NCLAT Upholds NCLT Decision in Equitas vs. Jumbo Finvest Case

NCLAT has rejected Equitas Small Finance Bank's appeal to initiate insolvency against Jumbo Finvest, upholding NCLT's decision. Equitas claimed Jumbo Finvest doesn't operate as a financial service provider following RBI's restrictions, but NCLAT maintained its status as one until its registration was canceled.

The National Company Law Appellate Tribunal (NCLAT) recently dismissed Equitas Small Finance Bank's appeal to initiate insolvency proceedings against Jumbo Finvest, confirming a prior decision by the National Company Law Tribunal (NCLT).

Initially, the Jaipur bench of NCLT rejected an insolvency plea filed against Jumbo Finvest, citing its status as a Financial Service Provider under the Insolvency & Bankruptcy Code. The tribunal reasoned that being a financial service entity, Jumbo Finvest cannot be classified as a corporate debtor under Section 7 of the Code.

Equitas argued before the NCLAT that given the restrictions imposed by the Reserve Bank of India (RBI) on Jumbo Finvest's business operations, the firm does not effectively function as a financial service provider. Despite this, NCLAT upheld that Jumbo Finvest retains its status until the registration's cancellation on October 14. The ruling emphasized that any actions under CIRP must comply with established legal provisions.

(With inputs from agencies.)