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2020 (4) TMI 773 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - scope of the term NBFC - existence of debt and dispute or not - time limitation - HELD THAT - The RBI, i.e. financial service regulator has granted the certificate of registration to carry on the business of Non-Banking Financial Institution in 1998 - the respondent has intentionally deceived the applicant while executing the KYC Form. Now he cannot escape from his liability by raising an objection of NBFC. It can be said that though the respondent is an NBFC, however, without ignoring the fact that the respondent himself entered into the transaction with the Applicant in the capacity of a Private Limited Company. Thus, in regard to the transaction under consideration the respondent falls under the definition of Corporate Debtor and cannot fall under the shell of the term 'NBFC. Pre-existing dipsute or not - HELD THAT - It is seen in the delivery report filed by the Applicant that the Demand notice under section 8 of IBC, 2016 was delivered on 16-3-2018 and the respondent has replied on 5-4-2018. Giving a notice of pendency of application under section 9 of the Arbitration and Conciliation Act, 1996 by the respondent after 10 days from receipt of demand notice, does not hit section 8(2) of IBC, 2016. Thus, the dispute raised by the respondent is patently feeble legal argument unsupported by evidence on the basis of pending application under section 9 of the Arbitration and Conciliation Act, 1996, for an interim measure without establishing that an amount of ₹ 63,31,706.09/- is due to the respondent. Time limitation - HELD THAT - In accordance with section 238 of the IBC, 2016, the provisions of the Code have overriding effect on the Arbitration and Conciliation Act, 1996. The Registered Office of the Corporate Debtor is situated in Jaipur and therefore this Tribunal has jurisdiction to entertain and try this Application. The matter is within the purview of Law of Limitation. Application admitted - moratorium declared.
Issues Involved:
1. Jurisdiction of the Tribunal 2. Existence of Debt and Default 3. Pre-existing Dispute 4. Status of Respondent as a Financial Service Provider 5. Appointment of Interim Resolution Professional (IRP) Issue-wise Detailed Analysis: 1. Jurisdiction of the Tribunal: The Respondent argued that as per clause 45 of the Client Registration Form, any dispute should be settled by arbitration, thus the Tribunal has no jurisdiction. However, the Tribunal noted that arbitration is not the sole remedy and the right under the Insolvency and Bankruptcy Code (IBC) is in addition to and not in derogation of the Arbitration and Conciliation Act, 1996. Therefore, the Tribunal held that it has jurisdiction to entertain the application. 2. Existence of Debt and Default: The Applicant claimed an outstanding amount of ?28,83,058.80 plus interest @24% per annum from the Respondent, who had availed services and opened a trading account. The Respondent denied any outstanding amount and claimed that ?63,31,706.90 was due from the Applicant. The Tribunal found that the Respondent had executed the KYC form in its own name for trading in securities and had not provided evidence of the alleged deposit amount due from the Applicant. Thus, the Tribunal accepted the Applicant's claim of debt and default. 3. Pre-existing Dispute: The Respondent contended that a case was pending before the Court of Additional District and Sessions Judge, Jaipur, and thus there was a pre-existing dispute. The Tribunal referred to the Supreme Court's judgment in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., which stated that the existence of a dispute must be plausible and not a patently feeble legal argument. The Tribunal found that merely filing an application under section 9 of the Arbitration and Conciliation Act, 1996 for interim measures does not establish the existence of a dispute. Therefore, the Tribunal concluded that the dispute raised by the Respondent was not sufficient to reject the application. 4. Status of Respondent as a Financial Service Provider: The Respondent argued that it was a Non-Banking Financial Company (NBFC) and thus excluded from the definition of a Corporate Debtor under the IBC. The Tribunal noted that the Respondent had a Certificate of Registration from the RBI to carry on the business of a non-banking financial institution. However, the Tribunal found that the Respondent had entered into the transaction with the Applicant in the capacity of a Private Limited Company and had not disclosed its NBFC status during the execution of the KYC form. Therefore, the Tribunal held that for the transaction under consideration, the Respondent falls under the definition of a Corporate Debtor. 5. Appointment of Interim Resolution Professional (IRP): The Tribunal appointed Mr. Vijendra Bangar as the Interim Resolution Professional (IRP) to take over the affairs of the Corporate Debtor and perform duties as required under the IBC. The IRP was directed to take steps as per sections 15, 17, 18, 19, 20, and 21 of the Code. The Tribunal also invoked a moratorium as envisaged under section 14 of the IBC, which will be in effect during the Corporate Insolvency Resolution Process (CIRP). Conclusion: The Tribunal admitted the application under section 9 of the IBC, 2016, initiating the Corporate Insolvency Resolution Process against the Respondent. The IRP was appointed, and a moratorium was invoked, with the Tribunal affirming its jurisdiction and rejecting the Respondent's claims of pre-existing dispute and NBFC status as a defense.
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