Monthly Digest Of IBC Cases: July 2024

IBC | CIRP Of Holding Company Cannot Include Subsidiary's Assets: Supreme Court

Case no. – Civil Appeal No. 4565 of 2021

Case Title – BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. & Anr.

The Supreme Court on Monday (July 23) held that a holding company is not the owner of its subsidiary's assets and thus, subsidiary assets cannot be included in the holding company's resolution plan.

A bench of Justice Abhay Oka and Justice Pankaj Mithal dismissed an appeal filed by a Successful Resolution Applicant of a Corporate Guarantor against NCLT's decision to admit Financial Creditor's application for recovery of balance amount from the Corporate Debtor.

The Corporate Debtor in this case was a subsidiary of the Corporate Guarantor.

“A holding company and its subsidiary are always distinct legal entities. The holding company would own shares of the subsidiary company. That does not make the holding company the owner of the subsidiary's assets...Therefore, the assets of the subsidiary company of the corporate debtor cannot be part of the resolution plan of the corporate debtor”, the court held.

Insolvency Resolution Of Corporate Guarantor Won't Bar Creditor From Filing CIRP Against Corporate Debtor For Balance Debt : Supreme Court

Case Title: BRS Ventures Investments Ltd. Versus SREI Infrastructure Finance Ltd. & Anr.

Citation : 2024 LiveLaw (SC) 508

In a notable decision relating to the Insolvency & Bankruptcy Code of 2016, the Supreme Court held when that the insolvency resolution of a corporate guarantor will not prevent the creditor from initiating another insolvency process against the corporate debtor for the balance debt.

The Court clarified that the insolvency resolution of the corporate guarantor will not result in the discharge of the corporate debtor towards the remaining debt.

High Court

Mere Initiation Of Arbitration Proceedings Doesn't Bar Corporate Debtor From Pursing Remedies Under IBC: Delhi High Court Allows Section 11(6) Petition

Case Title: Pitambar Solvex Pvt Ltd And Anr. vs. Manju Sharma And Ors.

Case No.: ARB.P. 212/2024, I.A. 9821/2024

The Delhi High Court bench of Justice Neena Bansal Krishna held that mere initiation of the arbitration proceedings does not bar the corporate debtor from pursuing his other remedies including those under the Insolvency Bankruptcy Code.

NCLAT

NCLAT Delhi: Lending Institutions Providing Loans To Homebuyers Don't Qualify As Financial Creditors Under IBC

Case Title:IIFL Home Finance Ltd. vs. Shiv Nandan Sharma, Resolution Professional Saha Infratech Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 856 of 2024

The National Company Law Appellate Tribunal ('NCLAT') Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha, and Mr. Indevar Pandey (Technical Members) held that lending institutions providing loans to homebuyers do not qualify as 'Financial Creditors' under Insolvency and Bankruptcy, Code 2016 ('IBC').

NCLAT Delhi: Assured Returns Class Of Creditors Allotted Commercial Space/Unit Constitutes 'Allottee' Under RERA And IBC

Case Title: Rita Malhotra & Anr. vs. Orris Infrastructure Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 484 of 2024

The National Company Law Appellate Tribunal (“NCLAT”) New Delhi bench comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra, and Mr. Arun Baroka (Technical Members) held that assured returns class of creditors who are allotted commercial space/unit constitutes an 'allottee' under Real Estate (Regulation and Development) Act, 2016 (“RERA”) and Insolvency and Bankruptcy Code, 2016 (“IBC”).

Corporate Guarantor Can't Be Absolved From Its Liability Only Due To Non-Invocation Of Guarantee: NCLAT Delhi

Case Title: Iskon Infra Engineering Private Limited vs. Central Bank of India

Case No.: Company Appeal (AT) (Insolvency) No. 323 of 2024 & I.A. No. 1080 of 2024

The National Company Law Appellate Tribunal ('NCLAT') Delhi bench, comprising Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) held that a Corporate Guarantor cannot be absolved from its liability only due to non-invocation of guarantee.

'Voluminous Appeal Records, Citations Of Very Little Value': NCLAT Chennai Raps Practising Company Secretary For Unnecessarily Burdening The Tribunal

Case Title: A. Vijayan v. Silver Line Retreat Hotels Private Limited

Case No.: CA(AT)(CH) No. 30 of 2024

The National Company Law Appellate Tribunal, Chennai Bench comprising of Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) came down heavily on a Practising Company Secretary for filing an Appeal with voluminous records running in several volumes.

Resolution Applicant Whose Name Was Not Included In 'Prospective Resolution Applicants' List Cannot Be Substituted At Later Stage: NCLAT, Delhi

Case Title: Swan Energy Ltd. vs Chandan Prakash Jain and Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 313 of 2024

The National Company Law Appellate Tribunal (NCLAT), Delhi bench of Justice Ashok Bhushan (Chairperson) and Mr Barun Mitra (Technical Member) held that a resolution applicant, who did not take part in the CIRP process from the beginning and was not included in the list of prospective resolution applicants, cannot be suddenly substituted as a resolution applicant to implement the plan of the Corporate Debtor.

NCLAT Delhi - RP Not Liable For Payments Made To 103 Employees Responsible For Preserving And Managing Operations Of Jet Airways

Case Title: Jet Aircraft Maintenance Engineers Welfare Association Versus Mr. Ashish Chhawchharia

Case No.: Company Appeal (AT) (Insolvency) No.1705 of 2023 & I.A. No. 6137 of 2023

The National Company Law Appellate Tribunal (Appellete Tribunal) Delhi, comprising Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), held that the Resolution Professional is not personally liable for the lump sum payments made to the 103 employees who were part of the Asset Preservation Team (APT) responsible for preserving and managing the operations of Jet Airways.

The Appellate Tribunal dismissed the appeal of the Jet Aircraft Maintenance Engineers Welfare Association, which sought payment for all workmen and employees of Jet Airways, against whom the Corporate Insolvency Resolution Process (CIRP) proceedings were initiated on June 20, 2019.

Electricity Being Essential Service Needs To Be Continued During CIRP Period, NCLAT Delhi Upholds RP's Decision To Increase Maintenance Charges

Case Title: Sanskriti Allottee Welfare Association (Reg.) & others Versus Gaurav Katiyar & anr

Case No.: Company Appeal (AT) (Insolvency) No. 878 of 2023

While upholding the Resolution Professional (RP) decision to increase the maintenance charges for homebuyers of the Corporate Debtor to cover electricity bills and dues, the National Company Law Appellate Tribunal (Appellant Tribunal) Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member), held that electricity, being an essential service, must continue during the Corporate Insolvency Resolution Process (CIRP) period.

With approval from the Committee of Creditors (CoC), the RP raised the electricity rate from ₹7 per unit to ₹8.91 per unit for homebuyers who received possession of their flats in the Sanskriti Project of the Corporate Debtor.

NCLT

Insolvency Professional Entities Qualified To Be Appointed As Resolution Professionals: NCLT Mumbai

Case Title: Piramal Capital and Housing Finance Limited vs Notion Real Estate Pvt. Ltd.

Case No.: IA(I.B.C)/3433(MB)2024 IN C.P. (IB)/915(MB)2023

The National Company Law Tribunal, Mumbai bench of Shri Sanjiv Dutt (Technical Member) and Shri K.R. Saji Kumar (Judicial Member), held that Insolvency Professional Entities (IPEs) are qualified to be appointed as Resolution Professionals (RPs) under the Insolvency and Bankruptcy Code, 2016.

The NCLT held that the Insolvency and Bankruptcy Board of India (IBBI) has the authority to regulate and recognize IPEs as resolution professionals, despite the IBC not explicitly mentioning them as professional service providers.

NCLT Mumbai: Exclusion Of Stay Period Of CIRP Petition Doesn't Postpone Insolvency Commencement Date Under IBC

Case Title: Ericsson India Private Limited vs. Reliance Communications Limited

Case No.: MA No. 3553 of 2019, MA 133 of 2020 & MA 645 of 2020 in CP No. 1386 of 2017 IA No. 3555 of 2019, IA 126 of 2020 & IA 646 of 2020 in CP No. 1387 of 2017

The National Company Law Tribunal ('NCLT') Mumbai bench comprising Justice V.G. Bisht (Retd.) (Judicial Member) and Mr. Prabhat Kumar (Technical Member) held that exclusion of period of stay of Corporate Insolvency Resolution Process (“CIRP”) petition does not lead to postponement of Insolvency commencement date under Insolvency and Bankruptcy Code, 2016 (“IBC”).

NCLT Mumbai: Notice To CD Recalling Loan Facility Doesn't Constitute Demand On Corporate Guarantor

Case Title: State Bank of India vs. Navjeevan Tyres Private Limited

Case No.: CP (IB) No.1282/MB/2022

The National Company Law Tribunal ('NCLT') Mumbai bench comprising Justice K. R. Saji Kumar (Judicial Member) and Mr. Sanjiv Dutt (Technical Member) held that notice to Corporate Debtor recalling loan facility doesn't constitute Demand on Corporate Guarantor.

NCLT Delhi: Adjudicating Authority Can't Consider Settlement Proposal Even With Higher Value After Approval Of Resolution Plan By CoC

Case Title: Sanjeev Mahajan vs. Indian Bank (Erstwhile Allahabad Bank) & Anr.

Case No.: I.A. No. 2594/2023 in Company Petition No. (IB) – 1913/ND/2019

The National Company Law Tribunal ('NCLT') Court V, New Delhi bench comprising Shri Mahendra Khandelwal (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) held that the Adjudicating Authority cannot consider a Settlement Proposal, even of a higher value than the Resolution Plan, after the approval of the Resolution Plan by the Committee of Creditors ('CoC').

IBBI

IBBI Issues Circular Directing Insolvency Professionals To File Forms To Monitor Voluntary Liquidation Processes On Electronic Platform Only

Circular No. IBBI/LIQ/74/2024

The Insolvency and Bankruptcy Board of India (“IBBI”) has issued a circular dated 28.06.2024 directing the Insolvency Professionals to file the forms to monitor the Voluntary Liquidation processes under IBC on the electronic platform hosted on IBBI's website at https://www.ibbi.gov.in. only.

IBBI Issues Circular Directing IPs To File Liquidation Process Forms On Electronic Platform Only

Circular No. IBBI/LIQ/73/2024

The Insolvency and Bankruptcy Board of India (“IBBI”) has issued a circular dated 28.06.2024 directing the Insolvency Professionals to file the forms to monitor the liquidation process under IBC on the electronic platform hosted on IBBI's website at https://www.ibbi.gov.in. only.

Ministry of Corporate Affairs

MCA Issues Circular Launching E-Form MGT-6 And BEN-2 In MCA-21 Version 3.0 From 15.07.2024

The Ministry of Corporate Affairs ('MCA'), Government of India has issued a circular dated 04.07.2024 launching e-Form MGT-6 (Form of return to be filed with the Registrar under section 89) and BEN-2 (Return to the Registrar in respect of declaration under section 90) in MCA-21 Version 3.0 on 15.07.2024.