Case title: Sunil Kumar Jain v Sundaresh Bhatt   2022 LiveLaw (SC) 382

Case No.: Civil Appeal No. 5910 of 2019

Supreme Court division bench comprising of Justice M.R. Shah and Justice Aniruddha Bose has held that the dues towards the wages/salaries of only those workmen/employees who actually worked during the Corporate Insolvency Resolution Process ("CIRP") are to be included in the CIRP costs.

The Bench clarified that the wages and salaries of all other workmen/employees of the Corporate Debtor during the CIRP, who actually have not worked and/or performed their duties when the Corporate Debtor was a going concern, shall not be included automatically in the CIRP costs. Such dues will be governed by Section 53(1)(b) and Section 53(1)(c) of the Insolvency and Bankruptcy Code, 2016 ("IBC"). It was further observed that Section 36(4) and Section 53(1) of the IBC shall not be applicable to dues of the workmen/employees on account of provident fund, gratuity and pension. They are to be treated outside the liquidation process and liquidation estate assets under the IBC. The order was passed on 19.04.2022.

NCLAT Delhi

1.Amount Invested In A Joint Venture Project In Capacity Of A Promoter And Investor Is Not A Financial Debt

Case Title: M/s Jagbasera Infratech Private Ltd. v Rawal Variety Construction Ltd.

Case No.: Company Appeal (AT) (Ins) No.150 of 2019.

The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Anant Bijay Singh (Judicial Member) and Ms. Shreesha Merla (Technical Member), has held that the amount invested in a Joint Venture project in the capacity as a 'Promoter' and 'Investor' does not fall within the definition of 'Financial Debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The order was passed on 04.04.2022.

The NCLAT Bench placed reliance on its earlier judgment passed in Mukesh N. Desai v Piyush Patel & Ors., Company Appeal (AT)(Ins) No.780/2020, wherein it had held that a profit share owner, who in the event of the success of the project would receive the residual gain, the amount invested by him in the land cannot be said to be a 'Financial Debt' as defined under Section 5(8) of the IBC.

2. Fresh Resolution Plan Cannot Be Considered By Committee Of Creditors

Case Detail: Steel Strips Ltd v Avil Menezes

Case No.: CA (AT)(Ins.) No. 89/2022

National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) & Ms. Shreesha Merla (Technical Member), has held that a fresh resolution plan cannot be considered by a Committee of Creditors ("CoC") once it has already approved a resolution plan.

The NCLAT Bench relied on the judgment of the Supreme Court in Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd. and held that the finality has been attached to the Resolution Plan of the Steel Strips Ltd. which was approved by the CoC, and such finality cannot be taken away by the NCLT. It was further observed that late and unsolicited bids by Resolution Applicants, after the original bidder becomes public upon passage of the deadline for submission of the plan, is a deviation of the original objective and timeline under the IBC.

3. Amount Given As 'Share Application Money' Is Not Covered Under Financial Debt

Case Title: Pramod Sharma v Karanaya HeartCare Pvt. Ltd.

Case No.: Comp. App. (AT) (Ins.) No. 426 of 2022.

The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that money given as 'Share Application Money' cannot be treated as a financial debt in order to initiate Corporate Insolvency Resolution Process ("CIRP") under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The order was passed on 21.04.2022.

The NCLAT Bench observed that admittedly the amount was given by the Appellant as a 'Share Application Money' on which no share was allotted and afterwards the principal amount was refunded by the Respondent under some settlement. The Bench dismissed the appeal and upheld the order passed by the NCLT Delhi, wherein it was held that the share application money does not fall under Section 5(8) of the IBC as it is not "a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money", since no debt was disbursed by the Appellant to the Respondent and no time value has been attached with the Share Application money.

4.Reliance Cancels Rs. 24,713 Crores Worth Of Deal With Future Group

Future Retail Limited ("FRL") is the flagship company of the Future Group of companies that operates popular retail chains such as Big Bazaar, Foodhall, Easyday Club, WH Smith et al. In August 2020, FRL became part of Rs. 24,713 Crores worth deal wherein Future Group had intended to sell nineteen of its companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures Ltd. ("RRVL"), a subsidiary of Reliance Industries Limited. All these companies were to consolidate into one entity named 'Future Enterprises Limited'. The National Company Law Tribunal, Mumbai Bench vide an order dated 28.02.2022 had permitted FRL to conduct its Shareholder's meeting. Accordingly, a Shareholder's meeting was convened by FRL from 20th April to 23rd April 2022 for seeking approval from its shareholders for its scheme of arrangement with Reliance. The shareholders and unsecured creditors have voted in favour of the deal but the secured creditors did not. Consequently, Reliance Industries Limited has cancelled the deal with Future Group on 23.04.2022.

NCLAT Chennai

Nil Payment To Operational Creditors Is Permissible Under The Resolution Plan

Case title: Genus Security and Allied Service versus Mr. Shivadutt Bannanje & Anr.

Case No.: CA (AT)(CH)(Ins) No. 110/2021

The National Company Law Appellate Tribunal ("NCLAT"), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Shri. Kanthi Narahari (Technical Member), has held that nil payment to Operational Creditors is permissible under the Resolution Plan if the liquidation value is less than the admitted claims of the Corporate Debtor.

It was further observed that question of discrimination will only arise when some of the Operational Creditors were being paid under the resolution plan, to the exclusion of other Operational Creditors, which was not the case here. The Bench held that the Resolution Plan, which proposed nil payment for the operational Creditors, suffered from no infirmity and illegality as it was approved by a majority vote of 95.07% of the Committee of Creditors ("CoC") and the commercial wisdom of the CoC cannot be interfered with by the NCLT or NCLAT. Accordingly, the Resolution Plan was held to be binding on all stakeholders including the Operational Creditors. The judgment was passed on 07.04.2022.

NCLT Mumbai

1.CIRP Initiated Against National Steel And AgroIndustries Ltd.

Case title: JM Financial Asset Reconstruction Co Ltd. v National Steel & Agro Industries Ltd.

Case no.: CP (IB) 2067/MB/2019

The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri K.K. Vohra (Technical Member), has admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") against National Steel & Agro Industries Ltd. and initiated Corporate Insolvency Resolution Process ("CIRP"), vide an order dated 11.04.2022.

The NCLT Bench observed that the Financial Creditor had established that the Credit facilities were sanctioned as well as disbursed to the Corporate Debtor, and that the Corporate Debtor had defaulted in payment of the debt. Accordingly, the two essential qualifications, i.e. existence of 'debt' and 'default', for admission of a petition under Section 7 of the IBC were fulfilled.

2. Notice Issued To SITI Networks Ltd. InSection 7 IBC Petition Filed By HDFC LTD.

Case title: Housing Development Finance Corporation limited v SITI Networks Limited

Case No.: C.P. (IB)/414(MB) 2022

The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Smt. Suchitra Kanuparthi (Judicial Member) and Smt. Anuradha Sanjay Bhatia (Technical Member), has issued notice to SITI Networks Ltd. in the matter of Housing Development Finance Corporation Limited v SITI Networks Limited., vide an order dated 30.03.2022.

Housing Development Finance Corporation Ltd. ("HDFC") had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against SITI Networks Ltd., for an alleged default of approximately Rs. 296 Crores in respect of the financial facility granted by HDFC. The matter was heard by the NCLT, Mumbai Bench on 30.03.2022 and accordingly, notice was issued to SITI Networks Ltd. with the liberty to file a reply.

3. Bank Of India Files Petition Under Section7 Of IBC Against Future Retail Limited

The Bank of India has filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") before the National Company Law Tribunal ("NCLT"), Mumbai Bench, seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against Future Retail Limited. The matter has not been listed yet for its first hearing.

A Framework Agreement was entered into between the Bank of India and Future Retail Limited, the petition has been filed over default of payments due under the said Agreement. The name of Mr. Vijaykumar Iyer has been proposed for the Interim Resolution Professional.

NCLT Kolkata

CIRP Can Be Initiated Based On AnUnchallenged Arbitral Award

Case Title: Viom Infra Ventures Limited v Bahula Infotech Private Limited

Case No.: C.P (IB) No. 197/KB/2021

The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while deciding a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has held that Corporate Insolvency Resolution Process ("CIRP") can be initiated based on an Arbitral Award if the said Award has not been challenged. Accordingly, CIRP has been initiated against Bahula Infotech Pvt. Ltd. vide an order dated 18.04.2022.

The NCLT Bench observed that the Corporate Debtor had neither raised any dispute with respect to the services of the Operational Creditor nor challenged the Arbitral Award by way of Section 34 petition under the Arbitration and Conciliation Act, 1996. Therefore, the debt is undisputed. It was further observed that in a petition under Section 9 of IBC, the prime point of defence is the existence of the dispute; and/or pendency of a suit or arbitration prior to the receipt of the demand notice under Section 8 of the IBC, however, in the instant case both these defences were not present.

The NCLT Bench also held that the CIRP cannot not be initiated on basis of Arbitral Award when:

a. A counterclaim exceeding the claim awarded was rejected by the Arbitral Tribunal on merits, and such rejection is also a matter of challenge before the Courts; and

b. A challenge had also been filed against the Arbitral Award.