The NCLAT while allowing the Appeal filed by one of the Shareholder, Shri Gyanchand Mutha of Corporate Debtor M/s Arkay International Finsec Limited against M/s Aditya Birla Money Limited (Operational Creditor) while reversing the Order and findings of Ld. NCLT, Jaipur Bench has recently held that CIRP cannot be admitted as by way of punishment for concealing particular facts with a creditor. More particularly when the Company does not fall within the definition of Corporate Debtor and Corporate Person as envisaged under section 3(8) read with section 3(7) of Insolvency and Bankruptcy Code, 2016.
"Considering the position of law, it appears to us that the Adjudicating Authority could not have initiated CIRP when the Corporate Debtor did not fall in the concerned definition of 'Corporate Person' under IBC. Under Section 3(8) 'Corporate Debtor' means a corporate person who owes a debt to any person."
The Appellant/Corporate Debtor:
The Counsel for the Appellant Shri Susshil Daga, the Managing Partner of Amicus Legal, while challenging the impugned Order passed by the Adjudicating Authority argued that the Adjudicating Authority has seriously erred in admitting CIRP against the Company which is involved in providing financial services as it is registered as NBFC with RBI and has filed all its necessary returns till date.
Hence, the order of the Adjudicating Authority initiating CIRP against the Company on the premise that a wrong category was ticked by it in the KYC form prescribed by the Operational Creditor M/s Aditya Birla Money Limited is not justified.
The Respondent/Operational Creditor:
The Ld. Senior Advocate, Shri Arvind Nayar for the Respondent submitted that the Corporate Debtor while filling the KYC form ticked on Public Limited Company instead of Financial Institution and accordingly should not be considered as financial service provider for the purpose of section 3(8) of IBC.
Hon'ble NCLAT Held:
The Hon'ble Appellate Tribunal clarified that when it comes to invoking provisions of IBC, if the law has protected the financial service provider, IBC proceedings could not have been invoked in the manner in which it has been done.
The Hon'ble Appellate Tribunal further held that the Application filed by the Respondent/Operational Creditor could not have been admitted by the Adjudicating Authority, as if by way of punishment for concealing particular facts in KYC by the Corporate Debtor.
The Hon'ble Appellate Tribunal allowed the appeal filed by the shareholder of the Corporate Debtor against the Order of admission of CIRP by the NCLT, Jaipur.