[Cites 2, Cited by 0]
Delhi High Court
M K G Financil Services Private Limited vs Union Of India Ministryof Finance ... on 6 April, 2026
Author: Prathiba M. Singh
Bench: Prathiba M. Singh
$~50
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 06th April, 2026
Uploaded on: 07th April, 2026
+ W.P.(C) 5904/2020 & CM APPL. 21338/2020, CM APPL. 21862-
21863/2026
M K G FINANCIL SERVICES PRIVATE LIMITED. ....Petitioner
Through: Mr. Rahul Agrawal, Mr. Rajesh
Agrawal and Mr. Sunil Dhamija
Advocates (M: 9910056062).
versus
UNION OF INDIA MINISTRY OF FINANCE
APPELLATE AUTHORITY DEPARTMENT
OF FINANCIAL SERVICES & ANR. .....Respondents
Through: Mr. T. P. Singh, SPC for UOI (M:
9971529687).
Mr. Ramesh Babu, Ms. Manisha
Singh, Ms. Tanya Chowdhary and Mr.
Rohan Shrivastava, Advs. for RBI.
CORAM:
JUSTICE PRATHIBA M. SINGH
JUSTICE MADHU JAIN
Prathiba M. Singh, J. (Oral)
1. This hearing has been done through hybrid mode.
2. The present petition has been filed under Article 226 and 227 of the
Constitution of India by the Petitioner, which is a Non-Banking Financial
Company (hereinafter, 'NBFC'), inter alia, challenging the order dated 11th
February, 2020 passed by the Respondent No. 1 i.e., the Appellate Authority
which confirmed the order dated 12th September, 2018 passed by the Reserve
Bank of India - cancelling the registration of the Petitioner as an NBFC. The
order dated 12th September, 2018 was communicated to the Petitioner vide
letter dated 17th September, 2018. Further, the challenge in the present petition
is also to the Net Owned Fund (hereinafter 'NOF') notification being
Notification No. 132/CGM(VSNM)-99 dated 20th April, 1999.
3. The brief background of the present case is that the Petitioner had filed
an application for registering itself as an NBFC and it was granted registration
with the Reserve Bank of India (hereinafter, 'RBI') on 19th August, 1999. The
Petitioner was thereafter conducting its business as an NBFC.
4. A revised regulatory framework had come into existence w.e.f. 10th
November, 2014 vide Circular No. 002/03/10.001/2014-15. As per the said
circular, the requirement of minimum NOF of Rs.2 crore was made applicable
to all NBFCs and the deadline for achieving the said NOF was 1st April, 2017.
5. In the present case, as per the RBI, the NOF was not achieved by the
Petitioner and accordingly, a Show Cause Notice (hereinafter, 'SCN') was
issued by the RBI on 2nd May, 2018 to the Petitioner. Reply dated 10th May,
2018 was thereafter filed by the Petitioner to the SCN. The impugned
cancellation order was passed by the RBI on 12th September, 2018, however,
it appears to have been communicated to the Petitioner on 17th September,
2018.
6. The case of the Petitioner is that it achieved Rs.2 crore NOF on 21st
September, 2018 but had received the impugned cancellation order on 22nd
September, 2018. Hence, it deserves to be considered that the NOF was
achieved and the impugned cancellation order passed by the RBI should be
set aside and remanded back to the RBI for fresh consideration.
7. On behalf of the Respondent No.2-RBI, it is submitted that by the time
the NOF was achieved, the only remedy available with the Petitioner was to
apply afresh as per the extended Rules and Guidelines. Ld. Counsel has also
placed on record similar orders passed by the ld. Single Judge of this Court
where similarly placed NBFCs have been permitted to file fresh applications
for licensing.
8. The Court has considered the matter. There are several petitions which
have been filed by various NBFCs before this Court, wherein different orders
have been passed from time to time, depending upon the facts of each case.
The broad principle that has been adopted by this Court is that prior to the
passing of the cancellation order, if the NOF has been achieved, the Court has
set aside the impugned order and remanded the matter for fresh consideration.
9. However, in this case, it is seen that the impugned cancellation order
was passed on 12th September, 2018 and was communicated vide letter dated
17th September, 2018. Even on the date when the RBI had communicated the
letter through speed post to the Petitioner, it had not achieved the requisite
NOF.
10. The case of the Petitioner at best is in terms of bank statement which
has now been filed with the application being CM APPL. 21862/2026,
wherein the Petitioner is stated to have achieved Rs.2 crore NOF on 21st
September, 2018 and not on 25th September, 2018.
11. At this stage, Mr. Babu, ld. Counsel for the RBI submits that merely
bank statements are not sufficient to show the NOF as there is no auditor
certificate proving that the NOF has been achieved as the liabilities of the
NBFC would also have to be considered apart from infusing of funds.
12. Under these circumstances, this Court is of the view that the NOF
having not been achieved despite sufficient time having been given to the
Petitioner, the impugned cancellation order dated 12th September, 2018
cannot be set aside or remanded back.
13. It is, accordingly, directed that if any fresh application is filed by the
Petitioner, the same shall be considered by the Respondents in accordance
with the prevalent/extant provisions - however the said application shall be
considered without being influenced by the earlier cancellation order, which
is impugned herein.
14. Petition is disposed of in the above terms. All pending applications, if
any, are disposed of.
PRATHIBA M. SINGH
JUDGE
MADHU JAIN
JUDGE
APRIL 6, 2026/MR/ck
