NCLAT Delhi: CIRP Against Financial Service Provider Is Not Maintainable Under IBC

The National Company Law Appellate Tribunal ('NCLAT') New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member) held that a Corporate Insolvency Resolution Process ('CIRP') application against the Financial Service Provider is not maintainable under Insolvency and Bankruptcy Code, 2016 ('IBC'). Background Facts: Globe Capital Market Ltd. (Appellant) has filed the appeal against the NCLT New Delhi's Order dated 03.07.2023 which rejected the Appellant's CIRP application against Narayan Securities Ltd. (Respondent) under Section 7 of IBC on the ground that CIRP application against a Financial Service Provider is not maintainable. NCLAT Verdict: The NCLAT New Delhi held that a CIRP application against the Financial Service Provider is not maintainable under IBC. The Appellate Tribunal observed that when the Respondent is a Financial Service Provider, the application under Section 7 is not maintainable since he is not included in the definition of corporate person as defined in Section 3(7) of the IBC. Section 3(7) of the IBC reads as follows: Section 3(7) “corporate person” means a company as defined in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013), a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider; Similarly, it highlighted that an application for CIRP filed under Sections 9 and 10 of IBC is also not maintainable against a Financial Service Provider. NCLAT dismissed the appeal and upheld NCLT Delhi's Order finding no ground to interfere in the Order. Case Title: Globe Capital Market Ltd. vs. Narayan Securities Ltd. Case No.: Company Appeal (AT) (Insolvency) No.32 of 2024 & I.A No. 62 of 2024 Click Here to Read/Download Order

NCLAT Delhi: CIRP Against Financial Service Provider Is Not Maintainable Under IBC

Sachika Vij

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