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2020 (3) TMI 158 - AT - IBCRecall the Order of admission - Adjudicating Authority was of the view that Corporate Debtor was required to establish that it was rendering financial services as defined under section 3(16) of IBC and that it is financial service provider as defined under section 3(17) of IBC which would require appreciation of evidence - HELD THAT - The present case is squarely covered by a Judgement of this Tribunal in the matter of Housing Development Finance Corpn. Ltd. v. RHC Holding (P.) Ltd. 2019 (7) TMI 638 - NATIONAL COMPANY LAW APPELLANT TRIBUNAL NEW DELHI - In that matter, Section 7 Application against M/s. RHC Holding Private Ltd. (Corporate Debtor) had been rejected giving rise to the Appeal. The Appellant - HDFC claimed that the Corporate Debtor in that matter was not Financial Service Provider. In that matter also, the Corporate Debtor had been issued Certificate by RBI as NBFC and had not been allowed to accept public deposits. The definition of Corporate Person in section 3(7) of IBC specifically provides that it shall not include any financial service provider . Considering the Certificate issued by the Reserve Bank of India and also documents as placed on record by the Appellant - Corporate Debtor, we have no hesitation to hold that the Corporate Debtor in the present matter on date of Application being financial service provider, the provisions of IBC could not have been invoked against the Corporate Debtor. There are no fault with the Impugned Order of Adjudicating Authority where it observed that it does not have jurisdiction to recall its Order of admission but do not agree with its other findings referred earlier and imposing of costs. However, this Tribunal has jurisdiction in Appeal to consider whether initiation of CIRP process against the Corporate Debtor is legal or not. The impugned order admitting the section 7 Application under IBC as well as further steps taken on admission of the Application and release the 'Corporate Debtor' from rigour of 'Corporate Insolvency Resolution Process', is set aside.
Issues:
1. Admissibility of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Corporate Debtor. 2. Jurisdiction of Adjudicating Authority to recall Order of admission. 3. Claim of Corporate Debtor being a Non-Banking Finance Company (NBFC) and exclusion from the definition of Corporate Person. 4. Interpretation of relevant provisions of the Insolvency and Bankruptcy Code and Reserve Bank of India regulations. 5. Application of legal precedent in similar cases. Issue 1: Admissibility of Application under Section 7: The Financial Creditor filed an Application under Section 7 of the IBC against the Corporate Debtor for default in loan repayment. The Adjudicating Authority admitted the Application, leading to a subsequent Application by the Corporate Debtor to recall the Order. The Financial Creditor claimed the Corporate Debtor failed to establish it was rendering financial services as defined under the IBC. The Adjudicating Authority, after considering arguments, declined to recall the Order, citing lack of jurisdiction to revisit the admission decision. Issue 2: Jurisdiction to Recall Order: The Adjudicating Authority held it lacked the power to review or recall the Order of admission once granted. Despite the Corporate Debtor's claims of being an NBFC, the Adjudicating Authority emphasized the need for the Corporate Debtor to prove it fell outside the definition of a Corporate Person under the IBC. The Authority rejected the Corporate Debtor's plea to recall the Order and imposed costs. Issue 3: Claim of Corporate Debtor as NBFC: The Corporate Debtor contended it was an NBFC and, therefore, excluded from the definition of a Corporate Person under the IBC. Evidence presented included balance sheets, registration certificates, and RBI documents. The Financial Creditor argued that the conditions of the RBI certificate were not fulfilled, preventing the Corporate Debtor from accepting public deposits. Issue 4: Interpretation of Legal Provisions: The Tribunal referred to a previous judgment involving a similar case to analyze the definition of "financial service" and the exclusion of financial service providers from the definition of Corporate Person under the IBC. It emphasized that the Adjudicating Authority should refrain from admitting applications against entities falling under the financial service provider category. Issue 5: Application of Legal Precedent: The Tribunal relied on a previous case to support its decision that the Corporate Debtor, being an NBFC and a financial service provider, should not have been subjected to the insolvency resolution process. It set aside the original Order admitting the Application under Section 7 of the IBC and released the Corporate Debtor from the insolvency resolution process. This comprehensive analysis delves into the core issues of admissibility, jurisdiction, regulatory compliance, and legal interpretation, ultimately leading to the Tribunal's decision to quash the Order and release the Corporate Debtor from insolvency proceedings.
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