2018 (2) TMI 1353 - Tri - Insolvency and Bankruptcy

Tribunal rules NBFC not a Corporate Debtor under Companies Act & IBC

The Tribunal dismissed the review application challenging the maintainability of the petition under the Companies Act, 2013 and the Insolvency and ... Corporate insolvency process - eligible debt - review petition - Held that:- the instant application, which is in the nature of review, does not warrant acceptance. The non applicant- petitioner had filed a petition under Section 7 of the Code alleging that deposits made by it have remained unpaid and the total amount claimed was more than Rs, 44.50 crores. Such a transaction does not involve an activity which is imputable to an NBFC. The fact that the applicant-respondent is registered as NBFC would not be sufficient to assume that all transaction irrespective of their nature and character would be regarded as activity of a financial service provider. By no stretch of imagination, it could mean that every NBFC is covered by the expression ‘financial service provider’ a license holder as ‘NBFC also have activities other than that of ‘financial service provider’. Applicant-respondent cannot successfully claim that having accepted deposits he has become financial service provider. Code has not excluded NBFC as a class but has preferred to go by the test of financial service provider. It therefore follows that the NBFC ipso facto has not been excluded from the definition of Corporate person as defined under section 3(7) of the Code. Mr. Agarwal has rightly contended that the functional test has been devised by using the expression that a corporate person shall not include any ‘financial service provider’ and an NBFC necessarily would have various facet of other activities would not be covered by the expression ‘Financial Service Provider’. In the case of Forech India (P.) Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. [2017 (11) TMI 1621 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL DELHI] has taken a view that no application under Sections 7, 9 & 10 of IBC, 2016 would be maintainable in case a liquidation order has been passed in respect of the same Corporate Debtor in winding up proceedings either by the High Court or by the Tribunal. In that regard reliance has been placed on the ineligibility clause in Section 11(d) of the IBC and the meaning of the word ‘winding up’ given in Sections 2(23) and 94A. The view of the Hon’ble Appellate Tribunal is binding on us as per the principles of stare decisis and the precedents. Therefore, the aforesaid argument would also not survive for consideration. Review application fails Issues:1. Maintainability of the petition under Section 420 of the Companies Act, 2013 and Section 65 of the Insolvency and Bankruptcy Code, 2016.2. Exclusion of financial service providers from the purview of the Insolvency and Bankruptcy Code, 2016.3. Interpretation of the statutory provisions without external aid.4. Jurisdictional issues due to pending winding-up petitions against the respondent.5. Allegations of disputed and unliquidated amounts in the petition.6. Inherent powers of the Tribunal to recall orders obtained by fraud.7. Appealability of the order to the NCLAT.8. Impact of pending petitions before the High Court on the maintainability of the application.Analysis:1. The application challenged the maintainability of the petition under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016, citing that the respondent, registered as a Non-Banking Financial Institution, falls outside the definition of a 'Corporate Debtor' under the Code. The applicant argued that the nature of the respondent's activities exempts it from the Code's provisions, relying on specific sections and definitions within the legislation.2. The Tribunal examined the exclusion of financial service providers from the Code's ambit based on a judgment of the Supreme Court and emphasized the need to interpret statutory provisions without external aid. The argument centered on whether the respondent's status as an NBFC automatically categorized it as a financial service provider, thus affecting its inclusion as a 'Corporate Debtor.'3. Jurisdictional concerns arose due to pending winding-up petitions against the respondent before the High Court, leading to a discussion on the impact of such proceedings on the Tribunal's authority to admit the current petition. The Tribunal referenced relevant case law and statutory provisions to address the jurisdictional challenges raised by the applicant.4. The Tribunal considered the allegations of disputed and unliquidated amounts in the petition, evaluating the respondent's absence during the proceedings and the service of notices. The respondent's arguments regarding the service of legal documents and the disputed nature of the claims were analyzed in the context of the application's maintainability.5. The application also invoked the Tribunal's inherent powers to recall orders obtained by fraud, drawing parallels to relevant legal precedents. The Tribunal assessed the grounds presented by the applicant and the respondent's counterarguments to determine the applicability of such powers in the current scenario.6. The appealability of the order to the NCLAT was discussed, highlighting the procedural aspect of challenging the Tribunal's decision. The Tribunal addressed the respondent's contention regarding the appeal process and its implications on the review application's validity.7. The impact of pending petitions before the High Court on the maintainability of the application was examined, referencing specific cases and legal interpretations to establish the Tribunal's authority in admitting the petition despite parallel proceedings. The Tribunal clarified the relevance of official liquidator appointments in such scenarios.8. Ultimately, the Tribunal dismissed the review application, emphasizing the reasons for rejection and imposing costs on the applicant. The final decision reaffirmed the validity of the original order dated 27.06.2017, concluding the detailed analysis of the issues raised in the judgment.