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IBC Weekly Round-Up [25th November...

IBC Weekly Round-Up [25th November To 1st December, 2024]

Mohd Malik Chauhan

2 Dec 2024 7:05 PM IST

NCLT Is Not Right Forum To Decide Whether Closure Of Factory Under Industrial Dispute Act Was As Per Law: NCLAT

Case Title: Rakesh J Shah & Ors. Vs. Sanjay Kumar Agarwal & Ors.

Case Reference:Company Appeal (AT) (Insolvency) No. 1490 of 2024

The NCLAT New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that the Adjudicating Authority is not the right forum to decide whether closure of the factory was in accordance with law. Such an issue should have been raised before the relevant authority under the Industrial Disputes Act and not before the Adjudicating Authority.

Revisiting Resolution Plan After Commencement Of Liquidation Process Is Against Principle Of Procedural Finality: NCLAT Chennai

Case Title: Mapletree Leather Goods Private Limited v. Savan Godiawala, C/o Deloitte Touche Tohmatsu India LLP

Case Number: Company Appeal (AT)(CH)(Ins) No.314/2020 (IA No.436/2021)

The National Company Law Appellate Chennai comprising of Justice Sharad Kumar Sharma, (Member Judicial) and Jatindranath Swain (Member Technical) dismissed two appeals filed by the Corporate Debtor seeking to challenge the order of NCLT, Bangalore by which it was directed to be put into the liquidation process and second to challenge the order of the same tribunal which dismissed the prayer of the Appellant for issue of an appropriate direction to the liquidator to put on hold the auction of the mmovable asset of the Corporate Debtor.

Performance Pay Does Not Qualify As Operational Debt For Which Proceedings U/S 9 Of IBC Cannot Be Initiated: NCLAT

Case Title: M Ramakanth v. M/s. Nagarjuna Fertiliser and Chemicals Limited

Case Reference:Company Appeal (AT) (CH) (Ins) No.213/2024

The NCLAT Chennai bench of Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) has held that a variable claim like performance pay which is not certain and has to be determined based on the performance of the employee will not be an operational debt as it is not the payment due therefore proceedings under section 9 of the IBC cannot be initiated for such a claim.

Application U/S 95 Cannot Be Rejected On Grounds Of Pendency Of One Time Settlement Proposal: NCLAT

Case Title: Mohit Dewan v. Bank of Maharashtra and Anr.

Case Reference:Comp. App. (AT) (Ins) No. 2176 of 2024 & I.A. No. 8129 of 2024

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that pendency of One Time Settlement Proposal (OTS) which is yet to be accepted, cannot be a ground to refuse initiation of insolvency process against the personal guarantors.

No Part Of Resolution Plan Can Be Given On Application Of Operational Creditor Till Plan Is Approved By Adjudicating Authority: NCLAT

Case Title: Pakhi Infra and Ors. v. Jabalpur MSW Pvt. Ltd.

Case Reference:Comp. App. (AT) (Ins) No. 2175 of 2024

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that no part of the Resolution Plan can be given to the operational creditor till the Resolution Plan pending for approval before the Adjudicating Authority is approved. However, any objections to the approval of the plan can be raised before the Adjudicating Authority.

Sale Certificate Issued In Favor Of Successful Bidder Can Be Cancelled If Bid Amount Is Not Paid Within 90 Days: NCLAT

Case Title: S P Construction v. Narendra Kumar Sharma

Case Reference:Company Appeal (AT) (Insolvency) No. 858 of 2024

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that as per Liquidation Regulations, the bid amount has to be paid within 90 days. If the amount is not paid, sale certificate issued in favor of the Successful Bidder can be cancelled and the security amount be forfeited.

Information Memorandum Based On Which Resolution Plan Is Submitted And Approved By CoC Cannot Be Modified: NCLAT

Case Title: Mrs. Supriya Singh Versus M/s Ansal Urban Condominiums Pvt. Ltd. and Ors.

Case Reference:Company Appeal (AT) (Insolvency) No. 1974 of 2024

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that Information Memorandum prepared by the Resolution Professional based on which the Resolution Plan was submitted and later approved by the CoC, cannot be modified.In this case, the allotment units to homebuyers were cancelled by the erstwhile management of the Corporate Debtor and this information was also included in the Information Memorandum based on which the plan was submitted and approved.

Share Application Money Deposited With Corporate Debtor Cannot Be Treated As Financial Debt U/S 5(8) Of IBC: NCLAT

Case Title:M/s. MURLIDHAR VINCOM PVT. LTD. Versus M/s. SKODA (INDIA) PVT. LTD

Case Reference:Company Appeal (AT) (Insolvency) No. 1334 of 2024

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that share application money deposited with the corporate debtor cannot be treated as financial debt under section 5(8) of the IBC. In this case, share application money was given for the allotment of shares but neither were shares allotted nor was money refunded.

Petition U/S 9 Of IBC Cannot Be Rejected On Grounds Of Raising Spurious Claim Of Pre-Existing Dispute: NCLAT

Case Title: Romi Datta Versus Sigma Supply Chain Solutions Pvt. Ltd and Anr.

Case Reference:Company Appeal (AT) (Insolvency) No. 1652 of 2023

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) has held that making belated entries in the books of account to show that goods were misappropriated cannot escape the conclusion that the dispute raised by the corporate debtor was merely a moonshine just to avoid the liability.

Impleadment Of Party After Closure Of Initial CIRP Plea Against Corporate Debtor: NCLAT Chennai Protects Operational Creditor's Claims

Case Title: Sathya Moorthy Sai Prasad vs Shapoorji Pallonji and Company Pvt. Ltd. & Anr.

Case No.: Company Appeal (AT) (CH) (Ins) No.134/2023 (IA Nos. 449/2023, 446/2023, 447/2023, 448/2023, 450/2023, 889/2023, 161/2024, 999/2024 & 1134/2024)

The National Company Law Appellate Tribunal (NCLAT), Chennai bench of Justice Sharad Kumar Sharma (Judicial Member) and Mr Jatindranath Swain (Technical Member) allowed the impleadment application filed by an Operational Creditor, on the ground that its application to initiate CIRP proceedings against the Corporate Debtor were closed due to initiation of CIRP by another creditor. The NCLAT exercised its discretionary power under Order 1 Rule 10 (2) of the CPC to allow the application.

Guarantor Cannot Become Financial Creditor Without Making Any Payment In Discharge Of Guarantee: NCLAT

Case Title: Mr. Suresh Kumar and Anr. Versus Central Bank of India

Case Reference: Company Appeal (AT) (Insolvency) No. 1592 of 2024

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that guarantor cannot become a financial creditor without paying any amount towards discharging the liability of the principal borrower for whom the guarantee was given.

Once Plausibility Of Pre-Existing Dispute Is Established, Application U/S 9 Of IBC Must Be Rejected: NCLAT

Case Title: M/s. Kashyap lnfraprojects Pvt. Ltd. Versus M/s. Hi-Tech Sweet Water Technologies Pvt. Ltd.

Case Reference: Company Appeal (AT) (Insolvency) No. 33 of 2023

The NCLAT New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Barun Mitra (Technical Member) and Indevar Pandey (Technical Member) has held that IBC bestows only summary jurisdiction upon the Adjudicating Authority. Once plausibility of a pre-existing dispute is noticed, it is not required of the Adjudicating Authority to make further detailed investigation. It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regarding the operational debt.

Application U/S 7 Of IBC Cannot Be Admitted In Absence Of Debt And Default: NCLAT New Delhi

Case Title: Mr. Atul Nathalal Patel Versus Mr. Manish Pardasani and Ors.

Case Reference:Company Appeal (AT) (Insolvency) No. 1008 of 2023

The NCLAT New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) has held that application under section 7 of the IBC cannot be admitted in absence of any debt and consequent default on the part of the corporate debtor. In this case, the corporate debtor had discharged the liability arising under the agreement despite this an application under section 7 was admitted.

Fraudulent Initiation Of CIRP Can Be Set Aside By NCLAT While Hearing Appeal U/S 61: NCLAT New Delhi

Case Title: Apnaghar Builders Pvt. Ltd. Versus Intense Fitness & Spa Pvt. Ltd. & Ors.

Case Number: Comp. App. (AT) (Ins.) No. 1025 of 2022 & I.A. No. 2964, 2965, 2966 of 2022

The 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 fraudulent initiation of the CIRP can be set aside by the NCLT or as a corollary by NCLAT also as they have jurisdiction to decide whether any proceeding under the code has been initiated fraudulently or not. In this case, the financial creditor in connivance with the corporate debtor and ex management of the corporate debtor had initiated the CIRP under section 7 of the code.

Written Agreement Not Mandatory To Prove Financial Debt If It Can Be Proved From Other Materials On Record: NCLAT

Case Title: Ravi Auto Ltd. Vs. Surana Mercantiles Pvt. Ltd.

Case Number: Company Appeal (AT) (Insolvency) No. 1059 of 2022 & I.A. No. 3090 of 2022

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Judicial Member) and Mr. Arun Baroka (Technical Member) has affirmed that it is not necessary for financial debt to be proved by a written agreement if it can be established from other materials on record then application under section 7 can be admitted.In this case, the section 7 application of the financial creditor was rejected on the ground that there was not written agreement to prove the existence of financial debt.

Liquidator Can Recover Amount Which Belongs To Corporate Debtor By Filing Application U/S 60(5)(c) Of IBC: NCLAT

Case Title: Arkay Logistics Limited Versus Mr. Abhijit Guhathakurta

Case Number: Company Appeal (AT) (Insolvency) No.836 of 2024 & I.A. No.3021 of 2024

The NCLAT New Delhi bench of Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that liquidator can recover the amount of the corporate debtor by filing an application under section 60(5)(c) of the code before the NCLT as it is a matter which arises solely from or which relates to the insolvency of the Corporate Debtor.

If Interest On Principal Amount Crosses Threshold Limit, Application U/S 7 Of IBC Can Be Admitted: NCLAT

Case Title: Mrs. Rita Kedia Versus Ashika Global Securities Private Limited and Ors.

Case Number: Company Appeal (AT) (Insolvency) No. 1536 of 2023

The NCLAT Delhi bench of Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) has affirmed that if interest on the principle amount disbursed to the corporate debtor crosses the threshold limit as provided under section 4 of the IBC, application under section 7 of the code can be admitted as interest is considered to be a disbursal against time value of money under section 5(8) of the code. In this case, although the principal amount was not claimed but the interest claimed crossed the threshold limit.

NCLT

Reduction Of Share Capital Does Not Exempt Company From Fulfilling Other Statutory Obligations: NCLT Ahmedabad

Case Title: Mahan Industries Limited

Case Number: CP 8 of 2023 (Under Sec 66 of Companies Act, 2013)

The National Company Law Tribunal, Ahmedabad comprising of Dr V.G Venkata Chalapathy (Member Technical) and Chitra Hankare (Member Judicial) approved a Section 66 application of Companies Act, 2013 filed by the Mahan Industries, seeking confirmation in the reduction of its share capital.

Mere Possession Over Assets Of Corporate Debtor Under SARFAESI Act Does Not Bar Filing Of Petition U/S 7 Of IBC: NCLT Kolkata

Case Title: SREI Equipment Finance Ltd. v. Roadwings International Pvt. Ltd.

Case Reference: I.A. (IB) No. 1268/KB/2024 in Company Petition (IB) No. 224/KB/2023

The NCLT Kolkata bench of Ms. Bidisha Banerjee (Judicial Member) and Shri Arvind Devanathan (Technical Member) have held that mere possession over assets of the corporate debtor under the SARFAESI Act does not prevent the financial creditor from preferring an application under section 7 of the IBC.

Only Assets Are Transferred In Going Concern Sale Of Corporate Debtor Under Liquidation, Liabilities Must Be Settled U/S 53 Of IBC: NCLT Mumbai

Case Title: Mr. Ravikant Modi v. Mr. Anshul Gupta (Liquidator)

Case Reference: IA No. 929 of 2024 in CP (IB) No. 1088/MB/2020

The NCLT Mumbai bench of Ms. Reeta Kohli (Judicial Member) and Ms. Madhu Sinha (Technical Member) has held that in a sale of the corporate debtor in liquidation as a going concern, only assets are transferred and liabilities have to be discharged as per section 53 of the Code.

Threshold Limit For Initiating Insolvency Process Against Personal Guarantors Is Also ₹1 Crore: NCLT New Delhi

Case Title: Mudraksh Investfin Pvt. Ltd. v. Gursev Singh

Case Reference: RCP IB-21/ND/2024 Old No- IB-422/ND/2024

The NCLT New Delhi bench of Shri Subrata Kumar Dash (Technical Member) and Shri Ashok Kumar Bhardwaj (Judicial Member) had held that the threshold limit for initiating insolvency process against the personal guarantors under section 95 of the Code would be the same as is with respect to the corporate debtor under section 4 of the IBC i.e. 1 crore.

IBC Weekly Round-Up [25th November To 1st December, 2024]

Mohd Malik Chauhan

The NCLT Kolkata bench of Ms. Bidisha Banerjee (Judicial Member) and Shri Arvind Devanathan (Technical Member) have held that mere possession over assets of the corporate debtor under the SARFAESI Act does not prevent the financial creditor from preferring an application under section 7 of the IBC.

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