NCLAT: Financial Service Provider Do not Come Within The Meaning of Corporate Person/Corporate Debtor

NCLAT rejected HDFC’S Insolvency Plea against RHC Holding; holds that RHC is a non-banking financial institution who is carrying on business of financial institution and thereby it being financial service provider do not come within the meaning of Corporate Person/Corporate Debtor

* Last year on 6th Dec, 2018 the NCLT found that RHC holding was a non banking financial company and does not come under the Insolvency and Bankruptcy Code(IBC, 2016). On the basis of that judgement, HDFC then decided to reach the Appellate Tribunal to question the NCLT ‘S decision.

*In present case, the NCLAT discarded the approaches made by HDFC to initiate the CIRP against the RHC Holding, a body advertised by two billionaire and former Ranbaxy and Fortis advertisers Singh brothers, Malvinder Mohan Singh and Sukhwinder Mohan Singh.

*HDFC’s insolvency plea against RHC holding was decided by a two bench headed by Chairman Justice S J Mukhopadhaya who approved the verdict of the Principal Bench NCLT, which earlier discarded HDFC’S petition. NCLAT said that the appeal has ” no merits” and said that non banking financial money lenders comes under the purview of Reserve Bank of India(RBI) and should seek remedies from the Central Bank not the Bankruptcy Court.

It further held that “The definition of “financial service” if read with definition of “financial service provider”, it is clear that it is not necessary that the “financial service providers” must accept the deposits. If any of the activity as defined in Section 3(16) of the I&B Code such as safeguarding and administering assets consisting of financial products belonging to another person, or agreeing to do so; effecting contracts of insurance; Offering, managing or agreeing to manage assets consisting of financial products belonging to another person; rendering or agreeing, for consideration, to render advice on or soliciting for the purposes of- buying, selling or subscribing to, a financial product; availing a financial service etc., they also come within the definition of “financial service provider”

The definition of ‘financial services’ as defined in Section 3(16) of I&B Code is not limited to the 9 activities as shown at Clause (a) to (i) of Section 3(16). The aforesaid Clauses (a) to (i) are inclusive which means there are other services which come within the meaning of “financial services”.

Based on the aforesaid principles as well as after examining the various sections of the RBI Act, the NCLAT was pleased to dismiss the appeal filed by HDFC & held that the RHC Holding does not fall within the ambit of the Code.