Lawstreet Journal

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

Lawstreet Journal 12 Jun 2021 3:21pm

Image courtesy: Lawstreet Journal Business 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… Continue Reading...

Tagged: Insolvency and Bankruptcy Code   Insolvency and Bankruptcy Board of India  
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