Supreme Court1. Insolvency and Bankruptcy Code Is Not For Money Recovery Proceedings: Supreme Court ReiteratesCase Title: Invest Asset Securitisation and Reconstruction Pvt. Ltd. v Girnar Fibres Ltd.Case No.: 2022 LiveLaw (SC) 423 The Supreme Court bench comprising of Justice Dinesh Maheshwari and Justice Aniruddha Bose reiterated that the provisions of Insolvency and...
Supreme Court
1. Insolvency and Bankruptcy Code Is Not For Money Recovery Proceedings: Supreme Court Reiterates
Case Title: Invest Asset Securitisation and Reconstruction Pvt. Ltd. v Girnar Fibres Ltd.
Case No.: 2022 LiveLaw (SC) 423
The Supreme Court bench comprising of Justice Dinesh Maheshwari and Justice Aniruddha Bose reiterated that the provisions of Insolvency and Bankruptcy Code, 2016 ("IBC") are essentially intended to bring the Corporate Debtor to its feet and are not of money recovery proceedings as such. The Appellant had filed an appeal before the Supreme Court under Section 62 of the IBC against the NCLAT order dated 18.11.2021, wherein Appellant's appeal was dismissed on the ground that application filed under Section 7 of IBC is barred by limitation.
The Supreme noted that the right to sue accrued on the date of declaration of Non Performing Asset (NPA) but there is no evidence of any acknowledgement of liability in terms of Section 18 of the limitation Act, 1963. The order was passed on 25.04.2022.
2. Moratorium Applies Only To Corporate Debtor; Natural Persons Like Its Director Would Continue To Be Liable U/s 138 NI Act: Supreme Court
Case Title: Narinder Garg v Kotak Mahindra Bank
Case No.: W.P. (C) 93 OF 2022
The Supreme Court Bench comprising of Justices UU Lalit, S. Ravindra Bhat and P.S. Narasimha, has reiterated that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the Corporate Debtor and the natural persons mentioned in Section 141 of the Negotiable Instruments Act would continue to be statutorily liable under the provisions of the said Act. The order was passed on 28.03.2022.
3. Supreme Court Keeps CIRP In Abeyance And Permitted Promoter To Complete The Housing Project
Case title: Anand Murti v Soni Infratech Private Limited.
Case No.: Civil Appeal Nos.7534 of 2021
The Supreme Court bench comprising of Justices L Nageshwara Rao and B R Gavai has directed to keep the Corporate Insolvency Resolution Process (CIRP) of Soni Infratech Pvt. Ltd. ("Corporate Debtor") in abeyance and permitted the erstwhile promoter of Corporate Debtor to complete the construction of real estate housing project within the stipulated time period.
The Promoter of Corporate Debtor had filed an additional affidavit before the Supreme Court, undertaking to complete the project in stipulated time and to return the money along with 6% p.a. interest to seven homebuyers who are objecting to settlement plan. The Bench noted that there are only 7 out of 452 homebuyers who are objecting to settlement plan and therefore, it will be interest of homebuyers to permit the promoter to complete the construction of the project. The Bench further observed that there is every possibility that if the CIRP is permitted, homebuyers will have to play an escalation cost whereas the Promoter is undertaking to honor the existing BBA without any escalation. Therefore, the appeal was disposed off by permitting the promoter to complete the project within stipulated time in terms of the additional affidavit and the same shall be treated as the undertaking to the Supreme Court. The order was passed on 27.04.2022.
NATIONAL COMPANY LAW APPELLATE TRIBUNAL (NCLAT)
1. Time Period Under Regulation 35A Is Directory And Not Mandatory: NCLAT, Delhi
Case Title: Aditya Kumar Tibrewal v Om Prakash Pandey
Case No.: Company Appeal (AT) Insolvency No. 583 of 2021
The National Company Law Appellate Tribunal (NCLAT) principal bench comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that time period prescribed under Regulation 35A of the IBBI (CIRP) Regulations (CIRP Regulations) is directory in nature and not mandatory. Any action taken by the Resolution Professional beyond the time prescribed under Regulation 35A of the CIRP Regulations cannot be held to be non-est or void only on the ground that it is beyond the period prescribed under Regulation 35A of the CIRP Regulations.
2. NCLAT Delhi Uphelds That Corporate Debtor Cannot Be Sent Into Liquidation Just Because Liquidation Value Is More Than The Value Of The Resolution Plan
Case title: CFM Asset Reconstruction Pvt. Ltd. v SS Natural Resources Pvt. Ltd. & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 396 of 2022.
The National Company Law Appellate Tribnal (NCLAT), Principal Bench, comprising of comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has upheld the order dated 06.04.2022 passed by NCLT Kolkata Bench whereby it was held that Corporate Debtor cannot be sent into liquidation just because liquidation value is more than the value of the Resolution Plan. It was reiterated that primary focus of the Insolvency and Bankruptcy Code, 2016 is to ensure revival and continuance of the Corporate Debtor. The order was passed on 19.04.2022.
3. Look Back Period Under Section 46 Not Applicable To Section 66 Under Insolvency And Bankruptcy Code, 2016: NCLAT Delhi
Case Title: Aditya Kumar Tibrewal v Om Prakash Pandey
Case No.: Company Appeal (AT) Insolvency No. 583/2021
National Company Law Appellate Tribunal (NCLAT) Principal Bench comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that the look back period prescribed under Section 46 of Insolvency & Bankruptcy Code, 2016 ("IBC") does not apply to transactions under Section 49 and 66 of the IBC. The Bench further observed that applications questioning the transactions covered by Section 49 and 66 of the IBC are not to be rejected on the ground that Application has been filed beyond the period prescribed under Section 46 of the IBC. The order was passed on 06.04.2022.
4. Territorial Jurisdiction Of NCLT Cannot Be Taken Away By Agreement Between The Parties: NCLAT Delhi
Case Title: Anil Kumar Malhotra v M/s Mahindra & Mahindra Financial Services Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 415 of 2022
The National Company Law Appellate Tribunal (NCLAT) Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that the territorial jurisdiction of NCLT to decide case under Insolvency and Bankruptcy Code, 2016 ("IBC") cannot be taken away by the agreement between the parties. Relying on the provision of Section 60(1) of the IBC, the Bench held that the adjudicating authority in relations to insolvency resolution shall be the NCLT having the territorial jurisdiction over the place where the registered office of corporate person is located.
5. Interest Free Security Deposit Is An Operational Debt: NCLAT Delhi
Case title: Vibrus Homes Pvt. Ltd. v Ashimara Housing Pvt. Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 80 of 2022
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that an interest free security deposit towards advance license fee will qualifies as an operational debt under the Insolvency & Bankruptcy Code, 2016. The Bench observed that "In view of the payment made was initially towards the advance license fee it was an operational debt, the Adjudicating Authority has rightly admitted the application under Section 9."
6. Resolution Professional Is Not Entitled To Fees During Stay On Insolvency Proceedings: NCLAT
Case Title: IndusInd Bank Ltd. v Mr. Rajendra K Bhuta
Case No.: Company Appeal (AT) (Insolvency) No. 177 of 2022
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member), has held that the Resolution Professional is not entitled for any professional fees during the period of stay on the Corporate Insolvency Resolution Process ("CIRP") of the Corporate Debtor. The order was passed on 26.04.2022
7. Even If Credit Facility Agreement Is Unstamped, Section 7 Petition Is Maintainable, On Proving Financial Debt: NCLAT Principal Bench
Case Title: Mr. Aashish Kadam & Anr. v Nagpur Nagarik Sahakari Bank Ltd. & Anr.
Case No.: Comp. App. (AT) (Ins.) No. 355 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that if a credit facility agreement is unstamped, then petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") can be admitted based on other material on the record which prove the existence of a financial debt. The Bench observed that the present case is a case of mortgage by deposit of title deed. Therefore, even if the Facility Agreement was not stamped, there were other materials on the record to prove the existence of a financial debt owed by the Appellant. The Bench dismissed the appeal and upheld the order of the Adjudicating Authority wherein CIRP was initiated. The order was passed on 21.04.2022.
Case Title: Ramesh Chander Agarwala v State Bank of India & Anr.
Case No: Company Appeal (AT) (Insolvency) No. 230 of 2022
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that the Resolution Professional can submit an additional report under Section 99 of the Insolvency & Bankruptcy Code, 2016 ("IBC").
Personal Guarantors of the Corporate Debtor had filed an appeal under Section 61 of the IBC before NCLAT against the order of the NCLT wherein a Resolution Professional was appointed without furnishing any limited notice to the Personal Guarantors in terms of Para 44 of the judgment of NCLAT in the case of Ravi Ajit Kulkarni Vs. State Bank of India.
NCLAT observed that though it limited notice was not issued, but subsequently the Personal Guarantors had appeared before the Adjudicating Authority. Therefore, in the interest of justice, NCLAT permitted the Personal Guarantors to submit a representation to the Resolution Professional and subsequently, the Resolution Professional can submit an additional report in continuation of his first report and the Adjudicating Authority will consider both the report before taking any decision under Section 100 of the Code. The order was passed on 22.04.2022.
9. Corporate Insolvency Resolution Process Can Be Resume On Failure Of Settlement Agreement: NCLAT Chennai
Case title: ICICI Bank v OPTO Circuits India Limited
Case No.: Company Appeal (AT) (CH) (Insolvency) No. 146 of 2021
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising of Justice M Venugopal and Mr. Kanthi Narahari, has held that Corporate Insolvency Resolution Process (CIRP) can be revived/resumed in case of failure of settlement agreement between the parties.
ICICI Bank had filed an appeal before NCLAT under Section 61 of the Insolvency & Bankruptcy Code, 2016 ("IBC") against the order dated 17.08.2020 of NCLT Bengaluru, wherein it had allowed the withdrawal of IBC petition but instead of giving liberty to revive the CIRP, it granted liberty to file a fresh petition under IBC against OPTO Circuits (India) limited. NCLAT modified the Impugned Order and granted liberty to ICICI Bank to seek revival/restoration of CIRP in case of non-compliance of the settlement agreement. The order was passed on 28.04.2022.
NATIONAL COMPANY LAW TRIBUNAL
1. CIRP Cannot Be Initiated OverUndecided Claims Or Unstamped And Unregistered Agreements: NCLT Cuttack
Case Title: Smarkworks Coworking Spaces Pvt. Ltd. v Turbot HQ India Pvt. Ltd.
Case No.: CP (IB) No. 181/CB (2020).
The National Company Law Tribunal ("NCLT"), Cuttack Bench, comprising of Shri P. Mohan Raj (Judicial Member) Shri Satya Ranjan Prasad (Technical Member), while adjudicating a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has held that Corporate Insolvency Resolution Process ("CIRP") cannot be initiated based on undecided claims and/or unstamped and unregistered agreements, which otherwise require compulsory registration in law.
The Adjudicating Authority observed that liquidated damages will crystalize only after being adjudicated by a competent Civil Court and undecided claim cannot be used to bring an application for insolvency. It was further observed that as per Section 5(21) of the IBC, operational debt means debt due towards the supply of goods or service rendered, however, the Petitioner has claimed amount arising out of breach of contract, which does not come under the definition of 'Operational Debt' in IBC. The order was passed on 08.04.2022.
Case title: M/s Jammu and Kashmir Bank Ltd. v GVK Industries Ltd.
Case No.: CP (IB) No. 320/7/HDB/2020.
The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Shri Bhaskara Pantula Mohan (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), while adjudicating a petition under Section 7 of the Insolvency and Bankruptcy Act, 2016 ("IBC"), has initiated Corporate Insolvency Resolution Process ("CIRP") against GVK Industries Ltd. ("Corporate Debtor") vide an order dated 21.04.2022. Mr. Mukesh Verma has been appointed as the Interim Resolution Professional.
3. Yes Bank Initiates Insolvency Proceeding Against Zee Learn Ltd, An Essel Group Company: NCLT Mumbai
Case Title: Yes Bank Ltd. v Zee Learn Ltd.
Case No.: C.P. (IB) 301/MB/2022.
The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri K.K. Vohra (Technical Member), has issued notice to Zee Learn Limited in a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The order was passed on 12.04.2022.
Zee Learn Ltd. is an Essel group company which operates in the education segment. The company owns a chain of K-12 schools such as Mount Litera Zee School, pre-school network called 'Kidzee' and Mount Litera World Preschool. Yes Bank Limited had sanctioned financial facility to Zee Learn Ltd. under which the current default as per the bank stands at Rs. 468 Crores.
4. Chairman Of Monitoring Committee Has Locus Standi To File Application For Fresh CIRP: NCLT Kolkata
Case Title: Beni Gopal Singhi v EMC Limited
Case No.: CP (IB) No.1237/KB/2018.
The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while adjudicating an interim application, has held that the Chairman of Monitoring Committee has the locus to file an application before the Adjudicating Authority to give a fresh lease of life to Corporate Insolvency Resolution Process ("CIRP").
The Adjudicating Authority held that under Section 33(3) of the IBC, in the event of contravention of the Resolution Plan, 'any person' other than the Corporate Debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order. If the Successful Resolution Applicant fails to implement the Plan within a stipulated time, it is the Monitoring Committee's duty to ensure that the interests of the stakeholders are safeguarded. Therefore, the Chairman of Monitoring Committee has locus standi to maintain the application, with or without a resolution to this effect being passed by the Monitoring Committee.
Case title: Beni Gopal Singhi v EMC Limited
Case No.: CP (IB) No.1237/KB/2018.
The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while adjudicating an interim application filed in Beni Gopal Singhi v EMC Ltd., has held that the affidavit filed by the Successful Resolution Applicant (incorporated in Cayman Islands) was impudent and seems to assume that the judicial authorities in India cannot understand anything beyond the limited territorial jurisdiction of India. Such affidavits are contempt of the authority of court and the Insolvency and Bankruptcy Code, 2016 ("IBC"). The Bench also proceeded against the tax haven based Successful Resolution Applicant ("SRA") under Section 74(3) of the Insolvency and Bankruptcy Code, 2016 ("IBC") for contravention of the approved Resolution Plan.
"The SRA has not exhibited any intention by taking some concrete steps that can instill some degree of confidence in the earnestness of the SRA. The SRA has taken the entire process for a ride, and nothing can really excuse this audacity. The attitude of the SRA really will tick every parameter that can be applied to satisfy the "knowing and wilful contravention" test laid down in section 74(3) of the Code on a reasonable construction."
"A strong message needs to go to the SRA that the majesty of law needs to be respected at all costs, and that Indian judicial processes cannot be taken for a ride like this."
The Adjudicating Authority disposed off the interim application by forfeiting the amount of Rs. 30 Crores paid by the SRA through invocation of Performance Bank Guarantee; proceeded against SRA and its concerned officers under Section 74(3) of IBC; and initiated fresh CIRP against the Corporate Debtor.
6. Insolvency Proceeding Initiated Against Andhra Cements Ltd., A Jaypee Group Company: NCLT, Amravati
Case title: M/s Pridhvi Asset Reconstruction and Securitisation Company Ltd. v M/s Andhra Cement Ltd.
Case No.: CP (IB) No. 37/7/AMR/2022.
The National Company Law Tribunal ("NCLT"), Amravati Bench, comprising of Justice Telaprolu Rajani (Judicial Member), while adjudicating a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has initiated Corporate Insolvency Resolution Process ("CIRP") against Andhra Cement Ltd. The NCLT observed that there is an admission of debt and default and the reasons accorded by the Corporate Debtor cannot be considered within the IBC framework. Mr. Nirav Kirit Pujara has been appointed as the Interim Resolution Professional. The order was passed on 26.04.2022.
HIGH COURT
Case Title: NCLT Bar Association Through Its Secretary General v Union Of India And Ors.
Case No.: W.P.(C) 6037/2018
A Delhi High Court division bench comprising of Acting Chief Justice Vipin Sanghi and Justice Navin Chawla, has recently directed the maintenance of status quo with regards to the occupation, renovation or construction of the space vacated by the Ministry of New and Renewable Energy in the building wherein the National Company Law Tribunal (NCLT) is located, till 04.05.2022. The order was passed on 22.04.2022.
The Bench was of the view that having different Benches of the NCLT at different locations, is bound to cause administrative difficulties in the functioning of the NCLT, as well as difficulties for the Advocates and litigants. Taking note of the fact that since the first floor of the building became available with the vacation of the said floor by the Ministry of New and Renewable Energy, the Court was of the view that the area should have been allotted to the NCLT in preference over any other Ministry. It added that the area earlier allotted to the NCLT admeasuring 11,860 square feet could, instead, be allotted to the other Ministries.
Case Title: Jasani Realty Pvt. Ltd. v. Vijay Corporation
Case No.: 2022 LiveLaw (Bom) 162; Commercial Arbitration Application (L) No. 1242 of 2022
The Bombay High Court Single Bench comprising of Justice G.S. Kulkarni, has held that merely because an application under Section 7 of Insolvency and Bankruptcy Code, 2016 is filed before the Adjudicating Authority is pending consideration, it does not oust the jurisdiction of the High Court to entertain an application filed under Section 11 of the Arbitration & Conciliation Act, 1996 ("Arbitration Act").
It was further held that an application filed under Section 7 of the IBC creates an erga omnes effect or involves third party rights only after it has been admitted by the Adjudicating Authority, however, before its admission, there is no embargo on the power of the court to decide on an application filed under Section 11 of the Arbitration Act for the appointment of an Arbitrator. Also, there is no requirement for the defendant to necessarily file an application under Section 8 of the Arbitration Act before taking recourse to the remedy available under Section 11 of the Arbitration Act. The order was passed on 25.04.2022.