RESERVE BANK OF INDIA ACT, 1934

Facts: Respondent Bank issued Statement on Developmental and Regulatory Policies which directed entities regulated by RBI not to deal with or provide services to any individual or business entities dealing with or settling virtual currencies and to exit relationship, if they already had one, with such individuals/business entities. Following said Statement, RBI also issued circular directing entities regulated by RBI not to deal in virtual currencies nor to provide services for facilitating any person or entity in dealing with or settling virtual currencies and to exit relationship with such persons or entities, if they were already providing such services to them. Hence, present petition.

Held: There could be no quarrel with the proposition that RBI had sufficient power to issue directions to its regulated entities in the interest of depositors, in the interest of banking policy or in the interest of the banking company or in public interest. If the exercise of power by RBI with a view to achieve one of these objectives incidentally causes a collateral damage to one of the several activities of an entity which did not come within the purview of the statutory authority, the same could not be assailed as a colourable exercise of power or being vitiated by malice in law. To constitute colourable exercise of power, the act must have been done in bad faith and the power must have been exercised not with the object of protecting the regulated entities or the public in general, but with the object of hitting those who form the target. To constitute malice in law, the act must have been done wrongfully and wilfully without reasonable or probable cause. The impugned Circular did not fall under the category of either of them.

Facts: The complainant Shri Roshan Alag submitted RTI application before the Central Public Information Officer (CPIO), Reserve Bank of India, Mumbai seeking information relating ban on coins of Rs. 5 and 10 having the picture of 'Mata Vaishno Devi'; who ordered for minting these coins, method of distribution of these coins in the market and requested for immediate withdrawal of these coins from the market in order to avoid any religious controversy among the people etc.

Held: The matter was heard by the Commission The complainant did not attend the hearing in spite of a notice of hearing having been sent to him. The respondents stated that the CPIO sent a point-wise reply to the complainant. In response to complainant's another representation, the RBI informed the complainant that all matters relating to design etc. of coins are the exclusive ambit of Government of India under the provisions of the Coinage Act, 2011. The role of RBI is restricted to putting the coins into circulation as and when made available by the India Government Mints, in terms of Section 39 of RBI Act 1934.

Facts: The Appellant filed its return which was processed under Section 143(1) of the IT Act. On the case being selected for scrutiny, a notice was issued. It was held that the principal business activity of the Assessee is trading in shares and securities. The loss from share trading was held to be a speculation loss. The assessing officer held that activities pertaining to futures and options could not be treated as speculative transactions. The loss from speculation was held not to be capable of being set off against the profits from business. Against the order of the assessing officer for assessment year 2008-2009, an appeal was filed before the CIT(A). The CIT(A) held that, the Assessee derived income from trading in derivatives and share business along with dividend and interest and was an NBFC. The CIT(A) held that, the provisions of Section 43(5) came into existence with effect from 1 April 2006 and hence, transactions in futures and options must be treated as business income as distinct from trading in shares. Consequently, the CIT(A) rejected the contention of the Assessee is that the assessing officer had erred in not allowing the speculation loss to be set off against profits of trading in futures and options. The Revenue appealed against the decision of the CIT(A).

Facts: The appellants are shroffs engaged in the business of providing credit to the members of the public. The traditional mode of organising the business of shroffs over the past several decades had been by way of partner ship firms. The nature of the services practised by the appellants generally involved maintaining a mutual current account where the customer may either place deposit on call or withdraw money on call with out security. The financing activity of the shroff firms was through capital contributions of the partners/proprietor and deposits made by members of the public.

Held: The impugned Section 45-S does not in any way prohibit or restrict any unincorporated body or individual from carrying on the business that it likes. It is open to unincorporated bodies to carry on their financial business either from their own funds or the funds borrowed from their relatives or from financial institutions. The restriction, which is placed by Section 45-S, is on the carrying on of such business by utilising public deposits.. Examining the validity of the amended Section 45-S of the Act by applying the principles enunciated over the years by this Court, and as encapsuled in the passage quoted in the earlier part of this judgment from this Court's decision in Papnasan Labour Unions Case (supra) we find that the said Section is in no way illegal or bad in law. Section 45-S no doubt prohibits the conduct of banking business by an unincorporated non-banking entity like a shroff, but this prohibition has come about, inter alia , in the interest of unwary depositors and borrowers (from shroffs) and with a view to prevent them from committing financial suicide.

Facts: The appellant has its registered office in Delhi. Its objects amongst other included "undertaking business of finance, hire-purchase, leasing and to finance lease operations of all kinds". The case of RBI is that the appellant was carrying on business of NBFC as defined under Section 45-I(f) of Chapter III-B of the Act. Thus the appellant came to be governed by the existing directions of RBI relating to such companies and these directions include NBFC (Reserve Bank) directions, 1997 as amended.The appellant applied to RBI for certificate of registration under the provisions of Section 45-IA(2) of the Act as NBFC. The RBI in order to satisfy itself whether the appellant fulfills the condition for such a registration could inspect the books and inspection was undertaken under the provision of Section 45B of the RBI Act.The appellant contented before the RBI it had decided in favor of retaining the fee based activities of merchant banking and discontinue financing operations and it stopped all fund based operations as NBFC. To which RBI replied that it will continue to be guided by RBI regulations as long as it does not return the public deposits.

Held: The court held that the Company has been under the jurisdiction of RBI ever since its inception and it voluntarily applied for registration after amendment of the RBI Act. On such a plea that it had withdrawn the application it cannot avoid the rigorous of law.

Facts: During the course of assessment proceedings, the AO received certain information that the assessee-company has carried out trading through certain registered brokers on NSEL and for various reasons, the trading on the NSEL exchange platform had stopped and in respect of many traders, their outstanding receivable amounts had remained unsettled. The Hon'ble Bombay High Court had subsequently set up a committee which has started recovery proceedings and certain amounts have been recovered. However, like other brokers/traders, the assessee-company has claimed the outstanding amount as bad debts. The AO further held that as per section 45V of RBI Act, NBFC companies are restricted from trading in any derivative contracts, unless the counter party is a bank. In the instance case, the counter party was not a bank and therefore the activity carried out by NBFC is illegal, restricted and contrary to public policy. Accordingly, the claim is also not eligible under section 37(1).

Held: It was held that the transactions undertaken by the assessee-company are in the nature of derivate transactions and loss arising therefrom is in the nature of speculative loss which cannot be allowed set off against normal business income. Secondly, the speculative transactions are not in compliance with section 45V of the RBI Act and hence, in view of Explanation to section 37(1), the same cannot be allowed as an allowable deduction in the hands of the assessee-company.