HDFC had moved the NCLT seeking to initiate the CIRP under section 7 of the IBC against the latter as it defaulted on repayment.
Non-banking financial companies (NBFCs) are not corporate debtors, and therefore corporate insolvency resolution proceedings (CIRP) under the Insolvency and Bankruptcy Code (IBC) cannot be initiated against such firms, the Delhi bench of the National Company Law Tribunal (NCLT) ruled on Thursday while dismissing the plea of HDFC against the holding firm of Malvinder Singh and Shivinder Singh, RHC Holding.
HDFC had moved the NCLT seeking to initiate the CIRP under section 7 of the IBC against the latter as it defaulted on repayment. RHC Holding owed `41 crore as on May 30, 2018 to HDFC.
“RHC Holding, being a financial service provider and having excluded from the definition of the ‘corporate person’, the present application filed under Section 7 of the Code against a financial service provider is not maintainable,” a NCLT Bench headed by President Justice MM Kumar, said.
However, the NCLT said, “We make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the right of the applicants before any other forum shall not be prejudiced on account of dismissal of instant application.”
The Reserve Bank had on April 3, 2008 certified RHC Holding, formerly known as Solaris Finance, to commence/carry on the business of non-banking financial without accepting public deposits. The IBC, under Section 3 (8), defines a ‘corporate debtor’ as ‘ a corporate person who owes a debt to any person’. The IBC excludes a financial service provider as a corporate person.
HDFC Ltd had earlier argued that since RHC Holdings had committed a default in repayment of the loan amount even after demands were raised, the adjudicating authority did not need to look into any other criterion for admission of the insolvency application.