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IBC Weekly Digest: 11th November To...

IBC Weekly Digest: 11th November To 17th November 2024

Mohd Malik Chauhan

20 Nov 2024 5:00 PM IST

Adjudicating Authority Cannot Enter Into Merits At S. 95 Application Stage Before Report Of RP Is Submitted U/S 99 Of IBC: NCLAT

Case Title:Central Bank of India Versus Deepen Arun Parekh

Case Reference: Company Appeal (AT) (Insolvency) No. 697 of 2024

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) affirmed that Adjudicating Authority cannot exercise its adjudicatory power at the stage of consideration of application under section 95 of the IBC by entering into the merits of the case. The power which is conferred on the adjudicating authority at this stage is to appoint a resolution professional. The Adjudicatory role comes into play when a report is submitted by the Resolution Professional under section 99 recommending either to admit or reject the application.

Directors Of Financial Creditors Not Disqualified From Filing Plea U/S 7 Of IBC Due To Sister Company's Default U/S 248 Of Companies Act: NCLAT

Case Title: CADILLAC INFOTECH PVT. LTD.Versus JKM INFRASTRUCTURE PVT. LTD and Ors.

Case Reference: Company Appeal (AT) (Insolvency) No. 1610 of 2024 & I.A. No. 5879 of 2024

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) held that directors of the financial creditors are not disqualified from filing a petition under section 7 of the IBC merely on the ground that sister company of the financial creditors in which they were holding the same position, defaulted under section 248 of the Companies Act in failing to continue its business for continuous period of 2 years. The default under section 164(2) of the Companies Act has to be proved to disqualify them from acting as the directors in other companies than which is in default.

Any Amount Proposed In Settlement Plan U/S 12A Of IBC Cannot Be Refunded If Plan Is Approved: NCLAT

Case Title: Globomet Engineering Private Limited Versus Shri Tejas J Parikh and Ors.

Case Reference: Company Appeal (AT) (Insolvency) No. 1080 of 2022

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) held that any amount proposed in the settlement plan under section 12A of the IBC cannot be refunded if the plan is later approved and the CIRP is closed. In this case, a settlement plan was proposed by the appellant in which 3 crores rupees was proposed to be given to the financial creditors. This plan was later approved.

Corporate Debtor's Property Cannot Be Recovered By Owner/Lessor During Moratorium Period U/S 14 Of IBC: NCLAT

Case Title: Chandrakant Khemka Versus Santanu Bhattacharjee and Ors.

Case Reference: Company Appeal (AT) (Ins.) No. 1064 of 2023

The NCLAT New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) affirmed that properties occupied by the corporate debtor cannot be recovered by owner/lessor during the moratorium period under section 14 of the IBC. In this case, the NCLT had handed over the possession of the property of the CD to the respondents on the submission of RP that the property was no longer required. This submission of the RP was not backed by the decision of the CoC.
In Absence Of Pre-Existing Dispute, Petition U/S 9 Of IBC Must Be Admitted If Debt And Default Are Proved: NCLAT

Case Title: SURENDRA SANCHETI Versus GOSPELL DIGITAL TECHNOLOGIES CO. LIMITED and Ors.

Case Reference: Company Appeal (AT) (Insolvency) No. 583 of 2024

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) affirmed that once it is established that the corporate debtor has defaulted in the payment of operational debt which amount had clearly become due and payable above the threshold limit, and further if there is no credible or plausible evidence to show the existence of pre-existing dispute, application under section 9 must be admitted by the Adjudicating Authority.

Sale Of Corporate Debtor As Going Concern Under Liquidation Regulations Takes Precedence Over Scheme Of Compromise U/S 230: NCLAT

Case Title: Narottamka Trade & Vyapaar Pvt. Ltd., V SPP Insolvency Professionals LLP and Anr.

Case Reference: Company Appeal (AT) (CH) (Ins) No.305/2024 and (IA No.817/2024)

The NCLAT Chennai bench of Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) affirmed that the sale of the Corporate Debtor as a going concern under Regulations 32(e) & 32A of the Liquidation Regulations is more transparent and effective; therefore, the sale of the Corporate Debtor as a going concern will have precedence, rather than resorting to the Scheme of Compromise under Section 230 (1) of the Companies Act, 2013.

NCLAT Orders Refund Of Pre-CIRP Electricity Dues Paid By SRA Under Protest For Restoration Of Electricity Connection

Case Title: Twentyone Sugars Limited vs. Maharashtra State Electricity Distribution Co. Ltd.

Case Number: COMPANY APPEAL (AT) (INS) NO.487/2023

The NCLAT bench comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) has allowed the refund of pre-Corporate Insolvency Resolution Process (CIRP) electricity dues paid by the Successful Resolution Applicant (SRA). Maharashtra State Electricity Distribution Co. (Respondent) had imposed the clearance of past dues as a precondition for restoring electricity connection. The Tribunal held that even if the payment was not made by the SRA/Appellant under protest, the Respondent was barred from recovering arrears that were extinguished by operation of law.

CoC Can Direct Liquidation Of Corporate Debtor Any Time Before Confirmation Of Resolution Plan U/S 33(2) Of IBC: NCLAT

Case Title: Sunil Surrendrakumar Kakkad Shareholder & Suspended Director of Sujyot Infrastructure Pvt. Ltd. Versus Sujyot Infrastructure Pvt. Ltd. and Anr.

Case Reference: Company Appeal (AT) (Insolvency) No. 1423 of 2024

The NLCAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that the CoC in its commercial wisdom can decide to liquidate the corporate debtor anytime after its constitution but before the confirmation of the Resolution Plan under section 33(2) of IBC. It is not mandatory that all steps related to revival of the corporate debtor through resolution plan must be exhausted before the liquidation can be directed.

Section 19(2) Application Can Be Preferred For Effective Conduct Of CIRP Despite Challenge To Admission Of CIRP: NCLAT

Case Title: M/s. Vilmar Agro Polymers Pvt. Ltd vs. SPC FAB Private Limited Saraswathi Nilayam & Anr.

Case Number: Company Appeal (AT) (CH) (Ins) No. 55/2024

The NCLAT, Chennai bench comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) has held that an application under section 19(2) of the Insolvency & Bankruptcy Code is maintainable when the Corporate Insolvency Resolution Process (CIRP) is admitted. The Tribunal observed that section 60(5) will not have a superseding effect to the provisions contained under section 19(2) read with section 14 for the purpose of effective conduct of CIRP proceedings

NCLT

Extinguishment Of Promoters' Personal Guarantees In Resolution Plan Is Valid If Plan Complies With IBC Provisions: NCLT Mumbai

Case Title: Small Industrial Development Bank of India (SIDBI) V/s Harshad Deshpande and Anr.

Case Reference: IA No. 2573/2021 In CP (IB) 4367/MB/ of 2018

The NCLT Mumbai Bench of Justice Anil Raj Chellan (Technical Member) and Kuldip Kumar Kareer (Judicial Member) affirmed that the clause in the resolution plan for extinguishing the personal guarantees of promoters furnished in favour of all financial creditors or the commercial decision of the CoC to approve such release of personal guarantees, including guarantees executed in favour of dissenting financial creditors, will not contravene any provisions of the Code. Further, the dissatisfaction of a creditor in respect of payment under the Resolution Plan is of no consequence unless it violates any of the provisions of the Code.

Banking Companies Not Required To Exhaust MSME Revival Option Before Filing Petition U/S 7 Of IBC: NCLT, Mumbai

Case Title: Technology Development Board vs. M/s Perfect Infraengineers Limited

Case Number: C.P.(IB) No. 322/MB/2023

The NCLT, Mumbai Bench comprising Shri Prabhat Kumar (Technical Member) and Justice Shri V.G. Bisht (Judicial Member) has observed that restructuring process contemplated in the notification dated 29.05.2015 issued by the Ministry of Micro, Small and Medium Enterprises is another mode for revival and rehabilitation of the MSME Corporate Persons in addition to Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal held that it cannot be said that MSMED Act overrides the provisions of IBC, unless said so expressly in terms of Section 240A(2). Thus, it is not incumbent on the Banking companies to first exhaust the avenue of revival under the Notification before proceeding to file an application under section 7 of IBC for the resolution of financial defaults under the Code. The Tribunal also held that an application under section 7 can be adjudicated by the Tribunal even on application of one financial creditor, provided the debt due to such financial creditor exceeds the threshold limit. Therefore, another lender of Corporate Debtor need not be impleaded as party to proceed under section 7

IBC Weekly Digest: 11th November To 17th November 2024

Mohd Malik Chauhan

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