Financial service providers are outside corporate person status under the IBC, so Section 7 insolvency proceedings cannot be maintained.

A financial service provider, including a non-banking financial company registered with the Reserve Bank of India, is excluded from the definition of corporate person under the Insolvency and Bankruptcy Code, 2016. Because the company was engaged in financial services and held RBI registration, it could not be treated as a corporate debtor for Section 7 proceedings. The insolvency framework was therefore inapplicable to it, and an application under Section 7 was not maintainable against the company.

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Issues: Whether a non-banking financial company registered as a financial service provider falls outside the definition of corporate person and corporate debtor under the Insolvency and Bankruptcy Code, 2016, with the result that an application under Section 7 is not maintainable against it.

Analysis: The relevant provisions of the Insolvency and Bankruptcy Code, 2016 exclude a financial service provider from the definition of corporate person. A financial service provider is a person engaged in providing financial services under authorisation or registration granted by a financial sector regulator, and the Code separately recognises financial services and financial sector regulators. The company in question held registration from the Reserve Bank of India to carry on non-banking financial business and its object clause showed that it was engaged in financial services. In these circumstances, it could not be treated as a corporate debtor for the purpose of Section 7 proceedings. The insolvency framework under the Code was held inapplicable to such financial service providers.

Conclusion: Section 7 proceedings against the company were not maintainable, and the insolvency order was liable to be set aside in favour of the appellant.

Ratio Decidendi: A financial service provider, including a non-banking financial company registered with the Reserve Bank of India, is excluded from the category of corporate person under the Insolvency and Bankruptcy Code, 2016 and cannot be proceeded against under Section 7 as a corporate debtor.

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