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2025 (3) TMI 435 - AT - IBCAdmission of application filed under Section 7 of IBC - whether the Appellant being a NBFC as certified by the regulator namely RBI is saved from the proceedings of the Code? - HELD THAT - As a matter of fact the issue regarding the appellant being NBFC and it s effect has never been before the Ld. NCLT for the purpose of seeking dismissal of the application filed under Section 7 by the Respondent. There is no dispute that the appeal is a continuation of the original proceedings but since the Appellant has to prove by leading evidence if already not led that it had been engaged in providing financial services for challenging the application filed under Section 7 therefore it is just and expedient to set aside the impugned order and remand the matter back to the Ld. NCLT keeping the issue open as to whether the application under Section 7 filed by the Respondent is maintainable against the present appellant in case the Appellant is a NBFC? Conclusion - The initial dismissal of the appeal set aside and the case remanded to the NCLT for a determination of whether the appellant as a registered NBFC was engaged in providing financial services thus affecting the applicability of Section 7 proceedings. Appeal allowed by way of remand.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment was whether the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the appellant, a purported Non-Banking Financial Company (NBFC), was maintainable. The specific issues included:
ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The Insolvency and Bankruptcy Code, 2016, particularly Section 7, which allows financial creditors to initiate insolvency proceedings against a corporate debtor, was central to the proceedings. Additionally, the definition of "financial service provider" under Section 3(17) of the Code was relevant, as it could potentially exempt NBFCs from such proceedings. Court's Interpretation and Reasoning The Tribunal initially dismissed the appeal due to the appellant's failure to prove its status as a registered NBFC. The appellant's claim was based on a certificate purportedly issued by the RBI, which was not initially accepted by the Tribunal due to conflicting information provided by the respondent, HDFC Bank, under the Right to Information Act, 2005. The Tribunal later reconsidered the matter after the appellant obtained confirmation from the RBI, facilitated by a writ petition in the Delhi High Court. Key Evidence and Findings Initially, the appellant failed to produce the original certificate of registration as an NBFC. The respondent provided evidence from the RBI, under RTI, indicating that the appellant was not a registered NBFC. However, subsequent proceedings revealed that the RBI did issue a certificate to the appellant, confirming its status as an NBFC. Application of Law to Facts The Tribunal's initial dismissal of the appeal was based on the absence of evidence supporting the appellant's NBFC status. Upon the appellant's successful acquisition of the certificate from the RBI, the Tribunal acknowledged the appellant's status as an NBFC, necessitating a reassessment of the Section 7 application's maintainability. Treatment of Competing Arguments The respondent's argument was initially supported by the RBI's RTI response, which contradicted the appellant's claim. However, the appellant's subsequent production of the RBI certificate shifted the balance, leading the Tribunal to reconsider the initial dismissal and remand the case for further examination of the appellant's activities as a financial service provider. Conclusions The Tribunal concluded that the appellant's status as an NBFC was sufficiently established, warranting a remand to the National Company Law Tribunal (NCLT) to determine whether the appellant was engaged in providing financial services as defined under the Code, which would affect the maintainability of the Section 7 application. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning "The Appellant is a registered NBFC by RBI to whom a certificate was issued by it under Section 45-1A of the RBI Act, 1934." Core Principles Established
Final Determinations on Each Issue The Tribunal set aside the initial dismissal of the appeal and remanded the case to the NCLT for a determination of whether the appellant, as a registered NBFC, was engaged in providing financial services, thus affecting the applicability of Section 7 proceedings. The Tribunal directed that the NCLT provide opportunities for both parties to present evidence regarding the appellant's engagement in financial services, emphasizing that the appeal's allowance did not address the case's merits.
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