited invested about Rs. 315 crores in lieu of
issuance of optionally convertible debentures, which company merged
with Siddhant Commercials, and since such transaction disturbed the
leverage ratio of the respondent no. 2 company, which was required to
be rectified. In the meanwhile, Ms. Kanta Aggarwal, who is the
petitioner before the NCLT proceedings, along with one Suresh
Aggarwal purchased 117325 equity shares from Mr. Sanjeev Kumar
to become shareholders in respondent No.2 company and in order to
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restore the leverage ratios, the said OCD s were converted into CCPS
vide resolution duly approved by General Body Meeting of the
respondent No.2 company.
12. It is was vehemently urged that the in order to disturb the
smooth functioning of the respondent No.2 company, the NCLT
petitioner, who is a director in the petitioner company before this
Court has launched ill motivated proceedings before the NCLT.
Reference was made to the order passed by the NCLT dated
15.05.2024, and order dated 18.05.2024 passed by the NCLAT,
whereby the order passed by the NCLT had been modified directing
status quo and providing that the Administrator shall act as an
Observer and shall verify the allegations qua the financial transactions
including siphoning of funds. It was pointed out that NCLT petitioner
is both a director and shareholder of the petitioner company in the
present writ proceedings. Despite order dated 15.05.2024 passed by
the NCLT, wherein the legality of the said CCPS was being
questioned, the writ petitioner acting at the instance of NCLT
petitioner purchased the CCPS. It was urged that a proxy litigation is
being pursued by Smt. Kanta Aggarwal and Shri Sunil Aggarwal who
themselves are in violation of RBI guidelines.
13. It is, therefore, urged that the allegations into the investment of
Rs. 315 crores through OCD are sub judice before the NCLT/NCLAT
and no parallel proceedings can be sustained. Much has been argued
that the writ petitioners purchased the said CCPS in the respondent
No.2 company from M/s. Siddhant Commercials Private Limited for a

9
Optionally Convertible Debentures
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sum of Rs. 175 crores, in order to further prejudice the respondent
No.2 company and cause hindrance in the management functioning.
During the course of arguments, learned Senior Counsel for the
petitioner invited attention of this Court to the tabular presentation
referring to the averments in the petition before the NCLT and the
instant writ so to buttress the point that they are similar and gross
abuse of the process of law.
14. Lastly, it was submitted that RBI is already seized of the matter
and the proceedings, conducted in accordance with the law, cannot be
hijacked. As an expert body, the RBI must be free to decide the issues
uninfluenced by any pleadings or motivated claims of the parties
involved. It was vehemently urged that there is no justification for
any action against the respondent No.2 company based on the
provisions of the RBI and, specifically, the RBI Master Directions,
2016 vide Regulation 61. It is vehemently urged that no breaches
have been committed in the upper ceiling of leverage ratio and it is
denied that conversion of OCD to CCPS is any where contrary to the
guidelines of the RBI. Learned counsel for the respondent No.2
company relied on decisions in Dr. Subramanian Swamy v. Union
10
of India and decision by High Court of Gujarat at Ahemdabad in the
11
case of Krishan Krupa Owners Association v. RBI and lastly on
the decision in the case of Hoichoi Technologies Private Limited v.
12
Reserve Bank of India .
ANALYSIS AND DECISION:

10
2024 SCC OnLine Del 5706
11
Special Leave Application 233/2013 dated 09.12.2013
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15. I have given my anxious consideration to the submissions
advanced by the learned counsels for the parties at the Bar. I have
gone through the relevant record of this case as also the written
submissions besides the case law placed on the record.
16. First things first, Chapter-III-B of the RBI Act provides a
detailed mechanism that outlines the supervisory role for the RBI in
overseeing the functioning of the NBFCs. As rightly pointed out by
learned Senior Counsel for the petitioner, this supervisory role is
continuous; it commences from the date of registration of the NBFCs
and remains till the time of its commercial death by way of winding
up. This aspect of the law has been clearly elucidated by the Supreme
Court in the case of Nedum Pillai Finance Company Limited
(supra) , wherein it was held that all activities of the NBFCs
automatically come under the scanner of RBI and that the continuation
of an NBFC in business would depend upon compliances with certain
provisions found in the RBI Act as well as the circulars/directions
issued by the RBI.
17. It would be expedient to refer to the observations of the
Supreme Court while examining the provisions that are found under
Chapter-III-B of the RBI Act which are summarized as under:-
“40. After the amendment made to Chapter III-B by Act 23 of
1997, this Chapter has become a complete code insofar as NBFCs
are concerned. This can be seen from various provisions of
Chapter III-B, which is summarised in the form of a table for easy
reference as follows:

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Supreme Court that the power of the intervention available with the
RBI over NBFCs is from the cradle to the grave . At this juncture, it is
also pertinent to refer to one of the most important provisions in
Chapter III-B Section 45-Q of the RBI Act, which reads as under:-
―45-Q. Chapter III-B to override other laws.- The provisions of this
Chapter shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in force or
any instrument having effect by virtue of any such law.‖

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19. Thus, Section 45-Q which is extracted above confers an
overriding effect upon Chapter-III-B over any other laws for the time
being in force, including the Companies Act, 2013. That being the
position in law, reverting back to the instant matter, it is the case of
the petitioner company that the affairs of respondent No.2 company
are being conducted in a manner, which is resulting in large scale
siphoning of funds, violation of regulations issued by respondent
No.1/RBI, so much so that the management is not fit and competent to
run the business of the respondent No.2 company. The petitioner
company has placed heavy reliance on two representations made to
the respondent No.1/RBI dated 24.05.2024 and 21.06.2024 besides
third one by the erstwhile independent Directors making a
representation dated 15.03.2024 citing various allegations of violation
of regulations by respondent No.2 which incidentally are highlighted
in the Status Report of the RBI dated 12.08.2024.
20. The challenge mounted by the learned counsel for respondent
No.2 company that the petitioner company has not come to this Court
with clean hands does not cut much ice , since the petitioner company
has made a clean breast of the proceedings pending before the NCLT,
as well as NCLAT and it is pointed out that an application bearing IA
No. 3852/2024 is already pending for consideration for its
impleadment. Indeed, the proceedings before the NCLT have been
initiated by the shareholders of respondent No.2 company, who, in
another capacity, are also the Directors in the petitioner company, but
it needs to be appreciated that they have two distinct legal status: one
as the shareholders, and thus, airing grievances against the oppression
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and mismanagement in the running of affairs by respondent No.2
company, for which the NCLAT is seized of the matter; and secondly,
such shareholders are the Directors in the petitioner company, they
have a different legal status but then it is the company which owns
17,50,000 CCPS issued by respondent No.2, having aggregate face
value of INR 175 crores.
21. The bottom line is that it cannot be overlooked that the
petitioner company, as a juristic person, has a legitimate expectation
that its investment in respondent No.2 company will not go to waste
and/or siphoned or pilfered away to its detriment, as well as that of
respondent No.2 company. At this juncture, it would be relevant to
refer to the supervisory concern of the RBI in functioning of the
respondent No.2 company, which are spelled out in the Status Report
dated 12.08.2024 as under:
“Breach of leverage ration: RBI h as defined l everage r atio as
Tot al Outside Liabilities divided by Owned Funds and prescribed a
limit of 7 as the upper ceiling for Base Layer NBFCs as per para
9.1 of Master Direction of RBI d a ted October 19 , 2023 and para 6
of Mast er Direction DNBR.PD . 007 / 03.10 . 119 / 2016-17 dated
September 01, 20 16 . However , th e lev erag e ratio of the co mpan y
was 117.77 as of March 31, 2022. A copy of the Master Directions
dated September 01, 2016 is enclosed herewith as ANNEXURE
R-10.
2. Issue of OCDs of Rs 315 crore without permission of RBI
and conversion of OCDs to CCPS' without prior approval of RBI:
The company accepted optionally convertible debentures (OCDs)
without the permission of RBI, which were classified as public
funds under Para 3(xxvi) of Reserve Bank of India Master
Direction - Non-Banking Financial Company – Non Systemically
Important Non-Deposit taking Company (Reserve Bank)
Directions, 2016 dated September 0 l, 2016 (applicable at that
time) breaching the upper ceiling of Leverage Ratio. Further, the
said OCDs were converted into Compulsorily Convertible
Preference Shares (CCPS), again in contravention of Para 61 of
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Reserve Bank of India Master Direction - Non-Banking Financial
Company - Non-Systemically Important Non-Deposit taking
Company (Reserve Bank) Directions, 2016 dated September 01,
2016 (applicable at that time) which requires all applicable NBFCs
to seek prior written permission from RBI for acquisition/transfer
of control. These CCPS are non-cumulative and are convertible
into equity shares within a period not exceeding 20 years from the
date of conversion. As currently, maximum tenure of these CCPS
is 20 years which is more than five years, these CCPS fall under
the category of Public Fund in terms of para 5.1.27 of Master
Directions, 2023 and will be reckoned for arriving at Leverage
Ratio. Nonetheless, Ld. NCLT, New Delhi vide order dated
15.05.2024 has observed that
"The OCDs/CCPS issued by the Respondent No.1, in
violation of the RBI regulations , shall stand cancelled and
money, thereof, shall be returned to respective holders and
necessary formalities in this regard would be completed . . .
"
Ld. NCLAT, however, vide order dated 22.05.2024 has granted
status quo with respect to the order dated 15.05.2024 of Ld. NCLT,
New Delhi.
3. Non-submission of essential returns/documents to RBI:
The company has not submitted essential returns/documents such
as Balance Sheet, Profit & Loss account and Statutory Auditor
Certificate for the financial year 2023-24 and Statutory Auditor
Certificate for the financial year 2022-23.
4. Complaint against the Managing Director: There is a
complaint against Mr Satya Prakash Bagla alleging that there are
cases against Managing Director, Mr. Satya Prakash Bagla who has
criminal antecedents and is subject to investigations by variou s
authorities viz., the ORI, CBI, ED, BOW and other regulatory
agencies. These allegations are yet to be verified. The answering
Respondent has sent an email dated 09.08.2024 to the company
asking for their comments on these as well as other allegations
made in the complaint dated 07.08.2024 received from Shri Anuj
Goenka, Director of Evaan Holdings Private Limited, within three
days.‖

22. A fortiori , the Status Report indicates that the company
accepted OCDs without the permission of respondent No.1/RBI,
thereby breaching the leveraged ratio of the company beyond the
th
acceptable level of 7 . Furthermore, it has been highlighted that It is
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further brought to the fore the OCDs were converted into CCPS again
without the permission of respondent No.1/RBI. Despite the long
passage of time, no remedial measures have been undertaken coupled
with the fact that respondent No.2 company has failed to submit
timely returns as required by respondent No.1/RBI, and on inspection
being carried out by the officials of the RBI, it was shocking that the
material and essential records were not even found at the premises of
respondent No.2 company.

23. Moreover, circumstances have arisen indicating that the
management of respondent No. 2 company has been pilfering or
siphoning of funds for the purchase of luxury cars and creating
fictitious loan accounts, diverting the funds to of the company for
matters which are dehors the ordinary course of business affairs of the
respondent No.2 company, besides defaulting on payment of debts.
Evidently, respondent No.2 company has not submitted essential
returns/ documents such as balance sheet, profit and loss account and
Statutory Auditors‘ certificate for Finance Year 2023-2024 and
Statutory Auditors‘ certificate for the Financial Year 2022-2023.
Despite the petitioner company and respondent No.3, the erstwhile
independent Director of respondent no. 2 since, repeatedly raising
concerns about the irregulates in managing the financial affairs of the
company, there are grounds to suspect a deliberate attempt to withhold
submissions and access to accounts. This raises serious concerns
regarding the complete lack of transparency regarding the utilization
of respondent No. 2 company's funds.
24. A fortiori , the aforesaid irregularities and the omissions which
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have been pointed out in the Status Report cannot be brushed aside
and respondent No.1/RBI is competent to inquire into such matters
and take appropriate action in accordance with the law. There is no
gain saying that the writ proceedings under Article 226 of the
Constitution of India, 1950, can be instituted against an
instrumentality of State, such as respondent No.1/RBI, when it is
demonstrated that it is failing to exercise the power vested in it.
Reference can be made to the decision by the Supreme Court in the
case of Destruction of Public and Private Properties v State of
13
AP wherein it was observed as under:-
―19. The situations in which a positive mandamus ( sic may be
issued) to do a particular act in a particular way, may be broadly
classified in the following manner. First are the broad mandamus
cases where this Court has held that the Court may issue a positive
mandamus to enforce the law. Thus in Vineet Narain case detailed
orders were passed for the investigation of the Hawala transaction
cases. It is laid down that positive directions can be issued where
there is a power coupled with a duty. The situations under which
this can happen are numerous.‖
20. In Commr. of Police v. Gordhandas Bhanji AIR at p. 27,
quoting from Julius v. Lord Bishop of Oxford where the Court said
: ( Julius case , All ER p. 47 I)
―… there may be something in the nature of the
thing empowered to be done, something in the
object for which it is to be done, something in the
conditions under which it is to be done, something
in the title of the person or persons for whose
benefit the power is to be exercised, which may
couple the power with a duty, and make it the duty
of the person in whom the power is reposed, to
exercise that power when called upon to do so.‖
21. In Comptroller and Auditor-General of India v. K.S.
Jagannathan the Court also explored the need to issue a positive
mandamus where a power was coupled with a duty : (SCC pp. 691-
93, paras 18-20)

13
2009 5 SCC 212
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―18. The first contention urged by learned counsel
for the appellants was that the Division Bench of
the High Court could not issue a writ of mandamus
to direct a public authority to exercise its discretion
in a particular manner. There is a basic fallacy
underlying this submission—both with respect to
the order of the Division Bench and the purpose
and scope of the writ of mandamus. The High
Court had not issued a writ of mandamus. A writ of
mandamus was the relief prayed for by the
respondents in their writ petition. What the
Division Bench did was to issue directions to the
appellants in the exercise of its jurisdiction under
Article 226 of the Constitution. Under Article 226
of the Constitution, every High Court has the
power to issue to any person or authority, including
in appropriate cases, any Government, throughout
the territories in relation to which it exercises
jurisdiction, directions, orders, or writs including
writs in the nature of habeas corpus, mandamus,
quo warranto and certiorari or any of them, for the
enforcement of the fundamental rights conferred by
Part III of the Constitution or for any other
purpose. In Dwarka Nath v. ITO this Court pointed
out that Article 226 is designedly couched in a
wide language in order not to confine the power
conferred by it only to the power to issue
prerogative writs as understood in England, such
wide language being used to enable the High
Courts ‗to reach injustice wherever it is found‘ and
‗ to mould the reliefs to meet the peculiar and
complicated requirements of this country ‘. In
Hochtief Gammon v. State of Orissa this Court
held that the powers of the courts in England as
regards the control which the judiciary has over the
executive indicate the minimum limit to which the
courts in this country would be prepared to go in
considering the validity of orders passed by the
Government or its officers. (emphasis in original)

19. Even had the Division Bench issued a writ of
mandamus giving the directions which it did, if
circumstances of the case justified such directions,
the High Court would have been entitled in law to
do so for even the courts in England could have
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issued a writ of mandamus giving such directions.
Almost a hundred and thirty years ago, Martin, B.,
in Mayor of Rochester v. R . said : (ER p. 794)

‗… But, were there no authority upon the subject,
we should be prepared, upon principle, to affirm
the judgment of the Court of Queen's Bench. That
Court has power, by the prerogative writ of
mandamus, to amend all errors which tend to the
oppression of the subject or other misgovernment,
and ought to be used when the law has provided no
specific remedy, and justice and good government
require that there ought to be one for the execution
of the common law or the provisions of a statute;
Comyns's Diges t, Mandamus (A). …
… Instead of being astute to discover
reasons for not applying this great constitutional
remedy for error and misgovernment, we think it
our duty to be vigilant to apply it in every case to
which, by any reasonable construction, it can be
made applicable.‘
The principle enunciated in the above case was
approved and followed in R. v. Revising Barrister
for the Borough of Hanley. In Hochtief Gammon
case this Court pointed out (at SCC p. 656) that the
powers of the courts in relation to the orders of the
Government or an officer of the Government who
has been conferred any power under any statute,
which apparently confer on them absolute
discretionary powers, are not confined to cases
where such power is exercised or refused to be
exercised on irrelevant considerations or on
erroneous ground or mala fide, and in such a case a
party would be entitled to move the High Court for
a writ of mandamus. In Padfield v. Minister of
Agriculture, Fisheries and Food the House of
Lords held that where Parliament had conferred a
discretion on the Minister of Agriculture, Fisheries
and Food, to appoint a committee of investigation
so that it could be used to promote the policy and
objects of the Agricultural Marketing Act, 1958,
which were to be determined by the construction
of the Act which was a matter of law for the court
and though there might be reasons which would
justify the Minister in refusing to refer a complaint
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to a committee of investigation, the Minister's
discretion was not unlimited and if it appeared that
the effect of his refusal to appoint a committee of
investigation was to frustrate the policy of the Act,
the court was entitled to interfere by an order of
mandamus. In Halsbury's Laws of England , 4th
Edn., Vol. I, Para 89, it is stated that the purpose of
an order of mandamus ‗is to remedy defects of
justice; and accordingly it will issue, to the end
that justice may be done, in all cases where there is
a specific legal right and no specific legal remedy
for enforcing that right; and it may issue in cases
where, although there is an alternative legal
remedy, yet that mode of redress is less
convenient, beneficial and effectual.‘

20. There is thus no doubt that the High Courts in India
exercising their jurisdiction under Article 226 have the
power to issue a writ of mandamus or a writ in the
nature of mandamus or to pass orders and give
necessary directions where the Government or a public
authority has failed to exercise or has wrongly exercised
the discretion conferred upon it by a statute or a rule or
a policy decision of the Government or has exercised
such discretion mala fide or on irrelevant considerations
or by ignoring the relevant considerations and materials
or in such a manner as to frustrate the object of
conferring such discretion or the policy for
implementing which such discretion has been conferred.
In all such cases and in any other fit and proper case a High
Court can, in the exercise of its jurisdiction under Article
226, issue a writ of mandamus or a writ in the nature of
mandamus or pass orders and give directions to compel the
performance in a proper and lawful manner of the
discretion conferred upon the Government or a public
authority, and in a proper case, in order to prevent injustice
resulting to the parties concerned, the court may itself pass
an order or give directions which the Government or the
public authority should have passed or given had it properly
and lawfully exercised its discretion.‖
{bold portions emphasized}

25. Avoiding a long academic discussion, it is well ordained in law
that a writ of mandamus lies where there is shown a failure to exercise
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the powers vested in statutory authorities and delay in exercise of its
powers might bring about irreparable injuries to statutory rights.
Reference can be invited to Hari Krishna Mandir Trust v. State of
14
Maharashtra , wherein it was held as under:-
“100. The High Courts exercising their jurisdiction under Article
226 of the Constitution of India, not only have the power to issue a
writ of mandamus or in the nature of mandamus, but are duty-
bound to exercise such power, where the Government or a public
authority has failed to exercise or has wrongly exercised discretion
conferred upon it by a statute, or a rule, or a policy decision of the
Government or has exercised such discretion mala fide, or on
irrelevant consideration.
101. In all such cases, the High Court must issue a writ of
mandamus and give directions to compel performance in an
appropriate and lawful manner of the discretion conferred upon the
Government or a public authority.
102. In appropriate cases, in order to prevent injustice to the
parties, the Court may itself pass an order or give directions which
the Government or the public authorities should have passed, had it
properly and lawfully exercised its discretion. In Director of
Settlements, A.P. v. M.R. Apparao Pattanaik, J. observed: (SCC p.
659, para 17)
― 17 . … One of the conditions for exercising power under
Article 226 for issuance of a mandamus is that the court
must come to the conclusion that the aggrieved person has
a legal right, which entitles him to any of the rights and
that such right has been infringed. In other words,
existence of a legal right of a citizen and performance
of any corresponding legal duty by the State or any
public authority, could be enforced by issuance of a
writ of mandamus, “mandamus” means a command. It
differs from the writs of prohibition or certiorari in its
demand for some activity on the part of the body or person
to whom it is addressed. Mandamus is a command issued
to direct any person, corporation, inferior courts or
Government, requiring him or them to do some particular
thing therein specified which appertains to his or their
office and is in the nature of a public duty. A mandamus is
available against any public authority including

14
2020 9 SCC 326
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administrative and local bodies, and it would lie to any
person who is under a duty imposed by a statute or by the
common law to do a particular act. In order to obtain a
writ or order in the nature of mandamus, the applicant has
to satisfy that he has a legal right to the performance of a
legal duty by the party against whom the mandamus is
sought and such right must be subsisting on the date of the
petition ( see Kalyan Singh v. State of U.P. ). The duty that
may be enjoined by mandamus may be one imposed by
the Constitution, a statute, common law or by rules or
orders having the force of law.‖ (emphasis in original)
103. The Court is duty-bound to issue a writ of mandamus
for enforcement of a public duty. There can be no doubt
that an important requisite for issue of mandamus is that
mandamus lies to enforce a legal duty. This duty must be
shown to exist towards the applicant. A statutory duty
must exist before it can be enforced through
mandamus. Unless a statutory duty or right can be
read in the provision, mandamus cannot be issued to
enforce the same. {bold portions emphasized}

26. In view of the foregoing discussion and for the reasons that the
present management of the respondent No.2 company has been
withholding relevant documents from the respondent No.1/RBI, it is
but necessary to arrest any further misappropriation and pilfering of
the funds of the respondent No.2 company, since any further delay
might be too late to protect the interests of the stakeholders.
27. During the course of arguments, a report dated 01.07.2024 of
Hon'ble Mr. Justice R.K. Gauba (Retired) was shown, who was
appointed as an Administrator by the NCLT vide order dated
15.05.2024 and later has been made as an Observer by the NCLAT
vide order dated 31.05.2024. The report would also go to suggest that
despite directions of the NCLT/NCLAT, major policy decisions were
taken without consulting him. It is revealed in the report that, although
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no major policy decisions were made during the meeting held on
20.06.2024, the reply filed by respondent no. 2 company in this case
shockingly states that Shri Sunil Kumar Sobti was appointed as an
Additional Director, and M/s K. S. Oberoi & Co. was appointed as
the Statutory Auditor of the respondent No.2 company. It is also
brought to the fore that despite repeated reminders, the present
management of respondent No.2 company has not shared several
details in the nature of organizational structure of the respondent No.2
company, list of secretarial records, statutory compliances, detailed
particulars of all the managerial personnel (current and former) scope
of their respective roles/responsibilities along with the details of their
remuneration/perks and benefits, in particular the copies of the audited
and unaudited financials of the company with schedule and trial
balances besides the list of list of receivables and payables besides list
of secured and unsecured creditors, and such non-compliances
assumes significance that all is not well in running the affairs of
respondent no. 2 company by the present management.
28. Before concluding the discussion in the instant matter, it would
be expedient to point out that the respondent no.2 company in its
reply-cum-affidavit through Mr. Achal Kumar Jindal dated
25.09.2024, filed in response to the Status report filed by the
respondent no.1/RBI dated 13.08.2024, has simply made bald denial
with regard to the issues and concerns which have been raised by the
respondent No.1/RBI. It is stated that in order to restore the leverage
ratio, the OCDs were converted into the CCPS vide the resolution
dated 27.09.2022. As regards the OCDs of ₹315 crores, having been
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received without permission, it is sought to be canvassed that it neither
qualifies to be a ‗public fund‘ nor Regulation 61 of 2016 of the RBI
Master Directions are applicable.
29. Reference is invited to the Rule XIII(c)(2) of the Non-Banking
Financial Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 2016, which excludes any amount received from another.
This interpretation, however, is not accurate, as the term ‗amount
received‘ is entirely distinct from the concept of debentures under
corporate law. As regards the conversion of OCDs into the CCPS, it is
submitted that ex post facto permission was sought vide application
dated 17.09.2024 from the respondent no.1/RBI.
30. Adverting to the issue of non-submission of audited balance
sheets for the financial year 2023-24, an excuse is taken that the
statutory Auditor M/s V. V. Kale has not deliberately filed the same
and had been evading to carry out its statutory duties and eventually
the said auditor has since resigned, after the order passed by the
NCLAT dated 25.05.2024; and it is stated that thereafter M/s K. S.
Oberoi & Co. has been appointed as the Statutory Auditor of the
respondent No.2 company on 19.06.2024. That fact was refuted by
the learned Senior Counsel for the petitioner stating that ,such auditor
has not been appointed under the overall supervision of the
administrator/observer.
31. Suffice to state that the issues and concerns which have been
raised by the respondent no.1/RBI in its report dated 13.08.2024, have
not been addressed, and there appears to be an attempt to brush these
alarming issues under the carpet. As for the case law referred, the
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decision of this Court in Dr. Subramanian Swamy v. Union of India
( supra) was one where a petition under Article 226 of the Constitution
of India was filed in the nature of public interest litigation for issuance
of writ of mandamus to form a Committee consisting of experts in
order to investigate the alleged fraudulent acts of M/s Max Life
Insurance Company Limited. It is in the said context that this Court
dismissed the writ petition holding that the High Court cannot act as a
‗super regulator‘ and interfere in matters which the petitioner
challenges being in the nature of private commercial transaction
between commercial entity, considering that the shareholders of the
public limited company had approved the transaction besides the fact
that such transactions were being regulated by the insurance and
banking sector as also by the SEBI and even the RBI were also seized
of the controversy.
32. The decision in the case of Krishnakrupa Owners Association
v. Reserve Bank of India was rendered in the context of decision
taken by the RBI under Section 39A of the Banking Regulation Act,
1949, whereby certain conditions had been imposed on the petitioner
including the restrictions, which restrained the respondent No. 3 from
paying more than ₹10,000/- to its depositors. The High Court refused
to exercise its jurisdiction and interfere in the banking affairs of the
respondent No. 3 since it was held that the RBI, which was an expert
body, was already seized of the matter.
33. Insofar as the decision in the case of Hoichoi Technologies
Private Limited v. Reserve Bank of India (supra) is concerned, it
was rendered in an altogether different context inasmuch as it was
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pertaining to certain supervisory role of the RBI under the Payment
and Settlement Systems Act, 2007, and the RBI being the regulatory
and supervisory body, has been designated to regulate and supervise
the payment systems to an entity based abroad under the aforesaid
Act. The issue was whether a Google group of companies are
operating as payment aggregator without being accredited/registered
to do so on Indian soil. It is in the said context that it was decided that
it should not interfere in the matter and it would be open to the parties
including the RBI and the Competition Commission of India to
adjudicate upon the issues involved on its own merits.
34. Therefore, finding no legally sustainable challenge to the
maintainability of present writ petition, and given that it is evident that
respondent No. 1/RBI has thus far failed to exercise its supervisory
powers, it becomes imperative that certain directions be issued to
respondent No.1/RBI to intervene in the matter and to ensure the
enforcement of binding regulations provided under the RBI Act. There
are cogent and ample material on the record that warrant full and
thorough inquiry into the affairs of the respondent No.2 company.
Therefore, considering the necessity to safeguard the interest of the
investors of respondent No.2 company besides other stakeholders
including the creditors, the following directions are passed:
(i) It is hereby directed that the Board of Directors of
respondent no. 2 company shall remain suspended with
immediate effect till further orders;
(ii) As a consequence, an interim arrangement is made
appointing an Interim Committee of Administrators headed
by Hon'ble Mr. Justice R.K. Gauba (Retired) [ Mobile No.
9650411919, email ID: rkgauba@gmail.com ] in order to
protect any further pilfering, siphoning or misappropriation
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of funds of the respondent No.2 company, with Mr. Mr.
Mahesh Aggarwal as Chartered Accountant [ Member No.
085013, Mobile No.9871324000, email ID:
ip1387ma@gmail.com ] and Mr. R. Maheswaram, a retired
Banker [ email ID: maheswaramlalitha@gmail.com
Mobile No. 9892182640 ], as the financial expert and to
perform all such duties which are required to be performed
by or vested with the Board of Directors of the respondent
No.2 company till such time the respondent No.1/RBI
appoints Directors for running the affairs of the respondent
No.2 company in terms of Section 45ID of the RBI Act;
(iii) In view of above (ii), the present Board of Directors shall
submit all the records including the books of accounts
besides all movable and immovable properties at the
disposal of the Interim Committee of Administrator
forthwith;
(iv) Further, as an interim measure Sabadra & Associates,
Chartered Accountant firm (IBA no. 120 in the list) is
appointed a statutory auditor to conduct special audit under
Section 45MA of the RBI Act and conduct statutory audit
under the Companies Act, 2013 to finalize the accounts of
respondent No.2 company within a period of four weeks;

(v) The said statutory audit of respondent No.2 company shall
be conducted for the financial years 2022-23 & 2023-24;
(vi) It is also provided that the respondent No.1/RBI shall be at
liberty to appoint any competent person on its own in the
interim committee of the Administrators.
(vii) A detailed report with regard to action taken by the Interim
Committee of Administrators and respondent No.1/RBI
shall be placed before this Court within five weeks from the
date of this order;
(viii) Hon'ble Mr. Justice R.K. Gauba (Retired) shall be paid
honorarium of Rs. 9,50,000/- per month. Likewise Shri
Mahesh Aggarwal, Chartered Accountant shall be paid
professional fees @ Rs.5,50,000/- per month; and Shri Mr.
R. Maheswaran, a retired Banker, shall be paid professional
fee @ 3,50,000/- per month. This shall be paid from the
date of taking over charge of such duties. The Court Master
of this Court shall send the contact details to Hon'ble Mr.
Justice R.K. Gauba (Retired) along with a copy of this
order.
(ix) Sabadra & Associates shall be paid a minimum fee of
Rs.10,00,000/- for audit of the books of accounts as per the
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financial year, and further fee if justified by the Interim
Committee of Administrator or the Administrator appointed
by the RBI, as the case may be.

35. The aforesaid directions are passed without prejudice to the
rights and powers of the respondent No.1/RBI to take appropriate
actions on finding out commission of any act of criminal nature or
violation of other laws during the course of investigation by
respondent No. 1/RBI in accordance with law.
36. A copy of this order be given dasti to all the concerned parties
through their counsels under the signature of the Court Master for
necessary compliance.
37. Re-notify for compliance on 02.12.2024.

DHARMESH SHARMA, J.
Sadiq/sp
OCTOBER 23, 2024/
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