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NCLT Initiates Insolvency Proceedings Against Aviva Life Insurance [Read Order]

By LawStreet News Network      12 November, 2019 06:11 PM      0 Comments

The National Company Law Tribunal (NCLT), New Delhi Bench-V, on November 4, 2019, in the matter of Apeejay Trust v. Aviva Life Insurance Co. India Ltd., has initiated a corporate insolvency resolution process against Aviva Life Insurance under theInsolvency and Bankruptcy Code, 2016(IBC).

The order was passed by a two-member Bench of Member (Judicial) Justice (Retd.) RajeshDayal Khare and Member (Technical) Sumita Purkayastha while hearing a petition filed invoking the provision of Section 9 of the Insolvency & Bankruptcy Code, 2016.

Background 

The petitioner and respondent entered into an agreement of Leave and License on June 25, 2008, for office premises and other services at Apeejay Express. Pursuant to the agreement, the petitioner had provided office premises and other services to the respondent. However, the respondent despite several requests has defaulted in making payments towards service tax and license fees to the tune of Rs. 27,67,203/-.

The petitioner, therefore, filed a petition as an Operational Creditor praying for initiation of Corporate Insolvency Resolution Process of the Corporate Debtor for its inability to liquidate their claim of Rs. 27,67,203/-.

The Operational Creditor issued the demand notice dated April 5, 2019, as required under Section 8 of the Code. The Corporate Debtor, vide reply dated April 5, 2019, denied any liability and stated that no dues are payable to the Operational Creditor.

Submissions 

Learned counsel, appearing for the Corporate Debtor, challenged the maintainability of the petition on the ground that they are an insurance company and therefore, they are "Financial Services Provider", the business of which is strictly regulated by the "Financial Sector Regulator" and, therefore, as per the provisions of the IBC, the petition cannot lie against the respondents and the same deserves to be dismissed.

Opposing the argument as “clearly fallacious”, learned counsel for the Operational Creditor said that there is no absolute bar of any kind, as contended by the Corporate Debtor, the bar is only operative for such institutions which are covered under financial services as defined under Section 3 (16) of the IBC, 2016. It was also submitted that in the present case, the Corporate Debtor had not provided any insurance cover or financial assistance of any kind and the defaulted dues were with respect to lease and rentals.

Decision

After hearing both the parties, the Tribunal observed that “The definition of financial service under Section 3 (16) of the Code clearly includes the transactions effecting contract of insurance. However, the Operational Creditor does not have any claim in respect of contract of insurance. The claim is with respect to the outstanding license fees and the service tax amounts. Hence, the Corporate Debtor cannot use the provisions of Section 3 of the Insolvency and Bankruptcy Code, 2016 as a blanket cover to claim exclusion from IBC Proceedings on the ground that it is a financial service provider.”

In view of the above, the Tribunal accepted the petition and initiated a corporate insolvency resolution process against the Corporate Debtor, Aviva Life Insurance.

Imposing a moratorium in terms of Section 14 of the Code, the Tribunal appointed Jatin Madan as the Interim Resolution Professional of Aviva Life Insurance.

[Read Order]



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