Aviva Life Becomes First Financial Company To Be Admitted Into IBC Proceedings After NCLT Upholds Landlord’s Claim

Court documents have revealed that Aviva Life Insurance has become the first financial company to be admitted into Insolvency and Bankruptcy Code (IBC) proceedings after the National Company Law Tribunal (NCLT) upheld a landlord’s claim accusing it of failing to meet its payment obligations.

Earlier, the insurer had claimed in court filings that IBC laws do not allow for insolvency of financial services providers.

As per court filings, the dispute between Aviva and Apeejay group began two years ago after the former stopped making license fees for Apeejay House, a property which belongs to the Apeejay Trust.

Though the NCLT noted that IBC exempts financial services providers from insolvency proceedings, it rejected Aviva’s attempt to seek an exemption on these grounds.

“The definition of financial service under Section 3 (16) of the IBC clearly includes the transactions effecting contract of insurance. However, the operational creditor (Apeejay Trust) does not have any claim in respect of contract of insurance. The claim is with respect to licence fees and the service tax amounts”, the tribunal said in its order.

“The corporate debtor cannot use the provisions of Section 3 of the Insolvency and Bankruptcy Code, 2016 as a blanket cover to claim exclusion from IBC proceedings on the ground that it is a financial service provider,” the order said.

The tribunal upheld Apeejay Trust’s claim for recovery of license fees of Rs 27 lakh from Aviva Life Insurance and ordered the appointment of Jatin Madan as insolvency resolution professional (IRP) to be charged with the affairs of the insurer till the committee of creditors is convened.