TaxTMI 
TaxTMI 
2020 (2) TMI 636
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....ncy & Bankruptcy Code, 2016. 2. PROVISIONS OF INSOVENCY CODE vis-à-vis FINANCIAL SERVICE PORIVIDER RULES : Before considering the merits of the Petition, this Bench is of the view that since certain new provisions of the Insolvency & Bankruptcy Code are going to be applied , therefore, at the outset, it is requisite to examine the applicability of those newly introduced provisions/notification under which the Applicant/Reserve Bank of India is seeking 'Admission' of this Petition under Insolvency & Bankruptcy Code, 2016. 2.1 Under the Insolvency & Bankruptcy Code, 2016 there is a Section 227 in The Code with the caption 'Power of Central Government to notify financial service providers, etc.', reads as under:- "227. Notwithstanding anything to the contrary examined in this Code or any other law for the time being in force, the Central Government may, if it considers necessary, in consultation with the appropriate financial sector regulators, notify financial service providers or categories of financial service providers for the purpose of their insolvency and liquidation proceedings, which may be conducted under this Code, in such manner as may....
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....onal", "Interim Resolution Professional" "Resolution Professional" or "Liquidator" occur, now for the application of this Rule, shall mean "Administrator". 2.6 Under this newly introduced Rules 2019 the process of Insolvency is prescribed as per Rule 5 supra reads as under:- '5. Corporate Insolvency Resolution Process of financial service providers.-The provisions of the Code relating to the Corporate Insolvency Resolution Process of the corporate debtor shall, mutatis mutandis apply, to the insolvency resolution process of a financial service provider subject to the following modifications, namely:- (a) Initiation of Corporate Insolvency Resolution Process .- (i) no corporate insolvency resolution process shall be initiated against a financial service provider which has committed a default under section 4, 3except upon an application made by the appropriate regulator in accordance with rule 6; (ii) the application under sub-clause (i) shall be dealt with in the same manner as an application by a financial creditor under section 7, subject to clause (iii); and (iii) on the admission of the application, the Adjudicating Authority s....
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....propriate regulator to the effect that it has no objection to the persons, who would be in control or management of the financial service provider after approval of the resolution plan under section 31; (iii) the appropriate regulator shall without prejudice to the provisions contained in section 29A, issue 'no objection' on the basis of the 'fit and proper' criteria applicable to the business of the financial service provider; (iv) where an appropriate regulator does not refuse 'no objection' on an application made under clause (ii) within forty-five working days of receipt of such application, it shall be deemed that 'no objection' has been granted.' 2.7 As far as the appointment of "Insolvency Professional" is concerned, under this Rule supra it is provided under Rule 9 that for the purpose of these Rules, only an "Administrator" proposed by the appropriate Regulator and appointed as such by the Adjudicating Authority shall act as an Insolvency Professional, etc. as the case may be. The "Administrator" so appointed shall have the same duties, functions, obligations, responsibilities, rights, and powers of an Insolvency Pro....
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....res or more, the proceedings shall be undertaken in accordance with the provisions of I&B Code 2016 to be read along with these Rules by the appropriate Regulator through Administrator and in this case Reserve Bank of India is designated. 4. FACTS & MERITS OF THE PETITION : About the merits of the case, the impugned Application, now sub judice before us, is submitted by the Reserve Bank of India ( RBI), set up under the Reserve Bank of India Act 1934, in the capacity of "Appropriate Regulator" through General Manager, Department of Regulation, Reserve Bank of India, Mumbai, duly authorized under Gazette Notification dated 11.08.2012 to submit the Application on behalf of RBI, against "Dewan Housing Finance Corporation Limited", the "Financial Service Provider". As per Part-III of Form-I 'Name of the 'Administrator' proposed is Mr. R. Subramaniakumar, Thiruvanmiyur, Chennai-600 041, Tamil Nadu. 4.1 About the 'Particulars of Default', RBI understands that DHFL has committed default of significant amount in relation to Financial Debt availed from various Financial Creditors, in particular, State Bank of India. As per Part-IV of Form-I, the 'Particulars of....
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....appointing the Administrator as the Insolvency Resolution Professional. Sd/- Chief General Manager" 4.3 Further, a Three Member "Advisory Committee" has also been constituted vide Press Release 2019-2020/1246 dated 02.11.2019 to assist the "Administrator", as under:- "Reserve Bank of India appoints an Advisory Committee to Advise the Administrator of Dewan Housing Finance Corporation Ltd. It may be recalled that the Reserve Bank of India, on November 20, 2019, had superseded the board of directors of Dewan Housing Finance Corporation Ltd. (DHFL) and appointed Shri R Subramaniakumar as the Administrator. The Reserve Bank, in exercise of powers conferred under section 45 IE 5(a) of the RBI Act 1934, has today constituted a three-member Advisory Committee to assist the Administrator of DHFL in discharge of his duties. The members of the Advisory Committee are as follows: 1. Dr Rajiv Lall, Non-Executive Chairman, IDFC First Bank Ltd 2. Shri N.S. Kannan, Managing Director and CEO, ICICI Prudential Life Insurance Co. Ltd 3. Shri NS Venkatesh, Chief Executive, Association of Mutual Funds in India. It may also be me....
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....t, 1891 Accounts statements attached. 6. List of any documents, correspondence, letters, notices or other communication in order to prove the existence of financial debt, the amounts due and date(s) of default 11-05-2018 (Date of Term Sheet) 17-07-2018 (Date of Facility Agreement) 03-05-2019 (Interest Demand Notice) 08-11-2019 (Email advising non-receipt of Interest due on 07-11-2019)" 4.5 Along with this Application the Applicant has enclosed several evidences to establish the Loans were granted time to time such as 'External Commercial Borrowings' ("ECB") in two tranches aggregating USD 240 Mio. It is interesting to note that the purpose intimated in the impugned "Terms and Conditions" was that for re-financing of existing ECB, the proceeds of which were utilized for low cost housing units as permitted by RBI. Also annexed a 'Facility Agreement' in respect of USD 110,000,000 signed between DHFL as "Borrower" on one hand and State Bank of India, Singapore Branch (Arranger with State Bank of India, Singapore Branch acting as "Agent") on the other hand. 4.6 Our attention has also been drawn on a long list of "Secured Loan" outstanding as on 31.03.20....
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....r is required to be passed as per decision of by the Hon'ble Supreme Court, as quoted above. The appeal stands disposed of with aforesaid observations and directions. No cost." unquote. 7. FINDINGS Heard the Petition/Application in the light of the above submissions, evidences, newly incorporated Rules along with the provisions of the Insolvency Code, 2016. The Applicant RBI in the capacity of "Appropriate Regulator" has submitted this Application against the 'Financial Service Provider' Dewan Housing Finance Corporation Limited on account of the fact that the default in repayment of the ECB Loan to SBI was committed, therefore, after following the due procedure as discussed supra prayed for "Admission" of the Petition u/s 7 to be read with Section 227 of the Insolvency Code. 7.1 In this case since the Board of Directors of DHFL was suspended by RBI vide Notification dated 20.11.2019 and appointed Mr. R. Subramaniakumar as Administrator, therefore, in such a situation there is no representation for and on behalf of the Corporate Debtor/Financial Service Provider DHFL. A Learned Advocate representing the Arbitrator remained present during the course of hearing, ....