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The Reserve
Bank of India issued
a circular letter bringing the directions to the notice of companies
like Peerless. On September 14, 1973, the Peerless Company addressed
a letter to the Reserve Bank of India explaining the nature of their
business and claiming that their business was outside the scope of
the directions issued by the Reserve Bank. Most
important of
all, it was requested that, if it was thought that their business
attracted the notification, they should be granted (80) exemption
from the applicability of
the notification as provided by paragraph 13. It was pointed out that
their business was [100] of a special type, that it was carried
on scientific lines
and actuarial principles
and that the applicability of the {120} notification
would injuriously affect
two hundred thousands of subscribers that 20,000 persons would lose
employment and that the potential for future employment would be
destroyed. It was further pointed out that over 90% of the concerned
Public Fund was invested (160) in Government securities and
in Nationalised
Banks. The Balance-sheet of
the company, its brochure and a copy of its advertisement were
enclosed.
The
Reserve Bank of India by their order dated December 3, 1973 exempted
the company from the provisions of paragraph 4 of the notification
in so
far as those
provisions restricted the acceptance of subscriptions under the
schemes upto 25% of the paid-up capital and free reserve fund.
Certain conditions were however, imposed. The company was directed to
{(240)} transfer every year to the reserve fund a sum not less than
50% of the profit after taxes. The company was directed not to
declare any dividend at rates higher
than 6%
and 7% on ordinary and preferential shares till the free reserve
became equal to the paid capital. The company was also required to
maintain not less than [300] 75% of its total assets in the form of
investments and Government Trustee-securities, etc.
The
Company was directed to submit (320) every year a certificate from
their Auditors in regard to compliance with the conditions imposed.
The exemption was to be reviewed every two years. It appears that
there was an inspection in 1974, but we have no information about
{360} the findings in the course of the
inspection. Evidently, nothing objectionable was
found.
This
is apparent from the affidavit filed on behalf of the Reserve Bank of
India in the Calcutta High
Court in
Civil Rule No. 5941 (W) 77, a writ petition [(400)] filed by
Favourite Investment Company challenging the refusal of the Reserve
Bank to grant them exemption from the Miscellaneous Non-Banking
Companies Directions, 1973 and complaining of discrimination in
that such an exemption had been granted to Peerless. Comparing the
schemes of the two companies, it was pointed out in the affidavit
that the Endowment Certificates
issued by Peerless Company were for periods ranging from ten to
thirty years while the Endowment Certificates granted
by Favourite Company
ranged from five to thirty {480} years. It was stated that the
schemes of the Favourite Company which ranged for short periods from
five to [500] thirty years were unscientific inasmuch as
interest payable by the company on short term certificates was higher
than 10% of the instalments or
subscriptions collected by the company which were invested in
Government securities and Banks where field was between five to ten
percent. 547
Words
- Injuriously:- adj. 1. Causing or tending to cause injury; harmful
- Endowment:- दान, चंदा
- Actuarial : (adj) relating to actuaries or their work of compiling and analysing statistics to calculate insurance risks and premiums.
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