2019 (11) TMI 843 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making repayment - Corporate Debtor raised objection regarding maintainability of the petition on the ground that they are an insurance company and therefore, they are Financial Services Provider , the business of which is strictly regulated by the Financial Sector Regulator - HELD THAT - The definition of financial service under Section 3 (16) of the Code clearly includes the transactions effecting contract of insurance. However, the Operational Creditor does not have any claim in respect of contract of insurance. The claim is with respect to the outstanding license fees and the service tax amounts. Hence, the Corporate Debtor cannot use the provisions of Section 3 of the Insolvency and Bankruptcy Code, 2016 as a blanket cover to claim exclusion from IBC Proceedings on the ground that it is a financial service provider. This Tribunal is inclined to admit this petition and initiate CIRP of the Corporate Debtor - Petition admitted.

Summary

Issues involved:
1. Invocation of Section 9 of the Insolvency & Bankruptcy Code, 2016 for non-payment of dues.
2. Dispute regarding the maintainability of the petition against a financial services provider.
3. Interpretation of the definition of "financial service provider" under the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The petitioner filed a petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, against the respondent for defaulting on payments totaling ?27,67,203 for office premises and services. Despite repeated requests, the respondent failed to make payments towards service tax and license fees. The petition sought initiation of Corporate Insolvency Resolution Process due to the respondent's inability to settle the outstanding amount. The respondent denied any liability in response to the demand notice issued under Section 8 of the Code.

2. The respondent argued against the maintainability of the petition, claiming to be a financial services provider regulated by the Financial Sector Regulator. Citing Sections 3(17) and 3(18) of the Insolvency and Bankruptcy Code, the respondent contended that proceedings cannot be initiated against financial institutions like insurance companies. The petitioner countered, asserting that the respondent's default related to lease and rental dues, not financial services as defined in Section 3(16) of the Code.

3. The Tribunal deliberated on the definition of "financial service" under Section 3(16) of the Code, which includes insurance contracts. However, as the claim was for outstanding license fees and service tax, not related to insurance, the Tribunal concluded that the respondent could not use the financial service provider status to evade insolvency proceedings. Consequently, the Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process and imposing a moratorium under Section 14 of the Code to protect the debtor's assets during the resolution process.

4. The Tribunal appointed an Insolvency Professional to oversee the resolution process and directed the Operational Creditor to deposit funds for immediate expenses. The order was communicated to all parties involved for compliance and further proceedings.