The National Company Law Appellate Tribunal (NCLAT) Wednesday dismissed a petition by HDFC to initiate insolvency proceedings against RHC Holding, an entity promoted by former Ranbaxy and fortis promoters Malvinder Mohan Singh and Shivinder Mohan Singh.
A two-member bench headed by Chairman Justice S J Mukhopadhaya upheld the order of the principal bench of the National Company Law Tribunal (NCLT) which had rejected HDFC's plea.
The appellate tribunal said it found "no merits" in HDFC's petition and said that non-bank financial company lenders come under the purview of the Reserve Bank of India (RBI) and should seek remedies from the central bank, not the bankruptcy court.
"We hold that the application under Section 7 of I&B Code is not maintainable. Therefore, the Adjudicating Authority rightly rejected the application. We find no merit in the appeal, it is accordingly dismissed," said NCLAT
The appellate tribunal said that under the definition provided under section 45 IA of the Reserve Bank of India Act, RHC Holding is a non-banking financial company (NBFC).
"Therefore, it is clear that the Respondent (RHC Holding), a non-banking financial institution is carrying on business of financial institution and thereby it being financial service provider do not come within the meaning of Corporate Person/Corporate Debtor," said NCLAT.
Also Read
Over HDFC's allegation that RHC Holding, a NBFC, is taking deposits in violation of conditions imposed by the RBI, the NCLAT said that such issue cannot be decided by NCLT while considering an Application under Section 7 or 9 of the I&B Code.
"Only on such ground NCLT cannot admit or reject an application under Section 7 or 9 of the I&B Code. If the terms and conditions imposed by Reserve Bank of India or there is violation of any of the provision of RBI, one may bring the same to the notice of Reserve Bank of India and not before the NCLT,"said NCLAT.
Under section 7 and 9 of the Insolvency & Bankruptcy code (IBC) a financial creditor and operational creditor may move insolvency plea against its debtors respectively in case of default in payment.
Earlier, passing an order on December 6, 2018, the NCLT had observed that RHC Holding was a non-banking financial company and does not come under the purview of the Insolvency and Bankruptcy Code (IBC).
HDFC had then approached the appellate tribunal to challenge the NCLT's ruling.
The mortgage lender had moved the NCLT to recover an amount of Rs 41 crore.
RHC Holding, promoted by the Singh brothers, had taken a loan of Rs 200 crore from HDFC in April 2016. RHC Holding had paid the interest for the first quarter on time but later started defaulting on its dues.
According to HDFC, even after adjusting the proceeds from the sale of pledged shares, an amount of Rs 41.09 crore remained due.
To recover the remaining amount, HDFC filed an insolvency plea against RHC Holding before the NCLT.
The NCLAT had in January this year issued notices to RHC Holding and other parties and directed them to file their replies.
Disclaimer: No Business Standard Journalist was involved in creation of this content
