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2024 Supreme(Online)(NCLT) 1256
NATIONAL COMPANY LAW TRIBUNAL
Dr. Venkata Ramakrishna Badarinath, MEMBER (JUDICIAL), Sh. Charan Singh, MEMBER (TECHNICAL)
Asmitha Microfin Ltd – Appellant
Versus
Reserve Bank of India – Respondent
Company Petition IB/23/2022
For the Petitioner: Mr. Y. Suryanarayana
For the Respondents: Shri Nalin Kumar, Dr. S.V. Ramakrishna, Shri G. Yash Vardhan, Shri Kailash Nath, Shri Peri Rama Krishna, Shri Kalyan Chakravarthy, Shri Krishna Grandhi
The court established that the petitioner remains a financial service provider under IBC, rendering its CIRP application non-maintainable due to the exclusion clause.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 10 - Corporate Insolvency Resolution Process - Petition filed by Corporate Applicant for initiating CIRP dismissed as applicant is determined to be a financial service provider post registration cancellation by RBI, rendering the petition non-maintainable. (Paras 15-24)
(B) Financial Service Provider - Concept elucidated - Definition under Section 3(17) of IBC, exclusion under Section 3(7) discussed - Court affirms charge of financial service provision based on operational timelines and actions. (Paras 15, 22)
Facts of the case:
Corporate Applicant, Asmitha Microfin Ltd, filed a petition for CIRP following inability to repay loans totaling approximately Rs. 14369 million, instigated by legislative changes affecting operations.
Findings of Court:
The regulations imposed post-cancellation of registration by RBI necessitated the applicant to lower total assets but actual compliance via asset recovery was absent, disqualifying it from CIRP.
Issues: Whether the applicant qualifies as a financial service provider per IBC stipulations; Maintainability of the CIRP application.
Ratio Decidendi: Court found substantial evidence confirming that the Corporate Applicant retained financial service provider status, firstly on account of operational definitions and secondly due to non-compliance with mandated asset disposal.
Result: Petition dismissed without costs.
| Table of Content |
|---|
| 1. application for initiating cirp filed under section 10 of ibc. (Para 1 , 2) |
| 2. arguments against the maintainability of the cirp application based on classification of petitioner. (Para 4 , 5) |
| 3. determination of petitioner’s status as a financial service provider under ibc. (Para 15 , 16 , 22) |
ORDER
1. This Petition is filed by M/s Asmitha Microfin Ltd/Corporate Applicant under Section 10 of Insolvency and Bankruptcy Code (hereinafter to be referred as “Code”), read with Rule 7 of Insolvency and Bankruptcy seeking initiation of Corporate Insolvency Resolution Process (CIRP), granting moratorium and appointment of Interim Resolution Professional as prescribed under the Code and Rules thereon, contending that the Petitioner defaulted in the payment of alleged debt of Rs.- 143,69,07,866/ .
2. The averments by the Corporate Applicant i.e. M/s Asmitha Microfin Ltd - in brief are:
2.1 The company was incorporated in the year 2001 with the main object of carrying micro finance business and registered with the Reserve Bank of India as an NBFC vide certificate of Registration dated 07.06.2022.
2.2 The Company was smoothly carrying out its business in 14 States pan India until 2010. However, the enactment of the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending Act), 2010, had impacted the recovery of advances portfolio of the Company in the States of Telangana and Andhra Pradesh (erstwhile State of Andhra Pradesh), which had adversely affected the business operations of the Company.
2.3 In order to meet the repayment obligations, the outstanding loans of the Applicant from the commercial banks and financial institutions were restructured in September 2011 under Corporate Debt Restructuring (CDR) by entering into Master Restructuring Agreement dated 24.09.2011 by and between the Petitioner, Small Industries Development Bank of India (SIDBI) and 26 other lenders of the Corporate Debtor. Under CDR, around 30% of the Company’s debt amounting to Rs. 350 crores were converted into Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) redeemable over a period of seven years at a coupon rate of 12% p.a. The balance debt amounting to Rs. 802.20 crores were structured to be repaid over a period of seven years including one year moratorium with an interest @ 12% p.a. payable from April 30th 2012. The Deed of hypothecation dated 24.09.2011 and - other ancillary documents have been filed as Annexure 5 (page 109 to 559) to the Petition.
2.4 Despite making efforts, the Applicant failed in servicing the debt of its creditors as there were no recoveries from the advance’s portfolio of the Applicant.
- 2.5 Besides on account of non compliance of the norms of the RBI by the Applicant, the RBI had cancelled the NBFC Registration of the Applicant vide its order dated 22.02.2019, the copy of which is annexed as - - Annexure 1 (page 16 19 of IA No. 697 of 2023). Thus, the Corporate Applicant ceased to carry on its business w.e.f. 22.02.2019.
- 2.6 The Applicant has received default notices from the following banks:
(i) Andhra Bank
(ii) HDFC Bank Limited
(iii) Central Bank of India
(iv) Syndicate Bank
(v) Punjab National Bank
(vi) State Bank of India
2.7 Subsequently, the affairs of the Applicant Company were deliberated upon in the Joint Lenders Meeting held on 19.04.2021, and after exploring various options, a decision to file an application under Section 10 of IBC before this Tribunal was taken. Accordingly, the Applicant addressed letter dated 28.09.2021 to RBI communicating the decision taken at the said Joint Lenders Meeting dated 19.04.2021.
2.8 Thus submitting, the present application is filed by the Corporate Applicant under Section 10 of IBC, seeking Corporate Insolvency Resolution Process against it.
3.1 The record of this Tribunal reveals that vide order dated 19.08.2022 passed in IA No.554 of 2022 filed by the Corporate Applicant, this Tribunal has allowed impleadment of RBI as proper and necessary part
