In an order dated November 9, 2019, passed by the National Company Law Tribunal (NCLT), Bankruptcy proceedings have been initiated against the first financial company named Aviva Life Insurance Co. Ltd India.
Insolvency proceeding initiated after the company was not paying the car parking, license fees, service charge or other maintenance charge and service tax to Apeejay Trust (Mumbai based). Aviva took office space at Apeejay Express located in Vashi, Mumbai in the year 2008 in June and owed an amount of Rs. 27,67,203 to Apeejay.
As per the records given to the court, the issue started to arise since the last two years when Aviva stopped making payment of the license fee to Apeejay on whose property Aviva was running their business for decades.
In this case, Apeejay is an Operational Creditor, and it issued a demand notice under section 8 of IBC, demanding the due amount which is of Rs. 27,67,203. In reply to this, Aviva denied any dues or liability which was further contended by Apeejay. It said that Aviva has failed to pay the rent amount for the premise that it has taken for lease. When Aviva did not take any action against this, NCLT admitted the petition of Apeejay and has now initiated an insolvency proceeding against them, i.e., Corporate Insolvency Resolution Process (CIRP).
Aviva said that they are the Insurance company and are regulated by financial sector regulator and hence as per the IBC Law, this petition should be dismissed. They even added that on similar ground in the past, a petition was dismissed against the Banks as there is an absolute bar. Legal Counsel of Apeejay said that this absolute bar provision claim is fallacious as it didn’t cover insurers as defined under Section 3(16) of the code.
Rajesh Narain Gupta who is a Managing Partner in SNG & Partners, a law firm said that financial services provider is kept outside the purview of IBC as per Section 2 read with Section 3 (7) and Section 227. He added, “the broader question here should be whether the provisions of IBC should be used to solve a civil or contractual dispute as in this case. “There should be a strict criterion for such disputes being entertained under IBC.”
However, to the contrary Amit Vyas who is a founding partner of Vertices Partners, a Mumbai-based boutique law firm said that the petition is good in Law as the default is in respect of unpaid lease rentals. Tribunal has also ordered to appoint an Insolvency Resolution Professional (IRP) in the matter.
In the FY 2018-19, Aviva posted a profit of Rs 50 crore, and over the time it incurred a loss of approximately Rs 1,200 which was carried forward in its books. A spokesperson from Aviva said that it works within the ethical practice, maintain the legal standard and have a professional work environment. No comment was made regarding the case as the matter is yet to start.