IBC Weekly Digest: 4th November To 10th November 2024

1. Noida Special Economic Zone Authority Vs. Manish Agarwal & Ors., CIVIL APPEAL NOS. 5918-5919 OF 2022, 2024 LiveLaw (SC) 858
2. STATE BANK OF INDIA AND ORS. Versus THE CONSORTIUM OF MR. MURARI LAL JALAN AND MR. FLORIAN FRITSCH AND ANR.| C.A. No. 5023-5024/2024 and Connected, 2024 LiveLaw (SC) 866
3. Pratham Expofab Private Limited v. Mr. Anil Matta, Resolution Professional and Ors., Company Appeal (AT) (Insolvency) No. 1803 of 2024
4. Sandip Narendrakumar Patel (Promotor/ExDirector) Yours Ethnic Foods Pvt. Ltd. vs. Svakarma Finance Pvt. Ltd. & Anr., Comp. App. (AT) (Ins) No. 1419 of 2023
5. Telecom Regulatory Authority of India v. Reliance Communication Ltd. & Ors., Company Appeal (AT) (Insolvency) No.355 of 2024
6. SUDIP DUTTA @ SUDIP BIJOY DUTTA v. PRASHANT JAIN, Company Appeal (AT) (Insolvency) No. 1494 of 2024 & I.A. No. 5389 of 2024
7. Hari Vitthal Mission vs. Ravi Sethia & Ors., Company Appeal (Ins) No. 1206 of 2022 & I.A. No. 3657, 3658, 3659 of 2022 & 4766 of 2023
8. JUBIN KISHORE THAKKAR V. PHOENIX ARC PRIVATE LIMITED, Company Appeal (AT) (Insolvency) No. 1931 of 2024
9. Dhiren Shantilal Shah RP of High Ground Enterprise Ltd. v. Swastik Productions Pvt. Ltd, Company Appeal (AT) (Insolvency) No. 360 of 2024 & Interlocutory Application Nos.1223 of 2024
10. Sandeep Behl v. Nirmal Trading Company and Ors., Company Appeal (AT) (Insolvency) No. 36 of 2024
11. COROB INDIA PVT. LTD. v. MR. BIRENDRA KUMAR AGRAWAL and Anr., Company Appeal (AT) (Insolvency) No. 749 of 2024
12. Alok Tripathi, Suspended Director v. Mohit K Gupta, Liquidator, Company Appeal (AT) (Insolvency) No. 1817 of 2024
13. Mr. Vinay Rai (Personal Guarantor) v. Technology Development Board and Ors., Company Appeal (AT) (Insolvency) No. 1891 of 2024
14. Kundan Minerals and Metals Limited v. (National Stock Exchange of India Limited, Mumbai, I.A. (IB) No. 1720/KB/2024

Supreme Court

'IBC Prevails Over SEZ Act', Supreme Court Rejects Noida SEZ's Claim

Case Title: Noida Special Economic Zone Authority Vs. Manish Agarwal & Ors., CIVIL APPEAL NOS. 5918-5919 OF 2022

Citation : 2024 LiveLaw (SC) 858

The Supreme Court dismissed the Noida Special Economic Zone's (NSEZ) plea challenging the NCLAT's decision to approve a resolution plan that granted Rs. 50 Lacs against NSEZ's admitted claim of about Rs. 6 Crore.

The NCLAT reduced the claim amount, partly due to penalties related to the renewal of the sub-lease and transfer charges.

The bench comprising Justices Abhay S. Oka and Augustine George Masih ruled that the Insolvency and Bankruptcy Code (IBC) prevails over the SEZ Act due to Section 238 of IBC's overriding effect, rejecting NSEZ's argument for exemptions from such payments.

Supreme Court Orders Liquidation Of Jet Airways On Failure Of Resolution Plan

Case Details : STATE BANK OF INDIA AND ORS. Versus THE CONSORTIUM OF MR. MURARI LAL JALAN AND MR. FLORIAN FRITSCH AND ANR.| C.A. No. 5023-5024/2024 and Connected

Citation : 2024 LiveLaw (SC) 866

The Supreme Court invoked its extraordinary powers under Article 142 of the Constitution to order the liquidation of Jet Airways in view of the "peculiar and alarming" circumstance that the resolution plan has not been implemented for five years.

The Court set aside the NCLAT Order which allowed the cash-strapped Jet Airways' ownership transfer to the Successful Resolution Applicant (SRA) without complete payment in accordance with the resolution plan.

'No Political Appointments' : Supreme Court Decries Poor Functioning Of NCLTs/NCLAT, Says Members Often Lack Domain Knowledge

Case Details : STATE BANK OF INDIA AND ORS. Versus THE CONSORTIUM OF MR. MURARI LAL JALAN AND MR. FLORIAN FRITSCH AND ANR.| C.A. No. 5023-5024/2024 and Connected

Citation : 2024 LiveLaw (SC) 866

In the judgment ordering the liquidation of Jet Airways, the Supreme Court made several critical remarks against the abysmal functioning of the National Company Law Tribunals and the National Company Law Appellate Tribunal benches.

Slamming the "growing tendency" of the NCLT and NCLAT members to ignore the orders of the Supreme Court, the Court stated that only persons of impeccable integrity should be appointed as the Tribunal Members. There should be no political appointment, the Court categorically stated.

NCLAT

Settlement Plan U/S 12A Of IBC Cannot Be Considered By CoC After Approval Of Resolution Plan: NCLAT

Case Title: Pratham Expofab Private Limited v. Mr. Anil Matta, Resolution Professional and Ors.

Citation: Company Appeal (AT) (Insolvency) No. 1803 of 2024

The NCLAT New Delhi Bench of Justices Ashok Bhushan and Barun Mitra affirmed that a settlement proposal under Section 12A of the IBC cannot be put before the CoC after the CoC has approved the resolution plan. The tribunal further observed that with the approval of the resolution plan by the CoC, the plan becomes inter se binding between the CoC and the SRA and hence no settlement proposal of the suspended management can be considered thereafter.

Recall Notice Issued During Cut-Off Period U/S 10A Of IBC Doesn't Alter Date Of Default If Default Occurred Before Cut-Off Period: NCLAT

Case Title: Sandip Narendrakumar Patel (Promotor/ExDirector) Yours Ethnic Foods Pvt. Ltd. vs. Svakarma Finance Pvt. Ltd. & Anr.

Case Number: Comp. App. (AT) (Ins) No. 1419 of 2023

The National Company Law Appellate Tribunal (NCLAT), New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) has held that the issuance of a recall notice during the cut off period specified under Section 10A (i.e. from 25.03.2020 to 25.03.2021) does not defer the date of default if the default occurred before 25.03.2020. The Tribunal noted that the recall notice issued during the cut off period was a procedural step that had no bearing on the initial default date because the default occurred well before the cut-off period. The Tribunal held that the application under section 7 of the Insolvency & Bankruptcy Code (IBC) was not hit by section 10A.

IBC Shall Prevail Over TRAI Act, Any Penalty Imposed By TRAI To Be Recovered As Per Scheme Of IBC: NCLAT

Case Title: Telecom Regulatory Authority of India v. Reliance Communication Ltd. & Ors.

Case Reference: Company Appeal (AT) (Insolvency) No.355 of 2024

The NCLAT New Delhi Bench of Justices Ashok Bhushan (Chairperson), Barun Mitra and Arun Baroka held that the IBC being a special statute and having a non-obstante clause under section 238 of the IBC shall prevail over the TRAI Act therefore any penalty imposed by the TRAI on the corporate debtor would be recovered as per the scheme of the IBC. No special treatment can be given to the TRAI over other creditors of the corporate debtor.

When Repayment Plan Is Not Submitted, Creditors Are Entitled To File Application For Bankruptcy Against Debtor U/S 121 Of IBC: NCLAT

Case Title: SUDIP DUTTA @ SUDIP BIJOY DUTTA v. PRASHANT JAIN

Case Reference: Company Appeal (AT) (Insolvency) No. 1494 of 2024 & I.A. No. 5389 of 2024

The NCLAT New Delhi Bench of Justices Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that the creditors are entitled to file a Bankrupcty Application under section 121 of the IBC if no repayment plan as per section 106 of the IBC is submitted or if submitted but rejected by the Adjudicating Authority under section 115 of the IBC.

Resolution Professional Has Authority To Determine Creditor's Related Party Status: NCLAT

Case Title: Hari Vitthal Mission vs. Ravi Sethia & Ors.

Case Number: Company Appeal (Ins) No. 1206 of 2022 & I.A. No. 3657, 3658, 3659 of 2022 & 4766 of 2023

The NCLAT bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) has held that the Resolution Professional (RP) has the authority to determine the related party status of a creditor. The Tribunal also held that In all cases where the Corporate Debtor is controlled by a trust, the trust would fall under the category of a related party in section 5(24)(h) and (j) of the Insolvency and Bankruptcy Code, 2016 (IBC).

Petition U/S 7 Of IBC Is Maintainable For Default Which Occurred Post Consent Decree: NCLAT

Case Title: JUBIN KISHORE THAKKAR V. PHOENIX ARC PRIVATE LIMITED

Case Reference: Company Appeal (AT) (Insolvency) No. 1931 of 2024

The NLCAT New Delhi bench of Justices Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) affirmed that a final judgment and/or decree of any Court or Tribunal or any Arbitral Award for payment of money, if not satisfied, would fall within the ambit of a financial debt for which the creditor is entitled to initiate proceedings under Section 7 of the IBC. In this case, the consent decree was passed in which the corporate debtor was directed to pay the debts but the corporate debtor defaulted.

Condonation Of Delay Is Case Specific, No Inflexible Rule Can Be Laid Down To Condone Delay U/S 61 Of IBC: NCLAT

Case Title: Dhiren Shantilal Shah RP of High Ground Enterprise Ltd. v. Swastik Productions Pvt. Ltd

Case Reference: Company Appeal (AT) (Insolvency) No. 360 of 2024 & Interlocutory Application Nos.1223 of 2024

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) affirmed that the condonation of delay in filing of the Appeal is on facts of each case, no inflexible rule can be laid down while exercising jurisdiction to condone the delay. In Appeals filed under section 61 the IBC, the jurisdiction of the Tribunal to condone the delay in filing of the Appeal after expiry of the limitation period, is only 15 days, which jurisdiction can be exercised.

Once Pre-Existing Dispute With Regard To Operational Debt Is Established, Petition U/S 9 Of IBC Cannot Be Admitted: NCLAT

Case Title: Sandeep Behl v. Nirmal Trading Company and Ors.

Case Reference: Company Appeal (AT) (Insolvency) No. 36 of 2024

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) affirmed that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. If the existence of a dispute prior to filing of an insolvency petition is established and the defence raised is not moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the behest of the Operational Creditor.

Security Deposit In Lease Agreement If Repayable Without Any Interest Cannot Be Classified As Financial Debt U/S 5(8) Of IBC: NCLAT

Case Title: COROB INDIA PVT. LTD. v. MR. BIRENDRA KUMAR AGRAWAL and Anr.

Case Reference: Company Appeal (AT) (Insolvency) No. 749 of 2024

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) held that security deposit given, while entering into a lease agreement cannot be classified as financial debt under section 5(8) of the IBC when it had been advanced with a condition that it would be returned without any interest once the possession of the leased premise is handed over.

Liquidator's Reliance On Transaction Audit Report Sufficient To File Application For Avoidance Of Preferential Transactions U/S 43 Of IBC: NCLAT

Case Title: Alok Tripathi, Suspended Director v. Mohit K Gupta, Liquidator

Case Reference: Company Appeal (AT) (Insolvency) No. 1817 of 2024

The NLCAT New Delhi bench of Justices Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that when the Liquidator has got a Transaction Audit Report done and on the basis of which has come to a conclusion that this is a preferential transaction, it cannot be said that he has not formed an independent opinion before filing an application for avoidance of preferential transactions under section 43 of the IBC.

Filing Petition U/S 94 Of IBC By Guarantor Through RP Does Not Preclude Financial Creditors From Seeking Replacement Of RP: NCLAT

Case Title: Mr. Vinay Rai (Personal Guarantor) v. Technology Development Board and Ors.

Case Reference: Company Appeal (AT) (Insolvency) No. 1891 of 2024

The NLCAT New Delhi bench of Justices Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that financial creditors are entitled to file an application seeking replacement of the Resolution Professional under section 98 of the IBC if they are of the opinion that the RP would not work in an independent manner or has association with other parties to the litigation. The fact that personal guarantor has a vested right to initiate insolvency resolution process under section 94 of the IBC does not preclude the financial creditor from filing the application under section 98 seeking replacement of the RP.

NCLT

Approved Resolution Plan Can Be Amended To Ensure Statutory Compliance U/S 31 Of IBC: NCLT Kolkata

Case Title: Kundan Minerals and Metals Limited v. (National Stock Exchange of India Limited, Mumbai

Case Reference: I.A. (IB) No. 1720/KB/2024

The NCLT Kolkata Bench of Justices D. Arvind and Bidisha Banerjee held that the approved resolution plan can be amended to ensure that it complies with the statutory provisions under section 31(e) of the IBC. In this case, an application seeking amendment to the approved resolution plan was filed by the SRA to increase the public shareholdings to 5% as mandated by Rule 19(5) of the SCRA Rules. The public shareholdings stood at 2.28% after the approval of the plan.

Article

Exploring The Priority Of Consideration For Insolvency Applications U/S 7 Of IBC Over Arbitration Applications U/S 8 Of Arbitration Act

In a recent decision titled Century Aluminium Company Limited v. Religare Finvest Limited (2024), the NCLAT grappled with an important question whether, when an insolvency petition under section 7 of the IBC is filed and yet to be admitted, subsequent filing of an arbitration application under section 8 of the Arbitration Act would be maintainable or not.

The tribunal observed that when the insolvency petition is filed and admitted or yet to be admitted, pendency or subsequent filing of the arbitration application is immaterial. The insolvency petition has to be decided first. The tribunal further observed that purpose of the IBC would be defeated if the insolvency petition is postponed just because a corresponding arbitration matter is pending.

IBBI Releases Discussion Paper On Real Estate Issues, Suggests Inclusion Of Land Authorities In CoC Meetings

On 7th November, 2024, the Insolvency and Bankruptcy Board of India (IBBI) has released a discussion paper on the issues related with the Real Estate with seven proposals.

This discussion paper is based on findings and recommendations from a recent study group by the Indian Institute of Insolvency Professionals of ICAI (IIIPI) that focused on improving real estate resolutions under IBC and coordination with RERA. It also includes issues and concerns raised during recent consultations with resolution applicants, Insolvency Professionals and other key stakeholders in the insolvency process.