NCLT dismisses HDFC’s insolvency plea against RHC Holding

The National Company Law Tribunal has today dismissed HDFC Ltd’s insolvency plea against Malvinder and Shivinder Singh owned RHC Holding Pvt Ltd for recovery of outstanding dues of over Rs 41 crore.

A two member Bench of the Tribunal led by its President MM Kumar held that RHC Holding, being a “non-banking financial company” was outside the purview of the Insolvency and the Bankruptcy Code.

RHC holding had taken a loan of Rs. 200 crore from HDFC in April 2016. Even after adjusting the proceeds from the sale of its pledged shares, a substantial amount of over Rs 41 crore remained outstanding. HDFC thus moved the Tribunal for the recovery of the said amount.

The Tribunal held that in view of the expressed exclusion of financial service provider from the definition of ‘corporate person’ in the Code, the provisions of Part 2 of the Code would not apply to them. Therefore, no creditors can invoke Section 7 or Section 9 of the Code to initiate corporate insolvency resolution process against any financial service provider, it said.

The Court thus decreed,

“The respondent company is primarily in the business of investment of shares, bonds, debentures, debts or loans in group companies, money market instruments including money market mutual funds and giving guarantees on behalf of the group companies and therefore providing financial services. Accordingly, respondent company being a financial service provider cannot be  termed as a corporate debtor under the Code.”

The Tribunal also noted that no notification under Section 227 of the Code has been issued to extend the application of  Section 7 and 9 to RHC Holding.

 With the dismissal of HDFC’s insolvency plea, the Court also went on to dispose of the intervention application moved by Japanese Drugmaker Daiichi Sankyo. In light of the pending execution proceedings against the Singh brothers as well as RHC Holding before the Delhi High Court for recovery of a Rs. 3500 crore arbitral award, Daiichi had objected to RHC Holding being pushed into insolvency.

HDFC was represented by Senior Advocate Amrita Singh with Advocates Amit Singh Chadha, Deepayan Mandal, Srishti Govil and Saurabh Monga.

RHC Holding was represented by Advocates Jayant Mehta, Aditya Dewan and Kahlid Arshad.

Daiichi Sankyo was represented by Senior Advocate Arun Kathpalia with P&A Law Offices Advocates Kanika Singhal, Samridhi Hota.

Read the Judgement: