NCLAT Delhi: CIRP U/s 7 Of IBC Can Be Initiated Against An Auction Purchaser In Proceedings Under SARFAESI Act, 2002

Case Title: Anjani Kumar Prashar (Suspended Director of Grandstar Realty Pvt. Limited) vs. Manab Datta & Ors.

Case No.: Company Appeal (AT) (Insolvency) No.1366 of 2023

The National Company Law Appellate Tribunal ('NCLAT') New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) held that Corporate Insolvency Resolution Process ('CIRP') can be initiated under Section 7 of IBC against an Auction Purchaser in proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act').

The NCLAT highlighted that financial debt can be incurred through various means, including assignment or transfers, as explicitly defined. In instances where amalgamation or demerger occurs under the Companies Act, 2013, resulting in the transfer or vesting of assets and liabilities to the amalgamated or transferee company, the transferee company cannot evade the obligations set forth in the insolvency code by claiming that disbursements were not directly made to it. Since the Corporate Debtor acquired the project under the SARFAESI Act, it cannot circumvent the provisions of the IBC and deprive the homebuyers of their rights. Given the existence of a financial debt, the filing of the application by the allottees under Section 7 cannot be faulted on this basis.

Once Resolution Plan Is Approved By CoC And NCLT, SRA Can't Seek Its Substitution With Another Resolution Applicant: NCLAT Delhi

Case title: UV Asset Reconstruction Company Ltd. & Anr. v Aircel Ltd. Through Its Monitoring Committee

Case No.: Company Appeal (AT) (Ins.) No. 333 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 after approval of a resolution plan by the Committee of Creditors (“CoC”) and NCLT, the Successful Resolution Applicant (“SRA”) cannot be substituted with another entity/resolution applicant.

The SRA is an Asset Reconstruction Company and the plan submitted by it was approved by the CoC and NCLT. Thereafter, the Reserve Bank of India (“RBI”) issued a circular intimating that Asset Reconstruction Companies cannot be Resolution Applicant unless they have achieved certain net worth. Since the SRA had not achieved the net worth as required by RBI, the SRA filed an application before NCLT seeking its substitution with another resolution applicant, owing to its subsequent ineligibility to be a resolution applicant as per RBI norms. The NCLT rejected the application and NCLAT has upheld the rejection.

NCLT

NCLT Kolkata: Dispute On Forgery And Fabrication Of Document Cannot Be Decided By Adjudicating Authority (NCLT) In A Summary Proceeding Under IBC

Case Title: Abdul Hannan vs. Jai Jute and Industries Ltd.

Case No.: Company Petition (IB) No. 154/KB/2022

The National Company Law Tribunal ('NCLT') Kolkata, comprising Smt. Bidisha Banerjee (Judicial Member), and Shri D. Arvind (Technical Member) held that the dispute relating to forgery and fabrication of a document cannot be adjudicated by the Adjudicating Authority in a summary proceeding under Insolvency and Bankruptcy Code, 2016 ('IBC').

The Tribunal placed reliance on the various decisions of the NCLAT in Radha Exports (India) Pvt. Limited vs. K.P. Jayaram, Jaginder Singh Lather vs. AU Small Finance Bank Ltd., Satori Global Limited v. Shailja Krishna, and Shri T.R. Arya v. Dilawari Motors Pvt. Ltd. wherein it was held that disputes as to whether the documents are forged or have been fabricated cannot be adjudicated by NCLT.

NCLT Kolkata: Police Complaint Before The Issuance Of The Demand Notice U/S 8 Of IBC Relating To Supply Of Inferior Goods Or Services Constitutes 'Pre-Existing Dispute'

Case Title: Abdul Hannan vs. Jai Jute and Industries Ltd.

Case No.: Company Petition (IB) No. 154/KB/2022

The National Company Law Tribunal ('NCLT') Kolkata, comprising Smt. Bidisha Banerjee (Judicial Member), and Shri D. Arvind (Technical Member) held that a Police Complaint, prior to the issuance of the Demand Notice under Section 8 of IBC prosecuting a dispute regarding the supply of inferior goods and/or service is a pre-existing dispute.

The Bench placed reliance on the NCLAT decision in Sherbahadur D. Yadav vs. M/s. Rohan Dyes and Intermediates Ltd. wherein it observed that existence of complaints prior to the initiation of proceedings u/s 9 of IBC is to be considered as a pre-existing dispute between the parties.

Further reliance was placed on NCLAT decision in Mr. Anil J. Nemaavarkar vs. M/s. Kumar Builders Mumbai Realty Pvt. Ltd,. wherein it was held that IBC is not for resolving disputes relating to service, benefits, and the remedy lies elsewhere.

Section 7 IBC Petition Can't Be Filed By Power Of Attorney Holder Unless Authorized By Board Resolution: NCLT Hyderabad

Case Title: Axis Bank Limited vs Karvy Forde Search Pvt. Ltd.

Case No.: CP(IB) No. 249/7/HDB/2022

The National Company Law Tribunal (“NCLT”), Hyderabad Bench, comprising Dr Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Charan Singh (Technical Member), has held that a petition under Section 7 of IBC cannot be filed by a 'power of attorney' holder unless duly authorized by a Board Resolution.

The NCLT examined the requirements for applying under Section 7(2) of IBC and referred to Form-1 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Entries in the form mandate submission of the name and address of the authorized person to apply on behalf of the financial creditor, along with an authorization letter. However, the form does not explicitly mention a 'power of attorney holder'.

The NCLT perused the notification issued by the Central Government under Section 7(1) of IBC, specifying persons authorized to apply on behalf of a financial creditor, which did not include 'power of attorney holders'.