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2018 SCC OnLine NCLAT 508

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In the National Company Law Appellate Tribunal
(BEFORE S.J. MUKHOPADHAYA, CHAIRPERSON AND BANSI LAL BHAT, JUDICIAL MEMBER)

Randhiraj Thakur … Appellant;

Versus
Jindal Saxena Financial Services Private Limited and Another …
Respondents.
††
Company Appeal (AT) (Insolvency) Nos. 32 & 50 of 2018
Decided on September 18, 2018
Advocates who appeared in this case :
For Appellant: Mr. Abhinav Vashisht, Senior Advocate assisted by Ms. Gauri Rishi
and Ms. Srishti Juneja, Advocates
For 1st Respondent: Mr. Tushar Parashar, Advocate
The Judgment of the Court was delivered by
SUDHANSU JYOTI MUKHOPADHAYA, J.:— This appeal has been preferred by the
th
appellant seeking, inter-alia, setting aside the order dated 8 January, 2018 passed
by the Adjudicating Authority (National Company law Tribunal), New Delhi whereby
and whereunder the application for recall preferred by the appellant is rejected.
Further prayer has been made to set aside the order dated 27th June, 2017 passed by
the Adjudicating Authority in Company Petition No. (IB)-84 (PB)/2017 whereby the
st
application preferred by the 1 Respondent (Financial Creditor) under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘I&B Code’) has
been admitted.
2. One of the ground taken by the appellant is that the original order was passed by
the Adjudicating Authority without issuing notice to the ‘Corporate Debtor’.
3. According to the learned counsel for the appellant ‘M/s. Mayfair Capital Pvt. Ltd.’
is a ‘financial service provider’ as defined in Section 3(17) of the I&B Code. It was
th
granted certificate of registration on 16 March, 2012 under Section 45-IA of the
Reserve Bank of India Act, 1934 to ‘M/s. Mayfair Capital Pvt. Ltd.’. Being a ‘Financial
Sector Regulator’ as defined in Section 3(18) of the I&B Code and having status of a
‘non-banking financial institution’, the application under Section 7 of the I&B Code
was not maintainable.
4. From the record, it appears that a ‘certificate of registration’ has been granted by
the Reserve Bank of India (RBI) to ‘M/s. Mayfair Capital Pvt. Ltd.’ to commence and
carry on the business of non-banking financial institution; which show that ‘M/s.
Mayfair Capital Pvt. Ltd.’ renders ‘financial service’ as defined in Section 3(16), which
reads as under:
“3. In this Code, unless the context otherwise requires,—
(16) “financial service” includes any of the following services, namely:—
(a) accepting of deposits;
(b) safeguarding and administering assets consisting of financial products,
belonging to another person, or agreeing to do so;
(c) effecting contracts of insurance;
(d) offering, managing or agreeing to manage assets consisting of financial
products belonging to another person;
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(e) rendering or agreeing, for consideration, to render advice on or soliciting for

the purposes of—
(i) buying, selling, or subscribing to, a financial product;
(ii) availing a financial service; or
(iii) exercising any right associated with a financial product or financial
service;
(f) establishing or operating an investment scheme;
(g) maintaining or transferring records of ownership of a financial product;
(h) underwriting the issuance or subscription of a financial product; or
(i) selling, providing, or issuing stored value or payment instruments or
providing payment services;”
5. Sub-section (17) of Section 3 of the I&B Code defines ‘financial service provider’
as under:
“3. In this Code, unless the context otherwise requires,—
(17) “financial service provider” means a person engaged in the business of
providing financial services in terms of authorisation issued or registration granted
by a financial sector regulator;
6. Sub-section (18) of Section 3 of the I&B Code defines the ‘financial sector
regulator’ as under:
“3. In this Code, unless the context otherwise requires,—
(18) “financial sector regulator” means an authority or body constituted under
any law for the time being in force to regulate services or transactions of financial
sector and includes the Reserve Bank of India, the Securities and Exchange Board
of India, the Insurance Regulatory and Development Authority of India, the Pension
Fund Regulatory Authority and such other regulatory authorities as may be notified
by the Central Government;”
7. As per the ‘Memorandum of Association’ of ‘M/s. Mayfair Capital Pvt. Ltd.’, the
main object, inter-alia, includes carrying on the business of an investment company to
carry on all types of financial operations and all types of financial services including
housing finance, consumer finance and industrial finance etc. The aforesaid facts have
st
not been disputed by 1 Respondent.
8. Learned counsel for the appellant submitted that ‘M/s. Mayfair Capital Pvt. Ltd.’
do not come within the definition of ‘corporate person’ as defined in sub-section (7) of
Section 3 of the I&B Code in view of exception carved out therein, therefore, cannot be
treated to be a ‘Corporate Debtor’ within the meaning of sub-section (8) of section 3 of
the I&B Code. Sub-section (7) and (8) of Section 3 as referred above are quoted
hereunder for ready reference:
“3. In this Code, unless the context otherwise requires,—
(7) “corporate person” means a company as defined in clause (20) of section
2 of the Companies Act, 2013, a limited liability partnership, as defined in clause
(n) of subsection (1) of section 2 of the Limited Liability Partnership Act, 2008,
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;”
(emphasis added)
(8) “corporate debtor” means a corporate person who owes a debt to any
person;
9. In the present case, we find that an ‘Inter Corporate Deposit Agreement’ was
reached between ‘M/s. Jindal Saxena financial Services Private Limited’ (1st
nd
Respondent) and ‘M/s. Mayfair Capital Pvt. Ltd.’ (2 Respondent) which is a non-
banking financial company. ‘M/s. Mayfair Capital Pvt. Ltd.’ had undertaken a ‘financial
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services’ by accepting deposit from ‘M/s. Jindal Saxena financial Services Private
Limited’ (1st Respondent) in terms of Section 3(16) of the I&B Code. Therefore, it
cannot be held that the amount was accepted towards public deposits. For the said
reason, in regard to transaction, in quest, ‘M/s. Mayfair Capital Pvt. Ltd.’ cannot be
nd
treated to be ‘Corporate Debtor’. ‘M/s. Mayfair Capital Pvt. Ltd.’ (2 Respondent)
being a ‘financial service provider’ and having excluded from the definition of
‘corporate person’ under sub-section (7) of Section 3 of the I&B Code the application
under Section 7 was not maintainable against ‘M/s. Mayfair Capital Pvt. Ltd.’
10. If the entire scheme of the I&B Code is seen, it will be evident that the Code is
to consolidate and amend the laws relating to reorganisation and insolvency resolution
of ‘corporate persons’, ‘partnership firms’ and ‘individual’ in a time bound manner. It
is a self-contained Code which is exhaustive in nature when it comes to reorganisation
and insolvency resolution. However, an exception had been carved out while enacting
the Code that the ‘financial service providers’ have been kept outside the purview of
the Code. Being a consolidating legislation only those acts are permitted which are
mentioned in the Code and it cannot be made applicable to ‘financial service providers’
including ‘non-banking financial institutions’ and MFI's banks, which have been kept
outside the purview of the Code.
11. The Adjudicating Authority has failed to notice the aforesaid provisions and
th
passed the impugned order dated 8 January, 2018 initiating ‘insolvency corporate
resolution process’ against ‘M/s. Mayfair Capital Pvt. Ltd.’, a ‘financial service
provider’ (non-banking financial company).
12. As the appellant was not a party before the Adjudicating Authority and the
nd
order was passed without notice to ‘M/s. Mayfair Capital Pvt. Ltd.’ (2 Respondent),
st
which has not been disputed by the 1 respondent and the appeal has been preferred
immediately after the impugned order, this appeal cannot be dismissed on the ground
of limitation having filed immediately when the appellant came to know the same. The
impugned order having passed against the ‘financial service provider’ (non-financial
company), is fit to be set aside. Accordingly, we set aside the impugned order dated
th
8 January, 2018 passed by the Adjudicating Authority.
13. In effect, order(s) passed by Ld. Adjudicating Authority appointing ‘Interim
Resolution Professional’, declaring moratorium, freezing of account and all other order
(s) passed by Adjudicating Authority pursuant to impugned order and action taken by
the ‘Resolution Professional’, including the advertisement published in the newspaper
calling for applications all such orders and actions are declared illegal and are set
st
aside. The application preferred by the 1 Respondent under Section 7 of the I&B
Code is dismissed. The Adjudicating Authority will now close the proceeding. The 2nd
Respondent Company is released from all the rigour of law and is allowed to function
independently through its Board of Directors from immediate effect.
14. The Adjudicating Authority will fix the fee of ‘Interim Resolution Professional’
nd
and ‘Mayfair Capital Private Limited’ (2 Respondent) will pay the fees for the period
he has functioned. The appeal is allowed with aforesaid observation and direction.
However, in the facts and circumstances of the case, there shall be no order as to cost.
———
†
New Delhi Bench
†† th
Arising out of order dated 8 January, 2018 passed by National Company Law Tribunal, New Delhi Bench in
C.A. No. 233(PB)/2017 in C.P. No. (IB)-84(PB)/2017
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