NCLT initiates insolvency proceedings against Aviva Life Insurance

NCLT initiates insolvency proceedings against Aviva Life Insurance

Aditi Singh

The National Company Law Tribunal, Bench V, New Delhi has initiated corporate insolvency resolution process against Aviva Life Insurance Co India Ltd under the Insolvency and Bankruptcy Code, 2016 (IBC).

Apart from imposing a moratorium in terms of Section 14 of the IBC, the NCLT has appointed Jatin Madan as the Interim Resolution Professional of Aviva Life Insurance.

The order was passed by a two-member Bench of Member (Judicial) Justice (Retd.) Rajesh Dayal Khare and Member (Technical) Sumita Purkayastha in a Section 9 IBC plea preferred by Apeejay Trust.

The Corporate Debtor, Aviva Life Insurance and the Operational Creditor, Apeejay Trust had entered into an agreement of Leave and License in June 2008 for office premises and other services for the former. However, in spite of several requests, the Corporate Debtor defaulted in making payments towards service tax and license fee to the tune of Rs 27,67,203.

The last payment in this regard was made in October 2017. Subsequently, the Operational Creditor issued a demand notice under Section 8 IBC in April 2019.

In response to the notice, the Corporate Debtor denied any liability and stated that no dues are payable.

The operational Creditor thus moved the NCLT under Section 9 IBC.

The Corporate Debtor argued that the Section 9 petition was not maintainable as it was an insurance company that was a ‘Financial Service Provider’ and was thus not covered under the ambit of IBC.

The Operational Creditor argued that there was no bar on the initiation of insolvency proceedings against the Corporate Debtor. It was submitted that a bar was only operative for institutions mentioned under ‘financial services’ as defined under Section 3(16) IBC.

It was further submitted that in the present case, the Corporate Debtor had not provided any insurance cover or financial assistance of any kind and the defaulted dues were with respect to lease and rentals.

After hearing the parties, the NCLT observed that under Section 3(16) IBC, financial service included transactions affecting a contract of insurance. However, in the present case, the claim was in respect of the outstanding license fees and service tax amounts, it added.

The NCLT thus concluded,

Hence, the Corporate Debtor cannot use the provisions of Section 3 of the Insolvency and Bankruptcy Code, 2016 as a blanket cover to claim an exclusion from IBC proceedings on the ground that it is a financial service provider.”

In view of the above, the NCLT admitted the section 9 petition and initiated a corporate insolvency resolution process against the Corporate Debtor, Aviva Life Insurance.

The Operational Creditor was represented by Advocates Krishnedu Datta, Pervinder, Deepak Agarwal and Rahul.

The Corporate Debtor was represented by Advocate Gurmeet Bindra.

Read the Order:

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