Kapston Facilities Management Ltd Vs Karvy Stock Broking Limited (NCLT Hyderabad)
Petition u/s 9 of IBC against Stock Brokers was not maintainable as same were Financial Service Provider
Conclusion: Insolvency petition filed against Corporate Debtor by Kapston Facilities Management Ltd. (Operational Creditor) under section 9 of IBC was dismissed as coprporate debtor was a financial service provider against whom no Corporate Insolvency Resolution Process ( CIRP ) could be initiated.
Held: Assessee-company (Corporate Debtor) was providing stock broking and research advisory services in India. The corporate debtor entered into an agreement with the operational creditor Kapston Facilities Management Ltd on April 20, 2011 wherein the operational creditor undertook to provide Security and Housekeeping services at offices of the corporate debtor and its group of companies. The operational creditor served a demand notice on June 28, 2021 asking for the payment due to the tune of Rs. 1,07,63,333 from the corporate debtor. The first default in making the payment occurred on October 1, 2019 for the invoices raised on July 31, 2019 and August 31, 2019. Thereafter this default continued. Operational debt fell due on the expiry of 30 days from the issuance of each invoice. Assessee-company submitted that the petition was not maintainable as it was a financial service provider and not a corporate person as defined under section 3(7) of the IBC. Assessee was a registered stock broker with the SEBI and stockbrokers fall within the ambit of financial services provider under section 3(17) of the IBC. Since assessee-company did not fall within the definition of the corporate debtor, CIRP could not be initiated against it by the operational creditor under section 9 of the IBC. It was next submitted that the total amount claimed by the operational creditor did not cross the threshold limit as provided under section 4 of the IBC because in the petition interest had also been claimed for which assessee-company never agreed to pay. If the interest claimed was excluded, the principal amount f belellow the threshold limit rendering the petition not maintainable. It was held that financial service providers did not fall within the definition of corporate person as defined under section 3 (7) of the IBC therefore the CIRP could not be initiated against them under section 9 of the IBC by the operational creditor. Since the assessee was registered with National Stock Exchange, Bombay Stock Exchange and SEBI, its services were a financial product under section 3(15) of the IBC therefore it was deemed to be a financial services provider under section 3(16) (e) of the IBC. Tribunal held that assessee-company was merely prohibited from stockbroking activities. Its certificate of registration issued by the SEBI was not either cancelled or suspended when the petition was filed therefore the plea of the operational creditor was meritless. Further observed that the date when the claimed amount became due had not been provided by the operational creditor. Additionally, as per the agreement the payment had to be made within 60 days from the issuance of an invoice. It could not be said that the claim was continuous rather each bill had a separate cause of action. The threshold limit for filing petition under Section 9 IBC was Rs.1 Crore as per Section 4 of IBC. If the interest component was excluded from the total claim, the claimed amount would be below statutory limit. Tribunal concluded that the amount of 25 invoices, amounting to Rs. 37,99,639/- fell within the excluded period under Section 10A of the IBC besides interest part can’t be included in the total claim. Accordingly, the remaining amount of default was below the threshold limit of Rs.1 Crore. NCLT rejected the petition also on the ground that the amount claimed did not meet the threshold limit and a substantial amount fell within section 10A period.
