2018 (10) TMI 913 - AT - Insolvency and Bankruptcy

Successful appeal sets aside order against financial service provider under Insolvency and Bankruptcy Code

The appeal was successful in setting aside the order rejecting the application for recall and the order admitting the application under Section 7 of the ... Corporate insolvency process - original order was passed by the Adjudicating Authority without issuing notice to the ‘Corporate Debtor’ - Held that:- If the entire scheme of the I&B Code is seen, it will be evident that the Code is to consolidate and amend the laws relating to reorganisation and insolvency resolution of ‘corporate persons’, ‘partnership firms’ and ‘individual’ in a time bound manner. It is a self-contained Code which is exhaustive in nature when it comes to reorganisation and insolvency resolution. An exception had been carved out while enacting the Code that the ‘financial service providers’ have been kept outside the purview of the Code. Being a consolidating legislation only those acts are permitted which are mentioned in the Code and it cannot be made applicable to ‘financial service providers’ including ‘non-banking financial institutions’ and MFI’s banks, which have been kept outside the purview of the Code. The Adjudicating Authority has failed to notice the aforesaid provisions and passed the impugned order dated 8th January, 2018 initiating ‘insolvency corporate resolution process’ against ‘M/s. Mayfair Capital Pvt. Ltd.’, a ‘financial service provider’ (non-banking financial company). As the appellant was not a party before the Adjudicating Authority and the order was passed without notice to ‘M/s. Mayfair Capital Pvt. Ltd.’ (2nd Respondent), which has not been disputed by the 1st respondent and the appeal has been preferred immediately after the impugned order, this appeal cannot be dismissed on the ground of limitation having filed immediately when the appellant came to know the same. The impugned order having passed against the ‘financial service provider’ (non-financial company), is fit to be set aside. Accordingly, we set aside the impugned order dated 8th January, 2018 passed by the Adjudicating Authority. Issues:1. Setting aside the order rejecting the application for recall.2. Setting aside the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.3. Determining the maintainability of the application under Section 7 against a financial service provider.4. Interpretation of the definitions of 'financial service provider' and 'financial sector regulator' under the Insolvency and Bankruptcy Code.5. Exclusion of financial service providers from the purview of the Insolvency and Bankruptcy Code.6. Failure of the Adjudicating Authority to consider relevant provisions in passing the impugned order.7. Timeliness of the appeal and setting aside the impugned order.Detailed Analysis:1. The appellant sought to set aside the order rejecting the application for recall. The grounds included lack of notice to the 'Corporate Debtor' by the Adjudicating Authority.2. The appeal aimed to set aside the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The appellant argued that as a financial service provider, the application was not maintainable against them.3. The issue of maintainability against a financial service provider was raised. The appellant contended that being a non-banking financial institution, the application under Section 7 was not valid.4. The definitions of 'financial service provider' and 'financial sector regulator' under the Insolvency and Bankruptcy Code were crucial in determining the status of the appellant. The appellant argued that as per these definitions, they were excluded from being considered a 'Corporate Debtor'.5. The judgment highlighted the exclusion of financial service providers from the Insolvency and Bankruptcy Code. It emphasized that the Code does not apply to financial service providers like non-banking financial institutions.6. The Adjudicating Authority's failure to consider relevant provisions led to the passing of the impugned order against the financial service provider. The judgment criticized this oversight in applying the Code to entities outside its purview.7. The timeliness of the appeal was addressed, noting that it was filed immediately after the impugned order and without the appellant being a party before the Adjudicating Authority. The order was set aside, and all related actions were deemed illegal.This detailed analysis covers the various issues raised in the judgment, providing a comprehensive understanding of the legal arguments and decisions made by the Appellate Tribunal.