IBC | Resolution Plan Approved By CoC Can't Be Withdrawn or Modified By Resolution Applicant: Supreme Court

Case Title: Deccan Value Investors L.P. & Anr. Versus Dinkar Venkatasubramanian & Anr.

Citation: 2024 LiveLaw (SC) 265

The Supreme Court has reiterated that once a resolution plan is approved by the Committee of Creditors (“CoC”) then it becomes impermissible for the resolution applicant to withdraw or modify the resolution plan.

The Bench Comprising Justices Sanjiv Khanna and Dipankar Datta referred to the Judgment of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Another, where the Supreme Court elaborated and set out several reasons why the resolution applicant cannot be permitted to withdraw or modify the resolution plan after approval by the Committee of Creditors, and before an order under Section 31(1) of the Code is passed.

The court observed that due to the absence of any statutory provision in the Insolvency and Bankruptcy Code, it is impermissible for the resolution applicant to modify or withdraw the resolution plan after the plan was approved by the CoC.

“The effect of approval by the adjudicating authority under Section 31(1) of the Code makes the resolution plan binding on all stakeholders, even those who are not members of the Committee of Creditors. The scrutiny by the adjudicating authority for grant of approval in terms of Section 31(1), read with other provisions of the Code, is limited and restricted. It does not allow or permit the resolution applicant to unilaterally amend/modify or withdraw the resolution plan post approval by the Committee of Creditors.”, the court said.

NCLAT

Voting For Section 12A Proposal To Be Computed As Per Proviso To Section 25A(3A) R/w Section 25A(3) Of IBC: NCLAT Delhi

Case title: Vijay Saini v Shri Devender Singh & Ors

Case No.: Comp. App. (AT) (Ins.) No. 1194 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 that for computing voting with regard to proposal under Section 12A of IBC, the voting has to be computed as per proviso to Section 25A(3A) read with Section 25A(3) of IBC. It has been further clarified that a proposal under Section 12A which statutorily requires 90% votes for approval, would not stand approved if majority (more than 50%) homebuyers/financial creditors vote in favour of it. The threshold of 90% votes must be met for approval of proposal.

Section 25A(3) of IBC provides that when the Authorised Representative represents several financial creditors, then he shall cast his vote for each financial creditor according to the instructions received from each financial creditor, to the extent of his voting share.

The Proviso to Section 25A(3A) of IBC states that when voting takes place in respect of proposal under Section 12A, then the Authorised Representative of Financial Creditor shall cast his vote in accordance with Section 25A(3).

“When the statute i.e. Section 12A provides 90% voting for approval of Section 12A proposal, 90% of the voting share of the creditor in class have to be taken into consideration. Since voting by each homebuyers who represented creditor in class has to be computed as per his voting share and adding all vote shares of the creditor in class with any other Financial Creditor if it is at least up to 90% only then 12A proposal is held to be passed”, the Bench held.

NCLAT Delhi: Treatment Of Income Tax Dues In The Resolution Plan As 'Operational Creditor' Doesn't Violate Section 30(2) Of IBC

Case Title: Jaiprakash Associates Ltd. vs. Jaypee Infratech Ltd. and Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 548 of 2023

The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that treatment of the Income Tax Department's dues in the Resolution Plan as 'Operational Creditor' is not violative of Section 30(2) of IBC.

NCLT Can't Direct CoC To Consider Suspended Management's Settlement Proposal, Without Opportunity To SRA: NCLAT Delhi

Case title: One City Infrastructure Pvt. Ltd. v Pratham Expofab Private Limited & Ors.

Case No.: Company Appeal (AT) (Insolvency) No.287 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 NCLT cannot direct the CoC to consider settlement proposal of Suspended Management of Corporate Debtor, without granting an opportunity to be heard to the Successful Resolution Applicant (SRA).

During the pendency of plan approval application before NCLT, the Suspended Management filed an application seeking consideration of their settlement proposal by Committee of Creditors (“CoC”). The NCLT did not accord any opportunity to SRA to file its response to the application and directed the CoC to consider the settlement proposal vis-à-vis the resolution plan. The NCLAT has set aside the NCLT order.

NCLAT Delhi: Non-Grant Of Reliefs And Concessions By NCLT Does Not Have Any Adverse Effect On The Validity Of The Resolution Plan And Is Not Violative Of The Law

Case Title: Jaiprakash Associates Ltd. vs. Jaypee Infratech Ltd. and Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 548 of 2023

The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) held that non-grant of any reliefs and concessions by NCLT does not have any adverse effect on the validity of the Resolution Plan and is not a violation of the law. The Bench emphasized that the Successful Resolution Applicant is obligated to implement the Resolution Plan, irrespective of whether specific reliefs and concessions are granted or not. It rejected the argument that the non-approval of certain reliefs and concessions within the Resolution Plan, the Resolution Plan cannot be approved and should be sent back to the CoC.

NCLAT Delhi: Personal And Corporate Guarantors Have No Right Of Subrogation After Approval Of Resolution Plan

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 personal guarantors and corporate guarantors have no right of subrogation after the approval of the Resolution Plan under IBC.

NCLAT Delhi: Section 29A(C) Disqualifies Those Managing And Controlling Corporate Debtor Who Failed To Clear Debts

Case Title: Navayuga Engineering Company Ltd. vs. Mr. Umesh Garg RP of Athena Demwe Power Ltd. and Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 783 of 2023

The National Company Law Appellate Tribunal ('NCLAT') New Delhi, comprising Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that Section 29A(c) of IBC disqualifies not only those in management and control of the Corporate Debtor when its account was declared Non-Performing Asset ('NPA') but also those in management and control of the Corporate Debtor in close proximity of time before the Resolution Plan was submitted, who failed to clear the debts of the Corporate Debtor.

NCLAT Delhi: Resolution Professional Is An Aggrieved Person If NCLT Overturns His Decision

Case Title: Devendra Singh Vs. Homebuyers of Sidhartha Buildhome Pvt. Ltd. & Ors.

Case No.: Company Appeal (AT) (Ins.) No. 791 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), held that the Resolution Professional is an aggrieved party when the decision of the National Company Law Tribunal (“NCLT”) directly overturns his decision.

Whether The Vote Of Each Homebuyer Is Required During The Voting On CIRP Withdrawal Resolutions? NCLAT Clarifies S 12A of IBC

Case Title: Vijay Saini vs Devender Singh & Ors.

Case No.: Company Appeal (AT) (Ins.) No. 1194, 791 & 982 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), held that for voting on Corporate Insolvency Resolution Process (CIRP) withdrawals under Section 12A of IBC, the vote of each homebuyer must be counted individually, rather than as a collective class of financial creditors.

Section 12A stipulates statutory provisions governing “withdrawal of application admitted under section 7, 9 or 10”. It states, “The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified.”

NCLAT Delhi: Trademark Hypothecated For Higher Amount And Assignment For Lower Amount Can't Be Sole Criteria To Treat It As 'Undervalued Transaction'

Case Title: Gloster Cables Ltd. vs. Fort Gloster Industries Ltd. and Ors.

Case No.: Comp. App (AT) (Ins) No. 1343 of 2019

The National Company Law Appellate Tribunal ('NCLAT') New Delhi, comprising Mr. Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha (Technical Member) held that the mere fact that the trademark was hypothecated for a higher amount and subsequently assigned for a lower amount would not be the sole criteria for deeming it an undervalued transaction.

MoU And Ledger Extract Are Insufficient Proof For Admitting Of Financial Debt Claim: NCLAT Delhi

Case title: D S Kulkarni & Associates v Manoj Kumar Aggarwal

Case No.: Company Appeal (AT) (Insolvency) No.923 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Arun Baroka (Technical Member), has held that Memorandum of Understanding (“MoU”) and extract of Ledger of the Corporate Debtor are insufficient proof for acceptance of a claim as financial debt.

One of the creditors of the Corporate Debtor submitted its claim before the Resolution Professional claiming itself to be a Financial Creditor at par with Homebuyers. To substantiate the claim, the creditor submitted an MoU and Ledger extract of the Corporate Debtor as proof. The Resolution Professional rejected the claim citing that financial debt claim cannot be admitted merely upon MoU and Ledger extract and the decision was upheld by the NCLT and NCLAT.

RP Best Person To Decide What Part Of Corporate Debtor's Business Is To Be Carried Out: NCLAT Delhi

Case title: Amit Tyagi v Indirapuram Habitat Centre Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No.272 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 Resolution Professional who is running the Corporate Debtor's business, is the best person to decide as to what part of the business can be carried out. Further, the allottees of a real estate project developed by the Corporate Debtor cannot demand execution of conveyance deed as a matter of right.

Relief To Home Buyers, NCLAT Upholds Resolution Plan Outlining Provisions For Completion Of 96 Residential Towers By Jaypee Infratech Pending Since 2011

Case Title: Jaiprakash Associates Ltd. vs Jaypee Infratech Ltd. and Others

Case No.: Company Appeal (AT) (Insolvency) No. 548

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), upheld a Resolution Plan which outlined provisions for the completion of approximately 96 residential towers that had remained under construction since 2011 by Jaypee Infratech Limited (JIL). The homebuyers' plea revolved around the delay in the implementation of the Resolution Plan and their earnest desire to acquire possession of their units.

Suraksha Realty Limited submitted its Resolution Plan, which was subsequently approved by the Committee of Creditors (CoC). However, objections were filed by Jaiprakash Associates Limited (“JAL”), the holding company of JIL and Manoj Gaur, the erstwhile Managing Director of JIL, against Suraksha Realty's Resolution Plan, in NCLT. The NCLT had approved Suraksha Realty's Resolution Plan, leading to the filing of appeals by JAL and Manoj Gaur in NCLAT. Now NCLAT has upheld the plan submitted by Suraksha Realty Limited.

NCLAT Delhi: Advance Paid By A Speculative Buyer In Real Estate Doesn't Fall Under Financial Debt Under IBC

Case Title: Naman Infradevelopers Pvt. Ltd. vs. Metcalfe Properties Pvt. Ltd.

Case No.: Company Appeal (AT)(INS) No.74 of 2024

The National Company Law Appellate Tribunal ('NCLAT') New Delhi, comprising Mr. Justice Ashok Bhushan (Chairperson), Mr. Justice Yogesh Khanna (Judicial Member), and Mr. Barun Mitra (Technical Member) held that the advance paid by a speculative buyer in Real Estate does not fall within the purview of Section 5(8) of IBC.

The Bench concluded that the Appellant cannot be given the status of 'Financial Creditor' as he is a speculative investor who has filed the CIRP application only for recovery of its money with profit and interest and not for the financial well-being of the Corporate Debtor.

Question Of Value Can't Be Raised Post Approval Of Resolution Plan By CoC: NCLAT Delhi

Case title: Committee of Creditors v Anil Tayal

Case No.: Company Appeal (AT) (Ins.) No.1633 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has upheld an order passed by NCLT herein it was held that the question of valuation of assets cannot be raised after the resolution plan has been approved by the Committee of Creditors (“CoC”).

Issue Of Whether Input Tax Has Been Taken In Excess Can't Be Dealt With In Section 9 Proceedings Under IBC: NCLAT Delhi

Case title: Zaara Enterprises Venture Pvt. Ltd. v Dhanraaj Agencies Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 356 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 issue whether the Corporate Debtor has claimed input tax in excess on a GST invoice raised by the Operational Creditor cannot be decided in proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”).

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.

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.

When Order Passed In Presence Of Both Parties' Counsels, Limitation To File Appeal Commences From Date Of Order: NCLAT Delhi

Case title: Supreme Construction Developers Pvt. Ltd. v Puranik Builders Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 215 of 2024.

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Justice Yogesh Khanna (Judicial Member) and Shri Barun Mitra (Technical Member), has held that when an order is passed in presence of counsels of both the parties, then the parties cannot claim that they were unaware of the order. Accordingly, the limitation to file appeal before NCLAT would commence from the date of order, and not the date of upload of order on NCLT website.

Section 12(2) of the Limitation Act, 1963 states that while computing limitation for filing an appeal, review or revision, the date on which the judgment was pronounced and the time taken to obtain copy of the judgment shall be excluded.

The Bench opined that when NCLT passes an order, the party is obligated to apply for certified copy to seek benefit of Section 12 of Limitation Act. Since the Appellant applied for certified copy after 30 days of passing of order, the Bench declined to exclude the period from computation of limitation.

Tribunal Not Empowered To Hear Case Afresh Under Recall Jurisdiction: NCLAT Chennai

Case title: Adv. (CA) V. Venkata Sivakumar v Hari S. Hari Karthik & Ors.

Case No.: Comp. App (AT) (CH) (INS) No. 8 / 2022

The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Justice Sharad Kumar Sharma (Judicial Member) and Shri Jatindranath Swain (Technical Member), has held that the Tribunal cannot hear a case de-novo while adjudicating an application filed for recall of an order. The Bench has dismissed a review application filed by an Applicant seeking recall of an NCLAT order. The Bench has held that the meaning of 'recall' cannot be expanded to be read as a synonym for 'review'.

“At this juncture, this Tribunal, aptly points out that the Power to Recall of an Order or Judgment of a Tribunal, can be exercised by it only, if any procedural error, committed, in pronouncing the earlier Order or Judgment. In addition, the Power to Recall an Order / Judgment, earlier passed by this Tribunal, is not the power to Re-hear the case De-novo, to find out any Apparent error, in the Order / Judgment, which is in the ambit of a Review of a Judgment, to examine the Judicial Propriety or any Apparent Error, committed, by the Court / Tribunal, which is not the case made out in the instant Review Application, which is sought to be read as Recall, by the Petitioner/Erstwhile Liquidator.”

Erstwhile Liquidator Can't Seek Recall Of An Order In His Personal Capacity After Being Replaced By Another Liquidator: NCLAT Chennai

Case Title: Adv. (CA) V. Venkata Sivakumar v Hari S. Hari Karthik & Ors.

Case No.: Comp. App (AT) (CH) (INS) No. 8 / 2022

The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Justice Sharad Kumar Sharma (Judicial Member) and Shri Jatindranath Swain (Technical Member), has held that a Liquidator, after being replaced with another liquidator, cannot seek recall of an order in his personal capacity. If the erstwhile liquidator is aggrieved by an order passed by NCLAT then the remedy would lie in appeal under Section 62 of IBC.

The erstwhile Liquidator had filed an appeal before the NCLAT. In the meanwhile, the erstwhile Liquidator was replaced with new Liquidator, who withdrew the appeal before the NCLAT. The Erstwhile Liquidator filed a review application before NCLAT seeking recall of the order whereby appeal was withdrawn. The NCLAT dismissed the review application citing that the erstwhile Liquidator has no locus standi to file such application or question the decision taken by New Liquidator in his official capacity.

NCLAT Delhi; IBC Does Not Provide Any Scope For Dissatisfied Homebuyers In Minority To Override Majority Decision Of COC

Case - Mr. Girish Nalavade Vs. Bhrugesh Amin and Ors.

Citation - Company Appeal (AT) (Insolvency) No. 1542 of 2023

The National Company Law Appellate Tribunal (NCLAT) New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that the IBC does not provide any scope for dissatisfied homebuyers in the minority to override the majority decision taken by the Committee of Creditors (COC).

NCLT

NCLT Kolkata: Corporate Debtor Can't Take Shelter U/S 186 Of Companies Act To Avoid CIRP When Loan Has Been Advanced In Breach Of Section 186(2) Of Companies Act

Case Title: EDCL Infrastructure Ltd. vs. Urban Infraprojects Pvt. Ltd.

Case No.: Company Petition (IB) No. 106/KB/2023

The National Company Law Tribunal ('NCLT') Kolkata, comprising Smt. Justice Bidisha Banerjee (Judicial Member) and Shri D. Arvind (Technical Member) held that the Corporate Debtor cannot take shelter under Section 186 of the Companies Act, 2013 to avoid Corporate Insolvency Resolution Process ('CIRP') under Section 7 of IBC, wherein the Financial Creditor has advanced loan in breach of Section 186(2) to the Corporate Debtor.

The Bench observed that the said provision serves as a safeguard for the shareholders/stakeholders of the Company, presently the Financial Creditor, ensuring that those managing the company cannot and do not exceed prescribed loan limits which would be in excess of their capacity and could lead the company into significant trouble in case of default. Thus, Section 186 of the Companies Act, 2013, mandates that if a company intends to provide a loan beyond the specified limits, it requires approval from shareholders through a special resolution.

In the event of a violation under Section 186(2) of the Companies Act, 2013, the affected parties would include the shareholders/stakeholders of the Financial Creditor and regulatory authorities. The Corporate Debtor cannot use such violations as a defense to refuse repayment of borrowed funds.

NCLT Mumbai Approves Rs. 9,661 Crore Resolution Plan By IndusInd International Holdings For Reliance Capital

Case Title: Mr. Nageswara Rao Y, Administrator of Reliance Capital Limited vs. Committee of Creditors of Reliance Capital Limited and IndusInd International Holdings Limited

Case No.: CP (IB) No. 1231 of 2021

The National Company Law Tribunal ('NCLT') Mumbai, comprising Justice V.G. Bisht (Judicial Member) and Mr. Prabhat Kumar (Technical Member), has approved the Rs. 9,661 crore resolution plan submitted by IndusInd International Holdings Ltd ('IIHL') for Reliance Capital Limited (Corporate Debtor) under Section 31 of IBC.

The Resolution Plan of IIHL is valued at Rs. 9,661 crores. Out of the total claims of Rs 38,526.42 crore, only Rs 26,086.75 crore were admitted by the NCLT with a massive haircut of 63 percent. The average fair value of the Corporate Debtor is Rs. 16,696.05 crores and the average Liquidation value is Rs. 13,158.46 crores.

Section 53 of IBC provides priority to the dues of Workmen and Employees, however, in the resolution plan they have been paid NIL against an admitted claim of Rs. 5.71 crores.

The Plan provides that the secured financial creditors who voted in favor of the Resolution Plan be paid in full to the extent of their outstanding principal amount. The unsecured financial creditors have been proposed to be paid 5% of their admitted claims.

The Plan provides that payment towards Related Party Creditors be settled for NIL.

NCLT Chennai: Adjudicating Authority Under IBC Is Not The Appropriate Forum To Decide On Revocation Of Attachment Made By ED Under PMLA During CIRP

Case Title: Mr. Palaniappan Liquidator of Nathella Sampath Jewelry Pvt. Ltd. vs. The Joint Director Directorate of Enforcement

Case No.: CP/129(IB)/2018

The National Company Law Tribunal ('NCLT') Chennai, comprising Shri Justice Jyoti Kumar Tripathi (Judicial Member) and Shri Ravichandran Ramasamy (Technical Member) held that the NCLT under IBC, is not the appropriate fora to decide on revocation of attachment made by Enforcement Directorate ('ED') under Prevention of Money Laundering Act, 2002 ('PMLA') during Corporate Insolvency Resolution Process ('CIRP').

NCLT observed that the 'Attachment' as a concept cannot be decided upon by the NCLT and cannot be subject to Section 60(5) of IBC.

NCLT Kolkata: IBC Prevails Over State Financial Corporation Act, 1951

Case Title: Mr. Rajesh Lahila vs. West Bengal Industrial Development Corporation Ltd.

Case No.: C.P. (IB) No. 1674/KB/2019

The National Company Law Tribunal ('NCLT') Kolkata, comprising Justice Ms. Bidisha Banerjee (Judicial Member) and Shri Arvind Devanathan (Technical Member), has held that IBC prevails over State Financial Corporation Act, 1951 (SFC Act).

Tribunal noted the inconsistency between Section 18(f) of IBC and Section 29 of the SFC Act and observed that while Section 18(f) of IBC casts duty on the Resolution Professional to take custody of Corporate Debtor's assets as recorded in the balance sheets, the explanation of the said provision also provides that Corporate Debtor's assets not in possession shall also be taken into custody.

On the other hand, Section 29 of the SFC Act provides that on a failure to the payment as per the terms and conditions of the borrowings, the Corporation can take first charge over the Corporate Debtor's immovable properties to be retained and dispose of the said properties pledged. The NCLT resolved the said inconsistency through the application of Section 238 of IBC providing that IBC shall prevail over any other statute in the case of such inconsistency.

NCLT Mumbai: Profits During CIRP Be Allocated To Financial Creditors When RFRP And Resolution Plan Are Silent On Such Allocation

Case Title: Kalyan Janata Sahakari Bank Ltd. & Anr. vs. Arun Kapoor, Resolution Professional of CICIL Biochem Private Limited

Case No.: C.P. (IB) No. 4676/MB/2018

The National Company Law Tribunal ('NCLT') Mumbai, comprising Mr. Kuldip Kumar Kareer (Judicial Member) and Mr. Anil Raj Chellan (Technical Member) held that the profits accrued during the Corporate Insolvency Resolution Process ('CIRP') be allocated to the Financial Creditors when the Request for Resolution Plan ('RFRP') and the Resolution Plan are silent on the allocation of profits.

Liquidation Value Is More Than Resolution Plan , NCLT Allahabad Directs SRA To Match Liquidation Value

Case title: Hadirah Steels Pvt. Ltd. v Rana Heavy Engineering Ltd.

Case No.: CP (IB) No.50/ALD/2022

The National Company Law Tribunal (“NCLT”), Allahabad Bench, comprising of Shri Praveen Gupta (Judicial Member) and Shri Ashish Verma (Technical Member), has directed the Successful Resolution Applicant to consider matching the resolution plan value at par with the liquidation value, which is on a higher side. The Successful Resolution Applicant is the Financial Creditor of the Corporate Debtor and also the sole member of Committee of Creditors (“CoC”).

“We are also conscious of the fact that commercial wisdom of the Committee of Creditors in the matter of approval of resolution plan should be regarded. However, in the peculiar circumstances of the case where the financial creditor who is member of CoC itself is the SRA as well, we therefore, find it justifiable in passing such directions to the SRA to consider matching the total plan value at par with the liquidation value with corresponding pro-rata rise in the amount of disbursement.”

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'.

NCLT Kolkata: Any Attachment Of Tainted Assets Of Corporate Debtor Before CIRP Commencement Would Always Be Available To Fulfill The Object Of IBC

Case Title: State Bank of India vs. Shree Mahalaxmi Corporation Pvt. Ltd.

Case No.: Company Petition (IB) No. 130/KB/2022

The National Company Law Tribunal ('NCLT') Kolkata, comprising Smt. Bidisha Banerjee (Judicial Member), and Shri D. Arvind (Technical Member), has held that Any attachment of tainted assets of a Corporate Debtor before the Corporate Insolvency Resolution Process ('CIRP') commencement would always be available to fulfill the object and goal of IBC.

NCLT Kolkata: Provisional Attachment Order Under PMLA Won't Bar Admission Of CIRP Against Corporate Debtor Under IBC

Case Title: State Bank of India vs. Shree Mahalaxmi Corporation Pvt. Ltd.

Case No.: Company Petition (IB) No. 130/KB/2022

The National Company Law Tribunal ('NCLT') Kolkata, comprising Smt. Bidisha Banerjee (Judicial Member), and Shri D. Arvind (Technical Member) held that the Provisional Attachment Order under PMLA will not bar the admission of Corporate Insolvency Resolution Process ('CIRP') proceedings against the Corporate Debtor under IBC.

NCLT Mumbai: Timeline Provided By CIRP Regulation 36A(6) Must Be Adhered To Strictly

Case Title: Shree Siddhivinayak Cotspin Pvt. Ltd. vs. Rajan Deshraj Agarwal and Anr.

Case No.: IA No. 2390 of 2023 In CP(IB) 518 (IB)2020

The National Company Law Tribunal ('NCLT') Mumbai, comprising Justice Kuldip Kumar Kareer (Judicial Member) and Mr. Anil Raj Chellan (Technical Member), has held that the timeline provided by the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP Regulation') 36A(6) must be adhered to strictly.

NCLT Chandigarh - Minimum Threshold Will Be Applicable To Any Amount Raised From Allottee

Case: Mr. Tek Chand Narula vs M/s Vatika Ltd.

Citation: CP (IB) No.528/Chd/Hry/2019 & IA No. 302/2022

The National Company Law Tribunal (NCLT), Chandigarh bench, comprising Justice Dr. P.S.N. Prasad (Judicial Member) and Shri Umesh Kumar Shukla (Technical Member), has held that the requirement of satisfying the minimum threshold of either 10% or 100 allottees will be applicable to any amount raised from an allottee, irrespective of whether the said allottee is alleging the default of interest or the principal amount.

IBBI

IBBI Amends CIRP Regulations W.E.F. 15th February 2024

Ref. No. IBBI/2023-24/GN/REG113

The Insolvency and Bankruptcy Board of India (“IBBI”) has issued a notification dated 15.02.2024, whereby amendments have been made to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”). The key amendments are:

• Operating separate bank accounts for real estate projects: To ensure financial transparency and accountability, the amendment makes it mandatory to have a separate bank account for each real estate project under a corporate debtor.
• Monthly meetings of the committee of creditors (CoC): Under the amended dispensation, the resolution professional (RP) is mandated to convene a CoC meeting at least once in every thirty days, with a provision to extend the interval between meetings to a maximum of one meeting per quarter, if CoC so decides.
• Voting procedures: In place of provision of minimum period specified for the opening of the voting window with no upper limit, the amended regulation empowers the CoC to decide the period of opening of electronic voting window with a minimum of twenty-four hours and a maximum of seven days with further increments of twenty-four hours each. Further, to streamline the voting process, the amendment mandates that where the matters listed for voting have already received requisite majority vote, the RP shall provide one last opportunity to vote by extending the voting window by a maximum period of twenty-four hours.
• Approval of insolvency resolution process costs: With a view to enhance the oversight of the CoC over going concern costs, the amendment provides that the RP to seek approval from the CoC for all costs including going concern costs related to the insolvency resolution process.
• Disclosure of valuation methodology: With an aim to increase transparency and reduce disputes over valuation related issues, the amendment provide for explaining the valuation methodology to the members of the CoC before the computation of estimates.
• Disclosure of fair value in the information memorandum: For fostering informed participation in the process, the amendment provides that the fair value may be made part of the information memorandum (IM). However, the CoC, after recording the reasons, can decide not to share such an information where in it's considered view such a disclosure is not beneficial for the resolution.
• Flexibility in inviting resolution plans in real-estate cases: With a view that each project in a real estate case may need different treatment in terms of resolution, the amendment clarifies that after due examination, the CoC may direct the RP to invite separate plan for each project.
• Monitoring committee for implementation of resolution plan: The amendment enables the CoC to decide for constitution of a monitoring committee for overseeing the implementation of the resolution plan. The committee may include the RP, any other insolvency professional or any other person as its member. In case the RP is made part of the committee, the monthly fee payable to him shall not exceed the monthly fee received by him during the corporate insolvency resolution process.

Continuation of the resolution process pending extension application: A clarification has been provided to ensure that RP continues to discharge his responsibilities under the resolution process till an application for extension is being decided by the Adjudicating Authority.