2022 (11) TMI 219 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Debtor is a Financial Service Provider - Operational Creditors - existence of debt and dispute or not - HELD THAT - It is pertinent to note that the Corporate Debtor is a Financial Service Provider Annexure A at Page 5 of the Affidavit in reply as is evident from the Registration Certificate that has been filed. The Hon ble NCLAT has reiterated time and again and had taken the same stand which is reflected in Saumil A Bhavnagri v. Nimit Builders Private Limited and Ors., 2020 (3) TMI 158 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI that the definition of Corporate Person in Section 3(7) of IBC specifically provides that it shall not include any financial service provider. The Corporate Debtor is a Financial Service Provider and hence the petition is rejected.

Summary

Issues:
- Maintainability of the petition under section 9 of the Insolvency and Bankruptcy Code, 2016
- Whether the Corporate Debtor qualifies as a Financial Service Provider

Detailed Analysis:

1. Maintainability of the petition under section 9 of the Code:
The Operational Creditor filed a Company Petition under section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for non-payment of a substantial sum. The Operational Creditor argued that the Corporate Debtor had delayed payments and failed to settle outstanding invoices. They issued a demand notice under section 8 of the Code, which was responded to by the Corporate Debtor. The Operational Creditor contended that the dispute was regarding Professional and Business Development Consultancy Services provided to the Corporate Debtor. The Corporate Debtor, on the other hand, disputed the claim, stating that the alleged debt was baseless and unsupported by evidence. They claimed that no valid contract existed, and the invoices were not acknowledged or accepted by them.

2. Qualification of the Corporate Debtor as a Financial Service Provider:
The Corporate Debtor argued that it falls under the definition of a Financial Service Provider as per the Insolvency and Bankruptcy Code, dealing with professional services related to financial products like securities. They highlighted that the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 govern the CIRP of financial service providers. The Corporate Debtor contended that the petition should be dismissed as it was not filed by the appropriate regulator as required by the Rules. They also cited cases to support their argument that the Operational Creditor's claim was not maintainable. The Tribunal noted that the Corporate Debtor was indeed a Financial Service Provider, and based on this finding, the petition was rejected under section 9 of the Code. The Tribunal emphasized that the Operational Creditor could explore other legal remedies available to them.

3. Conclusion:
The Tribunal, comprising Member (Judicial), concluded that the petition was not maintainable under section 9 of the Insolvency and Bankruptcy Code, 2016 due to the Corporate Debtor's classification as a Financial Service Provider. The judgment highlighted the specific exclusion of financial service providers from the definition of Corporate Person under the Code. Therefore, the Company Petition was rejected, granting the Operational Creditor the freedom to pursue alternative legal avenues. The order was signed on the 1st day of November 2022, and a certified copy was to be issued upon completion of formalities.