9 Jun 2021 4:44 PM GMT
The National Company Appellate Tribunal (NCLAT), New Delhi has recently agreed to examine a serious question of law i.e. whether a stock broking company should be considered as a Financial Service Provider under Section 3(16) of the Insolvency and Bankruptcy Code, 2016 and should be kept out of the purview of the Insolvency and Bankruptcy Code, 2016 ("IBC")? The development came while the...
The National Company Appellate Tribunal (NCLAT), New Delhi has recently agreed to examine a serious question of law i.e. whether a stock broking company should be considered as a Financial Service Provider under Section 3(16) of the Insolvency and Bankruptcy Code, 2016 and should be kept out of the purview of the Insolvency and Bankruptcy Code, 2016 ("IBC")?
The development came while the NCLAT stayed the Committee of Creditors formation of Corporate Debtor i.e. Simandhar Broking Ltd. if not constituted yet, till the next date of hearing, in an appeal filed by its Suspended Director under sec. 61 of the IBC challenging the order of NCLT, Ahmadabad Bench.
A petition under Section 7 of the IBC was filed in NCLT, Ahmedabad by the client of the Stock Broker, against his trading of shares in the Futures & Options Segment of the NSE (National Stock Exchange).
It was thus, the case of the Appellant that NCLT, Ahmedabad had taken a "contrary view" to the earlier decided judgments rendered by the NCLAT and other benches of the NCLT.
In appeal, the Suspended Director had submitted that the Corporate Debtor is a Financial Service Provider, therefore, in view of Section 3 (7) of the IBC and in view of this, it does not come within the definition of Corporate Person and the alleged debt is not Financial Debt within the meaning of Section 5 (8) of the IBC.
Counsel appearing on behalf of the Appellant had placed reliance on NCLT, Hyderabad Bench judgment passed in the matter Praveen Kumar Mundra v. CIL Securities Ltd wherein it was held that that the Stoking Broking Company is a financial service provider as it is regulated by SEBI, it deals with financial products i.e. securities and imparts financial services under Section 3(16) of the IBC. Hence, it should not be considered as the Corporate Person as stated under the Section 3(7) of the IBC. Thus, the insolvency proceedings of a stock broking company are not covered under the purview of IBC.
It was also submitted that the Respondent No. 1 (Financial Creditor) has suppressed the vital fact that the investor grievance resolution panel of NSE has rejected his claim and the admissible claim of the Financial Creditors is NIL.
While issuing notice to the Respondents, the bench headed by Justice Jarat Kumar Jain (Judicial Member) granted two weeks of time to file their reply in the matter.
"The Respondent No. 1 seeks and is granted two weeks time to file Reply Affidavit. Rejoinder, if any, may be filed one week thereafter. It is ordered that if the CoC has not been constituted it be put on hold till next date of hearing." the bench ordered.
For Appellant- Mr. Krishnendu Datta, Snr Advocate, Mr Hemant Sethi, Advocate with Gaurav H Sethi and Rahul Gupta Advocates.
For Respondent No.1-Mr. Abhishek Swaroop, Mr. Kiran Shah and Noman Singh Bagga Advocates.
Title: Nitin Pannalal Shah (Suspended Director of Simandar Broking Ltd.) v. Vipul H Raja & Ors.
Click Here To Read Order