The National Company Law Appellate Tribunal (“NCLAT”) in the case of HDFC Ltd vs RHC Holding Private ltd on 10/7/2019 held that the a NBFC which is rendering financial services under section 3(16) of the Insolvency and Bankruptcy Code 2016 is outside the scope of the code and therefore petition u/s 7 of Code was rightly rejected by the adjudicating authority.

The NCLAT held that the definition of financial service if read with the definition of financial service provider makes it clear that financial service provider must accept deposits and relied upon Clause (a) to (i) of Section 3(16) which are inclusive which means there are other services which come within the meaning of financial services and do not come within the meaning of Corporate Person/Corporate Debtor. It was observed that since the NBFC is taking deposits from others in violation of conditions imposed by the RBI, such issues cannot be decided by the NCLT under Section 7 or 9 of the Code.

The NCLAT also stated that if the terms and conditions imposed by RBI have been violated, the NBFC may bring the same to the notice of the RBI and not before NCLT. The NCLAT stated that Registration Certificate issued to NBFCs by RBI to carry on business of non-banking financial services and Section 45-I of the RBI Act confirms the finding that NBFCs fall within the definition of Financial Institution.