Supreme CourtStakeholders Consultation Committee's Advice Not Binding On Liquidator: Supreme CourtCase Title: V.S. Palanivel v. P. Sriram CS Liquidator etc, Civil Appeal Nos. 9059-9061 of 2022 Citation: 2024 LiveLaw (SC) 662The Supreme Court clarified that the advice offered by the Stakeholders Consultation Committee (SCC) constituted in liquidation proceedings is not binding on the Liquidator....
Supreme Court
Stakeholders Consultation Committee's Advice Not Binding On Liquidator: Supreme Court
Case Title: V.S. Palanivel v. P. Sriram CS Liquidator etc, Civil Appeal Nos. 9059-9061 of 2022
Citation: 2024 LiveLaw (SC) 662
The Supreme Court clarified that the advice offered by the Stakeholders Consultation Committee (SCC) constituted in liquidation proceedings is not binding on the Liquidator.
Case Title: V.S. Palanivel v. P. Sriram CS Liquidator etc, Civil Appeal Nos. 9059-9061 of 2022
Citation : 2024 LiveLaw (SC) 662
The Supreme Court recently interpreted Rule 12 of Schedule 1 under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 as mandatory in character. Rule 12 relates to how assets of the Company (Corporate debtor) are to be sold by the Liquidator.
Case Title: V.S. Palanivel v. P. Sriram CS Liquidator etc, Civil Appeal Nos. 9059-9061 of 2022
Citation : 2024 LiveLaw (SC) 662
The Supreme Court recently refused to cancel an e-auction despite the Auction Purchaser making a glaring default in making a deposit of the balance sale consideration on grounds that the subject matter of the auction has been utilised and the appellant failed to approach the court on time.
A bench of Justices Hima Kohli and Ahsanuddin Amanullah noted: "Much water has flown under the bridge by now. The subject land has been utilized by the Auction Purchaser to build a 200-bed Mother and Child hospital which is operational. Huge amounts have been pumped into the project by the Auction Purchaser. The hospital is fully functional providing medical facilities to seven surrounding districts."
In contrast, it noted that the appellant who moved the court in appeal to cancel the auction has not been a vigilant litigation. It observed: "His conduct shows that he has dragged his feet at every stage. Records reveal that belated applications have been filed by him for seeking recall of the orders passed by the Adjudicating Authority granting extension of time to the Auction Purchaser. For reasons best known to him, it took 19 months for the appellant to prefer an appeal before the Tribunal against the order passed by the Adjudicating Authority, as provided for in the IBC. Furthermore, the appellant resisted handing over possession of the subject property to the respondents thereby causing more delay."
Case Title: State Bank of India v. India Power Corporation Ltd
Citation: 2024 LiveLaw (SC) 766
The Supreme Court today (September 27) set aside an order of the National Company Law Appellate Tribunal (NCLAT) which refused to condone delay in filling an appeal because of the filling of a 'free copy' of the impugned order.
The bench of CJI DY Chandrachud and Justice Manoj Misra held that there was no difference between a free certified copy of the order and a certified copy which is obtained after paying cost under Rule 50 of the National Company Law Tribunal Rules 2016.
High Courts
Initiating Tax Proceedings After CIRP Approval Violates Section 31 IBC: Bombay High Court
Case: Uttam Value Steels Ltd. Vs Assistant Commissioner of Income Tax, WRIT PETITION (L) NO. 9420 OF 2022
Recently, the Bombay High Court dealt with a writ petition filed by Uttam Value Steels Ltd. and Mr. Subodh Karmarkar, challenging several notices issued by the Income Tax Department under various provisions of the Income Tax Act, 1961. The dispute revolved around tax claims and proceedings initiated by the Income Tax authorities against Uttam Value Steels Ltd., despite the company having successfully undergone a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).
Case Title: Uttam Value Steels Ltd. versus Assistant Commissioner of Income Tax and Ors
Case Number: Writ Petition (L) No. 9420 OF 2022
Since upon the completion of Corporate Insolvency Resolution Process (CIRP), the Assessee has changed hands and commenced under a new ownership and management, the Bombay High Court held that tax proceedings pertain to period prior to the CIRP, and consequent to the approval of the resolution plan, the tax proceedings stand extinguished. The Division Bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “provisions outlined in Section 31(1) of the Insolvency and Bankruptcy Code (IBC) stipulates that approval of resolution plan by the adjudicating authority is binding on Central Government and its agencies in respect of any statutory dues arising under any law for the time being in force, thus binding tax authorities and their enforcement actions”.
NCLAT
NCLAT Upholds Liquidator's Discretion To Reject Claims Based On Post-Liquidation Arbitral Awards
Case Title: SBS Holdings, Inc. vs. Mohan Lal Jain
Case Number: Company Appeal (AT) (Insolvency) No. 624 of 2024
The National Company Law Appellate Tribunal (NCLAT) bench, comprising Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member), has held that a Liquidator has the authority under Section 33(5) of the Insolvency and Bankruptcy Code, to decide to reject a claim that is made after the Liquidation Commencement Date. The Tribunal noted that the scheme of Regulations 12 and 16 of the IBBI (Liquidation Process) Regulations 2016 clearly contemplate that a claim cannot be admitted after the liquidation commencement date.
Case Title: Uttarakhand Power Corporation Ltd. vs. M/s Shirdi Industries Ltd. & Anr.
Case Number: Company Appeal (AT) (Insolvency) No. 799 of 2024 with Company Appeal (AT) (Insolvency) No. 803 of 2024 with Company Appeal (AT) (Insolvency) No. 832 of 2024
The National Company Law Appellate Tribunal (NCLAT) bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra, Member (Technical) has held that pre-CIRP dues of the Corporate Debtor must be settled in accordance with the approved resolution plan, and any voluntary payments made by the Corporate Debtor after the commencement of CIRP must be appropriated towards CIRP dues. The Tribunal observed insisting on a different manner of payment than what is specified in the resolution plan, would amount to an infraction of the resolution plan and cannot be countenanced.
NCLAT Affirms 'Nil' Payment To Operational Creditors In Resolution Plan
Case Title: Sai Balaji Facility vs. CA Ramchandra Dallaram Choudhary, RP for Adico Forge Pvt. Ltd. & Ors.
Case Number: Company Appeal (AT) (Insolvency) No. 1642 of 2024
The National Company Law Appellate Tribunal, New Delhi bench, presided by Justice Ashok Bhushan, upheld the Resolution plan, which proposed NIL payment to the operational creditors in the event of Liquidation, reiterating its decision in Rajat Metaal Polychem Pvt. Ltd. vs. Mr. Neeraj Bhatia and Anr., which held that no exception can be taken to such Plans, which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016.
NCLAT: Operational Creditor Can't Claim Priority Over Unsecured Financial Creditor In Liquidation
Case Title: Times Innovative Media Limited vs Pawan Aggarwal (Liquidator) & Anr.
Case Number: Company Appeal (AT) (Insolvency) No.1139 of 2024
The National Company Law Appellate Tribunal bench, comprising Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) held that under Section 53(1) of the Insolvency and Bankruptcy Code (IBC), unsecured financial creditors have priority in the waterfall mechanism over operational creditors in the distribution of a corporate debtor's liquidation estate. The tribunal reiterated that there is no distinction between related-party unsecured financial creditors and other unsecured financial creditors.
Case Title: Noida Power Company Limited vs Mr. Gaurav Katiyar Case Number:
Company Appeal (AT) (Insolvency) No. 1209 of 2024 with Company Appeal (AT) (Insolvency) No. 1210 of 2024
The National Company Law Appellate Tribunal (NCLAT), Delhi bench comprising Justice Ashok Bhushan, Chairperson, Barun Mitra (Technical Member) and Arun Baroka, Technical Member has directed the Resolution Professional to pay outstanding electricity dues incurred by the Corporate Debtor during the moratorium period. The Tribunal observed that the protection under Section 14(1) of the Insolvency and Bankruptcy Code (IBC) is subject to no defaults in payment of current dues as provided under the explanation of the provision.
Case Title: Kapil Katyal vs HDFC Securities Ltd. & Ors.
Case Number: Company Appeal (AT) No. 301 of 2024 & I.A. No. 6474 of 2024
The National Company Law Appellate Tribunal (NCLAT), New Delhi bench, comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) has reiterated that failure to apply for a certified copy of the impugned order within the prescribed limitation period renders the appeal time-barred.
NCLAT Dismisses Samrat Restaurant's CIRP Plea: Section 10A Bars Insolvency For COVID-19 Era Defaults
Case Title: Samrat Restaurant v. Brewcrafts Microbrewing Pvt. Ltd.
Case Reference: Company Appeal (AT) (Insolvency) No. 1409 of 2024 & I.A. No. 5117 of 2024
The National Company Law Appellate Tribunal (NCLAT), New Delhi dismissed the insolvency application filed under section 9 of the Insolvency and Bankruptcy Code (IBC) by Samrat Restaurant (Operational Creditor) against Brewcrafts Microbrewing Pvt. Ltd. (Corporate Debtor). The application was dismissed on the ground that a substantial portion of the debt arose during the period of section 10A.
Case Title: Ms Kalpana Jain vs Universal Oil Seals Mfg Co Pvt Ltd and ors
Case Number: COMPANY APPEAL (AT) NO. 196/2024
The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member) has held that the power of recall does not grant the NCLAT the authority to rehear a case in order to identify any apparent error in the judgment, as that falls within the scope of a review.
The bench held that the power of recall can only be exercised when a procedural error has been made in delivering the original judgment.
Case Title: N.V. Aluminium Cast Pvt. Ltd. vs APL Metals Ltd
Case Number: Company Appeal (AT) (Insolvency) No. 568 of 2024
The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that invoices deemed bogus by the Income Tax Department in assessment orders cannot be relied upon to initiate insolvency proceedings against a Corporate Debtor.
Case Title: M/s Agarwal Foundries Private Limited vs POSCO E&C India Private Limited
Case Number: Company Appeal (AT) (Insolvency) No. 1492 of 2024
The National Company Law Appellate Tribunal Principal Bench, New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that filing a Section 9 application for the sole purpose of recovering money, rather than resolving insolvency, constitutes an abuse of the IBC's provisions and is strongly disapproved.
The bench held that:
“We need to be mindful that no stakeholder takes any undue benefit of the provisions of the IBC. Interestingly, we find that the Appellant has been filing multiple Section 9 applications either against the Respondent or against the Empathy. The first Demand Notice under Section 8 of IBC was issued to the Respondent on 27.07.2017. The Appellant sent another notice on 11.10.2017 and followed it up with Section 9 application which was however withdrawn on 08.06.2018. Thereafter, the Appellant sent another Demand Notice on 17.07.2018 to Empathy and filed a Section 9 application against them which too was withdrawn on 15.10.2018. Subsequently on 24.10.2018, the Appellant sent a fresh Demand Notice to Empathy which was followed by a Section 9 application filed on 11.02.2019. This shows the malafide motive of the Appellant to keep the Section 9 pot boiling so as to arm-twist the Respondent which was otherwise a solvent company to illegally extort monies from them. Thus, the Section 9 application was not filed for the purpose of insolvency resolution but for recovery of money owed to them by Empathy fromthe Respondent. Such behaviour on the part of the Appellant amounts to misuse of the provisions of the IBC and is strongly deprecated.”
NCLAT Declares Sale Agreement Not A Financial Debt, Dismisses Insolvency Petition
Case Title: Sandeep Mittal vs. M / s ASREC (India) Ltd. & Ors.
Case Number: Company Appeal (AT) (Insolvency) No. 37 & 573 of 2024
The NCLAT Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Member, Technical), and Arun Baroka (Member, Technical), has held that a sale consideration in the sale agreement did not constitute a “financial debt” under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC).
Operational Creditors Getting Zero Payouts, Hands Of Courts Are Tied, Observed NCLAT, Delhi
Case: Rajat Metaal Polychem Pvt. Ltd. Vs. Mr. Neeraj Bhatia RP Vinayak Rathi Steels Rolling Mills Pvt. Ltd. and Anr.
Case Number: Company Appeal (AT) (Insolvency) No. 1063 of 2022
Recently the NCLAT, New Delhi in its judgement to the case of Rajat Metaal Polychem Pvt. Ltd. Vs. Mr. Neeraj Bhatia RP Vinayak Rathi Steels Rolling Mills Pvt. Ltd. and Anr. stated that during the Resolution Process, the operational creditors are denied any payment when the amount that is payable to them in the event of the Insolvency Process is nil. The courts are not able to assist them unless the legislation tends to come in aid of the operational creditors
Case Title: M/s Agarwal Foundries Private Limited vs. Posco E&C India Pvt. Ltd.
Case Number: Company Appeal (AT) (Insolvency) No. 1492 of 2024
The National Company Law Appellate Tribunal (NCLAT) bench comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member), and Arun Baroka (Technical Member) has held that the repeated filings of Section 9 applications and withdrawals indicate an attempt to misuse the provisions of the Insolvency and Bankruptcy Code (IBC) to “arm-twist” the Respondent, a solvent company to illegally extort monies rather than pursuing genuine insolvency resolution.
Case Title: Brijesh Haridas Nagar Co-op. Hsg Soc. Ltd. vs VAS Infrastructure Ltd. & Anr.
Case Number: Comp. App. (AT) (Ins) No. 1201 of 2024 & I.A. No. 4295, 4296, 4297, 4298 of 2024
The National Company Law Appellate Tribunal Principal Bench, New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member) and Indevar Pandey (Technical Member) has held that under the Insolvency and Bankruptcy Code (IBC), the limitation period for filing an appeal must be calculated from the date of pronouncement of the order. The bench held that a party involved in the proceedings, particularly as an intervenor, is presumed to have knowledge of the case and the order passed. Therefore, such a party cannot claim ignorance of the order as a reason for delay in filing an appeal.
Failure To Provide Time To Cure Defect In Section 9 Application Violates Procedural Mandate: NCLAT
Case: Shiv Glitz Hotels and Resorts LLP v. Oravel Stays Ltd., Company Appeal (AT) (Insolvency) No.577 of 2024
NCLAT Delhi recently set aside an order passed by the National Company Law Tribunal (NCLT), Ahmedabad, in the case of Shiv Glitz Hotels and Resorts LLP v. Oravel Stays Ltd., where the NCLT had dismissed a Section 9 application under the Insolvency and Bankruptcy Code (IBC), 2016, without merits. The appeal was filed by Shiv Glitz Hotels and Resorts LLP, an operational creditor, after the NCLT failed to provide an opportunity to rectify the defects in the application, as required by the IBC.
Case Title: Office Beanz Pvt. Ltd. vs ------
Case Number: Company Appeal (AT) (Insolvency) No. 1725 of 2024 & I.A. No. 6238, 6305 of 2024
The National Company Law Appellate Tribunal Principal Bench, New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that primary purpose of Section 10A of the IBC was to provide relief to corporate debtors who defaulted during the period specified in the section. It held that although the debt itself is not extinguished, Section 10A specifically bars applications under Sections 7, 8, and 10. Further, the bench held this prohibition remains effective even after the period covered by Section 10A has expired, meaning that no applications can be filed for defaults that occurred during this period.
Section 10A prohibits the filing of applications for the initiation of corporate insolvency resolution process (CIRP) under Sections 7, 9, and 10 of the IBC for any default arising on or after March 25, 2020.
No Inherent Right To Withdraw Section 9 IBC Application And Refile: NCLAT New Delhi
Case Title: Florex Tiles vs M/s. Greenstone Granite Pvt. Ltd.
Case Number: Company Appeal (AT) (Insolvency) No.1487 of 2024
The National Company Law Appellate Tribunal, Principal Bench, New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that in proceedings under the Insolvency and Bankruptcy Code (IBC), an Applicant does not have an inherent right to withdraw an application filed under Section 9 at any stage and subsequently request the liberty to file a new application.
Case Title: Wind World (India) Limited vs Indian Renewable Energy Development Agency Limited and anr
Case No: Company Appeal (AT) (Insolvency) No.175 of 2023
The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has held that there is no violation of Section 14(1)(d) of the Insolvency and Bankruptcy Code (IBC) in the auction of assets or facilities of a subsidiary company if the assets were handed over to the Corporate Debtor for operation and maintenance under the SARFAESI Act.
Section 14(1)(d) prohibits any recovery action or enforcement of security interests by creditors, landlords, or lessors if the assets are in the possession or occupation of the corporate debtor
Case Title: Sanjeev Mahajan vs Indian Bank and Others
Case No.: Company Appeal (AT) (Insolvency) No. 1440 of 2024
The National Company Law Appellate Tribunal, New Delhi division bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) held that once a Resolution Plan is approved by the Committee of Creditors (CoC) and the Corporate Insolvency Resolution Process (CIRP) is concluded, the submission of new settlement proposals is not permissible. The CoC's decision, particularly when taken with unanimous consent, is final and cannot be challenged unless it is arbitrary.
Dispute Regarding GST Dues Not A Bar To Section 9 IBC Proceedings: NCLAT
Case Title: Gulshan Kumar Ahuja vs. Monika Garg Sole Proprietor Aggarwal
Case Number: Company Appeal (AT) (Insolvency) No. 1202 of 2024
The NCLAT Bench of Justice Rakesh Kumar Jain, Member (Judicial) and Arun Baroka, Member (Technical) has held that the dispute regarding payment of GST dues is not a “pre-existing dispute” between the parties that would preclude the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC).
Case Title: Indiabulls Asset Reconstruction Company Ltd vs Pawan Kapoor
Case Number: COMPANY APPEAL (AT)(Insolvency) No.192/2021
The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member) has held that once the interim moratorium is in effect due to insolvency proceedings against a personal guarantor under the IBC, 2016, the bank is prohibited from continuing any further actions under the SARFAESI Act regarding the property mortgaged by the personal guarantor.
Section 12A Application Not Permitted During Liquidation Period: NCLAT Principal Bench
Case Title: Asha Chopra and ors vs M/s. Hind Motors India Limited and ors
Case Number: Company Appeal (AT) (Insolvency) No. 1425 – 1428 of 2024 & I.A. No. 5180 – 5183 of 2024
The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technicial Member) and Arun Baroka (Technicial Member) has held that an application under Section 12A of the IBC is not permitted during the liquidation period. Section 12A allows for the withdrawal of an insolvency application with the approval of ninety percent of the Committee of Creditors (CoC).
The bench noted that Section 12A is designed to facilitate the withdrawal of an application during the Corporate Insolvency Resolution Process (CIRP) before the insolvency resolution or liquidation proceedings have begun. Once the liquidation process commences, it held that the Committee of Creditors, which is instrumental in approving such withdrawals, ceases to exist in its original capacity.
The bench held that: “In view of the clear Statutory Scheme as delineated by 12A, Section 33 and Regulation 2B of the Liquidation Regulation, we are of the view that during Liquidation period, an Application under Section 12A is not permissible.”
NCLT
Deadlocks In Equal Shareholding Should Be Resolved By Buyout Of Shares: NCLT Mumbai
Case Title: Mr. Hormouz Phiroze Aderianwalla & Anr. vs. Del. Seatek India Pvt. Ltd. and Ors.
Case Number: Company Petition/199/MB/2022 & Company Petition/50/MB/2023
The National Company Law Appellate Tribunal (NCLT), Mumbai bench, comprising Mr. Kishore Vemulapalli Hon'ble Member (Judicial Member) and Ms. Anu Jagmohan Singh (Technical Member) has held that in cases of equal shareholding and director representation among shareholders, where a deadlock arises in the day-to-day management of the company, the deadlock should be resolved by one group purchasing the shares of the other.
Case Title: M/s Apogee Enterprises Pvt. Ltd. (formerly M/s Apogee Manufacturing Pvt. Ltd.) v. Late Shri Anil Nanda
Case Number: I.A. 1362/2024, I.A. 2082/2022, and I.A. 2634/2023 in C.P. (I.B) No. 514 of 2020
The National Company Law Tribunal (NCLT), New Delhi, Bench VI, comprising Shri Mahendra Khandelwal (Member, Judicial) and Shri Rahul Bhatnagar (Member, Technical), has held that insolvency proceedings initiated against a personal guarantor under the IBC abate upon the death of the guarantor and that legal representatives cannot be substituted in such cases.