Insolvency Law in Review – February & March 2022

These case summaries are not an exhaustive review of the cases under the Code; only significant rulings on the Code in the months of February and March 2022 have been summarized. However, this does not negate the possibility of some important decisions being missed on account of human error. Further, since the purpose of this endeavor is to keep practitioners abreast of relevant developments, the decisions are summarized and not comprehensively analyzed.

I. SUPREME COURT

In M/s Consolidated Construction Consortium Limited v. M/s Hitro Energy Solutions Private Limited, the Supreme Court held that a debt which arises out of an advance payment made to a corporate debtor for the supply of goods or services, would be considered as an 'operational debt' under the Code. The Supreme Court noted that the term 'operational debt' is broad enough to include all forms of contracts for the supply of goods and services between the operational creditor and corporate debtor, including the ones where the operational creditor may have been the receiver of goods or services from the corporate debtor. The Supreme Court rejected the contention that the term 'operational creditor' includes only those who supply goods or services to a corporate debtor and excludes those who receive goods or services from the corporate debtor.

In Ruchi Soya Industries Ltd. v. Union Of India & Others, the Supreme Court, while relying on its decision in the case of Ghanashyam Mishra & Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited & Others, held that the claim of the respondent, which was not lodged with the resolution professional (RP) after public announcements were issued under Sections 13 and 15 of the Code, and which is not a part of the resolution plan, would not survive. The Supreme Court noted that on the date of approval of the resolution plan by the National Company Law Tribunal (NCLT), all claims stood frozen, and the claims, which were not a part of the resolution plan, would not survive.

In Amit Katyal v. Meera Ahuja, the Supreme Court, exercising its powers under Article 142 of the Constitution of India read with Rule 11 of the National Company Law Tribunal Rules, 2016 (NCLT Rules), allowed the withdrawal of the corporate insolvency resolution process (CIRP) against a corporate debtor, where a settlement was arrived at between the promoter of the corporate debtor and the home buyers. According to the Supreme Court, the continuation of the CIRP against the corporate debtor would be detrimental to the larger interests of the homebuyers, as the moratorium imposed under Section 14 of the Code would prevent the homebuyers from initiating any proceeding against the corporate debtor in case of delayed possession or refund. Further, the home buyers stand to lose out in both cases: (i) if the resolution process is successful - as there is a possibility of large haircuts; and (ii) if the resolution process is not successful - as the home buyers are unsecured creditors in the liquidation proceedings. Therefore, in the larger interest of the home buyers, the Supreme Court, instead of directing the home buyers to approach the NCLT under Section 12A of the Code for the withdrawal, exercised its powers under Article 142 read with Rule 11 of the NCLT Rules to allow for the withdrawal.

In SVG Fashions Private Limited v. Ritu Murli Manohar Goyal, the Supreme Court citing its previous judgments in Laxmi Pat Surana v. Union Bank of India and Asset Reconstruction Company (India) Limited v. Bishal Jaiswal, held that a letter issued by the corporate debtor acknowledging liability before the expiry of the limitation period, would extend the period of limitation in accordance with Section 18 of the Limitation Act, 1963. The Supreme Court set aside the order of the National Company Law Appellate Tribunal (NCLAT), which had failed to take note of an acknowledgement letter and remanded the matter back to the NCLAT for a fresh consideration on the applicability of Section 18 of the Limitation Act, 1963 to the instant case.

II. HIGH COURTS

In Satyanarayan Bankatlal Malu and Another v. Insolvency and Bankruptcy Board of India and Another, the Bombay High Court held that the 'special courts' within the meaning of Section 435(2)(a) of the Companies Act, 2013 (i.e. comprising a single judge holding the office as a Session Judge or Additional Session Judge), do not have the jurisdiction to try offences under the Code. The Bombay High Court held that pursuant to the Companies (Amendment) Act, 2017, it is only the 'special courts' within the meaning of Section 435(2)(b) of the Companies Act, 2013 (i.e. comprising a Metropolitan Magistrate or Judicial Magistrate First Class) that have the jurisdiction to try offences under, inter alia, the Code, as the Companies (Amendment) Act, 2017 creates another class of court (i.e. Metropolitan Magistrate and Judicial Magistrate First Class) as 'special courts' for speedy trial of offences under the Code.

In Tharakan Web Innovations Pvt. Ltd. v. National Company Law Tribunal Kochi Bench & Another, the Kerala High Court set aside the decision of the NCLT, Kochi, which held that the notification dated March 24, 2020 increasing the threshold of minimum amount of default for filing of insolvency application to INR 1 crore, will not save the corporate debtor from the initiation of insolvency proceedings with respect to defaults which had taken place prior to March 24, 2020. The Kerala High Court held that pursuant to the notification dated March 24, 2020, the right to approach the NCLT stood modified, and it is only when there is a minimum default of INR 1 Crore, an application can be filed. The Kerala High Court further noted that the litmus test is whether there exists a default as defined in Section 4 of Code, on the date of the application.

In Shri Subhankar Bhowmik v. Union of India, the Tripura High Court held that decree holders can neither be classified as financial creditors or operational creditors under the Code, and stand on a different footing on their own. The Tripura High Court further held that as per Sections 14 and 28 of the Code, decree holders are barred from enforcing their decrees. Further, the Tripura High Court held that the decree, being judicially determined, is an admitted claim against the corporate debtor and the remedy provided to decree holders under the Code is to file such claims before the resolution professional (RP) or liquidator, as the case maybe. The role of the RP or liquidator, in such an instance, would be to acknowledge, vet, verify, and admit the decree as a claim against the corporate debtor, without looking behind the decree. Further, the Tripura High Court held that given the CIRP process under the Code is a non-adversarial process, efforts at revival of the corporate debtor would be frustrated by admitting an adversarial claimant in the committee of creditors (CoC) of the corporate debtor.

III. NATIONAL COMPANY LAW APPELLATE TRIBUNALS

In BDH Industries Ltd. v. Mars Remedies Private Limited, the NCLAT, New Delhi held that an explicit agreement to prove disbursement of the loan amount is not a necessary pre-requisite for admission of an application under Section 7 of the Code. The NCLAT, New Delhi noted that it is considered sufficient for admission of an application under Section 7 of the Code, if the applicant/petitioner is able to establish the existence of a 'debt' and the corporate debtor's default.

In Jet Aircraft Maintenance Engineers Welfare Association v. Shri Ashish Chhawchharia Resolution Professional for Jet Airways (India) Ltd. & Others, the NCLAT, New Delhi held that the provision of moratorium under Section 14(1)(b) of the Code and the provision of Regulation 29 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) enabling the RP to sell the unencumbered assets of the corporate debtor for better realization of value, are to be harmoniously constructed. The NCLAT, New Delhi held that despite declaration of moratorium under Section 14(1)(b) of the Code, the RP is empowered to conduct sale of unencumbered assets, if he is of the opinion that it is necessary for better realization of value. The NCLAT, New Delhi noted that the prohibition in transferring the assets of the corporate debtor under Section 14(1)(b) of the Code is on the corporate debtor, and the said prohibition ipso facto does not prohibit the RP or the CoC, who are empowered by specific provision of the Code, to undertake any such sale.

In Noida Special Economic Zone Authority v. Mr. Manish Agarwal, Resolution Professional of Shree Bhomika International Limited & Others, the NCLAT, New Delhi rejected the contention of the appellant that partial payment of the claim of the appellant under the resolution plan violated the Special Economic Zones Act, 2005, and the resolution plan was liable to be rejected as it was in direct contravention of Section 30(2)(e) of the Code. The NCLAT, New Delhi held that all the dues including statutory dues owed to the central government, state government and the local authority, if not a part of the resolution plan, stand extinguished, and the Code overrides any other law in case of any inconsistency between two laws.

In Himalayan Crest Power Pvt. Ltd. v. Pankaj Khaitan, Resolution Professional of M/s. Sasi Power Private Limited, the NCLAT, New Delhi, while relying upon the judgment of the Supreme Court in Urvashi Aggarwal v Kushagr Ansal and Others, upheld the decision of the RP to reject the appellant's claim of the 'interest component' on the grounds that there was a delay of nine years by the appellant in recognising the interest income in its balance sheet and there was no corresponding booking of interest by the corporate debtor in its accounts.

In Standard Surfa Chem India Pvt. Ltd. v. Kishore Gopal Somani, the NCLAT, New Delhi, while relying on the Supreme Court's judgment in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, held that the 'model timeline for liquidation process' provided in Regulation 47 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 is only directory in nature, and the time limit prescribed therein can be extended in exceptional circumstances.

In M/s Shiv Shakti Inter Globe Exports Pvt. Ltd. Vs. M/s KTC Foods Private Limited Through Liquidator, the NCLAT, New Delhi held that when the proceeds from the sale of the corporate debtor as a going concern under liquidation process, are duly distributed in the order of priority and in the manner prescribed under Section 53 of the Code, the claims of any other creditor cannot be entertained contrary to the provisions entailed under Section 53 subsequent to the distribution of sale proceeds, and no other entity including any government entity can claim any past unpaid or outstanding dues against the purchaser. The NCLAT, New Delhi noted that the scope and the objective of the Code is to extinguish all claims, specifically the ones which were not even made during the CIRP or in the liquidation stage, to aid the purchaser of the corporate debtor as a 'going concern' to start on a 'clean slate'.

In Rajnish Gupta v. Union Bank of India & Another, the NCLAT, New Delhi held that a mere withdrawal of the CIRP against the principal borrower will not be a bar for the lender from initiating fresh CIRP against the guarantor. The NCLAT, New Delhi held that it is well settled that the creditor is not bound to exhaust its remedy against the principal borrower before invoking the guarantee, and therefore, the withdrawal of petition filed against the principal borrower is not a fetter on initiating the CIRP against the guarantor in accordance with law.

In M/s. Brand Realty Services Ltd. v. M/s. Sir John Bakeries India Pvt. Ltd., the NCLAT, New Delhi held that that the mere fact that the reply to a demand notice under Section 8(1) of the Code having not been given within 10 days or no reply to demand notice having been filed by the corporate debtor, would not preclude the corporate debtor from bringing the relevant materials before the Adjudicating Authority to establish that there is a 'pre-existing dispute', which may lead to the rejection of the petition under Section 9 of the Code.

In Abhishek Gupta v. Asset Reconstruction Company (India) Pvt. Ltd., the NCLAT, New Delhi, while relying on the judgment of the Supreme Court in the case of ITC Limited v. Blue Coast Hotels Limited and Others, held that the mention of the words 'without prejudice' in a letter is for the purposes of protecting the right of the sender vis-à-vis any legal remedy available in case the settlement does not fructify, and has no application to the acknowledgement of the loan. In the present case, the NCLAT, New Delhi noted that the letter sent by the corporate debtor containing the note 'without prejudice', acknowledged the debt and did not refer to any settlement, and would, therefore, constitute an acknowledgement of liability for the purposes of extension of limitation period under Section 18 of the Limitation Act, 1963.

In Sikander Singh Jamuwal v. Vinay Talwar and Ors., the NCLAT, New Delhi directed the successful resolution applicant to release full provident fund dues in terms of the provisions of the Employees Provident Funds and Miscellaneous Provident Fund Act, 1952 (PF Act) on the grounds that as per Section 30(2)(e) of the Code, the resolution plan should not contravene any of the provisions of the law for the time being in force. The NCLAT, New Delhi further noted that no provision of the PF Act is in conflict with the Code, and provident fund dues are not the assets of the corporate debtor, as made amply clear by the provisions of Section 36(4)(a)(iii) of the Code.

In M/s Radico Trading Ltd. v. Tarun Batra (Insolvency Resolution Professional) and Others, the NCLAT, New Delhi held that it is not necessary for the NCLT to appoint experts for all applications filed under Section 46(1) of the Code, concerning applications for avoiding transactions at undervalue. It was further held that the power under Section 46(2) of the Code is an enabling power, and the expression used 'may require' indicates that it is not necessary that for all applications filed under Section 46(1), an expert has to be appointed mandatorily by the NCLT.

In M/s Hacxad Infotech Pvt. Ltd. vs. M/s Skootr Global Pvt. Ltd., the NCLAT, New Delhi held that in view of Rule 49(2) of the NCLT Rules, the NCLT is empowered to set aside ex-parte orders. The NCLAT, New Delhi further noted that the exercise of the NCLT's powers under this provision would not tantamount to a 'review'.

In Jaipur Trade Expocentre Pvt. Ltd. v. M/s Metro Jet Airways Training Pvt. Ltd., the NCLAT, New Delhi, directed the listing of the matter before a larger bench of a matter to decide the question of whether the payment of license fee for use and occupation of immovable premises for commercial purposes would amount to an 'operational doubt' within the meaning of Section 5(21) of the Code. Such direction was passed in the context of divergent views taken by the NCLAT, in its judgements in Mr. M. Ravindranath Reddy v. Mr. G. Kishan and Others and Anup Dubey v. National Agricultural Cooperative Marketing Federation of India Ltd. and Others.

In Bindals Duplux Ltd. v. ICMC Corporation Ltd., the NCLAT, Chennai, reiterated that the NCLT is not a 'court of law' deciding a money claim/civil suit, and that the proceedings under the Code are summary and non-adversarial in nature. In this backdrop, while noting that a grievance in relation to the quality of material supplied by the appellant had been raised by the corporate debtor, the NCLAT, Chennai held that the same clearly amounted to a 'dispute' within the meaning of Section 5(6) of the Code, and was, thus, not fit to be decided in a summary jurisdiction by the NCLT.

In Metals and Metal Electric Pvt. Ltd. v. Goms Electricals Pvt. Ltd., the NCLAT, Chennai held that for the purposes of the Ministry of Corporate Affairs' notification dated March 24, 2020 (which increased the threshold of minimum amount of default for filing of insolvency application to INR 1 crore), the relevant date for the applicability of the increased threshold for filing of an application for the initiation of the CIRP would be the date of the application and not the date of default. Consequently, the NCLAT, Chennai upheld the decision of the NCLT, Chennai, which refused to entertain an application for initiation of the CIRP filed after the issuance of the said notification for a pecuniary sum below INR 1 crore.

In Swaroop Kumar Huggi v. M/s. Simplex Infrastructure, the NCLAT, Chennai, relying on the judgment of the Supreme Court in Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy and Another, held that a financial creditor on the basis of a decree can file an application under Section 7 of the Code. The NCLAT, Chennai, while relying on the following definition of 'creditor' under Section 3(10) of the Code "creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor and unsecured creditor and a decree-holder," held that a decree holder is also a creditor in the eye of law.

IV. NATIONAL COMPANY LAW TRIBUNALS

In Dheeraj Kiranpal Singh Ahluwalia and Another v. Silver Jubilee Motors Limited, the NCLT, Mumbai held that in the absence of any loan agreement, specific schedule for repayment and proof of disbursement on record, the applicants cannot claim the amount in question as a financial debt. The NCLT, Mumbai relied upon the judgment of NCLAT, New Delhi in the case of Dr. B.V.S Laxmi v. Geometrix Laser Solution Private Limited to reiterate that disbursal is an essential element to prove financial debt. The NCLT, Mumbai also reasoned that there was no due date for repayment in the absence of the loan agreement itself, and therefore, there could be no proof of default.

In Solapur Dist. Central Co-operative Bank Limited v. Sangola Taluka Sahakari Sakhar Karkhana Limited, the NCLT, Mumbai held that a co-operative society registered under the Societies Registration Act, 1860, cannot fall within the purview of the term 'corporate person' as envisioned under Section 3(7) of the Code. The NCLT, Mumbai, while placing reliance on the NCLAT judgment in the case of Asset Reconstruction Company (India) Ltd. v. Mohammadiya Educational Society, rejected the applicant's contention that as Section 3(7) of the Code excludes only 'financial service providers' from the ambit of 'corporate person' and does not specifically exclude co-operative societies, the intention of the legislature was not to exclude co-operative societies from the ambit of 'corporate person'.

In Maharashtra State Co-operative Bank Limited v. Shri Siddheshwar Sahakari Sakhar Karkhana Limited, the NCLT, Mumbai held that a co-operative society registered under the Multi-State Co-operative Societies Act, 2002, does not fall within the meaning of 'corporate person' as defined under Section 3(7) of the Code. The NCLT, Mumbai further held that co-operative society also does not come under the ambit of Section 2 of the Code which governs the persons to whom the Code will be applicable – as the central government has not issued any notification regarding the applicability of the Code to co-operative societies.

In Vistra ITCL India Ltd. v. Satra Properties (India) Limited, the NCLT, Mumbai held that non-payment of stamp duty cannot be a ground for a corporate debtor to contend an application under Section 7 of the Code when both the 'debt' and the 'default' are proved without relying on the said documents. The NCLT, Mumbai also stated that 'debt' and 'default' can be proved through the records maintained by the information utility even without the filing of any documents by the party.

In Hindustan Candle Manufacturing Co. Private Limited. v. Shamik Enterprises Private Limited, the NCLT, Mumbai admitted an application under Section 7 of the Code and rejected the contention raised by the corporate debtor that a general authorisation given in the form of a board resolution cannot expressly refer to the initiation of the CIRP under the Code. The NCLT, Mumbai placed reliance on the NCLAT, New Delhi judgment in the case of Palogix Infrastructure Private Limited v. ICICI Bank Ltd., wherein it was held that if an officer had the authority to sanction loans, then no specific authorisation was needed by such officer to recover the loan amount or to initiate the CIRP. The NCLT, Mumbai reasoned that a general authorisation is sufficient to initiate the CIRP, and the lack of specific authorisation cannot be a valid ground to oppose an application under Section 7 of the Code.

In State Bank of India v. Aaj Ka Anand Papers Limited, the NCLT, Mumbai admitted an application under Section 7 of the Code and dismissed the corporate debtor's claim that the application was not maintainable on account of the mortgage deed in question not being genuine and that the interest charged by the financial creditor was higher than the agreed rate. The NCLT, Mumbai placed reliance on the Supreme Court judgment of M/s. Innoventive Industries Ltd. v. ICICI Bank & Another, and held that looking into the genuineness of the mortgage deed or the agreed rate of interest charged is beyond the spirit of the Code. The NCLT, Mumbai held that the only factor to be established is that of 'default', and once the same is done, then the application must be admitted regardless.

In Reliance Projects & Property Management Services Limited v. Committee of Creditors of Reliance Infratel Limited, the NCLT, Mumbai directed the financial creditor to share the excerpts from the audited forensic report concerning the corporate debtor with the successful resolution applicant in order to facilitate smooth implementation of the resolution plan, subject to the resolution applicant entering into a non-disclosure agreement with the financial creditor. The NCLT, Mumbai further noted that audited forensic report on the basis of which financial institutions, banks determine the accounts as fraud, are important for the successful resolution applicant for the purposes of the implementation of the resolution plan. The NCLT, Mumbai also distinguished the instant case from the judgment of the Supreme Court in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited & Another, by, inter alia, noting that the applicant, in this case, did not seek to either amend or modify its resolution plan but rather sought to implement the resolution plan, subject to perusal of the relevant excerpts of the forensic report.

In State Bank of India v. RPA Ferro Industries Private Limited, the NCLT, Mumbai, while admitting an application under Section 7 of the Code, dismissed the corporate debtor's claim that the application was not maintainable on account of an order of the Karnataka High Court in a writ petition directing the parties to consider a settlement and an application for recall of an ex-parte order pending before the Debt Recovery Tribunal (DRT). The NCLT, Mumbai noted that the pendency of the writ petition before the Karnataka High Court and the application before the DRT, have no bearing on the admission of an application under Section 7 of the Code.

In Edelweiss Asset Reconstruction Company Limited v. Ram Ratan Kanoongo, the NCLT, Mumbai dismissed an application contesting an approved resolution plan on account of classification of the applicant in a class separate from other unsecured financial creditors. The applicant here was categorised as an unsecured financial creditor, who had not disbursed funds but had a corporate guarantee of the corporate debtor. The NCLT, Mumbai noted that the Adjudicating Authority cannot overstep the decision of the CoC, which has the prerogative with the requisite majority to decide on the inter se distribution amongst the creditors based on commercial wisdom of the majority of the creditors, who determine through negotiations with the prospective resolution applicant as to how and in what manner the corporate resolution has to take place. The NCLT, Mumbai further held that that there is no provision in the Code, which mandates that a financial creditor is to be compensated in the ratio of percentage of its voting share as a CoC member, and it is a settled law that the amount offered by the prospective resolution applicant to the CoC members is a matter of deliberation, discussion and depends on the market forces where the acceptance, rejection, any amendment depends on the CoC's commercial wisdom and such decision is non-justiciable.

In R. Tarkeshwar Narayan v. Praveen Kumar Aggarwal, the NCLT, New Delhi held that even if the title to the security interest, created in favour of a creditor, does not belong to the corporate debtor, which availed the credit facilities, the financial creditor will still be a secured creditor to the corporate debtor. The NCLT, New Delhi held that the definition of 'security interest' in the Code includes "any other agreement or arrangement securing payment or performance of any obligation," and this term would include security interest, the title of which belongs to a third party, created in favour of a creditor.

In M/s Reach International v. M/s Altech Infrastructure Private Limited, the NCLT, New Delhi held that for the withdrawal of an application, which has been admitted by the Adjudicating Authority before the constitution of the CoC, the only recourse is through the process enshrined under Section 12A of the Code read with Regulation 30A of the CIRP Regulations. The NCLT, New Delhi, citing the judgement of the Supreme Court in Arun Kumar Jagatramka v. Jindal Steel and Power, held that Regulation 30A was substituted as a result of the judgement of the Supreme Court in Swiss Ribbons v. Union of India, to provide for withdrawal both before the constitution of the CoC as well as after the constitution of the CoC. Further, recourse to the inherent power under Rule 11 of the NCLT Rules can only be taken when there is no remedy available in the Code. The NCLT, New Delhi noted that Section 12A read with Regulation 30A of the CIRP Regulations, being available for the purposes of withdrawal of an application before the constitution of the CoC, Rule 11 of the NCLT Rules cannot be taken recourse to.

In Oriental Bank of Commerce v. M/s. Yamuna Infradevelopers Private Limited, the NCLT, New Delhi set aside the order passed by the Director General, Mines and Geology, terminating the mining contract with the corporate debtor on account of non-payment of dues during the CIRP and the liquidation process. The NCLT, New Delhi noted that the Director General, Mines and Geology, instead of exercising powers under the Haryana Minor Mineral Concession, Stocking, Transportation of Minerals and Prevention of Illegal Mining Rules, 2012 for recovery of dues, should have initiated steps in accordance with the Code, in view of the overriding power of the Code in terms of Section 238 of the Code and the moratorium on legal proceedings during liquidation in terms of Section 33(5) of the Code. The NCLT, New Delhi further noted that as per Regulation 31 of the CIRP Regulations, the amounts due to a person whose rights have been prejudicially affected on account of imposition of moratorium under Section 14(1)(d) of the Code, shall be included as CIRP costs. In the instant case, the NCLT, New Delhi directed the liquidator to include the outstanding rent of the property leased to the corporate debtor for the CIRP/liquidation period, as CIRP costs.

In JFE Shoji Steel Private Limited v. Danke Technoelectro Private Limited, the NCLT, Ahmedabad held that in case a settlement agreement is arrived at between the corporate debtor and the applicant, and the petition is disposed of as 'dismissed as withdrawn', then the parties are still bound to adhere to their obligations under the settlement agreement. In case the obligations are not adhered to, the NCLT, using its inherent powers under Rule 11 of the NCLT Rules, can revive the petition which was filed by the applicant. The NCLT, Ahmedabad, citing the judgment of the NCLAT, Chennai in Sree Bhadra Parks and Resorts Limited v. Sri Ramani Resorts and Hotels Private Limited, held the inherent powers under Rule 11 of the NCLT Rules permits the NCLT to allow or disallow an application for withdrawal or settlement and also to allow for restoration or revival of the application.

In Amit Dineshchandra Patel v. Chandra Prakash Jain, the NCLT, Ahmedabad held that while look back periods are provided under Sections 43 and 50 of the Code, no such period is provided for in case of fraudulent transactions under Section 66 of the Code. Further, the Code does not prescribe any time limit for which an audit can be conducted by the RP exercising his duties under Section 25(2)(d) of the Code. Considering that Section 18(a)(i) of the Code prescribes a period of two years for the collection of information relating to the assets, finances and operations of the corporate debtor, the NCLT, Ahmedabad expressed doubts at the powers of the interim resolution professional or the RP to conduct audit for a period greater than two years. However, the NCLT, Ahmedabad observed that the Supreme Court had not provided for any restrictions in the time limit for the conduct of forensic audit in Anuj Jain v. Axis Bank Limited. The NCLT, Ahmedabad further noted that for carrying of the forensic audit independently by the CoC, there can be restriction imposed by the NCLT.

In Board of Trustees of the Port of Mumbai v. Vijay Kumar Garg, the NCLT, Hyderabad held that the liquidator, before rejecting a claim filed by an applicant on the ground of delay, should consider the reasons put forward by the applicant as to the cause of the delay. The NCLT, Hyderabad, in the present case, while condoning the delay of 129 days in filing of the claim, directed the liquidator to receive the claim and re-examine it in accordance with the provisions of the Code.

In Maharashtra State Electricity Distribution Company Limited v. Vijay Kumar Garg, the NCLT, Hyderabad set aside the order of the liquidator rejecting the claim of the applicant, and held that it was wrong on the part of the liquidator to consider that an order of the Maharashtra Electricity Regulatory Commission (MERC) had attained finality since the order, on appeal, had not been stayed by the Appellate Tribunal for Electricity (APTEL). In the instant case, the MERC had upheld the termination of the power purchase agreement by the corporate debtor and had rejected the claim of the applicant for liquidated damages. This order was appealed to the APTEL, and during the pendency of the appeal, the applicant had filed its claim before the liquidator, which was rejected, on the grounds that the claim was uncrystallised and the order of MERC had attained finality.

In Laxmi Kantha Rao Thota v. IRIS Electro Optics Private Limited, the NCLT, Hyderabad found the financial creditor guilty under Section 65 of the Code since the CIRP was initiated fraudulently and maliciously without the purpose of seeking resolution of the insolvency of the corporate debtor. In the instant case, the NCLT, Hyderabad found that the applicant under Section 7 of the Code, was a related party of the corporate debtor and had initiated the CIRP in order to prevent other financial creditors of the corporate debtor from taking any steps under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act).

In Huvepharma Sea (Pune) Private Limited v. Amrit Feeds Limited, the NCLT, Kolkata held that it has no jurisdiction to decide questions relating to limitation under the Arbitration and Conciliation Act, 1996 while permitting the liquidator under Section 35 of the Code to pursue proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) against an arbitral award. The NCLT, Kolkata held that questions relating to the Arbitration Act can only be decided by the appropriate forum under the Arbitration Act, and the NCLT, in permitting leave to pursue proceedings under that Arbitration Act, cannot make such a determination.

In an application filed by JR Foods Ltd. under Section 10 of the Code, the NCLT, Chennai, while relying on the judgment of the NCLAT, New Delhi in Unigreen Global Pvt. Ltd. v. Punjab National Bank and Others, held that the pendency of proceedings under the SARFAESI Act against the corporate applicant, does not act as a bar to the admission of an application under Section 10 of the Code.