Stress Asset Resolution of Financial Service Providers

The session opened with a structural point that framed everything else: an NBFC is a company for every commercial purpose, but Section 3(7) of the IBC deliberately carves financial service providers out of the definition of "corporate person." Mr. Azeem Tariq Khan walked through how FSPs re-enter the Code only through the Section 227 window and the FSP Rules 2019, and only to the extent the Central Government notifies them — presently NBFCs and HFCs at or above ₹500 crore in asset size, with the RBI as the appropriate regulator. The practical consequences were mapped in detail: only the regulator can file, an Administrator displaces the resolution professional, the licence continues through the process, third-party assets sit outside the estate, and the regulator's no-objection gates any change of control at the plan approval stage. DHFL and SREI were used as the reference points for how CoCs, avoidance applications and third-party asset claims have actually played out. Mr. Vipul Aggarwal then took the discussion into the harder terrain of personal guarantees. Because Section 5(22) defines a personal guarantor as a guarantor to a corporate debtor, and an FSP is not a corporate debtor, Section 95 applications against promoters and directors who backed NBFC borrowings are now being contested at the threshold. The panel read Lalit Kumar Jain, Mahendra Kumar Jajodia and Shapoorji Pallonji v. Rekha Singh alongside the February 2026 NCLAT ruling in the Religare Finvest matter, which fixed FSP status to the date of the underlying transaction rather than the date of filing — a shift with direct consequences for pending and contemplated filings before the NCLT benches in Delhi and Mumbai. Ms. Tanya Anand closed the conversation on drafting and filing discipline. The panel was specific: invocation of the guarantee as a condition precedent is where Section 95 applications are increasingly being dismissed, and lenders were urged to revisit guarantee deeds, invocation notices and credit approval memos accordingly. For exposures to below-threshold NBFCs, the recovery route remains DRT, SARFAESI or the civil court — a point CFOs and treasury heads in the audience flagged repeatedly during the Q&A.