Supreme Court When Does Debt Become Financial Debt & Operational Debt Under IBC? Supreme Court Explains Case Title: Global Credit Capital Limited & Anr. Versus Sach Marketing Pvt. Ltd. & Anr. Citation: 2024 LiveLaw (SC) 331 The Supreme Court bench comprising Justice Abhay S. Oka and Justice Pankaj Mithal, has held that debt would be treated as an operational...
Supreme Court
When Does Debt Become Financial Debt & Operational Debt Under IBC? Supreme Court Explains
Case Title: Global Credit Capital Limited & Anr. Versus Sach Marketing Pvt. Ltd. & Anr.
Citation: 2024 LiveLaw (SC) 331
The Supreme Court bench comprising Justice Abhay S. Oka and Justice Pankaj Mithal, has held that debt would be treated as an operational debt only if the claim subject matter of the debt has some connection or co-relation with the 'service' rendered by the creditor to the debtor.
"Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the 'service' subject matter of the transaction.", the Bench opined.
The Court summarized the conclusions as follows :
· There cannot be a debt within the meaning of sub- section (11) of section 5 of the IB Code unless there is a claim within the meaning of sub-section (6) of section 5 of thereof;
· The test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money. The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of sub-section (8) of section 5;
· While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and
· Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co- relation with the 'service' subject matter of the transaction.
Process For IBC Offences To Be Issued By Sessions Court Despite Companies Act Amendment Vesting Jurisdiction On Judicial Magistrate: Supreme Court
Case Title: Insolvency And Bankruptcy Board Of India Versus Satyanarayan Bankatlal Malu & Ors.
Citation: 2024 LiveLaw (SC) 317
The Supreme Court bench comprising Justice BR Gavai and Justice Sandeep Mehta, while observing that the offences committed under the Insolvency and Bankruptcy Code, 2016 (“IBC”) would be tried by the Special Court established under Section 435 of the Companies Act, 2013 and the sessions judge would have the power to issue process against the accused, has upheld the issuance of process by the sessions judge to the accused.
The Court rejected the contention of the accused that the Sessions Judge wasn't empowered to issue process to the accused for the offences punishable up-to two years under the IBC but the judicial magistrate.
Reversing the High Court's decision, the Bench interpreted the scheme of Section 236(1) of IBC to hold that the power to try offences punishable under the IBC was vested in the special court by 'legislation by incorporation', meaning thereby the intention of the Parliament was clear to vest the power to issue summons upon the special court consisting of a person qualified to be a Sessions Judge or an Additional Sessions Judge. Thus, the subsequent amendments to the Section 435 of Companies Act, 2013 authorizing judicial magistrates to issue summons for offences punishable up to two years under the IBC would not have any effect on Section 236 of IBC.
NCLAT
Besides Section 27, RP Can Be Replaced On A Finding Given By NCLT Over His Conduct Or Any Proven Fact: NCLAT Delhi
Case title: Katra Realtors Pvt. Ltd. v Mr. Rajesh Ramnani, RP of Ansal Urban Condominiums Pvt. Ltd. & Anr.
Case No.: Company Appeal (AT) (Insolvency) No. 382 of 2024.
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Indevar Pandey (Technical Member), has held that an application filed for replacement of Resolution Professional, which is not filed under Section 27 of IBC, can be entertained when NCLT has given a finding on the conduct of Resolution Professional or in presence of any proven fact.
The NCLAT upheld the rejection of an application filed by a minority shareholder of the Corporate Debtor seeking replacement of Resolution Professional over mere allegations.
Case: Pankaj Mehta VS M/s. Ansal Hi-tech Township Limited
Citation: Comp. App (AT) (INS) No. 248 / 2023
The National Company Law Appellate Tribunal (NCLAT) New Delhi, comprising Justice M. Venugopal (Judicial Member) and Mr. Arun Baroka (Technical Member), has rejected an application filed by homebuyers under Section 7 of IBC seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Ansal Hi-Tech Township.
The Homebuyers had purchased flats in the Sushant Metropolis Township project being developed by Ansal Hi-Tech Township in NOIDA.
NCLAT held that homebuyers are from numerous different projects, and they have not established their case as creditors of a class concerning any particular project registered with RERA to fulfil the requirement of 10% or 100 homebuyers, as stipulated under Section 7(1) of IBC.
NCLAT Delhi: New Resolution Applicants Aren't Entitled To Participate In CIRP And Submit Resolution Plan To NCLT Without Issuance Of Fresh Form G
Case Title: Ashdan Properties Pvt. Ltd. vs. Mamta Binani (RP of Rolta India Ltd.) and Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 464 of 2024
Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member), has held that new Resolution Applicants are not entitled to submit applications to the Adjudicating Authority to participate in the Corporate Insolvency Resolution Process ('CIRP') and submit a Resolution Plan, when a fresh Form G hasn't been issued under Regulation 36A (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations 2016”).
NCLAT Delhi: RP Can Always Ask For Additional Information From Creditors To Substantiate The Claim And Exercise Due Diligence
Case Title: Mr. Umesh Kumar vs. Mr. Narendra Kumar Sharma, IRP of Indirapuram Habitat Centre Pvt. Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 100 of 2024
The National Company Law Appellate Tribunal ('NCLAT'), New Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member), has held the Resolution Professional can always ask for additional information from creditors to substantiate the claim and exercise due diligence.
NCLAT Delhi: Interveners Do Not Have The Right To Seek Relief For Themselves Before The Adjudicating Authority
Case Title: Jaiprakash Associates Ltd. vs. Jaypee Infratech Ltd. and Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 548 of 2023 & I.A. No. 2643, 3702 of 2023
The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) held that the interveners in a case do not have the right to seek relief for themselves before the Adjudicating Authority.
The NCLAT observed that interveners are expected to either support the challenged order or the appellant. The individuals who submit their claims to the Insolvency Resolution Professional and whose claims are documented have the complete right to approach the Successful Resolution Applicant or the Monitoring and Implementation Committee. They are entitled to pursue their entitlements according to the provisions outlined in the Resolution Plan.
NCLAT Delhi: Examining The Validity Of Any Contractual Agreement Is Beyond The Scope Of Powers Of RP
Case Title: Mr. Umesh Kumar vs. Mr. Narendra Kumar Sharma, IRP of Indirapuram Habitat Centre Pvt. Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 100 of 2024
The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member) held the examining the validity/sustainability of any contractual agreement including its formatting, etc lies outside the purview of the charter of duties and responsibilities of the Resolution Professional ('RP').
Case title: Gupta Textiles v Darshan Patel & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 408 of 2024
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Arun Baroka (Technical Member), has held that amount payable under resolution plan to Operational Creditors in terms of Section 30(2)(b) of IBC, can only be by way of cash and not partly paid Redeemable Preference Shares or equity.
NCLAT Chennai Stays Insolvency proceedings Against Charter Aircraft Service Provider 'Deccan Charters'
Case title: Sanjay Saihgal v Krone Finstock Private Limited & Anr.
Case No.: Company Appeal (AT) (CH) (Ins) No.123/2024
The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member), Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member), has stayed the insolvency proceedings initiated against Deccan Charters Pvt. Ltd. by the NCLT, till the next date of hearing i.e. 26.04.2024.
Deccan Charters is a Bengaluru based company which operates chartered helicopters and fixed wing aircrafts and also provides services such as aircraft maintenance, aircraft management and aviation training.
'Free Of Cost' Copy Of Order Sent By NCLT Registry Is Not A 'Certified Copy' For The Purpose Of Filing Appeal: NCLAT Chennai
Case title: Munagala Roja Harsha Vardhini v Vardhansmart Private Limited
Case No.: Company Appeal (AT) (CH) (Ins) No.23/2024
The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member), Justice Sharad Kumar Sharma (Judicial Member) and Shri Jatindranath Swain (Technical Member), has held that the 'free of cost' certified copy of final order sent by NCLT registry in compliance of NCLT Rules is not a 'certified copy' of the order for the purpose of filing appeal before NCLAT.
Rule 22(2) of the NCLAT Rules, 2016 provides that every appeal shall be accompanied by a certified copy of the impugned order. It was observed that the Appellant's obligation to apply for a certified copy of the order to be challenged by paying requisite fees cannot be dispensed with.
Delay In Issuance Of Sale Certificate Due To Restraint Order By NCLT, Auction Purchaser Not Entitled To Interest On Sale Consideration: NCLAT Delhi
Case title: Gokul Agro Resources Ltd. v Mr. Supriyo Kumar Chaudhuri
Case No.: Company Appeal (AT) (Insolvency) No. 1070 of 2023
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held an Auction Purchaser cannot claim interest on sale consideration from the Liquidator for delayed issuance of Sale Certificate, if the delay has occurred due to a restraint order passed by NCLT.
Allottee Obligated To Comply With Threshold Under Section 7(1) Of IBC Even After RERA Passes An Order In Its Favour: NCLAT Delhi
Case title: Shri Rahul Gyanchandani & Ors. v Parsvnath Landmark Developers Pvt. Ltd.
Case No.: Company Appeal (AT) (Insolvency) No. 309 of 2024
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Arun Baroka (Technical Member), has held that the status of an 'allottee' would not convert into a 'decree holder' for the purpose of IBC, merely because RERA Authority has passed an order in its favour directing the Builder/Corporate Debtor to refund the entire amount.
The second proviso to Section 7(1) of IBC states that, “Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less..”
The Allottee, even after procuring a favourable order from RERA, is obligated to meet the threshold given under second proviso to Section 7(1) for filing a petition under Section 7 of IBC.
“The Appellant cannot be said to go out of the definition of 'allottees' merely because they have an order in their favour by RERA and the Appellants' submission that they should be treated in a different category, i.e., category of 'Decree Holder' and are not required to comply with Section 7, sub-section (1), 2nd Proviso cannot be accepted. The Appellants even after order of the RERA, directing for refund by the Corporate Debtor, continued to be allottees and they have filed Section 7 Application as Financial Creditor of the Corporate Debtor. They are mandatorily required to comply with Section 7, sub-section (1), 2nd Proviso.”
NCLT
NCLT Mumbai Holds Resolution Professional Accountable For Biased Conduct, Sets Aside Approved Resolution Plan
Case: Bank of India Vs Wadhwa Buildcon LLP
Citation: C.P. (IB) No. 2946 of 2019
The National Company Law Tribunal (NCLT), Mumbai bench, comprising of Justice Reeta Kohli (Judicial Member) and Madhu Sinha (Technical Member), has held the Resolution Professional accountable for biased conduct aimed at facilitating the approval of the Successful Resolution Applicant (SRA) Plan by the Committee of Creditors (COC). Consequently, the NCLT has set aside the Resolution Plan of the SRA, as approved by the COC, holding SRA ineligible under Section 29A of the IBC to submit the Resolution Plan.
Party Refuses To Argue Unless Proceedings Are Recorded, NCLT Ahmedabad Adjourns Party's All Cases Sine Dine Till Recording Facility Is Made Available
Case Title: Gujarat Operational Creditors Association & Another Vs Nemo in 'State Bank of India v Essar Steels Ltd.'
Case No.: IA/347(AHM)2024 in CP(IB) 40 of 2017
The National Company Law Tribunal (“NCLT”), Ahmedabad Bench, comprising of Mrs. Chitra Hankare (Judicial Member) and Dr. Velamur G Venkata Chalapathy (Technical Member), has adjourned all matters sine dine belonging to Gujarat Operational Creditors Association (Applicant) till the time the project for online recording of proceedings is taken up by the administrative side of NCLT.
“Till the project for online recording of proceedings is taken up by the administrative side we will not hear any of applicant's matters and it is listed for further hearing Sine die as per his prayer.”
In a recall application filed by the Applicant, interim prayers were made for switching on the recording feature in Webex platform for audio/video recording of proceedings before NCLT. The NCLT ruled that it is not empowered under NCLT Rules or otherwise to grant such prayer.
“The main prayer sought by the Learned Counsel before this Court through this application is recording of the proceedings to be conducted when the cases filed by him are being heard in order to enable him to interpret or determine whether the orders passed are in order to satisfy the prayers filed by him. This Court has no powers under either the duties and responsibilities entrusted to this Court for conducting the proceedings, or the procedure prescribed in NCLT Rules (which were followed to hear the application) to pass any order as sought and the orders were passed strictly in terms of Rules laid down in NCLT 2016.”
NCLT Chennai - Resolution Professional Should Not Rely Solely On Corporate Debtor's Records For Verifying Claims
Case Title: K. Amutha Versus Resolution Professional of M/s. Ambojini Property Developers Private Limited
Case No.: CP/938/IB/2018
The National Company Law Tribunal (“NCLT”), Chennai bench, comprising Justice Jyoti Kumar Tripathi (Judicial Member) and Shri Ravichandran Ramasamy (Technical Member), has held that The Resolution Professional (RP) should not rely solely on the Corporate Debtor's records for verifying claims as the improper maintenance of the records can unfairly burden the creditors.
General Power Of Attorney Holder Can File An Application U/S 7 Of IBC Without A Specific Board Resolution Authorization: NCLT Mumbai
Case Title: Punjab National Bank v. Arshiya Limited
Case No.: CP (IB) No. 3143/MB/2019
The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising Shri K.R. Saji Kumar (Judicial Member) and Shri Sanjiv Dutt (Technical Member) has held that a General Power of Attorney (“GPA”) holder can file an application under Section 7 of IBC without having a specific Board Resolution.
The Bench held that under Section 7(1) of IBC, an application filed by a GPA holder will be considered to have been filed by the Financial Creditor itself and not by any person on its behalf. Therefore, a GPA holder does not need to have a specific Board Resolution as per the MCA Notification.
Loan Sanction Letter, Loan Agreement, Statement Of Account, And Copy Of Notice U/S 13(2) OF SARFAESI Constitute “Such Other Record” U/S 7(3)(A) Of IBC: NCLT Mumbai
Case Title: Indiabulls Housing Finance Limited v. Primcomm Media Distribution Ventures Private Limited
Case No.: C.P.(IB)-246(MB)/C-III/2022
The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising Smt. Lakshmi Gurung (Judicial Member) and Shri Charanjeet Singh Gulati (Technical Member), has held that loan sanction letter, statement of account, copy of notice under section 13(2) Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (“SARFAESI”), and revised payment schedule will constitute “such other record” under section 7(3)(a) of IBC.
HIGH COURT
Gujarat High Court Quashes Demand Notice And Assessment Order In Absence Of Any Claim Not Forming Part Of Resolution Plan
Case Title: Surya Exim Limited Thro Director Bhawani Singh Versus Union Of India & Ors.
Citation: 2024 Livelaw (Guj) 42; R/Special Civil Application No. 1195 Of 2023