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TMI Blog2021 (4) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... orate Debtor and cannot be considered as the Financial Service Provider since it is directly dealing with the financial products and not only rendering advice or soliciting or agreeing in that regard. The amount of debt payable by the Respondent - Corporate Debtor is more than the statutory limit prescribed under the provisions of the section 4 of the Insolvency and Bankruptcy Code, 2016 as on the date of filing of the application i.e. 22.07.2019 - The Applicant has furnished the copy of Written Communication of the Proposed Interim Resolution Professional - CA Prakash Udhawdas Tekwani in Form - 2 in terms of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. From the material placed on record by the Applicant, this Adjudicating Authority is satisfied that the application is complete in all respects and the Corporate Debtor has committed default in paying the dues to the Applicant - Petition admitted - moratorium declared. - CP (IB) No. 510/7/NCLT/AHM/2019 - - - Dated:- 6-4-2021 - Manorama Kumari, Member (J) And Chockalingam Thirunavukkarasu, Member (T) For the Appellant : Kiran Shah, FCA For the Respondents : Tushar Hemani, Sr. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to provide even the copy of the agreement entered into between the applicant and the respondent. The copy of the request and reminders is annexed as Annexure-F from page no. 102 to 110. 7. The applicant further stated that he has furnished copies of bank statement of multiple account of the applicant for compliance of the records relating to the entries in a banker's book in accordance with the Bankers Book of Evidence Act, 1891, which clearly reflects that the debt of the applicant has not been paid and that the corporate debtor is unable to pay its debts. The copies of the bank statement are annexed with application as Annexure-G at page no. 111 to 154. 8. It is further alleged that the corporate debtor manipulated with the account and ledgers in respect of the applicant so as to arrive at an outstanding balance, which suits convenient to the respondent at any point of time. However, the applicant at time and again revise the same. In support of the contention, the applicant annexed Annexure-H at page no. 155 to 164. 9. It is submitted that the amount of debt payable by the respondent/corporate debtor is more than the statutory limit prescribed under Section 4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegory of financial creditor. 17. It is further submitted that the company is a going concern having a share capital and paid up share capital is ₹ 30,00,000/- and having more than 90 clients and is actively working for the benefit of its clients. Findings 18. It is to be mentioned herein that when the matter was reserved after hearing from both sides, the respondent has approached the Hon'ble NCLAT, wherein the Hon'ble NCLAT passed an order on 19.11.2020, which said order is also communicated to this Bench. On perusal of the order, it is found that the respondent has filed an appeal before the Hon'ble NCLAT with an allegation that the respondent was not allowed sufficient opportunity to be heard, though, this Adjudicating Authority allowed the respondent to argue the matter on several occasions. It is to be mentioned that after resumption of hearing(s), post intervention of lockdown, due to Covid-19, the matter was taken for hearing time and again and on the request of the respondent several opportunity was granted from 16.07.2020. 19. Heard both sides at length also gone through the application and the reply along with the documents annexed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xure-C (Colly.) on pg. no. 81-83 and Annexure-E (Colly.) on pg. no. 86-91 of the rebuttal) and sale of shares and security margin through journal entry (Annexure-D on pg. no. 84-85 of the rebuttal). Further, the Applicant has also placed on record the copies of certain fake invoices to the tune of ₹ 33,45,621.91/- which are issued by one - M/s. Ujala Finstock Pvt. Ltd. under the garb of being registered under the Ahmedabad Stock Exchange Ltd. which was deregistered even before issuance of the invoices, the effect of which is given in the ledgers issued by the Respondent (Annexure-A (Colly.) on pg. no. 1-43). The said position is a clear indication that the debt is due and that there is a default on the part of the Corporate Debtor since time and again, there are changes/modifications of the accounts and ledgers which are given effect to avoid the liability for the payment to the Applicant and instead, reflect a counter claim which is not pursued by the Respondent as against the Applicant. 24. During the course of oral arguments, an issue was raised by the Respondent that it does not come within the definition of the Corporate Debtor by stating that it is a Financial Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority in respect of the Respondent being Financial Service Provider or not. Further, the Applicant has also submitted that the judgement which was referred to by the Adjudicating Authority i.e. Randhiraj Thakur v/s. M/s. Jindal Saxena Financial Services Private Limited Another (Company Appeal (AT) (Insolvency) Nos. 32 50 of 2018) clearly speaks that the application was preferred against the Non Banking Financial Institution/Company (NBFC) which is covered under the purview of Financial Service Provider and not coming within the meaning of the Corporate Person/Corporate Debtor and hence, the said judgement of the Hon'ble NCLAT is not applicable to the present case since the Respondent is involved in Stock Broking business and is not a NBFC. 27. Moreover, the provisions of Section 3(16)(e) of the Code specifically mention that the financial services include rendering or agreeing, for consideration, to render advice on or soliciting for the purposes of (i) buying, selling, or subscribing to, a financial product; (ii) availing a financial service; or (iii) exercising any right associated with financial product or financial service and accordingly, the said p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Respondent is entering into the derivative transactions in terms of Section 5(8)(g) of the Code. 31. It is to be mentioned herein that, if a company engaged in the business of Stock Broking or derivative transactions was to be considered as a Financial Service Provider (FSP) and was to be excluded from the CIRP proceedings, then the provisions of Section 5(8)(g) of the Code would have not been in existence and that the object of the law is not to have contradictions amongst the provisions of Section 3(16)(e) and Section 5(8)(g) of the Code. That apart, the provisions of Section 5(8)(g) of the Code are well incorporated with an intention to include the companies engaged in Stock Broking business and derivative transactions, since no companies other than those registered with SEBI can enter into such transactions. Hence, the Respondent is not covered under the definition of Financial Service Provider rather it is well covered under the definition of the Corporate Person and thus, it falls under the category of Corporate Debtor. 32. In addition to the above, also seen the Gazette Notification No. S.O. 4139(E) dated 18.11.2019, so issued by the Ministry of Corporate Affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Applicant and the Respondent on account of which the Respondent had allotted the Trade Code - V006 in the name of the Applicant but a copy of the same was not furnished to the Applicant for which numerous communications were made by the Applicant to the Respondent and the copies of the aforementioned communications are already annexed with the application and the same is a matter of record. Also, the present case relates to the Corporate Debtor being involved in a Stock Broking business and hence, the financial debt granted by the Applicant is not a regular loan transaction but a special transaction, wherein, the monies shall be utilized by the Respondent against the derivative transactions which shall be authorized by the Applicant and thus, the clause relating to the interest payable by the Respondent is not imposed by the Applicant in terms of Section 5(8) of the Code, wherein the interest is not supposed to be mandatory for the fact that the financial debt granted by the Applicant to the Respondent is a special transaction. Further, the Applicant has not claimed any interest against the debts due from the Respondent. Moreover, regarding the consideration against the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 42. In view of the above, the petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted. 43. The petition is, therefore, admitted and the moratorium is declared for prohibiting all of the following in terms of sub-section (1) of Section 14 of the Code:- (i) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (ii) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (iii) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (iv) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. 44. It is further directed that the supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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