38.6c New Delhi, India, Saturday, July 13, 2024
Business

Under the IBC, Is a Stock Broking Company a Financial Service Provider? ; NCLAT to Investigate

By Saakshi Singh Rawat      12 June, 2021 09:51 AM      0 Comments
Under the IBC, Is a Stock Broking Company a Financial Service Provider? ; NCLAT to Investigate

The National Company Appellate Tribunal (NCLAT) in New Delhi recently acknowledged a serious matter of law, namely whether a stock broking company should really be regarded a Financial Service Provider under S. 3 (16) of the Insolvency and Bankruptcy Code, 2016 ("IBC") or kept out from the ambit of the IBC?

In an appeal filed by it's own Suspended Director under s. 61 of the IBC appealing the ruling of NCLT, Ahmadabad Bench, the NCLAT halted the Committee of Creditors formation of Corporate Debtor, i.e. Simandhar Broking Ltd., if not yet constituted, till the next date of hearing. The buyer of the Stock Broker filed a case in NCLT, Ahmedabad, under Section 7 of the IBC, challenging his stock trading in the National Stock Exchange's Futures & Options Segment. Thus, the Appellant's contention was that NCLT, Ahmedabad had adopted a "contrarian opinion" to the prior determined judgements of the NCLAT and other NCLT panels.

In his appeal, the Suspended Director argued that because the Corporate Debtor is a Financial Service Provider, it's doesn't fall under the definition of a Corporate Person under S. 3(7) of the IBC, and the alleged debt is not a Financial Debt under S. 5 (8) of the IBC. Counsel for the Appellant relied on a judgement of the NCLT, Hyderabad Bench in the case of Praveen Kumar Mundra v. CIL Securities Ltd, in which it was retained that the Stoking Broking Company is a financial institution because it is regulated by SEBI, deals with financial products such as securities, and provides financial services under S. 3(16) of the IBC.

As a result, it should not be regarded as a Corporate Person as defined by S. 3(7) of the IBC. Further, a stockbroking company's insolvent processes are not covered by the IBC. It was further claimed that Respondent No. 1 (Financial Creditor) had concealed the crucial fact that his claim had been rejected by the NSE's investor grievance resolution panel, and therefore the Financial Creditors' acceptable claim was NIL. The Respondents were given 2 weeks to submit their reply in the matter after the bench led by Justice Jarat Kumar Jain (Judicial Member) issued notice to them.

The bench gave an order that respondent No. 1 requests and receives two weeks to file a Counter Affidavit. If necessary, a rebuttal may be filed one week later. It is directed that if the CoC has still not been formed, the case be put on hold until the next hearing date.

Appearances:

For Appellant- Mr. Krishnendu Datta, Snr Advocate, Mr Hemant Sethi, Advocate with Gaurav H Sethi and Rahul Gupta Advocates. 

For Respondent No.1-Mr. Abhishek Swaroop, Mr. Kiran Shah and Noman Singh Bagga Advocates.



Share this article:



Leave a feedback about this
TRENDING NEWS

bombay-high-court-denies-interim-relief-in-plea-against-1-year-pan-masala-ban
Trending Judiciary
Bombay High Court denies interim relief in plea against 1 year Pan Masala Ban [Read Order]

Bombay High Court denies interim relief to petitioners challenging the 1-year ban on pan masala, citing arguable questions and ongoing similar cases.

12 July, 2024 10:00 AM
sc-collegium-recommends-appointment-of-chief-justices-of-eight-high-courts
Trending Judiciary
SC Collegium recommends appointment of Chief Justices of eight High Courts [Read Order]

SC Collegium recommends appointments of Chief Justices for Delhi, Himachal Pradesh, J&K, Kerala, Madhya Pradesh, Madras, and Meghalaya High Courts.

12 July, 2024 10:55 AM

TOP STORIES

sc-to-hear-various-pleas-challenging-neet-ug-exam-today
Trending Judiciary
SC to Hear Various Pleas Challenging NEET-UG Exam Today

The Supreme Court will hear pleas challenging the NEET-UG exam today, with students raising concerns over malpractice and irregularities in the 2024 test.

08 July, 2024 10:23 AM
courts-cant-ask-accused-to-share-google-pin-location-as-bail-condition-sc
Trending Judiciary
Courts can't ask accused to share Google PIN location as bail condition: SC

Courts can't mandate sharing Google PIN location as bail condition, protecting privacy rights: Supreme Court. Decision overturns Delhi HC's bail condition requiring Google PIN sharing.

08 July, 2024 12:13 PM
madhya-pradesh-hc-quashes-fir-in-rape-case-rules-consensual-relationship-cannot-be-termed-rape
Trending Judiciary
Madhya Pradesh HC quashes FIR in rape case, rules consensual relationship cannot be termed rape [Read Order]

Madhya Pradesh HC quashes FIR in rape case, ruling consensual relationship between adults, even if promise of marriage is broken, cannot be termed rape.

08 July, 2024 12:47 PM
uttarakhand-hc-seeks-state’s-response-on-arresting-minors-found-dating
Trending Judiciary
Uttarakhand HC seeks State’s response on arresting minors found dating [Read Order]

Uttarakhand High Court seeks the state's response on arresting minors found dating, suggesting alternatives like counseling and statement recording.

08 July, 2024 01:34 PM

ADVERTISEMENT


Join Group

Signup for Our Newsletter

Get Exclusive access to members only content by email