NBFC Revival and Appeal for Revocation of NBFC Licence

NBFC and Its Revival

What is an NBFC?

Companies incorporated under companies act 2013 and engaged in an activity like facilitating loan and advances, acquisition of shares, stock, bonds, debentures, other securities and acceptance of deposit under any scheme or manner are called as NBFC companies.

What is the Cancellation and Revival of an NBFC?

Registration of NBFC's may be cancelled by the RBI for not conducting business in the manner specified in the respective statutes or due to any non-compliance. However, in certain circumstances, it is possible to apply for the revival of the NBFC whose licence has been cancelled. 

Circumstances in which NBFC license can be cancelled

if the RBI finds at any time that registered NBFC is not conducting its business in the manner specified in the act  or acting public interest then RBI can cancel the certificate of registration granted to it:

1. If registered NBFC ceases to carry on the business of as NBFC
2. If registered NBFC failed to comply with the conditions of registration specified under the Act and any additional conditions specified by the RBI at the time of issue of Certificate of registration.
3. If registered NBFC fails to fulfil the conditions specified in respect of capital maintenance.
4. If registered NBFC fails to comply with any direction issued by Reserve Bank Of India (RBI).
5. If registered NBFC fails to repay its deposit
6. If registered NBFC performing operation which is not in the interest of the public at large.
7. If registered NBFC has not filed the required annual/ quarter report in the stipulated time period.
8. If registered NBFC fails to apply for C-KYC, and membership of CIC
9. Before passing order of cancellation, RBI gives the opportunity of being heard except in case if the cancellation is made in favour of public interest at large.

PROCESS OF REVIVAL OF NBFC

NBFC licence may be cancelled by the RBI, after providing an opportunity of being heard. However, the incumbent has the right to appeal against the cancellation with the Ministry of Finance, pleading to set aside the order of the RBI which stated cancellation of the respective NBFC:

1. The aggrieved party can make an appeal against the order of RBI for cancellation of registration.
2. As per section 45-IA(7) of Reserve Bank Of India Act 1934, an appeal may be filed before appellate authority “department of financial services”
3. This Appeal must be filed within 30 days from the receipt of order.
4. A write petition article 226 can be filled before the heigh court.

Before drafting Appeal

1. Check your ROC compliances
2. Check your RBI returns (NBS-9)
3. Your companies tax audit report
4. Asset and Liability quality test
5. Minimum Net Owned Fund (minimum of 2 crores)
6. Proper Reason for appeal