The NCLT, New Delhi Bench noted that the definition of financial products covers securities and different types of contracts which are not defined under the Insolvency and Bankruptcy Code, 2016 ( hereinafter referred to as “IBC”). Therefore, the Securities Contracts (Regulation) Act, 1956 was looked at.
It was opined that the Shares, Scrips, Stocks, Bonds, Debentures, Debenture Stocks etc., are included under the term “Securities” and hence, can be treated as financial products as per Section 3(15) of the IBC.
Noting that the Corporate Applicant deals in securities, it was expounded that the Corporate Applicant would be a financial service provider and was registered with SEBI.
Therefore, Corporate Applicant was outside the purview of the Corporate Person as defined under Section 3(17) of the IBC and hence, could not file a Section 10 Application.
Brief Facts:
The present application is filed under Section 10 of the IBC by the Corporate Applicant for initiating the Corporate Insolvency Resolution Process (“CIRP”).
Brief Background:
The Corporate Applicant is a stock broker company also registered with SEBI. Due to financial crunch, it was not able to deposit the 20% margin of the total price of the stocks purchased by the Corporate Applicant on behalf of its clients. Therefore, the amount was forfeited by the SEBI.
Year after year, the Corporate Applicant is facing losses and hence, it has become impossible to continue the operations.
Contentions of the Respondents:
It was contended that the Applicant being a financial service provider does not come within the ambit of the ‘Corporate Person’.
Observations of the Tribunal:
The issue was whether a stock broker company can be said to be a financial service provider.
It was noted that the definition of financial products covers securities and different types of contracts which are not defined under the IBC. Therefore, the Securities Contracts (Regulation) Act, 1956 has to be looked at.
It was opined that the Shares, Scrips, Stocks, Bonds, Debentures, Debenture Stocks etc., are included under the term “Securities” and hence, can be treated as financial products as per Section 3(15) of the IBC.
Noting that the Corporate Applicant deals in securities, it was expounded that the Corporate Applicant would be a financial service provider and was registered with SEBI.
Therefore, Corporate Applicant was outside the purview of the Corporate Person as defined under Section 3(17) of the IBC.
The decision of the Tribunal:
Based on the aforementioned reasons, the Tribunal dismissed the application.
Case Title: M/s Bezel Stockbrokers Private Limited v. Security Exchange Board of India & Ors.
Case No.: Company Petition No. (IB)-251(ND)/2021
Coram: Sh. Ashok Kumar Bhardwaj, (Judicial Member), Sh. L. N. Gupta, (Technical Member)
Advocate for Applicant: Adv. Shikhar Tandon
Advocates for Respondent: Advs. Abhishek Baid, Praneet Das
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