Supreme CourtSupreme Court Declares Noida As An Operational Creditor Under The Insolvency And Bankruptcy Code, 2016 Case title: New Okhla Industrial Development Authority v Anand Sonbhadra Case No.: Civil Appeal No. 2222 of 2021 The Supreme Court Bench comprising of Justice KM Joseph and Justice Hrishikesh Roy has upheld the NCLAT judgment wherein it was held that...
Supreme Court
Case title: New Okhla Industrial Development Authority v Anand Sonbhadra
Case No.: Civil Appeal No. 2222 of 2021
The Supreme Court Bench comprising of Justice KM Joseph and Justice Hrishikesh Roy has upheld the NCLAT judgment wherein it was held that the NOIDA is an Operational Creditor under IBC and not a Financial Creditor. The order was passed on 17.05.2022.
The Bench observed that the subject matter of Section 5(8)(d) of IBC is a lease or a hire-purchase contract which is deemed as a finance or capital lease. NOIDA's contract with the Builders is not any lease or a hire purchase contract, which would entitle the lessor to be treated as the financial creditor. The Bench held that:
"138. We are of the view that in the facts of the appeals before us, we are unable to hold that the lessee has raised any amounts from the appellant. The question, therefore, of considering the last limb of Section 5(8)(f), namely, whether it has commercial effect of a borrowing could not arise. But we can safely say that the obligation incurred by the lessee to pay the rental and the premium cannot be treated as an amount raised by the lessee from the appellant…"
Case Title: Indian Overseas Bank v RCM Infrastructure Ltd.
Case No.: CA 4750 OF 2021, 2022 LiveLaw (SC) 496.
The Supreme Court Bench comprising of Justices L. Nageswara Rao and B R Gavai has held that the proceedings under the SARFAESI Act, 2002 cannot be continued once the Corporate Insolvency Resolution Process (CIRP) is initiated under IBC and the moratorium is ordered. It was observed that Section 14(1)(c) of the IBC has overriding effect over any other law and therefore, after commencement of CIRP there is complete prohibition for any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property. The words "including any action under the SARFAESI Act" in Section 14 of the IBC convey the legislative intent. The order was passed on 18.05.2022.
Section 18 Limitation Act Is Applicable To IBC Proceedings, Reiterates Supreme Court
Case Title: State Bank of India v Krishidhan Seeds Private Limited
Case No.: 2022 LiveLaw (SC) 497, CA 910 of 2021
The Supreme Court Bench comprising of Justices DY Chandrachud and Surya Kant has held that the provisions of Section 18 of the Limitation Act, 1963 are applicable to proceedings under the Insolvency and Bankruptcy Code, 2016. It was observed that an acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default. The provisions of Section 18 of the Limitation Act are applicable to proceedings under the IBC. The order was passed on 18.04.2022.
Supreme Court Issues Notice On Meru Cab's Plea Alleging Anti-Competitive Practices By Ola
Case Title: Meru Travels Solutions Pvt. Ltd. v Competition Commission of India
Case No.: Civil Appeal No.2843-2844/2022
The Supreme Court Bench comprising of Justices L. Nageswara Rao and B.R. Gavai has issued notice in the appeal filed by Meru Cab, challenging the order of the National Company Appellate Tribunal (NCLAT) wherein it had refused to set aside the order passed by the Competition Commission of India (CCI) exonerating Ola from allegations of abuse of dominant position. The Bench took note of the concurrent findings by the Director General, CCI and NCLAT.
Meru had contended before the CCI that Ola had abused its dominant position by indulging in predatory pricing and by entering into anti-competitive agreements with its drivers. Since the Commission prima facie found the allegation of abuse of dominant position to have some merit, it ordered the Director General (DG) to investigate the matter. Based on the investigation report, in 2017, CCI concluded that Ola did not abuse its dominant position. On 07.02.2022, the NCLAT also held that Ola has not indulged in predatory pricing or abused its dominant position.
Case Title: Mahendra Kumar Jajodia v State Bank of India
Case No.: Civil Appeal No. 1871/2022
The Supreme Court bench comprising of Justice S Abdul Nazeer and Justice Vikram Nath has dismissed the civil appeal filed against the judgment of National Company Law Appellate Tribunal (NCLAT) in the case of SBI versus Mahendra Kumar Jajodia. The order was passed on 06.05.2022.
The NCLAT on 27.01.2022 had held that even in the absence of any pending Corporate Insolvency Resolution Process or Liquidation proceedings, the application under Section 95(1) of the Insolvency Bankruptcy Code, 2016 against the personal guarantors of the Corporate Debtor is maintainable by the virtue of Section 60(1) of the Code before the National Company Law Tribunal having territorial jurisdiction over the place where the Registered office of the Corporate Person is located. The Supreme Court upheld the NCLAT order and dismissed the appeal by stating that there is no cogent reason to interfere with the order of NCLAT.
Case Title: Gurmeet Sodhi v Union of India & Ors.
Case No.: Writ Petition(s)(Civil) No(s).307/2022
The Supreme Court Bench comprising of Justices Vineet Saran and J K Maheshwari has issued notice on a petition filed by a personal guarantor which raises a constitutional challenge to the personal insolvency provisions under the Insolvency & Bankruptcy Code, 2016 ("IBC"). Since a similar issue is pending, the Court has directed to tag the case along with the pending Special Leave Petition (C) No.16464/2021.
The personal guarantor has filed a writ petition under Article 32 before the Supreme Court contending that the IBC does not provide for the personal guarantor's right to be heard before entertaining the insolvency petition and appointment of a resolution professional, thus violating the fundamental right to natural justice.
The Bench, as an interim relief, has restrained the resolution professional in the personal guarantor's insolvency proceedings from submitting the statutory report before the Adjudicating Authority while issuing notice in the writ petition. The Court also directed that the Petitioner shall not transfer, alienate, encumber or dispose of any of his assets or his legal rights or beneficial interest therein.
Appeal To NCLAT Shall Be Filed Within A Period Of 30 Days, Reiterates Supreme Court
Case Title: Safire Technologies Pvt. Ltd v Regional Provident Fund Commissioner & Anr.
Case No.: Civil Appeal No.2212 of 2021
The Supreme Court bench comprising of Justice L N Rao and Justice P S Narasimha has reiterated that an appeal against the order of NCLT shall be filed before the NCLAT within a period of 30 days and the appellate tribunal can only condone delay for a period of 15 days. The order was passed on 29.04.2022.
Case Title: New Delhi Municipal Council v Minosha India Limited
Case No.: CA No. 3470 of 2022
The Supreme Court Bench comprising of Justices KM Joseph and Hrishikesh Roy has held that the entire period during which the moratorium was in force in respect of Corporate Debtor, can be excluded while computing the period of limitation for a suit or proceeding by the Corporate Debtor.
The appellant had challenged the Delhi High Court's order allowing the application filed by respondent Corporate Debtor under Section 11(6) of the Arbitration and Conciliation Act. The court noted that Section 14 (moratorium) does not include an application under Section 11(6) of the A&C Act by the Corporate Debtor or for that matter, any other proceeding by the Corporate Debtor against another party. The order was passed on 27.04.2022.
Case title: Jayaswal Neco Industries Limited & Another v Reserve Bank of India & Ors.
Case No.: Special Leave Petition (Civil) Nos.9286-9287 of 2018.
The Supreme Court Bench comprising of Justice U.U. Lalit and Justice S. Ravindra Bhat, while adjudicating a Special Leave Petition (SLP) filed by Jayaswal Neco Industries Ltd., has allowed withdrawal of the SLP subject to costs of Rs. 10 Lakhs. The sole consideration behind permitting withdrawal was that nine lenders of Jayaswal Neco Industries Ltd., which were Public Sector Financial Corporations/Banks, had assigned their debts to Assets Care & Reconstruction Enterprise Ltd. ("ACRE"). If withdrawal was not permitted then these public sector lenders may have to refund huge sums of money. The order was passed on 04.05.2022.
Recovery Certificate Holder Can Initiate CIRP As Financial Creditor Under IBC: Supreme Court
Case Title: Kotak Mahindra Bank Limited v A. Balakrishna & Anr.
Case No.: 2022 LiveLaw (SC) 534, Civil Appeal No. 689 of 2021
The Supreme Court bench comprising of Justices L. Nageswara Rao, B.R. Gavai and A.S. Bopanna, has held that a liability in respect of a claim arising out of a Recovery Certificate under the Recovery of Debts and Bankruptcy Act, 1993 would be a "financial debt" within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC) and a holder of such Recovery Certificate would be a "financial creditor" under Section 5(7) of the IBC. The Bench observed that 'financial debt' as defined under Section 5(8) of the IBC as 'means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes…'. The use of word 'includes' is to enlarge the scope of the statute and hence the list in Section 5(8) is not an exhaustive but inclusive list.
NCLAT
Case Title: Damodar Valley Corporation v Dimension Steel and Alloys
Case No.: Company Appeal (AT) (Insolvency) No. 62 of 2022
The National Company law Appellate Tribunal (NCLAT) bench comprising of Justice Ashok Bhushan and Ms. Shreesha Merla has urged the Central Government and the Insolvency and Bankruptcy Board of India (IBBI) to consider legislative change regarding the payment to operational creditors under the resolution plan. The Bench observed that: "We are consistently receiving the Plans, where Operational Creditors either not paid any amount towards their claim or paid negligible amount, sometime even less than 1%." The Bench noted that time has come to reconsider the payment mechanism to operational creditors under the Resolution plan and urged the Central Government and IBBI to find out if there is any ground to reconsider the legislative change towards payment to the operational creditors under the resolution plan.
Case Title: S M Ghogbhai versus Schedulers Logistics India Pvt. Ltd
Case No.: Company Appeal (AT) Insolvency No. 281 of 2022
The National Company Law Appellate Tribunal (NCLAT), Principal Bench. comprising of Justice Ashok Bhushan and Dr. Alok Srivastava has held that the Article 1 of Limitation Act, 1963 is not applicable to the Petition filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code (IBC). Reliance was placed on the case of BK Educational Services Pvt. Ltd. v. Parag Gupta and Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries wherein Supreme Court held that the period of limitation for filing an application under Section 7 or 9 of the Code is to be decided as per Article 137 of the Limitation Act. NCLAT further held that Article 1 of Limitation Act deals with "suits relation to accounts" and an application under Section 9 of the Code cannot be said to be a suit relating to accounts.
Case Title: Hinduja Leyland Finance Ltd. v Fly Express Logistic Pvt. Ltd.
Case No.: Company Appeal (AT) (Ins.) No. 553 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Mr. Naresh Salecha (Technical Member), while adjudicating an appeal has upheld that Corporate Insolvency Resolution Process ("CIRP") cannot be initiated over a default which had occurred in the period mentioned under Section 10A of the Insolvency and Bankruptcy Code, 2016 ("IBC"), i.e. between 25.03.2020 to 24.03.2021. The order was passed on 20.05.2022.
Case Title: Prafulla Purushottamrao Gadge v. Narayan Mangal
Case No.: Comp. App. (AT) (Ins.) No. 498 of 2022
The National Company Law Appellate Tribunal (NCLAT) Bench comprising of Justice Ashok Bhushan and Ms. Shreesha Merla has held that an application filed after 24.03.2020 under Section 7 of the Insolvency and Bankruptcy Code, 2016 below the threshold of Rs. One Crore is not maintainable.
The suspended director of the Corporate Debtor had filed the appeal against the order passed by NCLT Mumbai wherein CIRP was initiated against the Corporate Debtor for the default of Rs. 78,65,000/-. The NCLAT held that the application filed on 25.06.2021 has to fulfill the requirement of increased threshold as introduced in Section 4 of IBC by notification dated 24.03.2020. The order was passed on 06.05.2022
Case Title: Omega Laser Products B.V. v Anil Agrawal
Case No.: Company Appeal (AT) (Insolvency) No.194 Of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member) has held that arrears of salary due beyond a period of 3 years would be barred by limitation for the purposes of initiating Corporate Insolvency Resolution Process (CIRP). The Managing Director had initiated CIRP against the Corporate Debtor over salary arrears dues which were barred by limitation. NCLAT has set aside the order of CIRP vide an order dated 10.05.2022 by observing:
"Therefore, this Tribunal if of the earnest view that the Section 9 Application filed on 27/08/2021 is 'barred by Limitation' as the claims of Rs.96,92,000/- and Rs.18,00,000/- pertain to the period prior to 31/03/2016 and more than three years have lapsed since."
Case Title: Sahara India v Shir Nandkisho Vishnupant Deshpande and Anr.
Case No.: Company Appeal (AT) (Ins) No. 368 of 2021
The National Company Law Appellate Law Tribunal (NCLAT) Bench comprising of Justices M. Venugopal (Member Judicial) and Dr. Ashok Kumar Mishra (Member Technical) has held that NCLT does not have the power to suo motu classify a transaction as a Preferential Transaction under Section 44 of the Insolvency and Bankruptcy Code, 2016. The NCLAT allowed the appeal challenging the order of the NCLT wherein the Adjudicating Authority had classified a transaction as 'Preferential Transaction.' The Bench remanded the matter back to the NCLT for deciding afresh in the light of the observations made in the order. The order was passed on 09.05.2022
Case Title: Potens Transmissions & Power Pvt. Ltd v Gian Chand Narang
Case No.: Company Appeal (AT) (Insolvency) No. 532 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member) has upheld the cancellation of sale of Apex Buildsys Ltd. as a going concern to Potens Transmissions & Power Pvt. Ltd. (Auction Purchaser), over the latter's failure to pay the sale consideration amount within 90 days, as stipulated under IBBI (Liquidation Process) Regulations 2016. The order was passed on 12.05.2022.
The NCLAT Bench observed that 90 days' period provided in the Liquidation Process Regulation is the maximum period for the Auction Purchaser to deposit the consideration amount, failing which the Regulation expressly mentions that the sale shall be cancelled. It was held that "when the Consequence of non-compliance of the provision is provided in the statute itself, the provision is necessary to be held to be mandatory."
Insolvency Cannot Be Initiated On The Basis Of Unpaid LTC And Leave Encashment Dues: NCLAT
Case Title: Kishore K Lonkar v Hindustan Antibiotics Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 934 of 2021.
The National Company Law Appellate Tribunal (NCLAT) Bench, comprising of Justice Ashok Bhushan and Ms. Shreesha Merla, has held that the welfare claims such as Leave Encashment, Superannuation Dues are not operational debt for the purpose of initiation of Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor under Section 9 of the Insolvency & Bankruptcy Code, 2016.
NCLAT noted that the definition of operational debt under Section 5(21) of the Code includes claim towards services which includes "employment" also however, the amount claimed by the Appellant was not towards any services rendered by him during his employment with the Corporate Debtor but all these payments were accrued after the cessation of employment. The Bench held that:
"9…Though 'service benefits' like 'LTC' accrue, on account of the service rendered during the period of employment, the scope and objective of the Code is simply not just for recovery of 'dues' but Resolution of the Companies meant for 'maximization of the value of assets', to promote entrepreneurship, availability of credit and balance all interest of the stakeholders"
National Company Law Appellate Tribunal Gets Five More Judges
Five new Judges have been appointed to the NCLAT vide a Notification dated 12.05.2022, the total Judges' strength has gone up from seven to twelve.
Following are the Details:
a. Justice Rakesh Kumar Jain, Retd. judge, Punjab and Haryana High Court
b. Justice Rakesh Kumar, Retd. Judge, Patna High Court
c. Justice M Satyanarayan Murthy sitting judge, Andhra Pradesh High Court
d. Barun Mishra, IAS, Retd. Secretary, Department of Justice
e. Naresh Salecha, IRAS, Member (finance), Railway Board
Case Title: Mr. Amar Vora v City Union Bank Ltd.
Case No.: Company Appeal (AT) (CH) (Ins) No. 130 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Kanthi Narahari (Technical Member), has held that a petition can be moved under Section 7, 9, or 10 of Insolvency and Bankruptcy Code, 2016 ("IBC"), even when proceedings with respect to the same debt are pending before the Debt Recovery Tribunal; or SARFAESI Act 2002; or Prohibition of Benami Property Transaction Act, 1988 or any other forum. IBC has an overriding effect over other laws. The order was passed on 11.05.2022.
Joint Auction Under IBC And SARFAESI Is Permissible: NCLAT
Case Title: Ayan Mallick v Pratim Bayal (Liquidator) & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 456 of 2022
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member), has upheld the Order of NCLT, Kolkata wherein NCLT had held that a joint auction under the provision of Insolvency and Bankruptcy Code, 2016 (IBC) and SARFAESI Act, 2002 is permissible in order to maximize the value of the assets of the Corporate Debtor and the guarantor.
Case Title: Amitabh Roy v Master Development Management (India) Pvt. Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 274 of 2022
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Shri Naresh Salecha (Technical Member), has held that an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") cannot be admitted over defaults relating to non-payment of TDS (Tax Deduction at Source) amount. The Bench observed that the Adjudicating Authority had committed serious error in admitting Section 9 Application on the submission of the Operational Creditor that non-payment of the TDS amounts to default. The Bench also imposed a cost of Rs. 1 Lakh on the Applicant. The order was passed on 18.05.2022.
NCLAT Sets Aside The Liquidation Order Of Ballarpur Industries Limited
Case Title: Finquest Financial Solutions Pvt. Ltd. v Anuj Jain (Erstwhile RP of Ballarpur Industries Ltd.) & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 227 of 2022.
The National Company Law Appellate Tribunal (NCLAT) Principal Bench comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member), while adjudicating an appeal, has set aside the order dated 25.01.2022 passed by NCLT Mumbai Bench whereby Ballarpur Industries Ltd. was sent to liquidation. The NCLAT Bench extended the Corporate Insolvency Resolution Process (CIRP) period till 30.04.2022 and directed the Resolution Professional to get the revised resolution plan approved by NCLT. The order was passed on 19.04.2022.
Decision Of Homebuyers As A Class Is Binding On Every Homebuyer: NCLAT, Delhi
Case Title: Sandeep Kumar Jain v. Anil Tayal
Case No.: Company Appeal (AT) (Insolvency) No. 446 of 2022
The National Company Law Appellate Tribunal (NCLAT), Principal Bench New Delhi, comprising of Justice Ashok Bhushan and Ms. Shreesha Merla, while adjudicating an appeal has held that decision taken by the homebuyers as a class is binding on every single homebuyer. The appeal was filed by two homebuyers against the order of NCLT New Delhi, which had rejected their intervention application on the basis that the class of homebuyers is already being represented before NCLT. The NCLAT upheld the NCLT order and directed that the Authorized Representative of class of homebuyers can always approach the Resolution Professional and the Adjudicating Authority in case of any difficulty.
Case Title: Bipin Sharma v Earth Infrastructure Limited & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 1112 of 2020.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Dr. Alok Srivastava (Technical Member), while adjudicating an appeal filed by one of the Financial Creditors challenging the eligibility of the Successful Resolution Applicant, Roma Unicon Designex Consortium ("SRA"), under Section 29A(c) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has declined to intervene in the Resolution Plan of SRA, as the same has been approved by the Committee of Creditors ("CoC") including Financial Creditors in class. It was observed that the Resolution Plan being approved by Financial Creditors in class voting through their authorized representative cannot be called into question. The order was passed on 27.04.2022
Insolvency Proceedings Are Not Only For Fees Of Resolution Professional: NCLAT
Case Title: Deepankar Sharma v Pradeep Cycle Industries.
Case No.: Company Appeal (AT) (Insolvency) No. 474 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan and Ms Sheersha Merla, has held that the Insolvency Proceedings are not proceedings only for fees of the Interim Resolution Professional (IRP). The Corporate Insolvency Resolution Process (CIRP) of Arpan International Pvt. Ltd. was initiated by NCLT on 22.12.2021, however, the Operational Creditor and Corporate Debtor entered into settlement and an application for withdrawal of petition was filed on 03.01.2022. Accordingly, NCLT ordered that IRP fees should be reduced to Rs. 1,75,000/- from the earlier value of Rs. 3,75,000/, as the IRP had worked for only 14 days. NCLAT upheld the reduction of the fees of the IRP by observing that the Insolvency Proceedings are not only for the fee of the IRP and RP, payment of fee and cost are only consequential to the main proceeding.
Committee Of Creditors Are Competent To Revise The Approved Fees Of ResolutionProfessional: NCLAT
Case Title: Kushwinder Singhal v Reena Tiwari.
Case No.: Company Appeal (AT) (Insolvency) No. 469 of 2022.
National Company Law Appellate Tribunal (NCLAT) principal bench comprising of Justice Ashok Bhushan and Ms. Sheersha Merla, has held that the Committee of Creditors (CoC) is fully competent to revise its earlier approval of the fees of the Resolution Professional. The erstwhile Resolution Professional of Bestways Transport India Pvt Ltd. was replaced by another Resolution Professional by the CoC, and NCLT had ordered re-consideration of the fees of the erstwhile Resolution Professional. NCLAT upheld the NCLT order and observed that CoC is fully competent to revise the fees of Resolution Professional, as the entitlement of fee depends on several factors including the change of circumstances such as the length of CIRP proceeding.
Case Title: Employees Provident Fund Organisation v Mr. Subodh Kumar Agarwal & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 116 of 2022
The National Company Law Appellate Tribunal (NCLAT) Principal Bench comprising of Justice Ashok Bhushan, Ms. Shreesha Merla and Mr. Naresh Salecha, has urged the IBBI to consider an amendment to the IBBI (Insolvency Process for Corporate Persons) Regulations in order to include claims in information which though not filed with the Resolution Professional but clearly reflects in the books/records of the Corporate Debtor. The Bench observed that the Regulation framing authority need to consider as to whether the Regulations need any amendment, clarification so as to include in the Information Memorandum any ongoing statutory proceeding which is likely to saddle the Corporate Debtor with financial or other liability. Further, even if the Resolution Professional has details of record, notices, orders indicating that certain amounts have been finalized to the received from the Corporate Debtor but due to want of claims being filed of such statutory authority they do not find any mention in the list of claims or Information Memorandum.
Case Title: Ashish Chandravandan Patel v Axis Bank Ltd. & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 618 of 2022
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Shri. Naresh Salecha (Technical Member),, has held that an order passed with the consent of both Members of an NCLT Bench but signed by only one of them due to temporary unavailability of the other Member, does not require the matter to be designated as part-heard and be heard afresh. Rule 152(4) of National Company Law Tribunal Rule, 2016 ("NCLT Rules") is only applicable in cases where a Member is unable to sign the order sheet in view of resignation, retirement or death; and not where a Member is temporary unavailable to sign the Order. The order was passed on 30.05.2022.
NCLAT To Hear Appeals On Resolution Plan Of Jet Airways On 5th July, 2022
Case Title: Association of Aggrieved Workmen of Jet Airways (India) Ltd. v Jet Airways (India) Ltd. & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 643 of 2021
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member), while hearing a batch of appeals filed against the resolution plan of Jet Airways (India) Ltd. by aggrieved employees and workmen of Jet Airways; Punjab National Bank; TLD MEAI FZE; Jet Aircraft Maintenance Engineers Welfare Association; Bhartiya Kamgar Sena; and Concor Air, has fixed the next date of hearing as 05.07.2022, with a direction that the implementation of the resolution plan shall abide by the outcome of these appeals.
Several appeals were filed before the NCLAT challenging the order dated 22.06.2021 of NCLT approving the resolution plan of Jalan Kalrock consortium. The Association of Aggrieved Workmen of Jet Airways (India) Ltd. had also filed an appeal challenging the time period of implementation of the resolution plan; non-consideration of the workmen and employees' dues including statutory dues such as gratuity, provident fund, leave encampment et al. Further, the challenge was also made with respect to the amount of workmen dues mentioned in the resolution plan (Rs. 100 Crores approx.). The order was passed on 30.05.2022.
NCLAT Stays The CIRP Of National Textile Corporation Ltd., A Public Sector Enterprise
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Shri Naresh Salecha (Technical Member), has stayed the Corporate Insolvency Resolution Process ("CIRP") against National Textile Corporation Ltd. ("Appellant"), which was initiated by NCLT Delhi vide an order dated 27.05.2022.
The Appellant, National Textile Corporation Ltd., is a Public Sector Enterprise under the Ministry of Textiles, Government of India. The Appellant filed an appeal against the NCLT order dated 27.05.2022 before the NCLAT, submitting that it has settled the matter with the Operational Creditor, and sought liberty to place on record the Settlement Agreement entered between the parties. The Operational Creditor/Respondent also confirmed that the settlement had taken place. The NCLAT Bench has stayed the CIRP of the Appellant and has listed the matter on 01.06.2022 for taking on record the Settlement Agreement and passing orders accordingly. The order has been passed on 31.05.2022.
NCLT
NCLT Mumbai Grants Time To Future Retail Ltd. To File Reply In Insolvency Plea
Case title: Bank of India v Future Retail Ltd.
Case No.: CP (IB) No. 527/MB/2022
The National Company Law Tribunal (NCLT), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), while hearing a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has granted time to Future Retail Ltd. for filing a reply to the petition. The next date of hearing has been fixed to 12.05.2022.
In April 2022, the Bank of India had filed a petition under Section 7 of the IBC before NCLT, Mumbai Bench, seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against FRL. On 28.04.2022 the matter was listed for its first hearing before the NCLT, Mumbai Bench, wherein FRL was granted time to file its reply to the insolvency plea.
No Conflict Between The Prohibition Of Benami Property Transaction Act, 1998 and IBC, 2016 Concerning Attachment Of Property: NCLT, Chennai Bench
Case Title:Shri. Mudapallur Varieth Gangadharan v. The Deputy Commissioner of Income Tax
Case No.: CP (IB)/768(CHE)/2018
The National Company Law Tribunal (NCLT), Chennai Bench, comprising of Justice S. Ramathilangam (Judicial Member) and B. Anil Kumar (Technical Member), has held that there is no conflict between the Prohibition of Benami Property Transaction Act, 1988 and the Insolvency and Bankruptcy Code, 2016 ("IBC") concerning the attachment of property, as the two are special Acts. It was observed that the general principle of construction where two Special Acts are in conflict is that, the Act made later should prevail as per the maxim- 'leges posteriores priores conterarias abrogant', which means the later laws shall abrogate the earlier laws that are contrary or in conflict with subsequent laws.
Case title: IDBI Bank Ltd. v Manoj Gaur (Personal Guarantor of Corporate Debtor Jaypee Infratech Ltd.)
Case No: IB-29(PB)/2022.
The National Company Law Tribunal (NCLT), New Delhi (Special Bench), comprising of Shri Dharminder Singh (Judicial Member) and Shri Avinash Kumar Srivastava (Technical Member), while adjudicating an application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has held that invocation of personal guarantee can be done by a Security Trustee only after obtaining consent of all co-lenders under the concerned Security Trustee Agreement. When there are multiple beneficiaries, the Trustee is bound to execute the Trust for the benefit of all beneficiaries in accordance with Trust Deed and after taking permission from the co-lenders. The order was passed on 05.05.2022.
The NCLT also observed that a Trustee is appointed to hold the Trust property for the benefit of the beneficiaries of the Trust, who have a beneficial interest in the Trust property. In cases where there are multiple beneficiaries, the Trustee is bound to execute the trust for the benefit of all the beneficiaries, in accordance with the Trust Deed and only after taking consent of other co-lenders.
Insolvency Proceedings Initiated Against Birla Tyres Ltd., A B.K. Birla Group Company: NCLT, Kolkata
Case Title: SRF Limited v Birla Tyres Ltd.
Case No.: C.P. (IB) No. 250/KB/2021.
The National Company Law Tribunal ("NCLT") Kolkata Bench, comprising of Rohit Kapoor (Judicial Member) and Shri Harish Chander Suri (Technical Member) while adjudicating a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") has initiated Corporate Insolvency Resolution Process ("CIRP") against Birla Tyres Ltd. for an admitted default of Rs. 10.18 Crores. Mr. Seikh Abdul Salam has been appointed as the Interim Resolution Professional. The order was passed on 05.05.2022.
Birla Tyres Ltd. is a part of B.K. Birla Group of Companies. In 1991, it was incorporated as a part of Kesoram Industries Ltd. but was later demerged in 2018 as a part of re-structuring plan.
Case Title: Hero Solar Energy Pvt. Ltd. v National Textile Corporation Ltd.
Case No.: C.P. No. IB-452/ND/2020
The National Company Law Tribunal (NCLT), New Delhi Bench, comprising of Mr. Dharminder Singh (Judicial Member) and Ms. Sumita Purkaysatha (Technical Member), has initiated Corporate Insolvency Resolution Process ("CIRP") against National Textile Corporation Ltd., which is a Public Sector Enterprise under Ministry of Textiles, Government of India. The NCLT Bench observed that there is a claim which is due and payable and the Corporate Debtor had failed to prove existence of any 'pre-existing dispute' in respect of the default. The petition was admitted under Section 9 of IBC and CIRP was initiated against the Corporate Debtor. Mr. Amit Talwar has been appointed as the Interim Resolution Professional and moratorium has been declared. The order was passed on 27.05.2022, however, the NCLAT has stayed the CIRP vide its order dated 31.05.2022 as parties had entered settlement.
Case Title: Saraf Chits Private Limited & Anr. v KAD Housing Private Limited
Case No.: (IB)-255(ND)/2021.
The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri Abni Ranjan Kumar Sinha (Judicial Member) and Shri L.N. Gupta (Technical Member), has held that Corporate Insolvency Resolution Process ("CIRP") cannot be initiated against a Corporate Debtor solely on the basis of the un-paid amount of interest, where the entire principal amount has already been discharged by the Corporate Debtor. The Bench observed that interest is not included in the term "debt" per se under IBC. Rather, "interest" can be claimed as "financial debt" only if such debt exists. The Bench opined that the "interest" component alone cannot be claimed or pursued in absence of the debt for initiating CIRP against the Corporate Debtor. An application pursued for realization of the interest amount alone is against the intent of the IBC. The order was passed on 23.05.2022.
Case Title: Sandesh Naik v. MT Educare Ltd.
Case No.: C.P.(IB)-678(MB)/2020
The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice H.V. Subba Rao (Judicial Member) and Chandra Bhan Singh (Technical Member), has held that salary for purported notice period amounts to specific performance of the appointment letter and does not fall within the definition of 'Operational Debt' as the same was not salary for the actual work done by the Operational Creditor.
The Applicant resigned from his job and demanded the Employer to pay salary for 3 months of notice period. The Employer only paid for 1 month and stated that the appointment letter did not provide for 3 months' payment. The NCLT dismissed the Section 9 application filed by the Applicant on the ground that there existed a dispute between the parties which ought to be adjudicated upon by leading evidence and conducting trials before the competent court and that the Applicant cannot use the IBC as a substitute of debt enforcement procedures.
Case Title: Mr. Daxesh D. Desai v Shopzo Brand Pvt. Ltd.
Case No.: IB 533/(ND)/2021.
The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri Dharminder Singh (Judicial Member) and Ms. Sumita Purkayastha (Technical Member), has held that for determining maintainability of an application in terms of Section 4 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), the date of filing of a petition has to be seen and not the date of default or demand notice. No petition under Section 7 or 9 of IBC could be filed for a default of less than Rs. 1 Crore, on or after 24.03.2020, even if the default had occurred or demand notice was sent prior to 24.03.2020.
NCLT Delhi Dismisses Insolvency Petition Against NBCC India Ltd., A Navratna Enterprise
Case Title: Biosafe Lab India Pvt. Ltd. v NBCC India Ltd.
Case No.: IB 323/ND/2022
The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Mr. Dharminder Singh (Judicial Member) and Ms. Sumita Purkaysatha (Technical Member), has dismissed an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against NBCC India Pvt. Ltd. The Bench observed that a serious dispute existed in relation to the due payment, which cannot be decided in a summary manner. The order was passed on 27.05.2022.
Case Title: Trimex Industries Pvt. Ltd. v. M/s. Sathavahana Ispat Ltd.
Case No.: CP (IB) No. 17/9/HDB/2020
In a split verdict, a two-judge Bench of NCLT, Hyderabad comprising of Shri Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), has referred to the Principal Bench the question of –"whether in an application filed by an Operational Creditor u/s 60(5) of the Code, the CoC can be barred from considering the resolution plan of a Prospective Resolution Applicant (PRA), when the same has not received approval of the CoC on the ground that the PRA and sole member of CoC are related parties". The Technical Member has allowed the application u/s 60(5) of IBC and directed the CoC not to consider the resolution plan of the PRA as the entire process of CIRP is vitiated and collusion between the parties is writ large on the face of CIRP of the CD, as the PRA was a related party to the sole member of the CoC, JC Flower Asset Reconstruction Company, to whom, after assignment of debts, the Corporate Debtor owed all financial debts. Thus, the application to pass an order is not premature. However, the Judicial Member rejected the application by observing that the plea would be within the jurisdiction of the CoC while voting for the plan and interference by the Adjudicating Authority would amount to usurpation of power which is not available under the Code.
Case title: N Kumar v. Tata Capital Housing Finance Ltd.
Case No.: CP (IB)/889(CHE)/2019
The National Company Law Tribunal, Chennai Bench comprising of Justice S. Ramathilagam and Mr. Anil Kumar B (Technical Member) has held that the project wise Corporate Insolvency Resolution Process (CIRP) of a real estate company is outside the purview of Insolvency and Bankruptcy Code, 2016
NCLT observed that there is no concept of limited CIRP or CIRP for specific projects anywhere in the IBC, 2016 or regulations made thereunder. NCLT further noted that the Supreme Court in the case of Pioneer Urban Land and Infrastructure Ltd. versus Union of India held that IBC is a beneficial legislation which can be trigged to put the whole corporate Debtor back on its feet.
NCLT Is Empowered To Pierce The Corporate Veil To Ascertain The Real Successful Bidder: NCLT Delhi
Case Title: Argentium International Pvt. Ltd. v Utm Engineering Pvt. Ltd.
Case No.: IB No. 248/ND/2019
The National Company Law Tribunal (NCLT), New Delhi Bench, comprising of Dharminder Singh (Judicial Member) and Sumita Purkayastha (Technical Member), has held that the NCLT has the power to pierce the 'corporate veil' in order to ascertain the real successful bidder. The Bench held:
"Tribunal is also not denuded of authority to pierce the 'corporate veil' to ascertain the real successful bidder. Therefore, the 'Corporate Veil' has to be lifted to prevent unjust and fraudulent act of the respondent herein and in order to look-into realities behind the legal façade and to hold him liable to the acts of the Corporate Debtor. No doubt, the separate personality of the company is statutory privileges, but it must be used for the legitimate purpose only. Whenever & wherever, if fraudulent or dishonest use is made of the legal entity, the individual will not be allowed to hide behind the curtain of the corporate personality. A duty is casted upon the Tribunal or the Court to break this shell of the company and to see who is actually benefitted by this curtain."
Case Title: Reserve Bank of India v SREI Infrastructure Finance Limited
Case No.: CP (IB) No.295/KB/2021.
The National Company Law Tribunal (NCLT), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), has held that the Insolvency and Bankruptcy Code, 2016 ("IBC") and the Reserve Bank of India (RBI) Guidelines do not prevail over each other as they have different scope and purpose. The NCLT does not have jurisdiction to adjudicate upon an audit conducted under RBI guidelines. The application was filed by Ex-Promoter of SREI Infrastructure Finance Ltd., Mr. Hemant Kanoria, challenging the KPMG Audit which was conducted under RBI guidelines. The Bench observed that:
"Therefore, the Code and the RBI circulars work in different fields and are, in a manner of speaking, disjoint sets. The adequacy or otherwise of KPMG's audit report would no doubt be determined by the lenders. We do not see any possibility of conflict between the two. There is no question of one prevailing over the other."
High Court
Case Title: Millennium Education Foundation v Educomp Infrastructure and School Management Limited
Case No.: ARB. P. 326 of 2022
The Delhi High Court Bench comprising of Justice Sanjeev Sachdeva has held that the mere pendency of an insolvency petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 is not a bar to the appointment of an arbitrator, neither an embargo on the power of the Court to decide arbitration applications. It is only when the insolvency petition is admitted and the moratorium is declared that the proceedings under the Arbitration Act would be non-maintainable.
All Related Proceedings Stand Discharged, Settled, Abated, & Extinguished On Approval Of Resolution Plan:Gujarat High Court
Case Title: Essar Steel Limited & Anr v State of Gujarat & Anr.
Case No.: C/SCA/8741/2006
The Gujarat High Court Bench comprising of Justice Vaibhavi D. Nanavati, while allowing an application filed by Essar Steel Limited seeking abatement of claims of the respondent (Arcelor Mittal Nippon Steel India Ltd.), has held that Section 31(1) of the IBC clarifies that once a resolution plan is approved by the Committee of Creditors then it shall be binding on all stakeholders, including the guarantors. It was further held that Section 31(1) ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate and hence, the claims of the Respondent were irrevocably and unconditionally abated, discharged, settled and extinguished in perpetuity upon approval of the Resolution Plan.
Rejected Claims By Resolution Professional In Insolvency Proceedings, To Be Decided By The Arbitrator: Delhi High Court
Case Title: Bharat Petroresources Limited v JSW Ispat Special Products Limited
Case No.: 2022 LiveLaw (Del) 469; ARB.P. 1154 of 2021.
The Delhi High Court Bench comprising of Justice Vibhu Bakhru has held that the claims rejected by Resolution Professional in the insolvency proceedings, on the ground that they arose after the insolvency commencement date, are to be decided by the arbitrator when the parties have an arbitration agreement. The Court observed that the claims arising after the insolvency commencement date would not be automatically extinguished. The order was passed on 11.02.2022.
IBBI
IBBI Rescinds Its Previous Circulars
The Insolvency and Bankruptcy Board of India (IBBI) vide its circular dated 23.05.2022 has rescinded its various earlier circulars by exercising its power under Section 196 of the Insolvency and Bankruptcy Code, 2016. As per circular dated 23.05.2022, IBBI conducted an exercise of review of its circulars and withdrew its earlier circulars as these circulars are no longer required due to incorporation of those changes in the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 or IBBI (Insolvency Professionals) Regulations, 2016.
IBBI Suspends IP Subrata Monindranath Maity Who Has Been Arrested By CBI Over Bribe Allegations
Case No.: IBBI/DC/95(Interim)/2022
The Insolvency and Bankruptcy Board of India (IBBI) has suspended Insolvency Professional, Mr. Subrata Monindranath Maity, vide an interim ex-parte order dated 09.05.2022, after the Central Bureau of Investigation (CBI) had arrested Mr. Subrata over bribe allegations.
On 03.05.2022 a complaint was filed before CBI, ACB Pune, alleging that after the settlement had taken place between the aforesaid Parties, Mr. Subrata (IRP in the matter) had approached Guardian Homes Pvt. Ltd. (Corporate Debtor) demanding an amount of Rs. 20 Lakhs as bribe in addition to the IRP fees amounting to Rs. 4 Lakhs, for completing the pending formalities before NCLT Mumbai after the settlement. It has been alleged that Mr. Subrata had threatened Guardian Homes that in case of non-payment of the bribe he might take coercive actions against Guardian Homes such as seizure of bank account and publication of notice of liquidation. CBI lodged a First Information Report (FIR) against Mr. Subrata on 04.05.2022 and arrested him thereafter. CBI has also issued a press release on 05.05.2022 narrating the case.
CBIC
CBIC Issues SOP for NCLT Cases In Respect Of The IBC
Instruction No. 1083/04/2022-CX9 dated: 23.05.2022
The Central Board of Indirect Taxes and Customs (CBIC) has issued the Standard Operating Procedure (SOP) for National Company Law Tribunal (NCLT) cases in respect of the Insolvency and Bankruptcy Code, 2016 (IBC).
The Board has instructed that the Insolvency and Bankruptcy Board of India establish the role of the GST and Customs authorities in certain crucial matters under the Insolvency and Bankruptcy Code, 2016. The GST and Customs Authorities have been classed as operational creditors. The authorities must file claims against corporate debtors when the corporate bankruptcy and resolution process is commenced and a public statement inviting claims is published by the insolvency professional. "It has also been noticed that the authorities then litigate on the denial of each claim, despite the established stance that no claims can be lodged after the plan is authorised and no demands can be made on the resolution applicant who has taken over the firm through such a resolution plan" the CBIC has instructed.
CBI
CBI Arrests Interim Resolution Professional For Demanding A Bribe Of 20 Lakhs
Central Bureau of Investigation (CBI) has arrested Insolvency Professional, Mr. Subrata Monindranath Maity, for demanding a bribe of Rs. 20 Lakhs from the promoter of Guardian Home Pvt. Ltd. for settlement of Corporate Insolvency Resolution Process (CIRP) of Guardian Homes.
NCLT Mumbai on 03.01.2020 dismissed the Section 9 petition against Guardian Homes but the decision was set aside by NCLAT vide its order dated 08.12.2020. Thereafter, NCLT Mumbai on 14.03.2022 had initiated CIRP against Guardian Homes and appointed Mr. Subrata Maity as the Interim Resolution Professional.
Subsequently, the dispute was settled between the Parties and an amount of Rs. 3 Crores was paid to Operational Creditor by Guardian Homes. It is alleged in the complaint dated 03.05.2022 filed before CBI, ACB Pune, that after the settlement, IRP had approached Guardian homes and demanded an additional amount of Rs. 20 Lakhs in addition to his fees of Rs. 4 Lakhs and in case of non-payment of the same, IRP will take coercive actions against the Guardian Homes such as seizure of bank account, publication of notice of liquidation.