Maintainability of Section 7 petition against former NBFC after registration cancellation; admission upheld, appeal dismissed

An insolvency petition under Section 7 was held maintainable because the corporate debtor ceased to be a financial service provider upon cancellation of its NBFC registration, removing the exclusion from the definition of corporate person. The tribunal found that the cancellation effective 18.09.2018 meant the exclusion did not apply when the petition was filed; accordingly the adjudicating authority's admission of the Section 7 application after finding debt and default was upheld and the appeal against admission was dismissed.

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Issues: Whether the Section 7 application against the Corporate Debtor was maintainable when the Corporate Debtor had its NBFC registration cancelled prior to filing of the Section 7 petition.

Analysis: The Court examined the statutory exclusion of "financial service provider" from the definition of "corporate person" under Section 3(7) of the IBC, 2016 and the definition of "financial service provider" under Section 3(17). The Tribunal reviewed the record, including the RBI letter showing cancellation of the Corporate Debtor's NBFC registration effective 18.09.2018, and compared the registration status with the date of filing of the Section 7 application (21.12.2019). The Court distinguished the present facts from the precedent relied upon by the Appellant, noting that in the cited case the question of the debtor's status as an NBFC had not been adjudicated below and was remanded for evidence; whereas here the cancellation certificate was on record indicating the Corporate Debtor was no longer a financial service provider when the Section 7 petition was filed. The Tribunal therefore concluded that the statutory exclusion did not apply on the date of filing.

Conclusion: The Section 7 application was maintainable; the Adjudicating Authority correctly admitted the Section 7 petition. The appeal is dismissed and interim order vacated; the period of the interim order shall be excluded from the CIRP period.

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