NBFCs Are Outside The Purview Of Insolvency & Bankruptcy Code: NCLAT [Read Judgment]
National Company Law Appellate Tribunal has held that Non-Banking Financial Corporation do not fall under the purview of Insolvency & Bankruptcy Code. It was noted that the respondent is a non-banking financial institution and is carrying on business of a financial institution and thereby it being financial service provider, it does not come within the meaning of Corporate Person/Corporate Debtor.
The present appeal was filed by the HDFC Bank against the order of the NCLT which stated that Respondent Company being a non-banking financial institution rendering 'financial services' is out of the purview of the I&B Code as per section 3(7). The appellants argued that the respondent shall be considered a corporate debtor under section 3(7) of the Code as it does not provide any of the nine financial services listed under section 3(16). Meanwhile, the respondent relied upon the Appellate Tribunal's judgment in Randhiraj Thakur Vs M/s Jindal Saxena Financial Services, which had held that application filed by financial creditor under Section 7 of the I&B Code is not maintainable against the company which has been granted a certificate of Registration under the RBI Act giving status of a "Non-Banking Financial Institution."
The Appellate Body highlighted that the definition of "financial service" if read with the definition of "financial service provider", it is clear that it's not necessary that the "financial service providers" must accept the deposits. The appellants argument was rejected by opining that Clauses (a) to (i) of section 3(16) are inclusive which means there are other services which come within the meaning of "financial services".
Further, the Appellate Tribunal also noted that the Registration of Certificate issued to the respondent by the RBI shows that it has granted a certificate to commence/carry on business of "non-banking financial services". The court also perused section 45-I of the RBI Act to confirm the finding that the respondent company falls within the definition of a financial institution.
Finally, the Appellate Tribunal made an the observation that if the terms and conditions imposed by the RBI have been violated, one may bring the same to the notice of the RBI itself and not before the Adjudicating Authority.