2018 (12) TMI 1714 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of outstanding amount - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The respondent M/S RHC Holding Private Limited, being a financial service provider and having excluded from the definition of the 'corporate person'; the present application filed under Section 7 of the Code against a financial service provider is not maintainable. Application being not maintainable, is dismissed.

Summary

Issues Involved:
1. Maintainability of the insolvency application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the respondent company.
2. Status of the respondent company as a financial service provider.
3. Applicability of the Insolvency and Bankruptcy Code, 2016 to financial service providers.

Issue-wise Detailed Analysis:

1. Maintainability of the Insolvency Application:

The applicant, HDFC Ltd., filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the respondent company, M/S RHC Holding Pvt. Ltd. The respondent and the intervener raised a preliminary objection regarding the maintainability of the application, arguing that the respondent is a financial service provider and, therefore, cannot be termed as a Corporate Debtor under the provisions of the Code.

2. Status of the Respondent Company as a Financial Service Provider:

The respondent company claimed to be primarily engaged in the business of investment in shares, bonds, debentures, debts, or loans in group companies, money market instruments, and providing guarantees on behalf of group companies. The respondent further argued that it is a Non-Deposit Accepting Non-Banking Financial Company (NDSI-NBFC), as evidenced by the Certificate of Registration issued by the Reserve Bank of India (RBI). The certificate explicitly stated that the respondent company is registered as a non-banking financial company with the prohibition from accepting public deposits.

3. Applicability of the Insolvency and Bankruptcy Code, 2016 to Financial Service Providers:

The definition of 'Corporate Debtor' under Section 3(8) of the Code refers to a corporate person who owes a debt to any person. However, the term 'Corporate Person' under Section 3(7) explicitly excludes financial service providers. Consequently, the provisions of Part II of the Code, which deal with insolvency resolution and liquidation for corporate persons, do not apply to financial service providers. The Code also empowers the Central Government under Section 227 to notify financial service providers or categories of financial service providers for insolvency and liquidation proceedings, but no such notification has been issued.

The Tribunal referred to the NCLAT judgment in the case of Randhiraj Thakur vs. Jindal Saxena Financial Services and Anr., which held that financial service providers, including non-banking financial institutions, are outside the purview of the Code. The respondent company, being a non-banking financial company and registered with the RBI, falls under the category of financial service providers and is thus excluded from the definition of a corporate person under the Code.

Conclusion:

The Tribunal concluded that the respondent, M/S RHC Holding Private Limited, being a financial service provider, is excluded from the definition of a 'corporate person' under the Code. Therefore, the application filed under Section 7 of the Code against the respondent is not maintainable. The application, 1B 738(PB)/2018, was dismissed as not maintainable. Consequently, the related company applications, C.A. 888 (PB)/2018, C.A. 889 (PB)/2018, and C.A. 1123 (PB)/2018, were also disposed of. The Tribunal clarified that the observations made in the order should not prejudice the rights of the applicants before any other forum.