In insolvency litigation, one of the most frequently raised preliminary objections is that the Corporate Debtor is a “Financial Service Provider” (“FSP”) and hence immune from the rigours of the Insolvency and Bankruptcy Code, 2016 (“IBC”). The exclusion under Section 3(7) for the FSP is frequently used as a jurisdictional shield to delay or defeat admission of insolvency petitions.
The difficulty arises where an entity once held NBFC registration but had lost that status before initiation of insolvency proceedings against it. The question then is whether such past status confers permanent immunity or whether the exclusion depends upon the corporate debtor’s status on the date of filing of the application under Section 7….