EPFO Employees Must Comply With IBC Timeline For Filing Claims; Default Officers Must Face Action: Supreme Court

Case Title: Employees Provident Fund Organization V. Fanendra Harakchand Munot

Citation: 2023 LiveLaw (SC) 734 | CIVIL APPEAL NO. OF 2023

The Supreme Court Bench comprising Justice Sanjiv Khanna and Justice SV Bhatti, has held that the Commissioner and employees of the Employees Provident Fund Organization (EPFO) must ensure that they comply with the timelines under the Insolvency and Bankruptcy Code, 2016. The Apex Court also stated that in case of failure to comply with the timelines, action must be taken against erring employees.

"..we are of the view that the Commissioner and employees of the EPFO must take steps to ensure that there is compliance with the timelines provided under the Insolvency and Bankruptcy Code, 2016. Failure may have legal consequences. The employees of the EPFO must be aware of the consequences in order to ensure compliance. In case there is dereliction of duty, action should be taken against erring employees in accordance with law."

NCLAT

NCLAT Delhi Upholds Reduction Of Resolution Professional’s Fee By NCLT

Case Title: Rohit J. Vora v Religare Finvest Ltd. & Ors.

Case No.: Company Appeal (AT)(Insolvency) No. 104 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has upheld the NCLT order whereby the fee of the Resolution Professional was reduced from Rs. 3.75 Lakhs + GST to Rs. 1 Lakh + GST.

The Bench observed that there was deficiency in the Resolution Professional’s performance, such as failure to publish Form G, invite Expression of Interest and to obtain any successful resolution plan for the Corporate Debtor within 180 days from the initiation of CIRP.

“Given the material on record and the facts and circumstances in the present matter, we are therefore inclined to agree with the finding of the Adjudicating Authority that the active CIRP period having expired with no substantial work to be taken up further and the Covid pandemic also having generally disrupted work, the scaling down of the fees to Rs 1 lakh was not discriminatory or unfair.”

Differential Payments Can Be Made To Assenting And Dissenting Unsecured Financial Creditors: NCLAT Delhi

Case Title: Peter Beck and Partner Vermoegensverwaltung GMBH v Sharon Bio-medicine Limited & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 912 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that differential payments can be made between the unsecured Financial Creditors who voted in favour of the plan and the ones who voted against it. The Bench ruled that, “we are of the view that assenting financial creditors entitled for payment as proposed in the plan and dissenting financial creditor is entitled as per the minimum entitlement as per Section 30(2)(b).”

Go Airlines | NCLAT Delhi Permits Lessor To Conduct Inspection Of Leased Aircraft Engines

Case Title: Engine Lease Finance B.V. v Resolution Professional of Go Airlines (India) Ltd. & Anr.

Case No.: Comp. App. (AT) (Ins.) No.1088 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Engine Lease Finance B.V. v Resolution Professional of Go Airlines (India) Ltd. & Anr., has permitted the lessor of aircraft engines of Go Airlines to conduct inspection of the leased engines.

“We are of the view that inspection be permitted within 10 days from today. As observed above, the observations made in the impugned order being at prima facie stage need not be treated as final expression of opinion by the Adjudicating Authority and all contention of both the parties are left open.”

NCLAT Chennai Reprimands Bank For Filing Appeal With Delay, Refuses To Condone

Case Title: DCB Bank Limited v Ramakrishnan Sadasivam & Ors.

Case No.: Company Appeal (AT) (CH) (Ins) No. 207/2023

The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Ms. Shreesha Merla (Technical Member), has reprimanded the conduct of a Bank which filed an appeal exactly on the 45^th day, despite having huge machinery at its disposal to prepare and file the appeal within statutory period of 30 days.

“Looking from any another angle, even if it is taken then that the appeal has been filed on 15th day of the extended period of 15 days even then there is no sufficient cause assigned by the Appellant as to why it had taken exactly 45 days in filing the appeal against the order dated 03.03.2022. The reasons are conspicuous by its absence especially when the Appellant is a Bank who had huge machinery at its disposal for the purpose of preparing the appeal and filing the same within the statutory period of 30 days.”

IBC | Sec. 9 Petition Not Maintainable Against Claim For Compensation Penalty Under A Contract: NCLAT Delhi

Case title: Chandrashekhar Exports Pvt. Ltd. v Babanraoji Shinde Sugar & Allied Industries Ltd.

Case No.: Company Appeal (AT) (Insolvency) No.1032 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has upheld the dismissal of a petition under Section 9 of IBC which was filed based on claim of compensation penalty under a contract. The Bench held that whether a claim for compensation penalty has crystallized or not is to be adjudicated by a competent Court and not the Adjudicating Authority.

NCLAT Chennai Stays Insolvency Proceedings Against Café Coffee Day’s Parent Company

Case Title: Malavika Hegde v Indusind Bank Ltd. & Anr.

Case No.: Company Appeal (AT) (CH) (Ins) No.235/2023

The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Mrs. Shreesha Merla (Technical Member), has stayed the Corporate Insolvency Resolution Process (CIRP) of M/s Coffee Day Global Ltd. which was initiated by the NCLT on 20.07.2023.

M/s Coffee Day Global Ltd. is the parent company of the Coffee Day Group and Coffee Day Enterprises Ltd., which runs a multinational coffeeshop named ‘Café Coffee Day’.

Sec. 10A Inapplicable To Defaults Committed Prior To 25.03.2020; NCLAT Chennai Says Explanation To Sec. 10A Removes All Doubts

Case Title: Carissa Investments LLC v Indu Techzone Pvt. Ltd. & Ors.

Case No.: Company Appeal (AT) (CH) (Ins) No.124/2022

The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member), has held that the Explanation to Section 10A of IBC removes any doubt by clarifying that the prohibition to initiate CIRP would be inapplicable to defaults committed prior to 25.03.2020.

“The object of the legislation was to suspend the operation of Sections 7, 9 and 10 in respect of defaults arising on or after March 25th 2020 when the lockdown was disrupting normal business operation. This Tribunal is of the considered view that the ‘Explanation’ removes any doubt by clarifying that the provisions of the Section shall not apply in respect of any default committed prior to 25.03.2020.”

Central Excise Authority Not A Secured Creditor Under IBC: NCLAT Chennai

Case Title: The Assistant Commissioner of Central Tax v Mr. Sreenivasa Rao Ravinuthala & Anr.

Case No.: COMPANY APPEAL (AT) (CH) (INS.) NO. 346/2021

The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member), has held that Central Excise Authority is not a Secured Creditor under IBC.

The Bench observed that usage of the words ‘save as provided in’ in Section 11E of Central Excise Act, 1944 is in the nature of an exception, intended to exclude the class of cases, mentioned in Companies Act, 1956, The Recovery of Debts due to Banks and the Financial Institutions Act, 1993, SARFAESI Act, 2002 and IBC. Also, ‘Secured Interest’ as defined under IBC, excludes charges created by Operation of law. Further, the Master Circular No.1053/02/2017-CX, issued by the Ministry of Finance specifies that dues under ‘Central Excise Act, 1944’ would have first charge only after the dues under the Provisions of IBC are recovered.

Request For Repetitive Adjournments By The Appellant: NCLAT Delhi Dismisses Appeal For Non-Prosecution

Case Title: Amrit Kumar Patel v Phoenix ARC Pvt. Ltd. & Ors.

Case No.: Company Appeal (AT) (Ins) No. 605 of 2022

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Rakesh Kumar (Judicial Member) and Dr. Alok Srivastava (Technical Member), has dismissed an appeal for non-prosecution, since the Appellant’s Counsel had sought adjournments on several continuous dates citing personal difficulty. The Bench held that the Appellant is not interested in pursuing the case.

Shri Ajai Das Mehrotra Takes Oath As A Technical Member In NCLAT

On 21.08.2023, Shri Ajai Das Mehrotra has taken oath as a Technical Member in the National Company Law Appellate Tribunal (“NCLAT”), Delhi.

Mr. Mehrotra had retired from the Indian Revenue Services as a Principal Chief Commissioner of Income Tax. Thereafter, he served as a Technical/Administrative Member in the Appellate Tribunal of Real Estate Regulatory Authority in Gandhinagar. He has also served as a Technical Member in the National Company Law Tribunal (NCLT), Ahmedabad Bench, before being appointed to the NCLAT.

NCLAT Delhi Reverses The Decision Of NCLT, Upholds CoC’s Decision To Accept Relinquishment Of Personal Guarantee On Payment

Case Title: SVA Family Welfare Trust & Anr. v Ujaas Energy Ltd. & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 266 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has upheld the decision of Committee of Creditors (CoC) to accept a value for relinquishment of personal guarantees of the Corporate Debtor under the Resolution Plan.

The Resolution Plan contained a clause whereby the rights under personal guarantees of the Corporate Debtor would stand extinguished and the Financial Creditors would be paid compensation towards release of such personal guarantees. The Plan was approved by the CoC with 78.04%.

“The decision of the CoC to accept the value for relinquishment of personal guarantee was a commercial decision of the CoC which cannot be allowed to be impugned at the instance of dissenting Financial Creditor.”

NCLT

NCLT Delhi Upholds Termination Of Related Party Agreements By Resolution Professional With Coc’s Consent

Case Title: India SME Asset Reconstruction Company Limited v M/s Medirad Tech India Limited

Case No.: Company Petition No. (IB)-1243(ND)/2018

The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Bachu Venkat Balaram Das (Judicial Member) and Shri L.N. Gupta (Technical Member), has upheld the termination of Related Party agreements (Service & Lease Agreements) by the Resolution Professional since the Committee of Creditors (CoC) had given ‘No Objection’ for such termination.

Successful Resolution Applicant Can Seek Termination Of Related Party Contracts Via Clauses In Resolution Plan: NCLT Delhi

Case Title: India SME Asset Reconstruction Company Limited v M/s Medirad Tech India Limited

Case No.: Company Petition No. (IB)-1243(ND)/2018

The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Bachu Venkat Balaram Das (Judicial Member) and Shri L.N. Gupta (Technical Member), has held that the Successful Resolution Applicant can seek termination of Related Party contract/agreement through relevant clauses in the Resolution Plan.

NCLT Mumbai Refuses To Admit Belated Claim Of EPFO Submitted Post Approval Of Resolution Plan By The CoC

Case Title: Small Industrial Development Bank of India v E & G Global Estates Limited

Case No.: CP (IB) No. 2995/MB/2019

The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Shri Kuldip Kumar Kareer (Judicial Member) and Smt. Anuradha Sanjay Bhatia (Technical Member), has refused to admit the claim of Employee Provident Fund Organization (EPFO), which was submitted belatedly after the approval of resolution plan by the Committee of Creditors.

“In view of the above discussion this bench is of the considered view that at this belated stage when the Resolution plan has already been approved by the members of the COC in its 8th meeting dated 20.04.2021, the belated claim filed by the Applicant cannot be entertained, as such claims would defeat the very purpose of the CIRP process which is supposed to conclude in a time bound manner.”

Stock Broker Company Is A Financial Service Provider Under IBC: NCLT Delhi

Case Title: M/s Bezel Stockbrokers Private Limited v Security Exchange Board of India & Anr.

Case No.: Company Petition No. (IB)-251(ND)/2021

The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Ashok Kumar Bhardwaj (Judicial Member) and Shri L.N. Gupta (Technical Member), has held that a stock broker company is a financial service provider under IBC. “Since Corporate Applicant, being a stock broker, was dealing in the activities of buying, selling, or dealing in securities etc., which in terms of Section 3(15) of IBC 2016 are a “Financial Product” belonging to another person. Hence, in terms of Section 3(16) of IBC 2016, the Corporate Applicant was providing “Financial Service” or in other words, it was a “Financial Service Provider”.”

NCLT Notifies Re-Constitution Of All Benches w.e.f. 21st August 2023

File No. 10/03/2023-NCLT

The National Company Law Tribunal (“NCLT”) has issued a circular dated 18.08.2023, intimating the re-constitution of all sixteen NCLT Benches across India. The re-constitution has taken place in view of the Ministry of Corporate Affairs circular dated 16.08.2023, whereby the newly appointed NCLT Members were assigned benches. The reconstitution is effective from 21.08.2023.

The re-constituted benches are as under:

Resolution Professional Responsible For Conducting Section 29A Due Diligence; Can Seek Information, Documents Or Clarification From RA: NCLT Mumbai

Case Title: M/s Blue Frog Media Pvt. Ltd.

Case No.: CP (IB) No. 4360/MB/C-I/2018

The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Shri Kishore Vemulapalli (Judicial Member) and Shri Anu Jagmohan Singh (Technical Member), has held that a Resolution Professional is responsible to conduct due diligence relating to Section 29A of IBC, to identify ineligibility of resolution applicant, if any. Additional information, documents or clarifications can be sought from the Resolution Applicant by the Resolution Professional. The mere submission of an affidavit by the resolution applicant under Section 29A of IBC would not suffice.

“The Resolution Professional has the responsibility to conduct Section 29A due diligence. A prospective Resolution Applicant submitting an affidavit stating that he/she is eligible under Section 29A to submit resolution plan will not suffice. Adequate due diligence on the prospective Resolution Applicants and its connected persons needs to be conducted effectively and within the requisite timeline to identify ineligibility, if any. The Resolution Professional should seek clarifications or additional information or document from the prospective Resolution Applicants, if needed for conducting the due diligence.”

Go Airlines | NCLT Issues Notice On Application Filed By RP Seeking Refund Of Cancelled Ticket Amount To Passengers

Case Title: Go Airlines (India) Limited

Case No.: Company Petition No. (IB)-264(PB)/2023

The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Mahendra Khandelwal (President) and Shri Rahul Bhatnagar (Technical Member), has issued notice in an application field by the Resolution Professional of Go Airlines, seeking permission to make refund to the passengers whose tickets were cancelled. The notice has been issued to the respondents namely, Committee of Creditors (“CoC”) and the Insolvency and Bankruptcy Board of India (“IBBI”), to enter appearance and file their reply.

Prior to CIRP initiation, Go Airlines was constrained to cancel 4,118 flights with 77,500 passengers in a span of thirty days as its flights were grounded. No refund was made to the passengers at that point of time.

In a hearing held on 25.07.2023, the NCLT had permitted Go Airlines to resume flight operations. Thereafter, an application was filed by Resolution Professional of Go Airlines, seeking permission to make refund to those passengers of Go Airlines whose tickets were cancelled.

NCLT Urges Parties To Take Follow Up Action On Pending Applications/Petition In E-Filing System Within 21 Days

File No. 25/02/2023-NCLT

The National Company Law Tribunal (“NCLT”) has issued a Circular dated 04.08.2023, intimating that the petitions/applications filed through E-Filing prior to 30.06.2023 are pending in the system without any follow up. The NCLT has urged the concerned parties/advocates to take a follow up action and prosecute the same within a period of 21 days (till 25.08.2023). Failing which these pending files would be treated as ‘not pursued’ and get archived.

NCLT Delhi Approves Resolution Plan For Net 4 India Limited

Case Title: Edelweiss Asset Reconstruction Company Limited v Net4 India Limited

Case No.: IB-409/PB/2017

The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Bachu Venkat Balaram Das (Judicial Member) and Shri Rahul Bhatnagar (Technical Member), has approved the Resolution Plan of Open Platforms Pvt. Ltd. for Net4 India Ltd.

Net 4 India Ltd. (“Corporate Debtor”) is engaged in the business of Domain name registration, Data Centre & Cloud Hosting Solutions, Enterprise Internet Services, VoIP Solutions, Enterprise Messaging & Hosting Solutions and Network Services Provider.

While Approving A Plan, Shall Not Waive Off Statutory Obligations Of The Corporate Debtor: NCLT Mumbai

Case Title: Corporation Bank v General Composite Pvt. Ltd.

Case No.: CP (IB) No. 703 /MB/C-I/2019

The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Shri H.V. Subba Rao (Judicial Member) and Ms. Anu Jagmohan Singh (Technical Member), has approved a resolution plan and directed that such approval shall not waive off any of the statutory obligations/liabilities of the Corporate Debtor and shall be dealt by the appropriate Authorities in accordance with law.

Further, any waiver sought in the resolution plan shall be given subject to the approval of the concerned Authorities, in light of Supreme Court judgment in Ghanshyam Mishra and Sons Private Limited v/s. Edelweiss Asset Reconstruction Company Limited.

Liquidator Assigns ‘Not Readily Realizable Assets’ Of Rs. 26 Crores For Rs. 50,000 During Pendency Of Avoidance Applications: NCLT Delhi Invalidates Assignment

Case Title: Ritu Tandon v M/s Rain Automotive India Private Limited

Case No.: Company Petition No. (IB)-1095(ND)/2019

The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Ashok Kumar Bhardwaj (Judicial Member) and Shri L.N. Gupta (Technical Member), has held that a Resolution Professional or Liquidator cannot assign a debt or Not Readily Realizable Assets (“NRRA”), when the avoidance applications under Sections 43,45, 50 and 66 of IBC are pending adjudication before the NCLT. The NRRAs can only be assigned once the Debt/Demand is determined or crystallized through NCLT’s adjudication.

“In the absence of conclusion/ adjudication of Avoidance/PUFE proceedings by the Adjudicating Authority, there will be room for arbitrariness and the Liquidator may end up assigning the NRRAs for an arbitrary or a meagre amount, as has happened in the instant case, where the Liquidator has assigned the debt/ “Not readily realisable assets” (NRRAs) of Corporate Debtor worth Rs. 26,38,37,645/- for a meagre consideration of Rs. 50,000/- only..”

NCLT Jaipur Rejects Application Filed By RP Seeking Recovery Of Amount From Corporate Debtor’s Debtor

Case Title: M/S Indus Contrainer Lines Pvt. Ltd. V Jadoun International Pvt. Ltd.

Case No.: IB No. 707(PB)/2018

The National Company Law Tribunal (“NCLT”), Jaipur Bench, comprising of Shri Deep Chandra Joshi (Judicial Member) and Shri Atul Chaturvedi (Technical Member), has rejected an application filed by the Resolution Professional seeking a direction to one of the debtors of the Corporate Debtor to pay its outstanding debts. The Bench opined that the duties imposed upon the Resolution Professional or IRP does not entitle the NCLT to exercise jurisdiction in matters where recovery of an amount is sought on behalf of the Corporate Debtor.

“The Resolution Professional in the present matter had approached this forum for recovery of debt which is allegedly owed by the Respondent No. 2 to the Corporate Debtor whereas it has forgotten the underlying principle which enunciates that this is not a debt recovery forum. There is no doubt that the Resolution Professional has ample powers to proceed and protect the debts of the Corporate Debtor, but it cannot do so by merely filing an Application under Section 60(5) of the Code in the pending CIRP of the Corporate Debtor.”

MCA

MCA Extends Deadline For Submitting Applications For Judicial & Technical Member Vacancies In NCLAT, Last Date To Apply Is 1st September 2023

Ref. No. A-1 2023 t2l2023-Ad IV-MCA

The Ministry of Corporate Affairs (“MCA”), Government of India, has issued a circular dated 17.08.2023, intimating that the deadline for submitting applications for the post of Judicial Members and Technical Members in the National Company Law Appellate Tribunal (“NCLAT”) has been extended. The Applications can now be submitted online at https://apptrbmembermca.gov.in by 01.09.2023. Thereafter, the print out of the online filed application has to be submitted on the given address by 08.09.2023 within 05:00 pm.

On 06.06.2023, the MCA had issued a circular inviting application for the post of Judicial Members and Technical Members in NCLAT. Previously, the deadline to submit the application was 05.07.2023. The terms and conditions laid down in Circular dated 06.06.2023 shall remain same.